Exhibit A Indicative Senior Term Sheet Senior Bank Financing for the Western Illinois Ethanol Project, Griggsville, Illinois

Transcription

1 Exhibit A Indicative Senior Term Sheet Senior Bank Financing for the Western Illinois Ethanol Project, Griggsville, Illinois The terms outlined below in this Indicative Senior Term Sheet (the Term Sheet ) are for discussion purposes only, and this Term Sheet does not constitute a commitment, offer, agreement in principle or other agreement or obligation by WestLB AG, New York Branch ( WestLB ) or any of its subsidiaries or other affiliates to provide financing. Any binding commitment by WestLB would be subject to, inter alia, due diligence, receipt of all required credit approvals by WestLB and negotiation and mutual agreement of satisfactory definitive documentation evidencing the credit facilities described in this Term Sheet (the Senior Financing Documents ). Type of Financing: Borrower: Sponsor: Senior secured first priority non-recourse financing (the Senior Financing ) consisting of: (i) construction and term loans (the Senior Construction and Term Facility ) to fund part of the costs of the Project (as defined below), and (ii) a working capital facility (the Working Capital Facility ) with a letter of credit sub-facility (the L/C Sub-facility ). The total capital requirement is currently estimated to be $160.6 million. Western Illinois Ethanol Project LLC (the Borrower ), a special purpose bankruptcy remote entity formed under the laws of Illinois that will directly own 100% of a 55 million gallon-per-year undenatured ethanol production facility located near Griggsville, Illinois (the Project ). Heartland Ethanol, LLC (the Sponsor ), a limited liability company formed under the laws of Delaware that will own directly, on or before Financial Closing (as defined below), 100% of the equity interests in the Borrower. Pursuant to a sponsor support and completion guarantee agreement (the Sponsor Support Agreement ), the Sponsor will agree to make additional equity contributions from time to time to pay Project costs (including construction cost overruns and fixed costs (including debt service during construction)) if sufficient amounts are not available under the construction budget in order to guarantee final completion of the Project at the guaranteed performance levels. The cap on the Sponsor s obligations under the Sponsor Support Agreement shall be $10.0 million. The Sponsor Support Agreement will be backed by a letter of credit in form and substance satisfactory to the Senior Lenders and issued by a bank satisfactory to the Senior Lenders (the Letter of Credit ). Use of Proceeds: The Senior Construction and Term Facility will be used to finance a portion of the construction of the Project, including, as applicable, construction costs, interest on the Senior Construction and Term Facility during construction, lenders and advisers costs and fees in relation to the Project, land costs, Project development costs and other agreed Project costs, including pre-funding of 3 months of the DSRA at Conversion (as defined below). The Working Capital Facility will be used to provide the Borrower with working capital for the Project. The Borrower may also have a gas purchase letter of credit and a transportation letter of credit issued under the L/C Sub-facility of

2 the Working Capital Facility in connection with the security requirements under its gas sales agreement with Tylex Ethanol Energy Services, L.P. in respect of the Project. WestLB may structure the Senior Financing with multiple tranches of loans as it deems appropriate and necessary. Sole Lead Arranger and Bookrunner: Administrative Agent: Collateral Agent: Securities Intermediary Bank: Senior Lenders: Amount of Senior Financing: WestLB WestLB WestLB To be determined WestLB and other financial institutions selected by WestLB in consultation with the Borrower. Up to $75.1 million, consisting of: (i) Up to $66.4 million in the aggregate for the Senior Construction and Term Facility; and (ii) Up to $8.7 million for the Working Capital Facility, with up to $3.7 million of such Working Capital Facility to be available under the L/C Sub-facility thereof. The remaining Project costs will be funded by (a) equity contributions in an amount of approximately $49.2 million, and (b) up to $45 million in subordinated secured tax-exempt bonds (the Subordinated Bonds ) to be issued by the Illinois Finance Authority (the Bond Issuer ) under the terms of a trust indenture with The Bank of New York Trust Company, N.A. as trustee (the Bond Trustee ). The Bond Issuer will lend the proceeds of the Subordinated Bonds to the Borrower pursuant to a loan agreement between the Bond Issuer and the Borrower. 2

3 Tenor: For the Senior Construction and Term Facility, a construction loan of approximately 20 months from Financial Closing and, upon conversion of the construction loan ( Conversion, and such date the Conversion Date ), a term loan of up to 6 years. The Working Capital Facility (other than the L/C Sub-facility thereof) will be available for five years beginning on the Conversion Date. Up to $760,000 of the L/C Sub-facility will be available from Financial Closing, and the remaining portion of the L/C Sub-facility will become available 30 days prior to mechanical completion of the Project. The Working Capital Facility (other than the L/C Sub-facility) shall require an annual clean up provision, and will be subject to customary inventory and receivables borrowing base calculations. Closings; Borrowings: Priority of Funding: Interest Rate: Applicable Spread: Scheduled Amortization: Closing of the Senior Financing shall occur on or prior to [TBD] (such closing, the Financial Closing ). The Senior Financing shall be available only after all equity and the proceeds of the Subordinated Bonds 1 have been applied to the Project costs. LIBOR plus Applicable Spread, payable quarterly in arrears basis points anticipated for the Senior Financing. For the Senior Construction and Term Facility, 6% per annum of the initial commitment amounts of the Senior Construction and Term Facility payable on a quarterly basis, commencing on the first quarterly payment date after the earlier of the Conversion Date and the expiration of the 20-month construction period. Any outstanding amounts will be payable in full on the final maturity date of the relevant facility. Security: Hedging Program: The Senior Financing will have a first priority perfected lien on all Project assets and equity interests in the Borrower. The Borrower shall submit a proposed commodity hedging program to the Agent for approval six months prior to the Project being operational, such approval not to be unreasonably withheld. The Borrower acknowledges that the purpose of the Hedging Program is to reduce (i) the Project s exposure to adverse swings in commodity spot prices and (ii) margin volatility. Interest rate hedging for at least 50% of the projected principal amount of the debt, or a suitable alternative dynamic hedge, will be required beginning 10 days after Financial Closing through maturity. Optional Prepayment: Optional prepayments of the Senior Financing, in whole or in part, shall be permitted at the Borrower s option, provided that the Borrower reimburses all breakage costs to the Senior Lenders, if any. Prepayments of less than 1 Mechanics of funding of subordinated bonds to be discussed. 3

4 US$500,000 shall not be permitted. Optional Prepayments shall be applied to the Senior Construction and Term Facility and the Working Capital Facility as requested by, and at the sole option of, the Borrower, with (a) the portion applied to the Senior Construction and Term Facility being applied to the remaining principal installments of the Senior Construction and Term Facility in inverse order of maturity and (b) the portion applied to the Working Capital Facility being used to prepay outstanding Working Capital Facility loans (and, in the case of any drawn letters of credit under the L/C Sub-facility, to cash collateralize such letters of credit) or set aside in a working capital reserve account (the WCRA ), with a corresponding reduction in the Working Capital Facility commitment amount by the amount set aside in the WCRA. Mandatory Prepayment: Usual and customary for projects of similar type, including but not limited to the following: 1) Proceeds from the sale of assets, insurance proceeds or condemnation proceeds in excess of $250,000 received by the Borrower. Insurance proceeds or condemnation proceeds in excess of $250,000 will be subject to the Borrower s right to use such proceeds for replacement or reconstruction on customary conditions; 2) The greater of (i) 75% of free cash flow and (ii) up to 100% of free cash flow if required to reduce the sum of the aggregate outstanding principal amount of the Senior Construction and Term Facility at the end of each quarterly period to the applicable Target Balance Amount (as defined below); 3) Up to 100% of money deposited in the Prepayment Holding Account, subject to the DSCR Test and Application of Funds in the Prepayment Holding Account, as described below; and 4) Funds on deposit in the VEETC Sub-account (as defined below) to the extent required to be used to prepay the Senior Financing pursuant to the section below entitled VEETC Event. Mandatory Prepayments shall be applied first to the Senior Construction and Term Facility, until such facility has been paid in full; and second, to the Working Capital Facility and to fund the WCRA. Mandatory prepayments of the Senior Construction and Term Facility shall be applied to the remaining principal installments of the Senior Construction and Term Facility in inverse order of maturity. Mandatory prepayments of the Working Capital Facility shall be used to prepay outstanding Working Capital Facility loans (and, in the case of any drawn letters of credit under the L/C Sub-facility, to cash collateralize such letters of credit). If the Senior Construction and Term Facility commitments have been cancelled or terminated in full and all outstanding Senior Construction and Term Facility loans have been repaid in full, within 90 days of the date thereof (i) all Working Capital Facility commitments shall be automatically and permanently 4

5 terminated in full and (ii) all outstanding Working Capital Facility loans shall be repaid in full (and, in the case of any drawn letters of credit under the L/C Subfacility, all such letters of credit shall be cash collateralized in full). Target Balance Amount: Debt Service Reserve Account: Priority of Application of Funds: The initial amount of the Senior Construction and Term Facility, reduced by 1/20 th of such amount on each quarterly date subsequent to the Conversion Date. A 6-month debt service reserve account ( DSRA ) covering scheduled debt service on the Senior Financing, with 3 months to be funded on the Conversion Date with cash or through a letter of credit from a reasonably acceptable bank, and the required balance to be funded after the Conversion Date from available cash flow in accordance with item (vii) of the Waterfall. The DSRA shall be funded in full no later than one year after the Conversion Date. All cash derived from the Project as well as amounts received under Federal, State and Local incentive programs, shall be held in a Project Cashflow Account (to be established) and shall be applied in the following order (the Waterfall ): (i) (ii) (iii) (iv) (v) (vi) (vii) To pay budgeted operating expenses, including cost of corn, commodity hedge expense incurred under the Hedging Program in the ordinary course of business, natural gas, electricity, overhead and property taxes and other working capital needs; To pay required maintenance capital expenditure, as reviewed and agreed to with the Independent Engineer; provided that no such review and agreement shall be required for (a) capital expenditures incurred in connection with regulatory or environmental compliance of not more than $500,000 per occurrence and $1,000,000 in aggregate per annum and (b) other capital expenditures of not more than $500,000 in the aggregate per annum; To pay interest and fees on the Senior Construction and Term Facility and the Working Capital Facility; To pay principal under the Working Capital Facility to the extent required pursuant to the annual clean-up provision or as a result of a reduction of the borrowing base, and to pay any obligations with respect to drawn letters of credit under the L/C Sub-facility of the Working Capital Facility; To pay scheduled principal under the Senior Construction and Term Facility; To fund the WCRA in the manner set forth under the section above entitled Optional Prepayments ; To fund the DSRA to the level required under the section above entitled Debt Service Reserve Account ; (viii) 5 Provided that no Default or Event of Default (each as defined below) has occurred and is continuing, to pay interest on the Subordinated

6 Bonds accrued in the current quarter, up to a maximum of 8.5% per annum; (ix) (x) (xi) (xii) (xiii) (xiv) (xv) To prepay the Senior Financing in an amount equal to 75% of the cash remaining after item (viii); To prepay the Senior Financing in an amount equal to such amount of the cash remaining after item (ix) as shall be necessary to apply towards prepayment of the Senior Financing in order for the Target Balance Amount to be met; To fund the Prepayment Holding Account, or to prepay the Senior Financing, in accordance with the cash sweep/trap mechanism based on the DSCR Tests (see below); If a VEETC Event has occurred and is continuing (see below), to fund the VEETC Sub-account; Provided that the Release of Equity Distributions conditions (see below) are met, to release an equity distribution in order to satisfy current interest on the Subordinated Bonds not paid under item (viii) above and deferred interest on the Subordinated Bonds; Provided that the Release of Equity Distributions conditions (other than item (iii) of the section below entitled Release of Equity Distributions ) are met, to release an equity distribution in order to pay Project-related tax liabilities (to be refined in consultation with tax counsel); and Provided that the Release of Equity Distributions conditions (see below) are met, to pay remaining amount as additional distributions. Release of Equity Distributions: Equity distributions (including any payment in respect of the Subordinated Bonds (other than interest payable under clause (viii) of the Waterfall)) shall be made on a quarterly basis after Conversion, to coincide with the scheduled interest and principal payment dates, subject to, without limitation: (i) no Default or Event of Default existing or resulting from the equity distribution, (ii) the DSRA and the WCRA being fully funded, (iii) no VEETC Event having occurred and being continuing and (iv) compliance with the DSCR Test (see below). No equity distributions shall be allowed prior to Conversion. DSCR Test: On any permitted equity distribution date, the DSCR Tests are performed to determine the level of equity distributions permissible in that period. DSCR is defined as (i) all revenues (other than extraordinary revenues (but including tax refunds)) net of operating expenses (including applicable taxes) and required maintenance capital expenditures, divided by (ii) the interest and scheduled principal payments for that period due under the Senior Financing. A Historical DSCR shall be calculated for the preceding 12-month period based 6

7 on actual historical figures. A Prospective DSCR shall also be calculated for the succeeding 12-month period, based on projections of the Borrower, feedstock and product pricing forecasts provided by the Independent Market Consultant, and operating costs forecasts provided by the Independent Engineer, all of which will be developed together with the Borrower. DSCR Tests 1. Both the Historical DSCR and Prospective DSCR are greater than or equal to 1.50x: If on any equity distribution date both the Historical DSCR and the Prospective DSCR are greater than or equal to 1.50x, no sweep to the Prepayment Holding Account, and no prepayment of the Senior Financing, will be required at item (xi) in the Waterfall. 2. Historical DSCR is greater than or equal to 1.50x and the Prospective DSCR is below 1.50x: If on any equity distribution date the Historical DSCR is greater than or equal to 1.50x and the Prospective DSCR is below 1.50x, all amounts remaining after item (x) in the Waterfall will be deposited into the Prepayment Holding Account. 3. Historical DSCR is below 1.50x: If on any equity distribution date the Historical DSCR is below 1.50x, all cash remaining after item (x) in the Waterfall shall be swept and used to make prepayments of the Senior Financing as described in Mandatory Prepayments above. VEETC Event: A VEETC Event shall be deemed to have occurred if, any time after June 30, 2009, the Volumetric Ethanol Excise Tax Credit (the VEETC ) (i) has expired or (ii) is scheduled to expire in less than 1.5 years, unless in each case a comparable credit satisfactory to the lenders is available. Application of Funds in the Prepayment If a VEETC Event has occurred and is continuing, then, if the aggregate of the cash sweep at items (ix) and (x) in the Waterfall is in an amount less than 90% of free cash flow after item (viii), then an amount equal to the difference between (a) 90% of free cash flow remaining after item (viii) in the Waterfall and (b) the amount of the cash sweeps made at items (ix) and (x) shall be deposited into a VEETC sub-account of the Prepayment Holding Account (the VEETC Sub-account ). If the VEETC expires, all amounts on deposit in the VEETC Sub-account shall be used to make prepayments of the Senior Financing as described in Mandatory Prepayments above. If a VEETC Event ceases to occur, any amounts on deposit in the VEETC Subaccount shall be applied in accordance with the Waterfall. Funds in the Prepayment Holding Account, pursuant to DSCR Test conducted in period x, shall remain there until the next quarterly DSCR Test date in period 7

8 Holding Account: x+1. At the next quarterly DSCR Test date, which shall coincide with the interest and principal payment date in period x+1, both a Historical DSCR for the preceding 12-month period and a Prospective DSCR for the succeeding 12- month period shall be calculated. Subject to the Historical and Prospective DSCR, funds trapped in the Prepayment Holding Account (other than the VEETC Sub-account thereof) will be allocated as follows: (i) If the Historical DSCR and the Prospective DSCR calculated in period x+1 are greater than or equal to 1.50x, then, subject to conditions (i), (ii) and (iii) in the Release of Equity Distributions section above, all amounts in the Prepayment Holding Account will be distributed. (ii) If the Historical DSCR calculated in period x+1 is greater than or equal to 1.50x and the Prospective DSCR calculated in period x+1 is below 1.50x, then funds will remain trapped in the Prepayment Holding Account. (iii) If the Historical DSCR calculated in period x+1 is less than 1.50x then all amounts in the Prepayment Holding Account shall be applied as a mandatory prepayment of the Senior Financing, and applied as described under Mandatory Prepayment above. Notwithstanding the above, the Borrower shall have the option at all times to apply all or a portion of the funds in the Prepayment Holding Account towards the prepayments of the Senior Financing, and applied as described under Optional Prepayment above. Independent Market Consultant(s): Independent Engineer: Insurance Consultant: Environmental Consultant: Muse Stancil, who shall provide an initial independent report on the corn, distillers grains and ethanol market as well as related pricing forecasts on an annual basis while the Senior Financing is outstanding. However, quarterly reviews may be required if there is a 20% or greater variance in the annual operating budget submitted for Senior Lender approval. Luminate, LLC, who shall provide an independent report on the technical aspects of the Project and, on behalf of the Senior Lenders, monitor construction progress, review operating budget on an annual basis and provide forecasts of operating expenses and capital expenditures on an annual basis, while the Senior Financing is outstanding. Moore-McNeil, LLC Luminate, LLC Senior Counsel: Lenders Chadbourne & Parke LLP Project Contracts: Project Contracts which shall be satisfactory in all respects to the Senior Lenders shall include, without limitation, the following agreements: EPC contract 8

9 Feedstock supply agreement Ethanol marketing agreement DDGS marketing agreement Operating and maintenance agreements Natural gas and electricity supply agreement All relevant Project permits Real estate documents Conditions Precedent to Financial Closing: The conditions precedent to Financial Closing will be customary for credit facilities of this nature (with customary qualifications), including, but not limited to, the following (each of which must be satisfactory to the Senior Lenders): 9 1. Delivery of legal opinions from counsel to the Borrower, the Sponsor, material Project parties, the Bond Trustee and bond counsel. 2. Delivery of base case project projections with mutually agreed assumptions, demonstrating certain agreed minimum coverage levels, as agreed with the Independent Engineer; 3. No Event of Default or event that would become an Event of Default with the giving of notice or passage of time or both under the Senior Financing Documents (a Default ) shall have occurred and be continuing; 4. Insurance coverage including, without limitations, builder s risk and performance insurance, shall be in full force and effect and delivery of an Insurance Consultant s report and certificate and insurance brokers certificates; 5. Delivery of a final report and certificate from the Independent Engineer, the Independent Market Consultant and the Insurance Consultant; 6. Delivery of a final Phase I and, if necessary, a Phase II environmental site assessment for the site of the Project; 7. Each of the Senior Financing Documents and relevant Project Contracts shall be in full force and effect; 8. Delivery of a construction schedule and budget for the plant, as agreed to with the Independent Engineer; 9. Intercreditor agreement among the collateral agent for the Senior Lenders, the Bond Issuer and the Bond Trustee in form and substance satisfactory to the Senior Lenders and in full force and effect; 10. Documentation for the Subordinated Bonds in form and substance reasonably acceptable to the Senior Lenders and in full force and effect; and 11. Real estate survey of the Project site and title insurance policy in form

10 and substance reasonably satisfactory to the Senior Lenders. Conditions Precedent to Each Drawdown: Customary for credit facilities of this nature (with customary qualifications) and others arising as a result of due diligence, including, but not limited to, the following (each of which must be reasonably satisfactory to the Senior Lenders): Receipt by the Administrative Agent of a borrowing request (which shall include customary certifications as to the status of construction of the Project) from the Borrower; 2. No Default or Event of Default (as certified to by the Borrower); 3. All representations and warranties (excluding any that expressly relate to an earlier date) are true and correct in all material respects (as certified to by the Borrower); 4. Since the Financial Closing, no Material Adverse Effect has occurred and is continuing ( Material Adverse Effect means an event, development or circumstance that has had or could reasonably be expected to have a material adverse effect on (a) the business, assets, property, condition (financial or otherwise) or operations of the Borrower or the Project, taken as a whole, (b) the ability of the Borrower, the Sponsor, any party to a Project document or any party to a Senior Financing Document to perform its material obligations under any Project document or Senior Financing Document to which it is a party, (c) creation, perfection or priority of the Security, or (d) the rights or remedies of any Senior Lender under any Senior Financing Document); 5. An appropriate endorsement to the title policy with respect to which a drawing is being made; 6. The required amount of equity has been contributed, all proceeds of the Subordinated Bonds have been disbursed, and all such equity and proceeds of the Subordinated Bonds have been applied to pay Project costs, as verified by the Independent Engineer; 7. The Sponsor Support Agreement and the Letter of Credit shall be satisfactory to the Senior Lenders and shall be in full force and effect; 8. The Senior Lenders shall have received confirmation from the Independent Engineer to the effect that (a) the funds to be drawn are to be used for approved project costs consistent with the terms of the Senior Financing Documents and the EPC contract, (b) requested draws are in compliance with the applicable drawdown schedule and construction budget, (c) outlining the status of construction progress, and (d) confirming that the funds committed but unused under the Senior Financing Documents are sufficient to achieve Conversion; 9. No litigation that could reasonably be expected to have a Material Adverse Effect; and

11 10. All necessary permits, licenses, consents, and other approvals, including compliance with the Equator Principles, then required for the Project, and not customarily obtained at a later stage of development shall have been obtained, shall be in effect, shall have been provided to the Senior Lenders and, except with respect to non-discretionary, ministerial permits, all relevant waiting/appeal periods shall have expired and no such permit or approval shall be subject to appeal. Conditions Precedent to Conversion: Customary for credit facilities of this nature (with customary qualifications) and others arising as a result of due diligence, including, but not limited to, the following (each of which must be reasonably satisfactory to the Senior Lenders): 1. The Project shall be complete and paid for (other than punchlist items), as certified by the Independent Engineer, and no mechanic s liens or similar liens shall have been filed thereon; 2. All required insurance for the Project shall be in full force and effect, as certified by the Insurance Consultant; 3. No Default or Event of Default shall have occurred or be continuing; 4. Receipt of all permits and governmental approvals then required for the operation of the Project; 5. All reserve accounts, including the DSRA and the WCRA, are funded to the required levels; 6. Delivery of legal opinions satisfactory to the Senior Lenders; and 7. Since the Financial Closing, no Material Adverse Effect has occurred and is continuing. Representations and Warranties: The Senior Financing Documents will include usual and customary representations and warranties (with customary knowledge and materiality qualifications), including, but not limited to, the following: 1. LLC existence, power and due authorization; execution delivery, legality, validity, binding effect and enforceability of the Senior Financing Documents and Project Contracts; non-contravention of applicable laws, rules and regulation, organizational documents and contracts; consents and approvals; 2. No Default or Event of Default has occurred and is continuing; 3. Compliance with laws; 4. Accuracy of information; 5. The Borrower has good title to all its assets, and no encumbrance exists except agreed permitted liens; 11

12 6. Perfection and priority of the liens and security interests contemplated by the Senior Financing Documents, subject to agreed permitted liens; 7. Receipt of permits and governmental approvals other than those which are not required until a later date; 8. There are no environmental liabilities, claims, releases or other matters of environmental concern; and 9. Single purpose nature of the Borrower. Affirmative Covenants: The Borrower will be subject to customary and usual affirmative covenants (with customary qualifications and baskets), including, but not limited to, the following: The Borrower shall use the proceeds of the Senior Financing and the proceeds of all required equity contributions and the Subordinated Bonds exclusively for approved Project costs; 2. The Borrower shall cause the Project to be constructed in accordance with the EPC contracts; 3. The Borrower shall cause the Project to be operated and maintained in accordance with the material Project documents, and all relevant operating budgets; 4. The Borrower shall comply with all applicable laws and permits; 5. The Borrower shall maintain insurance of types and amounts to be agreed with the Senior Lenders (after consultation with the Senior Lenders Insurance Consultant), and the Senior Lenders will be named additional insureds, and the Administrative Agent loss payee, under casualty, business interruption and builders risk coverage; 6. The Borrower shall provide the Administrative Agent with (a) copies of its quarterly and audited annual financial statements, and (b) copies of certain material Project parties audited annual financial statements, in each case prepared in compliance with GAAP; 7. The Borrower shall provide the Administrative Agent with copies of monthly progress reports received from the EPC contractor (all progress reports are to be reviewed and certified by the Independent Engineer) and other customary notices with respect to the Project; 8. The Borrower shall provide the Administrative Agent with annual reports of operations and annual operating budgets for the Project; 9. The Borrower shall provide the Administrative Agent with reasonable access to the Project and their financial books and records; and 10. The Borrower shall maintain good title to the Project and maintain the

13 priority and perfection of the liens created by the Senior Financing Documents. Negative Covenants: The Borrower will be subject to customary and usual negative covenants (with customary qualifications and baskets), including, but not limited to, the following: 1. The Borrower will not permit any liens on its assets or on the equity interests in the Borrower other than permitted liens; 2. The Borrower will not incur any additional indebtedness, subject to exceptions to be agreed; 3. The Borrower will not agree to amend or waive any provision of any material Project document or to amend or waive any provisions of any Project Contract or material Project document in excess of certain limits to be agreed without the consent of the Administrative Agent; 4. The Borrower will not enter into any transactions with affiliates except as permitted under the Senior Financing Documents; 5. The Borrower will not sell or transfer assets other than if the assets are being replaced in the ordinary course of business, are obsolete, or are not required for the reliable operation or maintenance of the Project, including grants of easements and similar rights; 6. The Borrower shall not create any subsidiaries; and 7. The Borrower will not enter into any change order under the EPC contract without the consent of the Administrative Agent, or the required Senior Lenders, as agreed during documentation, unless (among other things) (a) such change order does not exceed amounts to be agreed and (b) the Borrower certifies (and the Independent Engineer confirms) that (i) such change order is technically feasible, (ii) such change order is not reasonably expected to materially and adversely affect the operation or reliability of the Project, and (iii) the implementation of such change order is not reasonably expected to delay the Project. Events of Default: The Senior Financing Documents will contain customary and usual Events of Default (with customary cure rights and baskets), including, but not limited to, the following: 1. Failure to pay any principal when due, or failure to pay any interest or fees within three days of the date when due; 2. Bankruptcy, insolvency, etc. of the Borrower or the Sponsor; 3. Material default by the Borrower or by a counterparty to a material Project Contract (with customary cure rights and replacement rights); 13

14 4. Bankruptcy, insolvency, etc. of counterparties to material Project Contracts (with customary replacement rights); 5. A Change of Control shall occur ( Change of Control means (a) the Sponsor fails to maintain directly 100% of the equity interests in the Borrower, or (b) 20% or more of the equity interests in the Borrower are owned by, or under common control of, any Person other than the Sponsor); 6. Failure to achieve Conversion prior to the Date Certain (to be defined); 7. Loss of Security, other than an immaterial portion thereof; 8. Event of abandonment; 9. Cross-defaults; and Remedies: Governing Law: 10. Judgment defaults. Upon the occurrence and continuation of an Event of Default, the Senior Lenders may exercise all remedies at law or in equity including: declaring loans due, canceling commitments, cash collateralizing and exercising all rights with respect to the Security. New York law for the Senior Financing Documents. 14