EXECUTION COPY
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PARTICIPATION AGREEMENT
Dated as of May 18, 2005
among
PUNA GEOTHERMAL VENTURE,
as Lessee,
SE PUNA, L.L.C.,
as Owner Lessor,
WILMINGTON TRUST COMPANY,
in its individual capacity,
SE PUNA LEASE, L.L.C.,
as Equity Investor,
AIG ANNUITY INSURANCE COMPANY, AMERICAN GENERAL LIFE
INSURANCE COMPANY and ALLSTATE LIFE INSURANCE COMPANY
as Noteholders
and
UNION BANK OF CALIFORNIA, N.A.,
not in its individual capacity, but solely
as Indenture Trustee
PUNA GEOTHERMAL GENERATION PROJECT
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TABLE OF CONTENTS
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SECTION 1. DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT... 3
SECTION 2. PARTICIPATION; CLOSING DATE; TRANSACTION COSTS................ 3
Section 2.1. Agreement to Participate............................. 3
Section 2.2. Closing Date; Procedure for Participation............ 5
Section 2.3. Postponement of Closing; Investment of Funds......... 6
Section 2.4. Transaction Costs.................................... 7
SECTION 3. REPRESENTATIONS AND WARRANTIES................................ 8
Section 3.1. Representations and Warranties of the Lessee......... 8
Section 3.2. Representations and Warranties of the Owner Lessor... 21
Section 3.3. Representations and Warranties of the Trust Company.. 23
Section 3.4. Representations and Warranties of the Equity
Investor............................................. 24
Section 3.5. Representations and Warranties of the Noteholders.... 26
Section 3.6. Representations of the Indenture Trustee............. 29
SECTION 4. CLOSING CONDITIONS; CONDITIONS TO PURCHASE OF SENIOR NOTES.... 30
SECTION 5. COVENANTS OF THE LESSEE....................................... 38
Section 5.1. Maintenance of Existence............................. 38
Section 5.2. Maintenance of Permits............................... 38
Section 5.3. Compliance with Laws and Governmental Approvals...... 38
Section 5.4. Information.......................................... 38
Section 5.5. Annual Operating Budget.............................. 40
Section 5.6. Conduct of Business.................................. 41
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Table of Contents
(continued)
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Section 5.7. Books and Records; Inspections....................... 41
Section 5.8. Taxes; Utility Charges............................... 41
Section 5.9. Performance and Enforcement.......................... 41
Section 5.10. Utility Status....................................... 41
Section 5.11. Subsidiaries......................................... 41
Section 5.12. Notice of Change of Jurisdiction of Formation
Address; No Change of Name........................... 42
Section 5.13. Further Assurances................................... 42
Section 5.14. Limitation on Indebtedness........................... 42
Section 5.15. Limitation on Liens.................................. 43
Section 5.16. Restricted Payments.................................. 43
Section 5.17. Permitted Investments, Loans and Advances............ 43
Section 5.18. Merger, Consolidation, Sale of Substantially All
Assets............................................... 44
Section 5.19. Amendments to Project Documents...................... 44
Section 5.20. Certain Contracts and Agreements..................... 44
Section 5.21. Limitation on Transactions with Affiliates........... 44
Section 5.22. Depositary Agreement Accounts; Bank Accounts......... 45
Section 5.23. Sharing of Facilities................................ 45
Section 5.24. Capital Expenditures................................. 45
Section 5.25. Contingent Liabilities............................... 46
Section 5.26. Abandonment of Project............................... 46
Section 5.27. Accounts Receivable.................................. 46
Section 5.28. Intellectual Property................................ 46
Section 5.29. EWG Status........................................... 46
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Table of Contents
(continued)
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Section 5.30. Spare Drive Train Equipment.......................... 46
Section 5.31. Well Completion Efforts.............................. 47
Section 5.32. ERISA................................................ 47
SECTION 6. COVENANTS OF THE TRUST COMPANY AND THE OWNER LESSOR........... 49
Section 6.1. Compliance with the LLC Agreement.................... 49
Section 6.2. Owner Lessor's Liens................................. 49
Section 6.3. Amendments to Operative Documents.................... 49
Section 6.4. Transfer of the Owner Lessor's Leasehold Interest.... 50
Section 6.5. Owner Lessor; Lessor Estate.......................... 50
Section 6.6. Limitation on Indebtedness and Actions............... 50
Section 6.7. Change of Jurisdiction of Organization............... 50
Section 6.8. Approvals in Writing................................. 50
Section 6.9. Warranties of the Trust Company...................... 50
SECTION 7. COVENANTS OF THE EQUITY INVESTOR.............................. 51
Section 7.1. Restrictions on Transfer of Member Interest.......... 51
Section 7.2. Equity Investor's Liens.............................. 54
Section 7.3. Amendments or Revocation of LLC Agreement............ 54
Section 7.4. Bankruptcy Filings................................... 54
Section 7.5. Instructions......................................... 55
Section 7.6. Appointment of Successor Owner Manager............... 55
SECTION 8. COVENANTS OF THE INDENTURE TRUSTEE AND NOTEHOLDERS............ 55
SECTION 9. INDEMNIFICATION............................................... 56
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Table of Contents
(continued)
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Section 9.1. General Indemnity.................................... 56
Section 9.2. General Tax Indemnity................................ 63
SECTION 10. LESSEE'S RIGHT OF QUIET ENJOYMENT............................ 73
SECTION 11. SUPPLEMENTAL FINANCING; OPTIONAL REFINANCING; ASSUMPTION OF
NOTES........................................................ 74
Section 11.1. Financing Modifications.............................. 74
Section 11.2. Well Improvements.................................... 76
Section 11.3. Optional Refinancing of Lease Debt................... 78
Section 11.4. Cooperation.......................................... 80
Section 11.5. Assumption of Senior Notes........................... 80
SECTION 12. MISCELLANEOUS................................................ 83
Section 12.1. Consents............................................. 83
Section 12.2. Bankruptcy of Lessor Estate.......................... 83
Section 12.3. Amendments and Waivers............................... 84
Section 12.4. Notices.............................................. 84
Section 12.5. Survival............................................. 86
Section 12.6. Successors and Assigns............................... 86
Section 12.7. Governing Law........................................ 86
Section 12.8. Severability......................................... 87
Section 12.9. Counterparts......................................... 87
Section 12.10. Headings and Table of Contents....................... 87
Section 12.11. Limitation of Liability.............................. 87
Section 12.12. Consent to Jurisdiction; Waiver of Trial by Jury;
Process Agent........................................ 89
Section 12.13. Consent to Security Filings.......................... 89
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Table of Contents
(continued)
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Section 12.14. Further Assurances................................... 90
Section 12.15. Effectiveness........................................ 90
Section 12.16. Confidentiality...................................... 90
Section 12.17. Entire Agreement..................................... 91
Section 12.18. Expansion Project; Phase II Project.................. 91
Section 12.19. Assumption of the Notes.............................. 92
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APPENDICES:
Appendix A Definitions
Exhibit A to
Appendix A Completion Tests
TABLE OF ANNEXES
Annex A Pricing Assumptions
TABLE OF SCHEDULES
Schedule 3.1(h)(ii) Title; Liens re: Transfer and Conveyance
Schedule 5.22 Bank Accounts
TABLE OF EXHIBITS
Exhibit A Form of Section 5.4(d) Certificate
Exhibit B Form of Semiannual Operating Report (Section 5.4(e))
Exhibit C Form of Annual Operating Budget (Section 5.5)
Exhibit D Form of Subordination Provisions for Debt Instruments
Between Lessee and Pledgor (Section 5.14(b))
Exhibit E Form of Section 11.1(b)(ix) Certificate by Lessee
Confirmed by the Engineering Consultant
Exhibit F Form of Transfer Agreement (Section 7.1)
Exhibit G Form of Equity Investor Guaranty (Section 7.1)
Exhibit H Completion Notice
Exhibit I Appraisal Assumptions
TABLE OF SCHEDULES TO APPENDIX A
Schedule I Real Estate Documents
Schedule II Security Documents
TABLE OF EXHIBITS TO APPENDIX A
Exhibit A Completion Tests
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT, dated as of May 18, 2005 (this
"Participation Agreement" or this "Agreement"), is among (i) Puna Geothermal
Venture, a Hawaii general partnership (the "Lessee"), (ii) SE Puna, L.L.C., a
Delaware limited liability company (the "Owner Lessor"), (iii) Wilmington Trust
Company, a banking corporation organized and existing under the laws of the
State of Delaware, in its individual capacity (the "Trust Company"), (iv) SE
Puna Lease, L.L.C., a Delaware limited liability company (the "Equity
Investor"), (v) AIG Annuity Insurance Company, American General Life Insurance
Company and Allstate Life Insurance Company (each a "Noteholder" and,
collectively, the "Noteholders") and (vi) Union Bank of California, N.A., not in
its individual capacity, but solely as trustee under the Indenture (the
"Indenture Trustee").
WITNESSETH:
WHEREAS, KLDC is the owner in fee simple of the Project Site, subject
to the rights of the State of Hawaii in the Geothermal Resource, and KLDC leased
the Project Site to KLP pursuant to the Master Surface Lease;
WHEREAS, the State of Hawaii leased the right to develop the
Geothermal Resource to KLP pursuant to the Master Resource Lease;
WHEREAS, KLP subleased the Project Site to the Lessee pursuant to the
Power Plant Sublease and granted certain easements relating to the Project Site
to the Lessee pursuant to the Delivery System Grant of Easements;
WHEREAS, KLP subleased the right to develop the Geothermal Resource to
the Lessee pursuant to the Resource Sublease;
WHEREAS, the Lessee is the owner of the Project located on the Project
Site;
WHEREAS, the Lessee desires to (i) transfer all right, title and
interest (other than legal title) in its interest in the Project to the Owner
Lessor pursuant to the Head Lease, (ii) sublease the Project Site to the Owner
Lessor for the term of the Head Lease pursuant to the Sublease of Power Plant
Sublease and the Sub-Grant of Delivery System Grant of Easements, (iii) sublease
its rights to develop the Geothermal Resource to the Owner Lessor pursuant to
the Sublease of Resource Sublease, (iv) assign as security the Lessee's interest
in certain Project Documents to the Owner Lessor pursuant to the Lessee Security
Agreement, (v) assign as security the Lessee's right, title and interest in
and to the Project Site and certain third party consents related thereto to the
Owner Lessor pursuant to certain Security Documents, (vi) lease the Project from
the Owner Lessor pursuant to the Project Lease, (vii) sublease the Project Site
from the Owner Lessor for the term of the Project Lease pursuant to the
Sub-Sublease of the Power Plant Sublease and the Sub-Sub-Grant of Delivery
System Grant of Easements and (viii) sub-sublease the rights of the Owner Lessor
to develop the Geothermal Resource from the Owner Lessor pursuant to the
Sub-Sublease of Resource Sublease;
WHEREAS, the Owner Lessor desires to (i) accept the transfer of all
right, title and interest (other than legal title) in the Lessee's interest in
the Project from the Lessee pursuant to the Head Lease, (ii) sublease the
Project Site from the Lessee for the term of the Head Lease pursuant to the
Sublease of Power Plant Sublease and the Sub-Grant of Delivery System Grant of
Easements, (iii) sublease the Lessee's rights to develop the Geothermal Resource
from the Lessee pursuant to the Sublease of Resource Sublease, (iv) receive a
security interest in the Lessee's right, title and interest in certain Project
Documents from the Lessee pursuant to the Lessee Security Agreement, (v) receive
a security interest in the Lessee's right, title and interest in and to the
Project Site and receive certain third party consents related thereto pursuant
to certain Security Documents, (vi) lease the Project to the Lessee pursuant to
the Project Lease, (vii) sub-sublease the Project Site to the Lessee for the
term of the Project Lease pursuant to the Sub-Sublease of the Power Plant
Sublease and the Sub-Sub-Grant of Delivery System Grant of Easements and (viii)
sub-sublease its rights to develop the Geothermal Resource to the Lessee
pursuant to the Sub-Sublease of Resource Sublease;
WHEREAS, concurrently with the execution and delivery of this
Participation Agreement, the Pledgor has entered into the Lessee Partners
Interest Pledge Agreement and the Lessee Partners have entered into the PGV
Interests Pledge Agreement each in favor of the Owner Lessor to secure the
obligations of the Lessee under the Operative Documents;
WHEREAS, concurrently with the execution and delivery of this
Participation Agreement, the Equity Investor has entered into the LLC Agreement
with the Trust Company, pursuant to which the Owner Lessor has been created and
is authorized to, among other things and subject to the terms and conditions
thereof and hereof, lease the Project from the Lessee for the Head Lease Term
pursuant to the Head Lease, sublease the Project Site from the Lessee for the
Head Lease Term pursuant to the Sublease of the Power Plant Sublease and the
Sub-Grant of Delivery System Grant of Easements, take a security interest in the
Lessee's right, title and interest in certain Project Documents pursuant to the
Lessee Security Agreement, take a security interest in the Lessee's right, title
and interest in and to the Project Site and certain, third party consents
related thereto pursuant to certain Security Documents, lease the Project to the
Lessee for the Project Lease Term pursuant to the Project Lease and sub-sublease
the
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Project Site to the Lessee for the Project Lease Term pursuant to the
Sub-Sublease of the Power Plant Sublease and the Sub-Sub-Grant of Delivery
System Grant of Easements;
WHEREAS, in order to obtain a portion of the funds necessary to pay
the Head Lease Rent pursuant to the Head Lease, the Owner Lessor desires to
issue and sell to the Noteholders on the Closing Date Senior Notes pursuant to
the Indenture and secure its obligations thereunder by assigning to the
Indenture Trustee, among other things, its interests in the Project, the Project
Site, the Geothermal Resource and the Project Documents and certain of the
Operative Documents executed in connection therewith, all in accordance with the
terms and conditions of the Operative Documents;
WHEREAS, subject to the terms and conditions hereof, the Noteholders
are willing to purchase the relevant Senior Notes from the Owner Lessor on the
Closing Date;
WHEREAS, concurrently with the execution and delivery of the Head
Lease and the Project Lease, the Lessee, the Owner Lessor, the Equity Investor
and the Indenture Trustee will enter into the Depositary Agreement with the
Depositary Bank, pursuant to which certain Accounts will be created, and the
Lessee will deposit into the Senior Rent Reserve Account and the Junior Rent
Reserve Account, the amounts required pursuant to Section 4 of the Depository
Agreement; and
WHEREAS, the parties hereto desire to make certain deposits on the
Closing Date in accordance with the terms of the Depositary Agreement; and
WHEREAS, the parties hereto desire to consummate the transactions
contemplated hereby and by the other Operative Documents.
NOW, THEREFORE, in consideration of the premises, the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT
The capitalized terms used in this Participation Agreement, including
the foregoing recitals, and not otherwise defined herein shall have the
respective meanings specified in Appendix A hereto. The general provisions of
Appendix A shall apply to this Participation Agreement.
SECTION 2. PARTICIPATION; CLOSING DATE; TRANSACTION COSTS
Section 2.1. Agreement to Participate.
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Subject to the terms and conditions of this Agreement, and in reliance
on the agreements, representations and warranties made herein, the parties agree
to participate in the Transaction as described in this Section 2.1 on the
Closing Date as follows:
(a) the Equity Investor agrees to provide funds to the Owner
Lessor in an amount sufficient to (i) fund the Equity Investment and (ii) pay
the Transaction Costs that the Owner Lessor is responsible to pay pursuant to
Section 2.4 hereof (together, the "Equity Investor's Commitment");
(b) the Lessee agrees to (i) lease its interest in the Project to
the Owner Lessor pursuant to the Head Lease, (ii) sublease the Project Site to
the Owner Lessor for the term of the Head Lease pursuant to the Sublease of
Power Plant Sublease and the Sub-Grant of Delivery System Grant of Easements,
(iii) assign as security the Lessee's right, title and interest in certain
Project Documents to the Owner Lessor pursuant to the Lessee Security Agreement
(iv) assign as security the Lessee's right, title and interest in and to the
Project Site to the Owner Lessor pursuant to certain Security Documents and (u)
sublease to the Owner Lessor certain interests with respect to the Geothermal
Resource which has been leased to the Lessee pursuant to the Resource Sublease,
such sublease to be made pursuant to the Sublease of Resource Sublease; the
Owner Lessor agrees to (v) lease the Lessee's interest in the Project from the
Lessee pursuant to the Head Lease, (w) sublease the Project Site from the Lessee
for the term of the Head Lease pursuant to the Sublease of Power Plant Sublease
and the Sub-Grant of Delivery System Grant of Easements, (x) receive a security
interest in the Lessee's right, title and interest in certain Project Documents
from the Lessee pursuant to the Lessee Security Agreement (y) accept an
assignment as security for the Lessee's right, title and interest in and to the
Project Site pursuant to certain Security Documents and (z) sublease the
Lessee's interest in the Geothermal Resource from the Lessee pursuant to the
Sublease of Resource Sublease;
(c) the Owner Lessor agrees to (i) lease the Project to the
Lessee pursuant to the Project Lease, (ii) sub-sublease the Project Site to the
Lessee for the term of the Project Lease pursuant to the Sub-Sublease of Power
Plant Sublease and Sub-Sub-Grant of Delivery System Grant of Easements and (iii)
sub-sublease its interest in the Geothermal Resource to the Lessee pursuant to
the Sub-Sublease of Resource Sublease; the Lessee agrees to (x) lease the
Project from the Owner Lessor pursuant to the Project Lease, (y) sub-sublease
the Project Site from the Owner Lessor for the term of the Project Lease
pursuant to the Sub-Sublease of the Power Plant Sublease and the Sub-Sub-Grant
of Delivery System Grant of Easements and (z) sublease the Owner Lessor's
interest in the Geothermal Resource from the Owner Lessor pursuant to the
Sub-Sublease of Resource Sublease;
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(d) the Indenture Trustee agrees to enter into and act as the
trustee under the Indenture pursuant to which the Senior Notes will be issued;
(e) the Owner Lessor agrees to (i) enter into the Indenture, (ii)
issue the Senior Notes pursuant to the Indenture, and (iii) grant to the
Indenture Trustee liens and security interests in the Project, the Project Site,
the Project Document Interest and certain of the Operative Documents executed in
connection therewith (including the Lessee Partners Interest Pledge Agreement
and the PGV Interests Pledge Agreement) to secure its obligations thereunder;
(f) the Initial Noteholders agree to purchase the Senior Notes,
issued pursuant to the Indenture for a purchase price, in the case of each
Noteholder, not to exceed such Noteholder's Commitment;
(g) the Lessee, the Owner Lessor, the Equity Investor and the
Indenture Trustee agree to enter into the Depositary Agreement with the
Depositary Bank, pursuant to which, among other things, the Lessee will create a
security interest in favor of the Owner Lessor in the Accounts created thereby,
and the Owner Lessor will assign its rights in respect of certain Accounts to
the Indenture Trustee;
(h) the Owner Lessor agrees to use the funds received from the
Equity Investor and the Noteholders pursuant to clauses (a)(i) and (f),
respectively, of this Section 2.1 to (i) pay the Head Lease Rent, (ii) make the
deposits on the Closing Date as set forth in the Depositary Agreement;
(i) the Equity Investor and the Lessee agree to enter into the
Tax Indemnity Agreement;
(j) the Owner Lessor agrees to pay all Transaction Costs payable
by it pursuant to Section 2.4 hereof;
(k) the Lessee agrees to deposit into the Senior Rent Reserve
Account and the Junior Rent Reserve Account, the amounts required pursuant to
Section 4 of the Depositary Agreement; and
(l) the parties agree to enter into the agreements referred to
above and the other Operative Documents in form and substance satisfactory to
the Participants.
Section 2.2. Closing Date; Procedure for Participation.
(a) Closing Date. The closing of the Transaction (the "Closing")
shall take place commencing at 10:00 a.m., New York City time, on the Scheduled
Closing Date, or such other date as the Lessee shall specify pursuant to Section
2.3(a) (the
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"Closing Date"). The Closing shall take place at the offices of Xxxxxxxxxx &
Xxxxx LLP in New York, NY.
(b) Procedures for Funding. Unless the Closing Date shall have
been postponed pursuant to Section 2.3(a), subject to the terms and conditions
of this Participation Agreement, the Equity Investor shall make the Equity
Investor's Commitment available not later than 10:00 a.m., New York City time,
on the Closing Date, by transferring or delivering such amount, in funds
immediately available on such Closing Date, to the Trust Company.
(c) Expiration of Commitments. The obligation of the Equity
Investor to make its Equity Investment and the obligations of the Initial
Noteholders to purchase Senior Notes shall expire at 11:59 p.m., New York City
time, on May 31, 2005. If the Closing Date has not occurred on or before May 31,
2005, the Transaction Parties shall have no obligation to consummate the
Transaction and, except as provided in Sections 2.3, 2.4, 9.1 and 9.2, and in
any funding indemnity letter between the Lessee and the Initial Noteholders, all
obligations of the Transaction Parties shall cease and terminate.
Section 2.3. Postponement of Closing; Investment of Funds.
(a) Postponement of the Closing. The Closing may be postponed
from time to time to a date no later than May 31, 2005 for any reason if the
Lessee gives the Equity Investor, the Owner Lessor, the Indenture Trustee and
the Initial Noteholders a facsimile or telephonic (confirmed in writing) notice
of such postponement and notice of the date to which the Closing has been
postponed, and such notice of postponement shall, for purposes of Section
2.3(b), be deemed to be received by the Equity Investor prior to making the
Equity Investor's Commitment available if it is received by the Equity Investor
on or before 10:00 a.m., New York City time, on the date the Closing was
scheduled to occur. If the Equity Investor shall have provided funds in
accordance with Section 2.2(b) and the Closing is postponed, such funds shall be
returned to the Equity Investor, as soon as reasonably practicable but in no
event later than the Business Day following the date of such notice, unless the
Equity Investor shall have otherwise directed. All funds made available pursuant
to Section 2.2(b) will be held by the Trust Company in trust for the Equity
Investor and shall not be part of the Indenture Estate or the Lessor Estate, and
such funds shall remain the sole property of the Equity Investor unless and
until (i) released by the Equity Investor and made available to the Owner Lessor
and applied by the Owner Lessor to pay the Head Lease Rent or the Transaction
Costs related to the Closing, or (ii) returned to the Equity Investor, as
provided in this Section 2.3(a).
(b) Investment of Funds. If the Equity Investor has made the
Equity Investor's Commitment available to the Trust Company in accordance with
Section
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2.2(b) prior to receipt of a postponement notice under Section 2.3(a), the
Closing does not occur on the date such funds were required to be deposited, and
the Trust Company is unable to return such funds to the Equity Investor on such
date, the Trust Company shall, subject to Section 2.3(a) above, use reasonable
efforts to invest such funds from time to time at the written direction of the
Lessee and at the Lessee's sole expense and risk, in Permitted Investments until
such funds can be returned to the Equity Investor. If on the date the Equity
Investor's Commitment was required to be deposited, the Equity Investor has made
the Equity Investor's Commitment available to the Trust Company in accordance
with Section 2.2(b), the Closing does not occur on such date, and the Trust
Company has not returned such funds to the Equity Investor on or before 1:00
p.m., New York City time, on such date, then the Lessee shall reimburse the
Equity Investor for loss of the use of such funds at the Applicable Rate for
each day, from and including the day that such funds were made available to the
Trust Company by the Equity Investor to, but excluding, the earlier of (i) the
day that such funds have been returned to the Equity Investor pursuant to
Section 2.3(a) (funds received by the Equity Investor after 1:00 p.m., New York
City time, on any day shall be deemed to be returned on the next succeeding
Business Day) and (ii) the Closing Date. Subject to payment for the account of
the Equity Investor of any reimbursement for loss of use of funds due to it at
the Applicable Rate, any net gain realized on the investment of such funds
(including interest) shall be paid to the Lessee by the Trust Company on the
earlier of (i) the date such funds are returned to the Equity Investor pursuant
to Section 2.3(a) and (ii) the Closing Date. The Trust Company shall not be
liable for any interest on or loss resulting from such investments and, if such
funds are made available to the Owner Lessor and utilized to pay the Head Lease
Rent or Transaction Costs on the Closing Date, the Lessee shall reimburse the
Trust Company for any net loss realized on the investment of such funds. If such
funds are not so utilized, the Lessee shall, in addition to its obligation to
reimburse the Equity Investor for loss of use as provided above, reimburse the
Equity Investor on the date such funds are returned to the Equity Investor for
any net loss realized on the investment of such funds. In order to obtain funds
for payment of the Head Lease Rent or Transaction Costs or to return funds made
available to the Owner Lessor by the Equity Investor, the Trust Company is
authorized to sell any investments or obligations purchased as aforesaid.
Section 2.4. Transaction Costs. If the Transaction is consummated,
Transaction Costs substantiated or otherwise supported in reasonable detail
shall be paid by the Owner Lessor (with funds provided by the Equity Investor);
provided, however, that the Owner Lessor's obligation to pay such Transaction
Costs shall not exceed $2,500,000 and the Lessee shall pay all Transaction Costs
in excess of $2,500,000. If the transaction is consummated, all other fees,
costs and expenses not constituting Transaction Costs but incurred by the
Lessee, the Owner Lessor and the Equity Investor on or prior to the Closing Date
shall be for such party's respective account. If the transaction is not
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consummated, the Lessee shall pay all Transaction Costs in accordance with any
applicable fee letters or other agreements regarding fees.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of the Lessee. The Lessee
represents and warrants that, as of the date hereof:
(a) Due Organization; Conduct of Business, Etc. It is a general
partnership duly formed, validly existing, and in good standing under the laws
of the State of Hawaii, is duly licensed or qualified and in good standing in
each jurisdiction where the character of its properties or nature of its
activities makes such qualification necessary and has the partnership power and
authority to (i) own or hold under lease the property it purports to own or hold
under lease, (ii) carry on its business as now being conducted and as presently
proposed to be conducted and (iii) enter into and perform its obligations under
each of the Operative Documents to which it is or will be a party. The Lessee
Partners are the only partners of the Lessee. It is engaged solely in the
business of electricity generation and sales, the leasing, operation,
electricity sales, maintenance and financing of the Project, and the leasing
and/or financing of facilities, equipment or any other assets related thereto.
(b) Due Authorization; Enforceability, Etc. This Agreement and
each of the other Operative Documents to which the Lessee is or will be a party
have been or, when executed and delivered, will be duly authorized, executed and
delivered by all necessary action by the Lessee and, assuming the due
authorization, execution and delivery by and enforceability against each other
party thereto, this Agreement constitutes and, when executed and delivered, the
other Operative Documents to which the Lessee is or will be a party will
constitute, the legal, valid and binding obligations of the Lessee, enforceable
against it in accordance with their respective terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
arrangement, moratorium or other laws relating to or affecting the rights of
creditors generally and by general principles of equity. None of the Project
Documents to which the Lessee is a party have been amended or modified, except
as described in the respective definitions thereof.
(c) Non-Contravention. The execution, delivery and performance by
the Lessee of this Agreement and each of the other Operative Documents to which
it is or will be a party and the consummation by the Lessee of the transactions
contemplated hereby and thereby, do not and will not (i) contravene any
Applicable Law binding on the Lessee or its property, (ii) contravene any of the
Lessee's organizational documents, (iii) require any action, consent or approval
by any trustee or holder of Indebtedness of the Lessee or the Lessee Partners or
any Affiliate of such Person or under any other contract,
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agreement or instrument to which the Lessee is a party or by which the Lessee or
any of its property is bound or (iv) constitute a violation of or a default by
the Lessee under, or result in the creation of any Lien upon the property of the
Lessee (other than as permitted pursuant to any Operative Document) under, any
indenture, mortgage or other contract, agreement or instrument to which the
Lessee is a party or by which the Lessee or any of its property is bound
provided that if any such contravention or violation exists, such contravention
or violation would not result in one or more Claims against or being incurred by
the Lessee or against or in respect of the Project which when added to all other
Total Aggregate Claims, would result in Total Aggregate Claims in excess of
$1,500,000.
(d) Governmental Approvals; Governmental Actions.
(i) All Governmental Approvals which are required to be
obtained as of the Closing Date by or on behalf of the Lessee in connection
with (A) the acquisition, construction, operation and maintenance of the
Project, (B) the performance by the Lessee or the Owner Lessor of the
Operative Documents or (C) the leasing of the Project have been duly
obtained or made, were validly issued and are in full force and effect and
are not subject to any appeal or other judicial review. Except as set forth
in the Environmental Report, the Lessee is in compliance with all
Governmental Approvals required to be obtained as of the Closing Date.
(ii) No authorization, determination or approval or other
action by, and no notice to or filing or registration with, any
Governmental Entity or under any Applicable Law is required for the due
execution or delivery by the Lessee of the Operative Documents to which the
Lessee is or will be a party.
(e) Project Documents. Each of the Project Documents is in full
force and effect, and no default or breach exists under any Project Document
that permits the Lessee or, to the Lessee's Actual Knowledge, any other party
thereto, to terminate such Project Document or suspend its performance
thereunder or excuses such non-breaching party from any failure to perform
thereunder.
(f) Litigation. There is no pending or, to the Actual Knowledge
of the Lessee, threatened, arbitration, action, suit or proceeding against the
Lessee, or to the Actual Knowledge of the Lessee, no pending or threatened
action, suit or proceeding against the Project or any party to a Project
Document which, if adversely determined, would render this Participation
Agreement or any of the other Operative Documents ineffective or invalid or
would result in one or more Claims against or being incurred by the Lessee or
against or in respect of the Project which when added to all other Total
Aggregate Claims, would result in Total Aggregate Claims in excess of
$1,500,000.
9
(g) Chief Executive Office and Principal Place of Business of
Lessee and Location of the Project, Records, Etc.
(i) The chief executive office of the Lessee is located at
c/o Ormat Nevada Inc., 000 Xxxx Xxxxxx, Xxxxxx, Xxxxxx 00000. The Lessee is
a registered Hawaiian general partnership that is "located" (as such term
is used in Section 9-307 of the Hawaiian UCC) in the State of Hawaii.
(ii) The Project is located on and surrounded by the Project
Site in Puna on the island of Hawaii and is accessible by public road.
(h) Title; Liens.
(i) The Lessee has (A) valid legal title to the Project,
free and clear of all Liens other than Permitted Liens, described in
clauses (a) through (c) of the definition thereof and (B) a valid leasehold
interest in and to the Project Site, free and clear of all Liens, other
than, Permitted Liens described in clauses (a) through (c) and (j) of the
definition thereof and, in the case of both clauses (A) and (B) above, any
liens set forth in Schedule 3.1(h)(i) hereto and Permitted Encumbrances.
(ii) Upon execution and delivery of the Financing Documents
and recording or filing (as appropriate) of the documents and instruments
referred to in Schedule 3.1(h)(ii) in accordance with Section 4, (A) all
right, title and interest (other than legal title) to the Project will be
duly, validly and effectively conveyed and transferred to the Owner Lessor,
free and clear of all Liens other than Permitted Liens described in clauses
(a) through (c) of the definition thereof, (B) a valid leasehold interest
in the Project Site will be duly, validly and effectively leased or
conveyed, as applicable, to the Owner Lessor upon the terms and conditions
in the Sublease of Power Plant Sublease and the Sub-Grant of Delivery
System Grant of Easement, free and clear of all Liens, other than Permitted
Liens described in clauses (a) through (c) and (j) of the definition
thereof and (C) the Owner Lessor will be the sublessee of the Lessee's
interest in the Resource Sublease after giving effect to the Sublease of
Lessee's Interest in the Resource Sublease, and, in the case of clauses
(A), (B) and (C) above, subject to any liens set forth in Schedule
3.1(h)(i) hereto and Permitted Encumbrances.
(iii) When duly authorized, executed and delivered by each
of the parties thereto, the Indenture will create a valid Lien in favor of
the Indenture Trustee in the Indenture Estate and no filing, recording,
registration or notice with any federal or state Governmental Entity will
be necessary to establish or, except for such filings and recordings as
will be made pursuant to Section 4(r), to perfect,
10
or give record notice of, the Lien in favor of the Indenture Trustee in the
Indenture Estate to the extent such Lien may be perfected by filings or
recordings.
(iv) When duly authorized, executed and delivered by each of
the parties thereto, the Lessee Security Agreement will create a valid Lien
in favor of the Owner Lessor in the Security Agreement Collateral (as
defined in the Lessee Security Agreement) and no filing, recording,
registration, or notice with any federal or state Governmental Entity will
be necessary to establish or, except for such filings and recordings as
will be made pursuant to Section 4(r), to perfect, or give record notice
of, the Lien in favor of the Owner Lessor in the Security Agreement
Collateral (as defined in the Lessee Security Agreement) to the extent that
such Lien may be perfected by filings or recordings.
(v) When duly authorized, executed and delivered by each of
the parties thereto, the Lessee Partners Interest Pledge Agreement and the
PGV Interests Pledge Agreement will create valid Liens in favor of the
Owner Lessor in the ownership interests covered thereby and no filing,
recording, registration, or notice with any federal or state Governmental
Entity will be necessary to establish or, except for such filings and
recordings as will be made pursuant to Section 4(r), to perfect, or give
record notice of, the Liens in favor of the Owner Lessor in such ownership
interests to the extent that such Liens may be perfected by filings or
recordings.
(vi) When duly authorized, executed and delivered by each of
the parties thereto, the Depositary Agreement will create a valid Lien in
the Accounts in favor of the Owner Lessor and, in turn, in favor of the
Indenture Trustee, and no filing, recording, registration, or notice with
any federal or state Governmental Entity will be necessary to establish or,
except for such filings and recordings as will be made pursuant to Section
4(r), to perfect, or give record notice of, the Lien in favor of the Owner
Lessor and, in turn, in favor of the Indenture Trustee in the Accounts, to
the extent that such Lien may be perfected by filings or recordings.
(vii) None of the Permitted Liens (excluding any Owner
Lessor's Liens, Equity Investor's Liens or other Permitted Liens relating
to the Indenture Trustee) will adversely interfere with the ownership, use,
operation or possession of the Project or the Project Site or the use or
exercise by the Owner Lessor of its rights under the Project Lease, the
Sublease of Power Plant Sublease, the Sub-Grant of Delivery System Grant of
Easements, the Lessee Partners Interest Pledge Agreement, the PGV Interests
Pledge Agreement, the Sublease of Resource Sublease or the Lessee Security
Agreement.
11
(viii) The Lessee has made all payments required to be made
by it under the Project Documents; and no landlord Lien has been filed, and
no claim is being asserted, with respect to any such payments.
(i) Regulation. The use by the Lessee of the Head Lease Rent will
not violate or result in a violation of Section 7 of the Exchange Act, or any
regulations issued pursuant thereto, including Regulations T, U and X of the
regulations of the Board of Governors of the Federal Reserve System.
(j) Utility Representations
(i) Holding Company. The Lessee is not a "public-utility
company" or a "holding company", or an "affiliate" of a "holding company"
or of a "public-utility company", or a "subsidiary company" of a "holding
company", within the meaning of PUHCA nor is Lessee subject to regulation
under PUHCA.
(ii) The Lessee is not a "public utility" or a "transmission
utility" under the Federal Power Act.
(iii) Status. The Lessee is an EWG (as defined in PUHCA). As
such, the Lessee is not, nor will any of the Owner Lessor, the Equity
Investor, the Indenture Trustee or the Noteholders be, solely as a result
of its or their execution, delivery or performance of this Agreement or the
other Operative Documents or the transactions contemplated thereby (other
than with respect to the exercise of any remedies thereunder that would
result in direct ownership or control of the Project by any of the Owner
Lessor, the Equity Investor, the Indenture Trustee or the Noteholders,
rather than ownership or control of the Lessee by any of these entities),
be subject to regulation as a "public-utility company", a "holding company"
or a "subsidiary company" or an "affiliate" of any of the foregoing, under
PUHCA.
(iv) The Project is either (A) a qualifying, small power
production facility under Subchapter 2 of the Hawaii Public Utilities
Commission's Standards for Small Power Production and Cogeneration in the
State of Hawaii, Chapter 74 of Title 6 of the State of Hawaii's
Administrative Rules or (B) a "non-fossil fuel producer" within the meaning
of Section 269-27.2, Hawaii Revised Statutes.
(v) Public Utility. The Lessee is not, nor will any of the
Owner Lessor, the Equity Investor, the Indenture Trustee or the Noteholders
be, solely as a result of the execution, delivery or performance of this
Agreement or the other Operative Documents by any of them or the
transactions contemplated thereby, so
12
long as such Person does not operate the Project and is not otherwise
engaged in the business of producing, selling or transmitting electric
power, subject to regulation: (i) respecting the rates of electric
utilities or material financial and organizational regulation of electric
utilities under the Applicable Law of the State of Hawaii or (ii) otherwise
as an electric or other regulated utility, however denominated, under the
Applicable Law of the United States of America, including for the avoidance
of doubt the Federal Power Act, or the State of Hawaii.
(k) Investment Company Act. The Lessee is not an "investment
company" as defined in the Investment Company Act of 1940 and the rules and
regulations of the SEC promulgated thereunder.
(l) Securities Act. Neither the Lessee or any Affiliate thereof
nor anyone authorized by the Lessee or any Affiliate thereof has directly or
indirectly offered or sold any interest in the Project, the Member Interest, the
Senior Notes or any part thereof, or in any similar security or lease, or in any
security or lease the offering of which for the purposes of the Securities Act
would be deemed to be part of the same offering as the offering of the Member
Interest or the Senior Notes or any part thereof or solicited any offer to
acquire any of the same in violation of the registration requirements of Section
5 of the Securities Act. Neither the Lessee, any Affiliate thereof, nor any
agent, advisor or representative thereof, has engaged in general advertising or
general solicitation (as such terms are used in Rule 502(c) of Regulation D of
the Securities Act) with respect to the Senior Notes.
(m) Environmental Matters.
(i) Except as disclosed in the Environmental Report, (A) the
Lessee has not used, handled, generated, stored or Released any Hazardous
Materials in a manner that could reasonably be expected to subject the
Indenture Trustee, the Owner Lessor, the Equity Investor, any Noteholder or
the Lessee to liability under any Environmental Law; (B) there are no
Hazardous Materials used, stored, present or Released at or on the Project
or the Project Site, other than in compliance with Environmental Law; and
(C) there is no pending action, proceeding, investigation or inquiry by any
Person with respect to or asserting liability for the presence or Release
of Hazardous Materials in, on, from or to the Project or the Project Site,
or at any other location for which the Lessee could reasonably be liable,
provided that if such liability exists, such liability would not result in
one or more Claims against or being incurred by the Lessee or against or in
respect of the Project which when added to all other Total Aggregate
Claims, would result in Total Aggregate Claims in excess of $1,500,000.
13
(ii) Except as disclosed in the Environmental Report, the
Lessee is complying with, and since June 3, 2004 has complied with, and the
Project has been constructed and is being operated in compliance with, all
Environmental Laws, provided that if such failure to so comply exists, such
failure would not result in one or more Claims against or being incurred by
the Lessee or against or in respect of the Project which when added to all
other Total Aggregate Claims, would result in Total Aggregate Claims in
excess of $1,500,000, and there is no pending action, proceeding or, to the
Lessee's Actual Knowledge, investigation or inquiry by any Person with
respect to asserting liability for a violation of or noncompliance with any
Environmental Laws, and there are no capital expenditures currently
required under applicable Environmental Laws in order to maintain such
compliance, provided that, in each case, if such a Claim exists, such Claim
when combined with any Claims against or being incurred by the Lessee or
against or in respect of the Project which when added to all other Total
Aggregate Claims, would not result in Total Aggregate Claims in excess of
$1,500,000.
(iii) Except as disclosed in the Environmental Report, to
the Lessee's Actual Knowledge, there is not and has not been any
Environmental Condition (A) at, on, under or from the Project or the
Project Site or (B) resulting from or arising in connection with the
operation of the Project, or any other circumstances, actions, activities
or events that could reasonably be expected to (x) result in any danger of
foreclosure, sale, forfeiture or loss of, or imposition of a Lien on, the
Project or Project Site, (y) result in the impairment of the ownership,
construction, operation, use, leasing or maintenance of the Project or the
Project Site, or (z) reasonably form the basis of any liability under an
Environmental Law to the Lessee, or any liability (civil or criminal) to
the Indenture Trustee, the Equity Investor, the Owner Lessor or any
Noteholder, provided that if any such lien, impairment or liability exists,
they would not result in one or more Claims against or being incurred by
the Lessee or against or in respect of the Project which when added to all
other Total Aggregate Claims, would result in Total Aggregate Claims in
excess of $1,500,000.
(iv) Except as disclosed in the Environmental Report, no
Governmental Approvals are required under Environmental Laws to own,
construct, operate, use, lease or maintain the Project in accordance with
the Operative Documents. All Governmental Approvals necessary to operate
the Project have been obtained and are in full force and effect and none of
such Governmental Approvals are subject to any appeal, or any other
judicial review and the Lessee is in compliance with the provisions of all
such Governmental Approvals, which involve any danger of impairment of the
use, operation or maintenance of the Project or the Project Site in any
respect, including the
14
rescission, termination or modification of any such Governmental Approvals,
provided that if such a failure to obtain, maintain the effectiveness of,
or comply with such Governmental Approvals exists, such failure is not
reasonably likely to result in one or more Claims against or being incurred
by the Lessee or against or in respect of the Project which when added to
all other Total Aggregate Claims, would result in Total Aggregate Claims in
excess of $1,500,000.
(n) Applicable Law. The Lessee is in compliance with all
Applicable Laws (excluding Environmental Laws which is covered in Section 3.1(m)
hereunder) relating to the operation, maintenance, use or ownership of the
Project, except where noncompliance is not reasonably likely to result in one or
more Claims against or being incurred by the Lessee or against or in respect of
the Project which when added to all other Total Aggregate Claims, would result
in Total Aggregate Claims in excess of $1,500,000.
(o) ERISA. Assuming the correctness of the representations of the
Equity Investor in Section 3.4(g) and of the Noteholders in Section 3.5(d), the
Transaction will not constitute a "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975(c)(1) of the Code, and will not involve any
transaction in connection with which a penalty could be imposed under Section
502(i) of ERISA or a tax could be imposed pursuant to Section 4975 of the Code.
(p) No Lease Event of Default; No Event of Loss. No Lease Default
or Lease Event of Default has occurred or will occur upon or as a consequence of
the execution and delivery of the Operative Documents. No Event of Loss has
occurred or will occur upon the execution and delivery of the Operative
Documents.
(q) Property Rights, Utilities, Etc; Sufficiency and Delivery of
Project Documents.
(i) All utility services necessary for the use and operation
of the Project at the levels of performance contemplated by the Operative
Documents for the period from the date hereof through the term of the
Project Lease (it being understood that such level shall be up to 30 MW
unless the Owner Lessor has purchased the Expansion Project) (including
electrical, water and sewage services and facilities) are available to the
Project pursuant to the Project Documents or otherwise on commercially
reasonable terms.
(ii) The services to be performed, the materials to be
supplied and the property interests, easements and other rights granted
pursuant to the Project Documents or otherwise publicly available on
commercially reasonable terms comprise all of the services, materials and
property interests required for the
15
acquisition, development, installation, completion, operation and
maintenance of the Project (including access to, and transmission of
electricity from, the Project Site) in accordance with Applicable Laws and
the Project Documents.
(r) Eminent Domain. There is no action pending or, to the
Lessee's Actual Knowledge, threatened by a Governmental Entity or other Person
to initiate a taking or use of the Project or the Project Site through
condemnation, seizure, requisition of title, power of eminent domain or
otherwise, which is reasonably likely to have an adverse effect on the value
(current and residual), utility or useful life of the Project or would prevent
or interfere with the use or operation of the Project, provided that if such
interference exists, it would not result in one or more Claims against or being
incurred by the Lessee or against or in respect of the Project which when added
to all other Total Aggregate Claims, would result in Total Aggregate Claims in
excess of $1,500,000.
(s) Permitted Encumbrances. There are no violations of or
proceedings or actions pending or, to the Lessee's Actual Knowledge, threatened
with respect to any easements, reciprocal easement agreements, declarations,
development agreements or recorded restrictions or covenants which (i) would
result in one or more Claims against or being incurred by the Lessee or against
or in respect of the Project which when added to all other Total Aggregate
Claims, would result in Total Aggregate Claims in excess of $1,500,000 or (ii)
enjoin or prevent (A) the use, occupancy or operation of the Project or the
Project Site for the purposes contemplated by the Operative Documents or (B) the
performance by the Lessee of its obligations under this Agreement or any other
Operative Document the failure of which performance would result in one or more
Claims against or being incurred by the Lessee or against or in respect of the
Project which when added to all other Total Aggregate Claims, would result in
Total Aggregate Claims in excess of $1,500,000.
(t) Power Purchase Agreements; Transmission Agreements. Except
for the Power Purchase Agreement and the Transmission Agreements, there are no
contracts or agreements to which Lessee is a party providing for the sale of the
energy produced by the Project.
(u) Geothermal Resource. Except for the Resource Sublease, the
Resource Sublease Partial Assignment, the Sublease of Resource Sublease and the
Sub-Sublease of Resource Sublease, there are no contracts or agreements to which
Lessee is a party providing for the sale or transfer of the Geothermal Resource.
(v) Financial Statements; Accuracy of Information; Projections.
(i) The unaudited financial statements of the Lessee dated
as of December 31, 2004 for the period starting on June 3, 2004 and ending
on
16
December 31, 2004 and the unaudited pro forma balance sheet of the Lessee
as of the quarter ended not more than sixty (60) days prior to the Closing
Date and, in each case, delivered to the Participants pursuant to Section
4(cc), are the most recent financial statements prepared by the Lessee
prior to the execution and delivery of this Participation Agreement, and
are true and correct, and fairly present the financial condition, results
of operations and changes in cash flows of the Lessee on such date and for
such period then ended, in conformity with GAAP applied on a consistent
basis (subject to normal year-end audit adjustments). Except as have been
disclosed in writing by the Lessee to the Participants, there are no
liabilities, direct or contingent, which have accrued since the date of
such financial statements or such subsequent disclosure, except for any
liability that, if disclosed to any Participant, as the case may be, would
not be likely to adversely affect the decision of such Participant to enter
into the Transaction. Since the date of such financial statements, there
has been no change in the financial condition of the Lessee which has
resulted in a reduction of the tangible net worth of the Lessee in an
amount of $500,000 or more, taking into account all changes previously
disclosed to the Participants.
(ii) All factual information (other than projections or
other "forward-looking" statements) provided by or on behalf of the Lessee
to the Participants was true and correct, as of the date delivered or as of
the specific date of any particular items of information, and such
information did not, and as of the date hereof, does not omit to state any
fact necessary to make the statements contained in the information
providing not misleading in a way which would be likely to adversely affect
the decision of such Participant to enter into the Transaction. Any
historical factual information used in making such projections and other
"forward-looking" statements is, to the Lessee's Actual Knowledge, true and
accurate in all material respects. The Annual Operating Budget for 2005 and
the Projections delivered pursuant to Sections 4(h) and (o) herein (i) are
based on reasonable assumptions as to all legal and factual matters
material to the estimates set forth therein and (ii) have been prepared in
good faith and with due care, it being understood that the Projections were
prepared on the assumption that the Well Improvements are included in the
Project. To the Lessee's Actual Knowledge, any such information provided
with respect to any party to a Project Document (other than the Power
Purchaser) does not, as of the date delivered, omit to state any fact,
except for any fact that, if true or if disclosed to any Participant, as
the case may be, would not be likely to adversely affect the decision of
such Participant to enter into the Transaction.
(w) No Fees. Neither the Lessee nor any Person authorized or
employed by the Lessee as agent or otherwise has taken any action the effect of
which would be to cause any Participant to be liable for any brokers', finders',
agents' or
17
advisors' fees or commissions or costs of any nature or kind claimed by or on
behalf of brokers, finders, agents or advisors in respect of the transactions
contemplated by the Operative Documents.
(x) Adequate Rights.
(i) Subject to the Owner Lessor's obtaining any necessary
Governmental Approvals and fulfilling all applicable requirements under the
Project Documents, it is the good faith belief of the Lessee as of the
Closing Date that the rights and interest to be made available to the Owner
Lessor pursuant to the Operative Documents permit, or will permit at such
time, during the period commencing on the expiration or termination of the
Project Lease Term and ending on the expiration of the Head Lease Term (A)
the location, occupation, interconnection, maintenance and repair of the
Project, (B) the use, operation and possession of the Project in accordance
with the Projections, (C) appropriate ingress to and egress from the
Project and the Project Site for any reasonable purpose in connection with
the exercise of rights under the Operative Documents and (D) the
transmission of electricity from the Project substantially in the manner
currently transmitted as of the Closing Date; provided, however, that this
representation is based solely upon the facts as they exist on the Closing
Date and Applicable Laws in effect on the Closing Date and existing market
conditions, and no representation, projection or other statement is being
made in this paragraph with respect to any change in law or regulations
including Environmental Laws (whether or not proposed or contemplated), any
change in market conditions, any other change in facts or circumstances
after the Closing Date; or any modification, improvement or change to the
Project or the Project Site after the expiration of the Project Lease Term.
(ii) There are no subleases, rental agreements or other
agreements conferring on any Person other than the Lessee the right to use
or occupy all or any portion of the Project or the Project Site except
those, if any, reflected in the Title Policies or permitted or arising
pursuant to the Operative Documents.
(y) Qualification to do Business. The qualification of the Owner
Lessor, the Equity Investor, the Trust Company, the Indenture Trustee or any
Noteholder to do business under the laws of the State of Hawaii or any political
subdivision thereof is not required solely as a consequence of the execution and
delivery of the Operative Documents, the making of the Equity Investment or the
Loans or, prior to expiration or termination of the Project Lease, the
performance by the Owner Lessor, the Equity Investor, the Trust Company, the
Indenture Trustee or the Noteholders of this Agreement or any other Operative
Document to which it is or will be a party; provided that no
18
representation is made as to the necessity for qualification in connection with
the exercise by any such party of any remedy under the Operative Documents or
prior to exercising any rights or remedies in a Hawaii court of competent
jurisdiction.
(z) ERISA and Employees. The Lessee does not sponsor, maintain,
administer, contribute to, participate in, or have any obligation to contribute
to or any liability under, any employee benefit plan within the meaning of
Section 3(3) of ERISA nor since the date which is six years immediately
preceding the Closing Date has Lessee established, sponsored, maintained,
administered, contributed to, participated in, had any obligation to contribute
to or liability under, any such plan. The Lessee does not have, nor is the
Lessee reasonably expected to have, any liability in respect to any defined
benefit pension plan of any ERISA Affiliate that is subject to Title IV of
ERISA.
(aa) Priority. Other than Permitted Liens described in clauses
(a) through (c) of the definition thereof, the Lessee has not pledged, assigned,
sold, granted a security interest in, or otherwise conveyed any of the
Collateral under the Lessee Security Agreement. The Lessee has not authorized
the filing of and is not aware of any financing statements against the Lessee
that include a description of collateral covering the Collateral under the
Lessee Security Agreement other than any financing statement relating to
Permitted Liens described in clauses (a) through (c) of the definition thereof.
Other than Permitted Liens, the Lessee is not aware of any judgment or tax liens
against the Lessee.
(bb) Insurance. All insurance required under Section 11 of the
Project Lease or any Operative Document is in full force and effect.
(cc) Pledge of the Accounts. Other than the security interest
granted to the Owner Lessor and, until the Lien of the Indenture has been
discharged, collaterally assigned to the Indenture Trustee pursuant to the
Depositary Agreement, the Lessee has not pledged, assigned, sold, granted a
security interest in, or otherwise conveyed any of the Accounts.
(dd) Taxes. All Taxes, if any, due and payable on or before the
Closing Date in connection with the execution, delivery, recording and filing of
this Agreement or any other Operative Document or any other document or
instrument contemplated hereby or thereby, have been duly paid in full by, or on
behalf of, the Lessee.
(ee) Access; Egress. Access to and egress from the Project and
the Project Site are available and provided by public and/or private roads fully
accessible by Lessee. To the Lessee's Actual Knowledge, there are no plans of
any Governmental Entity to change the highway or road system in the vicinity of
the Project or Project Site,
19
or to restrict or change access from any such highway or road to the Project or
Project Site, in either case, in any manner that would be likely to adversely
affect the decision of a Participant to enter into the Transaction.
(ff) Notices. To the Lessee's Actual Knowledge, there are no
outstanding written notices from any Governmental Entity or by any insurance
company which currently issues any insurance to the Lessee or by any board of
fire underwriters or other body exercising similar functions that any repairs or
work or capital improvements are required to be done at or with respect to the
Project or the Project Site provided that if such repairs or other work or
improvements referred to in such notices are required they would not result in
one or Claims against or being incurred by the Lessee or against or in respect
of the Project, which when added to all other Total Aggregate Claims, would
result in Total Aggregate Claims in excess of $1,500,000.
(gg) Business, Debt, Contracts, Etc. The Lessee is not a party to
or bound by any contract other than (a) the Operative Documents to which it is a
party, and the Puna Geothermal Venture partnership agreement and (b) any other
contract to which it is a party that, if disclosed to the Participants, would
not be likely to affect the decision of a Participant to enter into the
Transaction.
(hh) Intellectual Property. To the Lessee's Actual Knowledge, the
Lessee owns, possesses or can acquire on reasonable terms, adequate trademarks,
trade names and other rights to inventions, know-how, patents, copyrights,
confidential information and other intellectual property necessary to operate
the Project as contemplated by the Project Lease, and have not received any
notice of infringement of or conflict with asserted rights of others with
respect to any such intellectual property rights provided that if such a failure
exists, it would not result in one or more Claims against or being incurred by
the Lessee or against or in respect of the Project which when added to all other
Total Aggregate Claims, would result in Total Aggregate Claims in excess of
$1,500,000.
(ii) No Fraudulent Conveyance. Lessee is consummating the
transactions contemplated hereby, including transfer of certain assets and
properties to the Owner Lessor, in good faith and without any intent to defraud
creditors of Lessee or subsequent purchasers.
(jj) Abandonment. The Lessee has not abandoned the Project.
(kk) Bank Balances. As of the Closing Date, the aggregate balance
for the bank accounts identified on Schedule 5.22 hereto is at least $500,000
and such balance is sufficient to pay all Operating Costs which are or may
become due and
20
payable prior to the first Monthly Determination Date (as defined in the
Depositary Agreement) following the Closing Date.
Section 3.2. Representations and Warranties of the Owner Lessor. The Owner
Lessor represents and warrants that, as of the date hereof:
(a) Due Organization. The Owner Lessor is a duly organized and
validly existing limited liability company under the laws of the State of
Delaware of which the Equity Investor is the sole member, and has the power and
authority to enter into and perform its obligations under this Agreement and
each of the other Operative Documents to which it is or will be a party.
(b) Due Authorization; Enforceability; Etc.
(i) (A) This Agreement and each of the other Operative
Documents (other than the Senior Notes) to which the Owner Lessor is or
will be a party have been or when executed and delivered will be duly
authorized, executed and delivered by the Owner Lessor, and (B) assuming
the due authorization, execution and delivery by and enforceability against
each party hereto other than the Owner Lessor, this Agreement constitutes
and when executed and delivered each of the other Operative Documents
(other than the Senior Notes) to which it is or will be a party will
constitute the legal, valid and binding obligations of the Owner Lessor,
enforceable against the Owner Lessor in accordance with its terms, except
as the same may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, arrangement, moratorium or other laws relating
to or affecting the rights of creditors generally and by general principles
of equity.
(ii) Upon the execution of the Senior Notes by the Owner
Lessor and authentication thereof by the Indenture Trustee in accordance
with the Indenture and delivery of such Senior Notes against payment
therefor, the Senior Notes will constitute legal, valid and binding
obligations of the Owner Lessor, enforceable against the Owner Lessor in
accordance with their respective terms, except as the same may be limited
by bankruptcy, insolvency, fraudulent conveyance, reorganization,
arrangement, moratorium or other laws relating to or affecting the rights
of creditors generally and by general principles of equity.
(c) Non-Contravention. The execution, delivery and performance by
the Owner Lessor of this Agreement and the other Operative Documents to which it
is or will be a party, and the consummation by the Owner Lessor of the
transactions contemplated hereby and thereby, do not and will not contravene (A)
any Applicable Law binding on the Owner Lessor or its property, (B) the LLC
Agreement or the Owner
21
Lessor's other organizational documents, or (C) the provisions of, or constitute
a default by the Owner Lessor under, or result in the creation of any Owner
Lessor's Lien under any indenture, mortgage or other material contract,
agreement or instrument to which the Owner Lessor is a party or by which the
Owner Lessor or any of its property is bound.
(d) Governmental Actions. Assuming the representations and
warranties of the Lessee contained in clauses (d), (i), (j), (k), (1), (m), (n),
(o), and (z) of Section 3.1 are true, no authorization, determination or
approval or other action by, and no notice to or filing or registration with,
any Governmental Entity is required for the due execution, delivery or
performance by, or the validity or enforceability as against, the Owner Lessor
of the LLC Agreement, this Agreement or any of the other Operative Documents to
which the Owner Lessor is or will be a party, other than any such authorization
or approval or other action or notice or filing as has been duly obtained, taken
or given.
(e) Litigation. There is no pending or, to the Actual Knowledge
of the Owner Lessor, threatened action, suit, investigation, arbitration or
proceeding against the Owner Lessor before any Governmental Entity that (i)
questions the validity of the Operative Documents or (ii) would, if determined
adversely to it, materially adversely affect the ability of the Owner Lessor to
perform its obligations under the LLC Agreement, this Agreement or any of the
other Operative Documents to which it is or will be a party or would materially
adversely affect the Project, the Project Site or any interest therein or part
thereof or the Lien of the Indenture on the Indenture Estate.
(f) Liens. The Indenture Estate is free of any Owner Lessor's
Liens created by or through Owner Lessor or any of its Affiliates (other than
the Equity Investor).
(g) Investment Company Act. The Owner Lessor is not an
"investment company" as defined in the Investment Company Act of 1940 and the
rules and regulations of the SEC promulgated thereunder.
(h) Securities Act. Neither the Owner Lessor nor anyone
authorized by it has directly or indirectly offered or sold any interest in the
Member Interest, the Senior Notes or any part thereof, or in any similar
security or lease, or in any security or lease the offering of which for the
purposes of the Securities Act would be deemed to be part of the same offering
as the offering of the Member Interest, the Senior Notes or any part thereof or
solicited any offer to acquire any of the same in violation of the registration
requirements of Section 5 of the Securities Act; it being understood for
purposes of this clause (h) that neither the Advisor to the Lessee nor the
Noteholders have acted or are acting on behalf of the Owner Lessor in connection
with the Senior Notes, the Member Interest, or otherwise.
22
Section 3.3. Representations and Warranties of the Trust Company. The Trust
Company hereby represents and warrants that, as of the date hereof:
(a) Due Incorporation; Etc. The Trust Company is a banking
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has the corporate power and authority to enter
into and perform its obligations under the LLC Agreement and this Agreement.
(b) Due Authorization; Enforceability; Etc.
(i) (A) The LLC Agreement has been duly authorized, executed
and delivered by the Trust Company and (B) assuming the due authorization,
execution and delivery by and the enforceability against the Equity
Investor, the LLC Agreement constitutes the legal, valid and binding
obligation of the Trust Company, enforceable against it in its capacity as
Owner Manager, in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
arrangement, moratorium or other laws relating to or affecting the rights
of creditors generally and by general principles of equity.
(ii) (A) This Agreement has been duly authorized, executed
and delivered by the Trust Company, and (B) assuming the due authorization,
execution and delivery by and the enforceability against each party hereto
other than the Trust Company, this Agreement constitutes a legal, valid and
binding obligation of the Trust Company, enforceable against the Trust
Company in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement,
moratorium or other laws relating to or affecting the rights of creditors
generally and by general principles of equity.
(c) Execution. Each of the Operative Documents to which the Trust
Company is or will be a party has been or when executed and delivered will be
duly authorized, executed and delivered by the Trust Company.
(d) Non-Contravention. The execution and delivery by the Trust
Company of the LLC Agreement and this Agreement do not and will not contravene
(i) (A) any Applicable Law of the State of Delaware governing the Trust Company
or any United States federal law governing the banking or trust powers of the
Trust Company, (B) the LLC Agreement or (C) its organizational documents or
bylaws, or (ii) the provisions of, or constitute a default by the Trust Company
under, or result in the creation of any Owner Lessor's Lien created by or
through the Trust Company or any of its Affiliates under, any indenture,
mortgage or other contract, agreement or instrument to
23
which the Trust Company is a party or by which the Trust Company or its property
is bound.
(e) Governmental Actions. No authorization, determination or
approval or other action by, and no notice to or filing or registration with,
any Governmental Entity is required for the due execution, delivery or
performance by the Trust Company of the LLC Agreement or this Agreement, other
than any such authorization or approval or other action or notice or filing as
has been duly obtained, taken or given.
(f) Litigation. There is no pending or, to the Actual Knowledge
of the Trust Company, threatened action, suit, investigation, arbitration or
proceeding against the Trust Company before any Governmental Entity that (i)
questions the validity of the Operative Documents, or (ii) would, if determined
adversely to it, materially, adversely affect the ability of the Trust Company
to perform its obligations under the LLC Agreement or this Agreement or would
adversely affect the Project, the Project Site or any interest therein or part
thereof or the security interest of the Indenture Trustee in the Indenture
Estate.
(g) Liens. The Indenture Estate is free of any Owner Lessor's
Liens created by or through the Trust Company or any of its Affiliates.
Section 3.4. Representations and Warranties of the Equity Investor. The
Equity Investor represents and warrants that, as of the date hereof:
(a) Due Organization. The Equity Investor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the power and authority to enter into and perform its
obligations under each Operative Document to which it is a party (the "Equity
Investor Agreements").
(b) Due Authorization; Enforceability; Etc. Each of the Equity
Investor Agreements has been or when executed and delivered will be duly
authorized, executed and delivered by the Equity Investor and, assuming the due
authorization, execution and delivery by and enforceability against each other
party thereto, each such Equity Investor Agreement constitutes or when executed
and delivered will constitute the legal, valid and binding obligations of the
Equity Investor, enforceable against the Equity Investor in accordance with its
respective terms, except as the same may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, arrangement, moratorium or other laws
relating to or affecting the rights of creditors generally and by general
principles of equity.
24
(c) Non-Contravention. The execution, delivery and performance by
the Equity Investor of each of the Equity Investor Agreements, and the
consummation by the Equity Investor of the transactions contemplated thereby, do
not and will not (i) contravene (A) any Applicable Law binding on the Equity
Investor or its property, or (B) any of its organizational documents, or (ii)
constitute a violation of or a default under, any indenture, mortgage or other
material contract, agreement or instrument to which the Equity Investor is a
party or by which the Equity Investor or its property is bound (it being
understood that, other than its representations set forth in Section 3.4(g), no
representation or warranty is being made relating to ERISA or Section 4975 of
the Code) which, in any case, individually or in the aggregate, is reasonably
likely to have a material adverse effect upon the Equity Investor or the Equity
Investor's ability to perform its obligations under the Operative Documents, or
result in the creation of any Equity Investor's Lien.
(d) Governmental Action. No authorization, determination or
approval or other action by, and no notice to or filing or registration with,
any Governmental Entity is required for the due execution, delivery or
performance by the Equity Investor of any of the Equity Investor Agreements
other than any authorization or approval or other action or notice or filing as
has been duly obtained, taken or given (it being understood that no
representation or warranty is being made as to any Applicable Laws relating to
the Project or the Project Site).
(e) Litigation. There is no pending or, to the Actual Knowledge
of the Equity Investor, threatened action, suit, investigation, arbitration or
proceeding against the Equity Investor before any Governmental Entity that (i)
questions the validity of the Operative Documents, or (ii) would, if determined
adversely to it, materially, adversely affect the Equity Investor's ability to
perform its obligations under any of the Equity Investor Agreements or would
adversely affect the Project or the Project Site or any interest therein or part
thereof or the Lien of the Indenture Trustee in the Indenture Estate.
(f) Liens. The Indenture Estate is free of any Equity Investor's
Liens.
(g) ERISA. No part of the funds to be used by the Equity Investor
to make or hold its investment pursuant to this Agreement, directly or
indirectly, constitutes or is deemed to constitute assets (within the meaning of
ERISA and any applicable rules, regulations and court decisions thereunder) of
any Plan.
(h) Acquisition for Investment. The Equity Investor is purchasing
the Member Interest to be acquired by it for its own account with no present
intention of distributing such Member Interest or any part thereof in any manner
that would require registration under the Securities Act, but without prejudice,
however, to the right of the Equity Investor at all times to sell or otherwise
dispose of all or any part of such Member
25
Interest in accordance with the Operative Documents and under an exemption from
registration available under such Securities Act.
(i) Securities Act. Neither the Equity Investor nor anyone
authorized by it has directly or indirectly offered or sold any interest in the
Member Interest, the Senior Notes or any part thereof, or in any similar
security or lease, or in any security or lease the offering of which for the
purposes of the Securities Act would be deemed to be part of the same offering
as the offering of the Member Interest, the Senior Notes or any part thereof or
solicited any offer to acquire any of the same in violation of the registration
requirements of Section 5 of the Securities Act; it being understood for
purposes of this clause (i) that neither the Advisor to the Lessee nor the Debt
Placement Agent nor the Noteholders have acted or are acting on behalf of the
Equity Investor in connection with the Senior Notes, the Member Interest, or
otherwise.
Section 3.5. Representations and Warranties of the Noteholders. Each
Initial Noteholder hereby severally represents and warrants that as of the date
hereof:
(a) Purchase for Investment. Such Noteholder is purchasing the
Senior Notes for its own account for investment purposes and not with a view to
resale or distribution thereof in contravention of the requirements of the
Securities Act or the securities laws of any State of the United States or any
other applicable jurisdiction, but without prejudice, however, to the right of
the Noteholder at all times to sell or otherwise dispose of such Senior Notes in
accordance with the Operative Documents and under an exemption from registration
available under such Securities Act.
(b) Registration. Such Noteholder acknowledges that the Senior
Notes have not been registered under the Securities Act or the securities laws
of any State of the United States or any other applicable jurisdiction, and may
not be offered, sold, pledged or otherwise transferred, except as set forth in
Section 2.8 of the Indenture.
(c) Securities Laws. (A) Such Noteholder is an institutional
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act (an "IAI"), has sufficient knowledge,
sophistication and experience in financial and business matters to be capable of
evaluating the merits and risks of the purchase of the Senior Notes and is able
and prepared to bear the economic risk of investing in and holding the Senior
Notes and is presently able to afford a complete loss of such investment and (B)
such purchase of the Senior Notes is either for its own account, or for the
account of one or more IAIs as to each of which it exercises sole investment
discretion with authority to bind each such other IAI, and not with a view to
any public resale or distribution thereof.
26
(d) Source of Funds. Each Initial Noteholder severally represents
that at least one of the following statements is an accurate representation as
to each source of funds (a "Source") to be used by such Initial Noteholder to
pay the purchase price of the Senior Notes to be purchased by such Initial
Noteholder hereunder:
(i) the Source is an "insurance company general account" (as
the term is defined in the United States Department of Labor's
Prohibited Transaction Exemption ("PTE") 95-60) in respect of which
the reserves and liabilities (as defined by the annual statement for
life insurance companies approved by the National Association of
Insurance Commissioners (the "NAIC Annual Statement")) for the general
account contract(s) held by or on behalf of any employee benefit plan
together with the amount of the reserves and liabilities for the
general account contract(s) held by or on behalf of any other employee
benefit plans maintained by the same employer (or affiliate thereof as
defined in PTE 95-60) or by the same employee organization in the
general account do not exceed 10% of the total reserves and
liabilities of the general account (exclusive of separate account
liabilities) plus surplus as set forth in the NAIC Annual Statement
filed with such Noteholder's state of domicile; or
(ii) the Source is a separate account that is maintained
solely in connection with such Initial Noteholder's fixed contractual
obligations under which the amounts payable, or credited, to any
employee benefit plan (or its related trust) that has any interest in
such separate account (or to any participant or beneficiary of such
plan (including any annuitant)) are not affected in any manner by the
investment performance of the separate account; or
(iii) the Source is either (x) an insurance company pooled
separate account, within the meaning of PTE 90-1 or (y) a bank
collective investment fund, within the meaning of the PTE 91-38 and,
except as disclosed by such Initial Noteholder to the Lessee and the
Equity Investor in writing, at least five (5) days prior to the date
of purchase, pursuant to this clause (iii), no employee benefit plan
or group of plans maintained by the same employer or employee
organization beneficially owns more than 10% of all assets allocated
to such pooled separate account or collective investment fund; or
(iv) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of PTE 84-14 (the "QPAM Exemption"))
managed by a "qualified professional asset manager" or "QPAM" (within
the meaning of Part V of the QPAM Exemption), no employee benefit
27
plan's assets that are included in such investment fund, when combined
with the assets of all other employee benefit plans established or
maintained by the same employer or by an affiliate (within the meaning
of Section V(c)(1) of the QPAM Exemption) of such employer or by the
same employee organization and managed by such QPAM, exceed 20% of the
total client assets managed by such QPAM, the conditions of Part I(c)
and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a
person controlling or controlled by the QPAM (applying the definition
of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more
interest in the Lessee or the Equity Investor and, at least (5) days
prior to the date of purchase (x) the identity of such QPAM and (y)
the names of all employee benefit plans whose assets are included in
such investment fund have been disclosed to the Lessee and the Equity
Investor in writing pursuant to this clause (iv); or
(v) the Source constitutes assets of a "plan(s)" (within the
meaning of Section IV of PTE 96-23 (the "INHAM Exemption")) managed by
an "in-house asset manager" or "INHAM" (within the meaning of Part IV
of the INHAM exemption), the conditions of Part I(a), (g) and (h) of
the INHAM Exemption are satisfied, neither the INHAM nor a person
controlling or controlled by the INHAM (applying the definition of
"control" in Section IV(d) of the INHAM Exemption) owns a 5% or more
interest in the Lessee or the Equity Investor and, at least five (5)
days prior to the date of purchase, (x) the identity of such INHAM and
(y) the name(s) of the employee benefit plan(s) whose assets
constitute the Source have been disclosed to the Lessee and the Equity
Investor in writing pursuant to this clause (v); or
(vi) the Source is a governmental plan; or
(vii) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage of ERISA.
As used in this Section 3.5(d), the terms "employee benefit plan", "governmental
plan", and "separate account" shall have the respective meanings assigned to
such terms in Section 3 of ERISA.
During the entire period that any Initial Noteholder holds the Senior
Notes, it shall disclose to the Lessee and the Equity Investor any information
(not previously provided) which it would have to have disclosed to the Lessee
and the Equity Investor pursuant to this Section 3.4(f) had the representation
contained in this Section 3.4(f) been made on any such date on which it
continues to hold the Senior Notes.
28
(e) Due Diligence. Such Initial Noteholder acknowledges that (i)
it has made, either alone or together with its advisors, such independent
investigation of the Project, the Project Site and the Collateral and of the
Lessee and its management, assets and related matters as such Initial Noteholder
deems to be, or such advisors have advised to be, necessary or advisable in
connection with an investment in the Senior Notes pursuant to the transactions
contemplated by this Agreement and the other Operative Documents, (ii) it and
its advisors have been afforded the opportunity to ask questions of the Lessee,
(iii) it and its advisors have been afforded access, and received all
information and data, that it and such advisors believe to be necessary or
sufficient in order to evaluate and reach an informed decision as to the
advisability of an investment in the Senior Notes pursuant to the transactions
contemplated by this Agreement and the other Operative Documents and (iv) it has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision as to the advisability of an investment in
the Senior Notes pursuant to the transactions contemplated by this Agreement and
the other Operative Documents. The foregoing acknowledgments shall in no way
derogate from, or reduce the rights of any Initial Noteholder in respect of, or
constitute or be used as any form of defense (or basis therefor) in respect of,
all or any of the representations, warranties, covenants and agreements of the
Lessee or any other Person set forth or referred to in the Operative Documents,
the accuracy and completeness of each of which representations, warranties,
covenants and agreements has been assumed by each Initial Noteholder in making,
and as the basis for, the foregoing acknowledgments.
(f) Due Authorization; Enforceability; Etc. Such Initial
Noteholder has all necessary power and authority to execute and deliver this
Agreement and perform its obligations hereunder; and this Agreement has been
duly authorized, executed and delivered by such Noteholder and, assuming the due
authorization, execution and delivery by each other party hereto, this Agreement
constitutes the legal, valid and binding obligation of such Noteholder,
enforceable against it in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
arrangement, moratorium or other laws relating to or affecting the rights of
creditors generally and by general principles of equity.
Section 3.6. Representations of the Indenture Trustee. The Indenture
Trustee represents and warrants that, as of the date hereof:
(a) Due Incorporation; Etc. It is a national banking association
duly organized, validly existing and in good standing under the laws of the
United States, and has full power and authority, as Indenture Trustee and/or in
its individual capacity to the extent expressly provided herein or in the
Indenture, to enter into and perform its obligations under the Indenture, the
Depositary Agreement and this Agreement (the "Indenture Trustee Agreements").
29
(b) Due Authorization; Enforceability; Etc. (i) Each of the
Indenture Trustee Agreements has been duly authorized, executed and delivered by
the Indenture Trustee and (ii) assuming the due authorization, execution and
delivery by each other party thereto, each of such Indenture Trustee Agreement
constitutes the legal, valid and binding obligation of the Indenture Trustee,
enforceable against it in its individual capacity or as Indenture Trustee, as
the case may be, in accordance with its terms, except as the same may be limited
by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement,
moratorium or other laws relating to or affecting the rights of creditors
generally and by general principles of equity.
(c) Non-Contravention. The execution and delivery by the
Indenture Trustee, in its individual capacity or as Indenture Trustee, as the
case may be, of the Indenture Trustee Agreements, and the consummation by the
Indenture Trustee, in its individual capacity or as Indenture Trustee, as the
case may be, of the transactions contemplated thereby, do not and will not (i)
contravene any Applicable Law of the State of California governing the Indenture
Trustee or any United States federal law governing the banking or trust powers
of the Indenture Trustee, (ii) contravene its organizational documents or
bylaws, (iii) contravene or constitute a violation of, or a default by the
Indenture Trustee under, any indenture, mortgage or other material contract,
agreement or instrument to which the Indenture Trustee is a party or by which
the Indenture Trustee or any of its property is bound or (iv) result in the
creation of any Indenture Trustee's Lien upon any property included in the
Indenture Estate.
(d) Governmental Actions. No authorization or approval or other
action by, and no notice to or filing or registration with, any federal or state
Governmental Entity governing the banking or trust powers of the Indenture
Trustee is required for the due execution, delivery or performance by the
Indenture Trustee of any Indenture Trustee Agreement, other than any such
authorization or approval or other action or notice or filing as has been duly
obtained, taken or given
(e) Eligibility. It is a trust company or bank authorized under
the laws of the State of California and the United States of America to exercise
trust powers, and (i) has a combined capital and surplus of at least
$250,000,000.
(f) Liens. The Indenture Estate is free of any Indenture
Trustee's Lien.
SECTION 4. CLOSING CONDITIONS; CONDITIONS TO PURCHASE OF SENIOR NOTES
The obligations of the Equity Investor, the Owner Lessor, the
Indenture Trustee, each Initial Noteholder and the Lessee to consummate the
Transaction on the
30
Closing Date shall be subject to satisfaction or waiver of
the following conditions at or prior to the Closing (except that the obligations
of any Person shall not be subject to such Person's own performance or
compliance):
(a) Operative Documents. (i) Each of the Financing Documents
shall have been duly authorized by the parties thereto, shall have been duly
executed and delivered by the parties thereto, and shall each be in full force
and effect, and executed counterparts of each shall have been delivered to each
of the parties hereto (other than the Tax Indemnity Agreement, which shall only
be delivered to the parties thereto and the Senior Notes, which shall only be
delivered to the Noteholders).
(ii) Copies of each of the Project Documents shall have been
delivered to the Equity Investor, the Owner Lessor, the Indenture Trustee
and the Initial Noteholders, certified by the Lessee as being true,
accurate and complete copies of such Project Documents and each of such
Project Documents shall be in full force and effect.
(b) Equity Investment. The Equity Investor shall have made the
Equity Investment to the Owner Lessor at the place and in the manner
contemplated by Section 2.
(c) Senior Notes. All conditions precedent to the issuance of the
Senior Notes to be issued on the Closing Date and the purchase thereof by the
Noteholders shall have been satisfied or waived, all as evidenced by the
issuance of such Senior Notes, and the Noteholders shall have purchased the
Senior Notes.
(d) Corporate Documents. Each of the Financing Parties shall have
received copies of the organizational documents of each of the Lessee, the Owner
Lessor, the Owner Manager, the Equity Investor, each Lessee Partner and the
Pledgor, and resolutions of the board of directors or appropriate committee of
each such Person duly authorizing the Transaction and such documents and such
evidence as each party may reasonably request in order to establish the
authority of each such other party to consummate the Transaction, the taking of
all corporate or other proceedings in connection therewith and compliance with
the conditions herein or therein set forth and the incumbency of all officers
signing any of the Financing Documents. Each of the foregoing documents and
evidence shall be reasonably satisfactory to the recipient.
(e) Representations and Warranties; Conditions Precedent. The
representations and warranties of the parties hereto set forth in Section 3
hereof shall be true and correct on and as of the Closing Date with the same
effect as though made on and as of the Closing Date and each of the Financing
Parties shall have received an Officer's Certificate from each of the other
parties hereto to such effect other than the
31
Initial Noteholders whose purchase of the Senior Notes on the Closing Date shall
be deemed to be a confirmation of their respective representations as of such
date.
(f) Events of Loss, Defaults, Events of Default; Project
Documents. No Event of Loss, Lease Default, Lease Event of Default, Indenture
Default, Indenture Event of Default or event that with notice or lapse of time
or both would constitute an Event of Loss shall have occurred and be continuing.
Each of the Project Documents shall be in full force and effect, and (i) no
default or breach shall exist under any Project Document that permits any party
thereto to terminate any Project Document or suspend its performance thereunder
or excuses such non-breaching party from any failure to perform thereunder and
(ii) no event of force majeure under any Project Document shall have occurred
and be continuing that is reasonably likely to result in a Material Adverse
Effect.
(g) No Threatened Proceedings. No action, suit or proceeding
shall have been instituted nor, to the Actual Knowledge of any party hereto,
threatened, before any Governmental Entity against the Lessee, nor shall any
action, suit or proceeding have been instituted, or to the Actual Knowledge of
any party hereto, threatened, before any Governmental Entity against or
affecting the Project or any party to a Project Document, which could reasonably
be expected to have a Material Adverse Effect.
(h) Projections. The Participants shall have received the
Projections dated the Closing Date, the substance of which shall be satisfactory
to the Participants.
(i) Receipt of Permits and Approvals. All Governmental Approvals
necessary to operate and maintain the Project in accordance with the terms and
conditions of the Operative Documents, shall have been duly obtained or made and
validly issued and shall be in full force and effect and shall not be the
subject of any pending or threatened judicial or administrative proceedings. To
the extent the Lessee has received copies of such Governmental Approvals, each
Financing Party shall have received true and complete copies thereof.
(j) Insurance Coverage. The Participants shall have received and
found satisfactory certificates of, or binders for, each policy of insurance
required under Section 11 of the Project Lease dated as of May 18, 2005,
accompanied by a report of the Insurance Consultant addressed to the
Participants in form and substance satisfactory to such parties stating that
insurance complying with the provisions of Section 11 of the Project Lease,
covering the risks and in the amounts referred to therein, has been obtained and
is in full force and effect, is not subject to cancellation without prior notice
and that all currently due premiums therefor have been paid in full.
32
(k) Engineering Report. Each of the Participants shall have
received the Engineering Report addressed to the Participants dated as of April
4, 2005, in form and substance satisfactory to such parties confirming that the
Project has an electrical capacity and is able to produce electric energy at
levels which would be required in order to comply with the Projections.
(l) Environmental Report. Each of the Participants shall have
received the Environmental Report addressed to the Participants dated as of
April 4, 2005 in form and substance satisfactory to such parties to the effect
that there are no conditions present which could reasonably be likely to result
in a Material Adverse Effect.
(m) Reports of the Geothermal Consultant. Each of the
Participants shall have received reports from the Geothermal Consultant
addressed to the Participants in form and substance satisfactory to such parties
dated the Closing Date to the effect that the Project has access to geothermal
resources which would be required to operate the Project at levels which would
be required in order to comply with the Projections.
(n) Appraisal. The Equity Investor shall have received the
Closing Appraisal addressed to the Equity Investor in form and substance
satisfactory to the Equity Investor. The Lessee and the Initial Noteholders
shall have received a letter from the Appraiser with regard to the fair market
value and remaining useful life of the Project dated as of the Closing Date.
(o) Annual Operating Budget. The Participants shall have received
a copy of the Annual Operating Budget for calendar year 2005, in form and
substance reasonably satisfactory to the Participants.
(p) Opinion with Respect to Certain Tax Aspects. The Equity
Investor shall have received (i) the opinion, dated the Closing Date, of Xxxxx
Xxxxxxxxxx LLP addressed and delivered only to the Equity Investor as to certain
tax matters in form and substance reasonably satisfactory to the Equity Investor
and (ii) the opinion dated the Closing Date of XxXxxxxxxxx Xxxxxx Xxxxx
XxxXxxxxx LLP addressed and delivered only to the Equity Investor as to certain
state and local tax matters in form and substance reasonably satisfactory to the
Equity Investor.
(q) Opinions of Counsel. Each of the parties shall have received
an opinion or opinions, dated the Closing Date, of (i) Xxxxxxxxxx & Xxxxx LLP,
special counsel to the Lessee and the Pledgor, (ii) Carlsmith Ball LLP, Hawaii
counsel to the Lessee, (iii) Xxxxx Xxxxxxxxxx LLP, counsel to the Equity
Investor, (iv) Xxxxxxxxxx Xxxxxxxx LLP, local counsel to Equity Investor, (v)
Morris, James, Hitchens & Xxxxxxxx LLP, counsel to the Owner Lessor, the Trust
Company, and the Owner Manager and (vi) Xxxxxxxx X. Xxxxxxx, Attorney at Law,
counsel to the Depositary Bank and the Indenture
33
Trustee, in each case, addressed to such Persons and in form and substance
satisfactory to such Persons. Each of the parties, excluding the Lessee, shall
have also received the opinion, dated the Closing Date, of XxXxxxxxxxx Xxxxxx
Xxxxx XxxXxxxxx LLP, Hawaii counsel to the Noteholders and the Equity Investor.
Each such Person expressly consents to the rendering by its counsel of the
opinion referred to in this Section 4(q) and acknowledges that such opinion
shall be deemed to be rendered at the request and upon the instructions of such
Person, each of whom has consulted with and has been advised by its counsel as
to the consequences of such request, instructions and consent. Furthermore, each
such counsel shall, to the extent requested, (x) include as addressees Persons
which may become Noteholders in the future or (y) permit such Noteholders to
rely on its opinion as if such opinion were addressed to such Persons.
(r) Perfection of Liens and Security Interests. The financing
statements, instruments (including recordation memoranda) and other documents
with respect to the filings and recordings described in Schedule 3.1(h)(ii)
shall be in form and substance reasonably satisfactory to the Indenture Trustee,
the Initial Noteholders and the Equity Investor and all such filings and
recordings and all other filings and recordings and other actions (including the
Owner Lessor and/or Indenture Trustee taking possession or control of such
collateral in which a security interest may be perfected by possession or
control) that are necessary in order to establish, protect, preserve and perfect
(i) the Lien of the Owner Lessor on, and perfected security interest in, all
right, title, estate and interest of the Lessee, the Pledgor or the Lessee
Partners, as applicable, in and to the assets and property which form the
collateral, under the Lessee Security Agreement, the Lessee Partners Interest
Pledge Agreement and the PGV Interests Pledge Agreement and in and to the
Accounts under the Depositary Agreement and the Bank of Hawaii Control
Agreements, and (ii) the Lien of the Indenture Trustee on, and perfected
security interest in, all right, title, estate and interest of the Owner Lessor
in and to the Indenture Estate and the Accounts, prior and superior to all other
Liens, existing or future (other than any future lien which by statute would
have priority), in each case, shall have been duly executed (if required to be
executed by the Lessee, the Pledgor, the Lessee Partners or the Owner Lessor, as
applicable, by Applicable Law) and delivered to the Indenture Trustee or its
designee in proper form for filing, registration or recordation, and all fees,
taxes and other charges relating to such filings and recordings and other
actions shall have been paid (or provision thereof shall be made) by the Owner
Lessor; and when such documents are filed or recorded, or other actions taken
(including the Owner Lessor and/or Indenture Trustee taking possession or
control of such collateral in which a security interest may be perfected by
possession or control), as applicable, (i) the Owner Lessor shall have a first
Lien on, and prior perfected security interest in (A) all right, title, estate
and interest of the Lessee, the Lessee Partners or the Pledgor, as applicable,
in and to the assets and property which form the collateral under the Lessee
Security Agreement, the Lessee Partners Interest Pledge Agreement and the PGV
Interests Pledge Agreement and (B) all
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right, title and interest of the Lessee in and to the Accounts under the
Depositary Agreement and the Bank of Hawaii Control Agreements and (ii) the
Indenture Trustee shall have a first Lien on, and prior perfected security
interest in, all right, title, estate and interest of the Owner Lessor in and to
the Indenture Estate and the Accounts, in each case, prior and superior to all
other Liens, existing or future (other than any future lien which by statute
would have priority). In addition, the Indenture Trustee and the Equity Investor
shall have received copies of Uniform Commercial Code, judgment and tax lien
search reports with respect to each "Debtor" specified in Schedule 3.l(h)(ii) in
each jurisdiction requested by the Indenture Trustee, the Initial Noteholders or
the Equity Investor confirming that no Uniform Commercial Code filing or
judgment or tax lien exists with respect to the properties or assets of such
Person.
(s) Funding Request. The Lessee shall have delivered a properly
executed funding request, in form and substance satisfactory to the
Participants.
(t) No Changes in Applicable Law. No change shall have occurred
in Applicable Law or the interpretation thereof by any competent court or other
Governmental Entity that would (i) make it illegal for any of the Lessee, the
Owner Lessor, the Indenture Trustee or any Participant to participate in the
Transaction or (ii) subject any of the Lessee, the Owner Lessor, the Indenture
Trustee or any Participant to regulation as a "public utility," or "electric
utility" or a "public utility holding company" (within the meaning of PUHCA or
any applicable regulatory law of Hawaii) solely as a result of the transactions
contemplated by the Operative Documents.
(u) [Intentionally omitted].
(v) Private Placement Number. A private placement number shall
have been issued by Standard & Poor's CUSIP Service Bureau (in cooperation with
the Securities Valuation Office of the National Association of Insurance
Commissioners) for the Senior Notes.
(w) Title Insurance. The Indenture Trustee shall have received a
lender's policy of title insurance and the Owner Lessor shall have received an
owner's policy of title insurance issued by the Title Company, or binding
commitments by the Title Company (in the form of a signed closing letter or an
ALTA Commitment) to issue such lender's and owner's policies of title insurance
(insuring as of the Closing Date), that meet the following requirements: (i) a
lender's policy in favor of the Indenture Trustee which shall (a) be in form and
substance reasonably satisfactory to the Indenture Trustee or any Initial
Noteholders, (b) contain such endorsements and affirmative coverage as the
Indenture Trustee or any Initial Noteholder may reasonably request up to an
amount equal to one hundred percent (100%) of the aggregate principal amount of
the Senior Notes, including (to the extent applicable with respect to the
Project and the Project Site
35
and available at a reasonable cost from the Title Company in the jurisdiction in
which the Project is located) the following: variable rate; survey;
comprehensive; access; creditor's rights (which may be provided without an
endorsement if a 1970 form of jacket is used); contiguity coverage; usury; doing
business; environmental protection lien; modified versions of CLTA 119.2 and
CLTA 119.3 and such other endorsements as the Indenture Trustee or any Initial
Noteholder may reasonably request, (c) insure (A) the Indenture Trustee for the
benefit of each of the Noteholders, in the amount of $52,000,000 and (B) that
the Indenture constitutes a valid first (1) leasehold mortgage lien of record or
(2) mortgage lien, as applicable, on the Owner Lessor's right, title and
interest as lessee or grantee, as applicable, of the Project Site, subject only
to such exceptions to title that are Permitted Liens and that, in any event,
would not reasonably be expected to have a Material Adverse Effect, (d) provide
for no survey exceptions as to the Project Site exclusive of beneficial
easements (other than matters shown by the survey described in Section 4.1(y))
and (e) provide coverage against all mechanics' and materialmen's liens existing
on the Closing Date, other than those for which Adequate Reserves have been
provided by the Lessee; and (ii) an owner's (or leasehold owner's) policy of
title insurance in favor of the Owner Lessor which shall (a) be in form and
substance reasonably satisfactory to the Equity Investor, (b) contain such
endorsements and affirmative coverage as the Equity Investor may reasonably
request, including (to the extent applicable with respect to the Project and
Project Site and available at a reasonable cost from the Title Company in the
jurisdiction in which the Project is located) the following: survey;
comprehensive; access; contiguity coverage; environmental protection lien; and
such other endorsements as the Equity Investor may reasonably request, (c)
insure the Owner Lessor's right, title and interest as lessee or grantee, as
applicable, of the Project Site in the amount of $52,000,000, (d) provide for no
survey exceptions as to the Project Site exclusive of beneficial easements
(other than matters shown by the survey described in Section 4.1(y)) and (e)
provide coverage against all mechanics' and materialmen's liens existing on the
Closing Date, other than those for which Adequate Reserves have been provided by
the Lessee. The Indenture Trustee shall also have received evidence that the
premiums in respect of such commitments and/or policies, all charges for
mortgage taxes (if any), and all related expenses, if any, have been paid or
shall be paid concurrently with the Closing. Each of the Equity Investor and the
Indenture Trustee shall have received a copy of all recorded documents referred
to, or listed as exceptions to title in, the title policy or policies referred
to in this Section.
(x) Material Adverse Effect. Since June 3, 2004, no event shall
have occurred which could reasonably be expected to have a Material Adverse
Effect.
(y) Survey. The Equity Investor, the Owner Lessor, the Indenture
Trustee and the Title Company shall have received an ALTA/ACSM land title survey
of the Project Site, certified to the Indenture Trustee, the Owner Lessor and
the Title Company in the manner prescribed by paragraph 8 of the Minimum
Standard Details
36
referred to below, dated not more than 180 days prior to the Closing Date,
prepared by an independent professional licensed land surveyor reasonably
satisfactory to the Equity Investor, the Indenture Trustee and the Title
Company, which survey shall be made in accordance with the Minimum Standard
Detail Requirements for Land Title Surveys jointly established and adopted by
the American Land Title Association, American Congress on Surveying & Mapping
and National Society of Professional Surveyors in 1999 and meeting the accuracy
requirements set forth therein, and which survey shall be reasonably
satisfactory to the Equity Investor, the Indenture Trustee and the Title
Company. Without limiting the generality of the foregoing, the survey shall: (a)
show the location of any easements, fences, restriction setback lines,
rights-of-way, encroachments and adjoining streets; (b) locate all means of
ingress and egress and contain a location sketch of the Project Site; (c) show
the location of all improvements as constructed on the Project Site; and (d)
indicate the flood zone designation, if any, in which the Project Site is
located.
(z) Reserve Accounts. Each of the Accounts shall have been
established in accordance with the Depositary Agreement and an amount equal to
the Capex Account (Debt) Deposit, the Senior Rent Reserve Requirement and the
Junior Rent Reserve Requirement, as applicable, shall have been deposited in the
Capex Account (Debt), the Senior Rent Reserve Account and the Junior Rent
Reserve Account, as applicable.
(aa) Letter as to Number of Offerees. The Equity Investor and the
Indenture Trustee shall have received a certification from the Debt Placement
Agent in form and substance reasonably satisfactory to such Persons, as to the
number of offerees by it of the Senior Notes, and the nature of such offerees.
(bb) Financial Statements. The Lessee shall have delivered the
financial statements referred to in Section 3.1(v)(i) herein.
(cc) Transaction Costs. Each of the parties hereto shall have
received satisfactory evidence that all Transaction Costs have been paid in full
by the applicable party.
(dd) Consents to Assignment. Each of the Transaction Parties
shall have received a duly executed copy of the Consents to Assignment, in form
and substance satisfactory to the Participants.
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SECTION 5. COVENANTS OF THE LESSEE
Section 5.1. Maintenance of Existence. The Lessee shall at all times
preserve and maintain in full force and effect its existence and its good
standing under the laws of the State of Hawaii.
Section 5.2. Maintenance of Permits. The Lessee shall obtain and maintain,
or cause to be obtained and maintained, in full force and effect all
Governmental Approvals required to be obtained from time to time in connection
with (i) the use, operation and maintenance of the Project as contemplated by
the Project Documents (for up to 30 MW), and the Expansion Project if purchased
by the Owner Lessor, and (ii) the execution, delivery and performance by the
Lessee of the Operative Documents to which it is a party, except, in each case,
where failure to so obtain or maintain any such Governmental Approval would not
be expected to result in a loss of revenues attributable to the use of the
Project in excess of $1,500,000, taking into account any Claims arising under
Sections 5.3, 5.9 and 5.28 hereunder.
Section 5.3. Compliance with Laws and Governmental Approvals. The Lessee
shall comply with all Applicable Laws (including Environmental Laws) and
Governmental Approvals, except where noncompliance could not reasonably be
expected to result in one or more Claims against or being incurred by the Lessee
in excess of $1,500,000, taking into account any Claims arising under Sections
5.2, 5.9 and 5.28 hereunder.
Section 5.4. Information. The Lessee shall deliver to the Equity Investor,
the Owner Lessor, and, so long as the Lien of the Indenture has not been
terminated and fully discharged, the Indenture Trustee:
(a) within 60 days after the close of each of the first three
quarterly accounting periods in each fiscal year of the Lessee (commencing with
the quarter ending June 30, 2005), unaudited quarterly consolidated financial
statements of the Lessee;
(b) within 120 days after the close of each fiscal year
(commencing with the fiscal year ending December 31, 2005), audited annual
consolidated financial statements for such fiscal year, with an unqualified
opinion (other than in respect of financial controls and procedures and similar
requirements of the Xxxxxxxx-Xxxxx Act) of an internationally recognized
independent accounting firm (the "Auditors");
(c) at the time of the delivery of the financial statements
provided for in clause (b) immediately above, a certificate of a Responsible
Officer of the Lessee to the effect that, to such officer's Actual Knowledge, no
Lease Default or Lease Event of Default has occurred and is continuing;
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(d) within sixty (60) days after each Rent Payment Date, a
certificate of a Responsible Officer of the Lessee, setting forth a calculation
of the Lease Rent Coverage Ratio for the two preceding semiannual periods and
the Projected Lease Rent Coverage Ratio for the then-current semiannual period
and the immediately following semiannual period in form and substance as set
forth in Exhibit A, provided, however, that if the Lease Rent Coverage Ratio for
any semi-annual period is below 1.20 to 1.00, the Equity Investor shall have the
right to request (i) detailed information regarding major maintenance and other
items in the Annual Operating Budget as it deems reasonable and (ii) additional
information and explanations with respect to the semiannual operating report
referred to in Section 5.4(e) until the next such semiannual period as the Lease
Rent Coverage Ratio for the two preceding semiannual periods and the Projected
Lease Rent Coverage Ratio for the then-current semiannual period and the
immediately following semiannual period are at least 1.20 to 1.00; provided,
further, that the Lessee shall provide the Indenture Trustee with a copy of any
such information provided to the Equity Investor pursuant to this clause (d);
(e) within sixty (60) days after each Rent Payment Date, a
semiannual operating report in the form attached hereto as Exhibit B and
promptly after any forced outage that lasts for more than fourteen (14)
consecutive days, notice of such forced outage;
(f) (A) as soon as practicable, but in any event within 10
Business Days after the Lessee obtains Actual Knowledge thereof, notice of any
event which constitutes a Lease Default or a Lease Event of Default or an Event
of Loss, specifying the nature of such Lease Default, Lease Event of Default or
Event of Loss and any steps the Lessee is taking or proposes to take to remedy
or otherwise address the same, and (B) promptly, and in any event within 30 days
after the Lessee obtains Actual Knowledge thereof, notice of:
(i) any litigation, arbitration or governmental proceeding
(other than any governmental proceeding in the ordinary course of business)
pending (A) against the Lessee or the Project or (B) with respect to any
Project Document to which the Lessee is a party or with respect to the
Project Site, which, in each case, individually or in the aggregate could
reasonably be expected to result in a Claim in excess of $500,000;
(ii) the occurrence and continuance of any Requisition
(without regard to the existence of any good faith contest in respect
thereof);
(iii) any change in the Responsible Officers of the Lessee,
accompanied by certified specimen signatures of any Responsible Officers so
appointed;
39
(iv) the existence of any Lien against the Indenture Estate;
(v) any notice received by the Lessee purporting to cancel
or materially alter the terms of any insurance policy which the Lessee is
required to maintain pursuant to the Project Lease; or
(vi) other than those which occur in the ordinary course of
business, any casualty, damage or loss, whether or not insured, through
fire, theft, other hazard or casualty, or any act or omission of the Lessee
or of any other Person if such casualty, damage or loss effects the
Project, the Project Site or the Geothermal Resource in the amount of
$100,000 or more.
(g) no later than ten Business Days after the effectiveness of
any amendment, supplement, modification or termination (other than by its terms)
of any Project Document, notice of such amendment, supplement or modification,
together with a copy thereof.
Section 5.5. Annual Operating Budget. On November 15 of each calendar year,
commencing on November 15, 2005, the Lessee shall deliver to the Equity
Investor, and, so long as the Lien of the Indenture has not been terminated and
fully discharged, the Indenture Trustee and the Noteholders, an annual operating
budget of Project Revenues and Operating Costs expected to be incurred by the
Lessee during the relevant fiscal year to which such budget applies in the form
attached hereto as Exhibit C (the "Annual Operating Budget") together with an
Officer's Certificate of the Lessee certifying that such Annual Operating Budget
has been prepared in good faith. The Equity Investor and the Noteholders will
have the right to review and approve (such approval not to be unreasonably
withheld or delayed) such Annual Operating Budget by December 15 of such year;
provided, however, the Equity Investor's and the Noteholders' approval of the
Annual Operating Budget shall not be required (A) if the aggregate Operating
Costs set forth in such Annual Operating Budget do not exceed by 15% or more the
sum of the (i) actual aggregate Operating Costs for the Project from January 1
of the then current fiscal year to October 31 of such year and (ii) the
aggregate costs and expenses budgeted for the Project from November 1 of such
year to December 31 of such year and (B) so long as on every fourth year
(beginning in 2009), the aggregate Operating Costs set forth in the Annual
Operating Budget for such year do not exceed by 45% or more the sum of the
actual aggregate Operating Costs for the Project incurred in the calendar year
that is four years prior to such year; provided further, that notwithstanding
the foregoing, the Equity Investor's and the Indenture Trustee's approval of the
Annual Operating Budget shall be required if, at any relevant time, the Lease
Rent Coverage Ratio for either of the immediately preceding two semiannual
periods was less than 1.20 to 1.00.
40
Section 5.6. Conduct of Business. Except as contemplated by Section 5.23
and Section 12.18, the Lessee shall not enter into or engage at any time in any
business other than the ownership, occupation, construction, testing, starting,
repair, operation, maintenance and use of the Project and the financing of the
Project and the sale of electric power or other products and byproducts of the
Project by the Lessee, and all other activities related thereto necessary for
the development, construction, operation and maintenance of the Project and as
otherwise contemplated or permitted by the Operative Documents.
Section 5.7. Books and Records; Inspections. The Lessee shall maintain
appropriate logs with respect to the Project and books, records and accounts in
which full, true and correct entries in accordance with GAAP consistently
applied, shall be made of all of its dealings and transactions.
Section 5.8. Taxes; Utility Charges. The Lessee shall, prior to the time
penalties shall attach thereto, (i) file, or cause to be filed, all tax and
information returns that are required to be, or are required to have been, filed
by it in any jurisdiction, and (ii) pay or cause to be paid all Taxes and
utility charges shown to be, or to have been, due and payable on such returns
and all other Taxes and utility charges lawfully imposed and payable by it, to
the extent the same shall have become due and payable, except to the extent
there is a good faith contest thereof by the Lessee and the Lessee has
maintained adequate reserves for such Taxes or utility charges to be funded out
of either (i) capital contributions from the Pledgor or (ii) distributions from
the Distribution Account made in accordance with the Depositary Agreement.
Section 5.9. Performance and Enforcement. The Lessee shall duly (i) perform
and observe in all respects its covenants and obligations under all Operative
Documents and (ii) operate and maintain the Project in accordance with Prudent
Industry Practice and Applicable Law, except to the extent that the
applicability thereof is being contested in good faith unless in the case of
clause (i), the failure to perform or observe such covenant or such obligation
or (ii) in the case of clause (ii), such contest, in each case, would be
expected to result in a loss of revenues attributable to the use of the Project
as contemplated by the Operative Documents in excess of $1,500,000, taking into
account any Claims arising under Sections 5.2, 5.3 and 5.28 hereunder.
Section 5.10. Utility Status.
The Lessee will not take any action that would result in the Owner
Lessor or any Participant being subject to any utility regulation.
Section 5.11. Subsidiaries. The Lessee will not establish or maintain any
subsidiary.
41
Section 5.12. Notice of Change of Jurisdiction of Formation Address; No
Change of Name. The Lessee shall provide the Equity Investor, the Owner Lessor
and, so long as the Lien of the Indenture has not been terminated and fully
discharged, the Indenture Trustee, prompt written notice of any anticipated
change in its address or jurisdiction of formation, which notice shall, in any
event, be provided no later than 30 days prior to such change. The Lessee shall
not change its name without the prior written consent of the Equity Investor and
the Noteholders.
Section 5.13. Further Assurances. The Lessee, at its own cost, expense and
liability, will cause to be promptly and duly taken, executed, acknowledged and
delivered all such further acts, documents and assurances reasonably requested
by the Equity Investor, the Owner Lessor or, so long as the Lien of the
Indenture shall not have been terminated and fully discharged, the Indenture
Trustee, as may be necessary in order to carry out the intent and purposes of
this Participation Agreement and the other Operative Documents to which it is a
party, and the transactions contemplated hereby and thereby. The Lessee, at its
own cost, expense and liability, will cause such financing statements and
fixture filings (and continuation statements with respect thereto) as may be
necessary and such other documents as the Equity Investor, the Owner Lessor or,
so long as the Lien of the Indenture shall not have been terminated and fully
discharged, the Indenture Trustee, shall reasonably request to be recorded or
filed at such places and times and in such manner, and will take all such other
actions or cause such actions to be taken, as may be necessary or advisable in
order to establish, preserve, protect and perfect the right, title and interest
of the Owner Lessor in and to the Project, the Project Document Interest, the
Lessee's Interest in the Geothermal Resource, the Project Site, or any portion
of any thereof or any interest therein and the first priority Lien intended to
be created by the Indenture and the other Security Documents therein. The Lessee
shall promptly from time to time furnish to the Equity Investor, the Owner
Lessor and, so long as the Lien of the Indenture shall not have been terminated
and fully discharged, the Indenture Trustee, such information with respect to
the Project, the Project Site, the Project Document Interest, the Geothermal
Resources or the transactions contemplated by the Operative Documents to which
it is a party as may be required to enable the Equity Investor, the Owner Lessor
or, so long as the Lien of the Indenture shall not have been terminated and
fully discharged, the Indenture Trustee, as the case may be, to timely file with
any Governmental Entity any reports and obtain any licenses or permits required
to be filed or obtained by the Owner Lessor under any Operative Document or the
Equity Investor as the owner of the Member Interest or the Indenture Trustee.
Section 5.14. Limitation on Indebtedness. The Lessee shall not create,
incur, assume or permit to exist any Indebtedness, except as follows, without
duplication (all such Indebtedness being referred to hereinafter as "Permitted
Indebtedness"):
42
(a) Indebtedness permitted pursuant to the terms of the Operative
Documents (including the Reserve Letters of Credit);
(b) Indebtedness of the Lessee, so long as the obligations of the
Lessee thereunder are (i) to the Pledgor and (ii) evidenced by an instrument or
instruments subordinated to the payment of Periodic Lease Rent by provisions
substantially in the form of Exhibit D hereto;
(c) surety bonds, performance bonds or similar arrangements with
third-party sureties or indemnitors or similar Persons in connection with a good
faith contest or otherwise permitted by the Project Lease or any other Operative
Document, with reimbursement obligations of the Lessee not in an aggregate
amount at any time outstanding in excess of $500,000;
(d) indemnities and similar obligations, if any, arising under
the Operative Documents, to the extent the same constitute Indebtedness;
(e) Indebtedness incurred to finance Modifications which are not
otherwise financed with Additional Senior Notes and/or additional investments by
the Equity Investor in accordance with the terms of the Project Lease, provided
that such Indebtedness (i) shall be payable solely from amounts distributable to
the Lessee pursuant to Section 5.9 of the Depositary Agreement and be
subordinated to the payment of the Periodic Lease Rent in accordance with the
subordination provisions set forth in Exhibit D;
(f) additional Indebtedness with the written prior consent of the
Owner Lessor and the Indenture Trustee.
Section 5.15. Limitation on Liens. The Lessee shall not create, incur or
suffer to exist or permit any Lien upon or with respect to any of its properties
or assets, other than Permitted Liens.
Section 5.16. Restricted Payments. The Lessee shall not make any
distribution to the Lessee Partners or ONI or any other payments from the
Distribution Account (including by transfer of assets or assumption or
incurrence of any other Indebtedness or liability) other than (i) as permitted
under Section 5.9 of the Depositary Agreement or (ii) as permitted under Section
8(b) of the PGV Interests Pledge Agreement following a Lease Event of Default
which is a Limited Recourse Event.
Section 5.17. Permitted Investments, Loans and Advances. The Lessee shall
not make any investments, advances or loans other than Permitted Investments.
43
Section 5.18. Merger, Consolidation, Sale of Substantially All Assets. The
Lessee shall not enter into any transaction of merger or consolidation, change
its form of organization or its business, or liquidate, wind-up or dissolve
itself (or suffer any liquidation or dissolution) without the consent of the
Owner Lessor and the Indenture Trustee. The Lessee shall not sell, assign,
convey, lease, transfer or otherwise dispose of any of its assets or purchase or
otherwise acquire all or substantially all of the assets or the businesses of
any other Person without the consent of the Owner Lessor and the Indenture
Trustee.
Section 5.19. Amendments to Project Documents. The Lessee shall not
terminate, amend, waive, modify or assign (other than pursuant to the Operative
Documents), or consent to the assignment of the rights or obligations of any
party to, any Project Document, unless such termination, amendment, waiver,
modification, assignment or consent to assignment of a Project Document could
not reasonably be expected to impair the rights of the Lessee in the Project or
the operation and maintenance of the Project or the rights of the Owner Lessor
or any of the Participants; provided, that the Lessee may make amendments to the
Project Documents that are of a routine, ministerial, administrative or de
minimis nature in order to cure any ambiguities correct or supplement any
defects or inconsistencies with respect thereto.
Section 5.20. Certain Contracts and Agreements. The Lessee shall not enter
into any agreements, contracts or other arrangements or commitments other than
(a) the Operative Documents existing on the Closing Date; (b) any additional
agreements for sale of excess capacity or energy or fuel (to the extent not
required for the operation of the Project) otherwise permitted by the Operative
Documents, the performance of which could not reasonably be expected to impair
the rights of the Owner Lessor or any of the Participants; (c) contracts
contemplated by any Operative Document, including contracts with Affiliates that
are permitted pursuant to Section 5.21, 5.23 and 12.18; (d) contracts for
emergency repairs or to avoid or minimize unplanned outages; and (e) agreements,
contracts or other arrangements or commitments which are (w) contemplated by the
Operative Documents (including as contemplated by Section 12.18), (x) entered
into by the Lessee with respect to the disposition of assets which the Lessee is
permitted to sell, transfer, assign, lease or sublease pursuant to the terms of
the Operative Documents, (y) entered into by the Lessee in the ordinary course
of business and which are included in the Annual Operating Budget consistent
with Section 5.5, or (z) in substitution for existing agreements, contracts or
other arrangements (other than the PPA) which are on substantially similar or
more favorable terms and conditions to the agreements, contracts or arrangements
being replaced.
Section 5.21. Limitation on Transactions with Affiliates. The Lessee shall
not enter into any transaction or series of related transactions with any
Affiliate except (i) as contemplated by Section 5.23 and 12.18 or(ii) on terms
no less favorable to the Lessee
44
than those in comparable third party, arm's length transactions and as
contemplated by the Operative Documents on the Closing Date (including, for the
avoidance of doubt, the Administrative Services Agreement).
Section 5.22. Depositary Agreement Accounts; Bank Accounts. The Lessee
shall maintain the amounts in the Accounts as set forth in the Depositary
Agreement. The amounts on deposit in each of the Accounts shall be subject to
the terms of, and disbursed in accordance with, this Participation Agreement and
the Depositary Agreement. The Lessee shall not maintain any other accounts other
than those specified therein and the bank accounts held in Hawaii as set forth
on Schedule 5.22, Part 1 hereto and any other bank accounts as set forth on
Schedule 5.22, Part 2 and Part 3. The Lessee shall close all of the bank
accounts set forth in Schedule 5.22, Part 2 within three (3) months of the
Closing Date. For the avoidance of doubt, the accounts set forth in Schedule
5.22, Part 3 will not be closed and will not be subject to any security
agreements or control agreements (it being understood that the Lessee has no
right to the monies in such accounts).
Section 5.23. Sharing of Facilities. The Lessee shall not share its
facilities or assets with any other entity or project, except as permitted in
Section 5.21. Notwithstanding the foregoing, the Lessee may share Severable
Modifications or certain facilities including, without limitation, substation,
interconnection and transmission facilities, back-up generators, emergency
equipment and administrative facilities, for the Phase II Project, so long as
(i) any construction is conducted by entities other than the Lessee Partners or
the Lessee, (ii) with respect to the Severable Modifications, the Lessee shall
comply with Section 11.1 hereto and Section 8 of the Project Lease, and (iii)
any such sharing shall not reduce by more than a de minimis amount, the rights
and benefits of the Owner Lessor, and, so long as the Lien of the Indenture
shall not have been terminated and fully discharged, the Indenture Trustee, with
respect to the Project or adversely affect the ability of the Project to
generate and transmit power to the limit of 33 MW, therefrom.
Section 5.24. Capital Expenditures. The Lessee shall not make capital
expenditures in excess of $2,000,000 in any calendar year with respect to
Optional Modifications (it being understood that this limitation shall not apply
to the Expansion Project, Required Modifications or the Well Improvements (so
long as capital expenditures incurred with respect to the Well Improvements are
incurred in the 2005 calendar year and are made solely from distributions from
the Distribution Account made in accordance with the Depositary Agreement or
from equity contributions made to the Lessee by the Pledgor)); provided,
however, such capital expenditures, if incurred, shall not exceed the aggregate
spending limitations with respect to all expenditures set forth in the Annual
Operating Budget for such year.
45
Section 5.25. Contingent Liabilities. Lessee shall not become liable as a
surety, guarantor, accommodation endorser or otherwise, for or upon the
obligation of any other Person; provided, however, that this Section 5.25 shall
not be deemed to prohibit:
(a) the acquisition of goods, supplies or merchandise in the
normal course of business or normal trade credit; or
(b) the endorsement of negotiable instruments received in the
normal course of its business.
Section 5.26. Abandonment of Project. Lessee shall not voluntarily abandon
the operation, maintenance, or repair of the Project except in connection with
the exercise, if any, by the Lessee of its termination option under Section 14
of the Project Lease.
Section 5.27. Accounts Receivable. Lessee agrees to use commercially
reasonable efforts to diligently pursue collection of all material accounts
receivable owing to it and all other material amounts that may from time to time
be owing to it for services rendered or goods sold.
Section 5.28. Intellectual Property. Lessee shall maintain adequate
trademarks, trade names and other rights to inventions, know-how, patents,
copyrights, confidential information and other intellectual property necessary
to operate the Project as contemplated by the Project Lease except where failure
to do so would result in one or more Claims in excess of $1,500,000 against the
Lessee, taking into account any Claims under Sections 5.2, 5.3 and 5.9.
Section 5.29. EWG Status. The Lessee shall maintain its status as an EWG
(as defined in PUHCA).
Section 5.30. Spare Drive Train Equipment. Lessee shall maintain a spare
steam drive train (which consists of a spare steam turbine without its housing,
spare steam turbine gearbox and associated couplings, spare pentane turbine, and
spare pentane turbine gearbox and associated couplings) on the Project Site by
December 31, 2005. For the avoidance of doubt, it is understood and agreed that
the spare drive train equipment included in the Project as of the Closing Date
constitutes the required spare drive train as of the Closing Date. In the event
that it becomes necessary to utilize any or all of such spare steam drive train,
the Lessee shall replace any parts used as soon as is commercially reasonable so
that there will be one complete spare steam drive train on the premises at all
times.
46
Section 5.31. Well Completion Efforts. Lessee shall use all commercially
reasonable efforts to make the Well Improvements and satisfy the Completion
Tests relating to such Well Improvements by December 30, 2005.
Section 5.32. ERISA. At no time shall Lessee use or attempt to use any
assets which would be deemed to be "plan assets" under the "plan asset
regulations" promulgated pursuant to ERISA to satisfy any or all obligations
under the Operative Documents.
Section 5.33. Partial Assignment. The Lessee shall enforce its rights (and
the rights of the Owner Lessor and the Indenture Trustee) under the Partial
Assignment and shall provide a copy to each of the Owner Lessor, Equity Investor
and Indenture Trustee of any material notice it receives from PGV-II pursuant to
the Partial Assignment.
Section 5.34. Withdrawals from Well Maintenance Reserve Account. At any
time prior to a withdrawal from the Well Maintenance Reserve Account in excess
of $200,000 or, if the aggregate withdrawals from such account in the calendar
year in which such additional withdrawal is to be incurred, would exceed
$500,000, Lessee shall provide to the Equity Investor the following: (i) a plan,
specifying the nature of the Well Maintenance Costs proposed to be incurred, the
need therefor and the effect of the proposed work on the Project and its
associated geothermal xxxxx, (ii) a detailed budget specifying by line item each
major category of expenditures, together with information supporting the overall
amount of the budget, and (iii) a schedule of work to be performed, including
estimated commencement and completion dates as well as estimated dates for
completion of major milestones (the "Work Plan"). If the Equity Investor does
not object to any aspect of the Work Plan within 14 days of receipt thereof (the
"14 Day Period"), it will be deemed to have accepted such Work Plan at the end
of such 14 Day Period; provided, however, that if within the 14 Day Period, the
Equity Investor shall reasonably request additional information, such 14 Day
Period shall be extended to add an additional 7 days to such 14 Day Period
beginning on the day that the Equity Investor shall have been provided with the
additional information requested by it (the "Additional Period"). If, however,
the Equity Investor objects to such Work Plan within the 14 Day Period or the
Additional Period, the Equity Investor shall have the option of retaining
GeothermEx, Inc. to review such Work Plan and who will act in accordance with
the standards and procedures specified in the penultimate sentence of this
Section 5.34 and submit changes, if any to such Work Plan within 5 Business
Days; provided, however, that (a) if GeothermEx, Inc. is no longer in existence
or is unable or unwilling to prepare such analysis or give such opinion, then
the Lessee and the Equity Investor shall attempt in good faith to agree upon
another reputable, recognized and independent resource consultant (GeothermEx
Inc. or such other independent resource consultant, the "Geothermal Consultant")
to prepare such analysis and give such opinion (pursuant to an engagement letter
that meets the requirements set forth below), and if such parties are
47
unable to so agree within thirty (30) days, then such other consultant shall be
selected by the procedure set forth in the immediately succeeding sentence of
this Section 5.34, (b) the costs of preparing such analysis shall be paid by
Lessee, and (c) the opinion of Geothermal Consultant shall in any case be
binding and conclusive on the parties. The procedure for selecting such other
Geothermal Consultant shall be as follows: (1) each party shall designate a
reputable, recognized and independent resource consultant who is not affiliated
with the other party, (2) such consultants shall together designate a third
reputable, recognized, and independent resource consultant who is not affiliated
with any party, (3) such third consultant shall prepare such analysis and give
such opinion, and (4) the Lessee shall pay the reasonable fees and expenses of
all the consultants. If the Geothermal Consultant determines that changes are
necessary, the Lessee shall incorporate such changes into a revised Work Plan
(the "Revised Work Plan") which the Geothermal Consultant shall approve within
three Business Days. After the Lessee has completed the work, it shall certify
the same to the Equity Investor and Geothermal Consultant. If the work was not
completed in accordance in all material respects with the Work Plan or, if a
Revised Work Plan has been implemented, in accordance with the Revised Work Plan
as determined by the Geothermal Consultant (acting in accordance with the
standards and procedures specified in the penultimate sentence of this Section
5.34), (it being understood that any cost overruns shall not be considered
deviations from the Work Plan or the Revised Work Plan and may be funded from
either a contribution by ONI or by withdrawals from the Well Maintenance Reserve
Account, provided that any such withdrawals in respect of cost overruns shall be
replenished from funds in the Distribution Account) then the amount of Well
Reserve Contributions to be made by the Lessee for the immediately succeeding
calendar year shall be increased by the difference between (x) the amount
actually withdrawn from the Well Maintenance Reserve Account in connection with
such work (without taking into account any cost overruns, which shall be
addressed as set forth above) and (y) the amount that Geothermal Consultant
believed should have been spent in connection with such work in accordance with
the Work Plan or, if implemented, Revised Work Plan, as the case may be (the
"Section 5.34 Differential"). In connection with resolving any dispute pursuant
to this Section, the Geothermal Consultant shall act pursuant to an engagement
letter to which (a) the Lessee and the Equity Investor are parties and (b) the
Geothermal Consultant is held harmless by the parties to the engagement letter
for its conclusions reached pursuant thereto, subject to exceptions for gross
negligence and willful misconduct, and that requires the Geothermal Consultant
to act objectively, with no bias toward any party. Notwithstanding anything to
the contrary set forth in the foregoing, the parties agree and acknowledge that
the Lessee shall have the right to (i) withdraw funds from the Well Maintenance
Reserve Account in accordance with Section 5.4 of the Depositary Agreement
without regard to the provisions of this Section 5.34 and (ii) make any
expenditures necessary in connection with addressing any safety or regulatory
issues that
48
require immediate action. The Lessee and the Equity Investor shall promptly
provide the Indenture Trustee with a copy of each document delivered under this
Section 5.34.
SECTION 6. COVENANTS OF THE TRUST COMPANY AND THE OWNER LESSOR
Section 6.1. Compliance with the LLC Agreement. The Trust Company in its
capacity as the Owner Manager, hereby covenants and agrees that it will:
(a) comply with all of the terms of the LLC Agreement applicable
to it; and
(b) not amend, supplement, or otherwise modify Sections 1, 2.5,
5, 8, 9, 10, 12.1, 13, 14, 15.2 and 15.3 of the LLC Agreement without the prior
written consent of (i) so long as the Project Lease has not terminated or
expired and no Lease Event of Default has occurred and is continuing, the
Lessee, and (ii) so long as the Lien of the Indenture has not been terminated
and fully discharged, the Indenture Trustee.
Section 6.2. Owner Lessor's Liens. Each of the Trust Company and the Owner
Lessor hereby severally and not jointly covenants that it will not directly or
indirectly create, incur, assume or suffer to exist any Owner Lessor's Lien
created by or through it or its Affiliates (other than in the case of the Owner
Lessor, the Equity Investor) and will promptly notify the Lessee, the Equity
Investor and, so long as the Lien of the Indenture has not been terminated and
fully discharged, the Indenture Trustee of the imposition of any such Lien of
which it has Actual Knowledge and shall promptly, at its own expense, take such
action as may be necessary to duly discharge such Owner Lessor's Lien created by
or through to it or its Affiliates (other than, in the case of the Owner Lessor,
the Equity Investor).
Section 6.3. Amendments to Operative Documents. Each of the Trust Company
and the Owner Lessor hereby severally and not jointly covenants that it will not
unless such action is expressly permitted by the Operative Documents (a) through
its own action, terminate any Operative Document to which it is a party, (b)
amend, supplement, waive or modify (or consent to any such amendment,
supplement, waiver or modification) of such Operative Documents in any manner or
(c) except as provided in Section 11 hereof or Section 2.10 of the Indenture,
take any action to prepay or refund the Notes or amend any of the payment terms
of the Notes without, in each case, the prior written consent of (i) so long as
the Project Lease has not terminated or expired and no Lease Event of Default
shall have occurred and be continuing, the Lessee, or, (ii) in the case of
clause (a) or (b), so long as the Lien of the Indenture has not been terminated
and fully discharged, the Indenture Trustee (except with respect to Excepted
Payments). Notwithstanding the foregoing, prior to any assumption of the Notes
by the Equity
49
Investor pursuant to Section 11.4, the Owner Lessor will not, so long as no
Lease Event of Default shall have occurred and be continuing and no
dispossessory remedies are being exercised, exercise its option to repay the
Notes pursuant to Section 2.10 of the Indenture prior to maturity without the
consent of the Lessee.
Section 6.4. Transfer of the Owner Lessor's Leasehold Interest. Other than
as contemplated by the Operative Documents, the Owner Lessor covenants that it
will not assign, pledge, sell, lease, convey or otherwise transfer any of its
then existing right, title or interest in and to the Owner Lessor's Leasehold
Interest, the Lessor Estate, or its rights in the Real Estate Documents or the
other Operative Documents without the prior written consent of the Lessee, (so
long as no Lease Event of Default shall have occurred and be continuing and no
dispossessory remedies are being exercised), the Equity Investor and, so long as
the Lien of the Indenture has not been terminated and fully discharged, the
Indenture Trustee. Nothing in this Section 6.4 shall limit the ability of the
Equity Investor to appoint a successor Owner Manager pursuant to Section 12 of
the LLC Agreement.
Section 6.5. Owner Lessor; Lessor Estate. The Owner Manager covenants that
it will not voluntarily take any action to subject the Owner Lessor or the
Lessor Estate to the provisions of any applicable bankruptcy or insolvency law
(as now or hereafter in effect).
Section 6.6. Limitation on Indebtedness and Actions. The Owner Lessor
covenants that it will not incur any Indebtedness or enter into any business or
activity except as required or expressly permitted or contemplated by any
Operative Document and the LLC Agreement.
Section 6.7. Change of Jurisdiction of Organization. The Owner Lessor shall
give the Equity Investor, the Lessee and, so long as the Lien of the Indenture
has not been fully terminated and fully discharged, the Indenture Trustee not
less than 30 days' prior written notice of any change in the jurisdiction of
organization of the Owner Lessor from the jurisdiction set forth in Section
3.2(a) and of any change in its name.
Section 6.8. Approvals in Writing. If and to the extent approval or
direction is required at any time from the Owner Lessor under the Operative
Documents or otherwise, the Owner Lessor shall only give such approval or
direction in writing.
Section 6.9. Warranties of the Trust Company. Upon the sale of the Project
pursuant to Section 10, 13, 14 or 22 of the Project Lease, the Trust Company
agrees to provide a warranty that the Owner Lessor's Leasehold Interest being
transferred by the Owner Lessor is being transferred free and clear of all Owner
Lessor's Liens created by or through the Trust Company and any of its
Affiliates.
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SECTION 7. COVENANTS OF THE EQUITY INVESTOR
Section 7.1. Restrictions on Transfer of Member Interest. (a) The Equity
Investor covenants and agrees that during the Project Lease Term it shall not,
directly or indirectly, assign, convey or transfer any of its right, title or
interest in the Member Interest without the prior written consent of the Lessee
(so long as no Lease Event of Default shall have occurred and be continuing and
no dispossessory remedies are being exercised), and, so long as the Lien of the
Indenture has not been terminated and fully discharged, without the prior
written consent of the Indenture Trustee; provided, however, that the Equity
Investor may assign, convey or transfer all (but not less than all) of its
interest in the Member Interest without such consent to a Person (the "Equity
Investor Transferee") that shall assume the duties and obligations of the Equity
Investor under the Operative Documents pursuant to a Transfer Agreement
substantially in the form of Exhibit F hereto, or otherwise in form and
substance reasonably satisfactory to the Lessee (so long as no Lease Event of
Default shall have occurred and be continuing and no dispossessory remedies are
being exercised) and, so long as the Lien of the Indenture shall not have been
terminated and fully discharged, the Indenture Trustee, if the following
conditions shall have been satisfied:
(i) prior written notice has been delivered to the Lessee
(so long as no Lease Event of Default shall have occurred and be continuing
and no dispossessory remedies are being exercised) and the Indenture
Trustee in accordance with clause (e) below;
(ii) the Lessee (so long as no Lease Event of Default shall
have occurred and be continuing and no dispossessory remedies are being
exercised), and, so long as the Lien of the Indenture shall not have been
terminated and fully discharged, the Indenture Trustee shall have received
an opinion of counsel of the Equity Investor Transferee, which opinion is
reasonably satisfactory to the Lessee (so long as no Lease Event of Default
shall have occurred and be continuing and no dispossessory remedies are
being exercised), and, so long as the Lien of the Indenture shall not have
been terminated and fully discharged, the Indenture Trustee, confirming (A)
that all regulatory approvals required in connection with such transfer or
necessary for the Equity Investor Transferee to assume the Equity
Investor's obligations under the Operative Documents shall have been
obtained, (B) the existence, power and authority of, and due authorization,
execution and delivery of all relevant documentation by, the Equity
Investor Transferee and the Equity Investor Guarantor and (C) that each of
the Transfer Agreement and the Equity Investor Guaranty referred to below
is the legal, valid, binding and enforceable obligation of the Equity
Investor Transferee or the Equity Investor Guarantor, as appropriate
(subject to customary qualifications as to bankruptcy
51
and equitable principles), and the Indenture Trustee and the Noteholders
shall have received a copy of, and be permitted to rely upon, such opinion;
(iii) the Equity Investor Transferee shall be a "United
States Person" within the meaning of section 7701(a)(30) of the Code;
(iv) the Equity Investor Transferee shall be Solvent;
(v) the Equity Investor Transferee shall be either (A) a
directly or indirectly wholly-owned Affiliate of the Equity Investor that
does not otherwise qualify under clause (B) below, provided that all of the
payment and performance obligations of the Equity Investor Transferee under
the Operative Documents shall be guaranteed by the Equity Investor
(pursuant to an Equity Investor Guaranty substantially in the form of
Exhibit G hereto or otherwise in form and substance reasonably satisfactory
to the Lessee (so long as no Lease Event of Default shall have occurred and
be continuing and no dispossessory remedies are being exercised) and, so
long as the Lien of the Indenture shall not have been terminated and fully
discharged, the Indenture Trustee), or (B) a Person that has, or the
payment and performance obligations of which with respect to the interest
being transferred under the Operative Documents are guaranteed (pursuant to
an Equity Investor Guaranty substantially in the form of Exhibit G hereto
or otherwise in form and substance reasonably satisfactory to the Lessee
(so long as no Lease Event of Default shall have occurred and be continuing
and no dispossessory remedies are being exercised) and, so long as the Lien
of the Indenture shall not have been terminated and fully discharged, the
Indenture Trustee) by an Equity Investor Guarantor that has, a tangible net
worth of at least $50,000,000;
(vi) such transfer is in compliance with the Securities Act;
(vii) (A) with respect to a transfer by the initial Equity
Investor (or any Affiliate thereof), the Equity Investor Transferee is not
itself, nor is any of its Affiliates, a Competitor of the Lessee or an
Affiliate thereof, (B) neither the Equity Investor Transferee nor any
Affiliate of the Equity Investor Transferee shall be in material litigation
with the Lessee or any Affiliate thereof, and (C) no Noteholder shall be
prohibited from transacting business with the Equity Investor Transferee or
any Affiliate of the Equity Investor Transferee.
(b) For purposes of the preceding Section 7.1(a), a "Competitor"
of the Lessee or any Affiliate thereof shall be an entity, or an Affiliate
thereof, that is engaged in the generation of geothermal energy, but excluding
for this purpose any entity (i) that owns any such generation facility in a
passive capacity (such as, e.g., the interests
52
owned by the Owner Lessor or the Equity Investor in the Project), either
directly or through a partnership, limited liability company or other investment
vehicle, so long as such entity does not have any Affiliates that are engaged in
the generation of geothermal energy (unless referred to in clause (ii) hereof)
or (ii) whose ownership of any such generating facility is incidental to its
principal line of business.
(c) Notwithstanding anything to the contrary contained herein,
any transfer by the Equity Investor of any portion of the Member Interest shall
include a transfer of an interest in any direct or indirect parent of the Equity
Investor up to but excluding the Equity Investor; provided, that, as long as any
required Equity Investor Guaranty remains in full force and effect, the transfer
restrictions set forth in clause (a)(vii) will not apply to any transfers of an
interest in such direct or indirect parent of the Equity Investor to other
entities that are at all times wholly owned, directly or indirectly, by a parent
of the Equity Investor.
(d) The Lessee shall not be responsible for any Taxes arising out
of or caused by any transfer pursuant to (or in breach of) this Section 7.1 and
the Pricing Assumptions shall not be changed as a result of any such transfer.
(e) The Equity Investor shall give the Owner Lessor, the Lessee
(so long as no Lease Event of Default shall have occurred and be continuing and
no dispossessory remedies are being exercised) and, so long as the Lien of the
Indenture has not been terminated and fully discharged, the Indenture Trustee no
more than ninety (90) days' and no less than thirty (30) days' (or fifteen (15)
days' in the case of a transfer to an Affiliate of the Equity Investor) prior
written notice of any transfer pursuant to this Section 7.1. Such written notice
shall be in the form of a certificate stating the name and address of any
proposed Equity Investor Transferee and that the proposed transfer satisfies the
requirements of this Section 7.1. If requested by the Equity Investor or the
Indenture Trustee, the Lessee will acknowledge qualifying transfers.
(f) All reasonable, documented out-of-pocket costs, fees and
expenses of the Indenture Trustee, the Noteholders, the Lessee and the Owner
Lessor, including reasonable attorneys' fees and expenses in connection with any
such transfer or proposed transfer, including any of the foregoing relating to
any amendments to the Operative Documents required in connection therewith,
shall be paid by the Equity Investor, without any right of indemnification from
the Lessee or any other Person; provided, however, that the Equity Investor
shall have no obligation to pay such costs, fees or expenses incurred by the
Lessee as a result of any transfer while a Significant Lease Default or Lease
Event of Default is continuing.
(g) Upon any such transfer in compliance with this Section 7.1,
(i) such Equity Investor Transferee shall (x) be deemed the "Equity Investor"
for all
53
purposes, and (y) enjoy the rights and privileges and perform the obligations of
the Equity Investor hereunder and under the Transfer Agreement, the Equity
Investor Guaranty and each other Operative Document to which the Equity Investor
is a party, and each reference in this Agreement, the Transfer Agreement, the
Equity Investor Guaranty and each other Operative Document to the "Equity
Investor" shall thereafter be deemed to include such Equity Investor Transferee
for all purposes and (ii) the transferring Equity Investor and the Equity
Investor Guarantor of such transferring Equity Investor's obligations shall be
released from all obligations hereunder and under each other Operative Document
to which such transferring Equity Investor or its Equity Investor Guarantor is a
party or by which such transferring Equity Investor and its Equity Investor
Guarantor is bound; provided, however, that in no event shall any such transfer
waive or release the transferring Equity Investor or its Equity Investor
Guarantor from any liability existing immediately prior to or occurring
simultaneously with such transfer, including its obligations referenced in
paragraph (f) above.
Section 7.2. Equity Investor's Liens. The Equity Investor covenants that it
will not directly or indirectly create, incur, assume or suffer to exist any
Equity Investor's Lien and the Equity Investor shall promptly notify the Lessee
and the Indenture Trustee of the imposition of any such Lien of which the Equity
Investor has Actual Knowledge and shall promptly, at its own expense, take such
action as may be necessary to duly discharge such Equity Investor's Lien.
Section 7.3. Amendments or Revocation of LLC Agreement. Notwithstanding
anything to the contrary contained in the LLC Agreement, the Equity Investor
covenants that it will not (a) amend, supplement, or otherwise modify (i) any
section of the LLC Agreement if such amendment, supplement or modification would
materially adversely affect the Lessee, the Indenture Trustee or the Noteholders
or (ii) Sections 1, 2.5, 5, 8, 9, 10, 12.1, 13, 14, 15.2 and 15.3 of the LLC
Agreement (in each case, except for amendments required by the Operative
Documents or by Applicable Laws) without the prior written consent of (x) so
long as the Lease has not terminated or expired and no Lease Event of Default
has occurred and is continuing, the Lessee, and (y) so long as the Lien of the
Indenture has not been terminated and fully discharged, the Indenture Trustee,
or (b) rescind, or otherwise waive compliance with or terminate the LLC
Agreement without the prior written consent of (x) so long as the Lease has not
terminated or expired and no Lease Event of Default has occurred and is
continuing, the Lessee, and (y) so long as the Lien of the Indenture has not
been terminated and fully discharged, the Indenture Trustee.
Section 7.4. Bankruptcy Filings. The Equity Investor agrees that it will
not file a petition, or join in the filing of a petition, seeking
reorganization, arrangement, adjustment or composition of, or in respect of, the
Owner Lessor under the Bankruptcy Code, or any other applicable federal or state
law or the law of the District of Columbia.
54
Section 7.5. Instructions. The Equity Investor agrees that it will not
instruct the Owner Lessor to take any action prohibited by this Agreement or any
other Operative Document.
Section 7.6. Appointment of Successor Owner Manager. Notwithstanding any
other provision of this Agreement, a successor Owner Manager shall not be
appointed by the Equity Investor without the consent of the Lessee, so long as
no Lease Event of Default has occurred and is continuing (such consent not to be
unreasonably withheld or delayed) and, so long as the Lien of the Indenture has
not been terminated and fully discharged, the Indenture Trustee, unless (a) such
successor Owner Manager meets the requirements of the LLC Agreement and has a
combined capital and surplus or tangible net worth of at least $150,000,000, and
(b) the Lessee (so long as no Lease Event of Default shall have occurred and be
continuing and no dispossessory remedies are being exercised), and the Indenture
Trustee, so long as the Lien of the Indenture shall not have been terminated and
fully discharged, shall have received at the expense of the Equity Investor (i)
an opinion or opinions of counsel, such counsel and such opinion to be
reasonably acceptable to such parties, to the effect that no regulatory consents
or approvals are required, or (ii) such other evidence thereof as is reasonably
satisfactory to the Lessee, so long as no Lease Event of Default has occurred
and is continuing, and, so long as the Lien of the Indenture shall not have been
terminated and fully discharged, the Indenture Trustee; provided, however, that
if the Trust Company resigns as Owner Manager, is terminated for cause, or shall
become incapable of acting as Owner Manager or shall be adjudged a bankrupt or
insolvent or a receiver of the Owner Manager or its properties shall be
appointed or any public officer shall take charge or control of the Owner
Manager or its property or affairs for the purpose of rehabilitation,
conservation or liquidation, the opinion required by clause (c) shall be at the
expense of the Lessee.
SECTION 8. COVENANTS OF THE INDENTURE TRUSTEE AND NOTEHOLDERS
(a) The Indenture Trustee will not directly or indirectly create,
incur, assume or suffer to exist any Indenture Trustee's Lien, and will promptly
notify the Equity Investor, the Owner Lessor, the Noteholders and the Lessee of
the imposition of any such Lien of which it has Actual Knowledge and shall
promptly, at its own expense, take such action as may be necessary to duly
discharge such Indenture Trustee's Lien.
(b) The Indenture Trustee shall, at the written request and
expense of the Lessee, execute and deliver to the Lessee and cooperate with the
Lessee to cause to be filed, if not already filed, such financing statements or
other documents and such continuation statements or other documents with respect
to financing statements or other documents previously filed relating to the Lien
created by the Indenture on the Indenture Estate as may be supplied to the
Indenture Trustee by the Lessee. The Indenture Trustee
55
shall promptly provide to the Lessee and the Owner Lessor copies of all
financing statements caused to be filed by it.
(c) Each Noteholder hereby severally covenants and agrees that in
no event shall such Noteholder transfer any Senior Note (or any beneficial
interest in any Senior Note) to the Lessee or knowingly transfer any Senior Note
or beneficial interest therein to any Affiliate of the Lessee, in each case
without the consent of the Equity Investor.
(d) Each Noteholder hereby severally covenants and agrees that
such Noteholder will not transfer any Senior Note (or any beneficial interest in
any Senior Note) it holds, except in compliance with Section 2.8 of the
Indenture.
SECTION 9. INDEMNIFICATION
Section 9.1. General Indemnity.
(a) Claims Indemnified. Subject to the exclusions stated in
Section 9.1(b) below, the Lessee hereby indemnifies each Noteholder, the
Indenture Trustee, the Owner Lessor, the Owner Manager, the Trust Company and
the Equity Investor, their respective Affiliates (and the respective agents,
employees, servants, directors, members and shareholders of each such Person
and, for purposes of Section 9.2, all affiliates and any members of any
combined, consolidated and/or unitary return) (each an "Indemnitee")) for, holds
each such Indemnitee harmless from, and defends each such Indemnitee against,
all Claims that may be imposed on, incurred or suffered by or asserted against
such Indemnitee in any way arising out of, in connection with, or relating to,
any of the following:
(i) the construction, financing (including the offering or
sale of the Senior Notes), refinancing, acquisition, operation, use,
non-use, warranty, ownership, possession, maintenance, repair, lease,
condition, alteration, modification, restoration, refurbishing, return,
purchase, sale or other disposition, insuring, sublease, or other use of
the Project, the Project Site, the Geothermal Resource, the Project
Document Interest or any Component or any portion thereof or any interest
therein;
(ii) the conduct of the business or affairs of the Lessee;
(iii) the manufacture, design, purchase, acceptance,
rejection, delivery or condition of, or improvement to, the Project, the
Project Site, any Component or any Modification, or any portion of any
thereof or any interest therein;
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(iv) the Project Lease, the Power Plant Sublease, the
Sublease of Power Plant Sublease, the Sub-Grant of Delivery System Grant of
Easements or any other Operative Document or the performance or enforcement
of any terms thereof;
(v) the Environmental Condition of the Project, the Project
Site or any portion or Component thereof or any Release or threatened
Release of Hazardous Materials from the Project, the Project Site or any
portion or Component thereof or the Master Surface Lease;
(vi) the offer, issuance, sale, acquisition or delivery of
the Senior Notes or any Additional Senior Notes;
(vii) the offer, sale or delivery of all or a portion of the
Member Interest by the Equity Investor;
(viii) the reasonable costs and expenses of each Indemnitee
in connection with any amendment, supplement, modification to, or any
waiver to the Operative Documents (whether or not actually entered into);
(ix) the imposition of any Lien other than, with respect to
a particular Indemnitee, a Lien arising by or through such Indemnitee or a
Related Party (or any of their agents, employees, servants or Affiliates)
that is prohibited under the terms of the Operative Documents;
(x) any violation by, or liability relating to, the Lessee
of, or under, any Applicable Law (including Environmental Laws), whether
now or hereafter in effect or any action of any Governmental Entity or
other Person taken with respect to the Project, the Geothermal Resource or
the Project Site, the Operative Documents or the interests of the Indenture
Trustee, the Noteholders, the Owner Lessor or the Equity Investor under the
Operative Documents or the presence, or use, storage, transportation,
treatment, disposal, generation, manufacture, Release or threatened Release
of any Hazardous Materials in, at, under or from the Project or the Project
Site or any portion or Component thereof;
(xi) responding with respect to the Transaction to any
subpoenas, document requests or other inquiries of Government Authorities
relating to any party to the Transaction other than such Indemnitee;
(xii) the non-performance or breach by the Lessee or the
Pledgor of any obligation contained in this Agreement or any other
Operative Document
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or the falsity or inaccuracy of any representation or warranty of the
Lessee or the Pledgor contained in this Agreement or any other Operative
Document;
(xiii) the continuing fees (if any) and expenses of the
Owner Manager, the Indenture Trustee, the Noteholders and the Depositary
Bank (including the reasonable fees and expenses of their respective
counsel, accountants and other professional persons) arising out of their
acceptance of the Operative Documents and the discharge of their respective
duties under or in connection with the Operative Documents; and
(xiv) in any other way relating to the Project, the Project
Site or the Project Document Interest.
(b) Claims Excluded. Any Claim, to the extent (but only to the
extent) (A) attributable to, (B) arising as a result of or (C) such Claim would
not have occurred but for, any of the following, is excluded from the Lessee's
agreement to indemnify the appropriate Indemnitee under this Section 9.1:
(i) acts, omissions or events (including violation of or
change in law or any change in the Environmental Condition of the Project
or the Project Site or any portion or Component thereof, or the use,
storage, transportation, treatment or manufacture of any Hazardous Material
in, at, under or from the Project or the Project Site) occurring after
expiration or early termination of the Project Lease and, where required by
the Project Lease, Sublease of Power Plant Sublease or the Sub-Grant of
Delivery System Grant of Easements, surrender to the Owner Lessor or its
successor of the Lessee's interest in the Project in compliance with the
provisions of the Project Lease and of the Lessee's subleasehold interest
in the Project Site in accordance with the provisions of the Sublease of
Power Plant Sublease and the Sub-Grant of Delivery System Grant of
Easements, as the case may be;
(ii) with respect to a particular Indemnitee and Related
Parties, any offer, sale, assignment, transfer or other disposition
(voluntary or involuntary) by or on behalf of (A) in the case of the Equity
Investor, the Equity Investor of any of its interest in the Member
Interest, (B) in the case of the Owner Lessor, if such action is taken at
the written direction of the Equity Investor, the Equity Investor and
Related Parties, the Owner Lessor of all or any of its interest in the
Owner Lessor's Leasehold Interest, or (C) in the case of the Indenture
Trustee or the Noteholders of any of their respective interests in the
Senior Notes, unless in any of the foregoing cases such transfer is
required by the terms of the Operative Documents or occurs in connection
with the exercise of remedies following the
58
occurrence and continuance of a Lease Event of Default and no dispossessory
remedies are being exercised;
(iii) in the case of any Indemnitee, fraud, gross negligence
or willful misconduct of such Indemnitee or a Related Party of the
Indemnitee seeking indemnification;
(iv) [Intentionally Omitted];
(v) with respect to any Indemnitee, the breach of any
agreement, covenant, representation or warranty of, such Indemnitee (or a
Related Party of such Indemnitee) seeking indemnification set forth in the
Operative Documents unless attributable to a breach by the Lessee of its
obligations under the Operative Documents;
(vi) any obligation or liability expressly borne, assumed or
to be paid in any Operative Document by the Indemnitee (or a Related Party
of such Indemnitee) seeking indemnification;
(vii) with respect to any Indemnitee (other than the
Indenture Trustee and the Noteholders), any Claim constituting or arising
from an Owner Lessor's Lien created by or through such Indemnitee or to a
Related Party of such Indemnitee (excluding for the purpose of this
paragraph the liens created pursuant to the Indenture);
(viii) except to make payments on an After-Tax Basis, any
Claim that is a Tax, or is a cost of contesting a Tax imposed on such
Indemnitee or an Affiliate thereof, whether or not the Lessee is required
to indemnify therefor under Section 9.2 or the Tax Indemnity Agreement;
(ix) any failure by the Owner Manager to distribute in
accordance with the LLC Agreement any amounts received and distributable
thereunder;
(x) any amendment, supplement, modification or waiver to a
Financing Document not requested by the Lessee or not required by any
Financing Document or by Applicable Law, except during and executed in
connection with a Lease Event of Default;
(xi) any Claim that constitutes principal and/or interest on
the Senior Notes; and
59
(xii) with respect to the Owner Lessor, the Owner Manager
and the Equity Investor only, any Claim resulting from any Indenture Event
of Default not caused by or attributable to a Lease Event of Default;
provided that the terms "omission," "negligence," "gross negligence" and
"willful misconduct," when applied with respect to the Owner Manager, the Trust
Company, the Equity Investor, the Owner Lessor, the Indenture Trustee, the
Noteholders or any Affiliate of any thereof, shall not include any liability
imputed as a matter of law to such Indemnitee solely by reason of any such
entity's interest in the Project, the Project Site or the Geothermal Resource or
the Project Document Interest or any such Indemnitee's failure to act in respect
of matters which are or were the obligation of the Lessee under this Agreement
or any other Operative Document.
(c) Insured Claims. Subject to the provisions of Section 9.1(e),
in the case of any Claim indemnified by the Lessee hereunder which is covered by
a policy of insurance maintained by the Lessee, each Indemnitee agrees, unless
it and each other Indemnitee shall waive its rights to indemnification (for
itself and each Related Party thereto) in a manner reasonably acceptable to the
Lessee, to cooperate, at the sole cost and expense of the Lessee, with insurers
in exercise of their rights to investigate, defend or compromise such Claim.
(d) After-Tax Basis. The Lessee agrees that any payment or
indemnity pursuant to this Section 9.1 in respect of any Claim shall be made on
an After-Tax Basis to the Indemnitees.
(e) Claims Procedure. Each Indemnitee shall promptly after such
Indemnitee shall have Actual Knowledge thereof notify the Lessee of any Claim as
to which indemnification is sought; provided, that the failure so to notify the
Lessee shall not reduce or affect the Lessee's liability which it may have to
such Indemnitee under this Section 9.1, and no payment hereunder by the Lessee
to an Indemnitee shall be deemed to constitute a waiver or release of any right
or remedy that the Lessee may have against any such Indemnitee for actual
damages resulting directly from such failure or delay of such Indemnitee to give
the Lessee such notice. Any amount payable to any Indemnitee pursuant to this
Section 9.1 and not being contested by the Lessee pursuant to this Section
9.1(e) shall be paid within thirty (30) days after receipt of such written
demand therefor from such Indemnitee, accompanied by a certificate of such
Indemnitee stating in reasonable detail the basis for the indemnification
thereby sought and (if such Indemnitee is not a party hereto) an agreement to be
bound by the terms of this Section 9 as if such Indemnitee were such a party.
The foregoing shall not, however, constitute an obligation to disclose
confidential information of any kind without the execution of an appropriate
confidentiality agreement. Promptly after the Lessee receives notification of
such Claim accompanied by a written statement describing in reasonable detail
the
60
Claims which are the subject of and basis for such indemnity and the computation
of the amount so payable, the Lessee shall, without affecting its obligations
hereunder, notify such Indemnitee whether it intends to pay, object to,
compromise or defend any matter involving the asserted liability of such
Indemnitee. Any such contest shall be initiated within 30 days after the giving
of such notice. The Lessee shall have the right to investigate and so long as no
Significant Lease Default or Lease Event of Default shall have occurred and be
continuing, the Lessee shall have the right, in its sole discretion, to defend,
or, so long as the Lessee has acknowledged in writing its obligation to
indemnify such Indemnitee with respect thereto, compromise any Claim for which
indemnification is sought under this Section 9.1; provided that no such defense
or compromise (i) is reasonably likely to involve any material danger of
foreclosure, sale, forfeiture or loss of, or imposition of a Lien on any part of
the Project, the Project Site, the Project Document Interest, the Lessor Estate
or the impairment of the Project or (ii) could result in any criminal liability
being incurred by, or could reasonably be expected to have any material adverse
effect on, such Indemnitee; provided, further, that no Claim shall be
compromised by the Lessee on a basis that admits any criminal violation or gross
negligence or willful misconduct on the part of such Indemnitee without the
express written consent of such Indemnitee (which consent may be withheld by the
Indemnitee in its sole discretion); and provided, further, that to the extent
that other Claims unrelated to the transactions contemplated by the Operative
Documents are part of the same proceeding involving such Claim, the Lessee may
assume responsibility for the contest or compromise of such Claim only if the
same may be and is severed from such other Claims (and each Indemnitee agrees to
use reasonable efforts to obtain such a severance). If the Lessee elects,
subject to the foregoing, to compromise or defend any such asserted liability,
it may do so at its own expense and by counsel selected by it and reasonably
satisfactory to such Indemnitee. Upon the Lessee's election to compromise or
defend such asserted liability and notification to such Indemnitee of its intent
to do so, such Indemnitee shall cooperate at the Lessee's expense with all
reasonable requests of the Lessee in connection therewith and will provide the
Lessee with all information not within the control of the Lessee as is
reasonably available to such Indemnitee which the Lessee may reasonably request;
provided, however, that such Indemnitee shall not, unless otherwise required by
Applicable Law, be obligated to disclose to the Lessee or any other Person, or
permit the Lessee or any other Person to examine (i) any income tax returns of
such Indemnitee or (ii) any confidential information or pricing information not
generally accessible by the public possessed by such Indemnitee (and, in the
event that any such information is made available, the Lessee shall treat such
information as confidential and shall take all actions reasonably requested by
such Indemnitee for purposes of obtaining a stipulation from all parties to the
related proceeding providing for the confidential treatment of such information
from all such parties). Where the Lessee, or the insurers under a policy of
insurance maintained by the Lessee, undertake the defense of such Indemnitee
with respect to a Claim (with counsel reasonably satisfactory to such
61
Indemnitee in the case of the Lessee or its Affiliates and without reservation
of rights against such Indemnitee), no additional legal fees or expenses of such
Indemnitee in connection with the defense of such Claim shall be indemnified
hereunder unless such fees or expenses were incurred at the request of the
Lessee or such insurers. Notwithstanding the foregoing, an Indemnitee may
participate at its own expense in any judicial proceeding controlled by the
Lessee pursuant to the preceding provisions, but only to the extent that such
party's participation does not in the reasonable opinion of counsel to the
Lessee interfere with such control; provided, however, that such party's
participation does not constitute a waiver of the indemnification provided in
this Section 9.1; provided further, that if and to the extent that (i) such
Indemnitee is advised by counsel in writing that an actual conflict of interest
exists where it is advisable for such Indemnitee to be represented by separate
counsel or (ii) there is a material risk that such Indemnitee may be indicted or
otherwise charged in a criminal complaint and such Indemnitee informs the Lessee
that such Indemnitee desires to be represented by separate counsel, such
Indemnitee shall have the right to control its own defense of such Claim and the
reasonable fees and expenses of such defense (including the reasonable fees and
expenses of such separate counsel) shall be borne by the Lessee. No Indemnitee
shall enter into any settlement or other compromise with respect to any Claim
without the prior written consent of the Lessee unless (i) the Indemnitee waives
its rights to indemnification hereunder or (ii) the Lessee has not acknowledged
its indemnity obligation with respect thereto and there is a significant risk
that a default judgment will be entered against such Indemnitee. Nothing
contained in this Section 9.1(e) shall be deemed to require an Indemnitee to
contest any Claim or to assume responsibility for or control of any judicial
proceeding with respect thereto. The Lessee shall pay all amounts determined to
be payable after such contest is completed within 15 days after the completion
of such contest.
(f) Subrogation. To the extent that a Claim indemnified by the
Lessee under this Section 9.1 is in fact paid in full by the Lessee or an
insurer under an insurance policy maintained by the Lessee, the Lessee or such
insurer shall be subrogated to the rights and remedies of the Indemnitee on
whose behalf such Claim was paid to the extent of such payment (other than
rights of such Indemnitee under insurance policies maintained at its own expense
or rights of the Owner Manager under the LLC Agreement) with respect to the
transaction or event giving rise to such Claim. Should an Indemnitee receive any
refund, in whole or in part, with respect to any Claim paid by the Lessee
hereunder, it shall promptly pay over to the Lessee the lesser of (i) the amount
refunded reduced by the amount of any Tax incurred by reason of the receipt or
accrual of such refund and increased by the amount of any Tax saved as a result
of the payment under this Section 9.1(f) or (ii) the amount the Lessee or any of
its insurers has paid in respect of such Claim (including any Tax gross up
amount).
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(g) Minimize Claims. The Equity Investor, the Owner Lessor, the
Owner Manager, and each of the other Transaction Parties will, to the extent
within their control, use their respective reasonable efforts to minimize Claims
relating to them, respectively, and indemnifiable by the Lessee under this
Section 9.1, including by complying with reasonable requests by the Lessee to do
or to refrain from doing any act if such compliance is of a purely ministerial
nature or, in the good faith opinion of the Equity Investor, the Owner Lessor,
the Owner Manager, or such other Transaction Party, as the case may be,
otherwise has no material adverse impact on the Equity Investor, the Owner
Lessor, the Owner Manager, or such Transaction Party, as the case may be, or any
Affiliate of any thereof or on the business or operations of any of the
foregoing.
Section 9.2. General Tax Indemnity.
(a) Indemnity. Except as provided in Section 9.2(b), the Lessee
agrees to indemnify on an After-Tax Basis each of the Indemnitees and to hold
each Indemnitee harmless from and defend each Indemnitee against all Taxes
imposed upon or with respect to or borne by or asserted against any Indemnitee,
the Lessee, the Project or the Project Site or any portion or Component or
Modification thereof or any interest therein, or upon any Operative Document or
interest therein, or otherwise arising out of, in connection with or relating
to, any of the following:
(i) the Project, the Project Site, the Lessor Estate or any
Collateral or any part thereof or interest therein;
(ii) the construction, financing, refinancing, acquisition,
operation, warranty, ownership, use, possession, maintenance, repair,
lease, condition, alteration, modification, restoration, refurbishing,
return, purchase, sale or other disposition, insuring, sublease, or other
use or non-use of the Project or the Project Site, or any portion or
Component or Modification thereof or any interest therein;
(iii) the conduct of the business or affairs of the Lessee
or any other operator at or in connection with the Project or the Project
Site;
(iv) the manufacture, design, purchase, acceptance,
rejection, delivery or condition of, or improvement of or to the Project or
the Project Site, or any portion or Component thereof or Modification
thereto, or any interest therein;
(v) the Head Lease or the Project Lease, the Sublease of
Power Plant Sublease or the Sub-Sublease of Power Plant Sublease or any
other Operative Document, the execution or delivery thereof, or the
performance or enforcement of any terms thereof or any Amendment thereto;
63
(vi) the payment of Periodic Lease Rent, Renewal Lease Rent,
Supplemental Lease Rent or any other payment under the Project Lease, the
Sublease of Power Plant Sublease or the Sub-Sublease of Power Plant
Sublease; or
(vii) otherwise in connection with the transactions
contemplated by the Operative Documents or any document or instrument in
connection with the Project related to any Operative Document or the
exercise of rights or remedies under any Operative Document or the
enforcement of any Operative Document.
(b) Excluded Taxes. The indemnity provided for in Section 9.2(a)
shall not extend to any Tax that is attributable to or arises as a result of or
is described in any of the following ( "Excluded Taxes"):
(i) Taxes imposed by the United States federal government
(including income and withholding taxes and any future value added,
consumption or other Taxes resulting from federal legislation subsequent to
the Closing Date), other than Taxes imposed under ERISA or under section
4975 of the Code;
(ii) Taxes imposed by any United States state or local
government or the District of Columbia or any possession of the United
States or any taxing authority of or in any thereof on, based on or
measured by gross or net income or gross or net receipts or capital or net
worth, including Taxes in the nature of capital gain, accumulated earnings,
personal holding company, excess profits, succession or estate, minimum,
alternative minimum, preference, franchise (including those based on
capital or net worth, loans or other investments), conduct of business and
other similar taxes (other than Taxes that are, or are in the nature of,
sales, use, stamp, license, ad valorem, value added, rental or property
Taxes, including Hawaii General Excise Taxes), including Hawaii Corporate
Income and Franchise Taxes;
(iii) Taxes other than Taxes imposed by the United States or
any United States state or local government or the District of Columbia or
any possession of the United States or any taxing authority of or in any
thereof ("U.S. Taxes") that would not have been imposed but for the
activities of an Indemnitee or any Affiliate thereof in such jurisdiction
unrelated to the transactions contemplated by the Operative Documents or
any document or instrument related thereto;
64
(iv) Taxes other than U.S. Taxes to the extent such non-U.S.
Taxes are a result of a nexus between the taxing jurisdiction and the
Indemnitee or an Affiliate that is not attributable to the transactions
contemplated by the Operative Documents;
(v) Taxes attributable to any period after the expiration or
sooner termination of the Project Lease and, if required, surrender of the
Project to the Owner Lessor or its successor and, as to Taxes in respect of
the payment of Rent, the payment of all Rent (or, in the case of the
Indenture Trustee, after the repayment of the Senior Notes and all other
amounts due and owing the Indenture Trustee and the Noteholders) other
than, in either case, during the exercise of remedies in connection with a
Lease Event of Default;
(vi) Taxes imposed on an Indemnitee attributable to or that
would not have occurred but for the gross negligence or willful misconduct
of such Indemnitee or any Affiliate thereof;
(vii) Taxes imposed on an Indemnitee attributable to or that
would not have occurred but for (A) any act or omission of such Indemnitee
or any Affiliate thereof that is expressly prohibited (or, in the case of a
failure to act, required to be performed) by the Operative Documents or any
document or instrument related thereto, or (B) a breach by such Indemnitee
(or any Affiliate thereof) of, or the inaccuracy of any of its
representations, warranties or covenants under, any Operative Document,
unless, in each case, attributable to the breach by the Lessee or any
Affiliate thereof of its obligations under a Operative Document;
(viii) Taxes attributable to or that would not have occurred
but for any voluntary transfer by the Indemnitee or any Affiliate thereof
(or, in the case of the Equity Investor, by the Owner Lessor at the written
direction of the Equity Investor) other than a transfer resulting from an
exercise by the Lessee of its rights under the Operative Documents; or any
involuntary transfer resulting from a bankruptcy of such Indemnitee or any
Affiliate thereof or a foreclosure by a creditor of such Indemnitee or
Affiliate thereof which bankruptcy or foreclosure is not attributable to
the breach by the Lessee or any Affiliate thereof of its obligations under
an Operative Document;
(ix) in the case of an Indemnitee that is the Equity
Investor or an Affiliate thereof, Taxes arising in connection with Equity
Investor's Liens; or in the case of an Indemnitee that is the Owner Lessor
or an Affiliate thereof, Taxes arising in connection with Owner Lessor's
Liens;
65
(x) Hawaii General Excise Taxes imposed on an Indemnitee
that is a Noteholder or the Indenture Trustee except to the extent such
Taxes are imposed as the result of a change in Applicable Law after the
Closing Date;
(xi) Taxes properly included in Transaction Costs or Head
Lease Rent;
(xii) Taxes imposed on, based on, or measured by any
compensation that any Owner Lessor, Indenture Trustee, Depositary Bank or
Paying Agent receives for its services;
(xiii) Taxes imposed on any Indemnitee attributable to or
that would not have occurred but for the Indemnitee's or any Affiliate's
being treated as other than a U.S. Person (as defined in section
7701(a)(30) of the Code);
(xiv) Taxes attributable to or that would not have occurred
but for the failure of an Indemnitee or an Affiliate thereof to comply on a
timely basis with certification, information, documentation, reporting or
other similar requirements concerning taxation, nationality, residence,
identity or connection with the jurisdiction or other similar matters,
provided, that the foregoing exclusion shall only apply if such Indemnitee
or Affiliate is eligible to comply with such requirement and shall have
been given timely written notice of such requirement by the Lessee;
(xv) Taxes imposed on an Indemnitee to the extent that the
Indemnitee's or an Affiliate's breach of its contest obligations under
Section 9.2(d) precludes the Lessee's ability to contest such Taxes,
provided that the Lessee shall have the right to bring suit for damages
resulting from any such breach;
(xvi) Taxes imposed on any Indemnitee attributable to or
that would not have occurred but for an Amendment to any Operative Document
which was not requested by the Lessee unless such Amendment (A) was
required by Applicable Law or the Operative Documents, (B) is necessary or
appropriate to conform with any Amendment to any Operative Document
requested by the Lessee in writing or (C) is made while a Lease Event of
Default shall have occurred and is continuing;
(xvii) Taxes imposed under section 4975 of the Code or under
ERISA or any comparable law of any Governmental Entity resulting from (A) a
breach by such Indemnitee of any representation, warranty or covenant made
66
hereunder or (B) a violation of Sections 406(b) of ERISA or Section
4975(c)(1)(E) or (F) of the Code by such Indemnitee; and
(xviii) Penalties, additions to Tax or interest imposed on
an Indemnitee attributable to such Indemnitee's or any Affiliate's failure
to comply with any requirements imposed on it under section 6011, 6111 or
6112 of the Code or the Treasury Regulations thereunder, unless such
failure results from the Lessee's breach of Section 9.2(f)(ii).
Notwithstanding the foregoing exclusions in this Section 9.2(b), no
exclusions shall apply to the determination of amounts needed to make a payment
on an After-Tax Basis.
(c) Payment.
(i) No Tax that is being contested in good faith in an
appropriate proceeding shall be payable while such proceeding is pending or
subject to any appeal pending a final judgment, subject to the Equity
Investor's right to obtain a Tax Advance in accordance with Section
9.2(d)(iii)(4).
(ii) So long as no Lease Event of Default and, in the case
of the Noteholders, no Indenture Event of Default, is continuing, each
Indemnitee will pay to the Lessee, without duplication, up to the amount of
the indemnity paid by the Lessee, (1) any refund of amounts with respect to
which the Lessee has made a general tax indemnity payment, and (2) any
current tax benefit realized by the Indemnitee in connection with the
payment under clause (1) and this clause (2) (net of any current Taxes
payable by the Indemnitee in respect of such refund). To the extent the
aggregate amount computed pursuant to clauses (1) and (2) is in excess of
the indemnity previously paid by the Lessee, such excess shall be used as
an offset against future general tax indemnity payments, if any, owed by
the Lessee to the Indemnitee. Any subsequent loss of any such refund or tax
benefit shall be an indemnified Tax hereunder without regard to the
exclusions in Section 9.2(b). In calculating tax losses and benefits, each
Indemnitee shall be presumed to be subject to federal, state and local
income tax at the highest marginal tax brackets applicable to the
Indemnitee, taking into account the deductibility of state and local taxes
for federal income tax purposes and the inclusion, if any, for federal
income tax purposes, of the refund referred to in clause (1) above.
(iii) If, in connection with a refund or credit of all or
part of any Taxes paid, reimbursed or advanced by the Lessee pursuant to
this Section 9.2, an Indemnitee receives an amount representing interest on
such refund or credit (or would have received such an amount but for offset
by unrelated matters), the
67
Indemnitee promptly shall pay to the Lessee the amount of such interest
that shall be fairly attributable to such Taxes paid, reimbursed or
advanced by the Lessee (net of Taxes payable in respect of the receipt or
accrual of such interest to the extent the payment of such interest by the
Indemnitee to the Lessee is not deductible for purposes of such Tax).
(iv) Each payment required to be made by the Lessee to an
Indemnitee pursuant to this Section 9.2 shall be paid either (1) when due
directly to the applicable taxing authority, by the Lessee if it is
permitted to do so, or (2) where direct payment is not permitted and with
respect to gross up amounts, in immediately available funds to such
Indemnitee by the later of (A) 30 days following the Lessee's receipt of
the Indemnitee's written demand for the payment (which demand shall be
accompanied by a statement of the Indemnitee describing in reasonable
detail the Taxes for which the Indemnitee is demanding indemnity and the
computation of such Taxes), (B) in the case of amounts which are being
contested pursuant to Section 9.2(d), at the time and in accordance with a
final determination of such contest or (C) in the case of any indemnity
demand for which the Lessee has requested review and determination pursuant
to Section 9.2(c)(v), the completion of such review and determination;
provided, however, in no event later than the date which is two Business
Days prior to the date on which such Taxes are required to be paid to the
applicable taxing authority (but subject to the Lessee's option under
Section 9.2(d)(iii)(4) hereof).
(v) The Lessee may request in writing that an independent
public accounting firm (which, in the case of the Noteholders, shall be the
regular outside auditing firm used by each Noteholder) selected by the
Indemnitee and reasonably acceptable to the Lessee review and determine the
amount of any indemnity payment by the Lessee to the Indemnitee pursuant to
this Section 9.2 (including any tax savings of the Equity Investor
associated with any indemnity obligation pursuant to this Section 9.2) or
any payment by an Indemnitee to the Lessee pursuant to Section 9.2(c)(ii).
The Lessee and the Indemnitee shall cooperate with such accounting firm and
supply it with all information (other than income tax returns) reasonably
necessary for the accounting firm to conduct such review and determination,
provided that such accounting firm shall agree in writing in a manner
satisfactory to the Indemnitee to maintain the confidentiality of such
information. The fees and disbursements of such accounting firm will be
paid by the Lessee; provided that such fees and disbursements will be paid
by the Indemnitee if the verification results in an adjustment in the
Lessee's favor of five percent or more of the present value of indemnity
payment or payments computed by the Indemnitee (determined using the
Discount Rate). In the event such accounting firm determines that such
computations are incorrect, then such firm shall determine what it believes
to be the correct computations. The computations
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of the accounting firm shall be final, binding and conclusive upon the
Lessee and the Indemnitee (absent manifest error). The parties hereto agree
that the accounting firm's sole responsibility shall be to verify the
computation of any payment pursuant to this Section 9.2(c) and that matters
of interpretation of this Participation Agreement or any other Operative
Document or applicable law are not within the scope of the accounting
firm's responsibility. Such accounting firm shall be requested to make its
determination within 30 days.
(vi) If the Lessee has paid an indemnity to an Indemnitee
pursuant to Section 9.1 or 9.2 (which payment shall include any Tax Advance
to the extent applied toward such indemnity), or if the Lessee has paid to
an Indemnitee an amount needed to make a payment on an After-Tax Basis, and
such Indemnitee realizes (or would have realized had such Indemnitee had
sufficient taxable income and tax liability) a reduction in U.S. federal,
state or local income taxes (including any offset or refund) ("Tax
Savings") that it would not have realized but for the relevant indemnified
Claim or Taxes or payment on an After-Tax Basis, and such Tax Savings shall
not previously have been taken into account in computing the amount of the
indemnity or payment on an After-Tax Basis to be paid by the Lessee, such
Indemnitee shall pay the Lessee (i) an amount equal to such Tax Savings and
(ii) any tax benefit realized by the Indemnitee in connection with the
payment under clause (i) and this clause (ii) net of any related tax
detriment, provided no Lease Event of Default is continuing. In calculating
the amount of any Tax Savings, and in calculating the amount of any tax
benefit described in clause (ii) of the preceding sentence, each Indemnitee
shall be presumed to be subject to federal, state and local income tax at
the highest marginal tax brackets applicable to the Indemnitee, taking into
account the deductibility of state and local taxes for federal income tax
purposes. Anything in this Section 9.2(c)(vi) to the contrary
notwithstanding, such Indemnitee shall not be required to make payments to
the Lessee in an amount exceeding the indemnities or After-Tax Basis
amounts previously paid by the Lessee to such Indemnitee.
(d) Contest.
(i) If a written claim is made by any taxing authority
against an Indemnitee or an Affiliate thereof for any Taxes with respect to
which the Lessee may be liable for indemnity hereunder (a "Tax Claim"),
such Indemnitee shall give the Lessee written notice of such Tax Claim as
soon as practicable (and in all events within 30 days), and shall furnish
the Lessee with copies of such Tax Claim and all other writings received
from the taxing authority to the extent relating to such Tax Claim,
provided that failure so to notify the Lessee shall not relieve the Lessee
of any obligation to indemnify the Indemnitee hereunder except
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to the extent that such failure precludes the Lessee's ability to conduct a
contest of such Taxes (provided further, that the Lessee shall have the
right to bring suit for damages resulting from any such failure). Subject
to Section 9.2(d)(iii), the Lessee shall be entitled for a period of 30
days from the receipt of such written notice (or such shorter period as is
reasonably specified by the lndemnitee if any contest of the Taxes must be
commenced prior to the expiration of thirty days) to request in writing
that the Indemnitee contest the imposition of such Taxes at the Lessee's
sole cost and expense and the Indemnitee shall not pay such Tax within such
period. The Indemnitee shall not pay such Tax Claim until at least 30 days
after providing the Lessee with such written notice unless (a) the
Indemnitee is required to do so by law or regulation and (b) in the written
notice described above, the Indemnitee has notified the Lessee of such
requirement.
(ii) Subject to Section 9.2(d)(iii), the Lessee will be
entitled to contest (acting through counsel selected by the Lessee and
reasonably satisfactory to the Indemnitee), and control the contest of, any
Tax Claim in good faith if (i) the contest of the Tax Claim may be pursued
in the name of the Lessee; (ii) such Tax Claim must be pursued in the name
of the Indemnitee but may be pursued independently from Tax Claims for
which the Lessee is not obligated to indemnify the Indemnitee (with each
Indemnitee agreeing to cooperate with the Lessee in its reasonable efforts
to sever the contest of any indemnified Tax from the contest of the
unindemnified Tax, so that the Lessee may control the contest of the
indemnified Tax); or (iii) the Indemnitee requests in writing that the
Lessee control such contest. In the case of all other Tax Claims, the
Indemnitee shall contest the Tax Claim including seeking judicial review of
any adverse administrative determination as requested by the Lessee, and
appealing any adverse judicial determination except as otherwise provided
in Section 9.2(d)(iii), and the Indemnitee shall control the contest of
such Tax Claim in good faith (acting through counsel selected by the
Indemnitee and reasonably satisfactory to the Lessee).
(iii) In the case of any contest pursuant to clause (i) or
(ii) above, the Lessee shall use reasonable efforts to contest such claim
in its own name and the Indemnitee shall use reasonable efforts to allow
the Lessee to contest such claim in the name of the Lessee. In the case of
a Tax Claim contested by the Lessee in the Lessee's name, the Lessee shall
consult in good faith with, and keep reasonably informed, the Indemnitee
and its counsel and shall provide the Indemnitee with copies of any
documents, reports or claims issued by or sent to the relevant auditing
agent or taxing authority, but the decisions regarding what actions to be
taken shall be made by the Lessee in its sole judgment. In the case of all
other Tax Claims, the Indemnitee shall contest the Tax Claim at the
Lessee's sole cost and expense if the Lessee shall request the
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Tax Claim be contested and the following rules shall apply to such contest:
(1) the Indemnitee will control the contest (and all decisions with respect
to such contest shall be made in its sole judgment exercised in good faith)
acting through counsel selected by the Indemnitee and reasonably
satisfactory to the Lessee; (2) at the Lessee's written request, if payment
is made to the applicable tax authority, the Indemnitee shall use all
reasonable efforts to obtain a refund thereof in appropriate administrative
or judicial proceedings; (3) the Indemnitee conducting such contest shall
consult with and keep reasonably informed the Lessee and its designated
counsel with respect to such Tax Claim, shall provide the Lessee with
copies of any documents, reports or claims issued by or sent to the
relevant auditing agent or taxing authority to the extent relating to such
Tax Claim (provided that the Indemnitee shall have the right to redact
items relating to the privileged or unrelated tax matters of the Indemnitee
or its Affiliates) and shall consult in good faith with the Lessee
regarding any request (a) to resist payment of Taxes if practical and (b)
not to pay such Tax except under protest if protest is necessary and
proper, but the decision regarding what actions to be taken shall be made
by the Indemnitee in its sole judgment.
(iv) Notwithstanding the foregoing, no contest with respect
to a Tax Claim will be required or permitted pursuant to this Section 9.2
and the Lessee shall be required to pay the applicable Taxes without
contest unless:
(1) no Lease Event of Default has occurred and is
continuing;
(2) there is no material risk of sale, forfeiture or
loss of, or the creation of a material Lien (other than a Permitted
Lien) on the Project or any portion or Component or Modification
thereof unless the Lessee has posted and maintained a bond or other
security (taking into account the amount of the Tax Claim and the
likelihood of success of a contest) (which may include Adequate
Reserves) reasonably satisfactory to the relevant Indemnitee or the
Taxes shall have been paid as provided in clause (4) below;
(3) the contest of such Tax Claim does not involve a
risk of imposition of any criminal liability on the Indemnitee;
(4) if such contest involves payment of the Tax, the
Lessee either advances to the Indemnitee on an interest-free basis
with no after-tax cost to such Indemnitee (a "Tax Advance") or pays,
on an After-Tax Basis to such Indemnitee, the amount payable by the
Lessee pursuant to Section 9.2(a) with respect to such Tax;
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(5) the Lessee shall have agreed to pay and shall pay
to such Indemnitee on an After-Tax Basis all reasonable out-of-pocket
costs and expenses that the Indemnitee may incur in connection with
the contest of such Tax Claim (including all reasonable legal,
accounting and investigatory fees and disbursements);
(6) the amount of the Taxes in controversy, taking into
account the amount of all similar and logically related Taxes with
respect to the transactions contemplated by the Operative Documents
that could be raised in any other year (including any future year) not
barred by the statute of limitations, exceeds $25,000;
(7) the contest would not require the Indemnitee to
extend the statute of limitations in respect of other Taxes not
indemnifiable by the Lessee hereunder;
(8) the Indemnitee has been provided at the Lessee's
expense with an opinion of independent tax counsel selected by the
Lessee and reasonably acceptable to the Indemnitee to the effect that
there is a Reasonable Basis for contesting such Tax Claim;
(9) in the case of a judicial appeal, no appeal to the
U.S. Supreme Court shall be required of the Indemnitee; and
(10) in the case of a contest conducted in the name of
an Indemnitee, the Lessee shall have delivered to the Indemnitee a
written acknowledgement of its liability under this Section 9.2 for
such Taxes, provided however, that such acknowledgement shall not be
required other than to the extent that the basis for the taxing
authority's claim is or becomes reasonably clear; provided further,
that Lessee shall not be bound by its acknowledgement of liability if
the contest is resolved on the basis of a written opinion of the
adjudicator that clearly indicates that the basis for the conclusion
is one for which the Lessee has no liability under this Section 9.2
with respect to such Tax.
(e) Settlement. Notwithstanding anything to the contrary
contained in this Section 9.2, the Indemnitee at any time may elect to decline
to take any action or any further action with respect to a Tax Claim and may in
its sole discretion settle any contest without the consent of the Lessee if such
Indemnitee (i) shall waive its right to indemnity under this Section 9.2 with
respect to such Tax Claim (and any Tax Claim with respect to any other taxable
year the contest of which is precluded by such waiver) and (ii) shall pay
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to the Lessee any amount previously paid or advanced by the Lessee pursuant to
Section 9.2 with respect to such Tax Claim other than amounts paid for expenses
of the contest.
(f) Reports.
(i) If any report, statement or return is required to be
filed by an Indemnitee with respect to any Tax that is subject to
indemnification under this Section 9.2, the Lessee shall (1) promptly
notify the Indemnitee (and the Indemnitee shall promptly notify the Lessee
in writing if a Responsible Officer of such Indemnitee is actually aware of
the filing, it being understood and agreed that no Indemnitee shall have
any obligation to determine whether any filing is necessary) in writing of
such requirement and (2) either (x) if permitted by Applicable Law, the
Lessee shall, at the Lessee's sole cost and expense, prepare such report,
statement or return and timely file such report, statement or return with
the appropriate taxing authority (except for any such filing that an
Indemnitee has notified the Lessee in writing that such Indemnitee intends
to file) or (y) if the Lessee is not permitted by Applicable Law to file
such report, statement or return or if so directed by the Indemnitee,
prepare and furnish to such Indemnitee not later than 10 days prior to the
date such report, statement or return is required to be filed a proposed
form of such report, statement or return for filing by the Indemnitee;
provided, however, that such Indemnitee shall have furnished the Lessee, at
the Lessee's written request and expense, with such information, not within
the control of the Lessee, as is in such Indemnitee's control or is
reasonably available to such Indemnitee and is necessary for such filing.
(ii) Each Indemnitee and the Lessee will timely provide the
other, at the Lessee's expense, with all information in its possession that
the other party may reasonably require and request to satisfy its
obligations under this Section 9.2(e) or otherwise to comply with any tax
reporting or filing requirement in connection with the transactions
contemplated by the Operative Documents.
(g) Non-Parties. If an Indemnitee is not a party to this
Agreement, the Lessee may require such Indemnitee to agree in writing, in a form
reasonably acceptable to the Lessee, to the terms of this Section 9.2 prior to
making any payment to such Indemnitee under this Section.
SECTION 10. LESSEE'S RIGHT OF QUIET ENJOYMENT
Each party to this Agreement acknowledges notice of the Project Lease,
the Power Plant Sublease and Sublease of Power Plant Sublease and expressly,
severally and as to its own actions only, agrees that, notwithstanding any
provision of any other
73
Operative Document, so long as no Lease Event of Default shall have occurred and
be continuing, it shall not interfere with or interrupt the quiet enjoyment of
the use, operation and possession by the Lessee of the Project in accordance
with the terms of the Project Lease.
SECTION 11. SUPPLEMENTAL FINANCING; OPTIONAL REFINANCING; ASSUMPTION OF NOTES
Section 11.1. Financing Modifications. (a) Subject to the satisfaction of
the provisions of Section 8 of the Project Lease, upon the written request of
the Lessee delivered at least ninety (90) days prior to any proposed financing
of the cost of any Modification, the Owner Lessor and the Indenture Trustee
agree, subject to Section 11.1(b), to cooperate with the Lessee to issue
Additional Senior Notes under the Indenture that will rank pari passu with the
Senior Notes and/or any Additional Senior Notes then outstanding as to the
Indenture Estate to finance such Modifications; provided, however, that the
Equity Investor shall have been given the opportunity, but shall have no
obligation, to provide all or part of the funds required to finance the cost of
any such Modification by making an Additional Equity Investment in such amount,
if any, as it may determine in its sole and absolute discretion, but the Lessee
shall have no obligation to accept such Additional Equity Investment. In
connection with any such financing, the Owner Lessor and the Indenture Trustee
will execute and deliver one or more supplements to the Indenture for the
purpose of subjecting any such Modifications to the Lien of the Indenture; and
the Lessee and the Owner Lessor will execute and deliver an amendment to the
Project Lease to reflect the adjustments required by clause (b)(iii) below.
(b) The obligations of the Owner Manager and the Indenture
Trustee to cooperate in the issuance of Additional Senior Notes pursuant to
Section 11.1(a) (any financing of Modifications through the issuance of such
Additional Senior Notes under the Indenture being called a "Supplemental
Financing") is subject to the conditions set forth in Section 2.12 of the
Indenture and to the following additional conditions:
(i) except with respect to Required Modifications, there
shall be no more than one such financing in any calendar year;
(ii) the Additional Senior Notes (A) shall have a final
maturity no later than the then-existing Lease Debt, and (B) will be fully
repaid out of Periodic Lease Rent, as adjusted in accordance with clause
(iii) below, pursuant to the Project Lease;
(iii) appropriate increases to Periodic Lease Rent and
Termination Value (for incremental debt service associated with any
Additional
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Senior Notes) shall be made to provide for the payment of the Additional
Senior Notes and to protect the Equity Investor's Net Economic Return;
(iv) no Lease Default or Lease Event of Default shall have
occurred and be continuing unless the Modifications to be constructed with
the proceeds of the Additional Senior Notes shall cure such default, and
such Modifications shall be made in compliance with the Operative
Documents;
(v) such Additional Senior Notes represent an aggregate
amount of not less than $5,000,000, nor greater than 100% of the costs of
the Modifications being financed; provided that the aggregate balance of
the Lease Debt (after taking into account the Additional Senior Notes)
shall not exceed 65% of the fair market value of the Project taking into
account such Modifications (such fair market value shall, at the request of
the Equity Investor or the Indenture Trustee, be determined by an appraiser
selected by the Lessee, at the cost of the Lessee, and reasonably
acceptable to the Equity Investor) and the Indenture Trustee;
(vi) the Equity Investor shall have received (A) an opinion
of independent tax counsel selected by the Equity Investor and reasonably
satisfactory to the Lessee to the effect that such financing will create no
incremental tax risk to the Equity Investor, and (B) an indemnity, with
verification, tax savings and contest rights provisions substantially the
same as those set forth in the Tax Indemnity Agreement, against any
incremental tax risks resulting from such financing in form and substance
reasonably satisfactory to the Equity Investor from the Lessee;
(vii) the Lessee shall have made or delivered such
representations, warranties, covenants, opinions, reports or certificates
relating to such Supplemental Financing as the Equity Investor or the
Indenture Trustee may reasonably request;
(viii) the Equity Investor shall not suffer any material
adverse accounting effect under GAAP as a result of such Supplemental
Financing; and
(ix) the Lease Rent Coverage Ratio for both of the
immediately preceding two semiannual periods was greater than or equal to
1.20 to 1.00 and the Projected Lease Rent Coverage Ratio for each
semiannual period occurring while such Additional Senior Notes are
outstanding is reasonably estimated (on a basis consistent with estimates
used in connection with preparing the Projections at closing) to be greater
than or equal to 1.20 to 1.00, as certified by the Lessee in an Officer's
Certificate delivered to the Equity Investor, the Owner Lessor, and
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the Indenture Trustee and confirmed by the Engineering Consultant in the
form attached hereto as Exhibit E.
(c) The Lessee shall pay, on an After-Tax Basis, all reasonable
out-of-pocket costs and expenses of the Transaction Parties, including the
reasonable fees and expenses of counsel to the Equity Investor, the Owner
Lessor, the Equity Investor, the Owner Manager, the Indenture Trustee and the
Noteholders, in each case to the extent incurred in connection with any
financing pursuant to this Section 11.1.
Section 11.2. Well Improvements.
(a) Subject to the satisfaction of the conditions set forth in
Section 11.2(c) hereof on December 30, 2005, (i) the amounts on deposit in the
Capex Account (Debt) shall be released to or at the direction of the Owner
Lessor in accordance with Section 5.11 of the Depositary Agreement, subject to
the conditions of such release set forth therein and (ii) the Equity Investor
shall provide an Additional Equity Investment in an amount equal to the
difference between (A) the fair market value of the Project as set forth in the
appraisal delivered pursuant to Section 11.2(c)(v) hereof and (B) the Equity
Investment plus the principal amount of the Notes issued on the Closing Date
(the aggregate of the amounts in clauses (i) and (ii), the "Additional Head
Lease Rent").
(b) Subject to the receipt of the amounts in Section 11.1(a) and
the satisfaction of the conditions set forth in Section 11.2(c) hereof, upon the
delivery by the Lessee of the Completion Notice, the Owner Lessor shall be
obligated to pay the Additional Head Lease Rent to the Lessee in accordance with
Head Lease Supplement No. 2.
(c) The obligations of the Equity Investor, Owner Lessor and the
Depositary Bank pursuant to Sections 11.1(a) and (b) are subject to the
following conditions:
(i) each Financing Party shall have received the Completion
Notice in the form attached hereto as Exhibit H and certified by the
Geothermal Consultant and the Engineering Consultant;
(ii) (x) (A) Head Lease Supplement Xx. 0 (xxxxxxxxxxx Xxxx
Xxxxx Xxxxxxxxxx Xx. 0), (X) Project Lease Supplement No. 2 (superseding
Project Lease Supplement No. 1) and (C) a supplement to the Indenture in
accordance with Section 2.16 of the Indenture, in each case shall have been
duly authorized by the parties thereto, shall have been duly executed and
delivered by the parties thereto, and shall each be in full force and
effect, and executed counterparts thereof shall have been delivered to each
of the parties hereto;
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(y) the Periodic Lease Rent, Termination Value, EBO
Price and FPPO Price shall be adjusted to reflect the fair market value of
the Project, as set forth in the appraisal delivered pursuant to Section
11.2(c)(v) hereof and otherwise in accordance with Section 3.4 of the
Project Lease;
(iii) financing statements, instruments (including
recordation memoranda) and other documents with respect to the filings and
recordings in form and substance reasonably satisfactory to the Indenture
Trustee, the Initial Noteholders and the Equity Investor and all such
filings and recordings and all other filings and recordings and other
actions (including the Owner Lessor and/or the Indenture Trustee taking
possession or control of such collateral in which a security interest may
be perfected by possession or control) that are necessary in order to
establish, protect, preserve and perfect the Lien of the Indenture Trustee
on, and perfected security interest in, all right, title, estate and
interest of the Owner Lessor in and to the Well Improvements, prior and
superior to all other Liens, existing or future (other than any future lien
which by statute would have priority), in each case, shall have been duly
executed (if required to be executed by the Lessee or the Owner Lessor, if
applicable, by Applicable Law) and delivered to the Indenture Trustee or
its designee in proper form for filing, registration or recordation, and
all fees, taxes and other charges relating to such filings and recordings
and other actions, shall have been paid (or provision thereof shall be
made) by the Lessee or the Owner Lessor;
(iv) each of the parties hereto shall have received (A) an
opinion or opinions, dated the date of the Head Lease Supplement Xx. 0, xx
(0) Xxxxxxxxxx & Xxxxx LLP, special counsel to the Lessee, (2) Carlsmith
Ball LLP, Hawaii counsel to the Lessee, (3) Morris, James, Hitchens &
Xxxxxxxx LLP, counsel to Owner Lessor, the Trust Company, and the Owner
Manager and (4) Xxxxxxxx X. Xxxxxxx, Attorney at Law, counsel to the
Indenture Trustee, in each case, addressed to such Persons and in form and
substance satisfactory to such Persons, as to the authorization, validity
and enforceability of, the supplements to the Head Lease, Project Lease and
Indenture and the valid creation and perfection of a Lien over the Well
Improvements under the Indenture, and (B) Officer's Certificates from the
Lessee, the Owner Lessor, the Indenture Trustee and the Equity Investor,
relating to such matters as counsel for such parties may reasonably request
in connection with the delivery of their opinions required under clause (A)
above; and
(v) (A) the Equity Investor shall have received an appraisal
from the Appraiser with regard to the Project addressed to the Equity
Investor and which appraisal shall (i) be based upon the assumptions
attached hereto as Exhibit I, (ii) set forth the fair market value of the
Project and (iii) be otherwise in form
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and substance satisfactory to the Equity Investor, and (B) the Lessee and
the Initial Noteholders shall have received a letter from the Appraiser
with regard to the fair market value and the remaining useful life of the
Project dated as of the date of Head Lease Supplement No. 2.
(d) The Lessee shall pay, on an After-Tax Basis, all reasonable
out-of-pocket costs and expenses of the Transaction Parties, including the
reasonable fees and expenses of counsel to the Equity Investor, the Owner
Lessor, the Equity Investor, the Owner Manager, the Indenture Trustee and the
Noteholders, in each case to the extent incurred in connection with the matters
contemplated by this Section 11.2.
(e) In the event the conditions set forth in Section 11.2(c) are
not satisfied on December 30, 2005 (or such later date as the Equity Investor,
the Lessee and the Indenture Trustee may agree), the Equity Investor shall have
no obligation to contribute the Additional Equity Investment to the Owner Lessor
pursuant to Section 11.2(a), the Lessee shall pay to the Indenture Trustee an
amount equal to the excess, if any, of the Debt Payment Amount over the amount
then in the Capex Account (Debt) in accordance with Section 5.11 of the
Depositary Agreement, and the Depositary Bank shall apply the amount on deposit
in the Capex Account (Debt) in accordance with Section 5.11(b) of the Depositary
Agreement.
Section 11.3. Optional Refinancing of Lease Debt. (a) The Lessee will have
the right at any time, exercisable on no more than two occasions, to request the
Owner Lessor, and the Owner Lessor in such event shall reasonably consider, and
shall not unreasonably refuse, to refund or refinance any Senior Note or any
Additional Senior Note, in whole, through the issuance of Additional Senior
Notes directly to the public provided that the public offering materials shall
not identify the Equity Investor, to the Noteholders or to such other funding
vehicle as may be used at that time. Any refinancing under this Section 11.3
shall be subject to the conditions to the issuance of Additional Senior Notes
contained in Section 2.12 of the Indenture, including payment of any Make Whole
Premium payable in connection therewith, which shall be paid by the Lessee as
Supplemental Rent in accordance with the Project Lease and the other Operative
Documents on an After-Tax Basis to the Owner Lessor and the Equity Investor, and
satisfaction of the following additional conditions:
(i) the Owner Lessor shall be able to issue and sell such
debt upon terms and conditions substantially the same as those then
existing, or on such modified terms and conditions as may be reasonably
acceptable to the Equity Investor, and in an amount adequate to accomplish
such refunding or refinancing;
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(ii) the Additional Senior Notes shall have a final maturity
and average life no later than that of the Senior Notes issued on the
Closing Date and will be fully repaid out of Periodic Lease Rent during the
Project Lease Term;
(iii) Periodic Lease Rent and Termination Value shall be
changed to reflect the change in the interest rate;
(iv) no Significant Lease Default or Lease Event of Default
shall have occurred and be continuing;
(v) the Equity Investor shall receive (A) a favorable legal
opinion of independent tax counsel selected by the Equity Investor and
reasonably satisfactory to the Lessee that the refinancing, including any
payments to be made in connection therewith (as opposed to the right to
request such refinancing), will not result in any incremental tax risk to
the Equity Investor and (B) an indemnity, with verification, tax savings
and contest rights provisions substantially the same as those set forth in
the Tax Indemnity Agreement, against any incremental tax risks resulting
from such refinancing in form and substance reasonably satisfactory to the
Equity Investor from the Lessee;
(vi) the Equity Investor shall not suffer any adverse
accounting effects under GAAP;
(vii) the refinancing, when taken as a whole, shall not have
resulted in any other material adverse effect on the Owner Lessor and the
Equity Investor, taken as a whole;
(viii) the Lessee shall have made or delivered such
representations, warranties, opinions or certificates as the Equity
Investor may reasonably request;
(ix) all documentation in connection with such refinancing
shall be reasonably satisfactory to the Owner Lessor and the Equity
Investor;
(x) all necessary authorizations, approvals and consents in
connection with such refinancing shall have been obtained from each Person
whose authorization, approval or consent is necessary to consummate such
refinancing with respect to the Lessee, the Owner Lessor, the Equity
Investor, the Equity Investor and the Indenture Trustee, and such
authorizations, approvals and consents shall be in full force and effect on
the closing date of such refinancing; and
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(xi) each of the Owner Lessor, the Equity Investor and the
Indenture Trustee shall have received from the Lessee an Officer's
Certificate dated the date of the issuance of the Additional Senior Notes
stating that all conditions precedent to the issuance of such Additional
Senior Notes have been satisfied or waived.
(b) The Lessee shall pay (or shall arrange for payment thereof to
be made from the proceeds of the financing contemplated by this Section 11.3),
on an After-Tax Basis, all reasonable out-of-pocket costs and expenses of the
Transaction Parties, including the reasonable fees and expenses of counsel to
the Equity Investor, the Owner Lessor, the Equity Investor, the Owner Manager,
the Indenture Trustee and the Noteholders, in each case to the extent incurred
in connection with any financing pursuant to this Section 11.3.
Section 11.4. Cooperation. The Equity Investor and the Lessee will
cooperate in connection with any refinancing of the Lease Debt, and so long as
such refinancing is in accordance with the terms of the Operative Documents, the
Equity Investor will execute such agreements and documents as may be necessary
with respect to any such refinancing and will instruct the Owner Lessor to act
accordingly.
Section 11.5. Assumption of Senior Notes. Upon the occurrence and during
the continuance of an Indenture Event of Default resulting from a Lease Event of
Default (but in any event prior to the consummation of any sale by the Indenture
Trustee of all or any portion of the Indenture Estate), the Equity Investor
shall have the right (but not the obligation) to assume, on a recourse basis as
joint obligor, all but not less than all of the obligations of the Owner Lessor
then outstanding under the Senior Notes by providing written notice thereof to
the Indenture Trustee, subject to the satisfaction of the following conditions:
(i) no Indenture Event of Default, nor any event that with
the passage of time or the giving of notice or both would become a
Indenture Event of Default, shall then exist other than such resulting from
a then existing Lease Event of Default or any event that with the passage
of time or the giving of notice or both would become a Lease Event of
Default;
(ii) the Equity Investor shall become jointly and severally
liable for all of the obligations of the Owner Lessor under the Senior
Notes (including any Make Whole Premium that may become payable under the
Lease Indenture after the assumption of the Senior Notes) and all such
obligations shall become direct, primary, recourse obligations of the
Equity Investor pursuant to an assumption agreement (which assumption
agreement may be combined with the amendment of the Indenture in order to
effectuate the assumption by the Equity
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Investor, on a joint and several basis, of the obligations and liabilities
of the Owner Lessor under the Senior Notes) which, among other things, (1)
shall contain representations, warranties, covenants and defaults
substantially the same as the representations, warranties, covenants and
defaults (other than with respect to the payment of Rent) of the Lessee
under the Project Lease and this Participation Agreement and (2) shall
contain appropriate amendments to the provisions of the Indenture in order
to (A) release the Project Lease from the Indenture Estate, (B) remove any
cross-default to the Project Lease under the Indenture, (C) terminate all
of the Indenture Trustee's rights in respect of the Project Lease, and (D)
include the defaults referenced in clause (1) above, including applicable
grace periods, as Indenture Events of Default under the Indenture;
(iii) after giving effect to such assumption and such
amendment to the Indenture, the Lien of the Indenture shall be and remain a
valid and first priority perfected security interest in the Indenture
Estate securing the obligations of the Equity Investor and the Owner Lessor
under the Senior Notes and the Equity Investor's obligations under such
assumption agreement (as set forth in the opinion delivered pursuant to
clause (v) below);
(iv) the Indenture Trustee shall have received one or more
opinion(s) of counsel (which shall contain customary qualifications), which
opinion(s) and counsel shall be reasonably satisfactory to each of them and
their respective counsel, to the effect that (a) such assumption agreement
has been duly authorized, executed and delivered on behalf of the Equity
Investor, (b) such assumption agreement, the amended Indenture and the
Senior Notes constitute legal, valid and binding obligations of the Equity
Investor, enforceable against it in accordance with their respective terms
(subject to customary bankruptcy and equitable qualifications) and (c) all
Governmental Approvals and filings required in connection with such
assumption have been obtained, and such opinion(s) shall address such other
issues as the Indenture Trustee shall reasonably request, subject, in the
case of the enforceability opinions to be rendered pursuant to clause (b),
to the limitation that enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, arrangement, moratorium
or other laws relating to or affecting the rights of creditors generally
and by general principles of equity;
(v) the Equity Investor shall have paid all amounts then due
and owing (including overdue interest) under the Senior Notes (other than
principal thereof then due and owing as a result of any acceleration of the
Senior Notes);
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(vi) after giving effect to such assumption (and the payment
in clause (vi) above), no Indenture Event of Default shall have occurred
and be continuing;
(vii) either (i) the Indenture Trustee receives an opinion
of counsel of a nationally-recognized law firm in form and substance
reasonably satisfactory to the Indenture Trustee stating that the
Noteholders will not recognize income, gain or loss for U.S. federal tax
purposes as a result of the assumption, or (ii) the Equity Investor shall
indemnify the Noteholders against any potential adverse tax effect as a
result of such assumption in form and substance reasonably acceptable to
the Indenture Trustee;
(viii) the Indenture Trustee shall have received a
certificate of a Responsible Officer of the Equity Investor containing
representations and warranties of the Equity Investor substantially similar
to those given by the Lessee hereunder and reasonably satisfactory to the
Indenture Trustee. Such certificate shall also state that (A) the
conditions precedent required by this Participation Agreement for such
assumption have been complied with (assuming that all documents, opinions
and other matters which must be acceptable or reasonably acceptable to a
receiving party are so acceptable to such party), (B) there is no pending
or, to the knowledge of the Equity Investor, threatened, action, suit,
investigation or proceeding against the Equity Investor that questions the
validity of any documentation related to such assumption, the Senior Notes
and the Indenture (each, an "Assumption Document") or the assumption
contemplated thereby or which, if adversely determined, would have a
material adverse effect on the ability of the Equity Investor to perform
its obligations under any Assumption Document and (C) after giving effect
to the assumption by the Equity Investor, (1) each representation and
warranty of the Equity Investor made pursuant to the Assumption Documents
is true and correct in all material respects and (2) the Equity Investor is
not insolvent within the meaning of any applicable preferential transfer,
fraudulent conveyance or bankruptcy law; and
(ix) the Equity Investor shall have paid, at no after-tax
cost to such parties, all reasonable documented out-of-pocket expenses
(including reasonable attorney's fees and expenses) of the Owner Lessor,
the Owner Manager and the Indenture Trustee in connection with such
assumption and other transactions referred to in this Section 11.5.
Notwithstanding the foregoing, the Equity Investor shall not have the right
to assume the Senior Notes if the aggregate principal amount of Senior Notes
which have been issued pursuant to the Indenture is more than $45,000,000.
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(b) The rights of the Equity Investor under this Section 11.5
shall not be deemed to limit in any respect the Indenture Trustee's rights and
remedies under the Indenture upon the occurrence of a Indenture Event of
Default; provided that upon the foregoing conditions being satisfied prior to
the consummation of any sale by the Indenture Trustee of all or any portion of
the Indenture Estate, all Indenture Events of Default arising from Lease Events
of Default shall be deemed cured and the Lien of the Indenture shall be
terminated solely with respect to the Owner Lessor's right, title and interest
to the Project Lease (and all Rent thereunder) and the Equity Investor and the
Owner Lessor (to the exclusion of the Indenture Trustee) may exercise all rights
of the Owner Lessor under the Project Lease.
SECTION 12. MISCELLANEOUS
Section 12.1. Consents. The Equity Investor covenants and agrees that it
shall not unreasonably withhold its consent to any consent requested of the
Owner Lessor under the terms of the Operative Documents that by its terms is not
to be unreasonably withheld by the Owner Lessor.
Section 12.2. Bankruptcy of Lessor Estate. If (i) all or any part of the
Lessor Estate becomes the property of a debtor subject to the provisions of
Title 11 of the United States Code, as amended from time to time, (ii) pursuant
to such reorganization provisions the Equity Investor is required, by reason of
the Equity Investor being held to have recourse liability to the debtor or the
trustee of the debtor directly or indirectly, to make payment on account of any
amount payable as principal or interest on the Senior Notes, and (iii) the
Indenture Trustee actually receives any Excess Amount, as defined below, which
reflects any payment by the Equity Investor on account of clause (ii) above, the
Indenture Trustee shall, upon obtaining Actual Knowledge thereof or upon written
request of the Equity Investor, promptly refund to the Equity Investor such
Excess Amount. For purposes of this Section 12.2, "Excess Amount" means the
amount by which such payment exceeds the amount that would have been received by
the Indenture Trustee if the Equity Investor had not become subject to the
recourse liability referred to in clause (ii) above. Nothing contained in this
Section 12.2 shall prevent the Indenture Trustee from enforcing any personal
recourse obligations (and retaining the proceeds thereof) of the Equity Investor
as contemplated by this Participation Agreement (other than those referred to in
clause (ii) above).
The Indenture Trustee agrees that should the Lessor Estate become a
debtor subject to the provisions of the Bankruptcy Code, it shall, upon the
written request of the Equity Investor, and provided that the making of the
election hereinafter referred to is permitted to be made by it under Applicable
Law and will not have any adverse impact on any Noteholder or the Indenture
Estate, all as determined by the Equity Investor or the Indenture Trustee, other
than as contemplated by the preceding paragraph, make the
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election referred to in Section 111 1(b)(1)(A)(i) of the Bankruptcy Code or any
successor provision if, in the absence of such election, the Indenture Trustee
would have recourse against the Equity Investor for the payment of the
indebtedness represented by the Senior Notes in circumstances in which such
Noteholders or the Indenture Trustee would not have recourse under the Indenture
if the Lessor Estate had not become a debtor under the Bankruptcy Code.
Section 12.3. Amendments and Waivers. No term, covenant, agreement or
condition of this Agreement may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto.
Section 12.4. Notices. Unless otherwise expressly specified or permitted by
the terms hereof, all communications and notices provided for herein to a party
hereto shall be in writing or by a telecommunications device capable of creating
a written record, and any such notice shall become effective (a) upon personal
delivery thereof, including by overnight mail or courier service, (b) in the
case of notice by United States mail, certified or registered, postage prepaid,
return receipt requested, upon receipt thereof, or (c) in the case of notice by
such a telecommunications device, upon transmission thereof, provided such
transmission is promptly confirmed by either of the methods set forth in clauses
(a) and (b) above, in each case addressed to such party and copy party at its
address set forth below or in the case of any such party or copy party hereto,
at such other address as such party or copy party may from time to time
designate by written notice to the other parties hereto:
If to the Lessee:
Puna Geothermal Venture
c/o Ormat Nevada Inc.
000 Xxxx Xxxxxx
Xxxxxx, Xxxxxx 00000
Attention: President
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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If to the Owner Lessor:
c/o Wilmington Trust Company
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Corporate Trust Administration
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
with a copy to:
Southern Company
000 Xxxxxxxxx Xxxxxx XX
Xxxxxxx, XX 00000
Attn: Xx. Xxxxx Xxxxx
Director, Finance and Capital Markets
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
If to the Owner Manager or the Trust Company:
Wilmington Trust Company
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Corporate Trust Administration
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
If to the Equity Investor:
c/o Southern Company
000 Xxxxxxxxx Xxxxxx XX
Xxxxxxx, XX 00000
Attn: Xx. Xxxxx Xxxxx
Director, Finance and Capital Markets
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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If to the Indenture Trustee:
Union Bank of California, N.A.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Corporate Trust Department
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
A copy of all notices provided for herein shall be sent by the party giving such
notice to each of the other parties hereto.
Section 12.5. Survival. All warranties, representations, indemnities and
covenants made by any party hereto, herein or in any certificate or other
instrument delivered by any such party or on the behalf of any such party under
this Agreement shall be considered to have been relied upon by each other party
hereto and shall survive the consummation of the transactions contemplated
hereby and in the other Operative Documents regardless of any investigation made
by any such party or on behalf of any such party. In addition, the
indemnification obligations by the Lessee under Section 9.1 and Section 9.2 of
this Agreement shall, subject to Section 9.1(b) and Section 9.2(b),
respectively, expressly survive the expiration or early termination (in either
case, for whatever reason) of the Project Lease or the transfer or other
disposition of the respective interests of the Equity Investor, the Owner
Lessor, the Trust Company, the Owner Manager, the Indenture Trustee and the
Noteholders in, to and under this Agreement, the Project Lease and the other
Operative Documents. Upon expiration or early termination of the Project Lease
(other than in connection with an assumption by the Lessee of the Notes), the
covenants of the Lessee in Section 5 shall terminate.
Section 12.6. Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of, and shall be enforceable by, the parties
hereto and their respective successors and assigns as permitted by and in
accordance with the terms hereof, including each successive holder of the Equity
Investor's Member Interest permitted under Section 7.1. Except as expressly
provided herein or in the other Operative Documents, no party hereto may assign
its interests herein without the consent of the other parties hereto.
Section 12.7. Governing Law. This Agreement has been delivered in the State
of New York and shall be in all respects governed by and construed in accordance
with the law of the State of New York including all matters of construction,
validity and performance.
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Section 12.8. Severability. If any provision hereof shall be invalid,
illegal or unenforceable under Applicable Law, the validity, legality and
enforceability of the remaining provisions hereof shall not be affected or
impaired thereby.
Section 12.9. Counterparts. This Agreement may be executed by one or more
of the parties hereto on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Lessee, the Indenture Trustee and the Equity Investor.
Section 12.10. Headings and Table of Contents. The headings of the sections
of this Agreement and the Table of Contents are inserted for purposes of
convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
Section 12.11. Limitation of Liability.
(a) No party to this Agreement shall have any obligation or duty
to the other parties with respect to the transactions contemplated hereby except
those obligations or duties expressly set forth in this Agreement and the other
Operative Documents to which it is a party, and none of the Trust Company or the
Indenture Trustee shall be liable for performance by any other party hereto of
such other party's obligations or duties hereunder or thereunder. In addition,
under no circumstances whatsoever shall the Equity Investor be liable to the
Lessee or any other Person in connection with the transactions contemplated
hereby for any action or inaction on the part of any other party hereto,
including the Owner Lessor or the Owner Manager, whether or not such action or
inaction is caused by willful misconduct or gross negligence of the Owner Lessor
or the Owner Manager, unless such action or inaction is at the written direction
or with the written consent of the Equity Investor.
(b) The Trust Company is entering into the Operative Documents to
which it is a party solely as manager under the LLC Agreement and not in its
individual capacity, except as expressly provided herein or therein, and in no
case whatsoever shall the Trust Company be personally liable for, or for any
loss in respect of, any of the statements, representations, warranties,
agreements or obligations of the Owner Lessor hereunder or under any other
Operative Document, as to all of which the other parties hereto agree to look
solely to the Lessor Estate; provided, however, that the Trust Company shall be
liable hereunder for its own gross negligence or willful misconduct or for a
breach of its representations, warranties and covenants made in its individual
capacity.
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(c) The Indenture Trustee is entering into the Operative
Documents to which it is a party solely as trustee under the Indenture, and not
in its individual capacity, and in no case whatsoever shall the Indenture
Trustee be personally liable for, or for any loss in respect of, any of the
statements, representations, warranties, agreements or obligations of the Owner
Lessor hereunder or under any other Operative Document, as to all of which the
other parties hereto agree to look solely to the Indenture Estate and the Lessor
Estate, respectively; provided, however, that the Indenture Trustee shall be
liable hereunder for its own negligence or willful misconduct.
(d) Notwithstanding anything contained herein to the contrary,
the right of the Indenture Trustee to perform any discretionary act enumerated
herein or in any other Operative Document to which it is a party (including the
right to consent to or approve of any action or document which requires its
consent or approval and the right to waive any provision of, or consent to any
change or amendment to, any of the Operative Documents) shall not be construed
as giving rise to any expressed or implied duty owed by such trustee, and the
Indenture Trustee shall not be answerable in connection with any of the
foregoing for, or have any liability whatsoever as a result of, (i) its refusal
to perform, consent or approve of such discretionary acts without the prior
consent or direction of the applicable percentage of the Noteholders that would
be required if such consent or direction was obtained under the Indenture, or
(ii) its performance of any such discretionary act (except for any negligence or
willful misconduct in the performance of such acts). In connection with any such
discretionary acts, the Indenture Trustee may in its sole discretion (but shall
not, except as otherwise provided in the Indenture or as otherwise required by
Applicable Law, have any obligation to) request the approval of the Noteholders,
and each of the Noteholders may in its sole discretion (but shall not, except as
otherwise provided in the Operative Documents to which it is a party or as
otherwise required by Applicable Law, have any obligation to) request the
approval of the Noteholders.
(e) The Equity Investor will give the Lessee and the Indenture
Trustee at least 15 days' prior notice of any proposed amendment or supplement
to Sections 2, 5.2, 6, 7, 8, 9, 10, 12, 13, 14 and 15 of the LLC Agreement and
deliver true, complete and fully executed copies to the Lessee and the Indenture
Trustee of any amendment or supplement to such Sections of the LLC Agreement. No
amendment or supplement to the LLC Agreement that could materially adversely
affect the interests of the Indenture Trustee shall become effective without the
written consent of the Indenture Trustee.
(f) None of the Trust Company, the Owner Manager, the Equity
Investor, the Equity Investor or the Indenture Trustee, or any Affiliates
thereof (other than the Owner Lessor), will be personally liable to any holder
of a Senior Note or in the case of the Owner Manager or the Equity Investor, to
the Indenture Trustee, for any amounts payable with respect to the Senior Notes.
All payments of principal of, premium,
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if any, and interest on, the Senior Notes (other than payments made in
connection with an optional redemption or purchase by the Owner Lessor or Equity
Investor and except as provided in Section 11.5) will be made only from the
Indenture Estate or the income and proceeds received by the Indenture Trustee
therefrom (including Periodic Lease Rent payable by the Lessee pursuant to the
Project Lease).
Section 12.12. Consent to Jurisdiction; Waiver of Trial by Jury; Process
Agent.
(a) Each of the parties hereto (i) hereby irrevocably submits to
the nonexclusive jurisdiction of the Supreme Court of the State of New York, New
York County (without prejudice to the right of any party to remove to the United
States District Court for the Southern District of New York) and to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York (and any court of appeals from either thereof) for the
purposes of any suit, action or other proceeding arising out of this Agreement,
the other Operative Documents, or the subject matter hereof or thereof or any of
the transactions contemplated hereby or thereby brought by any of the parties
hereto or their successors or assigns; (ii) hereby irrevocably agrees that all
Claims in respect of such action or proceeding may be heard and determined in
such New York State court, or in such federal court; and (iii) to the extent
permitted by Applicable Law, hereby irrevocably waives, and agrees not to
assert, by way of motion, as a defense, or otherwise, in any such suit, action
or proceeding, any claim that such party is not personally subject to the
jurisdiction of the above-named courts, that the suit, action or proceeding is
brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper or that this Agreement, the other Operative Documents, or
the subject matter hereof or thereof may not be enforced in or by such court.
(b) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES THE RIGHT TO DEMAND A TRIAL BY JURY, IN
ANY SUCH SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT, THE
OTHER OPERATIVE DOCUMENTS, OR THE SUBJECT MATTER HEREOF OR THEREOF OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY BROUGHT BY ANY OF THE PARTIES HERETO
OR THEIR SUCCESSORS OR ASSIGNS.
Section 12.13. Consent to Security Filings. Pursuant to Applicable Law,
each of the Lessee and the Owner Lessor authorizes the Indenture Trustee to file
or record, or cause to be filed or recorded, financing statements and other
filing or recording documents or instruments with respect to the Collateral
without the signature of the Lessee or the Owner Lessor in such form and in such
offices as appropriate in order to carry out the intent and purpose of the
Operative Documents and to establish and protect the rights and remedies created
or intended to be created in favor of the Indenture Trustee
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thereunder. The Indenture Trustee shall promptly deliver, or cause to be
delivered, to the Lessee copies of any such statements or amendments.
Section 12.14. Further Assurances. Each party hereto will promptly and duly
execute and deliver such further documents to make such further assurances for
and take such further action reasonably requested by any party to whom such
first party is obligated, all as may be reasonably necessary to carry out more
effectively the intent and purpose of this Participation Agreement and the other
Operative Documents.
Section 12.15. Effectiveness. This Agreement has been dated as of the date
first above written for convenience only. This Agreement shall become effective
on May 19, 2005, the date of execution and delivery by each of the parties
hereto.
Section 12.16. Confidentiality. Each of the Owner Lessor, the Owner
Manager, the Equity Investor, the Indenture Trustee and the Noteholders agrees
to maintain the confidential nature of, and shall not use or disclose the
Lessee's financial information or confidential information identified by the
Lessee as such (other than pursuant to a confidentiality agreement substantially
similar to the terms of this Section 12.16) without first obtaining the Lessee's
prior written consent; provided, that nothing in this Section 12.16 shall
require the Owner Lessor, the Owner Manager, the Equity Investor, the Indenture
Trustee or the Noteholders to obtain any consent of the Lessee in connection
with and the Lessee hereby authorizes the Owner Lessor, the Owner Manager, the
Equity Investor, the Indenture Trustee and each of the Noteholders to freely
disclose any financial information or confidential information with respect to
the Lessee, the Project, any Project Document or any Operative Document or the
parties thereto without any consent of the Lessee (a) in connection with (i)
exercising any of their respective rights under the Operative Documents,
including those exercisable upon the occurrence of a Lease Event of Default or
an Indenture Event of Default, (ii) providing information about the Lessee, the
Project, any Project Document or any Operative Document or the parties thereto
to any Person acquiring, or potentially acquiring, any interest of the Owner
Lessor or the Equity Investor under the Operative Documents and any such
Person's directors, officers, employees, agents and consultants in connection
with their credit evaluation of the Lessee or otherwise (if, in the case of any
such Person potentially acquiring such an interest from the Owner Lessor or the
Equity Investor, such Person agrees to be bound by the terms of a
confidentiality agreement substantially similar to the terms of this Section
12.16), (iii) any situation in which any of the Owner Lessor, the Owner Manager,
the Equity Investor, the Indenture Trustee or the Noteholders is required by
Applicable Law or required or requested by any Governmental Entity to disclose
information, (iv) providing information to counsel to any of the Owner Lessor,
the Owner Manager, the Equity Investor, the Indenture Trustee or the Noteholders
in connection with the Transaction, (v) providing information to independent
auditors or other consultants retained by any of the Owner Lessor, the Owner
Manager, the Equity Investor, the
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Indenture Trustee or the Noteholders, or (b) that is in or becomes part of the
public domain otherwise than through a wrongful act of any of the Owner Lessor,
the Owner Manager, the Equity Investor, the Indenture Trustee or the Noteholders
or any employees or agents thereof, (c) that is independently developed by any
of the Owner Lessor, the Owner Manager, the Equity Investor, the Indenture
Trustee or the Noteholders and (d) that is disclosed to any of the Owner Lessor,
the Owner Manager, the Equity Investor, the Indenture Trustee or the Noteholders
by a third party that has no obligation of confidentiality with respect to the
information disclosed.
Section 12.17. Entire Agreement. This Agreement, together with the other
Operative Documents, constitutes the entire agreement of the parties hereto and
thereto with respect to the subject matter hereof and thereof and supercedes all
oral and all prior written agreements and understandings with respect to such
subject matter.
Section 12.18. Expansion Project; Phase II Project.
(a) Expansion Project. Each of the parties hereto acknowledges
that the Lessee expects to add the Expansion Project to the Project in 2006 or
2007. The Expansion Project is expected to increase the capability of the
Project to generate additional power. The Expansion Project (i) will constitute
a Severable Modification and an Optional Modification which, unless such
Expansion Project is financed with Additional Senior Notes and/or an Additional
Equity Investment pursuant to and in accordance with the terms and conditions
of, the Operative Documents, will be financed by ONI (in which case the
Expansion Project will not be subject to the Head Lease or the Project Lease),
(ii) will not be undertaken unless and until a new power purchase agreement is
entered into with respect to such additional capacity of the Expansion Project,
(iii) will not be undertaken if the Improvement Conditions have not been
satisfied and (iv) will not be undertaken if the implementation of the Expansion
Project would reduce by more than a de minimis amount the rights and benefits of
the Owner Lessor, and so long as the Lien of the Indenture shall not have been
terminated and fully discharged, the Indenture Trustee, with respect to the
Project. To the extent that additional resource rights are needed for the
Expansion Project, and PGV-II is willing to provide such resource rights, the
parties agree to reasonably cooperate with the Lessee in securing an assignment
by PGV-II back to the Lessee of such portion of the rights in the Geothermal
Resource assigned to PGV-II pursuant to the Resource Sublease Partial Assignment
as may be required for the Expansion Project.
(b) Phase II Project. Each of the parties hereto also
acknowledges that ONI or PGV-II expects to undertake during the Basic Lease Term
the Phase II Project either adjacent to the Project or at a different location
on the Land (as defined in the Resource Sublease Partial Assignment). The Phase
II Project and the Project in the aggregate, are expected to have a generation
capacity of up to approximately 60 MW.
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The Phase II Project shall be subject to satisfaction of the conditions and
limitations set forth in the Resource Sublease Partial Assignment (which
conditions and limitations are incorporated herein) and shall only be permitted
if the Person that has agreed to purchase the additional contemplated electrical
output of the Phase II Project agrees that it shall have no right against the
Project, the Lessee, the Owner Lessor, the Indenture Trustee, the Equity
Investor or any Noteholder with respect to any matter relating to the Phase II
Project or the power to be sold therefrom, it being understood that if the Power
Purchaser shall purchase the output of the Phase II Project, it shall enter into
a new power purchase agreement. The Phase II Project will not be undertaken if
the implementation thereof would reduce by more than a de minimis amount the
rights and benefits of the Owner Lessor, and so long as the Lien of the
Indenture shall not have been terminated and fully discharged, the Indenture
Trustee, with respect to the Project. The parties agree that the Phase II
Project will not be part of the Project or subject to the Head Lease or the
Project Lease. The parties agree to reasonably cooperate with PGV to implement
the Phase II Project including with respect to any third party consents
necessary to implement such Phase II Project, it being understood that PGV-II
and ONI are third party beneficiaries of this Section. The parties acknowledge
that PGV and PGV-II may have to enter into co-tenancy agreements with PGV and/or
the Owner Lessor with respect to certain shared facilities, as contemplated by
Section 5.23. The parties agree to enter into or consent to such co-tenancy
arrangements provided there is no adverse effect on the operation, fair market
value, residual value or useful life of the Project.
Section 12.19. Assumption of the Notes. Notwithstanding the provisions of
Section 13.2 of the Project Lease, if (a)(1) the Lessee submits a Qualifying
Cash Bid, and the Owner Lessor accepts (or is deemed to have accepted) such
Qualifying Cash Bid, or (2) the Lessee purchases the Project for scrap pursuant
to Section 13.2(c) of the Project Lease, (b) the Lessee (or its designee) shall
have executed and delivered an assumption agreement to assume in full the Senior
Notes and the obligations and liabilities of the Owner Lessor under the
Indenture as permitted by and in accordance with Section 2.10(B) of the
Indenture, (c) the Indenture Trustee shall have been granted a first priority
security interest in and to all assets and property which form the collateral
under the Lessee Security Agreement and shall have received opinions of counsel,
in form and substance satisfactory to the Indenture Trustee, with respect to the
assumption of the Notes, (d) all other conditions contained in such Section
2.10(B) shall have been satisfied, and (d) no Lease Default or Lease Event of
Default shall have occurred and be continuing after giving effect to such
assumption, then the amounts otherwise payable by the Lessee pursuant to Section
13 of the Project Lease shall be reduced by the outstanding principal amount of
and accrued interest on the Notes so assumed by the Lessee. Notwithstanding the
provisions of Section 10.1 of the Project Lease, in the case of a Regulatory
Event of Loss, (i) if the Lessee (or its designee) shall have executed and
delivered an assumption agreement to assume in full the Senior Notes and the
obligations
92
and liabilities of the Owner Lessor under the Indenture as permitted by and in
accordance with Section 2.10(B) of the Indenture, (ii) all other conditions
contained in such Section 2.10(B) shall have been satisfied, and (iii) no
Significant Lease Default of Lease Event of Default shall have occurred or be
continuing after giving effect to such assumption, then the obligation of the
Lessee to pay Termination Value shall be reduced by an amount equal to the
outstanding principal amount of and accrued interest on the Notes so assumed by
the Lessee.
93
IN WITNESS WHEREOF, the parties hereto have caused this Participation
Agreement to be executed and delivered by their respective officers thereunto
duly authorized.
PUNA GEOTHERMAL VENTURE
By: ORNI 8 LLC, its partner
By: Ormat Nevada Inc., its Manager
By: /s/ Xxxxxx Xxxxxxxx
------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Assistant Secretary
By: OrPuna LLC, its partner
By: Ormat Nevada Inc., its Manager
By: /s/ Xxxxxx Xxxxxxxx
------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Assistant Secretary
SE PUNA, L.L.C.
By: Wilmington Trust Company, not in its
individual capacity but solely as
Owner Manager
By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Financial Services Officer
WILMINGTON TRUST COMPANY
By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Financial Services Officer
94
SE PUNA LEASE, L.L.C.
By: SE Hawaii, Inc., its sole member
By: /s/ Xxxxxxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxxxxxx X. Xxxxx
Title: Vice President
AIG ANNUITY INSURANCE COMPANY,
as Noteholder
AMERICAN GENERAL LIFE INSURANCE COMPANY,
as Noteholder
By: AIG Global Investment Corp.,
investment adviser
By: /s/ Xxxx Xxxxx Xxxxxxx
------------------------------------
Name: Xxxx Xxxxx Xxxxxxx
Title: Managing Director
ALLSTATE LIFE INSURANCE COMPANY,
as Noteholder
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title:
By: /s/ Xxxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title:
Authorized Signatories
00
XXXXX XXXX XX XXXXXXXXXX, N.A., as
Indenture Trustee
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
96
Appendix A to Participation Agreement
[See Attached]
Annex A to Participation Agreement
Pricing Assumptions
1. Head Lease Rent under Head Lease Supplement No. 1: $71,000,000
2. Senior Notes: $53,409,170.88
3. Transaction Costs: $2,500,000
4. Equity Investor's Commitment under Head Lease
Supplement No. 1: $25,174,608.67
(excluding Transaction
Costs)
5. Cost Recovery Deductions: $71,000,000 - 5 year
MACRS on a half-year
convention placed in
service on the Closing
Date
Transaction Expenses -
Straight Line over
Basic Lease Term
6. Basic Lease Term: From the Closing Date
to the Basic Lease Term
Expiration Date
7. Closing Date: May 19, 2005
8. Basic Lease Term Expiration Date: January 3, 2028
9. Rent Payment Date/s: June 30 and December 30
of each year during the
Basic Lease Term
10. Equity Investor Fiscal Year End: December 31
11. Equity Investor Federal Income Tax Rate: 35%
12. Equity Investor State Income Tax Rate: 6.4%
13. Early Buyout Option Date: December 30, 2010
14. Lease Debt Rate: 6.24%
15. Discount Rate for US GAAP: 8.00%
16. Semi-Annual Long-term AFR @ 110%: 5.25% p.a.
17. Minimum Lease Rent Coverage Ratio: 1.4:1
18. Hawaii General Excise Tax: 4.167% general excise
tax on Periodic Lease
Rent
Schedule 3.1(h)(ii) to Participation Agreement
RECORDINGS AND FILINGS
A. Recordings
(1) Memorandum of Resource Sublease Partial Assignment
Assignor: Puna Geothermal Venture
Assignee: PGV-II
Property: Any property subject to the Memorandum of
Resource Sublease Partial Assignment
To be filed w/: Bureau of Conveyances, Hawaii County, Hawaii
(2) Memorandum of State Partial Assignment Consent
Lessor: State of Hawaii
Lessee: Puna Geothermal Venture
Lessee: PGV-II
Property: Any property subject to the Memorandum of State
Partial Assignment Consent
To be filed w/: Bureau of Conveyances, Hawaii
(3) Memorandum of KLDC Partial Assignment Consent
Master Lessor: KLDC
Lessor: KLP
Lessee: Puna Geothermal Venture
PGV-II PGV-II
Property: Any property subject to the Memorandum of KLDC
Partial Assignment Consent
To be filed w/: Bureau of Conveyances, Hawaii
(4) Memorandum of KLP Partial Assignment Consent
Lessor: KLP
Lessee: Puna Genothermal Venture
Lessee: PGV-II
Property: Any property subject to the Memorandum of KLP
Partial Assignment Consent
To be filed w/: Bureau of Conveyances, Hawaii
(5) Memorandum of Second Amendment to Lease (Master Lease)
Master Lessor: KLDC
Lessor: KLP
Property: Any property subject to the Memorandum of
Second Amendment to Lease (Master Lease)
To be filed w/: Bureau of Conveyances, Hawaii
(6) Memorandum to Third Amendment to Lease (Resource Sublease)
Lessor: KLP
Lessee: Puna Geothermal Venture
Property: Any property subject to the Memorandum to Third
Amendment to Lease (Resource Sublease)
To be filed w/: Bureau of Conveyances, Hawaii
(7) Memorandum of Head Lease
Head Lessor: Puna Geothermal Venture
Head Lessee: Owner Lessor
Property: Any property subject to the Memorandum of Head
Lease
To be filed w/: Bureau of Conveyances, Hawaii
(8) Memorandum of Project Lease
Owner Lessor: SE Puna, L.L.C.
Lessee: Puna Geothermal Venture
Property: Any property subject to the Memorandum of
Project Lease
To be filed w/: Bureau of Conveyances, Hawaii
(9) Memorandum of Sublease of Power Plant Sublease
Sublessor: Puna Geothermal Venture
Sublessee: SE Puna, L.L.C.
Property: Any property subject to the Memorandum of
Sublease of Power Plant Sublease
To be filed w/: Bureau of Conveyances, Hawaii
(10) Memorandum of Sublease of Resource Sublease
Sublessor: Puna Geothermal Venture
Sublessee: SE Puna, L.L.C.
Property: Any property subject to the Memorandum of
Sublease of Resource Sublease
To be filed w/: Bureau of Conveyances, Hawaii
(11) Memorandum of Sub-Grant of Delivery System Grant of Easements
Subgrantor: Puna Geothermal Venture
Subgrantee: SE Puna, L.L.C.
2
Property: Any property subject to the Memorandum of Sub-
Grant of Delivery System Grant of Easements
To be filed w/: Bureau of Conveyances, Hawaii
(12) Memorandum of Sub-Sublease of Power Plant Sublease
Sub-Sublessor: SE Puna, L.L.C.
Sub-Sublessee: Puna Geothermal Venture
Property: Any property subject to the Memorandum of Sub-
Sublease of Power Plant Sublease
To be filed w/: Bureau of Conveyances, Hawaii
(13) Memorandum of Sub-Sublease of Resource Sublease
Sub-Sublessor: SE Puna, L.L.C.
Sub-Sublessee: Puna Geothermal Venture
Property: Any property subject to the Memorandum of Sub-
Sublease of Resource Sublease
To be filed w/: Bureau of Conveyances, Hawaii
(14) Memorandum of Sub-Sub-Grant of Delivery System Grant of Easements
Subgrantee: Puna Geothermal Venture
Subgrantor: SE Puna, L.L.C.
Property: Any property subject to the Memorandum of Sub-
Sub-Grant of Delivery System Grant of Easements
To be filed w/: Bureau of Conveyances, Hawaii
(15) Memorandum of State Consent
Lessor: State of Hawaii
Lessee: Puna Geothermal Venture
Property: Any property subject to the Memorandum of State
Consent
To be filed w/: Bureau of Conveyances, Hawaii
(16) Memorandum of KLDC Consent
Master Lessor: KLDC
Lessor: KLP
Property: Any property subject to the Memorandum of KLDC
Consent
To be filed w/: Bureau of Conveyances, Hawaii
(17) Memorandum of KLP Consent
Lessor: KLP
3
Lessee: Puna Geothermal Venture
Property: Any property subject to the Memorandum of KLP
Consent
To be filed w/: Bureau of Conveyances, Hawaii
(18) Memorandum of KLDC Estoppel
Master Lessor: KLDC
Lessor: KLP
Lessee: Puna Geothermal Venture
Property: Any property subject to the Memorandum of KLDC
Estoppel
To be filed w/: Bureau of Conveyances, Hawaii
(19) KLDC Mortgage
Mortgagor: KLDC
Mortgagee: Puna Geothermal Venture
Property: Any property subject to the KLDC Mortgage
To be filed w/: Bureau of Conveyances, Hawaii
(20) KLP Mortgage
Mortgagor: KLP
Mortgagee: Puna Geothermal Venture
Property: Any property subject to the KLP Mortgage
To be filed w/: Bureau of Conveyances, Hawaii
(21) Special Power of Attorney (PGV to Owner Lessor)
(22) Special Power of Attorney (Owner Lessor to Indenture Trustee)
(23) KLDC Mortgage Assignment
Mortgagee: Puna Geothermal Venture
Mortgagor: KLDC
Assignor Puna Geothermal Venture
Assignee SE Puna, L.L.C.
Property: Any property subject to the KLDC Mortgage
Assignment
To be filed w/: Bureau of Conveyances, Hawaii
(24) KLP Mortgage Assignment
Mortgagor: KLP
Mortgagee: Puna Geothermal Venture
4
Assignor: Puna Geothermal Venture
Assignee: SE Puna, L.L.C.
Property: Any property subject to the KLP Mortgage
Assignment
To be filed w/: Bureau of Conveyances, Hawaii
(25) Owner Lessor Assignment of Head Lease
Owner Lessor: SE Puna, L.L.C.
Indenture Trustee: Union Bank of California
Property: Any property subject to the Owner Lessor
Assignment of Head Lease
To be filed w/: Bureau of Conveyances, Hawaii
(26) Owner Lessor Assignment of Project Lease
Owner Lessor: SE Puna, L.L.C.
Indenture Trustee: Union Bank of California
Property: Any property subject to the Owner Lessor
Assignment of Project Lease
To be filed w/: Bureau of Conveyances, Hawaii
(27) Owner Lessor Assignment of Sublease of Power Plant Sublease
Assignor: SE Puna, L.L.C.
Assignee: Union Bank of California
Property: Any property subject to the Owner Lessor
Assignment of Sublease of Power Plant Sublease
To be filed w/: Bureau of Conveyances, Hawaii
(28) Owner Lessor Assignment of Sublease of Resource Sublease
Assignor: SE Puna, L.L.C.
Assignee: Union Bank of California
Property: Any property subject to the Owner Lessor
Assignment of Sublease of Resource Sublease
To be filed w/: Bureau of Conveyances, Hawaii
(29) Owner Lessor Assignment of Sub-Grant of Delivery System Grant of
Easements
Assignor: SE Puna, L.L.C.
Assignee: Union Bank of California
Property: Any property subject to the Owner Lessor
Assignment of Sublease of Sub-Grant of Delivery
5
System Grant of Easements
To be filed w/: Bureau of Conveyances, Hawaii
(30) KLDC Mortgage Assignment (Indenture Trustee)
Mortgagee: Puna Geothermal Venture
Mortgagor: KLDC
Assignor: Puna Geothermal Venture
Assignee: Union Bank of California
Property: Any property subject to the KLDC Mortgage
Assignment (Indenture Trustee)
To be filed w/: Bureau of Conveyances, Hawaii
(31) KLP Mortgage Assignment (Indenture Trustee)
Mortgagor: KLP
Mortgagee: PGV
Assignor: SE Puna, L.L.C.
Assignee: Indenture Trustee
Property: Any property subject to the KLP Mortgage
Assignment (Indenture Trustee)
To be filed w/: Bureau of Conveyances, Hawaii
(32) Indenture of Trust Security Agreement
Owner Lessor: SE Puna, L.L.C.
Indenture Trustee: Union Bank of California
Property: Indenture Estate
To be filed w/: Bureau of Conveyances, Hawaii
B. Filings
(1) Filing of UCC-1 Financing Statement
Debtor: Puna Geothermal Venture
Secured Party: Union Bank of California, N.A., as Indenture
Trustee
Assignor : SE Puna, L.L.C.
Collateral: Collateral under the Lessee Security Agreement
To be filed w/: Bureau of Conveyances, Hawaii
(2) Filing of UCC-1 Financing Statement
Debtor: SE Puna, LLC
6
Secured Party: Union Bank of California, N.A., as Indenture
Trustee
Collateral: Indenture Estate
To be filed w/: Secretary of State, Delaware
(3) Filing of UCC-1 Financing Statement
Debtor: SE Puna, L.L.C.
Secured Party: Union Bank of California, N.A., as Indenture
Trustee
Collateral: Indenture Estate (Fixture)
To be filed w/: Bureau of Conveyances, Hawaii
(4) Filing of UCC-1 Financing Statement
Debtor: ORNI 8 LLC
Secured Party: Union Bank of California, N.A., as Indenture
Trustee
Assignor: SE Puna, L.L.C.
Collateral: PGV Partnership Interest (Partnership Pledge
Agreement)
To be filed w/: Secretary of State, Delaware
(5) Filing of UCC-1 Financing Statement
Debtor: OrPuna LLC
Secured Party: Union Bank of California, N.A., as Indenture
Trustee
Assignor: SE Puna, L.L.C.
Collateral: PGV Partnership Interest (Partnership Pledge
Agreement)
To be filed w/: Secretary of State, Delaware
(6) Filing of UCC-1 Financing Statement
Debtor: Ormat Nevada Inc.
Secured Party: Union Bank of California, N.A., as Indenture
Trustee
Assignor: SE Puna, L.L.C.
Collateral: ORNI 8/OrPuna LLC Interests (LLC Pledge
Agreement)
To be filed w/: Secretary of State, Delaware
(7) Filing of UCC-1 Financing Statement
Debtor: Puna Geothermal Venture
7
Secured Party: Union Bank of California, N.A., as Indenture
Trustee
Assignor : SE Puna, L.L.C.
Collateral: Project Lease
To be filed w/: Bureau of Conveyances, Hawaii
(8) Filing of UCC-1 Financing Statement
Debtor: Puna Geothermal Venture
Secured Party: Union Bank of California, N.A., as Indenture
Trustee
Assignor : SE Puna, L.L.C.
Collateral: Assignment by Way of Security of the KLDC Real
Property Mortgage
To be filed w/: Bureau of Conveyances, Hawaii
(9) Filing of UCC-1 Financing Statement
Debtor: SE Puna, L.L.C.
Secured Party: Union Bank of California, N.A., as Indenture
Trustee
Collateral: Assignment by Way of Security of the KLDC Real
Property Mortgage (Indenture Trustee)
To be filed w/: Secretary of State, Delaware
(10) Filing of UCC-1 Financing Statement
Debtor: Puna Geothermal Venture
Secured Party: Union Bank of California, N.A., as Indenture
Trustee
Assignor : SE Puna, L.L.C.
Collateral: Assignment by Way of Security of the KLP Real
Property Mortgage
To be filed w/: Bureau of Conveyances, Hawaii
(11) Filing of UCC-1 Financing Statement
Debtor: SE Puna, L.L.C.
Secured Party: Union Bank of California, N.A., as Indenture
Trustee
Collateral: Assignment by Way of Security of the KLP Real
Property Mortgage (Indenture Trustee)
To be filed w/: Secretary of State, Delaware
8
(12) Filing of UCC-1 Financing Statement
Debtor: SE Puna, L.L.C.
Secured Party: Union Bank of California, N.A., as Indenture
Trustee
Collateral: Assignment by Way of Security of Project Lease
To be filed w/: Secretary of State, Delaware
(13) Filing of UCC-1 Financing Statement
Debtor: SE Puna, L.L.C.
Secured Party: Union Bank of California, N.A., as Indenture
Trustee
Collateral: Assignment by Way of Security of Head Lease
To be filed w/: Secretary of State, Delaware
(14) Filing of UCC-1 Financing Statement
Debtor: SE Puna, L.L.C.
Secured Party: Union Bank of California, N.A., as Indenture
Trustee
Collateral: Assignment by Way of Security of Owner Lessor's
Rights in Sublease of Resource Sublease
To be filed w/: Secretary of State, Delaware
(15) Filing of UCC-1 Financing Statement
Debtor: SE Puna, L.L.C.
Secured Party: Union Bank of California, N.A., as Indenture
Trustee
Collateral: Assignment by Way of Security of Owner Lessor's
Rights in Sub Grant of Delivery System Grant of
Easements
To be filed w/: Secretary of State, Delaware
(16) Filing of UCC-1 Financing Statement
Debtor: SE Puna, L.L.C.
Secured Party: Union Bank of California, N.A., as Indenture
Trustee
Collateral: Assignment by Way of Security of Owner Lessor's
Rights in Sublease of Power Plant Sublease
To be filed w/: Secretary of State, Delaware
(17) Filing of UCC-1 Financing Statement
Debtor: SE Puna, L.L.C.
9
Secured Party: Union Bank of California, N.A., as Indenture
Trustee
Collateral: Assignment by Way of Security of Owner Lessor's
Rights in Sub Grant of Delivery System Grant of
Easements (Fixture)
To be filed w/: Bureau of Conveyances, Hawaii
(18) Filing of UCC-1 Financing Statement
Debtor: SE Puna, L.L.C.
Secured Party: Union Bank of California, N.A., as Indenture
Trustee
Collateral: Assignment by Way of Security of Owner Lessor's
Rights in Sublease of Power Plant Sublease
(Fixture)
To be filed w/: Bureau of Conveyances, Hawaii
10
Schedule 5.22 to Participation Agreement
Part 1
1. Bank Name: Bank of Hawaii
ABA Number: 000000000
Account Number: 0003-427145
Reference: PGV General Account
2. Bank Name: Bank of Hawaii
ABA Number: 000000000
Account Number: 0003-427153
Reference: PGV Xxxxx Cash Account
Part 2
1. Bank Name: Bank of Hawaii
ABA Number: 000000000
Account Number: 0059-020846
Reference: PGV Employee Fund
2
Part 3
1. Bank Name: Bank of Hawaii
ABA Number: 000000000
Account Number: 59-019643
Reference: PGV Condition 50
2. Bank Name: Bank of Hawaii
ABA Number: 000000000
Account Number: 0006-112275
Reference: PGV Time Certificate of Deposit
3
Exhibit A to Participation Agreement
[Form of Section 5.4(d) Certificate]
PUNA GEOTHERMAL VENTURE
Section 5.4(d) Officer's Certificate
Reference is made to that certain Participation Agreement (the
"Participation Agreement"), dated as of May 18, 2005, by and among Puna
Geothermal Venture, a Hawaii general partnership (the "Lessee"), SE Puna,
L.L.C., a Delaware limited liability company (the "Owner Lessor"), Wilmington
Trust Company, a banking corporation organized and existing under the laws of
the State of Delaware, in its individual capacity (the "Trust Company"), SE Puna
Lease, L.L.C., a Delaware limited liability company (the "Equity Investor"), AIG
Annuity Insurance Company, American General Life Insurance Company and Allstate
Life Insurance Company (each a "Noteholder" and, collectively, the
"Noteholders") and Union Bank of California, N.A., not in its individual
capacity, but solely as trustee under the Indenture (the "Indenture Trustee").
Capitalized terms used herein but not otherwise defined shall have the meanings
set forth in Appendix A to the Participation Agreement.
Pursuant to Section 5.4(d) of the Participation Agreement, the
undersigned, acting solely as the [Insert title] of the Lessee, does hereby
certify that the calculation of the Lease Rent Coverage Ratio for the two
preceding semiannual periods as set forth in Exhibit A hereto is true and
correct and the Projected Lease Rent Coverage Ratio for the then-current
semiannual period and the immediately following semiannual period as set forth
in Exhibit A hereto is (i) based on reasonable assumptions as to all legal and
factual matters material to the estimates for such Projected Lease Rent Coverage
Ratio and (ii) has been prepared in good faith and with due care.
[Remainder of Page Intentionally Left Blank]
Exhibit A to Participation Agreement
Puna Geothermal Venture
By:
------------------------------------
Name:
Title:
Dated as of [__________ __], 200[_]
Exhibit A to Participation Agreement
Calculation of Lease Rent Coverage Ratio and
Projected Lease Rent Coverage Ratio
A. Lease Rent Coverage Ratio for period [7/1/XX] to [12/30/XX] and
[1/1/XX] to [6/30/XX] or [1/1/XX] to [6/30/XX] and [7/1/XX] to [12/30/XX]
(1) Project Revenues for
[7/1/XX] to [12/30/XX] or [1/1/XX] to [6/30/XX]: ___________
[1/1/XX] to [6/30/XX] or [7/1/XX] to [12/30/XX]: ___________
(2) Operating Costs for
[7/1/XX] to [12/30/XX] or [1/1/XX] to [6/30/XX]: ___________
[1/1/XX] to [6/30/XX] or [7/1/XX] to [12/30/XX]: ___________
(3) Periodic Lease Rent on [6/30/XX] and [12/30/XX]: ___________
Lease Rent Coverage Ratio* for
[7/1/XX] to [12/30/XX] or [1/1/XX] to [6/30/XX]: ___________
[1/1/XX] to [6/30/XX] or [7/1/XX] to [12/30/XX]: ___________
----------
* (1)-(2) / (3)
Exhibit A to Participation Agreement
B. Projected Lease Rent Coverage Ratio for period [7/1/XX] to
[12/30/XX] and [1/1/XX] to [6/30/XX] or [1/1/XX] to [6/30/XX] and [7/1/XX] to
[12/30/XX]
(4) Project Revenues for
[7/1/XX] to [12/30/XX] or [1/1/XX] to [6/30/XX]: ___________
[1/1/XX] to [6/30/XX] or [7/1/XX] to [12/30/XX]: ___________
(5) Operating Costs for
[7/1/XX] to [12/30/XX] or [1/1/XX] to [6/30/XX]: ___________
[1/1/XX] to [6/30/XX] or [7/1/XX] to [12/30/XX]: ___________
(6) Periodic Lease Rent on [6/30/XX] and [12/30/XX]: ___________
Projected Lease Rent Coverage Ratio* for
[7/1/XX] to [12/30/XX] or [1/1/XX] to [6/30/XX]: ___________
[1/1/XX] to [6/30/XX] or [7/1/XX] to [12/30/XX]: ___________
----------
* (1)-(2) / (3)
Exhibit B to Participation Agreement
[Form of Semiannual Operating Report]
SEMI-ANNUAL OPERATING REPORT FORMAT
o Executive Summary
o Financial
o Operating
o Well Drilling Activities (as applicable)
OPERATING AND PERFORMANCE DATA
<TABLE>
CURRENT SIX MONTHS YEAR TO DATE
--------------------------- ---------------------------
OPERATING STATISTICS Actual Budget % Var (1) Actual Budget % Var (1)
-------------------- ------ ------ --------- ------ ------ ---------
Peak Energy Sold (MWh) - First 25MW
Peak Energy Sold (MWh) - Additional 5MW
Off-Peak Energy Sold (MWh) - First 22MW
Off-Peak Energy Sold (MWh) - Additional MW
TOTAL ENERGY SOLD (MWH)
Peak Capacity Factor (based on PPA on Peak Max)
Off Peak Capacity Factor (based on PPA Off Peak Max)
Total Capacity Factor (weighted on and off peak)
Average Gross Power (MW)
Average Net Power (MW)
%OEC Availability
Scheduled Outage Hours
Forced Outage Hours
Number of Plant Trips (per PPA)
Gross Generation (MWh)
Parasitic Load (MWh)
Parasitic Load / Gross Generation (%)
</TABLE>
(1) In excess of 20% or $10,000, whichever is greater
DISCUSSION SECTIONS WOULD INCLUDE:
o Operating Highlights and Description of variances
o Wellfield Operations
o Lost Production
o Description of Maintenance Activities (routine and major) for the
period
o Environmental / Safety activities for the period
o Overview of Communications with Power Purchaser
o Discussion of any Regulatory, Political, or Legal Issues
o Community Relations
Exhibit B to Participation Agreement
o Administrative / Other
o Progress and Status of Drilling Activities (until new xxxxx are
contributing)
TRACER TEST (WHEN APPLICABLE)
o Discussion of Tracer Tests in planning
o Tracer Test Results (when available) as follows
<TABLE>
Wellhead
Pressure (psig, Estimated Estimated
Production range and Total Mass Enthalpy Steam Steam Rate
Xxxxx ~average) Rate (kph) (Btu/lbm) Fraction (%) (kph) Power (MWn)
---------- --------------- ---------- --------- ------------ ---------- -----------
KS - ___
KS - ___
Total
Maximum Injection Rate at
Wellhead Average Injection Rate 450 psig
Injection Pressure (psig, ---------------------- Temperature -------------------------
Xxxxx range) (kph) (gpm) Range (F) (kph) (gpm)
---------- --------------- ----- ----- ----------- ----- -----
KS - ___
KS - ___
Total
</TABLE>
State performance basis (number of units running, injection pumps on or off).
Exhibit B to Participation Agreement
FINANCIAL DATA
<TABLE>
CURRENT SIX MONTHS YEAR TO DATE
--------------------------- ---------------------------
ENERGY RATE DATA Actual Budget % Var (1) Actual Budget % Var (1)
---------------- ------ ------ --------- ------ ------ ---------
Average On-Peak Power Price (25MW)
Average On-Peak Power Price (Additional 5MW)
Average Off-Peak Power Price (22MW)
Average Off-Peak Power Price (Additional MW)
REVENUES
Total Capacity Revenues
Total Energy Revenues
TOTAL REVENUES
OPERATING EXPENSES
PLANT O&M
Labor
Chemicals, Parts, Tools
Systems Maintenance
Safety and General Expenses
Administrative Services
VARIABLE O&M
Field Expenses
Environmental Expenses
MAJOR MAINTENANCE
GENERAL LESSEE'S COSTS
Resource Royalties
Land Rent
Terra Thermal Royalties
Insurance
Other G&A
PROPERTY & GE TAX
Property Tax
Revenues GE Tax
Rent GE Tax
AGENT FEES
Agent Fees
TOTAL OPERATING EXPENSES
OPERATING INCOME
</TABLE>
(1) In excess of 20% or $10,000, whichever is greater.
Exhibit B to Participation Agreement
DISCUSSION SECTIONS WOULD INCLUDE:
o Financial Highlights and Discussion of Variances
o Well Maintenance Reserve Account detail, including the date and
amount of any withdrawals and the balance at the end of the
applicable period.
o
APPENDIX TO BE PROVIDED
o Turbine Vibration Monitoring Reports and data, for the applicable
period.
Exhibit C to Participation Agreement
[Form of Annual Operating Budget]
PGV - FORM OF OPERATING BUDGET
Revenues _____________
Plant O&M _____________
Variable O&M _____________
Major Maintenance _____________
General Leasee's costs _____________
Property & GE Tax _____________
Agent Fees _____________
TOTAL OPERATING COSTS _____________
Exhibit C to Participation Agreement
BUDGET [YEAR] - ITEMS SUMMARY ($K)
PLANT O&M _____________
Labor _____________
Chemichals, Parts, Tools _____________
Systems Maintenance _____________
Safety and General Expenses _____________
Administrative Services _____________
VARIABLE O&M _____________
Field Expenses _____________
Environmental Expenses _____________
MAJOR MAINTENANCE _____________
GENERAL LEASEE'S COSTS _____________
Resource Royalties _____________
Land Rent _____________
Terra Thermal Royalties _____________
Insurance _____________
Other G&A _____________
PROPERTY & GE TAX _____________
Property Tax _____________
Revenues GE Tax _____________
Rent GE Tax _____________
AGENT FEES _____________
Agent Fees _____________
Exhibit D to Participation Agreement
[Form of Subordination Provisions]
The indebtedness evidenced by this instrument (herein called the
"Subordinated Debt") is junior, subordinated and subject in right of payment to
the prior payment in full in cash of all Rent, as defined herein, payable by
Puna Geothermal Venture, a Hawaii general partnership (the "Lessee"). Each
holder of this instrument, by its acceptance hereof, agrees to and shall be
bound by all the provisions hereof.
As used herein, the term "Rent" shall mean all Periodic Lease Rent,
Renewal Lease Rent and Supplemental Lease Rent (as each term is defined in the
Participation Agreement defined below) payable by the Lessee under the Project
Lease Agreement, dated as of May 18, 2005 (the "Project Lease") between SE Puna,
L.L.C. (the "Owner Lessor") and the Lessee or arising out of or in connection
with the Participation Agreement, dated as of May 18, 2005 (as the same may be
amended, supplemented or otherwise modified from time to time, the
"Participation Agreement"), among the by and between the Lessee, the Owner
Lessor, Wilmington Trust Company, a banking corporation organized and existing
under the laws of the State of Delaware, in its individual capacity (the "Trust
Company"), SE Puna Lease, L.L.C., a Delaware limited liability company (the
"Equity Investor"), AIG Annuity Insurance Company, American General Life
Insurance Company and Allstate Life Insurance Company (each a "Noteholder" and,
collectively, the "Noteholders") and Union Bank of California, N.A., not in its
individual capacity, but solely as trustee under the Indenture (the "Indenture
Trustee"), and all other Operative Documents (as such term is defined in the
Participation Agreement).
Unless and until all Rent shall have been paid in full in accordance
with the terms of the Operative Documents, the Lessee will not, directly or
indirectly, make or agree to make:
(a) any payment (in cash or property, by set-off or otherwise),
direct or indirect, of or on account of any principal, premium
(if any) or interest in respect of any Subordinated Debt (or any
indebtedness subordinated to any Subordinated Debt) and no such
payment shall be accepted by any holder of Subordinated Debt, or
(b) any redemption, purchase or other acquisition, direct or
indirect, of any Subordinated Debt (or any indebtedness
subordinated to any Subordinated Debt), and no holder of any
Subordinated Debt shall be a party to any such redemption,
purchase or other acquisition,
in each case, other than from amounts that are permitted to be distributed to
the Lessee in accordance with Section 5.9 of the Depositary Agreement.
Exhibit D to Participation Agreement
Upon (a) any acceleration of the principal amount due on the
Subordinated Debt or (b) any payment or distribution of assets of the Lessee of
any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding up or total or partial liquidation or
reorganization or similar proceeding of the Lessee or its property, whether
voluntary or involuntary or in bankruptcy, insolvency, receivership or other
proceedings or upon an assignment for the benefit of creditors, then and in any
such event all Rent shall first be paid in full in cash before the holders of
the Subordinated Debt shall be entitled to receive and retain any assets so paid
or distributed in respect of the Subordinated Debt (for principal, premium (if
any), interest or otherwise); and, upon any such acceleration, dissolution or
winding up or liquidation or reorganization or similar proceeding, any payment
or distribution of assets of the Lessee of any kind or character, whether in
cash, property or securities, to which the holders of the Subordinated Debt
would be entitled, except as otherwise provided herein, shall be paid by the
Lessee or by any receiver, trustee in bankruptcy, liquidating trustee, agent or
other person making such payment or distribution, or by the holders of the
Subordinated Debt if received by them, directly to the Owner Lessor, the Equity
Investor, the Trust Company, the Indenture Trustee, the Noteholders or such
other Person to whom such Rent is owed (collectively, the "Financing Parties"),
provided that until the Lien of the Indenture has been terminated and fully
discharged, the Financing Party shall be the Indenture Trustee, in accordance
with the Operative Documents to the extent necessary to pay all Rent in full,
after giving effect to any concurrent payment or distribution to the Financing
Parties, before any payment or distribution is made to the holders of the
Subordinated Debt.
The holder of this instrument hereby irrevocably authorizes and
empowers (without imposing any obligation on) each Financing Party and such
Financing Party's representatives, under the circumstances set forth in the
immediately preceding paragraph, to demand, xxx for, collect and receive every
such payment or distribution described therein and give acquittance therefor, to
file claims and proofs of claims in any statutory or nonstatutory proceeding, to
vote such Financing Party's ratable share of the full amount of the Subordinated
Debt evidenced by this instrument in its sole discretion in connection with any
resolution, arrangement, plan of reorganization, compromise, settlement or
extension and to take all such other action (including without limitation, the
right to participate in any composition of creditors and the right to vote such
Financing Party's ratable share of the Subordinated Debt evidenced by this
instrument at creditors' meetings for the election of trustees, acceptances of
plans and otherwise), in the name of the holder of the Subordinated Debt
evidenced by this instrument or otherwise, as such Financing Party's
representatives may deem necessary or desirable for the enforcement of the
subordination provisions of this instrument. The holder of this instrument shall
execute and deliver to each Financing Party and such Financing Party's
representatives all such further instruments confirming the foregoing
authorization, and all such powers of
Exhibit D to Participation Agreement
attorney, proofs of claim, assignments of claim and other instruments, and shall
take all such other action as may be requested by such Financing Party or such
Financing Party's representatives in order to enable such Financing Party to
enforce all claims upon or in respect of such Financing Party's ratable share of
the Subordinated Debt evidenced by this instrument.
Should any payment or distribution be collected or received by the
holder of this instrument and such collection or receipt is not expressly
permitted by the foregoing provisions, such holder shall forthwith turn over the
same to the Financing Parties or their representatives in the form received
(except for the endorsement or the assignment of such holder when necessary)
and, until so turned over, the same shall be held in trust by such holder as the
property of the Financing Parties.
No holder of this instrument shall, without the prior written consent
of the Financing Parties, have any right to demand payment of, or accelerate the
maturity of, or institute any proceedings to enforce, or exercise any rights in
respect of any indebtedness evidenced by this instrument until the Rent is paid
in full.
Until the Rent shall have been paid in full, the holders of the
Subordinated Debt will not, without the prior written consent of the Financing
Parties, commence or join with any other Person in commencing any proceeding
against the Lessee or any other Person with respect to the Subordinated Debt
under any bankruptcy, reorganization, readjustment of debt, dissolution,
receivership, liquidation or insolvency law or statute now or hereafter in
effect in any jurisdiction, nor shall the holders of the Subordinated Debt,
without the prior written consent of the Financing Parties, participate in any
assignment for benefit of creditors, compositions, or arrangements with respect
to the Lessee's debts with respect to the Subordinated Debt.
The Lessee shall give prompt written notice to the holders of
Subordinated Debt of any dissolution, winding up, liquidation or reorganization
of the Lessee.
Subject to the payment in full of all Rent, the holders of the
Subordinated Debt shall be subrogated to the rights of the Financing Parties to
receive payments or distributions of assets of the Lessee made with respect to
the Rent until the Subordinated Debt shall be paid in full; provided, however,
that nothing herein contained shall be deemed to assign or grant to any holder
of Subordinated Debt, or subrogate any such holder to, any right of a Financing
Party as a mortgagee, secured party or other lien or pledgeholder to any
property of the Lessee which secures such Rent.
Nothing contained in this instrument is intended or shall impair as
between the Lessee, its creditors other than the Financing Parties, and the
holders of the Subordinated Debt, the obligation of the Lessee which is absolute
and unconditional, to pay to the
Exhibit D to Participation Agreement
holders of the Subordinated Debt, as and when the same shall become due and
payable in accordance with its terms, principal and interest hereon, subject to
the rights of the Financing Parties as herein provided, or to affect the
relative rights of the holders of the Subordinated Debt and creditors of the
Lessee other than the Financing Parties.
The terms of these subordination provisions, the subordination
effected thereby, and the rights of the Financing Parties, shall not be affected
by (a) any amendment of or addition or supplement to the Participation
Agreement, the other Operative Documents or Rent or any instrument or agreement
relating thereto, (b) any exercise or non-exercise of any right, power or remedy
under or in respect of the Participation Agreement, the other Operative
Documents or Rent or any instrument or agreement relating thereto, or (c) any
waiver, consent, release, indulgence, extension, renewal, modification, delay,
or other action, inaction or omission in respect of the Participation Agreement,
the other Operative Documents or Rent or any instrument or agreement relating
thereto; whether or not any holders of any Subordinated Debt shall have had
notice or knowledge of any of the foregoing. The terms of these subordination
provisions, the subordination effected thereby, and the rights of the Financing
Parties shall continue to be effective or shall be reinstated, as the case may
be, if, for any reason, any payment of the Rent by or on behalf of the Lessee
shall be rescinded or must otherwise be restored by a Financing Party.
Each holder of this instrument by its acceptance hereof authorizes and
directs the Lessee on its behalf to take such further action as may be necessary
or appropriate to effectuate the subordination as provided herein and appoints
the Lessee its attorney-in-fact for any and all such purposes.
Exhibit E to the Participation Agreement
[Form of Section 11.1(b)(ix) Certificate]
PUNA GEOTHERMAL VENTURE
Section 11.1(b)(ix) Officer's Certificate
Reference is made to that certain Participation Agreement (the
"Participation Agreement"), dated as of May 18, 2005, by and among Puna
Geothermal Venture, a Hawaii general partnership (the "Lessee"), SE Puna,
L.L.C., a Delaware limited liability company (the "Owner Lessor"), Wilmington
Trust Company, a banking corporation organized and existing under the laws of
the State of Delaware, in its individual capacity (the "Trust Company"), SE Puna
Lease, L.L.C., a Delaware limited liability company (the "Equity Investor"), AIG
Annuity Insurance Company, American General Life Insurance Company and Allstate
Life Insurance Company (each a "Noteholder" and, collectively, the
"Noteholders") and Union Bank of California, N.A., not in its individual
capacity, but solely as trustee under the Indenture (the "Indenture Trustee").
Capitalized terms used herein but not otherwise defined shall have the meanings
set forth in Appendix A to the Participation Agreement.
Pursuant to Section 11.1(b)(ix) of the Participation Agreement, the undersigned,
acting solely as the [Insert Title] of the Lessee, does hereby certify that the
Lease Rent Coverage Ratio for both of the immediately preceding two semiannual
periods was greater than or equal to 1.20 to 1.00 as calculated pursuant to
Exhibit A hereto and the Projected Lease Rent Coverage Ratio for the semiannual
period occurring in the period from [______] to [______](1) shall be at least
1.20 to 1.00, as calculated pursuant to Exhibit A hereto and (i) based on
reasonable assumptions as to all legal and factual matters material to the
estimates for such Projected Lease Rent Coverage Ratio and (ii) prepared in good
faith and with due care.
The Engineering Consultant has reviewed this calculation and confirms
the results thereof.
[Remainder of Page Intentionally Left Blank]
----------
(1) Insert period during which Indebtedness will be outstanding per Section
5.14(f)
Exhibit E to the Participation Agreement
Puna Geothermal Venture
By:
------------------------------------
Name:
Title:
Dated as of [__________ __], 200[_]
Certified by:
[Engineering Consultant]
By:
----------------------------------
Name:
Title:
Dated as of [__________ __], 200[_]
Exhibit E to Participation Agreement
Calculation of Projected Lease Rent Coverage Ratio
Projected Lease Rent Coverage Ratio for period [7/1/XX] to [12/30/XX]
or [12/31/XX] to [6/30/XX]*
(1) Project Revenues for period: ___________
(2) Operating Costs for period: ___________
(3) Periodic Lease Rent on [6/30/XX] or [12/30/XX]: ___________
Projected Lease Rent Coverage Ratio**: ____________
----------
* Calculate for each semiannual period during term of Indebtedness
** (1)-(2) / (3)
Exhibit F to Participation Agreement
[Form of Transfer Agreement]
FORM OF EQUITY INVESTOR'S TRANSFER AGREEMENT
TRANSFER AGREEMENT dated as of _____________, ____ (this
"Agreement"), between ___________________, a ______________ (the "Transferor"),
and ________________________________________, a _______________ (the
"Transferee").
WHEREAS, the Transferor has, prior to or concurrently with the
execution and delivery of this Agreement, by separate instrument, transferred
unto the Transferee all of its right, title and interest in the Member Interest;
WHEREAS, the parties hereto desire to (a) evidence the transfer by
the Transferor to the Transferee of all of the right, title and interest of the
Transferor in and to the following documents (except as reserved below): (i) the
Participation Agreement, dated as of May 18, 2005 (as at any time amended, the
"Participation Agreement"), by and between Puna Geothermal Venture, a Hawaii
general partnership (the "Lessee"), SE Puna, L.L.C., a Delaware limited
liability company (the "Owner Lessor"), Wilmington Trust Company, a banking
corporation organized and existing under the laws of the State of Delaware, in
its individual capacity (the "Trust Company"), SE Puna Lease, L.L.C., a Delaware
limited liability company (the "Equity Investor"), AIG Annuity Insurance
Company, American General Life Insurance Company and Allstate Life Insurance
Company (each a "Noteholder" and, collectively, the "Noteholders") and Union
Bank of California, N.A., not in its individual capacity, but solely as trustee
under the Indenture (the "Indenture Trustee"), (ii) the Tax Indemnity Agreement,
dated as of May 18, 2005 (as at any time amended, the "Tax Indemnity
Agreement"), between the Equity Investor and the Lessee, (iii) the Depositary
Agreement, dated as of May 18, 2005 (as at any time amended, the "Depositary
Agreement"), among the Lessee, the Indenture Trustee, Union Bank of California,
N.A., in its capacity as Depositary Bank, the Equity Investor and the Owner
Lessor, (iv) any other Operative Documents to which the Equity Investor has
become a party or by which the Equity Investor has become bound, and (v) the
proceeds from the foregoing, and (b) effect the assumption by the Transferee of
the obligations of the Transferor, if any, arising or accruing under the
Participation Agreement, the Tax Indemnity Agreement, the Depositary Agreement
and any other Operative Documents from and after the effective date of this
Agreement (with the documents described in such clauses (i), (ii), (iii) and
(iv) of clause (a) above being herein referred to as the "Transferred
Documents"); and
Exhibit F to the Participation Agreement
WHEREAS, Section 7.1 of the Participation Agreement permits such
transfer and assumption to be effected upon the fulfillment of certain
conditions, which conditions heretofore have been or concurrently with the
execution and delivery hereof are being fulfilled.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS. FOR PURPOSES OF THIS AGREEMENT, CAPITALIZED
TERMS USED HEREIN AND NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANINGS
ASSIGNED TO THEM IN APPENDIX A TO THE PARTICIPATION AGREEMENT AND THE GENERAL
PROVISIONS OF APPENDIX A SHALL APPLY HERETO.
SECTION 2. ASSIGNMENT. THE TRANSFEROR HEREBY IRREVOCABLY TRANSFERS
UNTO THE TRANSFEREE AS OF THE DATE HEREOF, ALL OF ITS PRESENT AND FUTURE RIGHT,
TITLE AND INTEREST IN AND TO THE TRANSFERRED DOCUMENTS AND ALL PROCEEDS OF THE
FOREGOING, TOGETHER WITH ALL OTHER DOCUMENTS AND INSTRUMENTS EVIDENCING ANY SUCH
RIGHT, TITLE AND INTEREST, EXCEPT SUCH RIGHTS OF THE TRANSFEROR AS HAVE ARISEN
OR ACCRUED IN FAVOR OF THE TRANSFEROR PRIOR TO THE DATE OF THIS AGREEMENT (SUCH
RETAINED RIGHTS TO INCLUDE, WITHOUT LIMITATION, [SPECIFIC ITEMS TO BE LISTED]).
SECTION 3. ASSUMPTION. THE TRANSFEREE HEREBY ASSUMES, AND COVENANTS
AND AGREES TO PAY, PERFORM AND DISCHARGE, ALL OF THE OBLIGATIONS AND LIABILITIES
OF THE "EQUITY INVESTOR" ARISING OR ACCRUING FROM AND AFTER THE EFFECTIVE DATE
OF THIS AGREEMENT UNDER THE TRANSFERRED DOCUMENTS AND ALL OF THE OBLIGATIONS AND
LIABILITIES OF THE "EQUITY INVESTOR" ARISING OR ACCRUING FROM AND AFTER THE
EFFECTIVE DATE OF THIS AGREEMENT IN CONNECTION WITH THE MEMBER INTEREST. THE
TRANSFEREE HEREBY CONFIRMS THAT IT SHALL, TO THE EXTENT OF ITS ASSUMPTION
THEREOF SET FORTH HEREIN, BE BOUND BY ALL THE TERMS OF THE TRANSFERRED DOCUMENTS
AND SHALL UNDERTAKE ALL OF THE OBLIGATIONS AND LIABILITIES OF THE TRANSFEROR AS
IF THEREIN NAMED AS THE EQUITY INVESTOR.
Exhibit F to the Participation Agreement
SECTION 4. REPRESENTATIONS AND WARRANTIES. THE TRANSFEREE REPRESENTS
AND WARRANTS THAT, AS OF THE DATE HEREOF:
Section 4.1. it is a ______________ duly organized, validly existing
and in good standing under the laws of________, and has the power and
authority to enter into and perform its obligations under this Agreement;
Section 4.2. this Agreement, has been or when executed and delivered
will be, duly authorized, executed and delivered by the Transferee and,
assuming the due authorization, execution and delivery by and
enforceability against the Transferor, this Agreement constitutes or when
executed and delivered will constitute the legal, valid and binding
obligations of the Transferee, enforceable against the Transferee in
accordance with its terms, except as the same may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, arrangement, moratorium
or other laws relating to or affecting the rights of creditors generally
and by general principles of equity;
Section 4.3. the execution, delivery and performance by the Transferee
of this Agreement and the consummation by the Transferee of the
transactions contemplated hereby, do not and will not (i) contravene (A)
any Applicable Law binding on the Transferee or its property, or (B) any of
its organizational documents, or (ii) constitute a violation of or a
default under, any indenture, mortgage or other material contract,
agreement or instrument to which the Transferee is a party or by which the
Transferee or its property is bound which, in any case, individually or in
the aggregate, is reasonably likely to have a material adverse effect upon
the Transferee or the Transferee's ability to perform its obligations
hereunder, or result in the creation of any Equity Investor's Lien
attributable to the Transferee;
Section 4.4. assuming the representations and warranties of the Lessee
contained in clauses (d), (i), (j), (k), (l), (m), (n), (o), (y) and (ff)
of Section 3.1 of the Participation Agreement are true as of the date
hereof, no authorization, determination or approval or other action by, and
no notice to or filing or registration with, any Governmental Entity is
required for the due execution, delivery or performance by the Transferee
of this Agreement, other than any authorization or approval or other action
or notice or filing as has been duly obtained, taken or given (it being
understood that no representation or warranty is being made as to any
Applicable Laws relating to the Project or the Project Site;
Section 4.5. there is no pending or, to the Actual Knowledge of the
Transferee, threatened action, suit, investigation or proceeding against
the
Exhibit F to the Participation Agreement
Transferee before any Governmental Entity that (i) questions the validity
of this Agreement, or (ii) would, if determined adversely to it,
materially, adversely affect the Transferee's ability to perform its
obligations under this Agreement;
Section 4.6. the Indenture Estate is free of any Equity Investor's
Liens attributable to the Transferee;
Section 4.7. the Transferee is purchasing the Member Interest to be
acquired by it for its own account with no present intention of
distributing such Member Interest or any part thereof in any manner that
would require registration under the Securities Act, but without prejudice,
however, to the right of the Transferee at all times to sell or otherwise
dispose of all or any part of such Member Interest in accordance with the
Operative Documents and under an exemption from registration available
under such Securities Act;
Section 4.8. neither the Transferee nor anyone authorized by it has
directly or indirectly offered or sold any interest in the Member Interest,
or any part thereof, or in any similar security or lease, or in any
security or lease the offering of which for the purposes of the Securities
Act would be deemed to be part of the same offering as the offering of the
Member Interest or any part thereof or solicited any offer to acquire any
of the same in violation of the registration requirements of Section 5 of
the Securities Act;
Section 4.9. the Transferee is a "United States person" within the
meaning of Section 7701(a)(30) of the Code;
Section 4.10. the Equity Investor Transferee shall be Solvent;
Section 4.11. *[the Transferee is a direct or indirect wholly-owned
Affiliate of the Equity Investor and all of the payment and performance
obligations of the Transferee under the Operative Documents are guaranteed
by the Equity Investor] [the Transferee has a tangible net worth of at
least $50,000,000] [the payment and performance obligations of the
Transferee with respect to the interest being transferred under the
Operative Documents are guaranteed by a Person that has a tangible net
worth of at least $50,000,000];
----------
* Insert the applicable representation.
Exhibit F to the Participation Agreement
Section 4.12. neither the Transferee nor any Affiliate of the
Transferee is a Competitor of the Lessee or any Affiliate thereof, and
neither the Transferee nor any Affiliate of the Transferee is in material
litigation with the Lessee or any Affiliate thereof; and
Section 4.13. (A) with respect to a transfer by the initial Equity
Investor (or any Affiliate thereof), the Equity Investor Transferee is not
itself, nor is any of its Affiliates, a Competitor of the Lessee or an
Affiliate thereof, (B) neither the Equity Investor Transferee nor any
Affiliate of the Equity Investor Transferee shall be in material litigation
with the Lessee or any Affiliate thereof, and (C) no Noteholder shall be
prohibited from transacting business with the Equity Investor Transferee or
any Affiliate of the Equity Investor Transferee.
SECTION 5. BENEFICIARIES. THE LESSEE, THE INDENTURE TRUSTEE, THE
NOTEHOLDERS AND THEIR RESPECTIVE SUCCESSORS AND PERMITTED ASSIGNS ARE INTENDED
BENEFICIARIES OF, AND MAY RELY UPON THE REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS CONTAINED IN, THIS AGREEMENT.
SECTION 6. EFFECTIVE DATE. THIS AGREEMENT AND THE ASSIGNMENT AND
ASSUMPTION EFFECTED HEREBY SHALL BE EFFECTIVE FROM AND AFTER THE DATE FIRST
ABOVE WRITTEN UPON SATISFACTION OF THE CONDITIONS SPECIFIED IN SECTION 7.1 OF
THE PARTICIPATION AGREEMENT.
SECTION 7. AMENDMENTS AND WAIVERS. NO TERM, COVENANT, AGREEMENT OR
CONDITION OF THIS AGREEMENT MAY BE TERMINATED, AMENDED OR COMPLIANCE THEREWITH
WAIVED (EITHER GENERALLY OR IN A PARTICULAR INSTANCE, RETROACTIVELY OR
PROSPECTIVELY) EXCEPT BY AN INSTRUMENT OR INSTRUMENTS IN WRITING EXECUTED BY
EACH PARTY TO THE PARTICIPATION AGREEMENT.
SECTION 8. GOVERNING LAW. THIS AGREEMENT HAS BEEN DELIVERED IN THE
STATE OF NEW YORK AND SHALL BE IN ALL RESPECTS GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE.
SECTION 9. SUBMISSION TO JURISDICTION; WAIVER OF TRIAL BY JURY;
SERVICE OF PROCESS. (I) WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OF THE
Exhibit F to the Participation Agreement
OTHER TRANSFERRED DOCUMENTS (HEREINAFTER, ANY "PROCEEDING"), EACH PARTY HERETO
IRREVOCABLY:
(a) Each of the parties hereto (i) submits to the nonexclusive
jurisdiction of the Supreme Court of the State of New York, New York County
(without prejudice to the right of any party to remove to the United States
District Court for the Southern District of New York) and to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York for the purposes of any suit, action or other proceeding arising out of
this Agreement, the Operative Documents, or the subject matter hereof or thereof
or any of the transactions contemplated hereby or thereby brought by any of the
parties hereto or their successors or assigns; (ii) agrees that all claims in
respect of such action or proceeding may be heard and determined in such New
York State court, or in such federal court; and (iii) to the extent permitted by
Applicable Law, waives, and agrees not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding, any claim that
such party is not personally subject to the jurisdiction of the above-named
courts, that the suit, action or proceeding is brought in an inconvenient forum,
that the venue of the suit, action or proceeding is improper or that this
Agreement, the Operative Documents, or the subject matter hereof or thereof may
not be enforced in or by such court.
(b) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES THE RIGHT TO DEMAND A TRIAL BY JURY, IN ANY
SUCH SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT, THE
OPERATIVE DOCUMENTS, OR THE SUBJECT MATTER HEREOF OR THEREOF OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY BROUGHT BY ANY OF THE PARTIES HERETO
OR THEIR SUCCESSORS OR ASSIGNS.
SECTION 10. COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED BY ONE OR
MORE OF THE PARTIES HERETO ON ANY NUMBER OF SEPARATE COUNTERPARTS, AND ALL OF
SAID COUNTERPARTS TAKEN TOGETHER SHALL BE DEEMED TO CONSTITUTE ONE AND THE SAME
INSTRUMENT.
Exhibit F to the Participation Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
[TRANSFEROR]
By:
------------------------------------
Name
Title
Mailing Address of Transferor:
[TRANSFEREE]
By:
------------------------------------
Name
Title
Mailing Address of Transferee:
Exhibit G to Participation Agreement
[Form of Equity Investor Guaranty]
EQUITY INVESTOR GUARANTY
This EQUITY INVESTOR GUARANTY (this "Guaranty"), dated as of
[__________ ___], 200[ ], is made by [______], a [______] (the "Guarantor"), to
and for the benefit of the Guaranteed Parties (as such term is defined below).
Reference is made to that certain Participation Agreement, dated as of
May 18, 2005 (the "Participation Agreement"), by and among, by and between Puna
Geothermal Venture, a Hawaii general partnership (the "Lessee"), SE Puna,
L.L.C., a Delaware limited liability company (the "Owner Lessor"), Wilmington
Trust Company, a banking corporation organized and existing under the laws of
the State of Delaware, in its individual capacity (the "Trust Company"), the
Equity Investor, AIG Annuity Insurance Company, American General Life Insurance
Company and Allstate Life Insurance Company (each a "Noteholder" and,
collectively, the "Noteholders") and Union Bank of California, N.A., not in its
individual capacity, but solely as trustee under the Indenture (the "Indenture
Trustee");
WITNESSETH:
WHEREAS, it is a condition to the effectiveness of the transfer
contemplated by Section 7.1 of the Participation Agreement that the Guarantor
execute and deliver this Guaranty; and
WHEREAS, [the Guarantor directly holds all of the membership interests
in the Equity Investor Transferee.]*
NOW, THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, the receipt of which is hereby acknowledged, the Equity
Investor hereby agrees as follows:
----------
* Only applicable if the Equity Investor Transferee is a wholly-owned subsidiary
of the Guarantor.
Exhibit G to Participation Agreement
ARTICLE I
DEFINITIONS; INTERPRETATION
For purposes of this Guaranty, capitalized terms used herein
(including those used in the foregoing recitals) and not otherwise defined
herein shall have the meanings assigned to them in Appendix A to the
Participation Agreement and the general provisions of such Appendix A shall
apply hereto; provided that the following terms shall have the following
meanings:
"Equity Investor Interest" shall have the meaning specified in Section
7.1 hereof.
"Equity Investor Transferee" shall have the meaning specified in
Section 7.1 hereof.
"Guaranteed Agreement" shall have the meaning specified in Section 2.1
hereof.
"Guaranteed Obligation" shall have the meaning specified in Section
2.1 hereof.
"Guaranteed Party" shall have the meaning specified in Section 2.1
hereof.
ARTICLE II
GUARANTY
Section 2.1 Guaranteed Obligations. The Guarantor does hereby
irrevocably and unconditionally guarantee as primary obligor and not as surety
to each of the Lessee, the Owner Lessor, the Indenture Trustee and the
Noteholders and their respective successors and permitted assigns (each a
"Guaranteed Party" and collectively the "Guaranteed Parties") (a) the punctual
payment to the Person entitled to receive such payment from the Equity Investor,
when due, whether by acceleration or otherwise, of all amounts payable at any
time by the Equity Investor Transferee under and in accordance with the
Operative Documents to which the Equity Investor Transferee is a party (each a
"Guaranteed Agreement" and collectively, the "Guaranteed Agreements"), however
created, arising or evidenced, whether direct or indirect, primary or secondary,
absolute
Exhibit G to Participation Agreement
or contingent, joint or several, and whether now or hereafter existing or due or
to become due, and (b) the full and prompt performance by the Equity Investor
Transferee of each and every duty, agreement, covenant, undertaking, indemnity
and obligation of the Equity Investor Transferee under and in accordance with
the terms of the Guaranteed Agreements, however created, arising or evidenced,
whether direct or indirect, primary or secondary, absolute or contingent, joint
or several, and whether now or hereafter existing or due or to become due,
taking into account applicable notice and grace periods. The Guarantor hereby
agrees that if for any reason the Equity Investor Transferee shall fail to pay
fully and promptly any amount payable under any Guaranteed Agreement, as and
when the same shall become due and payable, or if the Equity Investor Transferee
shall fail to perform and discharge any duty, agreement, covenant, undertaking
or obligation of the Equity Investor Transferee under any Guaranteed Agreement,
then the Guarantor (i) in the event of any such failure to make payment of any
amount, shall promptly upon demand by any Guaranteed Party pay such amount to
the Person entitled thereto, and (ii) in the event of any failure to perform and
discharge any such other duty, agreement, covenant, undertaking or obligation,
shall cause the same to be promptly performed and discharged. The amounts
payable by, and the duties, agreements, covenants, undertakings and obligations
of, the Equity Investor Transferee hereby guaranteed are hereinafter referred to
collectively as the "Guaranteed Obligations" and individually as a "Guaranteed
Obligation".
Section 2.2 Nature of Obligations. This Guaranty shall constitute a
guaranty of performance and of payment and not of collection, and the Guarantor
specifically agrees that it shall not be necessary, and that the Guarantor shall
not be entitled to require, before or as a condition of enforcing the liability
of the Guarantor under this Guaranty or requiring payment or performance of the
Guaranteed Obligations by the Guarantor hereunder, or at any time thereafter,
that any Person: (a) file suit or proceed to obtain or assert a claim for
personal judgment against the Equity Investor Transferee or any other Person
that may be liable for any Guaranteed Obligation; (b) make any other effort to
obtain payment or performance of any Guaranteed Obligation from the Equity
Investor Transferee or any other Person that may be liable for such Guaranteed
Obligation; (c) exercise or assert any other right or remedy to which such
Person is or may be entitled in connection with any Guaranteed Obligation or any
guaranty therefor; or (d) assert or file any claim against the assets of the
Equity Investor Transferee or any other Person liable for any Guaranteed
Obligation. Notwithstanding the foregoing, no provision of this Guaranty shall
be construed to avoid any notices or demands or cure periods available to the
Equity Investor Transferee under the Guaranteed Agreements, or to require the
Guarantor to pay, perform or discharge any Guaranteed Obligation prior to the
time such Guaranteed Obligation is due and payable pursuant to the Guaranteed
Agreements (other than any additional time periods that may
Exhibit G to Participation Agreement
be available under, or any notices and demands that may not be given or made as
a result of, any Applicable Laws (including any bankruptcy laws)).
ARTICLE III
PLACE AND MANNER OF PAYMENT
All payments to be made by the Guarantor under this Guaranty to a
Guaranteed Party shall be paid at the address or to the account specified from
time to time by notice from such Guaranteed Party to the Guarantor, or if no
such account or address is specified, to such Guaranteed Party at the address
provided for in Section 12 of the Participation Agreement. The Guarantor agrees
that it will make all payments due hereunder in U.S. Dollars by wire transfer in
immediately available funds to the party to which such payment is to be made.
ARTICLE IV
CHARACTER OF OBLIGATIONS; ETC.
Section 4.1 Obligations Not Affected. Except as provided in Section
8.6 hereof, the obligations of the Guarantor hereunder shall be continuing and
irrevocable, absolute and unconditional, primary and original, immediate and not
contingent and shall remain in full force and effect without regard to and shall
not be released, discharged or in any way affected by any circumstance or
conditions including, without limitation, the occurrence of any one or more of
the following events:
(a) any lack of validity or enforceability of any of the Guaranteed
Obligations under the Guaranteed Agreements or any provision thereof;
(b) any change in the time, manner or place of performance or payment
of, or in any other term of, all or any of the Guaranteed Obligations or any
other modification or supplement of or any consent to any departure from the
terms and conditions of any of the Guaranteed Agreements;
(c) any waiver, consent or other action or inaction or any exercise or
non-exercise of any right, remedy or power with respect to the Guaranteed
Obligations;
(d) any merger or consolidation, change, restructuring or termination
of the corporate structure or existence or ownership of the Equity Investor
Transferee or the Equity Investor, or any bankruptcy, insolvency, winding up,
dissolution, liquidation, receivership, or reorganization of, or similar
proceedings affecting the Equity Investor
Exhibit G to Participation Agreement
Transferee or its assets or any resulting release or discharge of any of the
Guaranteed Obligations;
(e) the recovery of any judgment against any Person or any action to
enforce the same;
(f) any failure or delay in the enforcement of the obligations of any
Person under any Guaranteed Agreement or any provision thereof;
(g) any set-off, counterclaim, deduction, defense, abatement,
suspension, deferment, diminution, recoupment, limitation or termination
available with respect to any Guaranteed Obligation;
(h) the amendment to or the release of or consent to any departure
from the primary or secondary obligation of any other Person with respect to any
Guaranteed Obligation;
(i) any compromise, alteration, amendment, modification, extension,
renewal, release or other change, or consent or other action, delay, omission or
failure to act, in respect of any of the terms, covenants or conditions of any
Guaranteed Agreement or Guaranteed Obligation, or any other agreement or any
related document referred to therein, or any assignment or transfer of any
thereof;
(j) to the maximum extent permitted by Applicable Law, any other
circumstance that might otherwise constitute a legal or equitable defense
available to or a discharge of a guarantor or surety with respect to any
Guaranteed Obligation;
(k) the partial payment or performance of the Guaranteed Obligations
(whether as a result of the exercise of any right, remedy, power or privilege or
otherwise) having been accepted or received; or
(l) any default, failure or delay, whether as a result of actual or
alleged force majeure, commercial impracticability or otherwise, in the
performance of the Guaranteed Obligations.
Should any money due or owing under this Guaranty not be recoverable
from the Equity Investor Transferee due to any of the matters specified in
Sections 4.1(a) through (l) above, then, in any such case, such money shall
nevertheless be recoverable from the Guarantor as though the Guarantor were
principal debtor in respect thereof and not merely a guarantor and shall be paid
by the Guarantor forthwith.
Section 4.2 Waiver by the Guarantor. The Guarantor hereby expressly
and irrevocably waives, to the fullest extent permitted by Applicable Law,
diligence,
Exhibit G to Participation Agreement
demand for payment, filing of claims with any court, any proceeding to enforce
any provision of any Guaranteed Agreement, notice of acceptance of this
Guaranty, any right to require a proceeding first against the Equity Investor
Transferee, whether to marshal any assets or otherwise, any diligence in
collection or protection of or realization upon any Guaranteed Obligation, any
obligation hereunder or any collateral security for any of the foregoing, any
right of protest, presentment, notice or demand whatsoever, all claims of
waiver, release, surrender, alteration or compromise, and all defenses (other
than the defense of payment or performance by the Equity Investor Transferee),
setoffs, counterclaims, recoupments, reductions, limitations, impairments or
terminations, whether arising hereunder or otherwise.
Section 4.3 Reinstatement. The Guarantor agrees that this Guaranty
shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of the Equity Investor Transferee is rescinded or must
be otherwise restored by any of the Guaranteed Parties, whether as a result of
any proceedings in bankruptcy or reorganization or otherwise.
Section 4.4 Subrogation. Until all of the Guaranteed Obligations and
all other obligations hereunder shall have been paid or performed in full, the
Guarantor will not exercise any rights which it may acquire by way of
subrogation under this Guaranty, by any performance or payment made hereunder or
otherwise. If any amount shall be paid to the Guarantor on account of such
subrogation rights at any time prior to the payment and performance in full of
the Guaranteed Obligations and the other obligations hereunder, such amount
shall be held in trust for the benefit of the Guaranteed Parties and shall
forthwith be paid to the Guaranteed Parties to be credited and applied to the
Guaranteed Obligations, whether matured or unmatured, in accordance with the
terms of the Guaranteed Agreement or to be held by the Guaranteed Parties as
collateral security for any Guaranteed Obligations thereafter existing.
ARTICLE V
RIGHTS OF THIRD PARTIES
This Guaranty is made for the benefit of, and shall be enforceable by,
each Guaranteed Party and its permitted successors and assigns to the extent of
its interest hereunder. This Guaranty shall not be construed to create any right
in any Person other than the Guaranteed Parties or to be a contract in whole or
in part for the benefit of any Person other than the Guaranteed Parties.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Exhibit G to Participation Agreement
As of the date hereof, the Guarantor represents and warrants that:
Section 6.1 Organization. The Guarantor is a [_____], duly organized,
validly existing and in good standing under the laws of the State of [_____],
and has the power and authority to enter into and perform its obligations under
this Guaranty.
Section 6.2 Due Authorization; Enforceability; Etc. This Guaranty has
been duly authorized, executed and delivered by the Guarantor and constitutes
the legal, valid and binding obligation of the Guarantor, enforceable against
the Guarantor in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement,
moratorium or other laws relating to or affecting the rights of creditors
generally and by general principles of equity.
Section 6.3 No Conflicts. The execution, delivery and performance by
the Guarantor of this Guaranty do not and will not (i) contravene (A) any
Applicable Law binding on the Guarantor or its property, or (B) any of its
organizational documents, (ii) constitute a violation of or a default under, any
indenture, mortgage or other material contract, agreement or instrument to which
the Guarantor is a party or by which the Guarantor or its property is bound
which, in any case, individually or in the aggregate, is reasonably likely to
have a material adverse effect upon the Guarantor or the Guarantor's ability to
perform its obligations hereunder, or (iii) require, on the part of the
Guarantor, any authorization, determination or approval or other action by, any
notice to or filing or registration with, any Governmental Entity, other than
any authorization or approval or other action or notice or filing as has been
duly obtained, taken or given (it being understood that no representation or
warranty is being made under this Section 6.3 as to any Applicable Laws relating
to the Project or the Project Site).
Section 6.4 No Litigation. There is no pending or, to the Actual
Knowledge of the Guarantor, threatened action, suit, investigation or proceeding
against the Guarantor before any Governmental Entity that would, if determined
adversely to it, materially, adversely affect the Guarantor's ability to perform
its obligations hereunder.
Section 6.5 Ownership. The Guarantor is the direct holder of all
membership interests in the Equity Investor Transferee.
Section 6.6 U.S. Person. The Guarantor is a "United States person"
wihtin the meaning of Section 7701(a)(30) of the Code;
Section 6.7 Net Worth. The Guarantor has a tangible net worth of at
least $50,000,000.
Exhibit G to Participation Agreement
ARTICLE VII
MISCELLANEOUS
Section 7.1 Amendments. Neither this Guaranty nor any of the terms
hereof may be terminated, amended, supplemented, waived or modified orally, but
only by an instrument in writing signed by all Guaranteed Parties and the
Guarantor.
Section 7.2 Notices. Any notice, request or other communication
hereunder shall be given in accordance with Section 12.4 of the Participation
Agreement. Any notice, request or other communication directed to the Guarantor
shall be sent to:
[Insert Notice Information]
Section 7.3 Severability. Any provision of this Guaranty that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction
only, be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by Applicable Law, the Guarantor hereby waives any provision of law that renders
any provision hereof prohibited or unenforceable in any respect.
Section 7.4 No Waiver. No delay on the part of any Guaranteed Party in
the exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise of any right or remedy shall preclude other or
further exercise thereof or the exercise of any other right or remedy.
Section 7.5 Expenses. The Guarantor shall pay, or reimburse each
Guaranteed Party for, all costs and expenses, including reasonable and
documented attorneys' fees and disbursements, incurred by it in connection with
the enforcement of this Guaranty.
Section 7.6 Term. Subject to reinstatement as set forth in Section 4.3
hereof, this Guaranty shall be in full force and effect and shall not terminate
with respect to any of the Guaranteed Obligations until the payment and
performance finally and indefeasibly in full of all Guaranteed Obligations.
Section 7.7 Successors and Assigns. The terms of this Guaranty shall
be binding upon the Guarantor and its successors and permitted assigns and shall
inure to the benefit of, and may be enforced by, the Guaranteed Parties.
Exhibit G to Participation Agreement
Section 7.8 Governing Law. This Guaranty has been delivered in the
State of New York and shall be in all respects governed by and construed in
accordance with the law of the State of New York including all matters of
construction, validity and performance.
Section 7.9 Submission to Jurisdiction; Waiver of Jury Trial. (a) The
Guarantor (i) hereby irrevocably submits to the nonexclusive jurisdiction of the
Supreme Court of the State of New York, New York County (without prejudice to
the right of any party to remove to the United States District Court for the
Southern District of New York) and to the nonexclusive jurisdiction of the
United States District Court for the Southern District of New York (and any
court of appeals from either thereof) for the purposes of any suit, action or
other proceeding arising out of this Guaranty or the subject matter hereof
brought by any of the Guaranteed Parties; (ii) hereby irrevocably agrees that
all claims in respect of such action or proceeding may be heard and determined
in such New York State court, or in such federal court; and (iii) to the extent
permitted by Applicable Law, hereby irrevocably waives, and agrees not to
assert, by way of motion, as a defense, or otherwise, in any such suit, action
or proceeding, any claim that such party is not personally subject to the
jurisdiction of the above-named courts, that the suit, action or proceeding is
brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper or that this Guaranty or the subject matter hereof may
not be enforced in or by such court.
(b) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE GUARANTOR HEREBY
IRREVOCABLY WAIVES THE RIGHT TO DEMAND A TRIAL BY JURY, IN ANY SUCH SUIT, ACTION
OR OTHER PROCEEDING ARISING OUT OF THIS GUARANTY OR THE SUBJECT MATTER HEREOF
BROUGHT BY ANY OF THE GUARANTEED PARTIES.
Section 7.10 Provisions Subject to Applicable Law. All rights, powers
and remedies provided herein may be exercised only to the extent that the
exercise thereof does not violate any Applicable Law, and are intended to be
limited to the extent necessary so that they will not render this Guaranty or
any provision hereof invalid or unenforceable under the provisions of any
Applicable Law.
Section 7.11 Headings. The headings of the various sections of this
Guaranty are inserted for purposes of convenience only and shall not be
construed to affect the meaning or construction of any of the provisions hereof.
Section 7.12 Further Assurances. The Guarantor will, at the
Guarantor's expense, promptly and duly execute and deliver all such documents
and assurances and take such further action as may be necessary or appropriate
in order to carry out more
Exhibit G to Participation Agreement
effectively the intent and purpose of this Guaranty and to establish and protect
the rights and remedies created hereunder.
Exhibit G to Participation Agreement
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed and delivered to each Guaranteed Party as of the date first above
written.
[______]
By:
------------------------------------
Name:
Title:
Exhibit H to the Participation Agreement
[FORM OF COMPLETION NOTICE]
PUNA GEOTHERMAL VENTURE
Completion Notice
Reference is made to the Participation Agreement (as amended,
restated, supplemented or otherwise modified from time to time, the
"Participation Agreement"), dated as of May ___, 2005, among (i) Puna Geothermal
Venture (the "Lessee"), (ii) SE Puna, L.L.C. (the "Owner Lessor"), (iii)
Wilmington Trust Company, in its individual capacity (the "Trust Company"), (iv)
SE Puna Lease, L.L.C. (the "Equity Investor"), (v) AIG Annuity Insurance
Company, American General Life Insurance Company and Allstate Life Insurance
Company (each a "Noteholder" and, collectively, the "Noteholders") and (vi)
Union Bank of California, N.A., not in its individual capacity, but solely as
trustee under the Indenture (the "Indenture Trustee"). Capitalized terms used
herein without definition have the respective meanings specified in the
Participation Agreement.
This Completion Notice is delivered pursuant to Section 11.2(c)(i) of
the Participation Agreement. The Lessee hereby certifies that the all conditions
set forth in Section 11.2(c) of the Participation Agreement to the obligations
of the Equity Investor to contribute an Additional Equity Investment pursuant to
Section 11.2(b) of the Participation Agreement to the Owner Lessor and the
immediate application of such Additional Equity Investment and the Capex Account
(Debt) Deposit to payment of costs with respect to the Production Well and
Injection Well, including those protocols set forth in the Completion Test
attached to the Participation Agreement as Exhibit A to Appendix A, have been
met as certified by the Geothermal Consultant and Engineering Consultant on
Exhibits A and B, respectively, hereto.
[Remainder of Page Intentionally Left Blank]
Exhibit H to the Participation Agreement
PUNA GEOTHERMAL VENTURE
By:
------------------------------------
Name:
Title:
Dated as of [__________ __], 200[__]
Exhibit H to the Participation Agreement
Exhibit A to Completion Notice
Geothermal Consultant Certification
We have made a physical inspection of the Production Well[s] and
Injection Well[s], collectively referred to as the Well Improvements. It is our
professional opinion, based upon such inspection and our participation in the
administration of the completion test protocols as set forth in the Completion
Tests attached as Exhibit A to Appendix A of the Participation Agreement and
referenced in the Completion Notice of which this certificate forms a part, that
the Well Improvements have satisfied the requirements as set forth in the
Completion Tests.
We hereby certify that the above statements are complete, true and
accurate to the best of our knowledge.
GEOTHERMEX, INC.
By:
------------------------------------
Name:
Title:
Dated as of [__________ __], 200[_]
Exhibit H to Participation Agreement
Exhibit B to Completion Notice
Engineering Consultant Certification
We have made a physical inspection of the Production Well[s] and
Injection Well[s], collectively referred to as the Well Improvements. It is our
professional opinion, based upon such inspection and our participation in the
administration of the completion test protocols as set forth in the Completion
Tests attached as Exhibit A to Appendix A of the Participation Agreement and
referenced in the Completion Notice of which this certificate forms a part, that
the Well Improvements have satisfied the requirements as set forth in the
Completion Tests.
We hereby certify that the above statements are complete, true and
accurate to the best of our knowledge.
STONE & XXXXXXX MANAGEMENT CONSULTANTS, INC.
By:
------------------------------------
Name:
Title:
Dated as of [__________ __], 200[_]
Exhibit I to Participation Agreement
PGV BASE CASE PRO FORMA ASSUMPTIONS
FOR THE PERIOD STARTING IN 2005 AND ENDING IN 2027
I. REVENUE ASSUMPTIONS
PLANT CAPACITY
o 2005 On-Peak Capacity: 25.5 MW
o 2006-2027 On-Peak Capacity: 28.5 MW
o 2005-2027 Off-Peak Capacity: 24.5 MW
o 2006-2027 Off-Peak Capacity: 24.5 MW
AVAILABILITY
o 97% availability factor (on and off peak)
o 1% line loss
AVOIDED COST
2005 base year starting Short Run Avoided Cost ("SRAC") forecasts are based on
HELCO's actual historic calculations and incorporate an agreed upon 5-year
reference period ending on January 1, 2005.
2005 Base Year Assumptions
o First 25 MW, On-Peak ($/KWh) $0.919
o First 22 MW, Off Peak ($/KWh) $0.752
o Additional 5 MW, On-Peak ($/KWh) $0.676
o Additional 5 MW, Off-Peak ($/KWh) $0.576
o Avoided Cost Escalation Each component of avoided cost will be
escalated at 2% per annum, (except for
the additional 5MW off peak energy,
which is always $0.01 less than the
additional 5MW on-peak energy, per the
HELCO Power Purchase Contract, as
Amended)
Exhibit I to Participation Agreement
II. EXPENSE ASSUMPTIONS
($000) 2005 Annual Increase
------ ------ ---------------
Plant O&M $6,740 2.5%
Variable O&M $ 910 2.5%
Property and Revenues Gen. Excise Tax $ 132 2.5%
Other G&A Expenses $ 151 2.5%
Agent Fees $ 15 2.5%
Terra Thermal 1.5% * 75% of Revenues
Resource Royalties 3% of Annual Revenues
Land Owners Rent - 2005 $461,250
Land Owners Rent - 2006 - 2010 1.35% of revenues + fixed component
of $219,000
Land Owners Rent - 2011 - 2015 1.35% of revenues + fixed component
of $240,900 (10% increase)
Land Owners Rent - 2016 - 2020 1.35% of revenues + fixed component
of $264,990 (10% increase)
Land Owners Rent - 2021 - 2027 1.35% of revenues + fixed component
of $291,489 (10% increase)
Insurance Fixed Values as-per Pro-Forma
Major Maintenance Fixed Values as-per Pro-Forma
Additional Amounts Fixed Values as-per Pro-Forma
Major Maintenance Reserve Contribution Fixed Values as-per Pro-Forma
Exhibit I to Participation Agreement
III. WORKING CAPITAL ASSUMPTIONS
<TABLE>
($000) 2004 Base Annual Assumption
------ --------- -----------------
Accounts Receivable $1,732 8.33% of Revenues
Accounts Payable $ 750 8.33% of Operating Expenses
Prepaid Expenses $ 160 50% of Insurance, Property & Excise Tax, and Royalties
</TABLE>
Execution Copy
APPENDIX A
--------------------------------------------------------------------------------
DEFINITIONS
--------------------------------------------------------------------------------
PUNA GEOTHERMAL GENERATION PROJECT
APPENDIX A - DEFINITIONS
SECTION 1. GENERAL PROVISIONS
In this Appendix A and each Operative Document (as hereinafter
defined), unless otherwise provided herein or therein:
(a) the terms set forth in this Appendix A or in any such Operative
Document shall have the meanings herein provided for and any term used in an
Operative Document and not defined therein or in this Appendix A but in another
Operative Document shall have the meaning provided for in such other Operative
Document;
(b) any term defined in this Appendix A by reference to another
document, instrument or agreement shall continue to have the meaning ascribed
thereto whether or not such other document, instrument or agreement remains in
effect;
(c) words importing the singular include the plural and vice versa;
(d) words importing a gender include any gender;
(e) a reference to a part, clause, section, paragraph, article, party,
annex, appendix, exhibit, schedule or other attachment to or in respect of an
Operative Document is a reference to a part, clause, section, paragraph, or
article of, or a party, annex, appendix, exhibit, schedule or other attachment
to, such Operative Document unless, in any such case, otherwise expressly
provided in any such Operative Document;
(f) a reference to any statute, regulation, rule, proclamation,
ordinance or law includes all statutes, regulations, rules, proclamations,
ordinances or laws varying, consolidating or replacing the same from time to
time, and a reference to a statute includes all regulations, policies,
protocols, codes, proclamations and ordinances issued or otherwise applicable
under that statute unless, in any such case, otherwise expressly provided in any
such statute or in such Operative Document;
(g) a definition of or reference to any document, instrument or
agreement includes any amendment or supplement to, or restatement, replacement,
modification or renovation of, any such document, instrument or agreement unless
otherwise specified in such definition or in the context in which such reference
is used;
(h) a reference to a particular section, paragraph or other part of a
particular statute shall be deemed to be a reference to any other section,
paragraph or other part substituted therefor from time to time;
(i) if a capitalized term describes, or shall be defined by reference
to, a document, instrument or agreement that has not as of any particular date
been executed and delivered and such document, instrument or agreement is
attached as an exhibit to the Participation Agreement (as hereinafter defined),
such reference shall be deemed to be to such form and, following such execution
and delivery and subject to clause (g) above, to the document, instrument or
agreement as so executed and delivered;
(j) a reference to any Person (as hereinafter defined) includes such
Person's successors and permitted assigns;
(k) any reference to "days" shall mean calendar days unless "Business
Days" (as hereinafter defined) are expressly specified;
(l) if the date as of which any right, option or election is
exercisable, or the date upon which any amount is due and payable, is stated to
be on a date or day that is not a Business Day, such right, option or election
may be exercised, and such amount shall be deemed due and payable, on the next
succeeding Business Day with the same effect as if the same was exercised or
made on such date or day (without, in the case of any such payment, the payment
or accrual of any interest or other late payment or charge, provided such
payment is made on such next succeeding Business Day);
(m) words such as "hereunder", "hereto", "hereof" and "herein" and
other words of similar import shall, unless the context requires otherwise,
refer to the whole of the applicable document and not to any particular article,
section, subsection, paragraph or clause thereof;
(n) a reference to "including" shall mean including without limiting
the generality of any description preceding such term, and for purposes hereof
and of each Operative Document the rule of ejusdem generis shall not be
applicable to limit a general statement, followed by or referable to an
enumeration of specific matters, to matters similar to those specifically
mentioned; and
(o) all accounting terms not specifically defined herein or in any
Operative Document shall be construed in accordance with GAAP.
SECTION 2. DEFINED TERMS
"365(h) Election" shall have the meaning specified in Section 4.2(A)
of the Indenture.
"Acceptable Letter of Credit Provider" shall mean a financial
institution (A) with senior long-term unsecured and unguaranteed debt rated A3
or higher by Xxxxx'x
2
or A- or higher by S&P, (B) the obligations of which are guaranteed by an entity
with senior long-term unsecured and unguaranteed debt rated A3 or higher by
Xxxxx'x or A- or higher by S&P or (C) whose letter of credit is confirmed by an
entity with senior long-term unsecured and unguaranteed debt rated A3 or higher
by Xxxxx'x or A- or higher by S&P.
"Account Bank" shall mean Bank of Hawaii.
"Account Funds" shall have the meaning specified in Section 1.2 of the
Depositary Agreement.
"Accounts" shall have the meaning specified in Section 1.2 of the
Depositary Agreement.
"Actual Knowledge" shall mean actual knowledge of any Responsible
Officer employed by the Owner Lessor or the Lessee or any other Person, as the
case may be, provided that the Owner Lessor or the Lessee or such other Person,
as the case may be, shall be deemed to have "Actual Knowledge" of any matter as
to which a Responsible Officer of such Person has been given notice in
accordance with the Operative Documents.
"Additional Equity Investment" shall mean the amount, if any, provided
by the Equity Investor (i) (in its sole and absolute discretion) to finance all
or a portion of the cost of any Modification financed pursuant to Section
11.1(a) of the Participation Agreement or (ii) pursuant to Section 11.2 (a) of
the Participation Agreement.
"Additional Security Agreement" shall have the meaning specified in
Section 2.10(B) of the Indenture.
"Additional Senior Notes" shall have the meaning specified in Section
2.12 of the Indenture.
"Administrative Services Agreement" shall mean the Administrative
Services Agreement, dated as of September 1, 2004, between ONI and the Lessee
pursuant to which ONI provides certain services relating to the operation of the
Project.
"Advisor to the Lessee" shall mean Societe Generale, New York Branch,
acting as advisor to the Lessee.
"Affiliate" of a particular Person shall mean any Person directly or
indirectly controlling, controlled by or under common control with such
particular Person. For purposes of this definition, "control" when used with
respect to any particular Person shall mean the power to direct the management
and policies of such Person, directly or
3
indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing; provided, however, that under no circumstance
shall the Trust Company be considered to be an Affiliate of any of the Owner
Lessor or the Equity Investor, nor shall any of the Owner Lessor or Equity
Investor be considered to be an Affiliate of the Trust Company.
"After-Tax Basis" shall mean, with respect to any payment received or
deemed to have been received or accrued, the amount of such payment increased so
that, after deduction of the amount of all Taxes (assuming for this purpose that
the recipient of such payment is subject to taxation at the highest federal and
applicable state and local marginal tax rates generally applicable to persons of
the same type as the recipient for the year in which such income is taxable)
required to be paid by the recipient (less any tax savings realized as a result
of the payment of the indemnified amount, in each case using the same tax rate
assumptions as set forth in the immediately preceding parenthetical phrase) with
respect to the receipt (actual or constructive) or accrual by the recipient of
such amount, such increased payment (as so reduced) is equal to the payment
otherwise required to be made or deemed to have been made or accrued.
"Allocated Rent" shall mean the amounts designated as such in, and
allocable to each Rental Period set forth in Project Lease Supplement No. 1 or
if executed, Project Lease Supplement No. 2.
"Annual Operating Budget" shall have the meaning specified in Section
5.5 of the Participation Agreement.
"Applicable Law" shall mean as to any Person, the certificate of
incorporation and by-laws or the partnership agreement or other organizational
or governing documents of such Person, and all applicable laws, including all
Environmental Laws, and treaties, judgments, decrees, injunctions, writs and
orders of any arbitration board or Governmental Entity and rules, regulations,
orders, ordinances and Governmental Approvals of any Governmental Entity.
"Applicable Rate" shall mean the Prime Rate (as published in the Wall
Street Journal from time to time) plus 2% per annum.
"Appraisal Procedure" shall mean (except with respect to the Closing
Appraisal and any appraisal undertaken to determine Fair Market Sales Value or
Fair Market Rental Value after a Lease Event of Default shall have occurred and
be continuing in connection with the exercise or remedies) an appraisal
conducted by an appraiser or appraisers in accordance with the procedures set
forth in this definition of "Appraisal Procedure." The Equity Investor and
Lessee will consult with the intent of selecting a mutually acceptable
Independent Appraiser. If a mutually acceptable
4
Independent Appraiser is selected, the Fair Market Rental Value or Fair Market
Sales Value or remaining useful life or other determination shall be determined
by such Independent Appraiser. If the Equity Investor and the Lessee are unable
to agree upon a single Independent Appraiser within a 15-day period, one shall
be appointed by the Equity Investor (or its designee), and one shall be
appointed by the Lessee (or its designee), which Independent Appraisers shall
attempt to agree upon the value, period, amount or other determination that is
the subject of the appraisal. If either the Equity Investor or the Lessee does
not appoint its appraiser within 30 days after the end of the 15-day period
referenced in the immediately preceding sentence, the determination of the
Independent Appraiser appointed by the other Person (if so appointed within such
period) shall be conclusive and binding on the Equity Investor and the Lessee.
If the Independent Appraisers appointed by the Equity Investor and the Lessee
are unable to agree upon the value, period, amount or other determination in
question within 30 days after the appointment of the second of such Independent
Appraisers, such appraisers shall jointly appoint a third Independent Appraiser
or, if such Independent Appraisers do not appoint a third Independent Appraiser,
the Equity Investor and the Lessee shall jointly appoint the third Independent
Appraiser. In such case, the average of the determinations of the three
appraisers shall be conclusive and binding on the Equity Investor and the
Lessee, unless the determination of one Independent Appraiser is disparate from
the middle determination by more than twice the amount by which the third
determination is disparate from the middle determination, in which case the
determination of the most disparate Independent Appraiser shall be excluded, and
the average of the remaining two determinations shall be conclusive and binding
on the Equity Investor and the Lessee.
"Appraiser" shall mean Standard & Poor's Corporate Value Consulting.
"Assigned Documents" shall have the meaning specified in clause 5 of
the Granting Clause of the Indenture.
"Assumption Documents" shall have the meaning set forth in Section
11.5 of the Participation Agreement.
"Auditors" shall have the meaning specified in Section 5.4(b) of the
Participation Agreement.
"Bank of Hawaii Control Agreement" shall mean the Deposit Account
Control Agreement and Acknowledgment of Security Interest with respect to
account numbers 0003-427153 and 0003-427145 dated as of May 18, 2005 between the
Lessee, the Account Bank and the Indenture Trustee.
"Bankruptcy Code" shall mean the United States Bankruptcy Code of
1978, 11 U.S.C. Section 101 et seq.
5
"Basic Lease Term" shall have the meaning specified in Section 3.1 of
the Project Lease.
"Basic Lease Term Expiration Date" shall have the meaning specified in
Section 3.1 of the Project Lease.
"Burdensome Termination Date" shall have the meaning specified in
Section 13.1 of the Project Lease.
"Burdensome Termination Notice" shall have the meaning specified in
Section 13.1 of the Project Lease.
"Business Day" shall mean any day other than a Saturday, a Sunday, or
a day on which commercial banking institutions are authorized or required by
law, regulation or executive order to be closed in Reno, Nevada, Puna, Hawaii,
New York, New York, San Francisco, California or Wilmington, Delaware.
"Business Interruption Insurance Proceeds" shall have the meaning
specified in Section 1.2 of the Depositary Agreement.
"Capex Account" shall have the meaning specified in Section 1.2 of the
Depositary Agreement.
"Capex Account (Debt)" shall have the meaning specified in Section 1.2
of the Depositary Agreement.
"Capex Account (Debt) Deposit" shall mean $8,968,969.04.
"Capital Lease Obligations" with respect to any Person shall mean the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as a capital lease on the balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Casualty Insurance Proceeds" shall mean any and all proceeds of any
insurance (other than Business Interruption Insurance Proceeds), indemnity,
warranty or guaranty paid from time to time with respect to any Event of Loss
(other than an Event of Loss described in clause (c) of the definition thereof)
or Partial Casualty, other than a Partial Casualty with respect to the seizure,
condemnation, confiscation or taking of, or requisition of title to or use of
any part of the Project or the Project Site by any Governmental Entity.
6
"Change of Control" shall mean ONI shall cease to own, beneficially
and of record, directly or indirectly, at least 50.1% of the voting and economic
interests of the Lessee.
"Claim" shall mean any liability (including in respect of negligence
(whether passive or active or other torts), strict or absolute liability in tort
or otherwise, warranty, latent or other defects (regardless of whether or not
discoverable), statutory liability, property damage, bodily injury or death),
obligation, loss, settlement, damage, penalty, claim, action, suit, proceeding
(whether civil or criminal), judgment, penalty, fine and other legal or
administrative sanction, judicial or administrative proceeding, cost, expense or
disbursement, including reasonable legal, investigation and expert fees,
expenses and reasonable related charges, of whatsoever kind and nature.
"Closing" shall have the meaning specified in Section 2.2(a) of the
Participation Agreement.
"Closing Appraisal" shall mean the appraisal, dated the Closing Date,
prepared by the Appraiser and addressed to the Equity Investor.
"Closing Date" shall have the meaning specified in Section 2.2(a) of
the Participation Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" shall mean the collective reference to all real and
personal property, tangible and intangible, and the proceeds thereof, subjected
from time to time to the Liens intended to be created by the Lessee Security
Documents.
"Collateral Revenues" shall have the meaning specified in clause (8)
of the Granting Clause of the Indenture.
"Commitment" shall mean, with respect to (a) AIG Annuity Insurance
Company, $13,000,000.00, (b) American General Life Insurance Company,
$13,704,585.44 and (c) Allstate Life Insurance Company, $26,704,585.44.
"Competitor" shall have the meaning specified in Section 7.1(b) of the
Participation Agreement.
"Completion" shall mean the satisfaction of the Completion Tests.
"Completion Notice" shall have the meaning set forth in Section
11.2(c)(i) of the Participation Agreement.
7
"Completion Tests" shall mean the completion tests to be conducted in
respect of the Injection Well and the Production Well as set forth on Exhibit A
hereto.
"Component" shall mean any appliance, part, instrument, appurtenance,
accessory, furnishing, equipment or other property of whatever nature that may
from time to time be incorporated in the Project, except to the extent
constituting Modifications.
"Consents to Assignment" shall mean each of (i) the State Consent,
(ii) the State Partial Assignment Consent, (iii) the KLP Consent, (iv) KLP
Partial Assignment Consent, (v) the KLDC Consent, (vi) KLDC Partial Assignment
Consent and (vii) the HELCO Consent.
"Cure Notice" shall have the meaning specified in Section 1.2 of the
Depositary Agreement.
"Damage Event" shall have the meaning specified in Section 1.2 of the
Depositary Agreement.
"Debt Payment Amount" shall have the meaning specified in Section 1.2
of the Depositary Agreement.
"Debt Placement Agent" shall mean SG Americas Securities, LLC.
"Debt Portion of Periodic Lease Rent" shall mean in respect of any
Rent Payment Date, the portion of Periodic Lease Rent payable on such Rent
Payment Date equal to the scheduled principal and interest due and payable on
the Senior Notes on such Rent Payment Date.
"Debt Portion of Termination Value" shall mean in respect of any
determination of Termination Value or amount determined by reference to
Termination Value payable pursuant to the Operative Documents, an amount equal
to the outstanding principal of, and accrued interest on, the Senior Notes on
such date of determination (other than any amounts past due and any overdue
interest thereon).
"Debt Portion of Well Expenditures" shall have the meaning specified
in Section 1.2 of the Depositary Agreement.
"Default Notice" shall have the meaning specified in Section 1.2 of
the Depositary Agreement.
"Default Period" shall have the meaning specified in Section 1.2 of
the Depositary Agreement.
8
"Delivery System Grant of Easements" shall mean that certain
unrecorded Delivery System Grant of Easements dated July 9, 1990, a Short Form
of which, dated July 9, 1990, was recorded in the Official Records as Document
No. 90-109526; as amended by that certain Amendment To Short Form Grant of
Easements dated September 25, 1996, recorded in the Official Records as Document
No. 96-145797; and as further amended by that certain Second Amendment To Short
Form Grant of Easements dated November 7, 1996, recorded in the Official Records
as Document No. 96-166499.
"Depositary Agreement" shall mean the Depositary Agreement, dated as
of May 18, 2005, among the Lessee, the Indenture Trustee, the Depositary Bank,
the Owner Lessor and the Equity Investor.
"Depositary Bank" shall mean Union Bank of California, N.A., in its
capacity as Depositary Bank under the Depositary Agreement.
"Depositary Bank Fee Letter" shall have the meaning specified in
Section 1.2 of the Depositary Agreement.
"Discount Rate" shall mean 8%.
"Distribution Account" shall have the meaning specified in Section 1.2
of the Depositary Agreement.
"Distribution Conditions" shall have the meaning specified in Section
1.2 of the Depositary Agreement.
"Dollars" or the sign "$" shall mean United States dollars or other
lawful currency of the United States.
"Drawing Event" shall mean either the Junior Rent Reserve Drawing
Event, the Senior Rent Reserve Drawing Event, the Well Maintenance Reserve
Drawing Event or the Indemnity Reserve Drawing Event, as applicable, each as
defined in the Depositary Agreement.
"Early Buyout Option" shall have the meaning specified in Section 21.1
of the Project Lease.
"EBO Amount" shall mean the excess of the EBO Price over the EBO Date
Prepaid Rent Balance.
"EBO Date" shall mean December 30, 2010.
9
"EBO Date Prepaid Rent Balance" shall mean the amounts specified as
such in Section 5 of Project Lease Supplement No. 1 or, if executed, Project
Lease Supplement No. 2.
"EBO Price" shall mean the amounts specified as such in Section 5 of
Project Lease Supplement No. 1 or, if executed, and Project Lease Supplement No.
2.
"Enforcement Notice" shall have the meaning specified in Section 5.1
of the Indenture.
"Engineering Consultant" shall mean Stone & Xxxxxxx, Inc. or any
successor thereto that is a nationally recognized independent engineer in the
power generation industry selected by the Equity Investor and, until such time
as the Indenture has been terminated and fully discharged, the Indenture Trustee
and reasonably acceptable to Lessee.
"Engineering Report" shall mean the report of the Engineering
Consultant addressed to the Equity Investor and the Noteholders.
"Environmental Condition" shall mean any physical condition or
circumstance, including the presence of any Hazardous Materials, that does or
reasonably could (a) require assessment, investigation, abatement, correction,
removal or remediation under any Environmental Law, (b) give rise to any
obligation or liability of any nature (whether civil or criminal, arising under
a theory of negligence or strict liability, or otherwise) under any
Environmental Law, (c) create or constitute a public or private nuisance or
trespass, or (d) constitute a material violation of or material non-compliance
with any Environmental Law.
"Environmental Consultant" shall mean Environmental Management
Associates.
"Environmental Law" shall mean any and all laws, rules, orders,
regulations, statutes, ordinances, codes, decrees or requirements of any
Governmental Entity or other Applicable Law (including common law) regulating,
relating to or imposing liability or standards of conduct concerning or relating
to the regulation, use or protection of natural resources or the environment, to
the protection of human health and safety as related to the environment or
exposure to Hazardous Materials, or to Releases of Hazardous Materials, or
otherwise relating to the generation, use, treatment, storage, disposal,
handling or transport of Hazardous Materials, as may have previously been, now
are, or may at any time hereafter be, in effect.
10
"Environmental Report" shall mean a Phase I environmental assessment
report dated as of February 2004, as amended on September 22, 2004 and a
bringdown of such report dated as of April 4, 2005, prepared by the
Environmental Consultant, dated no earlier than sixty (60) days prior to the
Closing Date.
"Equity Investment" shall mean $25,174,608.67.
"Equity Investor" shall mean SE Puna Lease, L.L.C., a Delaware limited
liability company.
"Equity Investor Agreements" shall have the meaning set forth in
Section 3.4(a) of the Participation Agreement.
"Equity Investor Guarantor" shall mean any Person that shall guaranty
the obligations of an Equity Investor Transferee under the Operative Documents
in accordance with Section 7.1(a) of the Participation Agreement.
"Equity Investor Guaranty" shall mean any guaranty agreement entered
into pursuant to Section 7.1(v) of the Participation Agreement guaranteeing the
obligations of an Equity Investor Transferee in the form attached to the
Participation Agreement as Exhibit G.
"Equity Investor Transferee" shall have the meaning specified in
Section 7.1(a) of the Participation Agreement.
"Equity Investor's Commitment" shall have the meaning set forth in
Section 2.1(a)(ii) of the Participation Agreement.
"Equity Investor's Lien" shall mean any Lien on the Indenture Estate
or any part thereof arising as a result of (a) Claims against or any act or
omission of the Equity Investor that are not related to, or that are in
violation of, any Operative Document or the transactions contemplated thereby or
that are in breach of any covenant or agreement of the Equity Investor set forth
therein, (b) Taxes against the Equity Investor that are not indemnified against
by the Lessee pursuant to the Equity Investor Agreements or (c) Claims against
or affecting the Equity Investor arising out of the voluntary or involuntary
transfer by the Equity Investor (other than transfers requested by the Lessee
and except as contemplated or permitted by the Operative Documents or in
connection with the exercise of remedies during the continuance of a Lease Event
of Default) of the Member Interest.
"Equity Investor's Net Economic Return" shall mean with respect to the
period between the Closing Date and the expiration of the Basic Lease Term, the
Equity
11
Investor's anticipated after-tax yield, aggregate after-tax lease income and
aggregate after tax-lease income over the first five years of the Basic Lease
Term, using the multiple investment sinking fund method of analysis (as
described in Paragraph 44 of FASB 13), computed on the basis of the same
methodology and assumptions as were utilized in determining the applicable
schedules of Periodic Lease Rent, Allocated Rent and Termination Values as of
the Closing Date.
"Equity Portion of Periodic Lease Rent" shall mean for any Rent
Payment Date the difference between (a) Periodic Lease Rent scheduled to be paid
under the Project Lease on such Rent Payment Date and (b) the Debt Portion of
Periodic Lease Rent as of such Rent Payment Date.
"Equity Portion of Termination Value", in respect of any determination
of Termination Value or amount determined by reference to Termination Value
payable pursuant to the Operative Documents, shall mean an amount equal to the
excess, if any, of (a) the Termination Value on the date of determination, over
(b) the Debt Portion of Termination Value.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean each Person, entity, trade or business
that together with Lessee is treated as a single-employer within the meaning of
Section 414(b), (c), (m) or (o) of the Code.
"Event of Loss" shall mean, with respect to the Project, any of the
following events:
(a) loss of the Project or use thereof due to destruction of or damage
to the Project that is beyond economic repair or that renders the Project unfit
for normal use, as determined by the Independent Engineer;
(b) damage to the Project that results in an insurance settlement with
respect to the Project on the basis of a total loss, or an agreed constructive
or a compromised total loss;
(c) seizure, condemnation, confiscation or taking of, or requisition
of title to or use of, all or a substantial part of the Project and/or Project
Site by any Governmental Entity (a "Requisition") following exhaustion of all
permitted appeals or an election by the Lessee not to pursue such appeals
(provided that no such contest shall extend beyond the earlier of (i) the date
which is one year after the loss of such title, or (ii) the date which is 36
months prior to the end of the Basic Lease Term or any Renewal
12
Lease Term then in effect or elected by the Lessee), but, in any case involving
Requisition of use but not of title, only if such Requisition of use continues
beyond the Basic Lease Term or any Renewal Lease Term then in effect or elected
by the Lessee; and
(d) if elected by the Equity Investor, and only in such case as
termination of the Project Lease and transfer of the Project shall remove the
basis of the regulation described below, subjection of the Owner Lessor's or the
Equity Investor's interest in the Project, any Operative Document or the Project
Lease, or any part thereof, to any rate of return regulation by any Governmental
Entity, or subjection of the Equity Investor (or any Affiliate thereof) or the
Owner Lessor to any other public utility regulation of any Governmental Entity
or law that in the reasonable opinion of the Equity Investor is materially
burdensome, in either case by reason of the participation of the Owner Lessor or
the Equity Investor in the transactions contemplated by the Operative Documents,
and not, in any event, as a result of (i) investments, loans or other business
activities of the Equity Investor or its Affiliates in respect of equipment or
facilities similar in nature to the Project or any part thereof or in any other
electrical, steam or other energy or utility related equipment or facilities or
the general business or other activities of the Equity Investor or its
Affiliates or the nature of any of the properties or assets from time to time
owned, leased, operated, managed or otherwise used or made available for use by
the Equity Investor or its Affiliates, (ii) a failure of the Equity Investor or
any of its Affiliates to perform routine, administrative or ministerial actions,
the performance of which would not subject the Equity Investor or any of its
Affiliates to any material adverse consequence (in the reasonable opinion of the
Equity Investor or such Affiliate acting in good faith) or (iii) the breach by
the Owner Lessor or the Equity Investor of any covenant set forth in any
Operative Document, except in each case (x) any breach that is imputed to the
Owner Lessor or the Equity Investor by reason of its interest in the Project or
(y) if such breach shall have been caused by any breach or act, or failure to
act in breach of a duty to do so, by the Lessee or any of its Affiliates, of any
covenant set forth in any Operative Document; provided that the Lessee, the
Owner Lessor and the Equity Investor agree to cooperate and to take reasonable
measures to alleviate the source or consequence of any regulation constituting
an Event of Loss under this clause (d) (a "Regulatory Event of Loss"), at the
cost and expense of the party requesting such cooperation and so long as there
shall be no adverse consequences to the Owner Lessor or the Equity Investor (or
any of its Affiliates) as a result of such cooperation or the taking of
reasonable measures.
"Excepted Payments" shall mean and include (a)(i) any indemnity
(whether or not constituting Supplemental Lease Rent and whether or not a Lease
Event of Default exists) payable to either the Trust Company, the Owner Manager,
the Equity Investor or the Owner Lessor or to their respective Indemnitees and
successors and permitted assigns (other than the Indenture Trustee) pursuant to
Section 9.1 or 9.2 of the Participation Agreement or under the Tax Indemnity
Agreement and for which amounts are on deposit
13
in a separate Indemnity Reserve Sub-Account pursuant to Section 4.8 of the
Depositary Agreement or (ii) any amount payable by the Lessee to the Owner
Lessor or the Equity Investor to reimburse any such Person for its costs and
expenses in exercising its rights or complying with its obligations under the
Operative Documents and which is available for distribution to such Persons
pursuant to the Depositary Agreement, (b)(i) insurance proceeds, if any, payable
to the Owner Lessor under insurance separately maintained by the Owner Lessor
with respect to the Project as permitted by and in accordance with the Project
Lease or (ii) proceeds of personal injury or property damage or other liability
insurance maintained under any Operative Document for the benefit of the Trust
Company, the Owner Manager, the Owner Lessor or the Equity Investor, (c) any
amount payable to the Equity Investor as the purchase price of the Equity
Investor's right and interest in the Member Interest, (d) all other fees
expressly payable to the Trust Company, the Owner Manager, the Equity Investor
or the Owner Lessor under the Operative Documents and which is available for
distribution to such Persons pursuant to the Depositary Agreement, (e) if the
Lessee exercises its right to assume the Senior Notes, any Termination Value (or
amount calculated by reference thereto) or purchase price payable by the Lessee
in connection therewith and (f) any payments in respect of interest, or any
payments made on an After-Tax Basis, to the extent attributable to payments
referred to in clause (a) through (e) above that constitute Excepted Payments.
"Excepted Rights" shall mean the rights of the Owner Lessor and Equity
Investor described in Section 5.6 of the Indenture.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Excluded Assets" shall mean the items set forth in Schedule III
hereto.
"Excluded Taxes" shall have the meaning specified in Section 9.2(b) of
the Participation Agreement.
"Expansion Project" shall mean the "topping" and/or "bottoming" units
as may be added to the Project at the sole discretion of the Lessee.
"EWG" shall mean an exempt wholesale generator, as defined in PUHCA.
"Fair Market Rental Value" or "Fair Market Sales Value" shall mean
with respect to any property or service as of any date, the cash rent or cash
price obtainable in an arm's length lease, sale or supply, respectively, between
an informed and willing lessee or purchaser under no compulsion to lease or
purchase and an informed and willing lessor or seller or supplier under no
compulsion to lease or sell or supply the property or service in question, and
shall, in the case of the Owner Lessor's Leasehold Interest, be determined
(except pursuant to Section 17 of the Project Lease or as
14
otherwise provided below or in the Operative Documents) on the basis (a) that
the conditions contained in Sections 7 and 8 of the Project Lease shall have
been complied with in all respects, (b) that the lessee or buyer shall have
rights in, or an assignment of, the Operative Documents to which the Owner
Lessor is a party (or in which the Owner Lessor has rights) and the obligations
relating thereto and (c) that the Owner Lessor's Leasehold Interest, as the case
may be, is free and clear of all Liens (other than Owner Lessor's Liens, Equity
Investor's Liens and Indenture Trustee's Liens) taking into account (y) the
remaining terms of the Sublease of the Power Plant Sublease and the Sub-Sublease
of the Power Plant Sublease, and (z) in the case of the Fair Market Rental
Value, the terms of the Project Lease and the other Operative Documents. If the
Fair Market Sales Value or Fair Market Rental Value, as the case may be, of the
Owner Lessor's Leasehold Interest is to be determined during the continuance of
a Lease Event of Default or in connection with the exercise of remedies by the
Owner Lessor or the Indenture Trustee pursuant to Section 17 of the Project
Lease, such value shall be determined by an appraiser appointed solely by the
Owner Lessor on an "as-is", "where-is" and "with all faults" basis and shall
take into account all Liens (other than Owner Lessor's Liens, Equity Investor's
Liens and Indenture Trustee's Liens); provided, however, in any such case where
the Owner Lessor shall be unable to obtain constructive possession sufficient to
realize the economic benefit of the Owner Lessor's Leasehold Interest, Fair
Market Sales Value or Fair Market Retail Value, as the case may be, of the Owner
Lessor's Leasehold Interest shall be deemed equal to zero dollars ($0). If in
any case other than in the preceding sentence the parties are unable to agree
upon a Fair Market Sales Value or Fair Market Rental Value, as the case may be,
of the Owner Lessor's Leasehold Interest within 30 days after a request therefor
has been made, the Fair Market Sales Value or Fair Market Rental Value, as the
case may be, of the Owner Lessor's Leasehold Interest shall be determined by
appraisal pursuant to the Appraisal Procedure. Any fair market value
determination of a spare part or Severable Modification shall take into
consideration any Liens or encumbrances to which the spare part or Severable
Modification being appraised is subject and which are being assumed by the
transferee, and that such spare part or Severable Modification is being
transferred on an "as-is", "where-is" basis.
"Federal Power Act" shall mean the Federal Power Act, as amended.
"FERC" shall mean the Federal Energy Regulatory Commission of the
United States or any successor agency or predecessor agency thereto.
"Financing Documents" shall mean the Participation Agreement, the Head
Lease, the Project Lease, the Senior Notes, the Tax Indemnity Agreement, the
Equity Investor Guaranty, if any, the Consents to Assignment, the Real Estate
Documents and the Security Documents.
15
"Financing Parties" shall mean the collective reference to the Equity
Investor, the Owner Lessor, the Initial Noteholders and the Indenture Trustee.
"FMV Renewal Lease Term" shall have the meaning specified in Section
15.2 of the Project Lease.
"FPPO Price" shall mean the amounts specified as such in Section 6 of
Project Lease Supplement No. 1 or, if executed, Project Lease Supplement No. 2.
"Funding Request" shall have the meaning set forth in Section 4(s) of
the Participation Agreement.
"Future Value" shall mean, with respect to any amount, the accreted
value of such amount that gives effect to the time value of money using the
Discount Rate.
"GAAP" shall mean generally accepted accounting principles used in the
United States consistently applied and in effect from time to time.
"Geothermal Consultant" shall mean GeothermEx or any successor thereto
that is a nationally recognized independent geothermal consultant in the
geothermal power generation industry selected by the Equity Investor and, until
such time as the Indenture has been terminated and fully discharged, the
Indenture Trustee and reasonably acceptable to the Lessee.
"Geothermal Generation Facility" shall mean the ten modular generating
units along with three production xxxxx, four injection xxxxx, separation
systems and auxiliary equipment, located at Kapoho, in the District of Puna,
County of Hawaii, Island of Hawaii, in the State of Hawaii together with all
improvements thereto, but not including the Excluded Assets, as more fully
described on Exhibit A to Head Lease Supplement No. 1.
"Geothermal Resource" shall have the meaning set forth in the Resource
Sublease Partial Assignment.
"Governmental Approvals" shall mean all authorizations, consents,
approvals, waivers, exceptions, variances, franchises, permissions, filings,
permits, orders, licenses, registrations, judgments, written interpretations,
decrees, exemptions and declarations of or with any Governmental Entity and
shall include those siting and operating permits and licenses, and any of the
foregoing under any applicable Environmental Law, that are required for the
ownership, construction, use, operation and maintenance of the Project.
"Governmental Entity" shall mean and include any nation or government,
any state or political subdivision thereof (whether federal, state or local),
any court and any
16
administrative agency or other regulatory body, instrumentality, authority or
other entity or official thereof exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Guarantee" shall mean, with respect to any Person, any obligation,
contingent or otherwise, of such Person directly or indirectly guaranteeing in
any manner any Indebtedness or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness or other
obligation (whether arising by virtue of partnership arrangements, by agreement
to keep-well, to purchase assets, goods, bonds or services, to take-or-pay or to
maintain financial statement conditions or otherwise), (ii) entered into for the
purpose of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part) or (iii) to reimburse any Person for
the payment by such Person under any letter of credit, surety, bond or other
guaranty issued for the benefit of such other Person, provided that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guaranty", "Guarantee" or "Guaranteed"
used as a verb has a correlative meaning.
"Hawaii General Excise Tax" shall have the meaning specified in
Chapter 237 of the Hawaii Revised Statutes, as amended.
"Hazardous Materials" shall mean (a) any petroleum or petroleum
products, explosives, radioactive materials, asbestos in any form, urea
formaldehyde foam insulation and polychlorinated biphenyls (PCB), in each case,
to the extent regulated under any Environmental Law; and (b) any chemicals,
materials or substances defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely hazardous
wastes", "restricted hazardous wastes", "toxic substances", "toxic pollutants",
"contaminants" or "pollutants", or words of similar import, under any applicable
Environmental Law and any other substance regulated pursuant to any applicable
Environmental Law.
"Head Lease" shall mean the Head Lease Agreement dated as of May 18,
2005 by and between the Head Lessor and the Head Lessee, together with any Head
Lease Supplement thereto from and after the date such Head Lease Supplement is
executed and delivered by the Head Lessor and the Head Lessee.
"Head Lease Base Term Expiration Date" shall have the meaning
specified in Section 3(a) of the Head Lease.
17
"Head Lease Event of Default" shall have the meaning specified in
Section 7(a) of the Head Lease.
"Head Lease Rent" shall mean the amounts designated as such in Head
Lease Supplement No. 1, or, if executed, Head Lease Supplement No. 2.
"Head Lease Supplement" shall mean a Head Lease Supplement
substantially in the form of Exhibit A to the Head Lease.
"Head Lease Supplement No. 1" shall mean the Head Lease Supplement No.
1 dated as of May 18, 2005 by and between the Lessor and the Lessee.
"Head Lease Supplement No. 2" shall mean the Head Lease Supplement No.
2 by and between the Lessor and the Lessee, relating to the Well Improvements.
"Head Lease Term" shall have the meaning specified in Section 3(a) of
the Head Lease.
"Head Lessee" shall mean the Owner Lessor in its capacity as lessee
under the Head Lease.
"Head Lessor" shall mean PGV in its capacity as lessor under the Head
Lease.
"HELCO" shall mean Hawaii Electric Light Company, Inc., an electric
public utility company organized and existing under the laws of the State of
Hawaii.
"HELCO Consent" shall mean Confirmation of Purchase Power Contract and
Agreement dated as of April 7, 2005 between HELCO and PGV, in form and substance
satisfactory to the Participants.
"Improvement Conditions" shall have the meaning specified in Section
8.2 of the Project Lease.
"Indebtedness" of any Person at any date shall mean, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable arising in
the ordinary course of business, (iv) all obligations of such Person under
leases which are or should be, in accordance with GAAP, recorded as Capital
Lease Obligations in respect of which such Person is liable, (v) all obligations
of such Person under interest rate or currency protection agreements or other
hedging instruments, (vi) all obligations of such Person to purchase securities
(or other property) which arise out of or in connection with the sale of the
same or substantially similar
18
securities (or property), (vii) all deferred obligations of such Person to
reimburse any bank or other Person in respect of amounts paid or advanced under
a letter of credit or other instrument, (viii) all Indebtedness of others
secured by a Lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person, and (ix) all Indebtedness of others Guaranteed
directly or indirectly by such Person or as to which such Person has an
obligation substantially the economic equivalent of a Guarantee or other
arrangement to assure a creditor against loss.
"Indemnitee" shall have the meaning specified in Section 9.1(a) of the
Participation Agreement.
"Indemnity Reserve Requirement" shall have the meaning set forth in
the Depositary Agreement.
"Indenture" shall mean the Indenture of Trust, Mortgage and Security
Agreement, dated as of May 18, 2005, between the Owner Lessor and the Indenture
Trustee, duly completed, executed and delivered on the Closing Date pursuant to
which the Owner Lessor will issue the Senior Notes.
"Indenture Bankruptcy Default" shall mean any event or occurrence,
which, with the passage of time or the giving of notice or both, would become an
Indenture Event of Default under Section 4.5(F) or (G) of the Indenture.
"Indenture Default" shall mean any event that with the giving of
notice or the passage of time would become an Indenture Event of Default.
"Indenture Estate" shall have the meaning specified in the Granting
Clause of the Indenture.
"Indenture Event of Default" shall have the meaning specified in
Section 4.5 of the Indenture.
"Indenture Payment Default" shall mean any event or occurrence, which,
with the passage of time or the giving of notice or both, would become an
Indenture Event of Default under Section 4.7C of the Indenture.
"Indenture Trustee" shall mean Union Bank of California, N.A., not in
its individual capacity, but solely as Indenture Trustee under the Indenture,
and each other Person who may from time to time be acting as Indenture Trustee
in accordance with the provisions of the Indenture.
"Indenture Trustee Agreements" shall have the meaning set forth in
Section 3.6(a) of the Participation Agreement.
19
"Indenture Trustee Office" shall mean the office to be used for
notices to the Indenture Trustee from time to time pursuant to Section 9.4 of
the Indenture.
"Indenture Trustee's Liens" shall mean any Lien on the Indenture
Estate or any part thereof arising as a result of (a) Claims against or any act
or omission of the Indenture Trustee or Affiliate thereof that is not related
to, or that is in violation of, any Operative Document or the transactions
contemplated thereby or that is in breach of any covenant or agreement of the
Indenture Trustee specified therein, (b) Taxes imposed upon the Indenture
Trustee or any Affiliate thereof that are not indemnified against by the Lessee
pursuant to any Operative Document, or (c) Claims against or affecting the
Indenture Trustee or any Affiliate thereof arising out of the voluntary or
involuntary transfer by the Indenture Trustee of any portion of the interest of
the Indenture Trustee in the Indenture Estate, other than pursuant to the
Operative Documents.
"Independent Appraiser" shall mean a disinterested, licensed
professional appraiser of industrial property who (a) meets the personal
property qualifications criteria established by the Appraisal Foundation; (b) is
a member of the Appraisal Institute or holds the senior accreditation of the
American Society of Appraisers; (c) is in the regular employ, or is a principal
of, a nationally recognized appraisal firm; and (d) has substantial experience
in the business of evaluating facilities similar to the Project.
"Initial Noteholders" shall mean AIG Annuity Insurance Company,
American General Life Insurance Company and Allstate Life Insurance Company.
"Injection Well" shall mean a geothermal well to be operated as an
injection well as part of the Well Improvements to be completed by December 30,
2005.
"Insurance Consultant" shall mean Xxxxx-XxXxxx LLC or any successor
thereto that is a nationally recognized independent insurance consultant in the
power generation industry selected by the Equity Investor and, until such time
as the Indenture has been terminated and fully discharged, the Indenture Trustee
and reasonably acceptable to the Lessee.
"IRS" shall mean the Internal Revenue Service of the United States
Department of Treasury or any successor agency.
"Junior Rent Reserve Account" shall have the meaning set forth in
Section 1.2 of the Depositary Agreement.
"Junior Rent Reserve Requirement" shall have the meaning set forth in
the Depositary Agreement.
20
"KLDC" shall mean Kapoho Land and Development Company, Limited, a
Hawaii corporation.
"KLDC Consent" shall mean the Master Lessor's Consent to (i) Mortgage
of Lessor's Interest in Master Lease, (ii) Second Amendment to Lease (Master
Lease), (iii) Certain Subleasing of the Resource Sublease, Subleasing of the
Power Plant Sublease and Sub-Granting of the Delivery System Grant of Easements,
(iv) Certain Sub-Subleasing of the Resource Sublease, Sub-Subleasing of the
Power Plant Sublease and Sub-Sub-Granting of the Delivery System Grant of
Easements and (v) Certain Assignments dated as of May 18, 2005, between KLDC as
Master Lessor and KLP as Lessor.
"KLDC Estoppel " shall mean the Master Lessor's Estoppel, Attornment
and Non-Disturbance Agreement (Master Lease), dated as of May 18, 2005, among
KLDC as Master Lessor, KLP as Lessor and PGV as Lessee.
"KLDC Mortgage" shall mean the Real Property Mortgage, Security
Agreement and Financing Statement, dated as of May 18, 2005, by KLDC as
Mortgagor to PGV as Mortgagee.
"KLDC Mortgage Assignment" shall mean the Assignment by Way of
Security of KLDC Real Property Mortgage, Security Agreement and Financing
Statement, by KLDC, Mortgagor, and PGV, Mortgagee, dated as of May 18, 2005,
between PGV as Assignor and Owner Lessor as Assignee.
"KLDC Mortgage Assignment (Indenture Trustee)" shall mean the
Assignment by Way of Security of Owner Lessor's Rights in KLDC Real Property
Mortgage, Security Agreement and Financing Statement, by KLDC, Mortgagor, and
PGV, Mortgagee, dated as of May 18, 2005, between Owner Lessor as Assignor and
Indenture Trustee as Assignee.
"KLDC Partial Assignment Consent" shall mean Master Lessor's Consent
to Partial Assignment of Lessee's Interest in Lease and Agreement (Master Lease)
dated as of May 18, 2005 by and among KLDC as Master Lessor, KLP as Lessor, PGV
as Lessee, and PGV-II.
"KLP" shall mean the Kapoho Land Partnership, a Hawaii limited
partnership.
"KLP Consent" shall mean Lessor's Consent to (i) Certain Subleasing of
the Resource Sublease, Subleasing of the Power Plant Sublease and Sub-Granting
of the Delivery System Grant of Easements, (ii) Certain Sub-Subleasing of the
Resource Sublease, Sub-Subleasing of the Power Plant Sublease and
Sub-Sub-Granting of the Delivery System Grant of Easements and (iii) Certain
Assignments and Estoppel
21
Certificate (Resource Sublease, Power Plant Sublease and Delivery System
Easements), dated as of May 18, 2005, between KLP as Lessor and PGV as Lessee.
"KLP Mortgage" shall mean the Real Property Mortgage, Security
Agreement and Financing Statement, dated as of May 18, 2005, by KLP as Mortgagor
to PGV as Mortgagee.
"KLP Mortgage Assignment" shall mean the Assignment by Way of Security
of KLP Real Property Mortgage, Security Agreement and Financing Statement, by
KLP, Mortgagor, and PGV, Mortgagee, dated as of May 18, 2005, between PGV as
Assignor to Owner Lessor as Assignee.
"KLP Mortgage Assignment (Indenture Trustee)" shall mean the
Assignment by Way of Security of Owner Lessor's Rights in KLP Real Property
Mortgage, Security Agreement and Financing Statement, by KLP, Mortgagor, and
PGV, Mortgagee, dated as of May 18, 2005, between Owner Lessor as Assignor and
Indenture Trustee as Assignee.
"KLP Partial Assignment Consent" shall mean Lessor's Consent to
Partial Assignment of Lessee's Interest in Lease and Agreement (Resource
Sublease) and Estoppel Certificate dated as of May 18, 2005 by and among KLP as
Lessor, PGV as Lessee, and PGV-II.
"Lease Debt" shall mean the debt evidenced by the Senior Notes and any
other debt issued as contemplated by Section 11 of the Participation Agreement.
"Lease Debt Rate" shall mean a rate per annum equal to 6.24%.
"Lease Default" shall mean an event that with the passage of time or
the giving of notice would become a Lease Event of Default.
"Lease Event of Default" shall have the meaning specified in Section
16 of the Project Lease.
"Lease Rent Coverage Ratio" shall mean, with respect to each Rent
Payment Date, the ratio of (i) all Project Revenues for the six month period
immediately preceding such Rent Payment Date (or, in the case of the first Rent
Payment Date, for the period from the Closing Date to the first Rent Payment
Date) less Operating Costs for such period to (ii) the amount of Periodic Lease
Rent due and payable on such Rent Payment Date.
"Leases" shall have the meaning specified in clause 2 of the Granting
Clause of the Indenture.
22
"Lessee" shall mean PGV in its capacity as lessee under the Project
Lease.
"Lessee Act" shall have the meaning specified in Section 5(a)(i) of
the Tax Indemnity Agreement.
"Lessee Partner(s)" shall mean individually, and collectively, ORNI 8
LLC, a Delaware limited liability company and OrPuna LLC, a Delaware limited
liability company.
"Lessee Partnership Agreement" shall mean the Third Amended and
Restated Partnership Agreement of the Lessee, dated as of June 4, 2004, entered
into by the Lessee Partners as amended by Amendment No. 1 dated as of May 17,
2005.
"Lessee Partners Interest Pledge Agreement" shall mean the Limited
Liability Company Pledge Agreement, dated as of May 18, 2005, made by ONI, as
pledgor, in favor of the Owner Lessor, in form and substance satisfactory to the
Participants, duly completed, executed and delivered on the Closing Date
pursuant to which ONI shall pledge its membership interests in the Lessee
Partners to the Owner Lessor.
"Lessee Section 467 Interest" shall have the meaning specified in
Section 3.2 of the Project Lease.
"Lessee Security Agreement" shall mean the Security Agreement, dated
as of May 18, 2005, between the Lessee and the Owner Lessor, duly completed,
executed and delivered on the Closing Date pursuant to which the Lessee will
grant a security interest to the Owner Lessor in certain assets of the Lessee.
"Lessee Security Documents" shall mean the Indenture, the Lessee
Partners Interest Pledge Agreement, the PGV Interests Pledge Agreement and the
Lessee Security Agreement.
"Lessor Estate" shall mean all the estate, right, title and interest
of the Owner Lessor in, to and under the Project, the Project Site, the Project
Document Interest, the Lessee Partnership Interest Pledge Agreement, the PGV
Interests Pledge Agreement and the other Operative Documents, including all
funds advanced to the Owner Lessor by the Equity Investor, all installments and
other payments of Periodic Lease Rent, Renewal Lease Rent, Supplemental Lease
Rent, condemnation awards, purchase price, sale proceeds, insurance proceeds and
all other proceeds, rights and interests of any kind for or with respect to the
estate, right, title and interest of the Owner Lessor in, to and under the
Project, the Project Site, the Project Document Interest, the Lessee Partnership
Interest Pledge Agreement, the PGV Interests Pledge Agreement and the other
Operative Documents, and any of the foregoing.
23
"Lessor Section 467 Interest" shall have the meaning specified in
Section 3.2 of the Project Lease.
"Letter of Credit Issuer" shall mean an Acceptable Letter of Credit
Provider issuing the applicable Reserve Letter of Credit.
"Letters of Credit" shall mean, collectively, the Junior Rent Reserve
Letter of Credit, the Senior Rent Reserve Letter of Credit, the Well Maintenance
Reserve Letter of Credit and the Indemnity Reserve Letter of Credit, each as
defined in the Depositary Agreement.
"Lien" shall mean any mortgage, security deed, security title, pledge,
lien (statutory or other), charge, encumbrance, lease, security interest,
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever intended to assure payment of any obligation,
including any conditional sale or other title retention agreement, pledge,
hypothecation, assignment, the interest of a lessor under a Capital Lease
Obligation, and any financing lease having substantially the same economic
effect as any of the foregoing.
"Limited Recourse Amount" shall mean, as of any date of determination,
an amount, not to be less than zero, equal to the Future Value (determined from
the Closing Date, using the Discount Rate) of the sum of the following amounts:
(i) 89% of the Head Lease Rent, minus (ii) the present value as of the Closing
Date (determined using the Discount Rate), of all of the following payments (x)
the Periodic Lease Rents from the Closing Date to the date of determination and
(y) any other amounts (including Claims) paid by the Lessee pursuant to the
Operative Documents which relates to or arises solely as a result of the related
Limited Recourse Event.
"Limited Recourse Event" shall have the meaning set forth in Section
17.4 of the Project Lease.
"LLC Agreement" shall mean the Limited Liability Company Agreement,
dated as of May 18, 2005, between the Owner Manager and the Equity Investor
pursuant to which the Owner Lessor shall be governed and administered.
"Loan" shall mean a loan evidenced by any Senior Note.
"Loss Proceeds Account" shall have the meaning specified in Section
1.2 of the Depositary Agreement.
"Loss Proceeds Account Deposits" shall have the meaning specified in
Section 1.2 of the Depositary Agreement.
24
"Majority in Interest of Noteholders" as of any date of determination,
shall mean Noteholders holding in aggregate more than 50% of the total
outstanding principal amount of the Senior Notes ; provided, however, that any
Note held by the Lessee and/or any Affiliate of the Lessee shall not be
considered outstanding for purposes of this definition unless the Lessee and/or
such Affiliate shall hold title to all the Senior Notes outstanding.
"Make Whole Premium" shall mean, with respect to any Senior Notes
subject to redemption pursuant to the Indenture, an amount equal to the
Discounted Present Value of such Senior Notes less the unpaid principal amount
of such Senior Notes; provided that the Make Whole Premium shall not be less
than zero. For purposes of this definition, the "Discounted Present Value" of
any Senior Notes subject to redemption pursuant to the Indenture shall be equal
to the discounted present value of all principal and interest payments scheduled
to become due after the date of such redemption in respect of such Senior Notes,
calculated using a discount rate equal to the sum of (a) the yield to maturity
on the U.S. Treasury security having an interpolated final maturity equal to the
remaining average life of such Senior Notes and trading in the secondary market
at the price closest to par and (b) 50 basis points.
"Master Resource Lease" shall mean the Geothermal Resources Mining
Lease No. R-2 dated as of February 20, 1981 between the State and KLP with
respect to the Geothermal Resource.
"Master Surface Lease" shall mean the Surface Lease dated as of
February 18, 1981 between KLDC and KLP.
"Material Adverse Effect" shall mean a materially adverse effect on
(a) the business, operations, properties, assets, results of operations or
financial condition of the Lessee or the Project or documents relating to the
Project, (b) the ability of the Lessee to perform its material obligations under
any of the Operative Documents to which it is a party, taken as a whole, (c) the
validity or enforceability of any of the Operative Documents taken as a whole or
(d) the validity or perfection of any of the Liens granted under any of the
foregoing or the material rights and remedies thereto or the exercise thereof.
"Maturity Date" shall mean December 30, 2019.
"Member Interest" shall mean the membership interest of the Equity
Investor in the Owner Lessor.
"Memorandum of Head Lease" shall mean the Memorandum of Head Lease,
dated as of May 18, 2005, between PGV as Head Lessor and Owner Lessor as Head
25
Lessee, relating to the Head Lease, as supplemented by Head Lease Supplement No.
1 and, if executed, Head Lease Supplement No. 2.
"Memorandum of KLDC Consent" shall mean the Memorandum of Master
Lessor's Consent to (i) Mortgage of Lessor's Interest in Master Lease, (ii)
Second Amendment to Lease (Master Lease), (iii) Certain Subleasing of the
Resource Sublease, Subleasing of the Power Plant Sublease and Sub-Granting of
the Delivery System Grant of Easements, (iv) Certain Sub-Subleasing of the
Resource Sublease, Sub-Subleasing of the Power Plant Sublease and
Sub-Sub-Granting of the Delivery System Grant of Easements and (v) Certain
Assignments (Master Lease) dated as of May 18, 2005, between KLDC as Master
Lessor and KLP as Lessor.
"Memorandum of KLDC Estoppel" shall mean the Memorandum of Master
Lessor's Estoppel, Attornment and Non-Disturbance Agreement (Master Lease),
dated as of May 18, 2005, among KLDC as Master Lessor, KLP as Lessor and PGV as
Lessee.
"Memorandum of KLDC Partial Assignment Consent" shall mean the
Memorandum of Master Lessor's Consent to Partial Assignment of Lessee's Interest
in Lease and Agreement (Master Lease) dated as of May 18, 2005, by and among
KLDC as Master Lessor, KLP as Lessor, PGV as Lessee, and PGV-II.
"Memorandum of KLP Consent" shall mean the Memorandum of Lessor's
Consent to (i) Certain Subleasing of the Resource Sublease, Subleasing of the
Power Plant Sublease and Sub-Granting of the Delivery System Grant of Easements,
(ii) Certain Sub-Subleasing of the Resource Sublease, Sub-Subleasing of the
Power Plant Sublease and Sub-Sub-Granting of the Delivery System Grant of
Easement and (iii) Certain Assignments, and Estoppel Certificate (Resource
Sublease, Power Plant Sublease and Delivery System Grant of Easements), dated as
of May 18, 2005, between KLP as Lessor and PGV as Lessee.
"Memorandum of KLP Partial Assignment Consent" shall mean the
Memorandum of Lessor's Consent to Partial Assignment of Lessee's Interest in
Lease and Agreement (Resource Sublease) and Estoppel Certificate dated as of May
18, 2005 by and among by KLP as Lessor, PGV as Lessee, and PGV-II.
"Memorandum of Project Lease" shall mean the Memorandum of Project
Lease, dated as of May 18, 2005, between the Owner Lessor and the Lessee, in
form and substance satisfactory to the Participants, duly completed, executed
and delivered on the Closing Date, relating to the Project Lease, as
supplemented by Project Lease Supplement No. 1 and, if executed, Project Lease
Supplement No. 2.
26
"Memorandum of Resource Sublease Partial Assignment" shall mean the
Memorandum of Partial Assignment of Lessee's Interest in Lease and Agreement
(Resource Sublease) dated as of May 18, 2005 between PGV as Assignor and PGV-II
as Assignee.
"Memorandum of Second Amendment to Lease (Master Lease)" shall mean
the Memorandum of Second Amendment to Lease, dated as of May 18, 2005, between
KLDC as Master Lessor and KLP as Lessor.
"Memorandum of State Consent" shall mean the Memorandum of Lessor's
Consent to Certain Subleasing and Sub-Subleasing of the Resource Sublease, the
Power Plant Sublease, Non-Disturbance and Attornment Agreement and Estoppel
Certificate (State Lease), dated as of May 18, 2005, between the State of Hawaii
as Lessor and PGV as Lessee.
"Memorandum of State Partial Assignment Consent" shall mean the
Memorandum of the Lessor's Consent to Partial Assignment of Lessee's Interest in
Lease and Agreement (State Lease) dated as of dated as of May 18, 2005 by and
among the State of Hawaii, PGV and PGV-II.
"Memorandum of Sub-Grant of Delivery System Grant of Easements" shall
mean the Memorandum of Sub-Grant of Delivery System Grant of Easements, dated as
of May 18, 2005, between PGV as Subgrantor and Owner Lessor as Subgrantee.
"Memorandum of Sublease of Power Plant Sublease" shall mean the
Memorandum of Sublease of Power Plant Sublease, dated as of May 18, 2005,
between PGV as Sublessor and Owner Lessor as Sublessee.
"Memorandum of Sublease of Resource Sublease" shall mean the
Memorandum of Sublease of Resource Sublease dated as of May 18, 2005, between
PGV as the Sublessor, and Owner Lessor as Sublessee.
"Memorandum of Sub-Sub-Grant of Delivery System Grant of Easements"
shall mean the Memorandum of Sub-Sub-Grant of Delivery System Grant of
Easements, dated as of May 18, 2005, between PGV as Subgrantee and Owner Lessor
as Subgrantor.
"Memorandum of Sub-Sublease of Power Plant Sublease" shall mean the
Memorandum of Sub-Sublease of Power Plant Sublease, dated as of May 18, 2005,
between Owner Lessor as Sub-Sublessor and PGV as Sub-Sublessee.
"Memorandum of Sub-Sublease of Resource Sublease" shall mean the
Memorandum of Sub-Sublease of Resource Sublease dated as of May 18, 2005,
between Owner Lessor as Sub-Sublessor, and PGV as Sub-Sublessee.
27
"Memorandum of Third Amendment to Lease (Resource Sublease)" shall
mean the Memorandum of Third Amendment to Lease, dated as of May 18, 2005,
between KLP as Lessor and PGV as Lessee.
"Minimum Credit Rating" shall mean with respect to (i) any senior
long-term unsecured securities of any Person or (ii) if such Person does not
have any such rated securities, a general unsecured credit rating of such
Person, in each case, which ratings shall be at least BBB- by S&P and Baa3 by
Moody's.
"Modifications" shall mean an addition, alteration, betterment,
improvement or enlargement of the Project, including any Required Modifications
and Optional Modifications.
"Monthly Determination Date" shall have the meaning specified in
Section 1.2 of the Depositary Agreement.
"Moody's" shall mean Xxxxx'x Investors Service, Inc.
"Nonseverable Modifications" shall mean any Modification that is not a
Severable Modification.
"Noteholder" shall mean any holder from time to time of an outstanding
Senior Note.
"Notice of Action" shall have the meaning specified in Section 1.2 of
the Depositary Agreement.
"Obsolescence Termination Date" shall have the meaning specified in
Section 14.1 of the Project Lease.
"Offer" shall have the meaning as provided in Section 17.1(e) of the
Project Lease.
"Offer Price" shall have the meaning as provided in Section 17.1(e) of
the Project Lease.
"Officer's Certificate" shall mean with respect to any Person, a
certificate signed (a) in the case of a corporation or limited liability
company, by the Chairman of the Board, the President, or a Vice President of
such Person or any Person authorized by or pursuant to the organizational
documents, the bylaws or any resolution of the board of directors, shareholders,
members, board of managers, or executive committee of such Person (whether
general or specific) to execute, deliver and take actions on behalf of such
Person in respect of any of the Operative Documents, (b) in the case of a
partnership, by
28
the Chairman of the Board of Directors, or the President or any Vice President
of a corporate general partner (and, in the case of the Lessee, which shall be
Responsible Officers of the Lessee), and (c) in the case of the Trust Company or
the Indenture Trustee, a certificate signed by a Responsible Officer of the
Trust Company or the Indenture Trustee, as the case may be.
"ONI" shall mean Ormat Nevada Inc., a Delaware corporation.
"ONI Consent" shall mean the Consent and Agreement dated as of May 18,
2005 between ONI and PGV with respect to the Administrative Services Agreement.
"Operating Costs" means, for any period and with respect to the
Lessee, cash amounts incurred and paid by the Lessee for the operation,
administration and maintenance of the Project or any portion thereof, including
premiums for insurance policies, major maintenance expenditures as set forth in
the applicable Annual Operating Budget, amounts funded into the Well Maintenance
Reserve Account (but excluding amounts paid out therefrom) and other
expenditures in respect of well maintenance costs of obtaining any other
materials, supplies or services for the Project, utilities, costs of
maintaining, renewing and amending governmental permits, franchise, licensing,
property, real estate, sales and excise taxes (excluding federal or state income
taxes), general and administrative expenses (including all royalties and rents),
employee salaries, wages and other employment-related costs, business management
and administrative services fees (including costs associated with the
Administrative Services Agreement), costs required to be paid by Lessee under
any Operative Document (other than scheduled Periodic Lease Rent), legal and
other Transaction Costs and all other fees payable to the Noteholders (other
than amounts constituting scheduled Periodic Lease Rent), and all other fees and
expenses necessary for the continued operation and maintenance of the Project
and the conduct of the business of the Lessee. Operating Costs shall not include
(i) capital expenditures (including expenditures referred to under
"Alterations"), (ii) payments for restoration or repair of the Project from the
Loss Proceeds Account or (iii) Permitted Investments.
"Operative Documents" shall mean the collective reference to the
Financing Documents and the Project Documents.
"Optional Modification" shall have the meaning specified in Section
8.2 of the Project Lease.
"Overdue Rate" shall mean the Lease Debt Rate plus 2%.
"Owner Lessor" shall mean SE Puna, LLC in its capacity as lessor under
the Project Lease.
29
"Owner Lessor Assignment of Head Lease" shall mean Assignment By Way
of Security of Head Lease dated as of May 18, 2005, by the Owner Lessor to
Indenture Trustee.
"Owner Lessor Assignment of Project Lease" shall mean Assignment By
Way of Security of Project Lease dated as of May 18, 2005 by the Owner Lessor to
Indenture Trustee.
"Owner Lessor Assignment of Sub-Grant of Delivery System Grant of
Easements" shall mean the Assignment by Way of Security of Owner Lessor's Rights
in Sub-Grant of Delivery System Grant of Easements, dated as of May 18, 2005, by
Owner Lessor as Assignor to Indenture Trustee as Assignee.
"Owner Lessor Assignment of Sublease of Power Plant Sublease" shall
mean the Assignment by Way of Security of Owner Lessor's Rights in Sublease of
Power Plant Sublease, dated as of May 18, 2005, by Owner Lessor as Assignor to
Indenture Trustee as Assignee.
"Owner Lessor Assignment of Sublease of Resource Sublease" shall mean
Assignment by Way of Security of Owner Lessor's Rights in Sublease of Resource
Sublease (Owner Lessor to Indenture Trustee) dated as of May 18, 2005 by Owner
Lessor as Assignor for the benefit of the Indenture Trustee as Assignee.
"Owner Lessor's Account" shall mean the Account No. 069429-000
maintained by the Owner Lessor with Wilmington Trust Company, ABA# 0000-000-00,
Ref: PUNA Geothermal Venture, Attention: Xxxxx XxXxxx or such other account of
the Owner Lessor, as the Owner Lessor may from time to time specify in a notice
to the Indenture Trustee pursuant to Section 9.4 of the Indenture.
"Owner Lessor's Leasehold Interest" shall mean all right, title and
interest of the Owner Lessor in and to the Project under the Head Lease.
"Owner Lessor's Lien" shall mean any Lien on the Indenture Estate or
any part thereof arising as a result of (a) Claims against or any act or
omission of the Owner Lessor or the Trust Company or Affiliate thereof that are
not related to, or that are in violation of, any Operative Document or the
transactions contemplated thereby or that are in breach of any covenant or
agreement of the Owner Lessor or the Equity Investor specified therein, (b)
Taxes imposed upon the Owner Lessor or the Equity Investor or any Affiliate
thereof that are not indemnified against by the Lessee pursuant to any Operative
Document, or (c) Claims against or affecting the Owner Lessor or the Equity
Investor or any Affiliate thereof arising out of the voluntary or involuntary
transfer by the Owner Lessor or the Equity Investor of any portion of the
interest of the Owner Lessor, or the
30
Equity Investor in the Owner Lessor's Leasehold Interest, other than transfers
requested by the Lessee or pursuant to the Operative Documents or in connection
with the exercise of remedies during the continuance of a Lease Event of
Default.
"Owner Manager" shall mean Wilmington Trust Company, a Delaware
banking corporation, not in its individual capacity, but solely as independent
manager under the LLC Agreement and each other Person that may from time to time
be acting as independent manager in accordance with the provisions of the LLC
Agreement.
"Partial Casualty" shall mean any loss of any part of the Project or
use thereof due to destruction or damage or seizure, condemnation, confiscation
or taking of or requisition of title to or use of, any part of the Project or,
if it prevents the Lessee from operating or maintaining any part of the Project
or the Project Site by any Governmental Entity that does not constitute an Event
of Loss.
"Participants" shall mean the Equity Investor and the Noteholders.
"Participation Agreement" shall mean the Participation Agreement,
dated as of May 18, 2005, among the Lessee, the Owner Lessor, Trust Company, in
its individual capacity, the Equity Investor, the Initial Noteholders and the
Indenture Trustee.
"Payment Accounts" shall have the meaning set forth in Section 1.2 of
the Depositary Agreement.
"Periodic Lease Rent" shall mean the amounts designated as such in,
and payable on each Rent Payment Date set forth in Schedule 1 to Project Lease
Supplement No. 1, or if executed, Project Lease Supplement No. 2 or any other
Project Lease Supplement executed and delivered by the Owner Lessor and the
Lessee.
"Permitted Encumbrances" shall mean all matters shown as exceptions on
Schedule B to each of the Title Policies as approved by the Indenture Trustee
and the Equity Investor and as in effect on the Closing Date.
"Permitted Indebtedness" shall have the meaning specified in Section
5.14 of the Participation Agreement.
"Permitted Investments" shall mean an investment in any of the
following: (i) direct obligations of the Department of the Treasury of the
United States of America; (ii) obligations of any federal agencies which
obligations are backed by the full faith and credit of the United States of
America; (iii) commercial paper rated in at least two top tier ratings
categories by Moody's or S & P; (iv) auction rate securities rated in any one of
the two highest rating categories by Moody's or S & P; (v) investment agreements
with banks
31
(foreign and domestic), broker/dealers, and other financial institutions rated
at the time of bid in any one of the three highest rating categories by Moody's
and S & P; (vi) repurchase agreements with banks (foreign and domestic),
broker/dealers, and other financial institutions rated at the time of bid in any
one of the three highest rating categories by Moody's and S&P, provided, that
(1) collateral is limited to the securities specified in clauses (i) and (ii)
above, (2) the margin levels for collateral must be maintained at a minimum of
102% including principal and interest, (3) the Collateral Agent shall have a
first priority perfected security interest in the collateral, (4) the collateral
will be delivered to a third party custodian, designated by the Issuer, acting
for the benefit of the Collateral Agent and all fees and expenses related to
collateral custody will be the responsibility of the Issuer, (5) the collateral
must have been or will be acquired at the market price and marked to market
weekly and collateral level shortfalls cured within 24 hours and (6) unlimited
right of substitution of collateral is allowed provided that substitution
collateral must be permitted collateral substituted at a current market price
and substitution fees of the custodian shall be paid by the Issuer; and (vii)
money market funds rated "AAAm" or "AAAm-G" or better by S&P.
"Permitted Liens" shall mean (a) the interests of the Lessee, the
Equity Investor, the Owner Lessor and the Indenture Trustee under any of the
Operative Documents, (b) all Owner Lessor's Liens, Equity Investor's Liens and
Indenture Trustee's Liens, (c) the reversionary interests of the Lessee in the
Project Site, (d) Liens for (i) taxes, assessments or governmental charges not
delinquent and that remain payable without penalty or (ii) taxes, assessments or
governmental charges being contested in good faith, if the Lessee has
established adequate reserves in the Operating Account or the Distribution
Account for such taxes, (e) suppliers', vendors', workmen's, repairmen's,
employee's, mechanics', materialmen's, construction or other like Liens arising
in the ordinary course of business for amounts the payment of which is either
(i) not yet delinquent or (ii) being contested in good faith, if (1) the Lessee
has established adequate reserves in the Operating Account or the Distribution
Account for the discharge of such Liens and (2) such proceedings do not involve
a material risk of the sale, forfeiture or loss of the Project, the Project Site
or the Project Document Interest (or any material part of any thereof) or are
bonded for the amount required under Applicable Law to release any such Liens
and, in either case, will not result in the imposition of any criminal liability
or any material civil liability against the Owner Lessor, the Equity Investor or
the Indenture Trustee, (f) pre-judgment Liens for claims against the Lessee
which are contested in good faith and Liens arising out of judgments or awards
against the Lessee with respect to which an appeal or proceeding for review is
being prosecuted in good faith and to which a stay of execution has been
obtained pending such appeal or review and so long as such proceedings do not
involve a material risk of the sale, forfeiture or loss of the Project, the
Project Site or the Project Document Interest (or any material part of any
thereof) and are bonded for the amount required under Applicable
32
Law to release any such Liens and will not result in the imposition of any
criminal liability or any material civil liability against the Owner Lessor, the
Equity Investor or the Indenture Trustee, (g) Permitted Encumbrances, other than
the Liens listed on Schedule 3.1(h)(i) to the Participation Agreement, (h) Liens
to secure Permitted Indebtedness, (i) Liens listed on Schedule 3.1(h)(i) to the
Participation Agreement, (j) such defects, easements, rights of way,
restrictions, physical irregularities and statutory liens that do not legally or
operationally impair the value or utility of the Project and that do not
individually or in the aggregate impair the value of the security interests
granted under the Operative Documents, (k) liens in connection with worker's
compensation, unemployment insurance or other social security or pension
obligations and (l) other Liens incidental to the conduct of the Lessee's
business (other than for borrowed money) which do not in the aggregate
materially impair the operation of the Lessee's business and which, could not
reasonably be expected to result in a claim against the Lessee or the Project in
excess of $500,000.
"Person" shall mean any individual, corporation, cooperative,
partnership, joint venture, association, joint-stock company, limited liability
company, trust, unincorporated organization or Governmental Entity.
"PGV" shall mean Puna Geothermal Venture, an Hawaii general
partnership.
"PGV Interests Pledge Agreement" shall mean the Partnership Pledge
Agreement, dated as of May 18, 2005, made by the Lessee Partners, as pledgor, in
favor of the Owner Lessor, in form and substance satisfactory to the
Participants, duly completed, executed and delivered on the Closing Date
pursuant to which the Lessee Partners shall pledge their partnership interests
in the Lessee to the Owner Lessor.
"PGV-II" shall mean PGV-II Inc., a Delaware corporation.
"Phase II Project" shall mean the separate geothermal generation
project that may be constructed by ONI, PGV-II or an Affiliate thereof (other
than PGV), adjacent to the Project, which, together with the Project, has a
projected output of up to approximately 60 MW.
"Plan" shall mean (a) any "employee benefit plan" (as defined in
Section 3(3) of ERISA) that is subject to Title I of ERISA, (b) any "plan" (as
defined in section 4975(e)(l) of the Code) that is subject to section 4975 of
the Code, (c) any other plan or arrangement that is subject to federal, state,
local, non-United States or other laws or regulations that are substantially
similar to such provisions of ERISA or the Code, and (d) any entity the
underlying assets of which may be deemed to hold such plans' assets.
33
"Pledgor" shall mean ONI, as pledgor under the Lessee Partners
Interest Pledge Agreement.
"Power Plant Sublease" shall mean the Power Plant Sublease, dated as
of July 9, 1990, by and between KLP as Lessor and Lessee as Lessee.
"Power Purchase Agreement" or "PPA" shall mean the Purchase Power
Contract for Unscheduled Energy Made Available from a Qualifying Facility, dated
as of March 24, 1986, as amended, restated, supplemented or modified from time
to time, between the Lessee (as successors in interest to Thermal Power Company)
and HELCO, including the Interim Agreement entered into in connection therewith
dated as of December 15, 2004.
"Power Purchaser" shall mean Hawaiian Electric Light Company, the
public utility on the island of Hawaii.
"PPA Period" shall mean the period during which the Power Purchase
Agreement is in effect.
"Pricing Assumptions" shall mean the "Pricing Assumptions" attached as
Annex A to the Participation Agreement.
"Production Well" shall mean a geothermal well to be operated as a
production well as part of the Well Improvements to be completed by December 30,
2005.
"Project" shall mean that certain Geothermal Generation Facility
consisting of ten modular generating units along with three production xxxxx,
four injection xxxxx, separation systems and auxiliary equipment, located at
Kapoho, in the District of Puna, County of Hawaii, Island of Hawaii, in the
State of Hawaii together with all improvements thereto, including Nonseverable
Modifications thereto, but not including the Excluded Assets.
"Project Document Interest" shall mean all right, title and interest
of the Lessee in the Project Documents collaterally assigned to the Owner Lessor
pursuant to the Lessee Security Agreement.
"Project Documents" shall mean (i) the Power Purchase Agreement, (ii)
the Administrative Services Agreement, (iii) the Transmission Agreements, (iv)
the Power Plant Sublease, (v) the Delivery System Grant of Easements, (vi) the
Resource Sublease, (vii) the Lessee Partnership Agreement, (viii) the TPC
Royalty Contract, (ix) the
34
Resource Sublease Partial Assignment, (x) the KLDC Partial Assignment Consent,
(xi) the KLP Partial Assignment Consent, and (xii) the State Partial Assignment
Consent.
"Project Lease" shall mean the Project Lease Agreement dated as of May
18, 2005 by and between the Lessor and the Lessee, together with any Project
Lease Supplement thereto from and after the date such Project Lease Supplement
is executed and delivered by the Lessor and the Lessee.
"Project Lease Supplement" shall mean a Project Lease Supplement
substantially in the form of Exhibit A to the Project Lease.
"Project Lease Supplement No. 1" shall mean a Project Lease Supplement
No. 1 dated as of May 18, 2005 by and between the Lessor and the Lessee.
"Project Lease Supplement No. 2" shall mean a Project Lease Supplement
No. 2 by and between the Lessor and the Lessee, relating to the Well
Improvements.
"Project Lease Term" shall mean the term of the Project Lease,
including the Basic Lease Term and all Renewal Lease Terms.
"Project Revenues" shall mean all of the following, without
duplication, received by the Lessee: (i) all income, revenues, payments,
proceeds, amounts and cash receipts, except for the proceeds received under the
Head Lease on the Closing Date, (ii) proceeds of any Business Interruption
Insurance; (iii) all payments received by the Lessee under the Power Purchase
Agreement and any other Project Documents, (iv) the cash proceeds (net of
customary transaction costs) of any sale, transfer or other disposition of any
asset by the Lessee, (v) any payments in respect of refunds of Taxes, (vi) all
other revenues from the operation of the Project; and (vi) the investment income
on amounts in the Accounts (but solely to the extent deposited in the Revenue
Account); all as determined on a cash basis; provided, however, that Project
Revenues shall not include any Casualty Insurance Proceeds or Requisition
Proceeds.
"Project Site" shall mean (i) the parcels of land described in Exhibit
A to the Power Plant Sublease and all rights of way, easements, rights,
privileges, permits and other appurtenances to such parcels and (ii) the
easement rights in the parcel of land described Exhibit A to the Delivery System
Grant of Easements and all rights of way, easements, rights, privileges, permits
and other appurtenances to such parcels.
"Projected Lease Rent Coverage Ratio" shall mean, with respect to each
Rent Payment Date, the ratio of (i) all Project Revenues projected for the six
month period immediately following such Rent Payment Date less Operating Costs
projected for such
35
period to (ii) the amount of Periodic Lease Rent due and payable on the next
succeeding Rent Payment Date.
"Projections" shall mean the detailed financial projections for the
Project covering the period from the Closing Date through the end of the Basic
Lease Term demonstrating that for the period from the Closing Date to the end of
the Basic Lease Term, the average Lease Rent Coverage Ratio will be at least
1.50 to 1.00 and the minimum Lease Rent Coverage Ratio will be at least 1.40 to
1.00, as annexed to the Engineering Report.
"Proportional Rent" shall mean the product of the Head Lease Rent
multiplied by the percentage set forth for such Rental Period in Schedule 2 to
Project Lease Supplement No. 1 or, if executed, Project Lease Supplement No. 2
under the caption "Proportional Rent Percentage".
"Prudent Industry Practice" shall mean, at a particular time, either
(a) any of the practices, methods and acts engaged in or approved by a
significant portion of the competitive geothermal power generating industry
operating in the United States at such time, or (b) with respect to any matter
to which the practices referred to in clause (a) do not apply, any of the
practices, methods and acts that, in the exercise of reasonable judgment in
light of the facts known at the time the decision was made, could have been
expected to accomplish the desired result at a reasonable cost consistent with
good competitive electric generation business practices, reliability, safety and
expedition. "Prudent Industry Practice" is not intended to be limited to the
optimum practice, method or act to the exclusion of all others, but rather to be
a spectrum of possible practices, methods or acts having due regard for, among
other things, manufacturers' warranties, the requirements of insurance policies
and the requirements of governmental bodies of competent jurisdiction.
"PUHCA" shall mean The Public Utility Holding Company Act of 1935, as
amended.
"Purchase Date" shall mean the EBO Date or the last day of the Basic
Lease Term, as applicable.
"Qualifying Cash Bid" shall have the meaning specified in Section 13.2
of the Project Lease.
"Real Estate Documents" shall mean each of the documents specified in
Schedule I hereto.
36
"Reasonable Basis" for a position shall exist if tax counsel may
properly advise reporting such position on a tax return in accordance with
Formal Opinion 85-352 issued by the Standing Committee on Ethics and
Professional Responsibility of the American Bar Association (or any successor to
such opinion).
"Rebuilding Closing Date" shall have the meaning specified in Section
10.3(c) of the Project Lease.
"Rebuilding Start Date" shall have the meaning specified in Section
10.3(a) of the Project Lease.
"Redemption Date" shall mean, when used with respect to any Note to be
redeemed, the date fixed for such redemption by or pursuant to the Indenture or
the respective Note, which date shall be a Termination Date.
"Registrar", with respect to the Senior Notes, shall have the meaning
specified in Section 2.8 of the Indenture.
"Regulatory Event of Loss" shall have the meaning specified in clause
(d) of the definition of "Event of Loss."
"Related Party" shall mean, with respect to any Person or its
successors and assigns, an Affiliate of such Person or its successors and
assigns and any director, officer, servant, employee or agent of that Person or
any such Affiliate or their respective successors and assigns; provided that the
Owner Manager, the Owner Lessor and the Equity Investor shall not be treated as
Related Parties to each other except that the Owner Lessor and the Owner Manager
shall be treated as a Related Party to the Equity Investor to the extent that
the Owner Lessor or the Owner Manager acts or omits to act at the written
direction or with the written consent of the Equity Investor.
"Release of Hazardous Materials" shall mean the release of any
Hazardous Material into or upon or under any land or water or air, or otherwise
into the indoor or outdoor environment, including by means of burial, disposal,
discharge, emission, injection, spillage, leakage, seepage, leaching, dumping,
pumping, pouring, escaping, emptying, placement and the like.
"Removable Modification" shall have the meaning specified in Section
8.3 of the Project Lease.
"Renewal Lease Rent" shall mean the lease rent payable during the
Wintergreen Renewal Lease Term or any FMV Renewal Lease Term, in each case as
determined in accordance with Section 15.4 of the Project Lease.
37
"Renewal Lease Term" shall mean the Wintergreen Renewal Lease Term or
any FMV Renewal Lease Term.
"Rent" shall mean Periodic Lease Rent, Renewal Lease Rent and
Supplemental Lease Rent.
"Rent Payment Date" shall mean each June 30 and December 30, during
the Project Lease Term, commencing on June 30, 2005.
"Rental Period" shall mean each full or partial taxable year during
the Project Lease Term.
"Replacement Component" shall have the meaning specified in Section
7.2(a) of the Project Lease.
"Replacement Contract" shall mean any contract entered into as
contemplated by Section 16(j) of the Project Lease to replace any Project
Document (other than the PPA) that is in default by a party thereto (other than
the Lessee), such contract and the parties to such contract to be reasonably
satisfactory to the Equity Investor and the Indenture Trustee.
"Replacement PPA" shall mean any power purchase agreement entered into
in replacement of the PPA following a default by HELCO thereunder, which
replacement agreement shall be on terms and conditions substantially similar to
the PPA and reasonably satisfactory to the Equity Investor and the Indenture
Trustee.
"Request Letter" shall have the meaning specified in Section 1.2 of
the Depositary Agreement.
"Required Modification" shall have the meaning specified in Section
8.1 of the Project Lease.
"Requisition" shall have the meaning specified in clause (c) of the
definition of "Event of Loss."
"Requisition Proceeds" shall mean any and all payments (in any form
whatsoever) made or paid from time to time in connection with any seizure,
condemnation, confiscation or taking of, or requisition of title to or use of
any portion of the Project or the Project Site by any Governmental Facility.
"Reserve Letter of Credit" shall mean one or more irrevocable, direct
pay letters of credit issued by the Letter of Credit Issuer in favor of the
Depositary Bank with (i) reimbursement obligations with respect thereto being
the obligations of any Person
38
other than the Lessee, (ii) an aggregate stated amount equal to an amount when
added to the amounts on deposit in the Senior Rent Reserve Account, the Junior
Rent Reserve Account, the Well Maintenance Reserve Account or the Indemnity
Reserve Account, as applicable, equal the Senior Rent Reserve Requirement,
Junior Rent Reserve Requirement, the Well Maintenance Reserve Requirement or the
Indemnity Reserve Requirement, respectively, on any given date and (iii) that is
drawable at an office of the Letter of Credit Issuer or a confirming bank in New
York City upon presentation of a drawing certificate pursuant to which the
beneficiary thereof certifies that the applicable Drawing Event has occurred and
is continuing, each of which shall (A) permit a drawing thereon by the
Depositary Bank (a) if such Letter of Credit is not extended or replaced at
least 30 days prior to its expiration, (b) if such Letter of Credit is not
replaced within 30 days following the date of any downgrade of the credit rating
of the Letter of Credit Issuer below that provided in the definition of
Acceptable Letter of Credit Provider and (c) upon the occurrence of the
applicable Drawing Event and (B) provide for an automatic draw of the entire
undrawn amount thereof if the applicable Letter of Credit Issuer shall not have
extended such Letter of Credit or received notice from the Depositary Bank or
the Owner Lessor of the replacement of such Letter of Credit at least 30 days
prior to its expiration.
"Resource Sublease" shall mean the Lease and Agreement dated as of
March 1, 1981, between KLP and the Lessee (as assignee of Xxxxxxxxxx Corporation
and Thermal Power Company pursuant to an Assignment of Lease and Agreement,
dated as of May 3, 1982) with respect to the Geothermal Resource, including the
Amendment to Lease and Agreement dated as of July 9, 1990 between KLP and the
Lessee and the Second Amendment to Lease and Agreement dated as of December 31,
1996 between KLP and the Lessee, provided, however, that the term "Resource
Sublease" excludes the bifurcated subleasehold estate created in favor of, and
held by, PGV-II pursuant to the Resource Sublease Partial Assignment."
"Resource Sublease Partial Assignment" shall mean the Partial
Assignment of Lessee's Interest in Lease and Agreement (Resource Sublease) dated
as of May 18, 2005 by and between PGV and PGV-II.
"Responsible Officer" shall mean (a) with respect to any Person (other
than the Owner Lessor, the Lessee, the Depositary Bank and the Indenture
Trustee), any official thereof having responsibility for the administration of
the Transaction, (b) with respect to the Owner Lessor, any officer in the
Corporate Trust Administration Department of the Trust Company (or a successor
group of the Owner Manager) having responsibility for the administration of the
Transaction, (c) with respect to the Lessee, the President or any Vice President
or any officer of the sole member of the Lessee Partners or any other Person or
Persons authorized to act on behalf of the Lessee by the Lessee Partners or the
sole member of the Lessee Partners (with written notice to the Equity
39
Investor and, so long as the Lien of the Indenture shall not have been
terminated and fully discharged, the Indenture Trustee), and (d) with respect to
each of the Depositary Bank or the Indenture Trustee, any officer within the
corporate trust department of any of the aforementioned parties, including any
vice president, assistant vice president, treasurer, assistant treasurer, trust
officer or any other officer of any of the aforementioned who customarily
performs functions similar to those performed by the persons who at the time
shall be such officers, respectively, or to whom any corporate trust matter is
referred because of such person's knowledge of and familiarity with the
particular subject and who shall have direct responsibility for the
administration of the Operative Documents to which the Depositary Bank or the
Indenture Trustee may be a party.
"Revenue Account" shall have the meaning specified in Section 1.2 of
the Depositary Agreement.
"S&P" shall mean Standard & Poor's Ratings Services, a division of The
XxXxxx-Xxxx Companies, Inc., or any successor thereto.
"Scheduled Closing Date" shall mean May 19, 2005, or any date set for
the Closing in a notice of postponement pursuant to Section 2.3(a) of the
Participation Agreement.
"SEC" shall mean the Securities and Exchange Commission, as from time
to time constituted, created under the Securities Exchange Act of 1934, or, if
at any time after the Closing Date such Commission is not existing and
performing the duties now assigned to it under the Securities Exchange Act, then
the body performing such duties at such time.
"Second Amendment to Lease (Master Lease)" shall mean the Second
Amendment to Lease, dated as of May 18, 2005, between KLDC as Master Lessor and
KLP as Lessor.
"Section 467 Interest" shall mean and include the Lessor Section 467
Interest and the Lessee Section 467 Interest.
"Section 467 Loan" shall mean any loan arising under and pursuant to
Section 467 of the Code in connection with the Project Lease.
"Secured Indebtedness" shall have the meaning specified in Section
1(B) of the Indenture.
"Securities Act" shall mean the Securities Act of 1933, as amended.
40
"Security Documents" "shall mean, collectively, each of the documents
specified on Schedule II hereto.
"Senior Note Register" shall have the meaning specified in Section 2.8
of the Indenture.
"Senior Notes" shall mean each of the Senior Notes, together with each
note issued in exchange, substitution or replacement therefor pursuant to
Section 2.8 or 2.9 of the Indenture.
"Senior Rent Reserve Account" shall have the meaning specified in
Section 1.2 of the Depositary Agreement.
"Senior Rent Reserve Requirement" shall have the meaning set forth in
Section 1.2 of the Depositary Agreement.
"Severable Modification" shall mean any Modification that can be
removed without causing material damage to the Project.
"Significant Lease Default" shall mean any of: (a) the failure by
Lessee to make any payment of Rent after the same shall have become due and
payable and (b) any event or circumstance that is, or with the passage of time
or the giving of notice or both would become, a "Lease Event of Default" under
clause (i), (j) or (k) of Section 16 of the Project Lease.
"Significant Partial Casualty" shall mean a Partial Casualty, the cost
of repair and/or replacement of which is equal or greater than seventy percent
(70%) of the full replacement value of the Project (based on true replacement
prices available to the Lessee as an Affiliate of the equipment manufacturer).
"Solvent" shall mean, with respect to a proposed Equity Investor
Transferee and its Subsidiaries considered as a whole, based on a pro forma
balance sheet, that (i) the assets and the property of the Equity Investor
Transferee and its Subsidiaries, considered as a whole, exceed the aggregate
liabilities (including contingent and unliquidated liabilities) of the Equity
Investor Transferee and its Subsidiaries, considered as a whole, (ii) after
giving effect to the assignment contemplated in Section 7.1 of the Participation
Agreement, the Equity Investor Transferee and its Subsidiaries, considered as a
whole, will not be left with unreasonably small capital, and (iii) after giving
effect to the assignment contemplated in Section 7.1 of the Participation
Agreement, the Equity Investor Transferee and its Subsidiaries, considered as a
whole, are able to both service and pay their liabilities as they mature. In
computing the amount of contingent or unliquidated liabilities at any time, such
liabilities will be computed as the amount that, in
41
light of all the facts and circumstances existing at such time, represents the
amount that is likely to become an actual or matured liability.
"Special Power of Attorney (Owner Lessor to Indenture Trustee)" shall
mean the Special Power of Attorney dated May 18, 2005, by which the Owner Lessor
appoints Indenture Trustee its true and lawful attorney-in-fact.
"Special Power of Attorney (PGV to Owner Lessor)" shall mean the
Special Power of Attorney dated May 18, 2005, by which PGV appoints Owner Lessor
its true and lawful attorney-in-fact.
"State Consent" shall mean the Lessor's Consent to Certain Subleasing
and Sub-Subleasing of the Power Plant Sublease, Non-Disturbance and Attornment
Agreement and Estoppel Certificate, dated as of April 1, 2005, by and between
the State of Hawaii and the Lessee, in form and substance satisfactory to the
Participants.
"State Partial Assignment Consent" shall mean Lessor's Consent to
Partial Assignment of Lessee's Interest in Lease and Agreement (State Lease)
dated as of April 1, 2005, by and among the State of Hawaii as Lessor, PGV as
Sublessee and PGV-II.
"Statement Date" shall have the meaning specified in Section 1.2 of
the Depositary Agreement.
"Statement Period" shall have the meaning specified in Section 1.2 of
the Depositary Agreement.
"Sub-Grant of Delivery System Grant of Easements" shall mean the
Sub-Grant of Delivery System Grant of Easements, dated as of May 18, 2005,
between PGV as Subgrantor and Owner Lessor as Subgrantee.
"Sublease of Power Plant Sublease" shall mean the Sublease of Power
Plant Sublease, dated as of May 18, 2005, between PGV as Sublessor and Owner
Lessor as Sublessee.
"Sublease of Resource Sublease" shall mean Sublease of Resource
Sublease dated as of May 18, 2005, between PGV as the Sublessor, and Owner
Lessor as Sublessee.
"Sub-Sub-Grant of Delivery System Grant of Easements" shall mean the
Sub-Sub-Grant of Delivery System Grant of Easements, dated as of May 18, 2005,
between Owner Lessor as Sub-Subgrantor and Lessee as Sub-Subgrantee.
42
"Sub-Sublease of Power Plant Sublease" shall mean the Sub-Sublease of
Power Plant Sublease, dated as of May 18, 2005, between Owner Lessor as
Sub-Sublessor and Lessee as Sub-Sublessee.
"Sub-Sublease of Resource Sublease" shall mean the Sub-Sublease of
Resource Sublease dated as of May 18, 2005, between Owner Lessor as
Sub-Sublessor, and PGV as Sub-Sublessee.
"Supplemental Financing" shall have the meaning specified in Section
11.1(b) of the Participation Agreement.
"Supplemental Lease Rent" shall mean any and all amounts, liabilities
and obligations (other than Periodic Lease Rent and Renewal Lease Rent) that the
Lessee assumes or agrees to pay under the Operative Documents (whether or not
identified as "Supplemental Lease Rent") to the Owner Lessor or any other
Person, including Termination Value.
"Tax" or "Taxes" shall mean all present and future fees, taxes
(including income, receipts, capital, excise and sales taxes, use taxes, stamp
taxes, value-added taxes, ad valorem taxes and property taxes (personal and
real, tangible and intangible)), levies, assessments, withholdings and other
charges and impositions of any nature, plus all related interest, penalties,
fines and additions to tax, now or hereafter imposed by any federal, state,
local or foreign government or other taxing authority.
"Tax Advance" shall have the meaning specified in Section
9.2(d)(iii)(4) of the Participation Agreement.
"Tax Claim" shall have the meaning specified in Section 9.2(d)(i) of
the Participation Agreement.
"Tax Event" shall mean any event or transaction treated, for Federal
income tax purposes, as a taxable sale or exchange of the Senior Notes.
"Tax Indemnity Agreement" shall mean the Tax Indemnity Agreement,
dated as of May 18, 2005, between the Lessee and the Equity Investor.
"Tax Requirements" shall mean the aggregate amount of Federal and
state income taxes payable by the Partners on the date that such taxes are due
to be paid by the Partners.
"Tax Savings" shall have the meaning specified in Section 9.2(c)(vi)
of the Participation Agreement.
43
"Term" shall have the meaning specified in Section 1.2 of the
Depositary Agreement.
"Termination Date" shall mean the thirtieth (or in the case of
February, the twenty-eighth) day of each month.
"Termination Value" for any Termination Date shall mean (x) during the
Basic Lease Term, an amount equal to the product of the Head Lease Rent and the
percentage set forth under the heading "Termination Value Percentage" on
Schedule 3 to Project Lease Supplement No. 1 or, if executed, Project Lease
Supplement No. 2 for such Termination Date, and (y) during any Renewal Lease
Term, an amount determined pursuant to Section 15.5 of the Project Lease.
"Third Amendment to Lease (Resource Sublease)" shall mean the Third
Amendment to Lease, dated as of May 18, 2005, between KLP as Lessor and PGV as
Lessee.
"Title Company" shall mean Title Guaranty of Hawaii, Incorporated, a
Hawaii corporation.
"Title Policies" shall mean each of the title policies issued on the
Closing Date to the Owner Lessor and the Indenture Trustee relating to the
Transaction.
"Total Aggregate Claims" shall mean all Claims relating to the Lessee,
the Project, the Project Site, or the Project Documents and which is the subject
of any representation or warranty of the Lessee contained in Section 3 of the
Participation Agreement (excluding the representation set forth in Section
3.1(v)(i) therein) or any covenant of the Lessee set forth in Section 5 of the
Participation Agreement.
"TPC Royalty Contract" shall mean the Accrual Agreement dated as of
September 1, 1990, by and between the Lessee and Thermal Power Company, a
California corporation.
"Transaction" shall mean, collectively, each of the transactions
contemplated under the Participation Agreement and the other Operative
Documents.
"Transaction Costs" shall mean the following costs to the extent
substantiated or otherwise supported in reasonable detail:
(a) the cost of reproducing and printing the Operative Documents and
all costs and fees, including filing and recording fees and recording, transfer,
mortgage, intangible and similar taxes in connection with the execution,
delivery, filing and recording of the Security Documents, and any other document
required to be filed or
44
recorded pursuant to the provisions hereof or of any other Operative Document
and any Uniform Commercial Code filing fees in respect of the perfection of any
security interests created by any of the Operative Documents or as otherwise
reasonably required by the Owner Lessor or the Indenture Trustee;
(b) the reasonable fees and expenses of the Debt Placement Agent;
(c) the reasonable fees and expenses of Xxxxx Xxxxxxxxxx LLP counsel
to the Equity Investor for services rendered in connection with the negotiation,
execution and delivery of the Participation Agreement and the other Operative
Documents and the LLC Agreement;
(d) the reasonable fees and expenses of Morris, James, Hitchens and
Xxxxxxxx LLP, counsel for the Owner Lessor, the Owner Manager, and the Trust
Company for services rendered in connection with the negotiation, execution and
delivery of the Participation Agreement and the other Operative Documents;
(e) the reasonable fees and expenses of White & Case LLP, counsel to
the Noteholders, for services rendered in connection with the negotiation,
execution and delivery of the Participation Agreement and the other Operative
Documents;
(f) the reasonable fees and expenses of XxXxxxxxxxx Xxxxxx Xxxxx
XxxXxxxxx LLP, Hawaii counsel to the Equity Investor and Noteholders;
(g) the reasonable fees and expenses of Xxxxxxxx X. Xxxxxxx, Attorney
at Law, counsel for the Indenture Trustee and the Depositary Bank, for services
rendered in connection with the negotiation, execution and delivery of the
Participation Agreement and the other Operative Documents;
(h) the reasonable out-of-pocket expenses of the Noteholders, the
Equity Investor (and its advisors) and the Owner Lessor;
(i) any fees payable to Noteholders and the initial fees and expenses
of the Trust Company, the Indenture Trustee and the Depositary Bank in
connection with the execution and delivery of the Participation Agreement and
the other Operative Documents to which either one is or will be a party;
(j) the fees and expenses of the Appraiser, for services rendered in
connection with delivering the Closing Appraisal required by the Participation
Agreement;
45
(k) the fees and expenses of the Engineering Consultant, for services
rendered in connection with delivering the Engineering Report and the
Environmental Update required by the Participation Agreement;
(l) the fees and expenses of the Geothermal Consultant, for services
rendered in connection with delivering the Geothermal Consultant's reports,
respectively, required by the Participation Agreement;
(m) the fees and expenses of the Insurance Consultant;
(n) the fees and expenses of Environmental Consultant for services
rendered in connection with delivering the Environmental Report;
(o) the premiums and any other fees and expenses relating to the Title
Policies; and
(p) the costs of the Equity Investor's internal engineering
consultants as evidenced by a work order charge.
Notwithstanding the foregoing, Transaction Costs shall not include
internal costs and expenses such as salaries and overhead of whatsoever kind or
nature (other than those expressly referred to above) nor costs incurred by the
parties to the Participation Agreement pursuant to arrangements with third
parties for services (other than those expressly referred to above), such as
computer time procurement (other than reasonable out-of-pocket expenses of the
Equity Investor), financial analysis and consulting, advisory services (except
as specifically set forth in (a)-(n) above), and costs of a similar nature.
"Transaction Party" or "Transaction Parties" shall mean, individually
or collectively, as the context may require, all or any of the parties to any of
the Operative Documents.
"Transfer Agreement" shall mean an assignment and assumption agreement
in form and substance substantially in the form of Exhibit F to the
Participation Agreement.
"Transmission Agreements" shall mean, collectively, the (a) Agreement
for Phase I Work on Interconnection Facilities, dated June 27, 1986, between PGV
and HELCO, (b) Agreement to Design 69 KV Transmission Lines, Substation at
Pohoiki, Modifications to Substations at Puna and Kaumana and Temporary 34.5
Facility to Interconnect PGV's Geothermal Electric Plant with HELCO's System
Grid (Phase II), dated May 23, 1990, between PGV and HELCO, (c) Agreement to
Construct 69 KV Transmission Lines, Substation at Pohoiki, Modifications to
Substations at Puna and
46
Kaumana and Temporary 34.5 Facility to Interconnect PGV's Geothermal Electric
Plant with HELCO's System Grid (Phase III), dated May 23, 1990, between PGV and
HELCO and (d) Transmission Line Agreement, dated March 7, 1995, between PGV and
HELCO.
"Treasury Regulations" shall mean regulations, including temporary
regulations, promulgated or proposed under the Code.
"Trust Company" shall mean Wilmington Trust Company.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939.
"Uniform Commercial Code" or "UCC" shall mean the Uniform Commercial
Code as in effect in the applicable jurisdiction.
"Value" shall have the meaning specified in Section 1.2 of the
Depositary Agreement.
"Verifier" shall have the meaning specified in Section 3.4(d) of the
Project Lease.
"Well Improvements" shall mean the Injection Well together with the
Production Well.
"Well Maintenance Reserve Account" shall have the meaning specified in
Section 1.2 of the Depositary Agreement.
"Well Maintenance Reserve Requirement" shall have the meaning set
forth in Section 1.2 of the Depositary Agreement.
"Wintergreen Renewal Lease Term" shall have the meaning specified in
Section 15.1 of the Project Lease.
47
SCHEDULE I
"REAL ESTATE DOCUMENTS"
1. Sublease of Resource Sublease
2. KLDC Estoppel
3. Resource Sublease Partial Assignment
4. Second Amendment to Lease (Master Lease)
5. State Partial Assignment Consent
6. KLP Partial Assignment Consent
7. KLDC Partial Assignment Consent
8. Memorandum of KLDC Partial Assignment Consent
9. Memorandum of KLP Partial Assignment Consent
10. Memorandum of Resource Sublease Partial Assignment
11. Memorandum of State Partial Assignment Consent
12. Memorandum of Sublease of Resource Sublease
13. Memorandum of Sub-Sublease of Resource Sublease
14. Memorandum of KLDC Estoppel
15. Memorandum of KLDC Consent
16. Memorandum of KLP Consent
17. Memorandum of Project Lease
18. Memorandum of Head Lease
19. Memorandum of Second Amendment to Lease (Master Lease)
20. Memorandum of State Consent
21. Memorandum of Sub-Grant of Delivery System Grant of Easements
22. Memorandum of Sub-Sub-Grant of Delivery System Grant of Easements
23. Memorandum of Sublease of Power Plant Sublease
24. Memorandum of Sub-Sublease of Power Plant Sublease
25. Memorandum of Third Amendment to Lease (Resource Sublease)
26. Special Power of Attorney (PGV to Owner Lessor)
27. Special Power of Attorney (Owner Lessor to Indenture Trustee)
28. Sub-Sublease of Resource Sublease
29. Sub-Grant of Delivery System Grant of Easements
30. Sub-Sub-Grant of Delivery System Grant of Easements
31. Sublease of Power Plant Sublease
32. Sub-Sublease of Power Plant Sublease
33. Third Amendment to Lease (Resource Sublease)
2
Schedule II
"SECURITY DOCUMENTS"
1. Indenture
2. Depositary Agreement
3. Lessee Partners Interest Pledge Agreement
4. PGV Interests Pledge Agreement
5. Lessee Security Agreement
6. Bank of Hawaii Control Agreement
7. KLDC Mortgage
8. KLP Mortgage
9. KLP Mortgage Assignment
10. KLDC Mortgage Assignment
11. KLP Mortgage Assignment (Indenture Trustee)
12. KLDC Mortgage Assignment (Indenture Trustee)
13. Owner Lessor Assignment of Sublease of Resource Sublease
14. Owner Lessor Assignment of Sub-Grant of Delivery System Grant of Easements
15. Owner Lessor Assignment of Project Lease
16. Owner Lessor Assignment of Head Lease
17. Owner Lessor Assignment of Sublease of Power Plant Sublease
2
Schedule III
"EXCLUDED ASSETS"
1. Caterpillar brand front end loader
2. Liquid Nitrogen Skid and Handling Equipment
3. 480/13.8 KV ABB Transformer
4. 1,000 Gal. Gasoline and Diesel Tanks - Hawaii Petroleum
5. TNT Storage Container - Xxxxxxx Xxxxxxx
6. 49' Manlift - Bacon Universal
7. Office equipment
3
SCHEDULE 1
TO
PROJECT LEASE
INSURANCE
INSURANCE PROVISIONS - PUNA
SECTION 1. (A) PROPERTY INSURANCE.
The Lessee will, subject to Section 8 below, maintain (or cause to be
maintained) in full force and effect at all times "All Risk" property insurance
customarily carried by prudent operators of geothermal power generating
facilities of comparable size and risk of the Project, and against loss or
damage from such causes as are customarily insured against, which includes
coverage for boiler and machinery, in a minimum amount not less than 100% of the
full replacement value of the Project (based on true replacement prices
available to the Lessee as an Affiliate of the equipment manufacturer). Such
insurance coverages are further subject to sublimits of $15,000,000 per
occurrence and in the annual aggregate for catastrophic perils (i.e., flood,
wind, earthquake, hurricane and volcanic eruption). Such insurance coverages
shall further be subject to a deductible, as to the Lessee's interest, not to
exceed (i) $250,000 per occurrence for property (physical) damage and boiler and
machinery breakdown, (ii) regarding occurrence of earthquake, wind, flood and
volcanic eruption 5% of the loss or a minimum of $500,000, and (iii) such other
higher amounts for catastrophic perils customarily maintained by prudent
operators of geothermal power generating facilities of comparable size and risk
of the Project.
(b) Stipulated Loss Insurance
The Lessee will, subject to Section 8 below, maintain (or cause to be
maintained) in full force and effect at all times Stipulated Loss Insurance in
an amount not less than the difference between the Termination Value and the
Actual Cost Value, which shall mean replacement cost new less depreciation. Such
insurance shall be payable in the event the Lessee elects or is deemed to have
elected to terminate this Project Lease in accordance with Section 10.1.
SECTION 2. BUSINESS INTERRUPTION INSURANCE.
The Lessee will, subject to Section 8 below, maintain (or cause to be
maintained) "Business Interruption" insurance (as a separate policy or as an
extension of the "All Risk" property insurance policy required above) covering a
total or partial loss of net revenue income as a result of indemnifiable
physical loss or damage arising from an occurrence under the "All Risk" property
policy. The limits of liability shall be sufficient to cover 12 months of
Periodic Lease Rent, provided, however, that in the event that the Lessee shall
not maintain Stipulated Loss Insurance as a result of such coverage being
unavailable on a commercially reasonable basis, the Lessee shall use its
commercially reasonable efforts to obtain "Business Interruption" insurance to
cover 18 months of Periodic Lease Rent. The indemnity period of this business
interruption shall be 12 months. Waiting period deductibles shall be consistent
with industry practice subject
1
to a maximum waiting period of (i) 45 days for each occurrence resulting from
property damage and (ii) 60 days for each occurrence resulting from boiler and
machinery breakdown.
SECTION 3. CONTROL OF WELL INSURANCE.
The Lessee will, subject to Section 8 below, maintain (or caused to be
maintained) in full force and effect at all times "Control of Well" insurance
providing coverage for the interest in the xxxxx for (a) costs to bring a well
under control, (b) re-drilling, re-completion and /or re-conditioning expenses,
(c) seepage, pollution and contamination resulting from a well out of control
and (d) loss or damage to property of others in the care, custody or control of
the Lessee. The limit of liability with respect to the combined effects of
clauses (a) and (b) above shall not be less than $20,000,000 per occurrence and
$20,000,000 in the aggregate. Sublimits are not less than $1,000,000 for clauses
(c) and (d) above. Deductibles with respect to the combined effects of this
paragraph shall be consistent with industry practice subject to a maximum a
deductible of not more than $250,000 per occurrence
SECTION 4. LIABILITY INSURANCE.
The Lessee with respect to the Project, will, subject to Section 8 below,
maintain (or caused to be maintained) commercial general liability insurance,
including contractual liability coverage, including sudden and accidental or
named perils pollution liability coverage, subject to such coverage being
commercially available on commercially reasonable terms, business automobile
liability insurance and employers liability insurance and workers compensation
(as applicable), insuring against claims for bodily injury (including death) and
property damage to third parties arising out of the ownership, operation,
maintenance, condition and use of the Project and the Project Site, with limits
of not less than $15,000,000 per occurrence and $15,000,000 in the aggregate (to
be maintained at all times) or such other higher amount customarily maintained
by prudent operators of geothermal power generating facilities of comparable
size and risk of the Project. A maximum deductible of $250,000.00 per occurrence
shall be allowed.
The Lessee will annually review the liability insurance maintained by it or on
its behalf and will, if necessary, revise such coverage and limits (including
deductibles) in order that the liability insurance maintained by it or on its
behalf is consistent with that maintained by prudent operators of similar
facilities of comparable size and risk to the Project; provided, that the Lessee
may not decrease coverage or limits below the requirements set forth herein
without the written consent of the Indenture Trustee (or, if the Lien of the
Indenture has been terminated and fully discharged, Owner Lessor), such consent
shall not be unreasonably withheld and which will be based on an analysis by an
independent insurance expert from an internationally recognized insurance
brokerage firm selected by the Lessee and reasonably acceptable to Indenture
Trustee (or, if the Lien of the Indenture has been terminated and fully
discharged, the Owner Lessor). Such liability insurance may be purchased either
in a single limit or in combination with a general and an excess policy.
2
SECTION 5. PROVISIONS WITH RESPECT TO INSURANCE.
In respect of the insurance required to be maintained or caused to be maintained
under this Schedule 1, the Lessee will (a) place the insurance maintained
pursuant to this Section with reputable insurance companies authorized to do
business in Hawaii having (i) an A.M. Best Insurance Reports rating of at least
"A-" or better and a financial size category of VIII or (ii) a Standard & Poor's
financial strength rating of "BBB" or higher, (b) name the Trust Company, the
Owner Lessor, the Equity Investor and the Indenture Trustee (as Indenture
Trustee and on behalf of the Noteholders) and their respective officers,
directors, employees, affiliates and assigns as additional insureds, as their
interests may appear (and, with respect to the insurance maintained pursuant to
Section 1 and 2 of this Schedule 1, name the Indenture Trustee (or, if the Lien
of the Indenture has been terminated and fully discharged, the Owner Lessor), as
sole payee, (c) cause the insurance companies to agree to waive all rights of
subrogation or action howsoever arising which they may have or acquire arising
out of any occurrence in respect of which any claim is admitted or paid
thereunder against the Trust Company, the Owner Lessor, the Equity Investor and
the Indenture Trustee and their respective directors, officers, employees and
assigns, and (d) cause such insurance or self-insurance to be primary without
right of contribution of any other insurance carried by or on behalf of the
Trust Company, the Owner Lessor, the Equity Investor and the Indenture Trustee
(as Indenture Trustee and on behalf of the Noteholders) with respect to their
respective interests in the Project and the Project Site.
All policies shall provide that the respective interests of the Trust Company,
the Owner Lessor, the Equity Investor and the Indenture Trustee shall not be
invalidated by any act or neglect of the Lessee or any other person, or any
breach or violation by the Lessee or any other person of any warranties,
declarations or conditions contained in the property insurance policies, any
action or inaction of the Lessee or others or by the use of the Project or the
Project Site for purposes more hazardous than permitted by such policies. All
liability insurance policies required to be maintained hereunder shall be
endorsed to provide that, in as much as the policies are written to cover more
than one insured, all terms, conditions, insuring agreements and endorsements,
with the exception of limits of liability, shall operate in the manner as if
there were a separate policy covering each insured. The Lessee shall, at its own
expense, promptly make or cause to be made all proofs of loss and take all other
steps necessary to collect the proceeds of such insurance.
The Lessee shall notify the insurance companies that the Lessee has granted a
first ranking assignment by way of security to the Owner Lessor and the
Indenture Trustee over the title and benefit of this insurance and its interest
and rights in the subject matter of this insurance, and confirm that they have
not been notified of any other pledge or assignment of or security interest in
the Lessee's interest in this insurance.
The insurance companies shall not be entitled to any recourse against or to
offset any sums payable to the Trust Company, the Owner Lessor, the Equity
Investor, the Noteholders or the Indenture Trustee against premium or other
monies owing by the Lessee, nor any sums owing to the Lessee under the policies
against any monies owing by the Lessee under any other policy or contract.
3
All of the insurance policies required by this Schedule 1 may cover other
operations, facilities and properties of the Lessee or its Affiliates as long as
the limits of insurance available to the Project and the Project Site are not
less than the requirements set forth herein.
Claims and losses, if any, under any insurance policies required to be carried
under this Schedule 1 shall be adjusted with the insurance companies, including
the filing of appropriate proceedings, by the Lessee, subject to the approval of
the Indenture Trustee (or, if the Lien of the Indenture has been terminated and
fully discharged the Owner Lessor) if a Lease Event of Default has occurred and
is continuing.
All loss payments under any policy of insurance maintained pursuant to Section 1
and 2 of this Schedule 1 shall be made to the Depositary Bank and applied in
accordance with the terms of the Depositary Agreement.
The Lessee shall promptly notify the Owner Lessor and, so long as the Lien of
the Indenture has not been terminated and fully discharged, the Indenture
Trustee, of any claim in excess of $500,000.00 under any insurance policy
maintained pursuant to this Schedule 1. If any insurance policies for this
Project contain(s) aggregate limits applying to facilities other than this
Project, and such limits are diminished by any incident, occurrence, claim,
settlement or judgment against such insurance which has caused the carrier to
establish a reserve, the Lessee shall take or cause to be taken immediate steps
to restore such aggregate limits or shall provide other equivalent insurance
protection for such aggregate limits at all times.
SECTION 6. REPORTS.
The Lessee shall annually provide (A) the Owner Lessor, the Equity Investor and
the Indenture Trustee a report from an independent insurance broker, signed by
an officer of the broker, stating that in the opinion of such broker, the
insurance then carried or to be renewed is in compliance with all insurance
requirements set forth in this Schedule 1 and (B) a certificate of a Responsible
Officer of the Lessee certifying that all premiums in respect of such policies
are current and that such coverage is in compliance with all insurance
requirements set forth in this Schedule 1.
The insurance policies shall provide for at least 45 (forty-five) days' prior
written notice to the Owner Lessor, the Equity Investor and the Indenture
Trustee of any act or omission or of any event of which the insurance companies
have knowledge and which the insurance companies consider may invalidate or
render unenforceable in whole or in part this insurance or any claim under it or
which might entitle the insurance companies to terminate, rescind or repudiate
this policy in whole or part, or treat it as avoided, terminated or suspended,
against any insured party. The insurance policies shall provide that if an
insurance policy is cancelled for any reason whatsoever, including non-payment
of premium, or any changes are initiated by the Lessee which affect the
interests of the additional insureds, such cancellation or change shall not be
effective as to the additional insureds until 45 (forty-five) days (except for
non-payment of premium which shall be ten (10) days), after receipt by the
Indenture Trustee, Equity Investor and Owner Lessor of written notice sent by
registered mail from the applicable insurance company, such registered mail to
be received at the respective addresses set forth in Section 12.4 of the
Participation Agreement.
4
SECTION 7. ADDITIONAL INSURANCE BY THE OWNER LESSOR.
At any time the Owner Lessor (either directly or in the name of the Equity
Investor) or Indenture Trustee may at its own expense and for its own account
carry insurance with respect to its interest in the Project and the Project
Site, provided, that such insurance does not in any way interfere with the
Lessee's ability to obtain insurance with respect to the Project described in
this Schedule 1. Any insurance payments received from policies maintained by the
Owner Lessor or Indenture Trustee pursuant to the previous sentence shall be
retained by the Owner Lessor or Indenture Trustee, as the case may be, without
reducing or otherwise affecting the Lessee's obligations hereunder.
SECTION 8. AMENDMENT OF INSURANCE REQUIREMENTS; UNAVAILABILITY OF INSURANCE.
If any insurance required to be maintained by the Lessee pursuant to this
Schedule 1 (including the limits or deductibles or any other terms under
policies for such insurance) ceases to be available on a commercially reasonable
basis, the Lessee shall provide written notice to the Owner Lessor, the Equity
Investor and, so long as the Lien of the Indenture has not been terminated and
fully discharged, the Indenture Trustee, which written notice shall be
accompanied by a letter from the Lessee's insurance broker stating that such
insurance is unavailable on a commercially reasonable basis and explaining in
detail the basis for such conclusions. Such notice shall be given not less than
thirty (30) days' prior to the scheduled date for renewal of any such policy.
In the event that a resolution acceptable to both parties cannot be reached,
within ten (10) days, the parties shall make arrangements, at the Lessee's
expense, for the formation of an insurance panel consisting of the Lessee's
insurance advisor (or broker) and the Owner Lessor's and, so long as the Lien of
the Indenture has not been terminated and fully discharged, the Indenture
Trustee's insurance advisor (or broker), and an independent insurance expert
from a internationally recognized insurance brokerage firm, chosen by the Lessee
and reasonably acceptable to the Owner Lessor and, so long as the Lien of the
Indenture has not been terminated and fully discharged, the Indenture Trustee.
Such independent expert shall conduct a separate review of the relevant
insurance requirements of this Schedule 1 and the market for such insurance at
the time, giving due consideration to the representations of both insurance
advisors, and upon conclusion of such review shall issue a written report
stating whether such insurance is available or unavailable on a commercially
reasonable basis and explaining in detail the basis for such conclusions.
If the insurance expert concludes that such insurance is not available on a
commercially reasonable basis, the insurance expert shall provide a written
recommendation and certification (which shall include the amount and type of
insurance which is available upon a commercially reasonable basis) not less than
fifteen (15) days before the date for renewal of such insurance. The Lessee
shall, prior to the expiration of the insurance then in effect, obtain such
insurance recommended and certified by such insurance expert that is available
on a commercially reasonable basis. The recommendation of the insurance expert
shall be conclusive and binding upon the Lessee and the Owner Lessor and the
Lessee shall, for so long as such insurance shall
5
be unavailable on a commercially reasonable basis, be required to carry such
insurance that the insurance expert has recommended and certified is available
on a commercially reasonable basis; provided, however, that if any required
insurance hereunder that had previously been unavailable on a commercially
reasonable basis shall become available on a commercially reasonable basis, the
Lessee shall obtain such required insurance as promptly as practicable after the
Lessee has been given notice of such availability, so long as such insurance can
be obtained without causing unreasonable (as determined by the insurance expert)
cost inefficiencies or disruptions mid-term in the existing insurance programs.
All reasonable fees, costs and expenses associated with the insurance panel
(including the review by the insurance expert) shall be for the sole account of
the Lessee.
6
Schedule 1 to Project Lease
INSURANCE PROVISIONS - PUNA
SECTION 1. (A) PROPERTY INSURANCE.
The Lessee will, subject to Section 8 below, maintain (or cause to be
maintained) in full force and effect at all times "All Risk" property insurance
customarily carried by prudent operators of geothermal power generating
facilities of comparable size and risk of the Project, and against loss or
damage from such causes as are customarily insured against, which includes
coverage for boiler and machinery, in a minimum amount not less than 100% of the
full replacement value of the Project (based on true replacement prices
available to the Lessee as an Affiliate of the equipment manufacturer). Such
insurance coverages are further subject to sublimits of $15,000,000 per
occurrence and in the annual aggregate for catastrophic perils (i.e., flood,
wind, earthquake, hurricane and volcanic eruption). Such insurance coverages
shall further be subject to a deductible, as to the Lessee's interest, not to
exceed (i) $250,000 per occurrence for property (physical) damage and boiler and
machinery breakdown, (ii) regarding occurrence of earthquake, wind, flood and
volcanic eruption 5% of the loss or a minimum of $500,000, and (iii) such other
higher amounts for catastrophic perils customarily maintained by prudent
operators of geothermal power generating facilities of comparable size and risk
of the Project.
(b) Stipulated Loss Insurance
The Lessee will, subject to Section 8 below, maintain (or cause to be
maintained) in full force and effect at all times Stipulated Loss Insurance in
an amount not less than the difference between the Termination Value and the
Actual Cost Value, which shall mean replacement cost new less depreciation. Such
insurance shall be payable in the event the Lessee elects or is deemed to have
elected to terminate this Project Lease in accordance with Section 10.1.
SECTION 2. BUSINESS INTERRUPTION INSURANCE.
The Lessee will, subject to Section 8 below, maintain (or cause to be
maintained) "Business Interruption" insurance (as a separate policy or as an
extension of the "All Risk" property insurance policy required above) covering a
total or partial loss of net revenue income as a result of indemnifiable
physical loss or damage arising from an occurrence under the "All Risk" property
policy. The limits of liability shall be sufficient to cover 12 months of
Periodic Lease Rent, provided, however, that in the event that the Lessee shall
not maintain Stipulated Loss Insurance as a result of such coverage being
unavailable on a commercially reasonable basis, the Lessee shall use its
commercially reasonable efforts to obtain "Business Interruption" insurance to
cover 18 months of Periodic Lease Rent. The indemnity period of this business
interruption shall be 12 months. Waiting period deductibles shall be consistent
with industry practice subject to a maximum waiting period of (i) 45 days for
each occurrence resulting from property damage and (ii) 60 days for each
occurrence resulting from boiler and machinery breakdown.
SECTION 3. CONTROL OF WELL INSURANCE.
The Lessee will, subject to Section 8 below, maintain (or caused to be
maintained) in full force and effect at all times "Control of Well" insurance
providing coverage for the interest in the xxxxx for (a) costs to bring a well
under control, (b) re-drilling, re-completion and /or re-conditioning expenses,
(c) seepage, pollution and contamination resulting from a well out of control
and (d) loss or damage to property of others in the care, custody or control of
the Lessee. The limit of liability with respect to the combined effects of
clauses (a) and (b) above shall not be less than $20,000,000 per occurrence and
$20,000,000 in the aggregate. Sublimits are not less than $1,000,000 for clauses
(c) and (d) above. Deductibles with respect to the combined effects of this
paragraph shall be consistent with industry practice subject to a maximum a
deductible of not more than $250,000 per occurrence
SECTION 4. LIABILITY INSURANCE.
The Lessee with respect to the Project, will, subject to Section 8 below,
maintain (or caused to be maintained) commercial general liability insurance,
including contractual liability coverage, including sudden and accidental or
named perils pollution liability coverage, subject to such coverage being
commercially available on commercially reasonable terms, business automobile
liability insurance and employers liability insurance and workers compensation
(as applicable), insuring against claims for bodily injury (including death) and
property damage to third parties arising out of the ownership, operation,
maintenance, condition and use of the Project and the Project Site, with limits
of not less than $15,000,000 per occurrence and $15,000,000 in the aggregate (to
be maintained at all times) or such other higher amount customarily maintained
by prudent operators of geothermal power generating facilities of comparable
size and risk of the Project. A maximum deductible of $250,000.00 per occurrence
shall be allowed.
The Lessee will annually review the liability insurance maintained by it or on
its behalf and will, if necessary, revise such coverage and limits (including
deductibles) in order that the liability insurance maintained by it or on its
behalf is consistent with that maintained by prudent operators of similar
facilities of comparable size and risk to the
2
Project; provided, that the Lessee may not decrease coverage or limits below the
requirements set forth herein without the written consent of the Indenture
Trustee (or, if the Lien of the Indenture has been terminated and fully
discharged, Owner Lessor), such consent shall not be unreasonably withheld and
which will be based on an analysis by an independent insurance expert from an
internationally recognized insurance brokerage firm selected by the Lessee and
reasonably acceptable to Indenture Trustee (or, if the Lien of the Indenture has
been terminated and fully discharged, the Owner Lessor). Such liability
insurance may be purchased either in a single limit or in combination with a
general and an excess policy.
SECTION 5. PROVISIONS WITH RESPECT TO INSURANCE.
In respect of the insurance required to be maintained or caused to be maintained
under this Schedule 1, the Lessee will (a) place the insurance maintained
pursuant to this Section with reputable insurance companies authorized to do
business in Hawaii having (i) an A.M. Best Insurance Reports rating of at least
"A-" or better and a financial size category of VIII or (ii) a Standard & Poor's
financial strength rating of "BBB" or higher, (b) name the Trust Company, the
Owner Lessor, the Equity Investor and the Indenture Trustee (as Indenture
Trustee and on behalf of the Noteholders) and their respective officers,
directors, employees, affiliates and assigns as additional insureds, as their
interests may appear (and, with respect to the insurance maintained pursuant to
Section 1 and 2 of this Schedule 1, name the Indenture Trustee (or, if the Lien
of the Indenture has been terminated and fully discharged, the Owner Lessor), as
sole payee, (c) cause the insurance companies to agree to waive all rights of
subrogation or action howsoever arising which they may have or acquire arising
out of any occurrence in respect of which any claim is admitted or paid
thereunder against the Trust Company, the Owner Lessor, the Equity Investor and
the Indenture Trustee and their respective directors, officers, employees and
assigns, and (d) cause such insurance or self-insurance to be primary without
right of contribution of any other insurance carried by or on behalf of the
Trust Company, the Owner Lessor, the Equity Investor and the Indenture Trustee
(as Indenture Trustee and on behalf of the Noteholders) with respect to their
respective interests in the Project and the Project Site.
All policies shall provide that the respective interests of the Trust Company,
the Owner Lessor, the Equity Investor and the Indenture Trustee shall not be
invalidated by any act or neglect of the Lessee or any other person, or any
breach or violation by the Lessee or any other person of any warranties,
declarations or conditions contained in the property insurance policies, any
action or inaction of the Lessee or others or by the use of the Project or the
Project Site for purposes more hazardous than permitted by such policies.
3
All liability insurance policies required to be maintained hereunder shall be
endorsed to provide that, in as much as the policies are written to cover more
than one insured, all terms, conditions, insuring agreements and endorsements,
with the exception of limits of liability, shall operate in the manner as if
there were a separate policy covering each insured. The Lessee shall, at its own
expense, promptly make or cause to be made all proofs of loss and take all other
steps necessary to collect the proceeds of such insurance.
The Lessee shall notify the insurance companies that the Lessee has granted a
first ranking assignment by way of security to the Owner Lessor and the
Indenture Trustee over the title and benefit of this insurance and its interest
and rights in the subject matter of this insurance, and confirm that they have
not been notified of any other pledge or assignment of or security interest in
the Lessee's interest in this insurance.
The insurance companies shall not be entitled to any recourse against or to
offset any sums payable to the Trust Company, the Owner Lessor, the Equity
Investor, the Noteholders or the Indenture Trustee against premium or other
monies owing by the Lessee, nor any sums owing to the Lessee under the policies
against any monies owing by the Lessee under any other policy or contract.
All of the insurance policies required by this Schedule 1 may cover other
operations, facilities and properties of the Lessee or its Affiliates as long as
the limits of insurance available to the Project and the Project Site are not
less than the requirements set forth herein.
Claims and losses, if any, under any insurance policies required to be carried
under this Schedule 1 shall be adjusted with the insurance companies, including
the filing of appropriate proceedings, by the Lessee, subject to the approval of
the Indenture Trustee (or, if the Lien of the Indenture has been terminated and
fully discharged the Owner Lessor) if a Lease Event of Default has occurred and
is continuing.
All loss payments under any policy of insurance maintained pursuant to Section 1
and 2 of this Schedule 1 shall be made to the Depositary Bank and applied in
accordance with the terms of the Depositary Agreement.
The Lessee shall promptly notify the Owner Lessor and, so long as the Lien of
the Indenture has not been terminated and fully discharged, the Indenture
Trustee, of any claim in excess of $500,000.00 under any insurance policy
maintained pursuant to this Schedule 1. If any insurance policies for this
Project contain(s) aggregate limits applying to facilities other than this
Project, and such limits are diminished by any incident, occurrence, claim,
settlement or judgment against such insurance which has caused the carrier to
establish a reserve, the Lessee shall take or cause to be taken immediate steps
to
4
restore such aggregate limits or shall provide other equivalent insurance
protection for such aggregate limits at all times.
SECTION 6. REPORTS.
The Lessee shall annually provide (A) the Owner Lessor, the Equity Investor and
the Indenture Trustee a report from an independent insurance broker, signed by
an officer of the broker, stating that in the opinion of such broker, the
insurance then carried or to be renewed is in compliance with all insurance
requirements set forth in this Schedule 1 and (B) a certificate of a Responsible
Officer of the Lessee certifying that all premiums in respect of such policies
are current and that such coverage is in compliance with all insurance
requirements set forth in this Schedule 1.
The insurance policies shall provide for at least 45 (forty-five) days' prior
written notice to the Owner Lessor, the Equity Investor and the Indenture
Trustee of any act or omission or of any event of which the insurance companies
have knowledge and which the insurance companies consider may invalidate or
render unenforceable in whole or in part this insurance or any claim under it or
which might entitle the insurance companies to terminate, rescind or repudiate
this policy in whole or part, or treat it as avoided, terminated or suspended,
against any insured party. The insurance policies shall provide that if an
insurance policy is cancelled for any reason whatsoever, including non-payment
of premium, or any changes are initiated by the Lessee which affect the
interests of the additional insureds, such cancellation or change shall not be
effective as to the additional insureds until 45 (forty-five) days (except for
non-payment of premium which shall be ten (10) days), after receipt by the
Indenture Trustee, Equity Investor and Owner Lessor of written notice sent by
registered mail from the applicable insurance company, such registered mail to
be received at the respective addresses set forth in Section 12.4 of the
Participation Agreement.
SECTION 7. ADDITIONAL INSURANCE BY THE OWNER LESSOR.
At any time the Owner Lessor (either directly or in the name of the Equity
Investor) or Indenture Trustee may at its own expense and for its own account
carry insurance with respect to its interest in the Project and the Project
Site, provided, that such insurance does not in any way interfere with the
Lessee's ability to obtain insurance with respect to the Project described in
this Schedule 1. Any insurance payments received from policies maintained by the
Owner Lessor or Indenture Trustee pursuant to the previous sentence shall be
retained by the Owner Lessor or Indenture Trustee, as the case may be, without
reducing or otherwise affecting the Lessee's obligations hereunder.
5
SECTION 8. AMENDMENT OF INSURANCE REQUIREMENTS; UNAVAILABILITY OF INSURANCE.
If any insurance required to be maintained by the Lessee pursuant to this
Schedule 1 (including the limits or deductibles or any other terms under
policies for such insurance) ceases to be available on a commercially reasonable
basis, the Lessee shall provide written notice to the Owner Lessor, the Equity
Investor and, so long as the Lien of the Indenture has not been terminated and
fully discharged, the Indenture Trustee, which written notice shall be
accompanied by a letter from the Lessee's insurance broker stating that such
insurance is unavailable on a commercially reasonable basis and explaining in
detail the basis for such conclusions. Such notice shall be given not less than
thirty (30) days' prior to the scheduled date for renewal of any such policy.
In the event that a resolution acceptable to both parties cannot be reached,
within ten (10) days, the parties shall make arrangements, at the Lessee's
expense, for the formation of an insurance panel consisting of the Lessee's
insurance advisor (or broker) and the Owner Lessor's and, so long as the Lien of
the Indenture has not been terminated and fully discharged, the Indenture
Trustee's insurance advisor (or broker), and an independent insurance expert
from a internationally recognized insurance brokerage firm, chosen by the Lessee
and reasonably acceptable to the Owner Lessor and, so long as the Lien of the
Indenture has not been terminated and fully discharged, the Indenture Trustee.
Such independent expert shall conduct a separate review of the relevant
insurance requirements of this Schedule 1 and the market for such insurance at
the time, giving due consideration to the representations of both insurance
advisors, and upon conclusion of such review shall issue a written report
stating whether such insurance is available or unavailable on a commercially
reasonable basis and explaining in detail the basis for such conclusions.
If the insurance expert concludes that such insurance is not available on a
commercially reasonable basis, the insurance expert shall provide a written
recommendation and certification (which shall include the amount and type of
insurance which is available upon a commercially reasonable basis) not less than
fifteen (15) days before the date for renewal of such insurance. The Lessee
shall, prior to the expiration of the insurance then in effect, obtain such
insurance recommended and certified by such insurance expert that is available
on a commercially reasonable basis. The recommendation of the insurance expert
shall be conclusive and binding upon the Lessee and the Owner Lessor and the
Lessee shall, for so long as such insurance shall be unavailable on a
commercially reasonable basis, be required to carry such insurance that the
insurance expert has recommended and certified is available on a commercially
reasonable basis; provided, however, that if any required insurance hereunder
that had previously been unavailable on a commercially reasonable basis shall
become available on a commercially reasonable basis, the Lessee shall obtain
such required insurance as promptly as practicable after the Lessee has been
given notice of such availability, so long as such insurance can be
6
obtained without causing unreasonable (as determined by the insurance expert)
cost inefficiencies or disruptions mid-term in the existing insurance programs.
All reasonable fees, costs and expenses associated with the insurance panel
(including the review by the insurance expert) shall be for the sole account of
the Lessee.
7
Exhibit A
FORM OF
PROJECT LEASE SUPPLEMENT NO. _
This PROJECT LEASE SUPPLEMENT NO. __, dated as of _________________,
is between SE PUNA, L.L.C., a Delaware limited liability company (the "Owner
Lessor"), and PUNA GEOTHERMAL VENTURE, a Hawaii general partnership (the
"Lessee").
WITNESSETH:
WHEREAS, the Owner Lessor and the Lessee have heretofore entered into
that certain Project Lease Agreement, dated as of [__, 2005] (the "Project
Lease"). The terms used herein are used with the meanings specified in the
Project Lease; and
WHEREAS, the Project Lease provides for the execution and delivery of
a Project Lease Supplement substantially in the form hereof for, among other
things, the purpose of leasing the Project and confirming Periodic Lease Rent,
Allocated Rent and Termination Values with respect thereto.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Lease. The Owner Lessor hereby leases the Project,
upon the terms and conditions set forth in the Project Lease, to the Lessee
for the Basic Lease Term (and Renewal Lease Term, if any) and the Lessee
hereby leases the Project upon the terms and conditions set forth in the
Project Lease, from the Owner Lessor for such Basic Lease Term (and Renewal
Lease Term, if any). The Head Lease Rent for the Project, designated as
such in the Head Lease Supplement therefor, is $________.
Section 2. Payment of Periodic Rent. The Lessee hereby agrees to
pay to the Owner Lessor basic lease rent for the lease of the Project (the
"Periodic Lease Rent"), payable with respect to the Basic Lease Term
thereof, as follows: each payment of Periodic Lease Rent shall be payable
on each Rent Payment Date in the amount equal to, subject to Section 3.4 of
the Project Lease, the product of (x) the Head Lease Rent therefor
multiplied by (y) the percentage set forth opposite such Rent Payment Date
on Schedule 1 hereto under the caption "Periodic Lease Rent Percentage."
Section 3. Allocation of Rent. The Periodic Lease Rent allocated
to each Rental Period for the use by the Lessee of the Project shall be an
amount equal to the product of (x) the Head Lease Rent therefor multiplied
by (y) the percentage set forth opposite such Rental Period in Schedule 2
hereof under the caption "Allocation Percentage" (the "Allocated Rent").
1
Section 4. Termination Values. Termination Values for any
Termination Date in respect of the Project shall be an amount equal to the
product of (x) the Head Lease Rent therefor multiplied by (y) the
percentage set forth under the heading "Termination Value Percentages" on
Schedule 3 hereto.
Section 5. EBO Price; EBO Date Prepaid Rent Balance. The EBO
Price in respect of the Project shall mean an amount equal to [$___]
[$___]. The EBO Date Prepaid Rent Balance shall mean an amount equal to
[$___] [$___].
Section 6. FPPO Price. The FPPO Price in respect of the Project
shall mean an amount equal to [$___] [$___].
Section 7. Miscellaneous. (a) This Project Lease Supplement No. _
shall be construed in connection with and as part of the Project Lease, and
all terms, conditions and covenants contained in the Project Lease, except
as herein modified, shall be and remain in full force and effect.
(b)This Project Lease Supplement No. __ may be executed in any number
of counterparts, each executed counterpart constituting an original but all
together one and the same instrument.
[FOR INSERTION IN PROJECT LEASE SUPPLEMENT NO. 2 ONLY:(C) THIS PROJECT
LEASE SUPPLEMENT NO. 2 SUPERSEDES PROJECT LEASE SUPPLEMENT NO. 1. ]
IN WITNESS WHEREOF, the Owner Lessor and the Lessee have caused this
Project Lease Supplement No. _ to be duly executed and delivered by their
respective officers thereunto duly authorized as of the day and year first above
written.
SE PUNA, L.L.C.
By: Wilmington Trust Company, not in
its individual capacity but solely
as Owner Manager
By:
-------------------------------
Name:
Title:
PUNA GEOTHERMAL VENTURE
By: ORNI 8 LLC, its partner
By:
-------------------------------
Name:
Title:
By: OrPuna LLC, its partner
By:
-------------------------------
Name:
Title:
*Receipt of the original counterpart of the foregoing Project Lease Supplement
No. __ is hereby acknowledged on this [____] day of May 2005.
Union Bank of California, N.A.,
as Indenture Trustee
By:
-------------------------------
Name:
Title:
----------
* This acknowledgment executed in the original counterpart only.
--------------------------------------------------------------------------------
SCHEDULE 1
TO THE
PROJECT LEASE SUPPLEMENT NO. _
PERIODIC LEASE RENT
(expressed as a percentage of Head Lease Rent and in dollars)
--------------------------------------------------------------------------------
RENT PERIODIC LEASE PERIODIC LEASE
PAYMENT DATE RENT PERCENTAGE RENT
------------ --------------- --------------
--------------------------------------------------------------------------------
SCHEDULE 2
TO THE
PROJECT LEASE SUPPLEMENT NO. _
ALLOCATED RENT, PROPORTIONAL RENT AND SECTION 467 INTEREST PERCENTAGES
(expressed as a percentage of Head Lease Rent)
--------------------------------------------------------------------------------
RENTAL PERIOD
--------------------- PROPORTIONAL SECTION 467
FROM AND TO AND ALLOCATION RENT INTEREST
INCLUDING INCLUDING PERCENTAGE PERCENTAGE PERCENTAGE
--------- --------- ---------- ------------ -----------
--------------------------------------------------------------------------------
SCHEDULE 3
TO THE
PROJECT LEASE SUPPLEMENT NO. _
TERMINATION VALUE PERCENTAGES
(expressed as a percentage of Head Lease Rent)
--------------------------------------------------------------------------------
[2]
[1] SECTION 467
TERMINATION TERMINATION VALUE LOAN BALANCE
DATE PERCENTAGE PERCENTAGE =[1] - [2]
----------- ----------------- ------------ ----------