$150,000,000 FIRST LIEN LETTER OF CREDIT FACILITY AGREEMENT

Exhibit 10.6

EXECUTION COPY

$150,000,000 FIRST LIEN LETTER OF CREDIT FACILITY AGREEMENT

Dated as of August 3, 2006

Among

LSP GEN FINANCE CO, LLC

as Borrower ,

THE GUARANTORS NAMED HEREIN

as Guarantors ,

BARCLAYS CAPITAL

as Joint Lead Arranger and Joint Book Runner ,

BARCLAYS BANK PLC

as Initial L/C Issuing Bank and Administrative Agent ,

ING CAPITAL LLC

as Joint Lead Arranger , Joint Book Runner and Syndication Agent

and

CREDIT SUISSE

as First Lien Collateral Agent

T A B L E    O F    C O N T E N T S

 

 

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FIRST LIEN LETTER OF CREDIT FACILITY AGREEMENT

FIRST LIEN LETTER OF CREDIT FACILITY AGREEMENT, dated as of August 3, 2006 among LSP GEN FINANCE CO, LLC, a Delaware limited liability company (the “ Borrower ”), the Guarantors (as hereinafter defined), the Lenders (as hereinafter defined), the L/C Issuing Banks (as hereinafter defined), BARCLAYS CAPITAL (“ Barclays Capital ”), as Joint Lead Arranger and Joint Book Runner, BARCLAYS BANK PLC (“ Barclays ”), as initial letter of credit issuing bank (the “ Initial L/C Issuing Bank ”) and as letter of credit facility administrative agent (together with any successor letter of credit facility administrative agent appointed pursuant to Article VII, the “ Administrative Agent ”) for the Lender Parties (as hereinafter defined), ING CAPITAL LLC (“ ING Capital ”), as Joint Lead Arranger, Joint Book Runner and Syndication Agent, and CREDIT SUISSE (“ Credit Suisse ”), as first lien collateral agent (together with any successor first lien collateral agent, the “ First Lien Collateral Agent ” and, together with the Administrative Agent, the “ Agents ”) for the First Lien Secured Parties (as hereinafter defined).

PRELIMINARY STATEMENTS:

(1) Pursuant to the Purchase and Sale Agreement, dated as of January 8, 2006 and amended as of May 4, 2006 (as amended, to the extent permitted under the Loan Documents (as hereinafter defined), the “ Purchase Agreement ”) among the Borrower and the Group II Holding Companies (as hereinafter defined) (as assignees of LS Power Generation, LLC (formerly known as LSP Bay II Harbor Holding, LLC), a Delaware limited liability company (the “ Parent ”)), and Duke Energy Americas, LLC, a Delaware limited liability company (“ DEA ”), DEA sold, and the Borrower or the applicable Group II Holding Company acquired, (a) all outstanding Equity Interests of the Generation Companies (as hereinafter defined) owned directly or indirectly by DEA and certain Affiliates (as hereinafter defined) and (b) various related contractual assets owned by the Generation Companies (collectively, the “ Acquisition ”).

(2) The Borrower, the Guarantors, the lenders party thereto from time to time (the “ First Lien Lenders ”), the issuing banks party thereto from time to time, the swing line bank party thereto from time to time, the First Lien Collateral Agent, Credit Suisse, as administrative agent (in such capacity, together with any successor administrative agent thereto, the “ First Lien Administrative Agent ”), Credit Suisse Securities (USA) LLC (“ CS Securities ”), as syndication agent, Credit Suisse, as documentation agent and CS Securities, Goldman Sachs Credit Partners L.P. (“ Goldman Sachs ”), Morgan Stanley & Co. Incorporated (“ MS&Co ”) and WestLB AG, New York Branch (“ WestLB ”), as joint bookrunners and joint lead arrangers, have entered into a First Lien Credit Agreement dated as of May 4, 2006 (as Amended and Refinanced (as hereinafter defined), the “ First Lien Credit Agreement ”), which provides, among other things, for (a) the borrowing of up to $950,000,000 pursuant to a term loan B facility (as Refinanced, the “ First Lien Term B Facility ”), (b) the borrowing of up to $40,000,000 pursuant to a delayed draw term facility (as Refinanced, together with the First Lien Term B Facility, the “ First Lien Term Facilities ”), (c) the borrowing of up to $100,000,000 pursuant to a working capital facility, of which up to $10,000,000 shall be available for swing line loans and (d) to the extent applicable, additional borrowings and extensions of credit for other uses, including the acquisition of the Ontelaunee Project (as hereinafter defined) (as Refinanced, the “ First Lien Incremental Facilities ”).

(3) The Borrower, the Guarantors, Credit Suisse, as initial special letter of credit issuing bank, administrative agent, first lien collateral agent, an initial lender and documentation agent, Goldman Sachs, as an initial lender, CS Securities, as syndication agent, and CS Securities and Goldman Sachs, as joint lead arrangers, have entered into a Special Letter of Credit Facility Agreement dated as of May 4, 2006 (as amended, the “ Special Letter of Credit Facility Agreement ”), which provides, among other things, for the issuance of the letters of credit described therein in order to provide security in the form of letters of credit to support the obligations of the Borrower and the Generation Companies under Permitted Commodity Hedge and Power Sale Agreements (as hereinafter defined) and the Purchase Agreement, and for other permitted uses as described therein.

(4) The Borrower, the Guarantors, the lenders party thereto from time to time, Credit Suisse, as second lien collateral agent (in such capacity, together with any successor second lien collateral agent, the “ Second Lien Collateral Agent ”), Credit Suisse, as administrative agent (in such capacity, together with any successor administrative agent thereto, the “ Second Lien Administrative Agent ”), CS Securities, as syndication agent, Credit Suisse, as documentation agent and CS Securities, Goldman Sachs, MS&Co. and WestLB, as joint bookrunners and joint lead arrangers, have entered into a Second Lien Credit Agreement dated as of May 4, 2006 (as Amended and Refinanced, the “ Second Lien Credit Agreement ”), which provides, among other things, for the borrowing of up to $150,000,000 pursuant to a second lien term facility (as Refinanced, the “ Second Lien Facility ”) and (b) to the extent applicable, additional borrowings and extensions of credit for other uses, including the acquisition of the Ontelaunee Project (as hereinafter defined) (as Refinanced, the “ Second Lien Incremental Facilities ”).

(5) The Borrower, the Parent, the Guarantors, Credit Suisse, as First Lien Administrative Agent, First Lien Collateral Agent, Second Lien Administrative Agent, Second Lien Collateral Agent, Third Lien Collateral Agent and Special Letter of Credit Administrative Agent, MSCG, as MSCG Hedging Counterparty, CS Energy, as CS Hedging Counterparty and J. Aron & Company, as Support Counterparty have entered into a Collateral Agency and Intercreditor Agreement dated as of May 4, 2006 (as amended including as amended by (a) Amendment No. 1, dated as of July 28, 2006, by and among the Borrower, the Parent, the Guarantors, Credit Suisse, as First Lien Collateral Agent, Second Lien Collateral Agent, Third Lien Collateral Agent, First Lien Administrative Agent, Second Lien Administrative Agent and Special L/C Administrative Agent, MSCG, as MSCG Hedging Counterparty and CS Energy, as CS Hedging Counterparty and (b) Amendment No. 2 to the Collateral Agency and Intercreditor Agreement and Amendment No. 1 to the Security Deposit Agreement, dated as of August 3, 2006, by and among the Borrower, the Parent, the Guarantors, Credit Suisse, as First Lien Collateral Agent, Second Lien Collateral Agent, Third Lien Collateral Agent, First Lien Administrative Agent, Second Lien Administrative Agent and Special L/C Administrative Agent, MSCG, as MSCG Hedging Counterparty, CS Energy, as CS Hedging Counterparty, J. Aron & Company, as Support Counterparty and JPMorgan Chase Bank N.A., as Depositary (the “ Omnibus Amendment Agreement ”), the “ Intercreditor Agreement ”), which provides, among other things, for certain agreements among the First Lien Collateral Agent, the Second Lien Collateral Agent and the Third Lien Collateral Agent with respect to the Collateral.

(6) The Borrower and Morgan Stanley Capital Group Inc. (“ MSCG ”), as counterparty, have entered into (a) that certain ISDA Master Agreement, dated as of January 27,

 

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2006, the Arlington ISDA Schedule of even date therewith, the confirmation exchanged between MSCG and the Borrower pursuant thereto on February 14, 2006 and each related schedule, exhibit or annex attached thereto (as amended, the “ Arlington Hedging Agreement ”), (b) that certain ISDA Master Agreement, dated as of January 27, 2006, and the Griffith ISDA Schedule dated of even date therewith, the confirmation exchanged between MSCG and the Borrower pursuant thereto on February 14, 2006 and each related schedule, exhibit or annex attached thereto (as amended, the “ Griffith Hedging Agreement ”), and (c) that certain ISDA Master Agreement, dated as of January 27, 2006, the Moss Landing ISDA Schedule dated as of even date therewith, the confirmation exchanged between MSCG and the Borrower pursuant thereto on February 14, 2006 and each related schedule, exhibit or annex attached thereto (as amended, the “ Moss Landing Hedging Agreement ”).

(7) The Borrower (as transferee from the Parent under a novation agreement dated as of February 9, 2006) and Credit Suisse Energy LLC (“ CS Energy ”) (as transferee from Credit Suisse International, pursuant to a novation agreement dated as of March 13, 2006), as counterparty, have entered into that certain ISDA Master Agreement, dated as of February 9, 2006, the ISDA Schedule dated as of even date therewith in respect of NEPOOL related transactions, the confirmation exchanged between CS Energy (as transferee from Credit Suisse International under a novation agreement dated as of March 13, 2006) and the Borrower (as transferee from Parent under a novation agreement dated as of February 9, 2006), and each related schedule, exhibit or annex (as amended, the “ Credit Suisse Hedging Agreement ”).

(8) The Borrower has requested that the Lender Parties provide the letters of credit described herein in order to provide security in the form of letters of credit to support the obligations of the Borrower and the Generation Companies under Permitted Commodity Hedge and Power Sale Agreements (as hereinafter defined) and for other permitted uses described herein.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.01. Certain Defined Terms . As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“ Accession Agreement ” means the Accession Agreement, dated as of the date hereof, entered into by the Administrative Agent, the Borrower, the First Lien Collateral Agent, the Second Lien Collateral Agent and the Third Lien Collateral Agent.

“ Accounts ” has the meaning specified in the Security Deposit Agreement.

“ Acquired Project ” means any electric generating facility, power transmission facility, power distribution facility, fuel supply source or fuel transportation source that is acquired by the Borrower, any Guarantor or an Acquisition Subsidiary (other than any Non-Recourse Subsidiary) as part of a Permitted Acquisition.

 

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“ Acquisition ” has the meaning specified in the Preliminary Statements.

“ Acquisition Subsidiary ” means a wholly-owned Subsidiary created by the Borrower or by any Guarantor (other than a Group II Holding Company or a Group II Portfolio Company) for the purpose of making a Permitted Acquisition.

“ Additional Guarantor ” has the meaning specified in Section 8.06.

“ Adjusted Base Capex Allowance ” means, for any Fiscal Year, $50,000,000 minus any amount that was, during the prior Fiscal Year, a Pullback Amount.

“ Adjusted Capex Limit ” means, for any Fiscal Year, the Adjusted Base Capex Allowance plus any Carryover Amount for such Fiscal Year plus any Pullback Amount for such Fiscal Year.

“ Administrative Agent ” has the meaning specified in the recital of parties to this Agreement.

“ Administrative Agent’s Account ” means the account of the Administrative Agent specified by the Administrative Agent in writing to the Borrower and the Lender Parties from time to time.

“ Affiliate ” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term “ control ” (including the terms “ controlling ,” “ controlled by ” and “ under common control with ”) of a Person means the possession, direct or indirect, of the power to vote 10% or more of the Voting Interests of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Interests, by contract or otherwise. When used with respect to the Borrower, “ Affiliate ” shall include the Parent and any Affiliate of the Parent (other than the Borrower).

“ Agents ” has the meaning specified in the recital of parties to this Agreement.

“ Agreement ” means this Letter of Credit Facility Agreement, as amended.

“ Agreement Value ” means, for each Hedge Agreement or Commodity Hedge and Power Sale Agreement, as the case may be, on any date of determination, an amount equal to the amount, if any, that would be payable by any Loan Party to its counterparty to such Hedge Agreement or Commodity Hedge and Power Sale Agreement, as the case may be, in accordance with its terms as if such Hedge Agreement or Commodity Hedge and Power Sale Agreement, as the case may be, was being terminated early on such date of determination as a result of an event of default or termination event arising with respect to such Loan Party.

 

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“ Annual Operating Budget ” has the meaning specified under Section 5.03(j).

“ Applicable Lending Office ” means, with respect to each Lender Party, such Lender Party’s Domestic Lending Office in the case of a Base Rate Advance and such Lender Party’s Eurodollar Lending Office in the case of a Eurodollar Rate Advance.

“ Applicable Margin ” means (a) for Base Rate Advances, 0.75%  per annum , and (b) for Eurodollar Rate Advances, 1.75%  per annum .

“ Appropriate Lender ” means, at any time, the L/C Issuing Banks and, if Lenders have made L/C Advances that are outstanding at such time, each such Lender.

“ Approved Fund ” means any Fund that is administered or managed by (a) a Lender Party, (b) an Affiliate of a Lender Party or (c) an entity or an Affiliate of an entity that administers or manages a Lender Party.

“ Arlington Hedging Agreement ” has the meaning specified in the preliminary statements to this Agreement.

“ Arlington Valley Project ” means the approximately 570 megawatt (nominal) natural gas-fired combined cycle electric generating plant located on a site in Maricopa County, Arizona, together with all auxiliary equipment, ancillary and associated facilities and equipment, electrical transformers, pipeline and electrical interconnection and metering facilities (whether owned or leased by LSP Arlington Valley) used for the receipt of fuel and water and the delivery of the electrical and potential steam output of said generating plant, and all other improvements related to the ownership, operation and maintenance of said generating plant and associated equipment.

“ as Amended and Refinanced ” means and includes, in respect of any Debt, or the agreement or contract pursuant to which such Debt is incurred, (a) such Debt (or any portion thereof) or related agreement or contract as extended, renewed, defeased, amended, amended and restated, supplemented, modified, restructured, refinanced, replaced, refunded or repaid, and (b) any other Debt issued in exchange or replacement for or to refinance such Debt, in whole or in part, whether with the same or different lenders, arrangers and/or agents and whether with a larger or smaller aggregate principal amount and/or a longer or shorter maturity, in each case to the extent permitted under the terms of the Loan Documents.

“ Asset Sale ” has the meaning specified in the Security Deposit Agreement.

Asset Sale Contribution ” means any capital contribution made directly or indirectly by the Parent to the Borrower or any Guarantor in connection with any Asset Sale (it being acknowledged and agreed that any such contributions may be made for the purpose of satisfying the Minimum Floor Amount).

“ Asset Sale Proceeds ” has the meaning specified in the Security Deposit Agreement.

 

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“ Assignment and Acceptance ” means an assignment and acceptance entered into by a Lender Party and an Eligible Assignee (with the consent of any party whose consent is required by Section 9.07), and accepted by the Administrative Agent, in accordance with Section 9.07 and in substantially the form of Exhibit A hereto or any other form approved by the Administrative Agent.

“ Available Amount ” means, with respect to any Letter of Credit at any time, the maximum amount available to be drawn under such Letter of Credit at such time, assuming compliance at such time with all conditions to drawing, after giving effect to (i) any drawings made thereunder prior to such time and (ii) any permanent reductions in the amount available to be drawn thereunder pursuant to the written request of the beneficiary thereof to the L/C Issuing Bank or pursuant to such reductions contemplated by the terms of such Letter of Credit.

“ Bankruptcy Code ” means 11 U.S.C. § 101 et seq . as now and hereafter in effect, or any successor statute

“ Bankruptcy Law ” means the Bankruptcy Code and all other liquidation, conservatorship, bankruptcy, general assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

“ Barclays ” has the meaning specified in the recital of parties to this Agreement.

“ Barclays Capital ” has the meaning specified in the recital of parties to this Agreement.

“ Base Capex Allowance ” means, for each Fiscal Year, $50,000,000.

“ Base Case Projections ” has the meaning specified in Section 3.01(a)(x).

“ Base Rate ” means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of:

(a) the rate of interest announced by Barclays in New York, New York, from time to time, as Barclays’ prime rate; and

(b)  ¹ / 2 of 1%  per annum above the Federal Funds Rate.

“ Base Rate Advance ” means an L/C Advance that bears interest as provided in Section 2.11(a)(i).

“ Bear Energy ” means Bear Energy LP, a Delaware limited partnership.

“ Borrower ” has the meaning specified in the recital of parties to this Agreement.

 

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“ Bridgeport Energy ” means Bridgeport Energy LLC, a Delaware limited liability company.

“ Bridgeport LTSA ” means the CT Operational Support and Scheduled Maintenance Services Contract, dated as of August 1, 2001, between Bridgeport Energy and Siemens Westinghouse Operating Services Co., as amended.

“ Bridgeport Project ” means the approximately 490 megawatt (nominal) natural gas-fired combined cycle electric generating plant located on a site in the City of Bridgeport, Fairfield County, Connecticut, together with all auxiliary equipment, ancillary and associated facilities and equipment, electrical transformers, pipeline and electrical interconnection and metering facilities (whether owned or leased by Bridgeport Energy or NC Development) used for the receipt of fuel and water and the delivery of the electrical and potential steam output of said generating plant, and all other improvements related to the ownership, operation and maintenance of said generating plant and associated equipment.

“ Business Day ” means a day of the year on which banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market.

“ Capital Expenditures ” means, for any Person for any period, the sum of, without duplication, (a) all expenditures made, directly or indirectly, by such Person during such period for equipment, fixed assets, real property or improvements, or for replacements or substitutions therefor or additions thereto, that have been or should be, in accordance with GAAP, reflected as additions to property, plant or equipment on a Consolidated balance sheet of such Person or have a useful life of more than one year plus (b) the aggregate principal amount of all Debt (including Obligations under Capitalized Leases) assumed or incurred in connection with any such expenditures. For purposes of this definition, the purchase price of equipment that is purchased simultaneously with the trade-in of existing equipment or with insurance proceeds shall be included in Capital Expenditures only to the extent of the gross amount of such purchase price less the credit granted by the seller of such equipment for the equipment being traded in at such time or the amount of such proceeds, as the case may be; provided that the term “ Capital Expenditures ” shall not include (i) expenditures made in connection with the replacement, substitution, restoration or repair of Property to the extent financed with (A) Insurance Proceeds paid on account of the Casualty Event in respect of the Property being replaced, restored or repaired or (B) Eminent Domain Proceeds paid on account of an Event of Eminent Domain in accordance with the terms of the Loan Documents, (ii) the purchase price of equipment that is purchased simultaneously with the trade-in of existing equipment to the extent that the gross amount of such purchase price is reduced by the credit granted by the seller of such equipment for the equipment being traded in at such time, (iii) the purchase of plant, property or equipment made to the extent financed with Asset Sale Proceeds in accordance with the terms of the Loan Documents, (iv) expenditures made as a part of a Permitted Acquisition so long as such expenditure is included in the calculation of the aggregate amount of consideration payable for such

 

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Permitted Acquisition and is permitted by the terms of this Agreement or (v) expenses under long-term service agreements, turbine maintenance agreements or spare parts agreements (including, without limitation, the Long Term Maintenance Agreements).

“ Capitalized Leases ” means all leases that have been or should be, in accordance with GAAP, recorded as capitalized leases.

“ Carryover Amount ” means, for any Fiscal Year, the amount (not to exceed $50,000,000) by which the Adjusted Base Capex Allowance for the prior Fiscal Year plus any Carryover Amount as determined during such prior Fiscal Year exceeds Capital Expenditures made in such prior Fiscal Year.

“ Casco Bay ” means Casco Bay Energy Company, LLC, a Delaware limited liability company.

“ Casco Bay Project ” means the approximately 520 megawatt (nominal) natural gas-fired combined cycle electric generating plant located on a site in Penobscot County, Maine, together with all auxiliary equipment, ancillary and associated facilities and equipment, electrical transformers, pipeline and electrical interconnection and metering facilities (whether owned or leased by Casco Bay) used for the receipt of fuel and water and the delivery of the electrical and potential steam output of said generating plant, and all other improvements related to the ownership, operation and maintenance of said generating plant and associated equipment.

“ Cash Equivalents ” means any of the following: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof; (b) securities issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof or any political subdivision of any such state or any public instrumentality thereof having maturities of not more than one year from the date of acquisition thereof and, at the time of acquisition, having a rating of AA- or higher from S&P or Aa3 or higher from Moody’s (or, if at any time neither S&P nor Moody’s shall be rating such obligations, an equivalent rating from another nationally recognized rating service); (c) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, a rating of at least A-1 or P-1 from either S&P or Moody’s (or, if at any time neither S&P nor Moody’s shall be rating such obligations, an equivalent rating from another nationally recognized rating service); (d) investments in certificates of deposit, banker’s acceptances and time deposits maturing within 270 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, the Administrative Agent or any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000; (e) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria of clause (d)

 

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above; (f) investments in “ money market funds ” within the meaning of Rule 2a-7 of the Investment Company Act of 1940, as amended, substantially all of whose assets are invested in investments of the type described in clauses (a) through (e) above; (g) other short-term investments utilized by foreign subsidiaries in accordance with normal investment practices for cash management in investments of a type analogous to the foregoing; and (h) cash.

“ Casualty Event ” means an event that causes any of the Collateral (in whole or in part) to be damaged, destroyed or rendered unfit for normal use for any reason whatsoever, other than ordinary use and wear and tear and other than any Event of Eminent Domain.

“ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time.

“ Change of Control ” means the occurrence of any of the following: (a) the Designated Affiliates and the Permitted Holders shall fail to own, directly or indirectly, beneficially and of record, Equity Interests in the Borrower representing at least 35% of the aggregate ordinary voting power and aggregate equity value represented by the issued and outstanding Equity Interests of the Borrower; (b) the Designated Affiliates and the Permitted Holders shall fail to own, directly or indirectly, beneficially or of record, Equity Interests representing a greater percentage of the aggregate ordinary voting power of the Borrower than is then held, directly or indirectly, beneficially and of record, by any other entity or group; or (c) the First Lien Collateral Agent shall cease to have a perfected Lien on 100% of the Equity Interests in the Borrower.

“ Collateral ” means (a) all Property of the Borrower and the Guarantors, now owned or hereafter acquired, and (b) all of the Equity Interests in the Borrower and the Group II Portfolio Companies and any Debt owed by the Borrower, any of its Subsidiaries or any Group II Portfolio Company to the Parent, in each case, other than the Excluded Property.

“ Collateral Documents ” means the First Lien Security Agreement, the First Lien Pledge Agreement, the Security Deposit Agreement, the First Lien Mortgages, each Consent and Agreement and each other agreement that creates or purports to create a Lien in favor of the First Lien Collateral Agent for the benefit of the First Lien Secured Parties, in each case as amended.

“ Combined EBITDA ” means the sum of the EBITDA of each of (a) the Borrower and its Subsidiaries and (b) each Group II Holding Company and its Subsidiaries.

“ Commodity Hedge and Power Sale Agreement ” means any swap, cap, collar, floor, future, option, spot, forward, power purchase and sale agreement (including, but not limited to, option and heat rate options), fuel purchase and sale agreement, power transmission agreement, fuel transportation agreement, energy management agreement, fuel storage agreement, netting agreement or similar agreement entered into in respect of any commodity, as amended, but excluding, for the avoidance of doubt, any Contract Support Documents.

 

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“ Commodity Hedge Counterparty ” means any Commodity Institution or any Power Distributor which has a Required Rating.

“ Commodity Institution ” means any Person that is a commercial bank, insurance company or other similar financial institution (including Credit Suisse, Goldman Sachs, Bear Energy and MSCG), or any Affiliate thereof, which is engaged in the business of entering into Commodity Hedge and Power Sale Agreements.

“ Communications ” has the meaning specified in Section 9.02(b).

“ Confidential Information ” means information that any Loan Party or Affiliate thereof furnishes to any Agent, any Lead Arranger or any Lender Party that is clearly identified at the time of delivery as confidential (it being understood and agreed that any such information provided on the Platform shall be deemed to be identified as confidential), but, with respect to any Agent, Lead Arranger or Lender Party, does not include any such information that is or becomes generally available to the public other than as a result of a breach by such Agent, such Lead Arranger or such Lender Party of its obligations hereunder or under any other agreement, or that is or becomes available to such Agent, such Lead Arranger or such Lender Party from a source other than the Loan Parties that is not, to the best of such Agent’s, such Lead Arranger’s or such Lender Party’s knowledge, acting in violation of a confidentiality obligation to a Loan Party or any of the Agents or Lead Arrangers.

“ Consent and Agreement ” means each consent and agreement entered into in respect of any Material Contract pursuant to the terms of the Loan Documents, including, without limitation, each consent and agreement delivered pursuant to Section 3.01(b)(ii)(D).

“ Consolidated ” refers to the consolidation of accounts in accordance with GAAP; provided that if GAAP would require the accounts of a Non-Recourse Subsidiary to be consolidated with the accounts of the Borrower, the Guarantors and their respective Subsidiaries, then for purposes hereof “ Consolidated ” shall exclude the consolidation of the accounts of any such Non-Recourse Subsidiary.

“ Contract Support Collateralization Event ” means, with respect to any Contract Support Document, the occurrence of a default, event of default, termination event or similar event thereunder giving rise to the right of the Support Counterparty under such Contract Support Document to require the applicable Loan Party to cash collateralize any credit or collateral support posted thereunder.

“ Contract Support Document ” means any agreement, document or instrument entered into from time to time by the Borrower or any Guarantor pursuant to which the Support Counterparty party thereto agrees to provide credit or collateral support (including through the posting of cash or letters of credit or guarantees) in respect of the Obligations of the Borrower or such Guarantor under any Permitted Commodity Hedge

 

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and Power Sale Agreement to which such Borrower or Guarantor is a party (including the Operative Agreement, dated as of August 1, 2006, among J. Aron & Company, the Borrower and LSP Moss Landing), in each case as Amended and Refinanced. For the avoidance of doubt, Contract Support Documents shall not include this Agreement, the First Lien Credit Agreement, the Special Letter of Credit Facility Agreement or the Second Lien Credit Agreement.

“ Contract Support First Lien Advances ” means, with respect to any Contract Support Document that was permitted to be entered into pursuant to the terms of all Financing Documents, as of any date of determination, the lesser of (i) the Maximum First Lien Claim under such Contract Support Document, and (ii) the aggregate sum of any amounts then required to (A) reimburse the relevant Support Counterparty for amounts drawn by the beneficiary of any credit or collateral support provided thereunder, and (B) following the occurrence of a Contract Support Collateralization Event, the amount the Loan Parties are required to provide thereunder to cash collateralize their Obligations to the Support Counterparty.

“ Contractual Obligations ” means, as to any Person, any provision of any Equity Interest issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its Property is bound.

“ Conversion ,” “ Convert ” and “ Converted ” each refer to a conversion of L/C Advances of one Type into L/C Advances of the other Type pursuant to Section 2.12 or 2.14.

“ Core Company ” means each of LSP Arlington Valley, LSP Moss Landing, Casco Bay, Griffith Energy, Bridgeport Energy, LSP Bridgeport, LSP Mohave and, in the event that the Borrower directly or indirectly acquires the Ontelaunee Project, Ontelaunee.

“ Credit Suisse ” has the meaning specified in the recital of parties to this Agreement.

“ Credit Suisse Hedging Agreement ” has the meaning specified in the Preliminary Statements.

“ CS Energy ” has the meaning specified in the Preliminary Statements.

“ CS Securities ” has the meaning specified in the Preliminary Statements.

“ Cure Notice ” has the meaning specified in Section 5.04(c)(ii).

“ DEA ” has the meaning specified in the Preliminary Statements.

“ Debt ” of any Person means, without duplication, (a) all Debt for Borrowed Money, (b) all Obligations of such Person for the deferred purchase price of property or services (other than trade payables not overdue by more than 90 days incurred in the ordinary course of such Person’s business), (c) all Obligations of such Person evidenced

 

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by notes, bonds, debentures or other similar instruments, (d) all Obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Obligations of such Person as lessee under Capitalized Leases, (f) all Obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interests in such Person or any other Person or any warrants, rights or options to acquire such Equity Interests, valued, in the case of Redeemable Preferred Interests, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (g) all payment Obligations of such Person then due and payable (after giving effect to any cure periods) in respect of any Hedge Agreement or Commodity Hedge and Power Sale Agreement, (h) all payment Obligations of such Person then due and payable (after giving effect to any cure periods) in respect of any Contract Support Document, (i) all Guaranteed Debt of such Person and (j) all indebtedness and other payment Obligations referred to in clauses (a) through (i) above of another Person secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness or other payment Obligations.

“ Debt for Borrowed Money ” of any Person means, at any date of determination, the sum, without duplication, of (a) all items that, in accordance with GAAP, would be classified as indebtedness on a Consolidated balance sheet of such Person at such date, (b) all Obligations of such Person under acceptance, letter of credit or similar facilities at such date and (c) all Synthetic Debt of such Person at such date; provided that for the avoidance of doubt, the South Bay Lease Obligations shall not constitute Debt for Borrowed Money.

“ Default ” means any Event of Default or any event that would constitute an Event of Default but for the passage of time or the requirement that notice be given or both.

“ Default Interest ” has the meaning set forth in Section 2.13.

“ Defaulted Advance ” means, with respect to any Lender Party at any time, the portion of any L/C Advance required to be made by such Lender Party to the Administrative Agent pursuant to Section 2.04 at or prior to such time that has not been made by such Lender Party or by the Administrative Agent for the account of such Lender Party pursuant to Section 2.04(e) as of such time. In the event that a portion of a Defaulted Advance shall be deemed made pursuant to Section 2.21(a), the remaining portion of such Defaulted Advance shall be considered a Defaulted Advance originally required to be made pursuant to Section 2.04 on the same date as the Defaulted Advance so deemed made in part.

“ Defaulted Amount ” means, with respect to any Lender Party at any time, any amount required to be paid by such Lender Party to any Agent or any other Lender Party

 

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hereunder or under any other Loan Document at or prior to such time that has not been so paid as of such time, including, without limitation, any amount required to be paid by such Lender Party to (a) any L/C Issuing Bank pursuant to Section 2.04 to reimburse any L/C Issuing Bank for any Unreimbursed Amount under any Letter of Credit, (b) any other Lender Party pursuant to Section 2.17 to purchase any participation in L/C Advances owing to such other Lender Party and (c) any Agent or any L/C Issuing Bank pursuant to Section 7.05 to reimburse such Agent or such L/C Issuing Bank for such Lender Party’s ratable share of any amount required to be paid by the Lender Parties to such Agent or such L/C Issuing Bank as provided therein. In the event that a portion of a Defaulted Amount shall be deemed paid pursuant to Section 2.21(a), the remaining portion of such Defaulted Amount shall be considered a Defaulted Amount originally required to be paid hereunder or under any other Loan Document on the same date as the Defaulted Amount so deemed paid in part.

“ Defaulting Lender ” means, at any time, any Lender Party that, at such time, (a) owes a Defaulted Advance or a Defaulted Amount or (b) shall take any action or be the subject of any action or proceeding of a type described in Section 6.01(h).

“ Depositary ” has the meaning set forth in the Security Deposit Agreement.

“ Designated Affiliate ” means each of LS Power Equity Partners L.P., LS Power Equity Partners PIE I, L.P. or any Affiliate thereof.

“ Domestic Lending Office ” means, with respect to any Lender Party, the office of such Lender Party specified as its “ Domestic Lending Office ” opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender Party, as the case may be, or such other office of such Lender Party as such Lender Party may from time to time specify to the Borrower and the Administrative Agent.

“ EBITDA ” means, for any Measurement Period, the sum (without duplication), determined on a Consolidated basis for the Borrower and its Subsidiaries (with Griffith Energy, ED Services and Southwest Power Partners being considered Subsidiaries for purposes of this definition solely to the extent wholly-owned by the Borrower or any Guarantor) and for each Group II Holding Company and its Subsidiaries (in addition, for the purposes of this definition, “EBITDA” shall include, without duplication, the cash actually distributed to the Borrower or a Guarantor by any Person that is partially-owned by the Borrower or a Guarantor but is not a Subsidiary), of

(a) net income (or net loss), including, without duplication, the cash actually distributed to the Borrower or a Guarantor by any Person that is partially-owned by the Borrower or a Guarantor but is not a Subsidiary,

(b) interest and other financing expenses (including the amortization of OID),

(c) income, withholding, franchise and similar tax expense and any tax distributions made pursuant to Section 3.2 of the Security Deposit Agreement,

 

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(d) all depreciation expense,

(e) all amortization expense (including any amortization of the fair value of intangible assets reflected in, or offset against, revenues, fuel or operating expenses in the calculation of net income),

(f) lease payments under the South Bay Lease and other Capitalized Leases,

(g) an amount, determined by the Borrower, of decommissioning, demolition, or remediation expenditures, not to exceed (i) in any Measurement Period, the total amount of such expenditures made during such Measurement Period and (ii) during the term of the Facilities, $50,000,000 in the aggregate,

(h) extraordinary, unusual or nonrecurring losses or charges (including any write-offs, write-downs or reversals but excluding any such charge that represents an accrual or reserve for a cash expenditure for a future period),

(i) any non-cash compensation expense recorded from grants of stock appreciation or similar rights, stock options, restricted stock or other rights to officers, directors or employees,

(j) any non-cash loss attributable to the mark to market movement in the valuation of hedge, commodity, capacity, power, interest rate hedge and related agreements (to the extent the cash impact resulting from such loss or gain has not been realized) or other derivative instruments pursuant to Financial Accounting Standards Board Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities”,

(k) losses from any sale, lease, transfer or other disposition of property (including but not limited to Asset Sales) permitted by the terms of this Agreement,

(l) any financing or financial advisory fees, accounting fees, legal fees, transfer or mortgage recording taxes and other out-of-pocket costs and expenses of the Borrower or any other Loan Party (including expenses of third parties paid or reimbursed by the Borrower or any other Loan Party) incurred solely as a result of the Transaction which are incurred on or before the Effective Date,

(m) any financing or financial advisory fees, accounting fees, legal fees, transfer or mortgage recording taxes and other out-of-pocket costs and expenses of the Borrower or any other Loan Party (including expenses of third parties paid or reimbursed by the Borrower or any other Loan Party) incurred as a result of a Permitted Acquisition (except to the extent financed with Non-Recourse Debt), “Credit Increase” under and as defined in the Special Letter of Credit Facility, First Lien Incremental Facility, Second Lien Incremental Facility or sale, lease, transfer or other disposition of assets,

(n) non-recurring cash charges resulting from severance, integration and other adjustments made as a result of (i) the Transaction, (ii) any sale, lease, transfer or other disposition of property permitted by the terms of this Agreement or (iii) any Permitted Acquisitions (except to the extent financed with Non-Recourse Debt),

 

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(o) any losses from the early extinguishment of Debt or Hedge Agreements, and

(p) restructuring charges, including any one-time costs incurred in connection with Permitted Acquisitions (except to the extent financed with Non-Recourse Debt),

(q) to the extent that major maintenance expenditures in any Measurement Period exceed those set forth in Schedule MM, an amount, determined by the Borrower, not to exceed, (i) for such Measurement Period, the amount of such excess and (ii) during the term of the L/C Facility, $75,000,000 in the aggregate.

(r) any expenses, fees or charges in connection with any issuance of any Debt or Equity Interests, any refinancing transaction or any amendment or other modification of any debt instrument (whether or not successful), in each case to the extent permitted under the Loan Documents,

(s) the lesser of (i) the balance in the Liquidity Reserve Account (determined in accordance with Section 3.9(a) of the Security Deposit Agreement) on the last day of such Measurement Period and (ii) $50,000,000,

minus

(t) extraordinary, unusual or nonrecurring gains (excluding any non-cash gain to the extent it represent the reversal of an accrual or reserve for a potential cash item that reduced EBITDA in any prior period)

(u) any non-cash gain attributable to the mark to market movement in the valuation of hedge, commodity, capacity, power, interest rate hedge and related agreements (to the extent the cash impact resulting from such loss or gain has not been realized) or other derivative instruments pursuant to Financial Accounting Standards Board Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities”, and

(v) gains from any sale, lease, transfer or other disposition of property permitted by the terms of this Agreement,

in the case of clauses (b) through (r), to the extent that such items were deducted in calculating net income (or net loss) for such period and in the case of clauses (t) through (v), to the extent that such items were added in calculating net income (or net loss) for such period, in each case for such Measurement Period, and in all cases, determined in accordance with GAAP. Notwithstanding the foregoing, for purposes of determining the Leverage Ratio (including without limitation for purposes of determining pro forma compliance with covenants in connection with a Permitted Acquisition), (A) there shall be included in EBITDA for any period, without duplication, the EBITDA of any Person, property, business or asset acquired by the Borrower or any Guarantor during such period

 

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(but not the EBITDA of any related Person, property, business or assets to the extent not so acquired), to the extent not subsequently sold, transferred or otherwise disposed of by the Borrower or such Guarantor (each such Person, property, business or asset acquired and not subsequently so disposed of, an “ Acquired Entity or Business ”), based on the actual EBITDA of such Acquired Entity or Business for such period (including the portion thereof occurring prior to such acquisition) and (B) there shall be excluded in determining EBITDA for any period the disposed EBITDA of any Person, property, business or asset sold, transferred or otherwise disposed of or closed by the Borrower or any Guarantor during such period (each such Person, property, business or asset so sold or disposed of, a “ Sold Entity or Business ”), based on the actual EBITDA of such Sold Entity or Business for such period (including the portion thereof occurring prior to such sale, transfer or disposition).

“ ED Services ” means ED Services, LLC, a Delaware limited liability company.

“ Effective Date ” has the meaning specified in Section 3.01.

“ Eligible Assignee ” means (a) any Person that is a Lender Party prior to the relevant assignment; (b) an Affiliate of a Lender Party; (c) an Approved Fund; and (d) any commercial bank, insurance company, investment or mutual fund or other entity that is an “ accredited investor ” (as defined in Regulation D under the Securities Act) and which extends credit or buys loans; provided , however , that neither any Loan Party nor any Affiliate of a Loan Party shall qualify as an Eligible Assignee under this definition.

“ Eminent Domain Proceeds ” has the meaning specified in the Security Deposit Agreement.

“ Energy Management Agreement ” means (a) that certain Energy Management Agreement, dated as of March 9, 2006 and amended as of May 2, 2006, among Bear Energy, the Borrower and the Guarantors party thereto from time to time, each ISDA Schedule thereto, each confirmation exchanged pursuant thereto and each related schedule, exhibit or annex attached thereto and (b) any other energy management agreement (and any schedules, confirmations, exhibits or annexes related thereto) with any Person with a Required Rating at the time of the execution thereof similar in purpose to the Energy Management Agreement referred to in clause (a), in each case as amended.

“ Environmental Action ” means any legally binding action, suit, written demand, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, any Environmental Permit or Hazardous Material or arising from alleged injury or threat to health, safety or the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages relating to Hazardous Materials and (b) by any governmental or regulatory authority or third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief relating to any Environmental Law or Environmental Permit.

 

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“ Environmental Law ” means any legally binding Federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, writ, judgment, injunction, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the environment, human health, safety or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials.

“ Environmental Permit ” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

“ Equity Cure ” has the meaning specified in Section 5.04(c).

“ Equity Interests ” means, with respect to any Person, shares of capital stock of (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or other acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or other acquisition from such Person of such shares (or such other interests), and other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of determination.

“ Equity Issuance ” has the meaning specified in the Security Deposit Agreement.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

“ ERISA Affiliate ” means any Person that for purposes of Title IV of ERISA is a member of the controlled group of the Borrower or any Guarantor, or under common control with the Borrower or any Guarantor, within the meaning of Section 414 of the Internal Revenue Code.

“ ERISA Event ” means (a) (i) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with respect to any Plan unless the 30 day notice requirement with respect to such event has been waived by the PBGC or (ii) the requirements of Section 4043(b) of ERISA apply with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days; (b) the application for a minimum funding waiver with respect to a Plan; (c) the provision by the administrator of any Plan of a notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of the Borrower or any Guarantor or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by the Borrower or any Guarantor or any

 

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ERISA Affiliate from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (f) the conditions for imposition of a lien under Section 302(f) of ERISA shall have been met with respect to any Plan; (g) the adoption of an amendment to a Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, such Plan.

“ Escrow Bank ” has the meaning specified in Section 2.21(b).

“ Eurocurrency Liabilities ” has the meaning specified in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.

“ Eurodollar Lending Office ” means, with respect to any Lender Party, the office of such Lender Party specified as its “ Eurodollar Lending Office ” opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender Party (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender Party as such Lender Party may from time to time specify to the Borrower and the Administrative Agent.

“ Eurodollar Rate ” means, for any Interest Period, for all Eurodollar Rate Advances comprising part of the same L/C Borrowing, an interest rate per annum equal to the rate per annum obtained by dividing (a) the rate per annum determined by the Administrative Agent by reference to the British Bankers’ Association Interest Settlement Rates for deposits in Dollars (as set forth by the Bloomberg Information Service or any successor thereto or any other service selected by the Administrative Agent which had been nominated by the British Bankers’ Association as a authorized information vendor for the purpose of displaying such rates) as the London interbank offered rate for deposits in U.S. dollars at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period for a period equal to such Interest Period ( provided that, if for any reason such rate is not available, the term “ Eurodollar Rate ” shall mean, for any Interest Period, the rate per annum determined by the Administrative Agent to be the average of the rates per annum at which deposits in Dollars are offered to major banks in the London interbank market in London, England at approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period.

“ Eurodollar Rate Advance ” means an L/C Advance that bears interest as provided in Section 2.11(a)(ii).

“ Eurodollar Rate Reserve Percentage ” for any Interest Period means the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve

 

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requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Rate Advances is determined) having a term equal to such Interest Period. As of the date hereof, the parties acknowledge that there is no such reserve requirement in effect.

“ Event of Eminent Domain ” means any action or series of actions by any Governmental Authority (a) by which such Governmental Authority appropriates, confiscates, condemns, expropriates, nationalizes, seizes or otherwise takes any part of the Collateral (in whole or in part) or (b) by which such Governmental Authority assumes custody or control of the Property (other than immaterial portions of such Property) or business operations of the Borrower or any Guarantor or any Equity Interests in the Borrower or any Guarantor.

“ Events of Default ” has the meaning specified in Section 6.01.

“ Excluded Property ” means: (a) any lease, license, permit, contract, property right or agreement to which the Borrower or any Guarantor is a party or any of such Loan Party’s rights or interests thereunder if and only for so long as the grant of a Lien thereon shall (i) give any other Person party to such lease, license, permit, contract, property rights or agreement the right to terminate its obligations thereunder, (ii) constitute or result in the abandonment, invalidation or unenforceability of any right, title or interest of any Loan Party therein or (iii) constitute or result in a breach or termination pursuant to the terms of, or a default under, any such lease, license, permit, contract, property rights or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions)); provided that such lease, license, permit, contract, property right or agreement shall be Excluded Property only to the extent and for long as the consequences specified above shall exist and shall cease to be Excluded Property and shall become subject to the Liens granted under the Collateral Documents, immediately and automatically, at such time as such consequences shall no longer exist; (b) any equipment (as such term is defined in the UCC) owned by the Borrower or any Guarantor that is subject to a purchase money Lien or a Capitalized Lease permitted pursuant to this Agreement if the contract or other agreement in which such Lien is granted (or in the documentation providing for such Capitalized Lease) prohibits or requires the consent of any Person other than any Loan Party as a condition to the creation of any other Lien on such equipment, but only, in each case, to the extent, and for so long as, the Debt secured by the applicable Lien or the Capitalized Lease has not been repaid in full or the applicable prohibition (or consent requirement) has not otherwise been removed or terminated; (c) any Equity Interests in or Property of the Parent, other than (i) the Parent’s Equity Interests in the Borrower (it being acknowledged for the avoidance of doubt that the Collateral does not include the Equity Interests in the Group II Holding Companies), (ii) the Parent’s interests in and under the Purchase Agreement and (iii) any Debt owed to the Parent by the Borrower, any Subsidiary of the Borrower or any Group II Portfolio Company from time to time; (d) any Property of any Group II Holding Company other than (i) any Equity Interests in any Group II Portfolio Company, (ii) such

 

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Group II Holding Company’s interests in and under the Purchase Agreement, and (iii) any Debt owed to such Group II Holding Company by the Borrower, any Guarantor or any of their respective Subsidiaries from time to time; (e) any Equity Interests in or Property of any Excluded Subsidiary; (f) the real property interests (including, without limitation, any interests or fixtures in which a Lien is customarily created or perfected through the execution and recordation of a mortgage, leasehold mortgage, deed of trust, leasehold deed of trust or fixture filing) of any Group II Portfolio Company; (g) after May 4, 2006, any real property interests which are acquired by any Loan Party if and to the extent that the Administrative Agent shall have reasonably determined that the costs (including, without limitation, recording taxes and filing fees) of creating and perfecting a Lien on such real property interests are excessive in relation to the value of the security afforded thereby; (h) the Property of any direct or indirect subsidiary of the Borrower or any Group II Holding Company, if such subsidiary is not wholly owned, directly or indirectly, by the Parent; provided that any such Property shall only constitute Excluded Property for so long as such subsidiary is not wholly owned by the Parent or any of its Subsidiaries; (i) the Equity Interests in Griffith Energy, ED Services, Southwest Power Partners, Moss Landing Mutual Water Company and Morro Bay Mutual Water Company, in each case, to the extent such Person is not wholly owned, directly or indirectly, by the Parent; provided that (A) subject to clause (B), such Equity Interests shall only constitute Excluded Property for so long as such Person is not wholly owned by the Parent or any of its subsidiaries and (B) neither the Equity Interests in, nor the Property of, Griffith Energy, ED Services or Southwest Power Partners shall be part of the Collateral (and shall be deemed to be Excluded Property) unless such Equity Interests are wholly-owned by the Borrower or any Guarantor); and (j) motor vehicles (as such term is defined in the UCC).

“ Excluded Subsidiary ” means (a) any Non-Recourse Subsidiary, (b) any other direct or indirect subsidiary of the Parent that is not a Loan Party and (c) any direct or indirect subsidiary of Parent which is not organized under the laws of the United States, any state thereof or the District of Columbia.

“ Federal Funds Rate ” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

“ Fee Letter ” means the fee letter dated as of July 31, 2006 among the Borrower, Barclays, Barclays Capital and ING Capital, as amended.

“ FERC ” means the Federal Energy Regulatory Commission.

“ Financial Covenants ” has the meaning specified in Section 5.04(c).

 

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“ Financial Letter of Credit ” means a letter of credit used solely (i) to support obligations under Commodity Hedge and Power Sale Agreements entered into by the Borrower or any Generation Company or (ii) to provide credit support under any agreement the counterparty to which provides credit support in respect of the Borrower’s or any of the Generation Companies’ obligations under a Permitted Commodity Hedge and Power Sale Agreement.

“ Financial Officer ” in respect of any Person means the chief financial officer, chief accounting officer, controller, treasurer or assistant treasurer of such Person.

“ Financing Document ” has the meaning specified in the Intercreditor Agreement.

“ First Lien Agreement Value ” has the meaning specified in the Intercreditor Agreement.

“ First Lien Collateral Agent ” has the meaning specified in the recital of parties to this Agreement.

“ First Lien Collateral Agent’s Office ” means, with respect to the First Lien Collateral Agent or any successor First Lien Collateral Agent, the office of such Agent as such Agent may from time to time specify to the Borrower and the Administrative Agent.

“ First Lien Credit Agreement ” has the meaning specified in the Preliminary Statements.

“ First Lien Guaranty ” means the guaranty of the Guarantors set forth in Article VIII, together with each other guaranty or guaranty supplement delivered pursuant to Section 5.01(q), in each case, as amended.

“ First Lien Lenders ” has the meaning specified in the Preliminary Statements.

“ First Lien Loan Documents ” means the First Lien Credit Agreement, the Collateral Documents, the Security Deposit Agreement, the Intercreditor Agreement, this Agreement and all other instruments, agreements and other documents evidencing or governing the First Lien Obligations or providing for any guaranty or other right in respect thereof, in each case as amended.

“ First Lien Mortgage Policies ” has the meaning specified in Section 3.01(b)(iv)(B).

“ First Lien Mortgages ” has the meaning specified in Section 3.01(b)(iv).

“ First Lien Mortgage Amendments ” has the meaning specified in Section 3.01(b)(iv).

“ First Lien Obligations ” has the meaning specified in the Intercreditor Agreement.

 

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“ First Lien Pledge Agreement ” means the First Lien Pledge Agreement dated as of May 4, 2006, by and among the First Lien Collateral Agent, on behalf of and for the benefit of the First Lien Secured Parties, the Parent and the Group II Holding Companies, as amended.

“ First Lien Secured Party ” has the meaning specified in the Intercreditor Agreement.

“ First Lien Security Agreement ” means the First Lien Security Agreement, dated as of May 4, 2004, made by the Borrower and each Guarantor (other than any Group II Holding Company) to the First Lien Collateral Agent, as amended.

“ First Lien Term Facilities ” has the meaning specified in the Preliminary Statements.

“ Fiscal Year ” means, with respect to the Borrower, a fiscal year of the Borrower, the Guarantors and their respective wholly-owned Subsidiaries ending on December 31 in any calendar year.

“ FPA ” means the Federal Power Act.

“ Fund ” means any Person (other than an individual) that is or will be engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course.

“ Funding Account ” has the meaning specified in the Security Deposit Agreement.

“ GAAP ” has the meaning specified in Section 1.03.

“ Generation Company ” means each of LSP South Bridge, LLC, LSP Arlington Valley, LSP Moss Landing, LSP South Bay, LSP Morro Bay, LSP Oakland, Casco Bay, Griffith Energy, Bridgeport Energy, LSP Bridgeport, LSP Mohave, to the extent that the Borrower has acquired the Ontelaunee Project, Ontelaunee, any Acquisition Subsidiary (other than any Acquisition Subsidiary that is a Non-Recourse Subsidiary) and each of their respective subsidiaries; provided that each of the foregoing shall only constitute a Generation Company for so long as it is either a Guarantor or a subsidiary of a Guarantor.

“ Goldman Sachs ” has the meaning specified in the Preliminary Statements.

“ Governmental Authority ” means the government of the United States of America or any other nation or government, any state, province, city, municipal entity or other political subdivision thereof, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government.

“ Governmental Authorization ” means any authorization, approval, consent, franchise, license, covenant, order, ruling, permit, certification, exemption, notice, declaration or similar right, undertaking or other action of, to or by, or any filing, qualification or registration with, any Governmental Authority.

 

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“ Granting Lender ” has the meaning specified in Section 9.07(k).

“ Griffith Energy ” means Griffith Energy, LLC, a Delaware limited liability company; provided , that if Griffith Energy, LLC is directly or indirectly disposed of pursuant to the terms of the Loan Documents, no provision in any Loan Document relating to Griffith Energy shall apply to or bind other Generation Companies.

“ Griffith Hedging Agreement ” has the meaning specified in the Preliminary Statements.

“ Griffith Project ” means the approximately 600 megawatt (nominal) natural gas-fired combined cycle electric generating plant located on a site in Mohave County, Arizona, together with all auxiliary equipment, ancillary and associated facilities and equipment, electrical transformers, pipelines and electrical interconnection and metering facilities (whether owned or leased by Griffith Energy, Southwest Power Partners or ED Services) used for the receipt of fuel and water and the delivery of the electrical and potential steam output of said generating plant, and all other improvements related to the ownership, operation and maintenance of said generating plant and associated equipment.

“ Group II Portfolio Company ” means, until such time as such Person is an Excluded Subsidiary, each of LSP Morro Bay, LSP Oakland or LSP South Bay, as the context may require.

“ Group II Holding Company ” means, until such time as such Person is an Excluded Subsidiary, LSP Morro Bay Holdings, LLC, LSP Oakland Holdings, LLC or LSP South Bay Holdings, LLC, as the context may require.

“Guaranteed Debt ” means, with respect to any Person, any Obligation or arrangement of such Person to guarantee or intended to guarantee any Debt ( “primary obligations ”) of any other Person (the “primary obligor ”) in any manner, whether directly or indirectly, including, without limitation, (a) the direct or indirect guarantee, endorsement (other than for collection or deposit in the ordinary course of business), co making, discounting with recourse or sale with recourse by such Person of the Obligation of a primary obligor, (b) the Obligation to make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement or (c) any Obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (A) for the purchase or payment of any such primary obligation or (B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided , however , that the term “Guaranteed

 

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Debt ” shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guaranteed Debt shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guaranteed Debt is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Guaranteed Debt) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder), as determined by such Person in good faith.

“ Guaranteed Obligations ” has the meaning specified in Section 8.01.

“ Guarantors ” means each Group II Holding Company, each Group II Portfolio Company, DEGM Holdings, LSP Arlington Valley, LSP Moss Landing, Casco Bay, LSP Bridgeport, Bridgeport Energy, LSP Mohave and each other subsidiary of the Borrower that shall be required to execute and deliver a guaranty pursuant to Section 5.01(q); provided that any subsidiary of the Borrower or the Parent that is released from the First Lien Guaranty in accordance with Section 5.1 of the Intercreditor Agreement shall not constitute a Guarantor or, to the extent applicable, a Group II Holding Company or a Group II Portfolio Company for the purposes of the Loan Documents.

“ Guaranty Supplement ” has the meaning specified in Section 8.06.

“ Hazardous Materials ” means (a) petroleum or petroleum products, by-products or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls, toxic mold and radon gas and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law.

“ Hedge Agreements ” means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other hedging agreements but excluding any Commodity Hedge and Power Sale Agreement, as amended.

“ Honor Date ” has the meaning specified in Section 2.04(a).

“ Indemnified Costs ” has the meaning specified in Section 7.05(a).

“ Indemnified Party ” has the meaning specified in Section 9.04(b).

“ Independent Consultant ” means the Independent Engineer, the Insurance Consultant and the Power Market Consultant.

“ Independent Director ” means a natural person who, for the five year period prior to his appointment as Independent Director has not been, and during the continuation of his service as Independent Director is not: (a) a member of, or a direct or indirect legal or beneficial owner in, the Parent or any of its Affiliates, including any de minimis Equity Interests; (b) an employee, director (other than with respect to his service as an Independent Director of the Parent or any of its Affiliates), stockholder, member,

 

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manager, partner or officer of the Parent or any of its Affiliates; (c) a customer, contractor, creditor (other than with respect to his service as an Independent Director of the Parent or any of its Affiliates, and any fee to be received therefor) or supplier of the Parent or any of its Affiliates; or (d) any member of the immediate family of a Person described in clause (a), (b) or (c).

“ Independent Engineer ” means any independent engineer retained on behalf of or for the benefit of the Lenders from time to time, including, as of the date hereof, R.W. Beck.

“ Information Memorandum ” means the information memorandum dated August 2006 used by the Lead Arrangers in connection with the syndication of the L/C Commitments.

“ ING Capital ” has the meaning specified in the recital of parties to this Agreement.

“ Initial Extension of Credit ” means the initial issuance of a Letter of Credit hereunder.

“ Initial L/C Issuing Bank ” has the meaning specified in the recital of parties to this Agreement.

“ Initial Lender Parties ” means the Initial L/C Issuing Bank and the Initial Lenders.

“ Initial Lenders ” means the banks, financial institutions and other institutional lenders listed on the signature pages hereof as the Initial Lenders.

“ Initial Mortgaged Properties ” means the real Property of each of LSP Arlington Valley, LSP Moss Landing, Casco Bay and Bridgeport Energy.

“ Initial Operating Budget ” has the meaning specified in Section 3.01(a)(x).

“ Initial Pledged Debt ” has the meaning specified in the First Lien Security Agreement.

“ Initial Pledged Equity ” has the meaning specified in the First Lien Security Agreement.

“ Initial Pledged Parent Debt ” means “ Initial Pledged Debt ” as defined in the First Lien Pledge Agreement.

“ Initial Pledged Parent Equity ” means “ Initial Pledged Equity ” as defined in the First Lien Pledge Agreement.

 

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“ Insurance Consultant ” means any insurance consultant retained on behalf of or for the benefit of the Lenders from time to time, including as of the date hereof Moore-McNeil, LLC.

“ Insurance Proceeds ” has the meaning specified in the Security Deposit Agreement.

“ Intellectual Property ” means the following intellectual property rights, both statutory and common law rights, if applicable: (a) copyrights, registrations and applications for registration thereof, (b) trademarks, service marks, trade names, slogans, domain names, logos, trade dress and registrations and applications of registrations thereof, (c) patents, as well as any reissued and reexamined patents and extensions corresponding to the patents and any patent applications, as well as any related continuation, continuation in part and divisional applications and patents issuing therefrom and (d) trade secrets and confidential information, including ideas, designs, concepts, compilations of information, methods, techniques, procedures, processes and other know-how, whether or not patentable.

“ Intercreditor Agreement ” has the meaning set forth in the Preliminary Statements.

“ Interest Coverage Ratio ” means, for any Measurement Period, the ratio of (a) Combined EBITDA to (b) cash interest payable on all Debt for Borrowed Money, in each case, of or by the Borrower and the Guarantors and their respective Subsidiaries for or during such Measurement Period.

“ Interest Period ” means for each Eurodollar Rate Advance comprising part of the same L/C Borrowing: (a) initially, the period commencing on the date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance, and ending one, two, three or six months thereafter, as selected by the Borrower in its notice of Conversion given with respect thereto and (b) thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not later than 12:00 P.M. (New York City time) on the third Business Day prior to the first day of such Interest Period; provided that all of the foregoing provisions relating to Interest Periods are subject to the following:

(i) Interest Periods commencing on the same date for Eurodollar Rate Advances comprising part of the same L/C Borrowing shall be of the same duration;

(ii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided , however , that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and

 

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(iii) whenever the first day of any Interest Period occurs on a day of a calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month.

“ Internal Revenue Code ” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

“ Investment ” in any Person means any loan or advance to such Person (excluding prepaid expenses and security deposits), any purchase or other acquisition of any Equity Interests or Debt or Property comprising a division or business unit or a substantial part or all of the business of such Person, any capital contribution to such Person or any other direct or indirect investment in such Person, including, without limitation, any acquisition by way of a merger or consolidation (or similar transaction) and any arrangement pursuant to which the investor incurs Debt of the types referred to in clause (i) or (j) of the definition of “ Debt ” in respect of such Person.

“ L/C Advance ” means, with respect to each Lender, such Lender’s funding of any L/C Borrowing (or participation in any Unreimbursed Amount) in accordance with its Pro Rata Share pursuant to Section 2.04.

“ L/C Borrowing ” means a borrowing consisting of simultaneous L/C Advances of the same Type (which shall initially be Base Rate Advances), and in the case of Eurodollar Advances, having the same interest period, in respect of a Letter of Credit.

“ L/C Commitment ” means, with respect to any Lender at any time, the amount set forth opposite such Lender’s name on Schedule I hereto under the caption “ L/C Commitment ” or, if such Lender has entered into one or more Assignment and Acceptances, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as such Lender’s “ L/C Commitment ,” as such amount may be reduced at or prior to such time pursuant to Section 2.10. As of the date of this Agreement, the aggregate amount of the L/C Commitments is $150,000,000.

“ L/C Commitment Fee ” has the meaning specified in Section 2.06(a).

“ L/C Exposure ” means, at any time, the sum of (a) the aggregate principal amount of outstanding L/C Advances at such time plus (b) the Available Amount of all Letters of Credit outstanding at such time plus (c) the aggregate Unreimbursed Amount under all Letters of Credit outstanding at such time.

“ L/C Facility ” means, at any time, the aggregate amount of the Lenders’ L/C Commitments at such time, as such amount may be reduced at or prior to such time pursuant to Section 2.10. As of the date of this Agreement, the amount of the L/C Facility is $150,000,000.

“ L/C Issuing Bank ” means the Initial Issuing Bank and any other Eligible Assignee appointed as an L/C Issuing Bank pursuant to Section 2.07 or to which any L/C

 

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Issuing Commitment is assigned in accordance with Section 9.07, so long as such Eligible Assignee expressly agrees to perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as an L/C Issuing Bank and notifies the Administrative Agent of its Applicable Lending Office and the amount of its L/C Issuing Commitment (which information shall be recorded by the Administrative Agent in the Register), for so long as such Initial Issuing Bank or Eligible Assignee, as the case may be, shall have an L/C Issuing Commitment.

“ L/C Issuing Commitment ” means the amount set forth opposite the L/C Issuing Bank’s name on Schedule I hereto under the caption “ L/C Issuing Commitment ” or, if an L/C Issuing Bank has entered into one or more Assignment and Acceptances, set forth for such L/C Issuing Bank in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as such L/C Issuing Bank’s “ L/C Issuing Commitment ,” as such amount may be reduced at or prior to such time pursuant to Section 2.10.

“ L/C Note ” means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit B hereto, evidencing the indebtedness of the Borrower to such Lender resulting from the L/C Advances made by such Lender, as amended.

“ L/C Related Documents ” has the meaning specified in Section 2.05(a).

“ L/C Support Facility Cash Collateral Account ” has the meaning specified in the Security Deposit Agreement.

“ Lead Arrangers ” means Barclays Capital and ING Capital.

“ Lender Party ” means any Lender and each L/C Issuing Bank, as the context may require.

“ Lenders ” means Initial Lenders and each Person that shall become a Lender hereunder pursuant to Section 9.07 for so long as such Initial Lender or Person, as the case may be, shall be a party to this Agreement and have a Commitment.

“ Letters of Credit ” has the meaning specified in Section 2.01.

“ Leverage Ratio ” means, at any date of determination, the ratio of Consolidated Total Debt of the Borrower and the Guarantors and their respective Subsidiaries at such date to Combined EBITDA for the most recently completed Measurement Period.

“ Lien ” means, with respect to any Property, (a) any mortgage, deed of trust, deed to secure debt, lien (statutory or otherwise), pledge, hypothecation, encumbrance, collateral assignment, charge or security interest in, on or of such Property, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing), relating to such Property, and (c) in the case of Equity Interests or debt securities, any purchase option, call or similar right of a third party with respect to such Equity Interests or debt securities. For the avoidance of doubt, “ Lien ”

 

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shall not include any netting or set-off arrangements under any Contractual Obligation (other than any Contractual Obligation constituting Debt for Borrowed Money or having the effect of Debt for Borrowed Money) otherwise permitted under the terms of this Agreement.

“ Liquidity Reserve Account ” has the meaning specified in the Security Deposit Agreement.

“ Liquidity Reserve Requirement ” means, as of any date of determination, the lesser of (a) $50,000,000 and (b) an amount equal to the sum of (i) the aggregate principal, interest (net of any payments projected to be received by the Borrower or any Guarantor under any Hedge Agreements), fees and other debt service projected to be payable under the First Lien Term Facilities, the Special Letter of Credit Facility Agreement and the Second Lien Credit Agreement for the six-month period occurring after such date of determination plus (ii) if a Long Term Maintenance Agreement is not then in effect with respect to either of the Bridgeport Project or the Moss Landing Project, the major maintenance outlays reasonably projected (as reasonably determined by the Borrower and after giving effect to any spare parts, inventory and equipment which are available to such Generation Portfolio Company for use in connection with such major maintenance) to be incurred in respect of the relevant Project for the three-month period occurring after such date of determination.

“ Loan Documents ” means (a) this Agreement, (b) the L/C Notes (if any), (c) the First Lien Guaranty, (d) the Intercreditor Agreement, (e) the Accession Agreement, (f) the Collateral Documents, (g) the Fee Letter, in each case as amended (including pursuant to any amendment to a Collateral Document entered into on or around the Effective Date).

“ Loan Parties ” means the Parent, the Borrower and the Guarantors.

“ Local Accounts ” has the meaning specified in the Security Deposit Agreement.

“ Long Term Maintenance Agreements ” means each of the Bridgeport LTSA, the Moss Landing LTSA and any Replacement LTSA.

“ LSP Arlington Valley ” means LSP Arlington Valley, LLC, a Delaware limited liability company (formerly known as “Duke Energy Arlington Valley, LLC”).

“ LSP Bridgeport ” means LSP Bridgeport, LLC, a Delaware limited liability company (formerly known as “Duke Bridgeport Energy, LLC”).

“ LSP Mohave ” means LSP Mohave, LLC, a Delaware limited liability company (formerly known as “Duke Energy Mohave, LLC”).

“ LSP Morro Bay ” means LSP Morro Bay, LLC, a Delaware limited liability company (formerly known as “Duke Energy Morro Bay LLC”).

 

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“ LSP Moss Landing ” means LSP Moss Landing, LLC, a Delaware limited liability company (formerly known as “Duke Energy Moss Landing LLC”).

“ LSP Oakland ” means LSP Oakland, LLC, a Delaware limited liability company (formerly known as “Duke Energy Oakland LLC”).

“ LSP South Bay ” means LSP South Bay, LLC, a Delaware limited liability company (formerly known as “Duke Energy South Bay, LLC”).

“ LSP South Bridge ” means LSP South Bridge, LLC, a Delaware limited liability company (formerly known as “DEGM Holdings, LLC”).

“ Margin Stock ” has the meaning specified in Regulation U.

“ Material Adverse Effect ” means a material adverse effect on (a) the business, condition (financial or otherwise), operations or properties of the Borrower and the Guarantors, taken as a whole, (b) the rights and remedies of any Agent or the Lender Parties under the Loan Documents or (c) the ability of the Loan Parties, taken as a whole, to perform their respective Obligations under the Loan Documents.

“ Material Contract ” means (a) the Purchase Agreement, each Permitted Commodity Hedge and Power Sale Agreement in effect on May 4, 2006 (other than those referred to in clause (g) of the definition thereof), the First Lien Loan Documents, the Special L/C Facility Documents, the Loan Documents and the Second Lien Loan Documents and (b) each other Contractual Obligation of the Borrower, any Guarantor or Griffith Energy that is material to the business, condition (financial or otherwise), operations or properties of (i) the Borrower, the Guarantors and Griffith Energy, taken as a whole or (ii) LSP Moss Landing or the Moss Landing Project.

“ Maturity Date ” means May 4, 2011.

“ Maximum First Lien Claim ” has the meaning specified in the Intercreditor Agreement.

“Maximum Third Lien Claim ” has the meaning specified in the Intercreditor Agreement.

“ Measurement Period ” means, as of any date of determination, the four consecutive fiscal quarters of the Borrower and the Guarantors then ended; provided that the first Measurement Period shall commence on September 30, 2006 and end on September 30, 2007.

“ Minimum Floor Amount ” means (i) with respect to Casco Bay, $275,000,00, (ii) with respect to LSP Arlington Valley, $225,000,000, (iii) with respect to Bridgeport Energy or LSP Bridgeport, $300,000,000, (iv) with respect to LSP Mohave or Griffith Energy, $100,000,000, (v) with respect to LSP Morro Bay, $50,000,000 and (vi) with respect to Ontelaunee, $200,000,000.

 

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“ Moody’s ” means Moody’s Investors Service, Inc.

“ Morro Bay Project ” means the approximately 1,002 megawatt (nominal) natural gas-fired conventional steam electric generating plant located on a site in San Luis Obispo County, California, together with all auxiliary equipment, ancillary and associated facilities and equipment, electrical transformers, pipeline and electrical interconnection and metering facilities (whether owned or leased by LSP Morro Bay) used for the receipt of fuel and water and the delivery of the electrical and potential steam output of said generating plant, and all other improvements related to the ownership, operation and maintenance of said generating plant and associated equipment.

“ Mortgaged Property ” has the meaning specified in the First Lien Mortgages.

“ Moss Landing Hedging Agreement ” has the meaning specified in the preliminary statements to this Agreement.

“ Moss Landing LTSA ” means the Long Term Service Agreement, dated September 29, 2000, between LSP Moss Landing and General Electric International, Inc., as amended.

“ Moss Landing Project ” means the approximately 2,529 megawatt (nominal) natural gas-fired combined cycle electric generating plant located on a site in Monterey County, California, together with all auxiliary equipment, ancillary and associated facilities and equipment, electrical transformers, pipelines and electrical interconnection and metering facilities (whether owned or leased by LSP Moss Landing) used for the receipt of fuel and water and the delivery of the electrical and potential steam output of said generating plant, and all other improvements related to the ownership, operation and maintenance of said generating plant and associated equipment.

“ Moss Landing Toll ” means the EEI Master Power Purchase & Sale Agreement, dated May 4, 2006 by and between LSP Moss Landing and Pacific Gas and Electric Company, the related Confirmation Letters dated March 2, 2006, and any schedules, exhibits and annexes thereto .

“ Moss Landing Toll Purchase Price ” has the meaning specified in the Purchase Agreement, as modified by the letter agreement dated February 24, 2006 between DEA and the Borrower (as assignee of the Parent).

“ Moss Landing Toll Purchase Price Adjustment ” has the meaning specified in the Purchase Agreement, as modified by the letter agreement dated February 24, 2006 between DEA and the Borrower (as assignee of the Parent).

“ MSCG ” has the meaning specified in the Preliminary Statements.

“ MS&Co. ” has the meaning specified in the Preliminary Statements.

“ Multiemployer Plan ” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which the Borrower, any Guarantor or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions.

 

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“ Multiple Employer Plan ” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the Borrower, any Guarantor or any ERISA Affiliate and at least one Person other than the Borrower, the Guarantors and the ERISA Affiliates or (b) was so maintained and in respect of which the Borrower, any Guarantor or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated.

“ NC Development ” means NC Development & Design, LLC, a Delaware limited liability company.

“ Net Cash Proceeds ” has the meaning specified in the Security Deposit Agreement.

“ Non-Consenting Lender ” has the meaning specified in Section 9.01.

“ Non-Material Guarantor ” means, as of any date of determination, each Group II Portfolio Company and each Group II Holding Company that meets the following criteria as of such date of determination: (a) no Letters of Credit are outstanding in favor of or supporting the obligations of any such Group II Portfolio Company or Group II Holding Company, at such date of determination or within ten Business Days after such date of determination, and (b) the total gross revenues of such Group II Portfolio Company or Group II Holding Company are less than 7% of the Consolidated total gross revenues of the Borrower and the Guarantors for (i) prior to June 30, 2007, the most recently ended fiscal quarter of the Borrower and the Guarantors and (ii) on and after June 30, 2007, the most recently ended Measurement Period, in the case of clause (b) as determined in accordance with GAAP.

“ Non-Recourse Debt ” means Debt of (a) any Group II Portfolio Company or Group II Holding Company and (b) with respect to any Acquisition Subsidiary which is also a Non-Recourse Subsidiary, that is incurred to finance the development, construction or acquisition by such Acquisition Subsidiary of any Acquired Project (including the refinancing of existing Debt related to such Acquired Project); provided that (i) such Debt is without recourse to the Borrower, any Guarantor or any of their respective Subsidiaries or to any Property of the Borrower, any Guarantor or any of their respective Subsidiaries (other than any Equity Interests in such Non-Recourse Subsidiary that are owned, directly or indirectly, by the Borrower, a Guarantor or any of their respective Subsidiaries and the Property owned by such Non-Recourse Subsidiary); (ii) neither the Borrower, any Guarantor nor any of their respective Subsidiaries provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Debt but excluding any Investment permitted under the terms of this Agreement that is not in the nature of Debt) or is directly or indirectly liable as a guarantor or otherwise in respect of such Debt or in respect of the business or operations of the applicable Non-Recourse Subsidiary that is the obligor in respect of such Debt or any of its Subsidiaries (other than a pledge of the Equity Interests in such Non-Recourse Subsidiary by the

 

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Borrower, a Guarantor and any of their respective Subsidiaries and the Property owned by such Non-Recourse Subsidiary); (iii) neither the Borrower, any Guarantor nor any of their respective Subsidiaries constitutes the lender of such Debt; (iv) no default with respect to such Debt (including any rights that the holders of such Debt may have to take enforcement action against such Non-Recourse Subsidiary or any of its Subsidiaries) would permit upon notice, lapse of time or both any holder of any other Debt (other than Debt under the Transaction Documents) of the Borrower, the Guarantor or any of their respective Subsidiaries (other than such Non-Recourse Subsidiary or any other Non-Recourse Subsidiary) to declare a default on such other Debt or cause the payment of such Debt to be accelerated or payable prior to its stated maturity; and (v) the lenders (or their respective agents) of such Debt have been notified in writing that they will not have any recourse to the Property of the Borrower, any Guarantor or any of their respective Subsidiaries (other than a pledge of the Equity Interests in such Non-Recourse Subsidiary by the Borrower, a Guarantor or any of their respective Subsidiaries and the Property owned by such Non-Recourse Subsidiary).

“ Non-Recourse Subsidiary ” means (a) any Group II Portfolio Company or Group II Holding Company that is an obligor with respect to any Non-Recourse Debt outstanding at any time, and/or (b) any Acquisition Subsidiary that is an obligor with respect to any Non-Recourse Debt outstanding at any time, if and for so long as the grant of a security interest in the Property of such Acquisition Subsidiary or the pledge of the Equity Interests in such Acquisition Subsidiary, in each case in favor of the First Lien Collateral Agent for the benefit of the First Lien Secured Parties, shall constitute or result in a breach, termination or default under the agreement or instrument governing the applicable Non-Recourse Debt; provided , that if any Group II Portfolio Company becomes a Non-Recourse Subsidiary, its related Group II Holding Company shall also be deemed to be a Non-Recourse Subsidiary; provided further that such Acquisition Subsidiary shall be a Non-Recourse Subsidiary only to the extent that and for so long as the requirements and consequences above shall exist; provided further that none of the Core Companies or any of their Subsidiaries may at any time be a Non-Recourse Subsidiary.

“ Notice of Issuance ” has the meaning specified in Section 2.02(a).

“ Notice of Termination ” has the meaning specified in Section 2.02(b).

“ NPL ” means the National Priorities List under CERCLA.

“ O&M Agreements ” means (a) the Operation and Maintenance Agreement for the Bridgeport Energy Facility, dated as of February 3, 2006, between Bridgeport Energy (as assignee of Parent) and North American Energy Services Company, a Washington corporation (“ NAES ”); (b) the Operation and Maintenance Agreement for the Casco Bay Energy Facility, dated as of February 3, 2006, between Casco Bay (as assignee of Parent) and NAES; (c) the Operation and Maintenance Agreement for the Moss Landing and Oakland Energy Facilities, dated as of February 6, 2006, among LSP Moss Landing (as assignee of Parent with respect to the Moss Landing Project), LSP Oakland (as assignee of Parent with respect to the Oakland Project) and Wood Group Power Operations

 

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(West), Inc., a Nevada corporation (“ Wood Group ”); (d) the Operation and Maintenance Agreement for the Morro Bay Energy Facility, dated as of February 6, 2006, between LSP Morro Bay (as assignee of Parent) and Wood Group; (e) the Operation and Maintenance Agreement for the South Bay Energy Facility, dated as of February 6, 2006, between LSP South Bay (as assignee of Parent) and Wood Group; (f) the Operation and Maintenance Agreement for the Arlington Valley Energy Facility, dated as of February 6, 2006, between LSP Arlington Valley (as assignee of Parent) and Wood Group; (g) the Parent Guarantee, dated as of February 6, 2006, between Wood Group Power Operations, Inc., a Nevada corporation (“ WGPO ”), and Parent, as amended; (h) the Parent Guarantee, dated as of the date hereof, among WGPO, LSP Moss Landing and LSP Oakland; (i) the Parent Guarantee, dated as of the date hereof, between WGPO and LSP Morro Bay; (j) the Parent Guarantee, dated as of the date hereof, between WGPO and LSP South Bay; and (k) the Parent Guarantee, dated as of the date hereof, between LSP Arlington Valley and WGPO.

“ O&M Costs ” has the meaning specified in the Security Deposit Agreement.

“ Oakland Project ” means the approximately 165 megawatt (nominal) light fuel oil-fired simple cycle generating plant located on a site in Alameda County, California, together with all auxiliary equipment, ancillary and associated facilities and equipment, electrical transformers, pipeline and electrical interconnection and metering facilities (whether owned or leased by LSP Oakland) used for the receipt of fuel and water and the delivery of the electrical and potential steam output of said generating plant, and all other improvements related to the ownership, operation and maintenance of said generating plant and associated equipment.

“ Obligation ” means, with respect to any Person, any payment, performance or other obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 6.01(h). Without limiting the generality of the foregoing, the Obligations of any Loan Party under the Loan Documents include (a) the obligation to pay principal, interest, letter of credit commissions, charges, expenses, fees, attorneys’ fees and disbursements, indemnities and other amounts payable by such Loan Party under any Loan Document and (b) the obligation of such Loan Party to reimburse any amount in respect of any of the foregoing that any Lender Party may elect to pay or advance on behalf of such Loan Party in accordance with the terms of the Loan Documents.

“ OID ” means, with respect to any Debt, the amount (i) by which such Debt is discounted at the time it is incurred or (ii) of fees payable, directly or indirectly, by the Borrower or any Guarantor to any Persons extending such Debt in connection with such extension (other than advisory, arrangement or underwriting fees).

“ Omnibus Amendment Agreement ” has the meaning specified in the Preliminary Statements.

 

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“ Ontelaunee ” means any Affiliate of the Borrower or any Affiliate or Subsidiary of any Designated Affiliate which is the owner or lessor of all or substantially all of the Ontelaunee Project.

“ Ontelaunee Project ” means the approximately 560 megawatt (nominal) natural gas-fired combined cycle electric generating plant located on a site in Ontelaunee Township, Pennsylvania, together with all auxiliary equipment, ancillary and associated facilities and equipment, electrical transformers, pipeline and electrical interconnection and metering facilities (whether owned or leased by Ontelaunee) used for the receipt of fuel and water and the delivery of the electrical and potential steam output of said generating plant, and all other improvements related to the ownership, operation and maintenance of said generating plant and associated equipment.

“ Operating Account ” has the meaning specified in the Security Deposit Agreement.

“ Operating Company ” means, to the extent a Guarantor hereunder, each of LSP Arlington Valley, LSP Moss Landing, LSP South Bay, LSP Morro Bay, LSP Oakland, Casco Bay, Griffith Energy, Bridgeport Energy and any Person who becomes a Guarantor under Section 8.06 hereof, if such Person owns and operates a power generation facility and is so designated in the relevant Guaranty Supplement.

“ Other Taxes ” has the meaning specified in Section 2.16(b).

“ Outstanding L/C Fee ” has the meaning specified in Section 2.06(a).

“ Parent ” has the meaning specified in the Preliminary Statements.

“ Parent O&M Costs ” has the meaning specified in the Security Deposit Agreement.

“ Patriot Act ” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56, signed into law October 26, 2001, as amended.

“ PBGC ” means the Pension Benefit Guaranty Corporation (or any successor).

“ Performance Letter of Credit ” means a letter of credit issued for general corporate purposes in support of the Borrower’s or any Generation Company’s obligation to any Person (including any governmental or regulatory entity, independent system operator (or similar organization) or other third party), including, without limitation, to support obligations under purchase and sale transactions, supply contracts, gas transportation agreements, unit contingent power contracts, service agreements, long-term service agreements, construction contracts and similar undertakings (including any arrangement entered into to meet any environmental, energy, permitting or other regulatory or governmental requirements); provided , that Performance Letters of Credit shall not include letters of credit issued to support (i) indebtedness and other payment Obligations of the type referred to in clauses (a) through (f), (i) and (j) of the definition of Debt or (ii) to fund a distribution or dividend in respect of any Equity Interests.

 

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“ Permitted Acquisition ” means, after May 4, 2006, the development, construction or acquisition of any electric generating facility, power transmission facility, power distribution facility, fuel supply source or fuel transportation source or the acquisition of all of the Equity Interests of a Person owning any of the foregoing (including the refinancing of any Debt related thereto); provided that at the time of such transaction each of the following conditions are met:

(a) both before and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing;

(b) unless such transaction is being financed with Non-Recourse Debt, the Borrower would be in compliance with the Financial Covenants as of the most recently completed Measurement Period ending prior to such transaction for which the financial statements and certificates required by Section 5.03(b) or 5.03(c) were required to be delivered, after giving pro forma effect to such transaction and to any other material event occurring after such Measurement Period as to which pro forma recalculation is appropriate as if such transaction (and the incurrence of any Debt in connection therewith) had occurred as of the first day of such Measurement Period;

(c) unless such transaction is being financed with Non-Recourse Debt, the Borrower shall have received a Ratings Reaffirmation; and

(d) unless such transaction is being financed with Non-Recourse Debt, any Acquisition Subsidiary related thereto shall have become a Guarantor in accordance with Section 5.01(q) and 8.06 hereof and all of the Property (other than any Excluded Property) of such Acquisition Subsidiary or otherwise owned by any Loan Party or any of its Subsidiaries and associated with such transaction shall be subject to a first priority Lien in favor of the First Lien Secured Parties in accordance with the provisions of Section 5.01(q).

“ Permitted Commodity Hedge and Power Sale Agreement ” means (a) the Arlington Hedging Agreement, (b) the Griffith Hedging Agreement, (c) the Moss Landing Hedging Agreement, (d) the Credit Suisse Hedging Agreement, (e) the Moss Landing Toll, (f) the Energy Management Agreement, (g) any Contractual Obligation in existence as of the Effective Date to the extent related to a Permitted Trading Activity (and any extension thereof), (h) any Replacement Commodity Hedge and Power Sale Agreement, (i) any Commodity Hedge and Power Sale Agreement entered into with any Independent System Operator (including, without limitation, any reliability must run agreement or contract or any other similar agreement) in respect of any Permitted Trading Activity and (j) any other Commodity Hedge and Power Sale Agreement entered into from time to time by any Loan Party with any Person that is a Commodity Hedge Counterparty at the time such Commodity Hedge and Power Sale Agreement is entered into in connection with any Permitted Trading Activity, in each case as amended.

 

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“ Permitted Holders ” means any Person acquiring Equity Interests in the Borrower to the extent that the Borrower shall have received a Ratings Reaffirmation in connection with the consummation of such acquisition.

“ Permitted Liens ” means:

(a) Liens for taxes, assessments and governmental charges or levies to the extent not required to be paid under Section 5.01(b);

(b) materialmen’s, mechanics’, carriers’, workers’, repairmen’s, employees’ or other like Liens, arising in the ordinary course of business or in connection with the operation and maintenance of their respective Property, which do not in the aggregate materially detract from the value of the Property to which they are attached or materially impair the use thereof or for amounts not yet due or which are being contested in good faith by appropriate proceedings;

(c) Liens, deposits or pledges to secure the performance of bids, tenders, trade contracts and leases (other than Debt), statutory obligations (including in respect of workers’ compensation laws or similar legislation), surety bonds (other than bonds related to judgments or litigation to the extent such judgment or litigation constitutes a Default), performance bonds and other obligations of a like nature incurred in the ordinary course of business;

(d) Liens securing judgments (or the payment of money not constituting a Default under Section 6.01(i)) or securing appeal or other surety bonds related to such judgments;

(e) all matters disclosed (whether or not subsequently deleted or endorsed over) on any survey, in the title policies insuring any real Property on which a Project is located, including easements and rights of way appertaining thereto or any commitments therefor, or in any title reports, that in each case have been delivered to the Administrative Agent on or before the date hereof (including pursuant to Section 3.01(b)(iv));

(f) imperfections or irregularities of title and other Liens that would not, in the aggregate, reasonably be expected to materially detract from the value of the affected Property;

(g) zoning, planning and other similar limitations and restrictions, and all rights of any Governmental Authority to regulate any real Property, including easements and rights of way appertaining thereto;

(h) easements, rights of way and other encumbrances on title to real Property that is material to the operation of a Project that do not render title to such Property encumbered thereby unmarketable or materially adversely affect the use of such Property for its present purpose;

 

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(i) Liens arising by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights;

(j) Liens or pledges of deposits of cash or cash equivalents securing deductibles, self-insurance, co-payment, co-insurance, retentions or similar obligations to providers or property, casualty or liability insurance in the ordinary course of business;

(k) any Lien arising in the ordinary course of business consistent with past practices by operation of law with respect to a liability that is not yet due or delinquent or which is being contested in good faith by appropriate proceedings;

(l) all matters of record as of the date hereof, that would not, in the aggregate, reasonably be expected to materially detract from the value of the affected Property;

(m) the terms and conditions of the Material Contracts or Contractual Obligations of the Borrower, the Guarantors or any of their subsidiaries in existence as of the date hereof;

(n) Liens created under the Collateral Documents; provided that (i) such Liens only secure (A) Debt permitted to exist under Sections 5.02(b)(i), 5.02(b)(ii), 5.02(b)(iii), 5.02(b)(iv), 5.02(b)(v), 5.02(b)(vi)(A), 5.02(b)(xi) and/or 5.02(b)(xx), and/or (B) Obligations under Permitted Commodity Hedge and Power Sale Agreements and Contract Support Documents entered into by the Borrower or any Guarantor; provided that the aggregate amount of any Contract Support First Lien Advances at such time plus the First Lien Agreement Value of the Permitted Commodity Hedge and Power Sale Agreements secured thereby at such time shall not exceed, when taken together, $475,000,000 at any one time, (ii) such Liens shall be subject to the terms of the Intercreditor Agreement and (iii) any lender or issuing bank (or an agent therefor) with respect to such Debt (including any Support Counterparty) and any Commodity Hedge Counterparty party to any such Permitted Commodity Hedge and Power Sale Agreement shall have become a party to the Intercreditor Agreement as, and shall have the obligations of, a First Lien Secured Party thereunder;

(o) Liens created under the Second Lien Collateral Documents; provided that (i) such Liens only secure Debt permitted to exist under Sections 5.02(b)(iii), 5.02(b)(iv), 5.02(b)(v), 5.02(b)(vi)(B) and 5.02(b)(xi), (ii) such Liens shall be subject to the terms of the Intercreditor Agreement with respect to Second Liens (as defined in the Intercreditor Agreement) and (iii) any lender or issuing bank (or an agent therefor) with respect to such Debt shall have become a party to the Intercreditor Agreement as, and shall have the obligations of, a Second Lien Secured Party (as defined in the Intercreditor Agreement) thereunder;

(p) Liens subordinated to the Liens created under the Loan Documents and the Second Lien Loan Documents on the terms set forth in the Intercreditor

 

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Agreement in respect of Third Lien Obligations, securing obligations under Contract Support Documents and Permitted Commodity Hedge and Power Sale Agreements entered into by the Borrower or any Guarantor; provided that the Support Counterparty to such Contract Support Document and Commodity Hedge Counterparty to such Permitted Commodity Hedge and Power Sale Agreement shall have become a party to the Intercreditor Agreement as, and shall have the obligations of, a Third Lien Secured Party thereunder;

(q) purchase money Liens upon or in real property or equipment acquired or held by the Borrower, any Guarantor or any of their respective subsidiaries in the ordinary course of business to secure the purchase price of such property or equipment or to secure Debt incurred solely for the purpose of financing the acquisition, construction or improvement of any such property or equipment to be subject to such Liens, or Liens existing on any such property or equipment at the time of acquisition (other than any such Liens created in contemplation of such acquisition that do not secure the purchase price), or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount; provided , however , that no such Lien shall extend to or cover any property other than the property or equipment being acquired, constructed or improved, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Lien being extended, renewed or replaced; and provided further that the aggregate principal amount of the Debt secured by Liens permitted by this clause (q) shall not exceed the amount permitted under Section 5.02(b)(viii) at any time outstanding;

(r) Liens arising under Capitalized Leases permitted under Section 5.02(b)(ix); provided that no such Lien shall extend to or cover any Collateral or Property other than the Property subject to such Capitalized Leases;

(s) the replacement, extension or renewal of any Lien permitted by clauses (q) and (r) above upon or in the same property theretofore subject thereto or the replacement, extension or renewal (without increase in the amount or change in any direct or contingent obligor) of the Debt secured thereby;

(t) Liens existing on the Property of any Person that becomes a Loan Party, or existing on Property acquired as part of a Permitted Acquisition to the extent the Liens on such Property secures Debt permitted by Section 5.02(b)(xiv); provided that such Liens attach at all times only to the same Property that such Liens attached to, and secure only the same Debt that such Liens secured, immediately prior to such Permitted Acquisition; and provided further that such Liens were not created in contemplation of such Permitted Acquisition;

(u) Liens placed upon the Equity Interests of any Subsidiary acquired pursuant to a Permitted Acquisition to secure Debt of the Borrower or any other Loan Party incurred pursuant to Section 5.02(b)(xiv) in connection with such Permitted Acquisition;

 

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(v) Liens on the Equity Interests in and/or Property of any Excluded Subsidiary securing Debt permitted to be incurred under Section 5.02(b)(xiii);

(w) Pledges of accounts receivable or deposits of Cash Equivalents securing obligations under fuel supply, fuel transportation, fuel management, energy management, power purchase or tolling agreements in the ordinary course of business;

(x) [intentionally omitted]; and

(y) Liens existing on the date hereof and described on Schedule 5.02(a) hereto

“ Permitted Trading Activity ” means (a) the daily or forward purchase and/or sale, or other acquisition or disposition of wholesale or retail electric energy, capacity, ancillary services, transmission rights, emissions allowances, weather derivatives and/or related commodities, in each case, whether physical or financial, (b) the daily or forward purchase and/or sale, or other acquisition or disposition of fuel, mineral rights and/or related commodities, including, swaps, options and swaptions, in each case, whether physical or financial, (c) electric energy-related tolling transactions, as seller or tolling services, (d) price risk management activities or services, (e) other similar electric industry activities or services or (f) additional services as may be consistent with Prudent Industry Practice from time to time in support of the marketing and trading related to the Property of the Borrower, any Guarantor or any of their respective subsidiaries, in each case, to the extent such activity is conducted in the ordinary course of business of the Borrower, the Guarantors and their subsidiaries and not for speculative purposes (it being acknowledged and agreed that (A) the transactions evidenced by the Permitted Commodity Hedge and Power Sale Agreements in effect as of the Effective Date, and other transactions under Permitted Commodity Hedge and Power Sale Agreements similar in structure and purpose, and (B) the Material Contracts relating to the transactions described in clauses (a)-(f) above in effect as of the Effective Date shall, in each case, be deemed to be transactions which constitute “ Permitted Trading Activity ”).

“ Permitted Working Capital Refinancing ” has the meaning specified in Section 5.02(b)(xx).

“ Person ” means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or Governmental Authority.

“ Plan ” means a Single Employer Plan or a Multiple Employer Plan.

“ Platform ” has the meaning specified in Section 9.02(b).

“ Pledged Accounts ” has the meaning specified in the First Lien Security Agreement.

“ Pledged Debt ” has the meaning specified in the First Lien Security Agreement.

 

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“ Pledged Parent Debt ” means “ Pledged Debt ” as defined in the First Lien Pledge Agreement.

“ Post-Petition Interest ” has the meaning specified in Section 8.05(b).

“ Power Market Consultant ” means R. W. Beck.

“ Power Distributor ” means (a) with respect to any Permitted Commodity Hedge and Power Sale Agreement, any Person that is a public utility or whose business is the sale or distribution of electric energy and (b) with respect to any Energy Management Agreement, any Person who is in the business of providing energy management services to Persons similar to the Guarantors.

“ Preferred Interests ” means, with respect to any Person, Equity Interests issued by such Person that are entitled to a preference or priority over any other Equity Interests issued by such Person upon any distribution of such Person’s Property, whether by dividend or upon liquidation.

“ Preliminary Statements ” means the preliminary statements to this Agreement.

“ Project ” or “ Projects ” means one or more of the Bridgeport Project, the Casco Bay Project, the Arlington Valley Project, the Griffith Project, the South Bay Project, the Morro Bay Project, the Moss Landing Project, the Oakland Project, to the extent that the Borrower has directly or indirectly acquired Ontelaunee, the Ontelaunee Project, and any other Acquired Project; provided that each of the foregoing shall only be a Project for so long as it is owned by a Guarantor or, in the case of the Griffith Project, a direct or indirect subsidiary of a Guarantor.

“ Property ” means any right or interest in or to any asset or property of any kind whatsoever (including Equity Interests), whether real, personal or mixed and whether tangible or intangible.

“ Pro Rata Share ” of any amount means, (a) with respect to any Lender at any time, the product of such amount times a fraction the numerator of which is the amount of such Lender’s L/C Commitment at such time and the denominator of which is the aggregate amount of the Lenders’ L/C Commitments at such time; provided that in the event the L/C Commitment shall have expired or terminated, the Pro Rata Share of any Lender shall be determined on the basis of the L/C Advances then outstanding.

“ Prudent Industry Practice ” means those practices, methods, techniques, specifications and standards of safety and performance, as they may be modified from time to time, that (a) are generally accepted in the electric generating and transmission industry as good, safe and prudent engineering practices in connection with the design, construction, operation, maintenance, repair or use of electric generating and transmission facilities and (b) are otherwise in compliance in all material respects with applicable law and Governmental Authorizations.

“ Public Accountant ” has the meaning specified in Section 5.03(b).

 

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“ Pullback Amount ” means, for any Fiscal Year, the amount (not to exceed $50,000,000) of the Base Capex Allowance for the following Fiscal Year that the Borrower, in its sole discretion, allocates to Capital Expenditures in the current Fiscal Year.

“ Purchase Agreement ” has the meaning specified in the Preliminary Statements.

“ Ratings Reaffirmation ” means, with respect to any proposed sale, transfer or disposition of any Equity Interests in the Borrower, the acquisition of Ontelaunee or any Permitted Acquisition (and the incurrence of any Debt in connection therewith) and with respect to any sale, lease or other disposition of the Equity Interests in or Property of any Core Company (to the extent otherwise permitted under the terms of this Agreement), that each of S&P and Moody’s shall have delivered a written confirmation that the credit ratings assigned by such entities to the Special L/C Facility (as defined in the Special Letter of Credit Facility Agreement), the First Lien Term Facilities and the Second Lien Facility shall be no lower than such ratings assigned by S&P and Moody’s, as the case may be, to the Special L/C Facility, the First Lien Term Facilities and the Second Lien Facility as of May 4, 2006, in each case after giving effect to the occurrence of such proposed sale, transfer or disposition, acquisition or incurrence, as applicable, and all transactions directly related thereto.

“ Redeemable ” means, with respect to any Equity Interest, any such Equity Interest that (a) the issuer has undertaken to redeem at a fixed or determinable date or dates, whether by operation of a sinking fund or otherwise, or upon the occurrence of a condition not solely within the control of the issuer or (b) is redeemable at the option of the holder.

“ Refinance ” means, in respect of the applicable Debt, (a) such Debt (or any portion thereof) as extended, renewed, defeased, refinanced, replaced, refunded or repaid, and (b) any other Debt issued in exchange or replacement for or to refinance such Debt, in whole or in part, whether with the same or different lenders, arrangers and/or agents and whether with a larger or smaller aggregate principal amount and/or a longer or shorter maturity, in each case, to the extent permitted under the terms of the Financing Documents. “ Refinanced ” and “ Refinancing ” shall have correlative meanings.

“ Register ” has the meaning specified in Section 9.07(d).

“ Regulation U ” means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time.

“ Related Fund ” means, with respect to any Lender that is a Fund, any other Fund that is advised or managed by (a) such Lender, (b) an Affiliate of such Lender or (c) an entity (or an Affiliate of such entity) that administers, advises or manages such Lender.

“ Replacement Commodity Hedge and Power Sale Agreement ” means, with respect to any Permitted Commodity Hedge and Power Sale Agreement, an agreement entered into by the Borrower or any Guarantor with a Commodity Institution or a Power Distributor with a Required Rating that is similar in purpose to the Permitted Commodity Hedge and Power Sale Agreement being replaced.

 

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“ Replacement LTSA ” means a long term services, turbine maintenance agreement or spare parts agreement entered into by the Borrower, or, in the case of Bridgeport Project, Bridgeport Energy, or, in the case of the Moss Landing Project, LSP Moss Landing, which is (a) either substantially similar to the Bridgeport LTSA or the Moss Landing LTSA, in each case, as in effect on the date hereof or (b) on terms and conditions reasonably acceptable to the Administrative Agent and, in either case for a period of not less than three months (or, if a shorter period, the duration of the applicable outage).

“ Required Excess Cash Flow Amount ” has the meaning specified in the Security Deposit Agreement.

“ Required Lenders ” means, at any time, Lenders owed or holding at least a majority in interest of the sum of (without duplication) (a) the aggregate principal amount of the L/C Advances outstanding at such time plus (b) the aggregate Available Amount of all Letters of Credit outstanding at such time plus (c) the aggregate amount of all Unused L/C Commitments at such time; provided , however , that if any Lender shall be a Defaulting Lender at such time, there shall be excluded from the determination of Required Lenders at such time (A) the aggregate principal amount of the L/C Advances owing to such Lender (in its capacity as a Lender) and outstanding at such time, (B) such Lender’s Pro Rata Share of the aggregate Available Amount of all Letters of Credit outstanding at such time, and (C) such Lender’s Pro Rata Share of the aggregate amount of all Unused L/C Commitments outstanding at such time.

“ Required Rating ” means, with respect to (a) any Commodity Institution that either (i) the unsecured senior debt obligations of such Person are rated at least A3 or A- by Moody’s and S&P, respectively, at the time of the execution of the applicable Permitted Commodity Hedge and Power Sale Agreement, or (ii) such Commodity Institution’s obligations under the applicable Permitted Commodity Hedge and Power Sale Agreement are guaranteed by a Person that is rated at least A3 or A- by Moody’s and S&P, respectively, at the time of the execution of the applicable Permitted Commodity Hedge and Power Sale Agreement, or (b) any Power Distributor that either (i) the unsecured senior debt obligations of such Person are rated at least Baa3 or BBB- by Moody’s and S&P, respectively, at the time of the execution of the applicable Permitted Commodity Hedge and Power Sale Agreement, or (ii) such Power Distributor’s obligations under any Permitted Commodity Hedge and Power Sale Agreement are guaranteed by a Person that is rated at least Baa3 or BBB- by Moody’s and S&P, respectively at the time of the execution of the applicable Permitted Commodity Hedge and Power Sale Agreement.

“ Responsible Officer ” means, as to any Person, its president, chief executive officer, any vice president, treasurer or secretary, any managing general partner or manager (or any of the preceding with regard to such Person’s managing general partner or manager) or authorized representative.

 

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“ Restricted Payment ” has the meaning specified in the Security Deposit Agreement.

“ Revenue Account ” has the meaning specified in the Security Deposit Agreement.

“ Revenues ” has the meaning specified in the Security Deposit Agreement.

“ S&P ” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.

“ Scheduled Payment Date ” means each March 31st, June 30th, September 30th and December 31st, commencing on September 30, 2006.

“ Second Lien Administrative Agent ” has the meaning specified in the Preliminary Statements.

“ Second Lien Collateral Agent ” has the meaning specified in the Preliminary Statements.

“ Second Lien Collateral Documents ” means any security agreement, pledge agreement, mortgage, deed of trust or other similar collateral document, instrument or agreement entered into by any Loan Party that creates or purports to create a Lien in favor of the Second Lien Collateral Agent securing the Second Lien Obligations, as amended and, in the case of the Second Lien Credit Agreement, as Amended and Refinanced.

“ Second Lien Credit Agreement ” has the meaning specified in the Preliminary Statements.

“ Second Lien Facility ” has the meaning specified in the Preliminary Statements.

“ Second Lien Incremental Facilities ” has the meaning specified in the preliminary statements to this Agreement.

“ Second Lien Loan Documents ” means the Second Lien Credit Agreement, the Second Lien Collateral Documents, the Security Deposit Agreement, the Intercreditor Agreement and all other instruments, agreements and other documents evidencing or governing the Second Lien Obligations or providing for any guaranty or other right in respect thereof, in each case as amended.

“ Second Lien Obligations ” has the meaning specified in the Intercreditor Agreement.

“ Second Lien Secured Parties ” has the meaning specified in the Intercreditor Agreement.

 

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“ Security Deposit Agreement ” means the Security Deposit Agreement, dated as of May 4, 2006 (as amended, amended and restated, supplemented or otherwise modified from time to time, including as amended by the Omnibus Amendment Agreement) by and among the Borrower, the guarantors party thereto, the First Lien Collateral Agent, the First Lien Administrative Agent, the Second Lien Collateral Agent and Third Lien Collateral Agent and the Depositary.

“ Single Employer Plan ” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the Borrower, any Guarantor or any ERISA Affiliate and no Person other than the Borrower, the Guarantors and the ERISA Affiliates or (b) was so maintained and in respect of which the Borrower, any Guarantor or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated.

“ Solvent ” and “ Solvency ” mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the Property of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature (taking into account reasonably anticipated prepayments and refinancings) and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“ South Bay Lease ” means the Lease Agreement between San Diego Unified Port District, as lessor, and LSP South Bay, as lessee, dated as of April 1, 1999.

“ South Bay Lease Obligations ” means Debt owed by LSP South Bay under the South Bay Lease.

“ South Bay Project ” means the approximately 700 megawatt (nominal) natural gas-fired conventional steam electric generating plant located on a site in San Diego County, California, together with all auxiliary equipment, ancillary and associated facilities and equipment, electrical transformers, pipeline and electrical interconnection and metering facilities (whether owned or leased by LSP South Bay) used for the receipt of fuel and water and the delivery of the electrical and potential steam output of said generating plant, and all other improvements related to the lease, operation and maintenance of said generating plant and associated equipment.

“ Southwest Power Partners ” means Southwest Power Partners, LLC, a Delaware limited liability company.

 

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“ Special L/C Facility Documents ” has the meaning specified in the Intercreditor Agreement.

“ Special Letter of Credit Facility Agreement ” has the meaning specified in the Preliminary Statements.

“ Subordinated Obligations ” has the meaning specified in Section 8.05.

“ Subsidiary ” of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership, joint venture or limited liability company or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries; provided , however , that each Excluded Subsidiary shall be deemed not to be a Subsidiary of the Parent, the Borrower or any other Loan Party hereunder.

“ Support Counterparty ” means any Person that agrees to provide credit or collateral support on behalf of the Borrower or any Guarantor to any Commodity Hedge Counterparty in respect of the obligations of the Borrower or any Guarantor under the related Permitted Commodity Hedge and Power Sale Agreement.

“ Syndication Agent ” has the meaning specified in the recital of parties to this Agreement.

“ Synthetic Debt ” means, with respect to any Person, without duplication of any clause within the definition of “ Debt, ” the principal amount of all (a) Obligations of such Person under any lease that is treated as an operating lease for financial accounting purposes and a financing lease for tax purposes ( i.e. , a “ synthetic lease ”), (b) Obligations of such Person in respect of transactions entered into by such Person, the proceeds from which would be reflected on the financial statements of such Person in accordance with GAAP as cash flows from financings at the time such transaction was entered into (other than as a result of the issuance of Equity Interests) and (c) Obligations of such Person in respect of other transactions entered into by such Person that are not otherwise addressed in the definition of “ Debt ” or in clause (a) or (b) above that are intended to function primarily as a borrowing of funds (including, without limitation, any minority interest transactions that function primarily as a borrowing).

“ Taxes ” has the meaning specified in Section 2.16(a).

“ Termination Date ” means the earlier of (a) May 4, 2011 and (b) the date of termination in whole of the L/C Issuing Commitments pursuant to Section 2.10 or 6.01.

“ Third Lien Collateral Agent ” has the meaning specified in the Intercreditor Agreement.

 

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“ Third Lien Collateral Documents ” means any security agreement, pledge agreement, mortgage, deed of trust or other similar collateral document, instrument or agreement entered into by any Loan Party that creates or purports to create a Lien in favor of the Third Lien Collateral Agent securing the Third Lien Obligations, as amended in accordance with the terms of this Agreement.

“ Third Lien Obligations ” means payment obligations of the Loan Parties under a Permitted Commodity Hedge and Power Sale Agreement or a Contract Support Document to the extent permitted to be secured pursuant to clause (p) of the definition of “ Permitted Liens .”

“ Third Lien Secured Party ” has the meaning specified in the Intercreditor Agreement.

“ Title Event ” has the meaning specified in the Security Deposit Agreement.

“ Total Debt ” shall mean, at any time, the aggregate amount of funded Debt for Borrowed Money of the Borrower and the Guarantors and their respective Subsidiaries outstanding at such time (without duplication), in the amount that would be reflected as indebtedness on balance sheets prepared at such time on a Consolidated basis in accordance with GAAP; provided , however , that, for the avoidance of doubt, the undrawn amount of all outstanding letters of credit (including any Letter of Credit) and unused commitments (including any L/C Commitments) shall not be included in the calculation of “ Total Debt .”

“ Transaction ” means the Acquisition and the other transactions contemplated by the Transaction Documents.

“ Transaction Documents ” means the Loan Documents and the Material Contracts referred to in clause (a) of the definition of “Material Contract.”

“ Type ” refers to the distinction between L/C Advances bearing interest at the Base Rate and L/C Advances bearing interest at the Eurodollar Rate.

“ Unreimbursed Amount ” has the meaning specified in Section 2.04(a).

“ Unused L/C Commitment ” means with respect to any Lender at any time (a) such Lender’s L/C Commitment at such time minus (b) the sum of (i) the aggregate principal amount of all L/C Advances made by such Lender (in its capacity as a Lender) and outstanding at such time plus (ii) such Lender’s Pro Rata Share of (A) the aggregate Available Amount of all Letters of Credit outstanding at such time and (B) the aggregate principal amount of all Unreimbursed Amounts owed to the L/C Issuing Bank in respect of Letters of Credit at such time.

“ Voting Interests ” means shares of capital stock issued by a corporation, or equivalent Equity Interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency.

 

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“ Withdrawal Liability ” has the meaning specified in Part I of Subtitle E of Title IV of ERISA.

SECTION 1.02. Computation of Time Periods; Other Definitional Provisions . In this Agreement and the other Loan Documents in the computation of periods of time from a specified date to a later specified date, the word “ from ” means “ from and including ” and the words “ to ” and “ until ” each mean “ to but excluding .” References in the Loan Documents to any agreement or contract “ as amended ” shall mean and be a reference to such agreement or contract as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with its terms.

SECTION 1.03. Accounting Terms . All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the first financial statements delivered pursuant to in Section 5.03(b) (“ GAAP ”).

SECTION 1.04. Currency Equivalents Generally . Any amount specified in this Agreement (other than in Articles II, VII and VIII) or any of the other Loan Documents to be in U.S. dollars shall also include the equivalent of such amount in any currency other than U.S. dollars, such equivalent amount to be determined at the rate of exchange quoted by the Administrative Agent in New York, New York at the close of business on the Business Day immediately preceding any date of determination thereof, to prime banks in New York, New York for the spot purchase in the New York foreign exchange market of such amount in U.S. dollars with such other currency.

SECTION 1.05. Certifications, Etc . All certifications, notices, declarations, representations, warrants and statements made by any officer, director or employee or a Loan Party pursuant to or in connection with the Agreement shall be made in such person’s capacity as officer, director or employee on behalf of the Loan Party and not in such Person’s individual capacity.

ARTICLE II

AMOUNTS AND TERMS OF THE LETTERS OF CREDIT

SECTION 2.01. Letters of Credit . Each L/C Issuing Bank agrees, on the terms and conditions hereinafter set forth and in reliance on the agreements of the Lenders set forth in Section 2.04, to issue (or cause its Affiliate that is a commercial bank to issue on its behalf) letters of credit (the “ Letters of Credit ”) in U.S. dollars for the account of the Borrower from time to time on any Business Day during the period from the Effective Date until five (5) Business Days before the Termination Date in an aggregate Available Amount (i) for all Letters of Credit issued by such L/C Issuing Bank not to exceed such L/C Issuing Bank’s L/C Issuing Commitment at such time, (ii) for all Letters of Credit not to exceed the L/C Facility at such time less the aggregate amount of outstanding L/C Advances made at or prior to such time and (iii) for all Letters of Credit not to exceed the aggregate Unused L/C Commitments of the Lenders at such time.

 

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SECTION 2.02. Request for Issuance . (a) Each Letter of Credit shall be issued upon notice, given not later than 12:00 P.M. (New York City time) on the third Business Day prior to the date of the proposed issuance of such Letter of Credit (or, in the case of Letters of Credit to be issued on the Effective Date, the second Business Day prior to the date of such issuance), by the Borrower to the relevant L/C Issuing Bank, which shall give to the Administrative Agent prompt notice thereof by telephone or in writing or by telecopier (and if by telephone shall be confirmed immediately in writing or by telecopier). Each such notice of issuance of a Letter of Credit in substantially the form of Exhibit C hereto (a “ Notice of Issuance ”) shall be by telephone or in writing or by telecopier (and if by telephone shall be confirmed immediately in writing or by telecopier), specifying therein (A) the requested date of such issuance (which shall be a Business Day), (B) the requested Available Amount of such Letter of Credit, (C) the proposed expiration date of such Letter of Credit, (D) the name and address of the beneficiary of such Letter of Credit, (E) the form of such Letter of Credit, and (F) a description of the nature of the obligation to be supported by such Letter of Credit. No L/C Issuing Bank shall be required to issue a Letter of Credit until such time as such L/C Issuing Bank and the Borrower have agreed on the form and substance of such Letter of Credit; provided that no L/C Issuing Bank shall unreasonably delay the issuance of any such Letter of Credit or unreasonably reject any provisions required by the Borrower to be included in or omitted from such Letter of Credit. Each L/C Issuing Bank will, upon fulfillment of the applicable conditions set forth in Article III, make such Letter of Credit available to the Borrower at its office referred to in Section 9.02 or as otherwise agreed with the Borrower in connection with such issuance. Notwithstanding anything herein to the contrary, no L/C Issuing Bank shall be under any obligation to issue any Letter of Credit if any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such L/C Issuing Bank from issuing such Letter of Credit, or any law applicable to such L/C Issuing Bank or any directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such L/C Issuing Bank shall prohibit, or direct that such L/C Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such L/C Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which such L/C Issuing Bank is not otherwise compensated hereunder), or shall impose upon such L/C Issuing Bank any unreimbursed loss, cost or expense (for which such L/C Issuing Bank is not otherwise compensated hereunder).

(b) Renewal and Termination of Letters of Credit . No Letter of Credit shall have an expiration date (including all rights of the Borrower or the beneficiary to require renewal) later than the fifth Business Day prior to the Termination Date and may by its terms be renewable annually unless the relevant L/C Issuing Bank has notified the Borrower (with a copy to the Administrative Agent) on or prior to the date for notice of termination set forth in such Letter of Credit but in any event at least 30 Business Days prior to the date of automatic renewal of its election not to renew such Letter of Credit (a “ Notice of Termination ”); provided that the terms of each Letter of Credit that is automatically renewable annually shall (i) require the relevant L/C Issuing Bank to give the beneficiary named in such Letter of Credit notice of any Notice of Termination, (ii) permit such beneficiary, upon receipt of such notice, to draw under such Letter of Credit prior to the date such Letter of Credit otherwise would

 

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have been automatically renewed and (iii) not permit the expiration date (after giving effect to any renewal) of such Letter of Credit in any event to be extended to a date later than five Business Days before the Termination Date. If a Notice of Termination is given by any L/C Issuing Bank pursuant to the immediately preceding sentence, such Letter of Credit shall expire on the date on which it otherwise would have been automatically renewed. Within the limits of the L/C Facility and subject to the limits referred to above, the Borrower may request the issuance of Letters of Credit under this Section 2.02, repay any L/C Advance resulting from drawings thereunder pursuant to Section 2.04(a) and request the issuance of additional Letters of Credit under this Section 2.02.

(c) Upon the issuance of a Letter of Credit by the L/C Issuing Bank pursuant to Section 2.02(a), such L/C Issuing Bank shall be deemed, without further action by any party hereto, to have sold to each Lender, and each Lender shall be deemed, without further action by any party hereto, to have purchased from such L/C Issuing Bank, a participation in such Letter of Credit in an amount for each Lender equal to such Lender’s Pro Rata Share of the Available Amount of such Letter of Credit, effective upon the issuance of such Letter of Credit.

SECTION 2.03. Letter of Credit Reports . Each L/C Issuing Bank shall furnish to the Administrative Agent (which shall promptly provide a copy to the Borrower) on a quarterly basis no later than the last Business Day immediately preceding the end of such quarter a written report summarizing any and all fees due and payable, as provided in Section 2.06 of this Agreement, for such quarter.

SECTION 2.04. Drawings and Reimbursements; Funding of Participations . (a) Upon receipt from the beneficiary of any Letter of Credit of any notice of drawing under such Letter of Credit, the relevant L/C Issuing Bank that issued such Letter of Credit shall notify promptly the Borrower and the Administrative Agent thereof. Not later than 12:00 P.M. (New York City time) on the third Business Day immediately following the date (each such date, an “ Honor Date ”) of any payment by any L/C Issuing Bank under a Letter of Credit, the Borrower shall reimburse such L/C Issuing Bank through the Administrative Agent in an amount equal to the amount of such drawing. If the Borrower fails to so reimburse any L/C Issuing Bank by such time (it being acknowledged and agreed that any such failure shall not be a Default hereunder), the Administrative Agent shall promptly notify each Lender of the Honor Date, the amount of the unreimbursed drawing (the “ Unreimbursed Amount ”), and the amount of such Lender’s Pro Rata Share thereof. In such event, the Borrower shall be deemed to have requested an L/C Borrowing of Base Rate Advances to be disbursed on the fourth Business Day immediately following the Honor Date in an amount not to exceed the Unreimbursed Amount (without regard, in each case, to the conditions set forth in Section 3.02). Any notice given by a L/C Issuing Bank or the Administrative Agent pursuant to this Section 2.04(a) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

(b) Each Lender shall upon any notice pursuant to Section 2.04(a) make funds available for the account of its Applicable Lending Office to the Administrative Agent for the account of the relevant L/C Issuing Bank by deposit to the Administrative Agent’s Account, in same day funds, an amount equal to such Lender’s Pro Rata Share of any

 

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Unreimbursed Amount in respect of a Letter of Credit not later than 1:00 P.M. (New York City time) on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of clause (c), each Lender that so makes funds available to such L/C Issuing Bank shall be deemed to have made a Base Rate Advance to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the relevant L/C Issuing Bank. If for any reason any Unreimbursed Amount cannot be refinanced by an L/C Borrowing as contemplated by Section 2.04(a), the request for Base Rate Advances submitted by the applicable L/C Issuing Bank as set forth in Section 2.04(a) shall be deemed to be a request by such L/C Issuing Bank that each of the Lenders fund its risk participation in the relevant Unreimbursed Amount and each Lender’s payment to the Administrative Agent for the account of the applicable L/C Issuing Bank pursuant to this Section 2.04(b) shall be deemed payment in respect of such participation.

(c) Until each Lender funds its L/C Advance pursuant to this Section 2.04 to reimburse any L/C Issuing Bank for any amount drawn under any Letter of Credit, interest in respect of such Lender’s Pro Rata Share of such amount shall be solely for the account of the L/C Issuing Bank.

(d) Each Lender’s obligation to make L/C Advances to reimburse the relevant L/C Issuing Bank for amounts drawn under any Letter of Credit, as contemplated by this Section 2.04, shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any setoff, counterclaim, recoupment, defense or other right which such Lender may against such L/C Issuing Bank, the Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default, or (iii) any other occurrence, event or condition, whether or not similar to any of the foregoing.

(e) If any Lender fails to make available to the Administrative Agent for the account of any L/C Issuing Bank any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.04 by the time specified in Section 2.04(b), such L/C Issuing Bank shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to such L/C Issuing Bank at a rate per annum equal to the Federal Funds Rate from time to time in effect. A certificate of any L/C Issuing Bank submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this Section 2.04(e) shall be conclusive absent manifest error.

(f) If, at any time after an L/C Issuing Bank has made a payment under any Letter of Credit and has received from any Lender such Lender’s L/C Advance in respect of such payment in accordance with this Section 2.04, the Administrative Agent receives for the account of such L/C Issuing Bank any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower, or otherwise, including proceeds of Collateral applied thereto by the Administrative Agent), the Administrative Agent will distribute to such Lender its Pro Rata Share thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s L/C Advance was outstanding) in the same funds as those received by the Administrative Agent.

 

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(g) If any payment received by the Administrative Agent for the account of any L/C Issuing Bank pursuant to Section 2.04(a) is required to be returned under any of the circumstances described in Section 9.11 (including pursuant to any settlement entered into by the L/C Issuing Bank in its discretion), each Lender shall pay for the account of its Applicable Lending Office to the Administrative Agent for the account of such L/C Issuing Bank its Pro Rata Share thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect.

SECTION 2.05. Obligations Absolute . The Obligations of the Borrower under this Agreement and any other agreement or instrument relating to any Letter of Credit shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement and such other agreement or instrument under all circumstances, including, without limitation, the following:

(a) any lack of validity or enforceability of any Loan Document, any Letter of Credit or any other agreement or instrument relating thereto (all of the foregoing being, collectively, the “ L/C Related Documents ”);

(b) any change in time, manner or place of payment of, or in any other term of, all or any of the Obligations of the Borrower in respect of any L/C Related Document or any other amendment or waiver of or any consent to departure from all or any of the L/C Related Documents;

(c) the existence of any claim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for which any such beneficiary or any such transferee may be acting), any L/C Issuing Bank or any other Person, whether in connection with the transactions contemplated by the L/C Related Documents or any unrelated transaction;

(d) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

(e) payment by any L/C Issuing Bank under a Letter of Credit against presentation of a draft, certificate or other document that does not strictly comply with the terms of such Letter of Credit;

(f) any exchange, release or non perfection of any Collateral or other collateral, or any release or amendment or waiver of or consent to departure from the Guaranty or any other guarantee, for all or any of the Obligations of the Borrower in respect of the L/C Related Documents; or

(g) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or a guarantor.

 

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The Administrative Agent, each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, no L/C Issuing Bank shall have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by any Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. None of the Agents, the Lenders, any L/C Issuing Bank or any of their Affiliates and their respective officers, directors, trustees, employees, agents or attorneys-in-fact shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit. The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided that this assumption is not intended to, and shall not, preclude the Borrower’s pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. None of the Agents, the Lenders, any L/C Issuing Bank or any of their Affiliates and their respective officers, directors, trustees, employees, agents or attorneys-in-fact, shall be liable or responsible for any of the matters described in clauses (a) through (g) of this Section 2.05; provided that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against any L/C Issuing Bank, and any L/C Issuing Bank may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which were caused by such L/C Issuing Bank’s willful misconduct or gross negligence or such L/C Issuing Bank’s willful or grossly negligent failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of any Letter of Credit. In furtherance and not in limitation of the foregoing, each L/C Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and the L/C Issuing Bank shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.

SECTION 2.06. Fees . (a)  L/C Facility Fees . (i) The Borrower shall pay to the Administrative Agent for the account of each Lender a commitment fee (the “ L/C Commitment Fee ”), payable in arrears quarterly on the last Business Day of each March, June, September and December, commencing on September 30, 2006 and on the Termination Date (and ending on the date the L/C Commitment is terminated), on such Lender’s Unused L/C Commitment at a rate per annum equal to 0.50%.

(ii) The Borrower shall pay to the Administrative Agent for the account of each Lender an outstanding letter of credit fee (the “ Outstanding L/C Fee ”), payable in arrears quarterly on the last Business Day of each March, June, September and December, commencing on September 30, 2006 and on the Termination Date (and ending on the date the L/C Commitment is terminated) with respect to any calendar quarter during which a Letter of Credit has been issued and is outstanding, on such Lender’s Pro Rata Share of the average daily amount of the Available Amount under all Letters of Credit outstanding during such quarter, at a rate per annum equal to 1.75%.

 

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(iii) The L/C Commitment Fee and the Outstanding L/C Fee shall be computed as provided in Section 2.15(c).

(b) Agents’, Lead Arrangers’ and L/C Issuing Banks’ Fees . The Borrower shall pay to each Agent, each Lead Arranger and each L/C Issuing Bank for its own account such fees as may from time to time be agreed between the Borrower and such Agent, such Lead Arranger or the L/C Issuing Bank.

SECTION 2.07. Replacement of L/C Issuing Bank . (a) Any L/C Issuing Bank may be replaced at any time by written agreement among the Borrower, a new L/C Issuing Bank and the Administrative Agent (with notice to such replaced L/C Issuing Bank); provided , however , that, if the replaced L/C Issuing Bank so requests, any Letter of Credit issued by such L/C Issuing Bank shall be replaced and cancelled prior to or concurrently with the removal of such L/C Issuing Bank and all fees and other amounts owed to such removed L/C Issuing Bank shall be paid to it.

(b) If at any time the unsecured senior debt of any L/C Issuing Bank is not rated at least A2 by Moody’s and A by S&P, then the Borrower may, upon 10 days’ prior written notice to such L/C Issuing Bank and the Administrative Agent, elect to (i) replace such L/C Issuing Bank with a Person selected by the Borrower so long as such Person is an Eligible Assignee and is reasonably satisfactory to the Administrative Agent or (ii) cause such L/C Issuing Bank to assign a portion of its L/C Issuing Commitment to an additional L/C Issuing Bank selected by the Borrower so long as such Person is an Eligible Assignee and is reasonably satisfactory to the Administrative Agent. Each replacement or assignment pursuant to this Section 2.07(b) shall be done in accordance with Section 9.07.

(c) From and after the effective date of any such replacement or addition, (a) the successor or additional L/C Issuing Bank shall have all the rights and obligations of a L/C Issuing Bank under this Agreement (and the Letters of Credit to be issued by it on such effective date or ther