Common use of Security Fund Clause in Contracts

Security Fund. (A) Seller shall establish, fund, and maintain a security fund, pursuant to the provisions of this Article 11 (“Security Fund”), which shall be available to (i) pay any amount due EPE pursuant to this Agreement, whether arising before, on, or after the Commercial Operation Date or termination of this Agreement, (ii) provide EPE security that Seller will construct the Facility to meet the Construction Milestones, and (iii) provide security to EPE to cover damages, including Replacement Energy Costs, should the Facility fail to achieve the Commercial Operation Date or otherwise not operate in accordance with this Agreement. Seller shall establish the Security Fund at a level of twenty dollars per kilowatt ($20/kW) of Designed Maximum Output no later than thirty (30) Days following the Execution Date. Seller shall increase the Security Fund by twenty dollars per kilowatt ($20/kW) of Designed Maximum Output, to a total level of forty dollars per kilowatt ($40/kW) within thirty (30) Days of the later of (y) obtaining construction permits or (z) execution of the Interconnection Agreement, but in no event later than June 1, 2010. Seller shall increase the Security Fund by twenty dollars per kilowatt ($20/kW) of Designed Maximum Output, to a total level of sixty dollars per kilowatt ($60/kW) of Designed Maximum Output, at least thirty (30) days prior to the Commercial Operation Date. Seller shall maintain the Security Fund at such required level throughout the remainder of the Term. Seller shall replenish the Security Fund to the applicable required level within ten (10) Business Days after any draw on the Security Fund by EPE. ****=Confidential treatment has been requested for the redacted portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as ****. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission. (B) In addition to any other remedy available to it under this Agreement or at law, EPE may, to the extent Seller fails to perform or abide by the terms of this Agreement, or by order of a Governmental Authority of competent jurisdiction, before, on, or after termination of this Agreement, draw from the Security Fund such amounts as are necessary to recover amounts owing to EPE pursuant to this Agreement. Such amounts include any damages due to EPE and any amounts for which EPE is entitled to indemnification under this Agreement. EPE must provide notice to Seller ten (10) Business Days prior to drawing such amounts from the Security Fund. If Seller fails to deliver payment of such amounts by check or electronic funds transfer to EPE within ten (10) Business Days of such notification, EPE may, in its sole discretion, draw all or any part of such amounts due to it from any form of security to the extent available pursuant to this Section 11.1, and from all such forms, and in any sequence EPE may select. Any failure to draw upon the Security Fund or other security for any damages or other amounts due to EPE shall not prejudice EPE’s rights to recover such damages or amounts in any other manner. (C) The Security Fund shall be established in the amounts specified in Section 11.1(A) above, shall be maintained at Seller’s sole expense, shall be originated by or deposited in a financial institution or company acceptable to EPE and meeting the requirements specified in Section 11.1(C)(1) below (“Issuer”), and, prior to the Commercial Operation Date, shall be (i) in the form of the instrument described in Section 11.1(C)(1) below, or (ii) at Seller’s election and at EPE’s reasonable discretion, in the form described in Section 11.1(C)(2) or 11.1(C)(3) below: (1) An irrevocable standby letter of credit in a form and substance acceptable to EPE, from an Issuer with an unsecured bond rating (not enhanced by third-party support) equivalent to A- or better as determined by both Standard & Poor’s and Moody’s, or, if either one or both are not available, equivalent ratings from alternate rating sources acceptable to EPE (“Letter of Credit”). In addition, if such unsecured bond rating of the Issuer is exactly equivalent to A-, the Issuer must not be on credit watch or similar classification, or have a negative outlook by a rating agency. Such Letter of Credit must be consistent with this Agreement and shall include a provision for at least thirty (30) Days advance notice to EPE of any expiration or earlier termination of the Letter of Credit, so as to allow EPE sufficient time to exercise its rights under the Letter of Credit should Seller fail to extend or replace the same. The form of the Letter of Credit must meet EPE’s requirements to ensure that claims or draw-downs can be made unilaterally by EPE in accordance with the terms of this Agreement. Such security must be issued for a minimum term of three hundred and sixty (360) Days. Seller shall cause the renewal or extension of the security for additional consecutive terms of three hundred and sixty (360) Days or more (or, if shorter, the remainder of the Term) no later than thirty (30) Days prior to each expiration date of the Letter of Credit. If the Letter of Credit is not renewed or extended as required herein, EPE shall have the right to draw immediately upon the Letter of Credit and to place the amounts so drawn, at Seller’s cost and with Seller’s funds, in an interest bearing escrow account in accordance with Section 11.1(C)(2) below. The Letter of Credit shall be governed by the Uniform Customs and Practice for Documentary Credits (2007 Revision), International Chamber of Commerce Brochure No. 500 (the “UCP”), except to the extent that the terms hereof are inconsistent with the ****=Confidential treatment has been requested for the redacted portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as ****. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission. provisions of the UCP, in which case the terms of the Letter of Credit shall govern. (2) United States currency deposited with an Issuer, in which EPE holds a first and exclusive security interest perfected by control, either: (i) in an account under which EPE is designated as beneficiary with sole authority to draft from the account or otherwise access the security; or (ii) in an account held by Issuer as escrow agent with instructions to pay claims made by EPE pursuant to this Agreement, such instructions to be in a form satisfactory to EPE (each an “Account”). Security provided in this form shall include a requirement for immediate notice to EPE from Issuer and Seller in the event that the sums held as security in the account do not at any time meet the required level for the Security Fund as set forth in this Section 11.1. Funds held in the account may be deposited in a money-market fund, short-term treasury obligations, investment-grade commercial paper and other liquid investment-grade investments with maturities of three months or less, with all investment income thereon to be taxable to, and to accrue for the benefit of, Seller. After the Commercial Operation Date is achieved, annual account sweeps for recovery of interest earned by the Security Fund shall be allowed by Seller. At such times as the balance in the escrow account exceeds the amount of Seller’s obligation to provide security under this Agreement, EPE shall remit to Seller on demand any excess in the escrow account above Seller’s obligations. (3) A guaranty in a form and substance acceptable to EPE, from an Issuer with a senior unsecured credit rating (not enhanced by third-party support) equivalent to BBB+ or better as determined by both Standard & Poor’s and Moody’s, or if either one or both are not available, equivalent ratings from alternate rating sources acceptable to EPE (“Guaranty”). In addition, if such senior unsecured credit rating of the Issuer is exactly equivalent to BBB+, the Issuer must not be on credit watch or similar classification, or have a negative outlook by a rating agency. EPE may reevaluate from time to time the value of any Guaranty posted by Seller for possible downgrade or for other negative circumstances. If the credit rating of the Issuer is downgraded or EPE otherwise has commercially reasonable grounds to believe that there has been a material adverse change in the creditworthiness of the Issuer, then Seller shall be required to convert the Guaranty provided by such Issuer (i) to a Letter of Credit meeting the criteria set forth in Section 11.1(C)(1) above, or, (ii) at Seller’s election and at EPE’s reasonable discretion, to an Account or a Guaranty meeting the criteria set forth in Sections 11.1(C)(2) above and 11.1(C)(3), herein, respectively, no later than thirty (30) Days after receiving notice from EPE that such conversion is required pursuant to this Section 11.1(C)(3). (D) Promptly following the end of the Term and the completion of all of Seller’s obligations under this Agreement, EPE shall release the balance of the Security Fund (including any accumulated interest, if applicable) to Seller. ****=Confidential treatment has been requested for the redacted portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as ****. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission. (E) If there is an early termination of this Agreement that is not due to default by Seller and no amounts remain outstanding and unpaid by Seller under the Agreement, EPE shall refund the Security Fund to Seller. (F) Seller shall reimburse EPE for the incremental direct expenses (including the reasonable fees and expenses of counsel) incurred by EPE in connection with the preparation, negotiation, execution or release of any security instruments, and other related documents, used by Seller to establish and maintain the Security Fund pursuant to Seller’s obligations under this Section 11.1.

Security Fund. (A) During the Term of this Agreement, Seller shall establish, fund, and maintain a security fund, pursuant to the provisions of this Article 11 (“Security Fund”), ) which shall be available to (i) pay any amount due EPE pursuant to this Agreement, whether arising before, on, or after the Commercial Operation Date or termination of this Agreement, (ii) provide EPE security that Seller will construct the Facility to meet the Construction MilestonesMilestones and achieve Commercial Operation by the Scheduled COD, and (iii) provide security to EPE to cover damages, including Replacement Liquidated Delay Damages, Capacity Shortfall Damages, and Energy Costs, should the Facility fail to achieve the Commercial Operation Date or otherwise not operate in accordance with this AgreementShortfall Damages. Seller shall establish the Security Fund at a level of twenty dollars per kilowatt One Hundred Dollars ($20/kW100) per kW of the Expected Nameplate Capacity (the “Required Amount”), thirty percent (30%) of Designed Maximum Output which shall be established no later than thirty five (305) Business Days following the Execution Effective Date. Seller shall increase the Security Fund by twenty dollars per kilowatt ($20/kW) of Designed Maximum Output, to a total level of forty dollars per kilowatt ($40/kW) within thirty (30) Days of the later of (y) obtaining construction permits or (z) execution of the Interconnection Agreement, but in no event later than June 1, 2010. Seller shall increase the Security Fund by twenty dollars per kilowatt ($20/kW) of Designed Maximum Output, to a total level of sixty dollars per kilowatt ($60/kW) of Designed Maximum Output, at least thirty (30) days prior to the Commercial Operation DateRequired Amount within five (5) Business Days following satisfaction or waiver of all conditions set forth in ARTICLE 6. Seller shall maintain the Security Fund at such required level the Required Amount throughout the remainder of the Term; provided, that, commencing on the Commercial Operation Date, the Required Amount will be reduced to Seventy-Five Dollars ($75) per kW of the Expected Nameplate Capacity. Seller shall replenish the Security Fund to the applicable required level portion of the Required Amount within ten five (105) Business Days after any draw on the Security Fund by EPE. ****=Confidential treatment has been requested for the redacted portions of this exhibit. The copy filed herewith omits the information subject ; provided, however, that Seller shall have no obligation to the confidentiality request. Omissions are designated as ****. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission. (B) In addition to any other remedy available to it under this Agreement or at law, EPE may, to the extent Seller fails to perform or abide by the terms of this Agreement, or by order of a Governmental Authority of competent jurisdiction, before, on, or after termination of this Agreement, draw from replenish the Security Fund such amounts as are necessary to recover amounts owing to EPE pursuant to this Agreement. Such amounts include any damages due to EPE and any amounts for which EPE is entitled to indemnification under this Agreement. EPE must provide notice to Seller ten (10) Business Days prior to drawing such amounts from the Security Fund. If Seller fails to deliver payment of such amounts by check or electronic funds transfer to EPE within ten (10) Business Days of such notification, EPE may, in its sole discretion, draw all or any part of such amounts due to it from any form of security to the extent available pursuant to this Section 11.1, and from all such forms, and in any sequence EPE may select. Any failure to draw upon the Security Fund or other security for any damages or other amounts due to EPE shall not prejudice EPE’s rights to recover such damages or amounts in any other manner. (C) The Security Fund shall be established in the amounts specified in Section 11.1(A) above, shall be maintained at Seller’s sole expense, shall be originated by or deposited in a financial institution or company acceptable to EPE and meeting the requirements specified in Section 11.1(C)(1) below (“Issuer”), and, prior to the Commercial Operation Date, shall be (i) in the form of the instrument described in Section 11.1(C)(1) below, or (ii) at Seller’s election and at EPE’s reasonable discretion, in the form described in Section 11.1(C)(2) or 11.1(C)(3) below: (1) An irrevocable standby letter of credit in a form and substance acceptable to EPE, from an Issuer with an unsecured bond rating (not enhanced by third-party support) equivalent to A- or better as determined by both Standard & Poor’s and Moody’s, or, if either one or both are not available, equivalent ratings from alternate rating sources acceptable to EPE (“Letter of Credit”). In addition, if such unsecured bond rating of the Issuer is exactly equivalent to A-, the Issuer must not be on credit watch or similar classification, or have a negative outlook by a rating agency. Such Letter of Credit must be consistent with this Agreement and shall include a provision for at least thirty (30) Days advance notice to EPE of any expiration or earlier termination of the Letter of Credit, so as to allow EPE sufficient time to exercise its rights under the Letter of Credit should Seller fail to extend or replace the same. The form of the Letter of Credit must meet EPE’s requirements to ensure that claims or draw-downs can be made unilaterally by EPE in accordance with the terms of this Agreement. Such security must be issued for a minimum term of three hundred and sixty (360) Days. Seller shall cause the renewal or extension of the security for additional consecutive terms of three hundred and sixty (360) Days or more (or, if shorter, the remainder of the Term) no later than thirty (30) Days prior to each expiration date of the Letter of Credit. If the Letter of Credit is not renewed or extended as required herein, EPE shall have the right to draw immediately upon the Letter of Credit and to place the amounts so drawn, at Seller’s cost and with Seller’s funds, in an interest bearing escrow account in accordance with Section 11.1(C)(2) below. The Letter of Credit shall be governed by the Uniform Customs and Practice for Documentary Credits (2007 Revision), International Chamber of Commerce Brochure No. 500 (the “UCP”), except to the extent that the terms hereof are inconsistent with the ****=Confidential treatment has been requested for the redacted portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as ****. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission. provisions of the UCP, in which case the terms of the Letter of Credit shall govern. (2) United States currency deposited with an Issuer, in which EPE holds a first and exclusive security interest perfected by control, either: (i) in an account under which EPE is designated as beneficiary with sole authority to draft from the account or otherwise access the security; or (ii) in an account held by Issuer as escrow agent with instructions to pay claims made by EPE pursuant to this Agreement, such instructions to be in a form satisfactory to EPE (each an “Account”). Security provided in this form shall include a requirement for immediate notice to EPE from Issuer and Seller in the event that the sums held as security in the account do not at any time meet the required level for the Security Fund as set forth in this Section 11.1. Funds held in the account may be deposited in a money-market fund, short-term treasury obligations, investment-grade commercial paper and other liquid investment-grade investments with maturities of three months or less, with all investment income thereon to be taxable to, and to accrue for the benefit of, Seller. After the Commercial Operation Date is achieved, annual account sweeps for recovery of interest earned by the Security Fund shall be allowed by Seller. At such times as the balance in the escrow account exceeds the amount of Seller’s obligation to provide security under this Agreement, EPE shall remit to Seller on demand any excess in the escrow account above Seller’s obligations. (3) A guaranty in a form and substance acceptable to EPE, from an Issuer with a senior unsecured credit rating (not enhanced by third-party support) equivalent to BBB+ or better as determined by both Standard & Poor’s and Moody’s, or if either one or both are not available, equivalent ratings from alternate rating sources acceptable to EPE (“Guaranty”). In addition, if such senior unsecured credit rating of the Issuer is exactly equivalent to BBB+, the Issuer must not be on credit watch or similar classification, or have a negative outlook by a rating agency. EPE may reevaluate from time to time the value of any Guaranty posted by Seller for possible downgrade or for other negative circumstances. If the credit rating of the Issuer is downgraded or EPE otherwise has commercially reasonable grounds to believe that there has been a material adverse change in the creditworthiness of the Issuer, then Seller shall be required to convert the Guaranty provided by such Issuer (i) to a Letter of Credit meeting the criteria set forth in Section 11.1(C)(1) above, or, (ii) at Seller’s election and at EPE’s reasonable discretion, to an Account or a Guaranty meeting the criteria set forth in Sections 11.1(C)(2) above and 11.1(C)(3), herein, respectively, no later than thirty (30) Days after receiving notice from EPE that such conversion is required pursuant to this Section 11.1(C)(3). (D) Promptly following the end of the Term and the completion of all of Seller’s obligations under this Agreement, EPE shall release the balance of the Security Fund (including any accumulated interest, if applicable) to Seller. ****=Confidential treatment has been requested for the redacted portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as ****. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission. (E) If there is an early termination of this Agreement that is not due to default by Seller and no amounts remain outstanding and unpaid by Seller under the Agreement, EPE shall refund the Security Fund to Seller. (F) Seller shall reimburse EPE for the incremental direct expenses (including the reasonable fees and expenses of counsel) incurred by EPE in connection with the preparation, negotiation, execution or release of any security instruments, and other related documents, used by Seller to establish and maintain the Security Fund pursuant to Seller’s obligations under this Section 11.1.