This
FORBEARANCE AGREEMENT , dated as of January 1, 2009
(this “ Agreement ”), is entered into by and
among AZ BIOMASS LLC, a Delaware limited liability company and
indirect wholly-owned subsidiary of State Street Bank and Trust
Company (together with any Additional Class A Equity Investor,
the “ Class A Equity Investors ” and each a
“ Class A Equity Investor ”), SNOWFLAKE
WHITE MOUNTAIN POWER, LLC, an Arizona limited liability company
(the “ Company ”), and COBANK, ACB, as
Administrative Agent and Collateral Agent on behalf of the Secured
Parties, as such terms are defined in the Credit Agreement as
hereinafter defined (together with its successors and assigns, the
“ Forbearing Party ”).
WHEREAS ,
to finance the development, construction, operation and maintenance
of its biomass-fired power generation plant located near Snowflake,
Arizona (the “ Project ”), the Company has
entered into that certain Amended and Restated Credit Agreement,
dated as of January 1, 2009 , by and among the Company,
Renegy, LLC, an Arizona limited liability company, and Renegy
Trucking, LLC, an Arizona limited liability company (collectively,
the “ Borrowers ”), the Forbearing Party and the
financial institutions from time to time party thereto (as the same
may be further amended, modified or supplemented from time to time,
the “ Credit Agreement ”; provided ,
however , that for purposes of this Agreement, no defined
term incorporated in this Agreement from the Credit Agreement shall
be deemed amended by any such amendment, modification or
supplement);
WHEREAS ,
under the provisions of the Amended and Restated Limited Liability
Company Agreement of the Company, dated as of January 1, 2009
(as the same may be further amended, modified or supplemented from
time to time, the “ Company Operating Agreement
”), the Class A Equity Investors own certain interests
in the Company (the “ Class A Interest ”)
and are allocated certain renewable electricity production tax
credits generated by the Project under Section 45 of the
Internal Revenue Code of 1986, as amended (the “ PTC
Benefits ”);
WHEREAS ,
as a condition precedent to purchasing the Class A Interest,
the Class A Equity Investor has required the Class B
Member to pledge the Class B Interest to the Class A
Equity Investor to secure the Class B Member’s
obligations (including its obligations as Manager) under the
Company Operating Agreement and the Membership Interest Purchase
Agreement pursuant to a Pledge and Security Agreement (the “
Class B-A Pledge Agreement ”);
WHEREAS ,
it is a condition precedent to the issuance to each Class A
Equity Investor of its Class A Interest that such Class A
Equity Investor pledge, as security for payment and performance by
the Borrowers of the Obligations under the Credit Documents, to the
Forbearing Party such Class A Interest pursuant to a Pledge
Agreement
among such
Class A Equity Investor, the Forbearing Party and the Company
(each such agreement, the “ Class A Pledge
Agreement ” and all such agreements collectively the
“ Class A Pledge Agreements ”);
and
WHEREAS ,
to protect its investment in its Class A Interest, its receipt
of the PTC Benefits and, indirectly, its interest in the Project,
each Class A Equity Investor has requested, and the Forbearing
Party has agreed, that, during the Forbearance Term and so long as
no Non-Forbearance Default has occurred, the Forbearing Party
shall, and shall cause the other Secured Parties to, forbear from
exercising certain enforcement rights under the Collateral
Documents on and subject to the terms and conditions set forth
herein.
NOW,
THEREFORE , in consideration of the mutual agreements,
covenants, representations and warranties set forth herein, and
intending to be legally bound hereby, the parties hereto hereby
agree as follows:
1.
Definitions and Rules of Interpretation . All
capitalized terms not otherwise defined herein or in the preamble
and recitals hereto are as defined in the Credit Agreement
(including Exhibit A thereto), the rules of interpretation set
forth in the Credit Agreement (including Exhibit A thereto)
shall apply to this Agreement as if set forth herein, and the
following terms shall have the meaning as set forth
below:
“
Additional Class A Equity Investor ” has the
meaning given in Section 10(a).
“
Class A Collateral ” means all collateral pledged
to the Forbearing Party pursuant to the Class A Pledge
Agreements.
“
Class B-A Pledge Agreement” has the meaning given
in the recitals.
“
Class B Member ” has the meaning given in the
Company Operating Agreement.
“
Class B Pledge Agreement ” means each of the
Renegy Holdings Pledge Agreement and any other pledge agreement
executed between the Forbearing Party and a Class B
Member.
“
Class B Interest ” has the meaning given in the
Company Operating Agreement.
“ Cure
Amount ” means an amount equal to (a) the sum of
(i) the amount actually paid pursuant to a Payment Default
Cure, (ii) the amount actually paid by the Class A Equity
Investors, in conjunction with Payment Default Cures, to effect the
cure of the Events of Default specified by the Forbearing Party in
the written notice to the Class A Equity Investors pursuant to
Section 4 and (iii) the amount actually paid by the
Class A Equity Investors in order to cure any other Major
Default, Default or Event of Default minus (b) any amount
distributed to the Class A Equity Investors pursuant to
Section 3(e).
“
Forbearance Term ” has the meaning given in
Section 2.
“ Major
Defaults ” means an Event of Default pursuant to
Section 8.1.4 (provided that the Forbearing Party concludes in
good faith that such Event of Default could
reasonably be
expected to have a Material Adverse Effect), Section 8.1.5(a)
(only with respect to Sections 5.1.2, 5.17, 5.19, 5.25, 6.2,
6.3, 6.4, 6.6.2, 6.11(a), 6.30), Section 8.1.6, Section 8.1.8,
Section 8.1.9, Section 8.1.10, Section 8.1.12(a),
Section 8.1.12(b) (other than with respect to violations of
the Original Air Permit solely to the extent addressed by the Major
Source Permit), Section 8.1.13, Section 8.1.15 (except
for Major Project Documents to which an Affiliate of the Company is
a party), Section 8.1.16 and Section 8.1.17 of the Credit
Agreement.
“
Manager ” has the meaning given in the Company
Operating Agreement.
“
Membership Interest Purchase Agreement ” has the
meaning given in the Company Operating Agreement.
“
Non-Forbearance Default ” has the meaning given in
Section 5.
“ Payment
Default ” means an Event of Default pursuant to
Section 8.1.1 of the Credit Agreement.
“ Payment
Default Cure ” means a cure by the Class A Equity
Investors of any Payment Default and/or to replenish the amount of
any Reserve Account Withdrawal.
“Purchase Agreement” means that Membership
Interest Purchase Agreement dated as of January 1, 2009,
between Sponsor and the Class A Equity Investor, providing for
the purchase of the Class A Interest by the Class A
Equity Investor.
“ Reserve
Account Withdrawal ” has the meaning given in
Section 5(b)(ii).
“
Reserved Enforcement Rights ” has the meaning given in
Section 3.
“ Working
Capital Loans ” has the meaning given in the Company
Operating Agreement.
2.
Forbearance Accommodations . From the date hereof until
the earlier of the Term Loan Maturity Date and the expiration of
the Preference Period (as defined in the Company Operating
Agreement) (the “ Forbearance Term ”), the
Forbearing Party agrees solely for the benefit of the Class A
Equity Investors that, subject to the Reserved Enforcement Rights
and except during any period when any Non-Forbearance Default has
occurred and is continuing, the Forbearing Party shall not, and
shall cause each other Secured Party to not, exercise any of its
remedies under any Collateral Document or in respect of the
Collateral (including, without limitation, the Class A
Collateral pursuant to the Class A Pledge
Agreements).
3.
Reserved Enforcement Rights . Notwithstanding the
provisions of Section 2, the Forbearing Party reserves and
retains, for itself and each other Secured Party, the following
rights and remedies with respect to the Collateral provided for it
under the Credit Documents (the “ Reserved Enforcement
Rights ”):
(a) the
right to exercise its remedies with respect to the Class B
Interest under the Class B Pledge Agreement;
(b) the
right to exercise the rights of the Class B Interest with
respect to the management and control the Company or the Project in
accordance with the Company Operating Agreement, subject to
Section 5(g);
(c) the
right to realize on the value of the Collateral through the sale or
transfer of the Class B Interest, subject to the Company
Operating Agreement (and Section 9(a) hereof);
(d) the
right to access and withdraw funds from all of the Accounts in
accordance with the Credit Agreement and the other Credit Documents
(including the Collateral Documents) solely for the specific
purposes designated in Article 7 of the Credit Agreement for
such funds, including for the payment of any amount of unpaid
Obligations which have resulted, or with the passage of time will
result, in a Payment Default;
(e) the
right to access or block the distributions made or to be made to
the Company or any Sponsor Entity in accordance with the Credit
Documents; provided that if (i) a Class A Equity
Investor effects a Payment Default Cure, (ii) the amount of
any withdrawal from any Account to pay for any other item or
purpose contemplated under the Credit Documents has been
replenished from any source, and (iii) all Events of Default
that are curable by the payment of a sum of money have been so
cured, then the Forbearing Party and the Secured Parties shall not
deny the Company (or, thereby indirectly, each Class A Equity
Investor) the right to access and shall not withhold or block the
distributions to be made to the Company (and thereby, indirectly,
to each Class A Equity Investor) from the Revenue Account in
accordance with Section 7.2(b)(8) of the Credit Agreement up
to an amount not to exceed the Cure Amount;
(f) the
right to make such filings, renewals, or initiate such proceedings,
or give any notice or demand, or take any other actions (or refrain
from taking such actions) necessary in order to preserve and
protect the Collateral or for the perfection and priority of the
security interest and liens of the Collateral Agent under the
Collateral Documents; and
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