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Home My WebLink AboutState of Alaska The Alaska Public Utlities Commission 1998ALASKA ELECTRIC LIGHT AND POWER COMPANY STATE OF ALASKA (907) 780-2222 FAX (907) 463-3304 5601 Tonsgard Court Juneau, AK 99801-7201 THE ALASKA PUBLIC UTILITIES COMMISSION Before Commissioners: Sam Cotten, Chairman Alyce A. Hanley Dwight D. Omquist Tim Cook James M. Posey In the Matter of the Power Agreement ) Between ALASKA ELECTRIC LIGHT AND ) POWER COMPANY, ALASKA INDUSTRIAL ) DEVELOPMENT & EXPORT AUTHORITY, and ) ALASKA DEPARTMENT OF FISH & GAME for ) the Sale and Purchase of the Electric Capability ) ofthe Snettisham Hydro Electric Project ) U-97-245 COMPLIANCE FILING, ORDER NO. 1 On June 24, 1998, the Commission issued Order No. 1 (U-97-245(1)) in this docket, approving the above-referenced Power Sales Agreement ("PSA"). Alaska Electric Light & Power Company ("AELP") was to file with the Commission within five days of the Snettisham Transaction's closing a tariff compliance filing indicating the Snettisham inception rate along with the utility's base rate and any tariff sheets that may need revising to reflect the Snettisham changes. The Company was also required to file executed copies of agreements entered into for the purchase of the capability of the Snettisham project with a summary of interest rates, terms, and costs. The purchase of COMPLIANCE FILING, U-97-245(1)-August 20, 1998 Page 1 the Snettisham project by the Alaska Industrial Development and Export Authority ("AIDEA") occurred on August 18, 1998. Concurrent with this closing, AELP entered into a "take or pay' contract for the entire capability of the Snettisham project and all costs associated with the project. Inception Rate: In Order No. 1 (U-97-245(1)) the Commission approved the Snettisham Power Sales Agreement with certain restrictions. Among those restrictions was that an inception rate no higher than 4.02 cents per kilowatt-hour for Snettisham power be established on an interim and refundable basis. This rate was derived from the estimated annual costs ofSnettisham energy of$9,209,000 and estimated annual Snettisham production of229,279,000 kwh. ($9,209,000/229,279,000 4.02 cents). Several factors have changed which has had a positive effect on reducing the average cost of Snettisham energy. The annual costs of Snettisham energy as filed in AELP's Motion for Clarification on July 8, 1998 and as projected as of this date are summarized in the table on the next page. COMPLIANCE FILING, U-97-245(1)-August LU, 1998 Page 2 Estimated Snettisham Costs July 8, 1998 August 20, 1998 Debt Service $7,070,000 $6,360,606 Interest on Debt Service (396,000) (218,391) AIDEA Administration 100,000 50,000 Repair and Replacement Fund 653,000 685,279 Operation and Maintenance 1,472,000 1,343,033 AELP Administrative Overhead 100,000 100,000 Insurance Expense 210,000 210,000 Total Costs $9,209,000 $8,530,527 The primary reasons for the cost reductions are discussed below: 1. Annual debt service has been reduced due to (1) term ofthe bonds being increased from 30 to 35 years, (2) less monies being required to purchase and install four new submarine cables and (3) the amount of money required to be held in the debt service reserve was reduced from 100% to 63% ofthe annual debt service. The July 8, 1998 estimated cost of the new cables were $14.8 million after deducting $2.5 million which was forthcoming from the Federal government. After cable bids were received the replacement cost is now set at $8.4 million after the Federal government contribution. With COMPLIANCE FILING, U-97-245(1)-August 20, 1998 Page 3 these changes the par value of the bonds issued was $1 00 million without the use of any other source of financing. 2. Interest on the debt service reserve was based on a required debt service reserve of 100% of the annual debt service. The bond rating agency reduced this requirement to only 63%. 3. AIDEA Administrative costs are expected to be less than originally estimatedby $50,000 due to the exemption which AIDEA received from the U.S. Forest Service for transmission line right of way fees. 4. Operations and Maintenance expenses are also expected to be $128,067 less. AELP has also revised the amount of energy required from Snettisham upward due to kwh sales being closer to budgeted estimates in recent months. The earlier estimate was based on Snettisham production of229.3 million kwh compared with the current estimate of243.8 million kwh of energy. The effect ofthese changes results in a reduction in the inception rate, after taking into account the Snettisham Hatchery revenues, from 3.99 cents down to 3.47 cents. Since AELP's existing tariffed rates are based on the cost of Snettisham energy being 3.47 cents per kwh the inception rate set by AELP in this filing represents no change from exiting rates under Federal ownership of the Snettisham project. The inception rate pricing sheets reflecting the December 23, 1997 estimated costs as well as the costs on which the actual inception rate was calculated are included in Tab 1. AELP is taking some risk that costs may actually be COMPLIANCE FILING, U-97-245(1)-August 20, 1998 Page 4 higher than those estimated and that sales may not be as high as forecasted in order that a rate neutral position can be taken for the benefit ofit's customers. AELP Capital Expenditures The Commission limited any contribution by AELP for the Snettisham acquisition to no more than $1 million dollars. Due to cost reductions mentioned earlier under the discussion of the inception rate there will be no need for AELP to contribute any monies for the project acquisition. COPA TariffPages New COPA tariff pages are filed as a part of this filing to reflect the new COPA rates to be effective August 18, 1998 until the next required seasonal filing which will be on October 15, 1998. These tariff pages are transmitted to you for filing, in compliance with the Alaska Public Utilities Commission Act and sections 3 AAC 48.200 3 ACC 48.430 of the Alaska Administrative Code. New tariff sheets are included with this filing as follows: Tariff Sheet Number Original 131 167 168 169 170 171 172 Revised (21st) (4th) (4th) (20th) (20th) (I st) (1st) Cancels Sheet Number Original 131 167 168 169 170 171 172 Revised (20th) (3rd) (4th) (19th) (19th) (Original) (Original) Schedule or Rule No. 44 98 98 98 98 98 98 The Cost of Power Adjustment calculation sets the adjustment, effective August 18th, 1998, at ($0.0023) per kwh. COMPLIANCE FILING, U-97-245(1)-August 20, 1998 Page 5 Also enclosed are copies of Schedule 44, Purchase of Non-firm Power from a Qualifying Facility, filed in compliance with the Alaska Public Utilities Commission Act and sections 3 AAC 50.750-3 AAC 50.820 of the Alaska Administrative Code. The present number of customers affected by Schedule 44 is zero and the immediate revenue effect is also zero. There are currently no qualifying facilities producing power available for purchase under this rate nor is AELP aware of any under development. All affected tariff pages are located at Tab 2. These rates reflect the nature of the Power Sales Agreement as a "take or pay" contract and the continuing obligation of the Company to pay Snettisham costs in the event that any replacement or diesel power is required to meet AELP's loads Executed Copies of Agreements The Company was also required to file executed copies of the Snettisham transfer agreements. An executed copy of the Power Sales Agreement is located in Tab 3. Tab 4 contains a copy of the Operations and Maintenance Agreement whereby the Company will provide all operations and maintenance functions for the project. Also, attached to this filing is the Official Statement prepared by the Bond Underwriters. This document contains, among other information the following which may be of particular interest: I. Sources and Uses of Funds 2. Annual debt service requirements 3. Description of the Snettisham project 4. Annual project operating costs COMPLIANCE FILING, U-97-245(1) ~August 20, 1998 Page 6 Page4 Page 23 Page 24, Page 28 5 AELP corporate information Page 30 6 Consulting Engineers report prepared by CH2Mhill Appendix A 7 Project Engineer's Report Appendix B 8.Summary of the Bond Resolution Appendix C 9 Summary of the Power Sales Agreement Appendix D There are numerous other less significant closing documents related to the transfer of the Snettisham project to the State of Alaska, any of which AELP will make available upon request. Insurance Matters AELP has been successful in obtaining all required insurance under the Operations and Maintenance agreement as well as Debt Service Insurance. Coverage has a 45 day waiting period and will provide for debt service payments for up to 18 months for covered events which result in either a partial or total loss of delivery capability of the Snettisham Project. Any insurance proceeds will be credited to the COPA account and have the affect of reducing costs to AELP's customers in the event of a Snettisham outage. COMPLIANCE FILING, U-97-245(1)-August 20, 1998 Page 7 Communications Copies of all communications with respect to this matter should be directed to (1) Eric Redman, 701 Fifth Avenue, #6100, Seattle, Washington 98104, (206) 389-6000 (phone), (206) 447-0849 (fax), eredman@hewm.com (e-mail) and (2) Mr. William A. Corbus, President of Alaska Electric Light & Power, 5601 Tonsgard Court, Juneau, Alaska 99801. DATED this 20th day of August, 1998. Respectfully submitted, ALASKA ELECTRIC LIGHT AND POWER CO. t>.~.e&~ a. ~ By William A. Corbus, President ALASKA ELECTRIC LIGHT & POWER COMPANY Attachments Compliance Filing, U-97-245(1)-August 20, 1998 STATE OF ALASKA THE ALASKA PUBLIC UTILITIES COMMISSION Before Commissioners: Sam Cotten, Chainnan Alyce A. Hanley Dwight D. Omquist Tim Cook James M. Posey In the Matter of the Power Agreement ) Between ALASKA ELECTRIC LIGHT AND ) POWER COMPANY, ALASKA INDUSTRIAL ) DEVELOPMENT & EXPORT AUTHORITY, and ) ALASKA DEPARTMENT OF FISH & GAME for ) the Sale and Purchase of the Electric Capability ) of the Snettisham Hydro Electric Project ) U-97-245 CERTIFICATE OF SERVICE Stephen D. Crapo hereby certifies that he is an employee of Alaska Electric Light and Power Company, 560 I Tonsgard Court, Juneau, Alaska 99801, and that on August 20, 1998, true and correct copies of a tariff compliance filing from William A. Corus to the Alaska Public Utilities Commission, dated August 20, 1998 were delivered to: Randy Simmons Executive Director Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage, AK 99503 (907) 269-3044 Fax Kevin Brooks Director of Administration Alaska Dept. of Fish and Game P.O. Box 25526 Juneau, AK 99802-5526 8120/98 12:22 PM CERTIFICATE OF SERVICE (U-97-245) ALASKA ELECTRIC LIGHT AND POWER COMPANY Snettisham Interim Refundable Inception Rate Reference: Order No. 1, Docket U-97 -245 Snettisham Purchase Power Cost Capped at $.0402 per kwh= $9,209,000/229,279,000 kwh (1) Remove Snettisham Power Costs Imbedded in Existing Tariffed Rates (A) Snettisham Portion of Total Energy Requirements (1995 Test Year) AELP Production 50,945,987 Snettisham Purchases 257.144.000 Total Kwh Produced and Purchased 308,089,987 Snettisham Portion: (B) Snettisham Existing Energy Rate/Kwh (A)*( B) (2) Add Back Snettisham Energy Rate 83.46% $0.0347 (A) Annual Estimated Cost of Snettisham Power Snettisham Debt Service (Principal/Interest) Interest on Debt Service Reserve Fund AIDEA Administration Costs Payments into Repair and Replacement Fun· Snettisham O&M Expense AELP Administrative Overhead Insurance Expense Total Snettisham Costs (B) Firm Energy From Snettisham Costs $6,360,606 ($218,391) $50,000 $685,279 $1,343,033 $100,000 $210.000 $8,530,527 243,770,690 ($0.0290) (C) Snettisham Inception Energy Rate [Before Hatchery Credit] (A)/(B) [Maximum Allowed= $.040: $0.0350 (D) Snettisham Hatchery Revenues Est. Annual Kwh Sales Rate/Kwh From Electric Service Contrac1 Kwh Revenue Services Revenues Per Contract Total Revenue (E) Snettisham Costs Less Hatchery Revenues 1,800,000 $0.0347 $62,460 $9.400 $71,860 (A)-(D) $8,458,667 (F) Snettisham Inception Energy Rate [After Hatchery Credit] (E)/(B) [Same as Existing Costs] $0.0347 (G) Snettisham Portion of Total Energy Requirements (1995 Test Year) Snettisham Portion [From 1 (A) Above]: 83.46% Allowed Snettisham Retail Energy Rate (F)X(G) (3) lncrease/(Decrease) to Existing Tariffed Rates (1 + 2) [Rate Neutral) INfERIM RAlE(OS) $0.0290 ($0.0000) ALASKA ELECTRIC LIGHT AND POWER COMPANY Snettisham Sample Interim Refundable Inception Rate -6/30/98 • SOC Reference: Order No.1, Docket U-97-245 Snettisham Purchase Power Cost Capped at $.0402 per kwh= $9,209,000/229.279.000 kwh (1) Remove Snettisham Power Costs Imbedded in Existing Tariffed Rates (A) Snettisham Portion of Total Energy Requirements ( 1995 Test Year) AELP Production 50,945,987 Snettisham Purchases 257.144.000 Total Kwh Produced and Purchased 308,089,987 Snettisham Portion: (B) Snettisham Existing Energy Rate/Kwh (A)*(B) 83.46% $0.0347 ($0.0290) (2) Add Back Allowed Snettisham Energy Rate (A) Annual Estimated Cost of Snettisham Power (5/18/98 Pricing Report) Snettisham Debt Service (Principal/Interest Interest on Debt Service Reserve Fund AIDEA Administration Costs Payments into Repair and Replacement Fu Snettisham O&M Expense AELP Administrative Overhead Insurance Expense Total Snettisham Costs Costs $7,070,000 -396,000 100,000 653,000 1,472,000 100,000 210.000 $9,209,000 (B) Firm Energy From Snettisham 229,279,000 (9.6% below 1998 Budget of 253,733,094 kwh) (C) Snettisham Inception Energy Rate [Before Hatchery Credit] (A)/(B) [Maximum Allowed) $0.0402 (D) Snettisham Hatchery Revenues Est. Annual Kwh Sales Rate/Kwh From Electric Service Contra• Kwh Revenue Services Revenues Per Contract Total Revenue (E) Snettisham Costs Less Hatchery Revenues 1,800,000 $0.0347 $62,460 $9.400 $71,860 (A)-(D) $9,137,140 (F) Snettisham Inception Energy Rate [After Hatchery Credit] (E)/(B) $0.0399 (G) Snettisham Portion of Total Energy Requirements (1995 Test Year) Snettisham Portion [From 1 (A) Above]: 83.46% Allowed Snettisham Retail Energy Rate (F)X(G) $0.0333 (3) lncrease/(Decrease) to Existing Tariffed Rates (1 + 2) $0.0043 INTERIM RATE APUCNo.l 21st Sheet No. 131 Canceling 20th Sheet No. l3l Alaska Electric Light and Power Company State of Alaska Schedule No. 44 Purchase of Non-Fir.m Power from a Qualifying Facility Public Utilities Commission Applicable to: Qualifying power production facilities with a design capacity of 100 KW or less. Rates: The rates reflected below are based on the cost of energy which Alaska Electric Light and Power Company (AELP) will avoid by virtue of its interconnection with qualifying facilities. Rate A: This rate shall be effective at all times that energy available from AELP owned hydro generators and the Snettisham hydroelectric facility is sufficient to meet all AELP customers' energy requirements. Avoided Energy Cost Avoided Energy Cost Rate A Incremental Cost of firm energy per kilowatt-hour from Snettisham $0.0 per kilowatt-hour $0.0 per kilowatt-hour Rate B: With the exclusion of exceptions listed, this rate shall be effective when AELP is using diesel fuel to generate electricity. However, diesel generation for maintenance and testing purposes of two hours or less per day will not cause this rate to become effective. Avoided Energy Cost Avoided Rate B = Cost of Diesel fuel consumed during previous 3 months Kilowatt-hours produced by diesel generation -previous 3 months $22,314 253,500 $0.0880 per kilowatt-hour These rates will be adjusted in conjunction with the Cost of Power Adjustment filings on May 15 and October 15 of each year. c R Pursuant to U-97-245 (1) Effective _ _.!..A!.!:u:I:lg.::::us:!!:t..!1~8"-' .:..;19:::9:..::8~------ Tariff Advice No. 271 Issued by Alaska Electric Li ht and Power Com an Title Secretary-Treasurer APUCNo.l Fourth Canceling Third Sheet No. 16 7 Alaska Electric Light and Power Company State of Alaska Public Utilities Commission Schedule No. 98 Cost of Power Adjustment Clause a. Applicability: b. The rates in all filed rate schedules (except Schedule 25- Large Commercial Interruptible Electric Heat, and Schedule 95-Controlled Service Interruptible Load, unless penalty rates are in effect, and the special contract with a rate for Juneau Ready Mix) for electric service shall be subject to adjustment the applicable Cost of Power Adjustment set forth in (e.) below. Cost of Power Adjustment A Cost of Power Adjustment charge will be added to billings to customers to reflect the cost of fuel used in diesel generation. c. Cost of Power Balance Account The utility shall maintain a Cost of Power Balance Account commencing November, 1983. The Cost of Power Balance Account will commence with a zero balance, with balances thereafter reflecting the sum of the debit and credit entries prescribed. The prescribed entries are as follows: Pursuant to U-97-245 (1) Effective August 18, 1998 Tariff Advice No. 2 7 1 I"ued by ~ Alaska Electric Light and Power Company By~O.C...t~ Title Secretary-Treasurer D c APUC No.1 Fourth Sheet No. 16 8 ~----------------------------------- Canceling Third Sheet No. 16 8 Alaska Electric Light and Power Company State of Alaska Public Utilities Commission Schedule No. 98 (Continued) Cost of Power Adjustment Clause 1. A debit entry equal to the total cost of diesel fuel used to generate energy during the month. 2. A credit entry equal to the total number of KWH's of energy sold during the month under all rates (except Schedules 25, 95, Juneau Ready Mix special contract and miscellaneous adjustments), multiplied by the cost of power adjustment amount in effect during that month. 3. A credit entry equal to gross margins greater than the allowed gross operating margin collected under rate Schedules 25 and 95. The allowed gross operating margin shall be equal to .5 cents per KWH sold to residential and small commercial customers, and 1.5 cents per KWH sold to large commercial customers. 4. A debit or credit entry to make any necessary correction to adjust the cost or volume of fuel. 5. A credit for any insurance proceeds received from Snettisham debt service insurance policies. Pursuant to U-97-245 (1) Tariff Advice No. 2 7 1 Issued by By Effective August 18, 1998 c c APUC No.1 20th Sheet No. 169 Cancelling 19th Sheet No. 169 Alaska Electric Light and Power Company State of Alaska Public Utilities Commission Schedule No. 98 (continued) d. Revision of Cost of Power Adjustment (1) By October 15th and May 15th the utility will, by tariff advice letter, file the Determination of Cost of Power Adjustment detailed 1n (e.) to reflect the change 1n the average fuel and cost per KWh sold for the ensuing peak or off-peak season respectively. The filing shall include such supporting data and work papers as the Alaska Public Utili ties Commission considers appropriate to support the computation. (2) The revised Cost of Power Adjustment will be effective for all billings subsequent to the revision date, subject to subsequent review and adjustment by the Alaska Public Utilities Commission. Revision dates will coincide with the beginning of the monthly billing cycle for each season. e. Determination of the Cost of Power Adjustment: (1) Current cost of fuel: Energy Source Diesel (Sept, Oct) Fuel Total cost of fuel Pursuant to U-97-245 (1) Tariff Advice No. 271 Estimated Cost per Purchases ,Unit (B) 85,449 gal 920,000 kwh Effective $0.8917 August 18, 1998 Issued by Alaska Electric Li ht and Power Com an Total (A x B) 76,195 $ 76,195 By Title Secretary-Treasurer c I I I I I I c APUC No.1 20th Sheet No. 170 ------~~~---------- f. Cancelling 19th Sheet No. 170 ------~~~---------- Alaska Electric Light and Power Company State of Alaska Public Utilities Commission Schedule No. 98 (Continued) (2) Balance of Cost of Power Account (249,741) (at July 31, 1998) Estimated entries to Cost of Power Account August 1 -31, 1998: Diesel Generation 580,000 kwh 49,789 Kilowatt hour sales: 21,106,000 kwh August, 1998 X (0.0009) 18,996 --------- Estimated Balance -Cost of Power Account {at August 31, 1998) (180,956) { 3) Total of ( 1) + ( 2) above (104,761) ( 4) Estimated Kwh sales 44,594,000 (September 1, 1998 October 31' 1998) ( 5) Cost of Power Adjustment ($0.0023) (3 l I (4 l per kilowatt-hour Cost of Power Balance Report The Company shall file a report on the status of the Cost of Power Balance Account by May 15th and October 15th of each year. This report shall include: (1) The unit prices, volumes and total costs of fuel purchased as well as K~'ffi generated by unit; c I I I I I I I I I I I I I I c R Pursuant to U-97-245 (1) Effective ____ ....:A...:u:::Jg:o:.:u::.:::s:.:..t .:..18:::.:,;....;1::..;:9::..;:9..:::8 ________ _ Tariff Advice No. 2 71 By Secretary-Treasurer APUCNo. 1 First Sheet No. 171 Canceling Original Sheet No. 171 Alaska Electric Light and Power Company State of Alaska Public Utilities Commission Schedule No. 98 (Continued) D (2) Invoices supporting fuel purchases; C (3) KWH sold by month; c (4) Documentation for all adjustments to prices or volumes; C and (5) The resulting monthly balances in the Cost of Power C Balance Account as of January 31st or August 31st. Pursuant to U-97-245 (1) Effective August 18, 1998 Tariff Advice No. 2 7 1 Title __ s_e_c_r_e_t_a_r_y_-_T_r_e_a_s_u_r_e_r _____ _ APUCNo.l First Sheet No. 172 ---------------------- Canceling Original Sheet No. 172 Alaska Electric Light and Power Company State of Alaska Schedule No. 98 (Continued) Emergency Fuel Cost Rate Adjustment Public Utilities Commission In the event of a failure of the Snettisham hydroelectric project or transmission lines extending for a period of ten days or longer, an emergency fuel adjustment may be included in the Cost of Power Adjustment rate, beginning 14 days after the emergency occurs and remaining in effect until energy is again available to the Juneau area from Snettisham and the monthly billing cycle has made a full revolution. The COPA rate shall be recalculated every 30 days until the balancing account has been reduced to less than $50,000 and greater than ($50,000). For example, assume Snettisham energy is cut off March 10"\ and is expected to be unavailable for several weeks. The COPA rate would be calculated as follows and be effective with billings beg inning March 24th. a.) b.) c.) d.) e.) Balance of COPA Account on February 28th Plus: Estimated Cost of Diesel fuel (March 1 -April 23) Total Cost through April 23rd Projected kwh sales, March 24 April 23 Cost of Power Adjustment, per kwh $ xx,xxx. XXX, XXX. $x,xxx,xxx. xx,xxx,xxx. {line c. divided by line d.) This rate shall supersede that set forth on tariff sheet 170 and will be effective for billings through April 23. Costs will be updated, and a new rate will be effective for billings beginning April 24th. Pursuant to U-97-245 (1) Effective August 18, 1998 Tariff Advice No. 271 Issued by Alaska Electric Li ht and Power Com an By Title Secretary-Treasurer c I I I I I I I I c Nores __________________ __ SNEffiSHAM HYDROELECTRIC PROJECT AGREEMrnNTFORTHESALEANDPURCHASEOFTHE ELECTRIC CAP ABILITY OF THE SNETI1SHAM HYDROELECTRIC PROJECT ("POWER SALES AGREEI\t1ENT') between ALASKA ELECTRIC LIGHT AND POWER COMPANY ("Purchaser") and ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY A Public Corporation of the State of Alaska ("Authority') Section 1. Section 2. (a) (b) (c) (d) Section 3. Section 4. (a) (b) (c) (d) Section 5. (a) (b) (c) (d) (e) Section 6. (a) (b) (c) (d) (e) Section 7. (a) (b) (c) (d) Section 8. (a) (b) (c) (d) (e) (f) 50004146.07 TABLE OF CONTENTS Definitions ................................................................................................................ 2 Tenn Of Agreement; Amendment. .......................................................................... 6 Conditions Precedent to Effectiveness ..................................................................... 6 Commencement of Payment Obligations ................................................................ 8 Tenn ......................................................................................................................... 8 Amendment .............................................................................................................. 8 D . . . fPr. ecommissiorung o OJeCt .................................................................................... 8 The Project ............................................................................................................... 9 Sale and Purchase of Electrical Power Capability ................................................... 9 Title to Project Work ............................................................................................... 9 Independent Consultant ........................................................................................... 9 Best Efforts Regarding Project Costs ...................................................................... 9 Project Financing ..................................................................................................... 9 Project Acquisition ................................................................................................... 9 Additional Bonds ..................................................................................................... 9 Parity Obligations .................................................................................................. ! 0 Assignment of Payments to Trustee ...................................................................... 10 Refinancing ............................................................................................................ 1 0 Purchaser's Obligations ......................................................................................... ! 0 Management of Project Operations ....................................................................... 1 0 Costs of Project Operation ..................................................................................... 1 0 Payments of Project Costs by the Purchaser to Authority ..................................... 11 Insurance ................................................................................................................ 13 Replacement Power When Project Power Is Unavailable ..................................... 13 Renewal and Replacement Fund ............................................................................ 13 Establishment and Purposes ofR & R Fund .......................................................... 13 Title toR & R Fund ............................................................................................... 13 Annual R & R Contribution ................................................................................... 13 Disposition ofR & R Fund on Termination .......................................................... 14 Budgets and Oversight ........................................................................................... 14 Annual Operating Budget ...................................................................................... 14 Snettisham Project Committee .............. _ ................................................................. 14 Construction Activities .......................................................................................... 14 Surplus Assets/I..eases ............................................................................................. 15 Contests .................................................................................................................. 15 Interfunds Transfers ............................................................................................... 15 -1- Section 9. (a) (b) Section 10. (a) (b) (c) (d) Section 11. (a) (b) (c) (d) (e) Section 12. Section 13. (a) (b) (c) (d) Section 14. (a) (b) Section 15. (a) (b) (c) (d) Section 16. (a) (b) (c) (d) (e) (f) Section 17. (a) (b) Section 18. (a) 50004146.07 Page Proceeds of a Taking .............................................................................................. 15 Taking ofProject .................................................................................................... l5 Taking of Purchaser's System ............................................................................... 16 Obligations In The Event OfDefault ..................................................................... l7 Dispute Resolution; Obligation of Continued Performance .................................. 17 Additional Rights and Remedies ........................................................................... 17 Removal and Restoration of the Purchaser as Project Operator ............................ 17 Disruption of Project Operations or Purchaser's System Due to Labor Disputes .................................................................................................................. 18 Purchaser's System ................................................................................................ 18 Operating Expenses ............................................................................................... 18 Purchaser's Rate Covenants ................................................................................... 19 Operation and Maintenance of the Purchaser's System ........................................ 19 Limitation on Certain Contracts ............................................................................. 19 Mergers, Consolidations and Sale of System by the Purchaser ............................. 19 Records and Reporting ........................................................................................... 20 Compliance with Laws and Regulations ................................................................ 21 Compliance With Law ........................................................................................... 21 Status of Bonds ...................................................................................................... 21 Licenses and Permits .............................................................................................. 21 Compliance with Continuing Disclosure Requirements ........................................ 21 Assignment ............................................................................................................ 22 Assignment Generally ............................................................................................ 22 Assignment by Authority ....................................................................................... 22 End of Project ........................................................................................................ 22 Determination of the End of Project ...................................................................... 22 Election to Purchase Project .................................................................................. 22 Decommissioning .................................................................................................. 23 Purchaser's Payment Obligations .......................................................................... 23 Prepayment, Redemption and Defeasance Provisions ........................................... 23 Redemptions Generally .......................................................................................... 23 Optional Prepayment of Project Costs ................................................................... 24 Extraordinary Optional Redemption ...................................................................... 24 Mandatory Redemption in Event of a Determination of Taxability ...................... 25 Amounts Payable on Redemption ...................................................... : .................... 25 Defeasance ............................................................................................................. 25 Representations and Warranties ............................................................................. 26 Representations of Authority ................................................................................. 26 Representations of the Purchaser ........................................................................... 26 Dispute Resolution ................................................................................................. 27 General ................................................................................................................... 27 -11- (b) (c) (d) (e) (f) (g) (h) Section 19. (a) (b) (c) (d) (e) (f) (g) (h) (i) G) EXHIBITS Exhibit A Exhibit B Exhibit C Exhibit D 50004146.07 Page Independent Consultant ......................................................................................... 27 J d" . 1 R . IB" d" Arb" . u 1c1a evtew 1n 1ng 1trat1on ..................................................................... 27 Selection of Arbitrator(s) ....................................................................................... 27 Procedures .............................................................................................................. 28 Hearing-Law-Appeal Limited ............................................................................ 28 Provisional Remedies ............................................................................................. 29 Attorneys' Fees and Costs ..................................................................................... 29 Miscellaneous ........................................................................................................ 29 Notices, Computation Of Time And Holidays ...................................................... 29 Applicable Law/Forum and Venue ........................................................................ 29 Availability Of Information ................................................................................... 30 Severability ............................................................................................................ 30 Waiver Not Continuing .......................................................................................... 30 Construction of Agreement .................................................................................... 30 Covenant To Act In Good Faith ............................................................................. 30 No Third-Party Beneficiary ................................................................................... 30 Section Headings ................................................................................................... 31 Multiple Copies ...................................................................................................... 31 Description of the Project and Included Assets Necessary Approvals Resolution Option Agreement -m- POWER SALES AGREEMENT THIS AGREEMENT is dated as of July 15, 1998, by ALASKA ELECTRIC LIGHT AND POWER COMPANY (the "Purchaser"), an Alaska corporation, and the ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY, a public corporation of the State of Alaska (the "Authority") and is effective as of the Effective Date (as defined below). RECITALS A. Pursuant to the Alaska Power Administration Asset Sale and Termination Act, the United States Department of Energy, Alaska Power Administration ("USDOE") is authorized to sell to the Authority the Snettisham hydroelectric project. The Authority has entered into an agreement with US DOE dated February 10, 1989, together with amendments thereto, expressing the terms and conditions for the purchase and sale of the project ("the Purchase Agreement"). B. The Purchaser currently owns and operates electric generating plants and power transmission and distribution systems and purchases power from USDOE generated by the Project (as defmed herein). C. As of the Effective Date, the Authority is closing the purchase of the Project under the Purchase Agreement and is issuing its bonds for purposes of fmancing the purchase price and certain related costs and expenses. D. The Authority desires to sell, and the Purchaser desires to buy, all of the Capability of the Project (as defined below) pursuant to this Agreement. It is understood by the parties that this Agreement is intended, without limitation, to secure the payment of debt service on all Bonds and Parity Obligations (as defmed below) issued to fmance the purchase of the Project and to pay for Project Work (as defined below), to be collaterally assigned to the Trustee as security for payment of the Bonds and Parity Obligations, and to survive any taking of Purchaser's System as an obligation of the Purchaser and/or condemnor. E. The parties intend and agree that ( 1) the Purchaser shall have responsibility for operating the Project, except as otherwise provided herein; (2) the Authority's responsibilities under this Agreement shall be primarily those related to Project finance, as distinct from Project operations; and, therefore (3) this Agreement shall be implemented and interpreted at all times in a manner that allows the Purchaser the maximum Project-related operating flexibility consistent with the Authority's responsibilities under this Agreement and the Resolution (as defined below). NOW, THEREFORE, the parties agree as follows: -1- Section 1. Defmitions. For the purposes of this Agreement, the following definitions apply: "Act" or references to AS 44.88 mean Title 44, Chapter 88 of the Alaska Statutes (AS 44 .88) and 1996 SLA Ch. 111, Section 25, as the same may be amended or supplemented from time to time. "Additional Bonds" means any bonds of the Authority (including any bonds issued to refund the Bonds) issued pursuant to the Resolution on a parity of lien with the Bonds on the Project and Project revenues. "Additional Payments" means the amounts payable by the Purchaser pursuant to Section 6(c)(i)(C). "Affiliate" means Snettisham Electric Company, an Alaska corporation that is on the date hereof a wholly owned subsidiary of Alaska Energy and Resources Company and is under common control with the Purchaser, and/or any permitted successor thereto. "Agreement" means this Power Sales Agreement, as it may be amended, modified or supplemented. "Annual Operating Budget" has the meaning set forth in Section 8(a). "Annual R & R Contribution" means the annual amount to be deposited each Fiscal Year into the R & R Fund, as set forth in Section 7(c). "APUC" means the Alaska Public Utilities Commission and/or any successor thereto. "Authority" means the Alaska Industrial Development and Export Authority as established by the Act, and/or any successor agency thereto. "Bonds" means all bonds, notes, or other evidences of indebtedness issued by the Authority pursuant to the Resolution, the proceeds of which are used to finance or refinance the acquisition and construction of the Project and pay and/or reimburse related costs of acquisition and construction of the Project and Project Work. "Capability of the Project" means the entire capability of the Project to generate and transmit Electric Power at any and all times, including periods when the Project is inoperable, is curtailed, or is not operating, in each case in whole or in part for any reason whatsoever. "Code" means the Internal Revenue Code of 1986, as amended. -2- 50004146.07 . "Debt Service Fund" means the fund established with the Trustee for purposes of paymg debt service on the Bonds and Parity Obligations from a portion of the Revenues received from the payments to be made by the Purchaser pursuant to Section 6( c) hereof. "Debt Service Reserve Fund" means the fund of that name established by the Resolution and to be held by the Trustee as security for Bonds and Parity Obligations. "Decommissioning Costs" means all expenditures (including without limitation capital items, labor, administrative, fees and expenses of the Independent Consultant and other advisers) that are specific to the Project and which are either: (1) required by law to decommission the Project in accordance with all Necessary Approvals and all federal, state and local laws and regulations then applicable to the Project; or (2) necessary to protect human health or public safety. Where this Agreement pennits decommissioning before the end of the Term hereof, Decommissioning Costs shall include the costs to retire the Bonds and Parity Obligations, if any. "Dispute Resolution" means the process described in Section 17. "Effective Date" means the date on which all of the conditions precedent set forth in Section 2(a) have been satisfied or waived by the parties. "Electric Power" or "Power" means electric energy or electric capacity or both. Where the context of this Agreement requires a distinction, electric energy is specified and/or expressed in kilowatthours or megawatthours and electric capacity is specified and/or expressed in kilowatts or megawatts. "FERC" means the Federal Energy Regulatory Commission and/or any successor thereto. "Fiscal Year" means that twelve-month period starting January 1 of a calendar year through and including December 31 of the same calendar year. The initial Fiscal Year for purposes of this Agreement is that portion of the twelve-month period starting on the Effective Date through and including the following December 31. If that portion of the calendar year is shorter than ninety (90) days the parties shall determine the initial Fiscal Year, which must end on a December 31 and may not be longer than 456 days. The last Fiscal Year for purposes of this Agreement shall be that portion of the twelve-month period between the end of the last full (i.e., 12-month) Fiscal Year and the expiration of this Agreement. "Independent Consultant" means an independent individual or firm of engineers or any other consultant that is nationally recognized and has expertise with respect to electric power projects comparable to the Project, or other consultant, selected by agreement of the Authority and the Purchaser and, if applicable, meeting the requirements of the Resolution. For purposes hereof, "independent" mearis a person who is in fact independent and does not have any substantial interest, direct or indirect, in the Authority or the Purchaser. "Initial R & R Contribution" is the amount of $1,800,000 to be contributed to the Renewal & Replacement Fund from proceeds of the Bonds. -3- 50004146.07 "Insurance Consultant" means a nationally recognized insurance broker or consultant with expertise in insuring projects comparable to the Project, selected by agreement of the Authority and the Purchaser and meeting the requirements of the Resolution. "Margin" has the meaning specified in Section 5(b )(iv). "Minimum R & R Fund Requirement" means $500,000. "Necessary Approvals" means all of the permits, conveyances, actions or consents required under applicable local, state or federal law in order for (a) this Agreement or any amendment thereof to become enforceable and (b) the Project to be acquired and operated in accordance with this Agreement, as set forth in Exhibit B. ••operations and Maintenance Agreement" or ••o&M Agreement" means the Operations and Maintenance Agreement dated the date hereof between the Purchaser and the Authority, as the same may be amended, supplemented and modified from time to time. "Option Agreement" means that certain Snettisham Option Agreement dated the date hereof between the Authority and the Affiliate in substantially the form attached hereto as Exhibit D, as the same may be amended, supplemented and modified from time to time. "Parity Obligations" means any bonds, notes or other evidences of indebtedness (including any such indebtedness issued to refund outstanding Parity Obligations) issued by the Purchaser or the Affiliate, or by any issuer other than the Authority for the Purchaser or the Affiliate, that are authenticated and delivered by the Trustee and are to be secured on a parity of lien with outstanding Bonds. ''Project" means the Snettisham hydroelectric project and all assets comprising the project, including all transmission lines and cable, all as more particularly described in Exhibit A, as the same may be changed from time to time as a result of Project Work. "Project Costs" means the amounts payable by the Purchaser to the Authority pursuant to Section 6( c) of this Agreement. "Project Expansions" means Project improvements, betterments, additions and expansions (other than Project Repairs) that are consistent with Prudent Utility Practice. "Project Repairs" means repairs, maintenance or replacements of existing parts, fixtures or equipment with respect to the Project, which (i) are required by federal or state law or this Agreement or are otherwise necessary to keep the Project in good and efficient operating condition, consistent with Prudent Utility Practice, and (ii) are chargeable to the capital account of the Project under the Code. Repairs, maintenance or replacements of existing parts, fixtures or equipment which result in improvement of the Project are not excluded from this definition. -4- "Project Sale Agreement" shall mean the Project Sale Agreement substantially in the form of Exhibit A to the Option Agreement, that meets the requirements of the Resolution, provides for the sale by the Authority to the Affiliate of all or substantially all of the property, facilities and assets comprising the Project, and evidences and secures the Project Purchaser's obligation to pay the purchase price of the Project stated therein and perform all other obligations of the Project Purchaser thereunder. "Project Work" means Project Repairs and/or Project Expansions. "Prudent Utility Practice" shall mean at a particular time any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry at such time, or which, in the exercise of reasonable judgment in light of facts known at such time, could have been expected to accomplish the desired results at the lowest reasonable cost consistent with good business practices, reliability, safety and reasonable expedition. Prudent Utility Practice is not required to be the optimum practice, method or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts which could have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability, safety and expedition. Prudent Utility Practice includes due regard for manufacturers' warranties and the requirements of governmental agencies of competent jurisdiction and shall apply not only to functional parts of the Project, but also to appropriate structures, landscaping, painting, signs, lighting and other facilities. In evaluating whether any matter conforms to Prudent Utility Practices, the parties shall take into account, among other things, (a) the nature of the parties hereto under the laws of the State of Alaska and their statutory duties and responsibilities and (b) the objectives of (i) complying with environmental and safety regulations and management agreements, (ii) minimizing the financial risk of the parties hereto and (iii) providing the Purchaser with flexibility in the conduct of its business affairs. For purposes of this Agreement, "national standards for the industry" means Prudent Utility Practice. "Purchase Agreement" means that certain agreement between the Authority and the U.S. Department of Energy dated February 10, 1989 relating to the purchase and sale of the Project to the Authority, as amended. "Purchaser" means Alaska Electric Light and Power Company and/or any permitted successor thereto. "Purchaser's System" or "System" means the Purchaser's electric utility system within the City and Borough of Juneau or any other system directly interconnected thereto for the distribution, transmission, and generation of Electric Power, which is owned and operated by the Purchaser. "Purchaser's System" does not include the Project. "Reimbursable Administrative Costs" means those reimbursable expenses of the Authority specific to the Project as set forth in the Operations and Maintenance Agreement. "Reimbursable Extraordinary Administrative Costs" means those unbudgeted Reimbursable Administrative Costs which result from an unexpected event and/or an emergency, as set forth in the Operations and Maintenance Agreement. -5- 50004146.07 "Renewal and Replacement Fund" or "R & R Fund" means the Renewal and Replacement Fund established by the Authority pursuant to the Resolution and Section 7 of this Agreement. "Resolution" means the Snettisham Power Revenue Bond Resolution adopted by the Authority on July 22, 1998, a copy of which is attached hereto as Exhibit C, as the same may be amended, modified or supplemented from time to time pursuant to Supplemental Resolutions (as defmed in the Resolution) adopted in accordance with the provisions of the Resolution. "Snettisham Project Committee" means the committee described in Section 8(b) of this Agreement. "Term" means the term of this Agreement provided by Section 2(c) of this Agreement. "Total Taking" means, with respect to the Purchaser's System or the Project, a taking by any state or federal government agency, or subdivision thereof, of all or substantially all of the capability or output from or assets comprising the System or the Project. "Transition Plan" means that plan adopted by the USDOE and the Authority describing the arrangements and timetable for completing the sale and transfer of the Project to the Authority. "Trustee" means the Trustee, which may at any time be designated as Trustee under the Resolution. "USDOE" means the United States Department of Energy, Alaska Power Administration. Any capitalized terms used and not otherwise defmed herein shall have the meanings given such terms by the Resolution. Section 2. Term Of Agreement; Amendment. (a) Conditions Precedent to Effectiveness. This Agreement shall become effective upon the fulfillment of the following conditions: (i) Approval of this Agreement, the Operations and Maintenance Agreement, the Option Agreement. and related transactions by the Board of Directors and shareholders, to the extent required, of the Purchaser and the Affiliate; (ii) Delivery to the Authority and the purchasers of the first series of Bonds issued under the Resolution of an opinion by legal counsel for the Purchaser that (A) the Purchaser and the Affiliate are duly organized and validly existing and have the corporate power and authority to execute, deliver and perform their respective obligations under this Agreement, -6- the O&M Agreement and the Option Agreement; (B) the execution and delivery of, and performance of the respective obligations of the Purchaser and the Affiliate under, this Agreement, the O&M Agreement and the Option Agreement have been duly authorized by all necessary corporate action; (C) this Agreement, the O&M Agreement and the Option Agreement have been duly executed and delivered by the Purchaser and the Affiliate and constitute the valid and binding obligations of the Purchaser and the Affiliate, enforceable against the Purchaser and the Affiliate, as applicable, in accordance with their respective terms; and (D) such other matters as the Authority may reasonably request or as may be reasonably requested in connection with the issuance of the first series of Bonds under the Resolution. (iii) Approval of this Agreement, the Operations and Maintenance Agreement, the Option Agreement and related transactions, including necessary bond approval and authority, by the Authority's Board of Directors; (iv) Conveyance of Project real and personal property interests to the Authority, including, but not limited to, the following: (A) USDOE private and permitted lands; (B) Bureau of Land Management transmission line rights·of- way and communication sites; (C) U.S. Forest Service transmission line rights-of-way; (D) Main Project area lands selected by the State of Alaska (includes title conveyance to State of Alaska and subsequent conveyance to the Authority pursuant to Alaska Statute 38.05.81 0); and (E) State of Alaska, Department of Natural Resources tideland leases; (v) To the extent legally required, issuance or assignment of necessary environmental permits or authorities; (vi) Purchaser, Authority, and Alaska Department of Fish and Game approval and execution of Snettisham Hydroelectric Project Hatchery Coordination Agreement; (vii) Satisfaction of purchaser's obligations under the Purchase Agreement between the Authority and USDOE; (viii) The closing of the Authority's purchase of the Project under the Purchase Agreement, including but not limited to agreement with USDOE on adequate assurances with respect to environmental and other liabilities; -7- (ix) The issuance of all other Necessary Approvals as set forth in Exhibit B, including but not limited to approval of this Agreement and any other approvals required from the APUC; and (x) The closing of the issuance and sale of the first series of Bonds pursuant to the Resolution. (b) Commencement of Payment Obligations. The payment obligations of the Purchaser under this Agreement shall commence on the Effective Date. The Purchaser's payment obligations shall be as specified in Section 6. (c) Term. The Term of this Agreement shall begin on the Effective Date and, unless earlier terminated pursuant to the Option Agreement, shall end on December 31, 2038, provided, however, that if, on December 31, 2038, there are no Bonds or Parity Obligations outstanding and the Authority still owns the Project notwithstanding the best efforts of Affiliate and/or the Purchaser to acquire the Project, the Purchaser may elect, by notice to the Authority, to extend the term of this Agreement to December 31, 2048, on all the terms and conditions set forth herein; and, provided, further, that if the term is so extended and the Authority still owns the Project on September 1, 2048, the parties shall conduct good faith negotiations concerning the terms and conditions of a possible further extension of the term. (d) Amendment. No amendment of this Agreement shall be effective without (i) applicable Necessary Approvals, if any, and (ii) the written approval(s) of the Trustee and holders of the Bonds and Parity Obligations, but only to the extent such written approval(s) may be required by the Resolution. Section 3. Decommissioning of Project If the Project has not been purchased, pursuant to the Option Agreement, prior to the date identified in Section 2 of the Option Agreement, and if Affiliate gives notice pursuant to Section 2 of the Option Agreement that it does not elect to purchase the Project (or if Affiliate fails to deliver any notice prior to the deadline specified in Section 2 of the Option Agreement), the parties shall proceed to negotiate in good faith a plan for the decommissioning of the Project in an orderly manner as soon as possible. Such plan shall include, among other things, the funding of a reserve account to be established and maintained by the Authority for purposes of paying all Decommissioning Costs and a ·timetable for conducting the work necessary to decommission the Project. The Purchaser shall be solely responsible for funding such reserve account, and shall commence no later than eighteen (18) months prior to the last day of the Term to make monthly payments to the Authority (as part of the Project Costs payable pursuant to Section 6(c)) in such amounts as are determined by the parties to be necessary and appropriate for decommissioning the Project In the event the parties are unable to agree on the decommissioning plan, including the amount and timing of the funding of a reserve account, either party may submit the matter for Dispute Resolution. Any and all obligations of the Purchaser with respect to decommissioning of the Project, including those set forth in the decommissioning plan, shall survive the Term of this Agreement. -8- 50004146.07 Section 4. The Project (a) Sale and Purchase of Electrical Power Capability. The Authority hereby sells and the Purchaser hereby purchases all of the Capability of the Project. The Purchaser shall have the right to purchase any additional Capability of the Project that may be produced if the Project is ever expanded or upgraded, provided that the Purchaser pays any additional debt service and any additional operation and maintenance expense relating to any Project Expansions. (b) Title to Project Work. Title to any assets acquired or constructed in connection with any Project Work shall be vested in the Authority, until such time (if any) as the Project (including such assets) is sold to Affiliate pursuant to the Option Agreement and the Project Sale Agreement. (c) Independent Consultant. The Purchaser and the Authority shall appoint an Independent Consultant to provide services with respect to the Project as set forth in this Agreement, the Operations and Maintenance Agreement and the Resolution. Except as provided in Section 17(h), the fees and expenses of the Independent Consultant shall be operation and maintenance expenses to be borne by the Purchaser under the Operations and Maintenance Agreement. Subject to provisions in the Resolution, the contract with the initial and each successor Independent Consultant shall provide, among other things, that the Independent Consultant (i) may not resign or terminate its contract on less than one hundred twenty ( 120) days notice, unless a successor Independent Consultant shall have been appointed by the Authority and the Purchaser and shall have assumed the obligations of the resigning Independent Consultant; (ii) may be removed by the Purchaser, with the consent of the Authority, at any time on ten (1 0) days notice; and (iii) shall receive payment only for services with respect to the Project that are actually performed. If the Purchaser and the Authority cannot agree on the appointment or removal of the initial Independent Consultant or on any successor Independent Consultant, such dispute shall be subject to binding arbitration described in Sections 17(d) through 17(h) below. (d) Best Efforts Regarding Project Costs. In their performance and interpretation of this Agreement, the parties agree to use their reasonable best efforts to assure that the Project provides power to the Purchaser at the lowest reasonable cost, taking into account the obligations imposed by the Act, this Agreement, the Resolution, Prudent Utility Practice, and the characteristics of the Purchaser's System. Section 5. Project Financing (a) Project Acquisition. The Authority shall pay the costs of acquisition and construction of the Project and related assets from the proceeds of the first series of Bonds. (b) Additional Bonds. The Authority shall have the option, but not the obligation, to issue Additional Bonds to pay the costs of acquisition and construction of Project Work. In addition to any requirements applicable to the issuance of Additional Bonds set forth -9- ~146.01 in the Resolution, any Additional Bonds issued by the Authority shall be subject to the following terms and conditions: (i) The proceeds thereof shall not be used to finance O&M Costs (as defined in the O&M Agreement), except for Project Repairs. (ii) For purposes of Project Costs payable by the Purchaser pursuant to Section 6(c)(i)(A), interest on such Additional Bonds shall include a margin (expressed as a percentage or portion thereof) which, when added to the interest rate that would otherwise be borne or charged with respect to the Additional Bonds, will compensate the Authority for the use of its credit or funds (the "Margin"). For any particular issue of Additional Bonds, the Margin shall be commensurate with margins charged by the Authority with respect to financings of similar principal amount and obligors of comparable creditworthiness. (iii) The Purchaser shall provide such documentation as the Authority may reasonably request in order to provide for payment by the Purchaser of the Additional Bonds (including the Margin) on the due dates therefor. (c) Parity Obligations. If the Authority declines to issue Additional Bonds for purposes of financing the costs of Project Work on terms satisfactory to the Purchaser, the Purchaser shall have the option to cause Parity Obligations to be issued in accordance with the requirements of the Resolution to pay such costs, and the option of obtaining financing in any other manner consistent with the limitations upon any such other financing contained in the Resolution, the 0 & M Agreement and this Agreement. (d) Assignment of Payments to Trustee. The parties recognize and agree that (i) the Authority will be required to collaterally assign to the Trustee, as security for the payment of the Bonds and Parity Obligations, its rights to receive certain payments under this Agreement, and (ii) the Purchaser shall pay directly to the Trustee for deposit into the Revenue Fund held by the Trustee such portion of the payments required to be made hereunder, as the Authority may direct. (e) Refmancing. Consistent with the obligations of the parties under Section 4(d), the Authority (with respect to the outstanding Bonds) or the Purchaser (with respect to the Parity Obligations) may cause the outstanding Bonds and the Parity Obligations to be refunded or refmanced from time to time if such refunding or refinancing would reduce the Purchaser's cost of Electric Power from the Project Section 6. Purchaser's Obligations (a) Management of Project Operations. The Purchaser and the Authority shall enter into the Operations and Maintenance Agreement. (b) Costs of Project Operation. Commencing on the Effective Date, the Purchaser shall bear all costs of managing, operating, maintaining and improving the Project, -10- 50004146.07 including vvithout limitation all costs of performing the obligations of the operator under the Operations and Maintenance Agreement. (c) Payments of Project Costs by the Purchaser to Authority. In addition to costs to be borne by the Purchaser under subsection (b) of this Section, during the Term, the Purchaser unconditionally and irrevocably agrees to pay to the Authority or reimburse the Authority for the follovving amounts, which shall constitute Project Costs, notvvithstanding a suspension or reduction in the Capability of the Project or any interruption, interference, or curtailment in whole or in part of Power supplied by the Project. Such payments shall not be subject to any reduction, by defense, counterclaim, offset or otherwise, and the Purchaser shall be unconditionally obligated to make such payments as provided herein notwithstanding the existence or pendency of any dispute between the parties under this Agreement, the Operations and Maintenance Agreement or otherwise. (i) Commencing on the tenth (lOth) day of the month follovving the issue date of the first Series of Bonds under the Resolution, and on the tenth (1Oth) day of each month thereafter: (A) An amount equal to one-sixth (116) of the interest payment due on the immediately succeeding interest payment date for all Bonds and Parity Obligations, plus an amount equal to one-twelfth (1/12) of the Principal Installment(s) due on the immediately succeeding principal payment date for all Bonds and Parity Obligations; provided that semi- annually on each January 1 and July 1 the monthly amounts payable pursuant to this clause (i)(A) shall be adjusted to give the Purchaser credit for the income earned during the immediately preceding six months on amounts on deposit in the Debt Service Fund; and provided, further, that the monthly amount payable pursuant to this clause (i)(A) in respect of interest prior to the initial interest payment date for a Series of Bonds or Parity Obligations shall be the amount determined by dividing the interest due on the initial interest payment date by the number of complete months to elapse from the delivery date of such Series to the initial interest payment date for such Series, and the monthly amount payable pursuant to this clause (i)(A) in respect of the initial Principal Installment for a Series of Bonds or Parity Obligations shall be the amount determined by dividing the amount of such initial Principal Installment by the number of complete months to elapse from the delivery date of such Series to the date for payment of the initial Principal Installment for such Series. (B) Any additional amount required so that the amount available to the Authority in the Fiscal Year to be deposited mth the Trustee as Revenues mll be not less than the debt service coverage percentage required by Section 7.12.1 of the Resolution. (C) (1) The Reimbursable Administrative Costs of the Authority included in the Annual Operating Budget for the preceding month, (2) any Reimbursable Extraordinary Administrative Costs incurred by the Authority during the preceding month, as invoiced by the Authority to the Purchaser, and (3) the Margin mth resp7ct to any issue of Additional Bonds, in equal monthly installments; provided, that the Authonty shall give the Purchaser such advance notice of any Reimbursable Extraordinary Administrative -11- Costs as is reasonable under the circumstances. The amounts payable under this paragraph (C) shall be referred to herein as "Additional Payments." (D) An amount necessary to pay any costs of operating and maintatmng the Project that (1) have not been paid, by Purchaser pursuant to the O&M Agreement or otherwise, or (2) have been paid by the Authority but not yet reimbursed pursuant to this Agreement (although eligible for reimbursement). (ii) Commencing on the tenth (1Oth) day of January of the first full Fiscal Year after the adoption of the Resolution, and on the tenth (1Oth) day of each month thereafter, an amount equal to 1/12 of the then applicable Annual R & R Contribution. (iii) The amount, if any, required to increase the amount on deposit in the Debt Service Reserve Fund to an amount not less than the Debt Service Reserve Requirement not later than the date specified by the Resolution and/or to reimburse the provider of any Reserve Fund Credit Facility for any draws thereon as required by the terms thereof. (iv) The amount, if any, required to increase the amount on deposit in the R & R Fund to an amount not less than the Minimum R & R Fund Requirement not later than the end of any Fiscal Year in which the amount on deposit in the R & R Fund shall be less than the Minimum R & R Fund Requirement. (v) On any redemption or prepayment date for Bonds or Parity Obligations as a result of an optional or extraordinary optional redemption of such Bonds or Parity Obligations pursuant to Section 16 or a mandatory redemption of such Bonds or Parity Obligations in the event of a Determination of Taxability as required by the applicable provisions of the Bonds and the Resolution, the principal amount of such Bonds or Parity Obligations, together with any applicable redemption or prepayment premium, and accrued interest to the redemption date. (vi) Annually, not later than 45 days after the end of each Bond Year, or on a date or dates to be determined by Supplemental Resolution, for deposit in the Rebate Fund, such amount as is necessary to cause the amount on deposit in the Rebate Fund (after a deposit, if any, therein from excess earnings in the Debt Service Reserve Fund) to be equal to the estimated Rebate Amount for that Bond Year. (vii) The amount necessary to discharge any Project-related liens on Project assets and to pay other costs as may be incurred under the Resolution in connection with the Bonds and Parity Obligations, including but not limited to costs of calculation of arbitrage rebate amounts and fees and expenses of the Trustee for acting as such under the Resolution. (viii) Commencing on the date specified in Section 15(c) and on the same day of each month thereafter, the amount determined in accordance with Section 15(c) as necessary to fund a reserve for Decommissioning Costs. -12- 50004146.07 (d) Insurance. The Purchaser shall have the primary responsibility for obtaining insurance coverage for the Project as provided in the Operations and Maintenance Agreement, including such insurance as may be determined by the State of Alaska Division of Risk Management and/or its successor agency; provided, that the amount of any premiums payable with respect to any insurance coverage that is specific to the Project and obtained by the Authority as provided in the Operation and Maintenance Agreement shall be included in Reimbursable Administrative Costs. Subject to the requirements of the Resolution, the proceeds of insurance coverage on Project assets, including real and personal property, shall be payable under such arrangements as may be reasonably approved by the Authority to ensure that the proceeds are used to repair, replace, or otherwise restore the Project to at least as good condition or state of repair as it was in prior to the occurrence with respect to which such proceeds were payable. (e) Replacement Power When Project Power Is Unavailable. At any time when Power from the Project is unavailable, it shall be the Purchaser's responsibility to obtain and provide such replacement power for the Purchaser's System as the Purchaser reasonably determines may be appropriate or required under the circumstances to obtain adequate revenues for the payment of Project Costs under Section 6(c). The parties recognize and agree that (i) the load requirements of Purchaser's System during any time when Power from the Project is unavailable may be less that those which the Purchaser would meet when Power from the Project is available, and (ii) in no event shall the Purchaser be obligated under this Agreement to obtain and provide such replacement power in amounts in excess of that which would be available to the Purchaser from the Project if the Project were operating. Section 7. Renewal and Replacement Fund (a) Establishment and Purposes of R & R Fund. On or prior to the Effective Date, the Authority shall establish, as provided in the Resolution, the Renewal and Replacement Fund as an interest-bearing account exclusively for Project purposes and deposit the Initial R & R Contribution therein. The R & R Fund is created for the purpose of paying or reimbursing the cost of Project Repairs and associated engineering, construction and administration costs, which under standard accounting practices and the Code is treated as a capital cost or which the parties otherwise agree is to be funded from the R & R Fund. (b) Title to R & R Fund. The R & R Fund shall be held by the Trustee under and as provided in the Resolution. All earnings from the investment of amounts in the R & R Fund shall be retained in the Fund. (c) Annual R & R Contribution. The Annual R & R Contribution for the first full Fiscal Year is $685,279, and the Annual R & R Contribution for each subsequent Fiscal Year shall be the amount of the Annual R & R Contribution for the immediately preceding Fiscal Year increased by an amount equal to three percent (3%) thereof. Commencing on the third anniversary of the Effective Date and every three years thereafter, the Independent Consultant shall evaluate the then applicable Annual R & R Contribution and the projected levels of future Annual R & R Contributions and recommend such adjustments thereto as are necessary to maintain the R & R Fund at an appropriate amount consistent with the requirements of the -13- Resolution, in light of the prior three years' Project experience and the condition of the Project. The Authority and the Purchaser by mutual agreement also may propose to make adjustments to the Annual R & R Contribution by notifying the Independent Consultant in writing of the amount of the proposed adjustment and the reasons therefor. If the proposed adjustment is not objected to in writing by the Independent Consultant 'Nithin thirty (30) days following receipt of notice of the proposed adjustment, the adjustment shall be deemed approved, but if the adjustment would reduce the level of the R & R Fund below the amount of the Independent Consultant's current recommended amount and the Independent Consultant objects in writing to the recommended adjustment within such thirty (30) day period, such adjustment shall not be made. Foil owing any adjustment, the "Annual R & R Contribution" shall mean the amount of each annual deposit, as so adjusted. Notwithstanding any other provision in this Section 7(c), the amount on deposit in the R & R Fund shall not be reduced to an amount less than the Minimum R & R Fund Requirement. (d) Disposition of R & R Fund on Termination. Upon the retirement of all Bonds and Parity Obligations, and the determination of Decommissioning Costs, if any, any amount remaining in the R & R Fund shall be paid first to the Authority for any unreimbursed Project Costs hereunder, and then to the Purchaser. Section 8. Budgets and Oversight (a) Annual Operating Budget. In accordance with the procedures more particularly described in the Operations and Maintenance Agreement, on or before the date each year specified in such Agreement, the Purchaser shall prepare and submit to the Authority for its review an operating and maintenance plan and budget for the next Fiscal Year (in its original form and as thereafter amended pursuant to the Operations and Maintenance Agreement, the "Annual Operating Budget"). Each Annual Operating Budget shall detail (i) the Purchaser's expected operating, maintenance, fuel and other out-of-pocket expenses incurred for, or properly allocated, to the Project and administrative costs properly allocated to the Project and (ii) based on information previously provided by the Authority, the Authority's anticipated Reimbursable Administrative Costs and, if known, Reimbursable Extraordinary Administrative Costs which are reimbursable under Section 6(c)(i)(B). Each Annual Operating Budget shall be accepted by the parties, and thereafter amended, in accordance with the procedures set forth in the Operations and Maintenance Agreement. (b) Snettisham Project Committee. A Snettisham Project Committee shall be created and members appointed to facilitate the exchange of information and opinion between the parties and the Combined City and Borough of Juneau. One member shall be appointed by each of the Authority and the Purchaser and the City and Borough of Juneau Assembly shall be invited to appoint a member. Each member shall serve until removed and a successor is appointed by its respective appointing entity. (c) Construction Activities. If it is permitted to do so under the terms of the Resolution, the Authority shall call for a withdrawal of funds from the Project Fund pursuant to Section 5.3.6 of the Resolution for deposit in other Funds established thereunder when and to the extent directed by the Purchaser, and it shall obtain and submit (at Purchaser's expense) a -14- Counsel's Opinion and such other information as may be required to satisfy the preconditions to each such withdrawal and deposit. The Authority shall make payments of Costs of Acquisition and Construction from the disbursed sum at the request of Purchaser according to mutually acceptable payment procedures. (d) Surplus Assets/Leases. If it is permitted to do so under subsection 7.7.2(a) of the Resolution, the Authority shall sell or exchange property or facilities constituting part of the Project when and as directed by the Purchaser, and it will obtain and file such documents with the Trustee (at the Purchaser's expense) as may be required by said subsection to effect such sales. If it is permitted to do so under subsection 7. 7 .2(b) of the Resolution, the Authority shall lease, make contracts or grant licenses for the operation of or take other actions with respect to any part of the Project permitted thereunder when and as directed by the Purchaser, and it will obtain and file such documents with the Trustee (at the Purchaser's expense) as may be required by said subsection to effect such transactions. (e) Contests. If it is permitted to do so under Section 7.19 of the Resolution, the Authority shall contest judgments, taxes, assessments, charges and claims described therein when and as directed by the Purchaser, provided that the Purchaser has deposited with the Authority reserves deemed adequate with respect thereto; provided, however, that the Authority shall also have the right to conduct such contests if permitted by Section 7.19 of the Resolution and if determined that it is in its interest to do so, even in the absence of direction from the Purchaser. (f) Interfunds Transfers. If it is permitted to do so under the terms of the Resolution, the Authority shall request excess funds in the Debt Service Reserve Fund to be transferred by the Trustee, under Section 5.7.2 of the Resolution, to the Rebate Fund or to the Revenue Fund, as applicable, when and to the extent directed by the Purchaser. If it is permitted to do so under the terms of the Resolution, the Authority shall direct excess earnings on investments in the Revenue Fund to be transferred by the Trustee, under Section 5.9.1 of the Resolution, to the Rebate Fund when and to the extent directed by the Purchaser. If it is permitted to do so under the terms of the Resolution, the Authority shall direct excess amounts in the Rebate Fund to be transferred by the Trustee, under Section 5.9.2 of the Resolution, to the Revenue Fund when and to the extent directed by the Purchaser. (g) Provisions Supplemental. The provisions in this Section 8 relating to withdrawal, deposit and transfer of funds held by the Trustee under the Resolution are supplemental to the rights and obligations of the Authority under the Resolution with respect to such withdrawal, deposit and transfer of funds held by the Trustee. Section 9. Proceeds of a Taking (a) Taking of Project. In the event of a taking of the Project or the Capability of the Project, the proceeds thereof shall be applied as follows: (i) In the event of a Total Taking of the Project or the Capability of the Project, any proceeds received by the Authority shall be used in the following order of -15- 50004146.07 priority: (A) to pay and redeem or defease all outstanding Bonds and Parity Obligations in accordance with the Resolution, and (B) to pay Project Costs owed to the Authority pursuant to Section 6(c)(i)(D) or Section 6(c)(vi). Any excess proceeds remaining following the foregoing applications shall be paid to the Purchaser. (ii) In the event of any taking (other than a Total Taking) of the output or capacity of the Project or any assets comprising the Project, the proceeds thereof shall be applied in the same manner as proceeds of insurance are required to be applied under the Resolution. Notwithstanding any partial or Total Taking, the Purchaser shall remain liable for the performance of all its obligations under this Agreement, including without limitation payment of Project Costs under Section 6( c), until all such obligations have been satisfied in full and this Agreement has been terminated. (b) Taking of Purchaser's System. (i) The Purchaser and the Authority have entered into this Agreement in reliance on the fact that the Purchaser owns and controls and, subject to the provisions of Section ll(d), will at all times during the Term, own and control the Purchaser's System. The parties acknowledge and agree that the Authority and the holders of the Bonds and Parity Obligations will be irreparably harmed if the Purchaser is prevented, for any reason, from performing its obligations under this Agreement. Accordingly, the parties shall use their reasonable best efforts to prevent a condemnation of the Purchaser's System while any Bonds or Parity Obligations are outstanding. Notwithstanding any taking of the output or capacity from or the assets of the Purchaser's System (whether or not such taking constitutes a Total Taking), the Purchaser shall remain liable for the performance of all of its obligations under this Agreement, including without limitation payment of Project Costs under Section 6( c), until all such obligations have been satisfied in full and this Agreement has been terminated. (ii) The condemnor may assume the obligations of the Purchaser under this Agreement, and Purchaser shall thereupon be released from those obligations; provided, that the Independent Consultant determines that the condemnor has the financial ability to assume such obligations without impairing the security for the outstanding Bonds and Parity Obligations. In all other cases, the Purchaser's future payment obligations under the Agreement shall be accelerated and shall become due and payable to the Authority upon condemnation, which amount shall be included among the Purchaser's severance damages resulting from condemnation, and such condemnation proceeds shall be used and applied first to pay and redeem or defease all outstanding Bonds and Parity Obligations in accordance with the Resolution, and any and all such condemnation proceeds not required for such purpose shall be paid over to the Purchaser; provided, that the Purchaser's payment obligations shall not be accelerated if, in the opinion of the Independent Consultant, the taking is so limited in character, extent, or effect that it does not impair the Purchaser's ability to perform its obligations under this Agreement. -16- 50004146.07 Section 10. Obligations In The Event Of Default (a) Dispute Resolution; Obligation of Continued Performance. Upon failure of either the Purchaser or the Authority to perform any covenant, agreement or obligation contained in this Agreement, the other party may submit the matter for Dispute Resolution. Both parties shall continue to perform all of their covenants, agreements and obligations contained in this Agreement while any Dispute Resolution is pending. The Purchaser shall continue to make payments in the event of any dispute regarding performance of any obligation by any party under this Agreement and this obligation of continued payment pending resolution of disputes shall be immediately enforceable by the Authority and the Trustee, as the Authority's assignee. (b) Additional Rights and Remedies. In addition to the Authority's rights under this Agreement, if the Purchaser has for any reason suspended or reduced, or has failed to make or has been prevented from making, payments required under this Agreement, the Authority may: (i) Terminate or suspend the delivery of Power to the Purchaser and offer any Power not delivered to the Purchaser because of non-payment to any other person on terms and conditions deemed favorable by the Authority; provided, that any payments received by the Authority from any such other person shall be deemed to be received in mitigation of the Authority's claim for damages against the Purchaser; and/or (ii) Terminate or suspend the Operations and Maintenance Agreement, remove the Purchaser as operator of the Project and appoint a replacement operator. In the event the Authority removes the Purchaser as Operator of the Project, Purchaser shall reimburse the Authority for all reasonable costs under the circumstances of managing, operating and maintaining the Project for the duration of any period of default by the Purchaser, including without limitation costs incurred by the Authority or a qualified operator appointed by the Authority in connection with the performance of the Purchaser's obligations under the Operations and Maintenance Agreement. No exercise by the Authority of any of its rights (or any failure by the Authority to exercise any of its rights) under this Section lO(b) shall relieve the Purchaser of any payment obligation under this Agreement or relieve the Purchaser of any liability for damages resulting from non-payment. (c) Removal and Restoration of the Purchaser as Project Operator. (i) So long as the Purchaser continues to make timely payment of Project Costs, the Authority shall have the power to remove the Purchaser as operator of the Project only upon a finding by a court of competent jurisdiction that: (A) The Purchaser has materially breached its duty to operate the Project in accordance with Prudent Utility Practice; -17- (B) The Authority has given written notice of the breach to Purchaser and Purchaser has failed to cure the breach within thirty (30) days of the date written notice was given; provided, that if the breach is incapable of being cured within the thirty (30) day period, the Authority may not remove the Purchaser as operator so long as the Purchaser has commenced and is diligently pursuing a cure; (C) As a result of the breach, the Authority reasonably believes that the Purchaser's ability to continue making timely payment of Project Costs in accordance with this Agreement is or will be jeopardized; and (D) Substitution of a different entity as operator of the Project is necessary to assure the Purchaser's ability to continue making timely payment of Project Costs in accordance with this Agreement. (ii) If the Authority removes the Purchaser as operator of the Project under clause (i) above, then the Authority shall be obligated to restore the Purchaser as operator upon a finding by a court of competent jurisdiction that: (A) The Purchaser is capable of operating the Project m accordance with Prudent Utility Practice; (B) The Purchaser is capable of making timely payments of Project costs in accordance with this Agreement; and (C) The default is cured. (d) Disruption of Project Operations or Purchaser's System Due to Labor Disputes. In the event of a labor dispute, including strikes or lockouts, which result in the disruption of either the Purchaser's operation and maintenance of the Project or the delivery of Power from the Project to the Purchaser's customers, the Authority shall have the right, but not the obligation, to temporarily replace the Purchaser as operator of the Project and/or to temporarily assume operation and maintenance of the Purchaser's System to assure the delivery of Power to the Purchaser's customers and the collection of revenues necessary to pay Project Costs under this Agreement. Any such replacement or assumption of operations and maintenance by the Authority, or its designee, shall occur only for the duration of the disruption caused by the labor dispute. The Purchaser shall reimburse the Authority for all costs reasonable under the circumstances of managing, operating and maintaining the Project for the duration of any such disruption, including without limitation all costs reasonable under the circumstances incurred by the Authority or a qualified operator appointed by the Authority in connection with the performance of the Purchaser's obligations under the Operations and Maintenance Agreement. ' Section 11. Purchaser's System (a) Operating Expenses. The amounts payable under this Agreement are operating expenses of the Purchaser's System, and are valid and binding general obligations of -18- the Purchaser, payable from the gross revenues of said Purchaser's System as a cost of purchased electric power. (b) Purchaser's Rate Covenants. In order to afford, permit and make timely payments as specified in this Agreement, the Purchaser agrees that it will establish, charge and collect rates, fees, and charges with respect to the Purchaser's System in accordance with applicable law and subject to applicable regulatory approvals to provide revenues sufficient to meet its obligations under this Agreement and sufficient to pay, together with any other funds or money available therefor, any and all other amounts payable from or which constitute or may constitute a charge and lien upon such revenues including, but not limited to, amounts sufficient to pay all Project Costs. Purchaser will affirmatively and promptly pursue all remedies necessary to secure APUC approval of retail rates required to meet the terms of this Agreement where APUC approval is required. (c) Operation and Maintenance of the Purchaser's System. The Purchaser covenants and agrees that it will operate and maintain its System in good repair, working order and condition, in accordance with Prudent Utility Practice. Purchaser will take all necessary steps to (i) comply with applicable federal and state laws and regulations, licenses and permits relating to the use and operation of, and the Purchaser's sale of electric power to retail consumers over, the Purchaser's System, and (ii) maintain in good standing its certificate of public convenience and necessity issued by APUC for the Purchaser's System. (d) Limitation on Certain Contracts. The Purchaser covenants and agrees not to enter voluntarily into any contract or agreement to take or to take or pay for power, other than this Agreement, payable from the revenues of the Purchaser's System on a parity with or superior to the payment of its obligations under this Agreement. The limitations of this Section 11 (c) shall not apply to contracts or agreements creating obligations on a parity with obligations under this Agreement if a written opinion from the Independent Consultant is rendered that (i) the contract or agreement is reasonably expected to contribute to the conduct of the business of the Purchaser's System in an efficient and economical manner consistent with Prudent Utility Practice and (ii) the contract or agreement will not impair the ability of the Purchaser to raise revenues sufficient to meet its obligations under this Agreement. (e) Mergers, Consolidations and Sale of System by the Purchaser. The Purchaser shall not (i) abandon, sell, lease or otherwise dispose of the Purchaser's System or substantially all of the assets of that Sy~tem (any of the foregoing, a "transfer''), or (ii) enter into any merger, consolidation or share exchange with any other entity, unless (x) such transaction is permitted under the Resolution and (y) if not otherwise prohibited under the Resolution, such transaction is consented to in writing by the Authority, which consent shall not be unreasonably withheld, and, without limiting the generality of the foregoing, the Purchaser has provided the Authority with: (A) In the case of a transaction described in clause (i) or (ii) above in which the Purchaser is not the surviving entity, the report of the Independent Consultant concluding that the successor in interest to the Purchaser has experience in the business of electric power generation and supply at least equivalent to that of the Purchaser; and -19- 50004146.07 (B) The report of an independent, nationally recognized financial advisory firm, investment banking firm or accounting firm with experience in utility finance that, in the opinion of such firm, the Purchaser or, in the case of a transaction described in the foregoing clause (i) or clause (ii), the successor in interest to the Purchaser can be reasonably expected to have substantially the same or greater ability (1) to produce revenues sufficient to meet all payment obligations and (2) to perform all other obligations under this Agreement and the Operations and Maintenance Agreement as the Purchaser would have had absent the transaction. Any permitted successor in interest to the Purchaser pursuant to a transaction described in clause (i) or clause (ii) above must assume in writing all of the assigning Purchaser's obligations hereunder, must pay any amounts due and owing from the Purchaser hereunder and must provide the Authority and the Purchaser with an opinion of counsel that this Agreement is enforceable against such successor in interest. Notwithstanding the foregoing, no transaction described in this Section 11(e) shall be permitted if giving effect thereto would impair or jeopardize the exemption from federal income tax of interest on outstanding tax-exempt Bonds or Parity Obligations. Notwithstanding any portion of the foregoing subsection 11(e), the Authority acknowledges that the Purchaser has pledged and granted a lien against Purchaser's System to First Trust of California, N.A. and Lisa D. Jones, as Trustees, pursuant to that certain First Mortgage Indenture dated September 1, 1962, as amended, as security for bonds issued thereunder, and said pledge and lien is applicable to and encumbers Purchaser's rights under the O&M Agreement and this Agreement. The transfer of Purchaser's System by the grant of that pledge and lien, the assignment of the O&M Agreement and this Agreement by the grant of that pledge and lien, and the further transfer or assignment of Purchaser's System and the Purchaser's rights in the O&M Agreement and this Agreement by foreclosure of or realization upon the pledge and lien granted by the First Mortgage Indenture dated September 1, 1962, as amended, is hereby approved and excepted from the foregoing restrictions. Alaska Energy and Resources Company may enter into a merger, consolidation, reorganization, or stock sale without the Purchaser's compliance with the provisions of this subsection 11 (e) provided that any such transaction does not cause any change in the Purchaser's assets, operations or business condition. Section 12. Records and Reporting (a) The Authority shall have the right to review and audit all records and other documents in the Purchaser's possession used in the calculation of any amount calculated or payable by the Purchaser, and to determine compliance with any covenant, under this Agreement. The Purchaser shall have the right to review and audit all records and other documents in the Authority's possession that relate to the Project, including but not limited to Reimbursable Administrative Costs and Reimbursable Extraordinary Administrative Costs payable by the Purchaser to the Authority. -20- 500041<46.07 (b) The Purchaser shall deliver to the Authority: (i) within ten (10) days after the Purchaser's receipt thereof, but in any event within 120 days after the end of each Fiscal Year a consolidated balance sheet and consolidated statement of income and a consolidated statement of cash flow of the Purchaser and its subsidiaries (if any), setting forth in comparative form corresponding figures from the preceding Fiscal Year, all in reasonable detail and scope, and audited and certified by an independent public accounting finn of recognized national standing selected by the Purchaser, and prepared in accordance with generally accepted accounting principles; and (ii) promptly upon their becoming available, copies of (A) all financial statements, reports and proxy statements sent or made available generally by the Purchaser to its security holders (including its bondholders) and (B) all regular and periodic reports and all registration statements and prospectuses, if any, filed by the Purchaser with any securities exchange or with the Securities and Exchange Commission; and (iii) with reasonable promptness, such other information and financial data relating to the Purchaser as the Authority may reasonably request. Section 13. Compliance with Laws and Regulations (a) Compliance With Law. The Purchaser shall take all necessary steps to comply with applicable federal and state laws and regulations, licenses and permits relating to the use and operation of the Project and the Purchaser's System. (b) Status of Bonds. The parties shall not take any action which would cause the interest on any Bond which is originally issued on a tax-exempt basis to become taxable under the Code. (c) Licenses and Permits. The Authority and the Purchaser shall take all necessary steps within their control to comply with applicable federal and state laws and regulations, and to obtain and thereafter comply with all applicable licenses and permits relating to the use and operation of the Project. (d) Compliance with Continuing Disclosure Requirements. To meet the conditions of paragraph (d)(2) of United States Securities and Exchange Commission Rule 15c2- 12 (the "Rule"), as applicable to a participating underwriter for the Bonds and any Parity Obligations that constitute municipal securities under the Rule, the Purchaser covenants and agrees to enter into an agreement with the Trustee or other dissemination agent under which the Purchaser shall undertake (the "Purchaser's Undertaking,) for the benefit of holders of Bonds and Parity Obligations that constitute municipal securities under the Rule to provide or cause to be provided the annual fmancial information and notices of material events to the persons, at the times and in the manner required by the Rule. The Purchaser's Undertaking shall inure to the benefit of the Purchaser, the Authority and any holder of Bonds and Parity Obligations that constitute municipal securities under the Rule, and shall not inure to the benefit of or create any rights in any other person. No failure by the Purchaser or other obligated person to comply with -21- S0004l.c6.07 the Purchaser's Undertaking shall constitute a default in respect of the Bonds or Parity Obligations. The sole remedy of any holder of a Bond or Parity Obligation that constitutes a municipal security under the Rule shall be to take such actions as that holder deems necessary and appropriate, including seeking a writ of mandate or order of specific performance from an appropriate court, to compel the Purchaser or other obligated person to comply with the Purchaser's U ndertak:ing. Section 14. Assignment (a) Assignment Generally. This Agreement shall inure to the benefit of, and shall be binding upon the respective successors and assigns of the parties to this Agreement; provided, that this Agreement or any interest herein may be transferred or assigned by the Purchaser only in connection with a transaction permitted under Section ll(e) of this Agreement. (b) Assignment by Authority. The Authority may assign its rights hereunder as follows: (i) The Authority may collaterally assign this Agreement, together with all of its rights hereunder, to the Trustee for the purpose of securing the Bonds and Parity Obligations; (ii) The Authority may assign this Agreement, together with all of its rights and obligations hereunder, to a successor government entity created by and under authority of the State of Alaska, in which event the successor entity shall assume, and the Authority shall be released from, all of the Authority's obligations under this Agreement; and (iii) The Authority may assign this Agreement, together with the 0 & M Agreement, to Affiliate at the time of a sale of the Project to Affiliate pursuant to the Option Agreement, in which event Affiliate shall assume, and the Authority shall be released from, all of the Authority's obligations under this Agreement and the 0 & M Agreement at the time of such assignment. Section 15. End of Project (a) Determination of the End of Project. The Project shall end if the Authority and the Purchaser agree that (i) the Project can no longer be operated in accordance with Prudent Utility Practice or (ii) the Project cannot be operated in a manner consistent with Prudent Utility Practice absent Project Work and either such Project Work is not cost effective in comparison with other Power sources available to the Purchaser or neither party is willing to finance the cost of such Project Work. If the parties cannot agree as to whether the Project should end, either party may submit the matter for Dispute Resolution. (b) Election to Purch~e Project. After a determination has been made pursuant to Section 15(a) to end the Projec~, Affiliate may elec~ t.o purchase the. Proje~t from ~e Authority on the terms set forth in the Option Agreement by gtvmg the Authonty wntten nottce of such election within thirty (30) days of the date on which the determination to end the Project -22- is made. If Affiliate elects to purchase the Project, the parties will proceed in good faith and as expeditiously as possible to fulfill the applicable requirements set forth in the Option Agreement. (c) Decommissioning. If Affiliate fails to give notice of its election to purchase the Project within the period of time set forth in Section 15(b ), the parties shall decommission the Project. The parties shall prepare a decommissioning plan as contemplated by Section 3 hereof. To the maximum extent possible, the decommissioning plan shall provide for the prepayment of any outstanding Bonds and Parity Obligations. If the parties are unable to agree on a decommissioning plan, either party may submit the matter for Dispute Resolution. (d) Purchaser's Payment Obligations. Notwithstanding any determination to end or decommission the Project, the Purchaser shall continue to be obligated to pay all Project Costs until all Bonds and Parity Obligations have been paid or provision has been made for the payment of the Bonds in accordance with the Resolution and for payment of the Parity Obligations in accordance with the terms thereof; provided, that from the date on which the Project is declared ended, Project Costs shall no longer include costs for operation and maintenance of the Project or the Annual R & R Contribution. Section 16. Prepayment, Redemption and Defeasance Provisions. (a) Redemptions Generally. (i) So long as no Event of Default shall have occurred and be continuing, the Purchaser shall have the right to direct the Authority to redeem Bonds or Parity Obligations pursuant to any provisions of the Resolution that permit the Authority to direct the Trustee to redeem the Bonds or Parity Obligations in an optional or extraordinary optional redemption. (ii) Any such direction by the Purchaser to the Authority pursuant to this Section 16 shall be subject to the limitations that (a) any excess proceeds of tax-exempt Bonds or tax-exempt Parity Obligations transferred from the Project Fund to the Revenue Fund pursuant to Section 5.3.6 of the Resolution that are required by an Opinion of Counsel to be used to redeem such Bonds or Parity Obligations shall be used only for that purpose; and (b) the Purchaser shall not direct that any money held by the Trustee in the Rebate Fund or in other Funds under the Resolution reasonably expected to be required to pay any Rebate Amount be used to carry out any optional or extraordinary optional redemption. (iii) If the Purchaser directs the Authority to redeem Bonds or Parity Obligations pursuant to Section 16(a), the Purchaser shall prepay Project Costs in the amounts and at the times necessary to provide to the Authority funds which, with amounts already held by the Trustee and available under the Resolution for this purpose, will be sufficient to pay the Redemption Price of all Bonds and Parity Obligations so called for redemption at the time and in the manner required by the Resolution, and _the Authority shall use those funds for that purpose. When so directed by the Purchaser, the Authority shall also give the Trustee such notices and take such other procedural actions as may be required to effect the redemption. The Authority shall direct the Trustee to use funds held by it and available and permitted to be used in such -23- 500041<16.07 redemption, under Sections 5.6.2, 5.6.3 and 5.7.3 of the Resolution, if and to the extent so directed by the Purchaser. (b) Optional Prepayment of Project Costs. The Purchaser, at its option, may pay the remaining balance of the Project Costs or any portion thereof in advance at the times and Redemption Prices and after notice to the Authority and the Trustee in the manner provided in the Resolution. The Purchaser shall pay the Redemption Price of any Bonds or Parity Obligations so called for redemption at the times and in the manner required by the Resolution. (c) Extraordinary Optional Redemption. The Purchaser may direct the Authority to redeem all Outstanding Bonds and any Parity Obligations in accordance with the applicable provisions of the Resolution upon the occurrence of any of the following events: (i) The Project shall have been damaged or destroyed to such an extent that, in the reasonable judgment of the Purchaser, (l) the Project cannot reasonably be expected to be restored, within a period of twelve (12) months, to the condition immediately preceding such damage or destruction, or (2) the normal use and operation of the Project are reasonably expected to be prevented for a period of twelve (12) consecutive months. (ii) Title to, or the temporary use of, all or a significant part of the Project shall have been taken under the exercise of the power of eminent domain (1) to such extent that the Project cannot, in the reasonable judgment of the Purchaser, reasonably be expected to be restored within a period of twelve (12) months to a condition of usefulness comparable to that existing prior to the taking, or (2) as a result of the taking, normal use and operation of the Project are reasonably expected, in the reasonable judgment of the Purchaser, to be prevented for a period of twelve (12) consecutive months. (iii) As a result of any changes in the Constitution of the State, the Constitution of the United States of America, or state or federal laws or as a result of legislative or administrative action (whether state or federal) or by final decree, judgment or order of any court or administrative body (whether state or federal) entered after the contest thereof by the Authority or the Purchaser in good faith, this Agreement shall have become void or unenforceable or impossible of performance in accordance with the intent and purpose of the parties as expressed in this Agreement, or if unreasonable burdens or excessive liabilities shall have been imposed with respect to the Project or the operation thereof including, without limitation, federal state or other ad valorem, property, income or other taxes not being imposed on the date of this Agreement other than ad valorem taxes presently levied upon privately owned property used for the same general purpose as the Project or the facility of which it is a part. (iv) The Purchaser shall have delivered to the Authority and the Trustee an Opinion of Bond Counsel to the effect that, as a result of a change in federal tax law that applies to any outstanding tax-exempt Bonds or tax-exempt Parity Obligations, interest on such Bonds or parity Obligations is no longer excluded from gross income of the Holders thereof for federal income tax purposes. -24- S0004146.07 If the Purchaser determines to direct any such extraordinary optional redemption of Bonds and Parity Obligations, the Purchaser shall, within ninety (90) days following the event permitting such redemption, give notice to the Authority and to the Trustee specifying the date on which the Purchaser will deliver the funds required for such redemption to the Trustee, which date shall be not more than ninety (90) days from the date that notice is mailed, and the Authority shall make arrangements satisfactory to the Trustee for the giving of the required notice of redemption. (d) Mandatory Redemption in Event of a Determination of Taxability. If, as provided in the Bonds and the Resolution, the Bonds, or any Parity Obligations become subject to mandatory redemption because a Determination of Taxability (as such term defined in the Resolution) shall have been made with respect thereto, the Purchaser or the Project Purchaser shall deliver to Trustee, upon the date requested by the Trustee, the amount needed to pay the Redemption Price of the Bonds or Parity Bonds and the Resolution. (e) Amounts Payable on Redemption. The amount payable by the Purchaser in the event of an optional, extraordinary optional or mandatory redemption of Bonds shall be the sum of the following: (i) An amount of money which, when added to the money and investments held to the credit of the Debt Service Fund and, in the case of a redemption of all Outstanding Bonds and Parity Obligations, the Debt Service Reserve Fund and the Renewal and Replacement Fund, will be sufficient pursuant to the provisions of the Resolution to pay, at the applicable Redemption Price, and discharge all then Outstanding Bonds and Parity Obligations to be redeemed on the earliest applicable redemption date, that amount to be paid to the Trustee, plus (ii) An amount of money equal to the Additional Payments relating to the Bonds or Parity Obligations accrued and to accrue until actual final payment and redemption of the Bonds or Parity Obligations, that amount or applicable portions thereof to be paid to the Trustee or to the persons to whom those Additional Payments are or will be due, plus (iii) Any other amounts due and payable by Purchaser to Authority or Trustee under this Agreement or the Resolution. (f) Defeasance. So long as no Event of Default shall have occurred and be continuing, the Purchaser shall have the right to direct the Authority to defease Bonds or Parity Obligations pursuant to Section 12.1 of the Resolution or any other provisions that permit the Authority to direct the Trustee to defease Bonds or Parity Obligations. Any such direction by the Purchaser to the Authority pursuant to this section shall be subject to the limitations that (a) any excess proceeds of tax-exempt Bonds or tax-exempt Parity Obligations transferred from the Project Fund to the Revenu~ Fund pursuant to Section 5.3.6 of the Resolution that are required by a Counsel's Opinion to be used to defease such Bonds or Parity Obligations shall be used only for that purpose; and (b) the Purchaser shall not direct at the money held by the Trustee in the Rebate Fund or in any other Funds under the Resolution reasonably expected to be required to pay any Rebate Amount to be used to carry out any defeasance. If the Purchaser directs the Authority to defease Bonds or Parity Obligations pursuant to this section, the Purchaser shall ~25- 50004146.07 prepay Project Costs (in cash or by the delivery of Defeasance Obligations (as defined in the resolution)) in the amounts and at the times necessary to provide to the Authority funds or Defeasance Obligations which, with amounts already held by the Trustee and available under the Resolution for such defeasance, shall be sufficient under Section 12.1 to defease the Bonds or Parity Obligations to be so defeased at the times and in the manner required by the Resolution. The Authority shall use those funds and Defeasance Obligations solely for that purpose. When so directed by the Purchaser, the Authority also shall give the Trustee such notices and take such other procedural actions, as may be necessary or required to effect the defeasance. The Authority shall direct the Trustee to use funds held by it and available and permitted to be used in such defeasance under any applicable provisions of the Resolution, including but not limited to funds available for withdrawal from the Debt Service Reserve Fund and the Debt Service Fund pursuant to Section 5.6.4 and 5.7.4 of the Resolution, if and to the extent so directed by the Purchaser. Section 17. Representations and Warranties (a) Representations of Authority. The Authority represents and warrants as follows: (i) The Authority is a public corporation of the State of Alaska duly created, organized and existing pursuant to AS 44.88. (ii) The Authority is authorized, and has taken all steps necessary pursuant to the Constitution and laws of the State of Alaska and the regulations and by-laws of the Authority, to enter into this Agreement and to comply fully with the terms hereof. (iii) The Authority's execution and performance of this Agreement will not conflict with, violate, or constitute an event of default under any other resolution, contract, agreement, bond, note, mortgage, or other obligation of the Authority, or with respect to any order, ruling, or decree of any court or regulatory agency to which the Authority is subject at the time the Authority executes this Agreement. (b) Representations of the Purchaser. The Purchaser represents and warrants as follows: (i) The Purchaser is a corporation duly authorized, created, and existing under and by virtue of the laws of the State of Alaska. (ii) The Purchaser is authorized, and has taken all steps necessary pursuant to its articles of incorporation and by-laws and applicable laws and regulations, to enter into this Agreement and to comply fully with the terms hereof. (iii) The Purchaser's execution and performance of this Agreement will not conflict with, violate, or constitute an event of default under any other resolution, indenture, contract, agreement, bond, note, mortgage, or other obligation of the Purchaser, or with respect -26- to any order, ruling, or decree of any court or regulatory agency to which the Purchaser is subject at the time the Purchaser executes this Agreement. (iv) The Purchaser is a certificated public utility, and its certificate of public convenience and necessity includes the City and Borough of Juneau metropolitan area. Section 18. Dispute Resolution (a) General. In the event that (i) the Authority and the Operator shall fail to resolve a material issue or dispute or (ii) a dispute arises between the Authority and the Operator regarding the application or interpretation of any provision of this Agreement, the provisions of this Section 17 shall apply. (b) Independent Consultant. In the event of a dispute or issue referred to in Section 17(a) above (other than a dispute regarding the selection or removal of the Independent Consultant, which dispute shall be subject to binding arbitration described in Sections 17(d) through 17(h) below), upon written notice given by one party to the other and to the Independent Consultant, the issue or dispute shall be submitted to the Independent Consultant for resolution. Within ten (10) days after delivery of such notice, each party shall submit to the Independent Consultant a written statement setting forth such party's position with respect to the issue in question. Within twenty-five (25) days following delivery of such notice or such longer period as the Independent Consultant shall deliver to the parties its written determination of the issue. Unless a party elects to have the determination of the Independent Consultant reconsidered through judicial review or binding arbitration, as provided in Sections 17(c) through (i) below, the Operator and the Authority shall abide by the decision of the Independent Consultant. Any decision by the Independent Consultant with respect to an issue or dispute submitted hereunder shall be consistent with Prudent Utility Practice and shall, to the greatest extent reasonably possible under the circumstances, have the effect of protecting and preserving the revenues necessary to pay debt service on all outstanding Bonds and Parity Obligations. (c) Judicial Review/Binding Arbitration. If either party chooses to not abide by the decision of the Independent Consultant or if the Independent Consultant declines to make a determination, then the parties may mutually agree to submit the issue or dispute to binding arbitration described in Sections 17(d) through 17(h) below; however, the parties may mutually agree to modify any provision or procedure regarding binding arbitration. If the parties do not mutually agree to resolve the issue or dispute through binding arbitration, then either party may file suit in an Alaska State Court of competent jurisdiction to obtain a de !!2.Y£ review of the issue or dispute. Either party may call the Independent Consultant as a witness or submit affidavits of the Independent Consultant as part of its case. (d) Selection of Arbitrator(s). If the expenditure or other amount in question is less than $250,000, there shall be one neutral arbitrator; if the expenditure or other amount in question is $250,000 or more, there shall be three neutral arbitrators. The arbitrator(s) shall be selected and qualified as follows: -27- (i) Promptly following the demand for arbitration, each party shall submit to the other party a list of names of firms or individuals that would be acceptable to such party. If the parties cannot agree on the identity of the arbitrator(s) within ten (1 0) days of the arbitration demand, the arbitrator( s) shall be selected by the administrator of the American Arbitration Association ("AAA") regional office for Anchorage. (ii) Each of the arbitrators shall be an individual with demonstrated experience in electric utility operations and fmance. (e) Procedures. The arbitration shall be conducted in accordance with the AAA Commercial Arbitration Rules with Expedited Procedures, in effect on the date hereof, as modified by this Agreement. There shall be no dispositive motion practice. As may be shown to be necessary to ensure a fair hearing, the arbitrator(s) may authorize limited discovery and may enter pre-hearing orders regarding (without limitation) scheduling, document exchange, witness disclosure and issues to be heard. The arbitrator(s) shall not be bound by the rules of evidence or of civil procedure, but may consider such writings and oral presentations as reasonable business people would use in the conduct of their day-to-day affairs, and may require the parties to submit some or all of their case by written declaration or such other manner of presentation as the arbitrator(s) may determine to be appropriate. The parties intend to limit live testimony and cross-examination to the extent necessary to ensure a fair hearing on material issues. Either party may call the Independent Consultant as a witness or submit affidavits of the Independent Consultant as part of its case. All statutes of limitations which would otherwise be applicable shall apply to any arbitration proceeding hereunder. (f) Hearing-Law-Appeal Limited. The arbitrator(s) shall take such steps as maybe necessary to hold a private hearing within ninety (90) days of the initial demand for arbitration and to conclude the hearing within three (3) days; and the written decision of the arbitrator(s) shall be made not later than fourteen (14) calendar days after the hearing. The parties have included these time limits in order to expedite the proceeding, but they are not jurisdictional, and the arbitrator(s) may for good cause afford or permit reasonable extensions or delays, which shall not affect the validity of the award. The written decision shall contain a brief statement of the claim(s) determined and the award made on each claim. In making the decision and the award, the arbitrator(s) shall apply applicable substantive law. Absent fraud, collusion or willful misconduct by an arbitrator, the award shall be final, and judgment may be entered in any court having jurisdiction thereof. The arbitrator(s) may. award injunctive relief or any other remedy available from a judge, (including the joinder of parties or consolidation of this arbitration with any other arbitration arising under the Operations and Maintenance Agreement or the Power Sales Agreement involving common issues of law or fact or which may promote judicial economy, but shall not have the power to make any award payable by the Authority (except an award for attorneys' fees and costs under Section 17(h) or an award determining that an amount is properly payable out of the R & R Fund), and shall not have the power to award punitive or exemplary damages. The decision and award of the arbitrators need not be unanimous; rather, the decision and award of two arbitrators shall be final. The parties confirm that by agreeing to binding arbitration, that they intend to give up their right to have such disputes decided in court by a judge or jury. -28- (g) Provisional Remedies. Pending selection of the arbitrator(s), either party may request the AAA to appoint unilaterally an arbitrator for the limited purpose of awarding temporary or preliminary relief, however the arbitrator appointed for this purpose shall cease to have any power to enter orders after the arbitrator(s) is selected pursuant to paragraph (d) above. Any temporary or preliminary relief shall be limited to relief that the arbitrator(s) could award. This award may be immediately entered in any federal or state court having jurisdiction over the parties even though the decision on the underlying dispute may still be pending. Once the arbitrator(s) is selected pursuant to paragraph (d) above, the arbitrator(s) may, upon request of a party, issue a superseding order to modify or reverse such temporary or preliminary relief or may confirm such relief pending a full hearing on the merits on the underlying dispute. Any such initial or superseding order of temporary or preliminary relief may be immediately entered in any federal or state court having jurisdiction over the parties even though the decision on the underlying dispute may remain pending. Such relief may be granted by the arbitrator(s) only after notice to and opportunity to be heard by the opposing party unless the party applying for such relief demonstrates that its purpose would be rendered futile by giving notice. (h) Attorneys' Fees and Costs. If the party submitting a matter for resolution to the Independent Consultant, arbitration, or court does not prevail, such party shall pay all of the costs and expenses of the Independent Consultant, the arbitration and the other party (including such other party's reasonable attorney's fees). If the party submitting a matter for resolution to the Independent Consultant, arbitration, or court prevails, such party shall pay one- half of all of the costs and expenses of the Independent Consultant and arbitration, and the other party shall pay the other one-half; and each party shall be responsible for its own costs and expenses (including attorneys' fees). If the party submitting a matter for resolution to the Independent Consultant prevails before the Independent Consultant but loses in arbitration or judicial review requested by the other party, such party shall pay one-half of all of the costs and expenses of the Independent Consultant and arbitration, and the other party shall pay the other one-half; and each party shall be responsible for its own costs and expenses (including attorneys' fees). If more than one issue or dispute is submitted for resolution, the award of attorneys' fees and costs shall be separately made for each issue or dispute on a prorated basis. Section 19. Miscellaneous (a) Notices, Computation Of Time And Holidays. Any notice required by this Agreement to be given to any party shall be effective when it is received by such party, and in computing any period of time from such notice, such period shall commence at 12:01 p.m. prevailing time at the place of receipt on the date of receipt of such notice. Whenever this Agreement calls for notice to or notification by any party the same (unless otherwise specifically provided) shall be in writing directed to the Authority's executive director or the Purchaser's general manager. If the date for making any payment or performing any act is a day on which banking institutions are closed in the place where payment is to be made or a legal holiday, payment may be made or the act performed on the next succeeding day which is neither a legal holiday nor a day when banking institutions are closed in such place. (b) Applicable Law/Forum and Venue. The laws of the State of Alaska shall govern the interpretation and application of this Agreement. Any actions or judicial proceedings -29- 50004146.07 arising out of this Agreement shall be filed and prosecuted in the Superior Court for the State of Alaska, Third Judicial District, at Anchorage. (c) Availability Of Information. The parties shall make available to each other, for inspection and copying during business hours, all books, records, plans and other non- proprietary information relating to any calculation or determination to be made pursuant to this Agreement. (d) Severability. (i) Severability Generally. If any section, paragraph, clause or provision of this Agreement or any agreement referred to in this Agreement shall be fmally adjudicated by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall be unaffected by such adjudication and all the remaining provisions of this Agreement shall remain in full force and effect as if such section, paragraph, clause or provision or any part thereof so adjudicated to be invalid had not been included herein. (ii) Correction and Substitution. If any section, paragraph, clause or provision of this Agreement or any agreement referred to in this Agreement shall be finally adjudicated by a court of competent jurisdiction to be invalid or unenforceable, then and in such event the parties agree that they shall exercise their reasonable best efforts to correct such invalidation and substitute appropriate agreements and contractual arrangements to achieve the intent of this Agreement. (e) Waiver Not Continuing. Any waiver at any time by either party to this Agreement of its rights with respect to any default of the other party hereto, or with respect to any other matter arising in connection with this Agreement, shall not be considered a waiver with respect to any subsequent default, right or matter. (f) Construction of Agreement. Both the Authority and Purchaser have participated in the drafting of this Agreement and have been advised by separate counsel. Neither party shall be considered the drafter for purposes of applying rules of construction in any disputes arising under this Agreement. This Agreement shall be construed in harmony with the Resolution; however, where the terms cannot be harmonized, the terms of the Resolution shall control wherever it is material to the security of the bondholders. (g) Covenant To Act In Good Faith. In order to permit this Agreement, throughout its term, to be fully effective in accordance with the original intent of the parties, each party agrees that it shall at all times act in good faith and with fair dealing in performing its obligations and in exercising its rights under this Agreement. (h) No Third-Party Beneficiary. Notwithstanding that the operation of this Agreement may and is intended to confer benefits on third parties who are not signatories to this Agreement, this Agreement shall be enforceable only in accordance with its provisions expressly governing enforcement. In promising performance to one another under this Agreement, the parties intend to create binding legal obligations to and rights of enforcement in (i) one another, -30- and (ii) such assignees or successors in interest of the parties as may enjoy a right to enforce this Agreement by virtue of provisions of this Agreement that expressly create such a right in such assignees or successors in interest. By entering into this Agreement, the parties expressly do not intend to create any obligation or promise any performance to any other third party, .nor have the parties created for any other third party any right to enforce this Agreement. (i) Section Headings. The section headings in this Agreement are for convenience only, and do not purport to, and shall not be deemed to, define, limit or extend the scope or intent of the section to which they pertain. G) Multiple Copies. This Agreement shall be executed in several counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument IN WITNESS WHEREOF, the parties have caused this Agreement to be executed the day and year first above written. SC004146.07 ALASKA INDUSTRIAL DEVELOPMENT ANDEXPORTAUTHORITY By: ALASKA ELECTRIC LIGHT AND POWER COMPANY By: W cct· a~ a. c., AcoJ William A. Corbus Its: President/General Manager -31- Exhibit A DESCRIPTION OF THE PROJECI' AND INCLUDED ASSETS [NOTE: This Exhibit A is for reference only. A final Exhibit A will be prepared and filed with the Commission for attachment to the Power Sales Agreement upon completion of work by AIDEA and USDOE under the Transition Agreement] The Snettisham Hydroelectric Project consists of the following features, assets, structures, facilities, and equipment, among others (including, in all cases, associated lands, rights of way, water rights, permits, etc.): 1. Long Lake Reservoir and Crater Lake Reservoir 2. Wate1works, including power twmel 3. Powerhouse, including three (3) generators and associated structures, facilities, and equipment 4. Generation switchyard, including transformers and associated structures, facilities, and equipment 5. Warehouses, dormitories, machine shop, aviation-related equipment and facilities, and other structures, facilities, and equipment in the vicinity of the powerhouse and generation switch yard 6. Rolling stock, equipment, and tools 7. Overhead transmission structures, facilities, and conductor (138kV) between the generation site and Taku Inlet 8. Existing submarine cables under Taku Inlet (138kV) 9. Overhead transmission structures, facilities, and conductor (138kV) between Taku Inlet and Thane Substation 10. Thane Substation, including structures, facilities, transformers, switches, and SCAD A equipment 11. The design, acquisition, construction and installation of four new 138kV submarine cables across Taku Inlet to interconnect the Project and the Thane Substation A-1 50004146.07 ExhibitB NECESSARY APPROVALS As of the date of execution of this Agreement, the Necessary Approvals include but are not limited to the items listed below. The parties agree that this Exhibit B shall be updated from time- to-time prior to the Effective Date to clarify or add further Necessary Approvals that may be required. 1. APUC approval of this Agreement. 2. Certificate of Public Convenience and Necessity issued by APUC to the Authority as owner of the Project, or grant of exemption from such requirement. B-1 50004146.07 50004146.07 Exhibit C RESOLUTION C-1 ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY RESOLUTION NO. G98-09 SNETIISHAM POWER REVENUE BOND RESOLUTION Adopted July 22, 1998 ~04139.08 TABLE OF CONTENTS ARTICLE I. Definitions and Statutory Authority ................................................................................. 2 1.1 Definitions ........................................................................................................... 2 1.2 Interpretation ..................................................................................................... 16 1.3 Authority for this Resolution .............................................................................. 17 1.4 Resolution to Constitute Contract.. ..................................................................... 17 1.5 Obligation ofBonds ........................................................................................... 17 ARTICLE II. Authorization and Issuance ofBonds ........................................................................... l8 2.1 Authorization of Bonds ...................................................................................... 18 2.2 General Provisions for Issuance ofBonds .......................................................... 18 2.3 Additional Bonds ............................................................................................... 21 2.4 Refunding Bonds ............................................................................................... 23 2.5 Parity Obligations .............................................................................................. 24 ARTICLE ill. General Terms and Provisions ofBonds ..................................................................... 26 3.1 Medium of Payment; Form and Date; Letters and Numbers ............................... 26 3.2 Legends ........................................................................................................... _.. 26 3.3 Execution and Authentication ............................................................................ 26 3.4 Exchange of Bonds ............................................................................................ 27 3.5 Negotiability, Transfer and Registry; Bond Depository ...................................... 27 3.6 Regulations With Respect to Exchanges and Transfers ...................................... ~ 29 3. 7 Bonds Mutilated, Destroyed, Stolen or Lost ....................................................... 29 ARTICLE IV. Redemption ofBonds .................................................................................................. 30 4.1 Privilege of Redemption and Redemption Price ................................................. 30 4.2 Redemption at the Election or Direction of the Authority ................................... 30 4.3 Redemption Otherwise Than at the Authority's Election or Direction ................. 30 4.4 Selection ofBonds to be Redeemed; Allocation to Sinking Fund Installments ....................................................................................................... 31 4.5 Notice of Redemption ........................................................................................ 31 4.6 Payment of Redeemed Bonds ............................................................................. 31 ARTICLE V. Establishment ofFunds and Application Thereof.. ...................................................... 32 5.1 Pledge ofRevenues and Other Funds and Assets ................................................ 32 5.2 Establishment of Funds and Accounts ................................................................ 33 5.3 Project Fund ...................................................................................................... 33 5.4 Revenues and Revenue Fund ............................................................................. 35 5.5 Payments Into Certain Funds ............................................................................. 36 5.6 Debt Service Fund ............................................................................................. 37 5.7 Debt Service Reserve Fund ................................................................................ 38 5.8 Renewal and Replacement Fund ........................................................................ 40 5.9 Rebate Fund ....................................................................................................... 40 5.10 Cancellation and Destruction of Bonds .............................................................. 40 -1- ~139.08 ARTICLE VI. Depositories of Moneys, Security for Deposits and Investment ofFunds ................ .41 6.1 I>epositories ....................................................................................................... 41 6.2 I>eposits ............................................................................................................. 41 6.3 Investment of Certain Funds .............................................................................. 42 6.4 Valuation and Sale oflnvestments ..................................................................... 42 ARTICLE VII. Particular Covenants ofthe Authority ...................................................................... .43 7.1 Payment of Bonds .............................................................................................. 43 7.2 Extension ofPayment of Bonds ......................................................................... 43 7.3 Offices for Servicing Bonds ............................................................................... 43 7.4 Further Assurance .............................................................................................. 43 7.5 Power to Issue Bonds and Pledge Revenues and Other Funds and Assets .......... .44 7.6 Power to Collect Charges ................................................................................... 44 7.7 Creation ofLiens; Sale and Lease ofProperty; Sale ofProject to Project Purchaser ........................................................................................................... 44 7.8 Independent Consultant.. .................................................................................... 47 7. 9 Annual Budget. .................................................................................................. 4 7 7.10 Limitations on Operating Expenses and Other Costs ......................................... .48 7.11 Acquisition of the Project and Its Operation and Maintenance ............................ 48 7.12 Charges and Expenses .................................................................................. -...... 48 7.13 Power Sales Agreement; Operations and Maintenance Agreement; Project Sale Agreement ................................................................................................. 49 7.14 Insurance ........................................................................................................... 50 7.15 Reconstruction; Application of Insurance Proceeds ............................................ 51 7.16 Maintenance ofDebt Service Reserve Fund ....................................................... 52 7.17 Accounts and Reports ........................................................................................ 52 7.18 Tax Covenants ................................................................................................... 56 7.19 Payment ofTaxes and Charges .......................................................................... 57 7.20 Pledge of the State ............................................................................................. 57 7.21 Waiver ofLaws ................................................................................................. 57 7.22 (}eneral. ............................................................................................................. 57 ARTICLE VIII. Remedies ofHolders ................................................................................................. 58 8.1 ]~vents of Default. .............................................................................................. 58 8.2 Account and Examination ofRecords After Default.. ......................................... 59 8.3 Application of Revenues and Other Moneys After Default ................................. 60 8.4 Acceleration ....................................................................................................... 61 8.5 Appointment ofReceiver ................................................................................... 62 8.6 Proceedings Brought by Trustee ........................................................................ 62 8.7 Restriction on Action by Holders of Bonds and Parity Obligations ..................... 63 8.8 Remedies Not Exclusive .................................................................................... 64 8.9 Effect of Waiver and Other Circumstances ......................................................... 64 8.10 Notice ofDefault ............................................................................................... 64 . h F'd . . 64 ARTICLE IX. Concernmg t e 1 uc1anes ......................................................................................... . 9.1 Trustee; Appointment and Acceptance of Duties ................................................ 64 9.2 Paying Agents; Appointment and Acceptance ofDuties ..................................... 65 -ll- j0004139.08 9.3 Responsibilities of Fiduciaries ........................................................................... 65 9.4 Evidence on Which Fiduciaries May Act. .......................................................... 66 9.5 Compensation .................................................................................................... 66 9.6 Certain sPermitted Acts ..................................................................................... 67 9.7 Resignation of Trustee ....................................................................................... 67 9.8 Removal ofTrustee ............................................................................................ 67 9.9 Appointment of Successor Trustee; Financial Qualifications of Trustee and Successor Trustee ........................................................................................ 67 9.10 Transfer of Rights and Property to Successor Trustee ........................................ 68 9.11 Merger or Consolidation .................................................................................... 68 9.12 Adoption of Authentication ................................................................................ 68 9.13 Resignation or Removal ofPaying Agent and Appointment of Successor. ......... 69 ARTICLE X. Supplemental Resolutions ............................................................................................ 69 10.1 Supplemental Resolutions Effective Upon Filing With the Trustee .................... 69 10.2 Supplemental Resolutions Effective Upon Consent ofTrustee ........................... 70 10.3 Supplemental Resolutions Effective With Consent ofHolders ........................... 71 10.4 General Provisions ............................................................................................. 71 10.5 Amendments Prior to Delivery of Bonds ........... : ................................................ 71 ARTICLE XI. Amendments ................................................................................................................ 72 11.1 Mailing .............................................................................................................. 72 11.2 Powers of Amendment. ...................................................................................... 72 11.3 Consent of Holders ............................................................................................ 72 11.4 Modifications by Unanimous Consent.. .............................................................. 74 11.5 Exclusion of Certain Bonds and Parity Obligations ............................................ 74 11.6 Notation on Bonds and Parity Obligations .......................................................... 74 ARTICLE XII. Miscellaneous ............................................................................................................. 75 12.1 Defeasance ......................................................................................................... 75 12.2 Evidence of Signatures of Holders and Ownership ofBonds and Parity Obligations ........................................................................................................ 77 12.3 Moneys Held for Particular Bonds or Parity Obligations .................................... 78 12.4 Preservation and Inspection ofDocuments ......................................................... 78 12.5 No Recourse on the Bonds ................................................................................. 78 12.6 Severability oflnvalid Provisions ...................................................................... 78 12.7 Holidays ............................................................................................................ 78 12.8 Notices .............................................................................................................. 78 ARTICLE Xlll. Bond Form and Effective Date ................................................................................. 79 13.1 Form ofBonds and Bond Registrar's Certificate of Authentication ..................... 79 13.2 Effective Date .................................................................................................... 79 EXHIBIT A-· BOND FORM EXHIBIT B -·FORM OF REQUISITION -Ill- ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY SNETTISHAM POWER REVENUE BOND RESOLUTION WHEREAS, the Alaska Industrial Development and Export Authority (the "Authority") is authorized and (!mpowered by the provisions of the hereinafter defined Act to issue bonds of the Authority for the purpose of providing funds to pay the cost of acquiring, constructing, reconstructing, improving and/or equipping projects which promote, develop and advance the general prosperity and economic welfare of the people of Alaska; and WHEREAS, the Act in Section .172 establishes the Economic Development Account in the Revolving Fund which may be used only to finance, acquire, manage, and operate Development Projects (as such term is defined in AS 44.88.900(3) as amended or supplemented from time to time) that the Authority intends to own and operate, including projects to be operated by an agent of the Authority; and WHEREAS, the Authority is authorized by 1996 SLA Ch. 111, Section 25, to acquire.the Snettisham hydroelectric project and related assets from the federal Alaska Power Administration, including the design, acquisition, construction and installation of four new 138 kV submarine cables to interconnect the Thane Substation (the "Project"), and to issue not to exceed $100,000,000 ofbonds to finance that acquisition; and WHEREAS, the Authority on December 16, 1996, adopted Resolution No. 96-13 expressing the official intent of the Authority to issue bonds to finance the Project; and WHEREAS, the Authority has prepared a finance plan that includes an estimate of the total cost of the Project, a description of the sources of money that will be used to finance the total cost of the Project, an estimate of the operational costs of the completed Project, and a description of the source of money that is to be used to pay the operational costs, and has submitted such finance plan to the State Bond Committee, the Governor and the Legislature of the State of Alaska; and WHEREAS, the Authority also is generally authorized by Alaska Statutes 44.88 to acquire an interest in a project as necessary or appropriate to provide financing for the project; to acquire, manage and operate a project as the Authority considers necessary or appropriate to serve a public purpose; to issue bonds payable exclusively from the income and receipts or other money derived from the project financed with the proceeds of such bonds; to encumber in any manner by mortgage or by creation of any other security interest real or personal property owned by it, including a project, in furtherance of the Authority's corporate purposes; and to sell, by installment sale or otherwise, real or personal property owned by the Authority, including a project, when, in the judgment of the Authority, such action is in furtherance of its corporate purposes; and 1 WHEREAS, the Authority has provided, pursuant to the terms of the Power Sales Agreement, the Operations and Maintenance Agreement and the Project Sale Agreement regarding the Project, for consideration at least sufficient, in the judgment of the Authority, to pay the principal of and interest on the Bonds as they become due and to create and maintain the reserves for the payments required thereby that the Authority considers necessary or desirable, and to meet all obligations in connection therewith and all costs necessary to service the Bonds; and WHEREAS, the Authority has solicited the review and advice of the governing body of the City and Borough of Juneau, Alaska, the area in which the Project is located, concerning the development, maintenance and operation of the Project, and the City and Borough of Juneau, Alaska, has approved the Authority's acquisition of the Project, and WHEREAS, an issue of the Authority's bonds may be secured under a resolution giving powers to a corporate trustee for the purposes described in AS 44.88.100; NOW, TID~REFORE, to secure the payment of principal of and Redemption Price, if any, and interest on Bonds and Parity Obligations according to their true intent and meaning, to secure the performance and observance of all of the covenants, agreements, obligations and conditions contained therein and herein, and to declare the terms and conditions upon and subject to which the Bonds are intended to be issued, held, secured and enforced, and in consideration of the premises and the acceptance by the Trustee of the trusts created herein and of the purchase and acceptance of Bonds and Parity Obligations by the Holders, and for other good and valuable consideration, the receipt of which is acknowledged, the Authority adopts this Resolution and absolutely sells, pledges and assigns hereby to the Trustee, and to its successors in trust, and its and their assigns, and grants a security interest in, all right, title and interest of the Authority in and to (i) the Revenues, (ii) the Power Sales Agreement, (iii) the Operations and Maintenance Agreement, (iv) the Project Sale Agreement, (v) the Project Note, (vi) the Pledge Agreement, and (vii) the Project, except in each case for the Unassigned Authority Rights, in trust, subject to the provisions hereof (such capitalized terms used herein being defined in Article I); and BE IT RESOLVED by the Alaska Industrial Development and Export Authority, as follows: ARTICLE I. Definitions and Statutory Authority 1.1 Definitions. The following terms shall, for all purposes of this Resolution, have the following meanings: "Accountant" shaH mean a nationally recognized firm of certified public accountants selected by the Authority. 2 mo4139.08 "Act" shall mean Title 44, Chapter 88 of the Alaska Statutes (AS 44.88) and 1996 SLA Ch. 111, Section 25, as the same may be amended or supplemented from time to time. "Additional Bonds" shall mean Bonds authenticated and delivered pursuant to Section 2.3. "Aggregate Debt Service" for any period shall mean, as of any date of calculation, the sum of the amounts of Debt Service for such period with respect to the Outstanding Bonds and Parity Obligations of all Series. "Annual Budget" shall mean the annual budget, as amended or supplemented, adopted or in effect for a particular Fiscal Year as provided in Section 7.9. "Authority"' shall mean the Alaska Industrial Development and Export Authority organized and existing under the Act. "Authorized Officer of the Authority" shall mean the Chairman, Vice Chairman, Executive Director, Secretary, Assistant Secretary or Treasurer of the Authority or any officer or employee of the Authority authorized to perform specific acts or duties by resolution duly adopted by the Authority. Whenever chief financial officer is used in this Resolution it shall mean a person designated as such by the Executive Director. "Authorized Officer of the Project Purchaser" shall mean any of the persons at the time designated to act on behalf of the Project Purchaser by written certificate furnished to the Authority and the Trustee containing the specimen signature of those persons and signed on behalf of the Project Purchaser by its President or any Vice President. That certificate may designate an alternate or alternates. "Average Aggregate Debt Service" shall mean, as of any date of calculation, the sum of the remaining Aggregate Debt Service divided by the number of Bond Years such Bonds and Parity Obligations are scheduled to remain Outstanding. "Bond" or "Bonds" shall mean any bond or bonds, note or notes, or evidence of indebtedness or ~~vidences of indebtedness, as the case may be, issued by the Authority and authenticated and delivered under and pursuant to, and entitled to the benefit and security of, this Resolution. "Bond Counsel" shall mean a law firm of nationally recognized standing in the field of municipal finance law whose opinions are generally accepted by purchasers of public obligations, selected by the Authority and reasonably acceptable to the Trustee and the Purchaser or the Project Purchaser, as applicable. "Bond Depository" shall mean a Holder acting as a central securities depository as provided in Section 3.5. 3 "Bond Insurance Policy" means a municipal bond insurance policy, if any, issued m connection with any Series of Bonds or Parity Obligations. "Bond Insurer" shall mean any entity providing a Bond Insurance Policy. "Bond Register" shall mean the books and records of the Authority maintained by the Bond Registrar for the purpose of registration of any Series ofBonds. "Bond Registrar" shall mean the Trustee or any other bank or trust company organized under the laws of any state of the United States of America or any national banking association appointed by the Authority to perform the duties of Bond Registrar enumerated in Section 7.3. "Bond Year" shall mean each period of 12 calendar months ending on January 1. "Capital Improvements" shall mean Project Repairs and/or Project Expansions. "Capital Improvements Financing Limit" shall mean, as of any calculation date, a dollar limit on the aggregate original stated principal amount of all Additional Bonds and Parity Obligations at any time issued or secured under the Resolution for the purpose of financing Capital Improvements (except Additional Bonds and Parity Obligations issued to finance Capital Improvements that the Independent Consultant has determined to be necessary to meet regulatory requirements applicable to the Project) equal to (i) for the Fiscal Year that includes the issue date of the first Series of Bonds issued under the Resolution, $15,000,000; and (ii) for each Fiscal Year thereafter, the amount of the Capital Improvements Financing Limit for the prior Fiscal Year adjusted in proportion to the annual percent change in the CPI during the prior Fiscal Year; reduced by the aggregate original stated principal amount of all previously issued Additional Bonds and Parity Obligations taken into account under the Capital Improvements Financing Limit. The Capital Improvements Financing Limit shall not apply to Refunding Bonds or to Parity Obligations issued for refunding purposes. "Code" shall mean the Internal Revenue Code of 1986, as amended, including applicable Treasury regulations thereunder. "Costs of Acquisition and Construction" shall mean all costs and expenses of acquiring the Project, including designing, acquiring, constructing and installing four 138 kV submarine cables across Taku Inlet to interconnect the Project and the Thane Substation, and planning, designing, acquiring, constructing, installing and financing any Capital Improvement, placing the Project or a Capital Improvement in operation, and obtaining governmental approvals, certificates, permits and licenses with respect thereto. Such costs shall include amounts required to be paid to any other party which are applied or are to be applied under agreement to the payment of items of Cost of Acquisition and Construction. Such costs also shaH include, but shall not be limited to: (a) Reimbursements to the Authority and the Purchaser for original expenditures made for the Project or a Capital Improvement prior to the issue date of Bonds; 4 W!D4139.0B (b) Costs of preliminary investigation and development, the performance or acquisition of feasibility and planning studies, the securing of regulatory approvals, as well as costs for land and land rights, water and water rights, engineering, contractors' fees, labor, materials, equipment, utility services and supplies, accounting, legal and financing fees and expenses~ (c) The purchase price of the Project payable under the Purchase Agreement; (d) Interest accruing in whole or in part on Bonds prior to and during construction and for such additional period as the Authority may reasonably determine to be necessary for the placing of the Project or a Capital Improvement or any facility thereof in operation in accordance with the provisions of this Resolution; (e) Amounts required by this Resolution or a Supplemental Resolution to be paid into any Funds or Accounts established pursuant to this Resolution from the proceeds of Bonds issued to finance the Project or a Capital Improvement; (f) The payment of principal, Redemption Price, if any, and interest when due (whether at the maturity of principal or at the due date of interest or upon redemption) on any bond anticipation note or other note or evidence of indebtedness issued in anticipation of Bonds for the purpose of financing the Project or a Capital Improvement; (g) Training and testing costs incurred by the Authority which are properly allocable to acquisition and construction; (h) All costs of insurance applicable to the period of construction; (i) The cost of restoring and repairing in accordance with Prudent Utility Practice all public or private property damaged or destroyed in the construction of a Capital Improvement, or the amount required by law to be paid by the Authority as adequate compensation for such damages, or amounts required by law or Prudent Utility Practice to be paid with respect to the restoration, relocation, removal, reconstruction or duplication of property made necessary or caused by the construction and installation of the Project or a Capital Improvement to the extent such costs are not otherwise paid out of the proceeds of insurance; G) Legally required or permitted federal, state and local taxes and payments in lieu of taxes applicable to the period of construction; (k) All other costs incurred by or on behalf of the Authority and properly allocable to the acquisition of the Project or acquisition or construction of a Capital Improvement; and (1) Costs oflssuance. "Costs of Issuance" shall mean any item of expense payable or reimbursable, directly or indirectly, by the Authority, the Purchaser or the Project Purchaser and related to the 5 50004139 Of! authorization, offering, sale, issuance or delivery of Bonds, including, but not limited to, printing costs, costs of preparation and reproduction of documents, filing and recording fees, initial fees and charges of any Fiduciary, legal fees and disbursements, fees and disbursements of the Independent Consultant, fees and disbursements of other consultants and professionals, costs of credit ratings, fees and charges for preparation, execution, transportation and safekeeping of Bonds, application fees and premiums on municipal bond insurance, credit facility charges and costs and expenses relating to the refunding of Bonds or other obligations issued to finance or refinance the Project or a Capital Improvement. "Counsel's Opinion" shall mean an opinion of Bond Counsel~ provided, however, that, in the case of any opinion required pursuant to clause (a)(iv) of Subsection 2.2.1, Subsection 5.3.5 or paragraph (b) of Subsection 5.3.6, "Counsel's Opinion,. shall mean an opinion of the Office of the Attorney General of the State, if the Authority is the owner of the Project, or an opinion of counsel to the Project Purchaser, if it is the owner of the Project, and, in the case of the opinions required pursuant to Subsection 7.7.3(a)(ii)(B)(2) and (5), "Counsel's Opinion" shall mean and include the opinions of counsel to the Purchaser and the Project Purchaser required by that Subsection. "CPI" shall mean the Consumer Price Index-All Urban Consumers for Anchorage, Alaska, published in January of each Fiscal Year by the United States Department of Labor, Bureau of Labor Statistics, or any successor index designated and published by the United States Department of Labor, Bureau of Labor Statistics, or any successor federal agency, to report percent changes in consumer prices for Anchorage, Alaska. "Debt Service" for any period shall mean, as of any date of calculation and with respect to any Series, an amount equal to the sum of (i) interest accruing during such period on Bonds or Parity Obligations of such Series, except to the extent that such interest is to be paid from deposits in the Interest Account in the Debt Service Fund made from proceeds of Bonds or Parity Obligations and (ii) that portion of each Principal Installment for such Series which would accrue during such period if such Principal Installment were deemed to accrue daily in equal amounts from the next preceding Principal Installment due date for such Series (or, if there shall be no such preceding Principal Installment due date, from a date one year preceding the due date of such Principal Installment or from the date of issuance of the Bonds or Parity Obligations of such Series, whichever date is later). Such interest and Principal Installments for such Series shall be calculated on the assumption that no Bonds or Parity Obligations of such Series Outstanding at the date of calculation will cease to be Outstanding except by reason of the payment of each Principal Installment on the due date thereof. For the purposes of this definition (x) interest and Principal Installments with respect to interest accreting on compound interest or zero coupon or like interest paying Bonds shall be deemed to accrue in the twelve (12) months immediately prior to the final maturity of such Bonds; and (y) the Authority m.ay dete:mine ~hat inte~est will accrue on variable rate Bonds at a rate equal to the actual rate dunng a pnor penod spec1fied by the Supplemental Resolution relating to the issuance of such variable rate Bonds. "Debt Service Fund" shall mean the Debt Service Fund established in Section 5.2. 6 ~04139.08 "Debt Service Reserve Fund" shall mean the Debt Service Reserve Fund established in Section 5 .2. "Debt Serv!ce Reserve Requirement" shall mean an amount equal to the least of (i) a percentag~ of Maxim~m Aggregate Debt Service, not exceeding 100% of Maximum Aggregate Debt Service, as specified by the Supplemental Resolution authorizing the first Series of Bonds under the Resolution, (ii) 125% of Average Aggregate Debt Service, or (iii) 10% of proceeds of the Bonds and Parity Obligations. "Deed of Trust" shall mean the Deed of Trust under which the Authority is Trustor and the Truste: is beneficiary, constituting a lien on the Project real property and improvements, together With the related Security Agreement under which the Authority grants to the Trustee a security interest in Project personal property, and all Collateral Assignments to the Trustee of Project leasehold interests and rights of way. "Defeasance Obligation" shall mean any Federal Obligation or any obligation of a municipality that has been defeased by Federal Obligations and is rated not less than AAA by Moody's and Standard & Poor's. "Depository" shall mean any bank or trust company organized under the laws of any state of the United States of America or any national banking association selected by the Authority and approved in writing by the Trustee as a depository of moneys and securities held under the provisions of this Resolution, and may include the Trustee; provided that, if the Trustee shall fail to so approve, it shall deliver to the Authority a statement of its reasons for such failure. "Determination of Taxability" shall mean, with respect to any tax·exempt Bonds or tax- exempt Parity Obligations, a final decision, ruling or technical advice by any federal judicial or administrative authority to the effect that, as a result of a failure by the Authority, the Purchaser or the Project Purchaser, as applicable, to observe or perform any covenant, agreement or obligation on its part to be observed or performed under the Resolution, the Power Sales Agreement, the Project Sale Agreement or the Tax Exemption and Nonarbitrage Certificate or the inaccuracy of any representation made herein or therein, interest on such Bond or Parity Obligation is or was includible in the gross income of the Holder thereof for federal income tax purposes (other than a Holder who is a "substantial user" of the Project or a "related person" as those terms are used in Section 147(a) of the Code); provided that no decision by any court or decision, ruling or technical advice by any administrative authority shall be considered final (a) unless the Holder involved in the proceeding or action giving rise to such decision, ruling or technical advice (i) gives the Authority, the Purchaser, the Project Purchaser (if it then owns the Project) and the Trustee prompt notice of the commencement thereof, (ii) offers the Purchaser and the Project Purchaser (if it then owns the Project) the opportunity (within thirty (30) days after such offer) to assume control of the contest thereof, provided the Purchaser and the Project Purchaser (if it then owns the Project) shall have agreed to bear all expenses in connection therewith and to indemnify that Holder against all liabilities in connection therewith, and (iii) if the Purchaser or the Project Purchaser does not assume control of such contest within that thirty- day period, offers the Authority the opportunity to assume control of such contest, provided the Authority shall have agreed to bear all expenses in connection therewith and to indemnify that 7 ~0~1390ll Holder against all liabilities in connection therewith; and (b) until the expiration of all periods for judicial review or appeal. "Event of Default" shall have the meaning given to such term in Section 8.1. "Federal Obligation" shall mean any direct obligation of, or any obligation the full and timely payment of principal of and interest on which is guaranteed by, the United States of America. "Fiduciary" or "Fiduciaries" shall mean the Trustee, the Bond Registrar, the Paying Agents, or any or all of them, as may be appropriate. "Fiscal Year" generally shall mean, including with respect to the Project, the Purchaser and the Project Purchaser, the calendar year, except that for the purposes of any requirement contained in Section 7.17 applicable to the Authority concerning provision by the Authority of its annual financial statements and annual financial information, ''Fiscal Year" shall mean the twelve month period commencing on July 1 of each year and including June 30 of the succeeding calendar year. "Fund" or "Funds" shall mean, as the case may be, each or all of the Funds established in Section 5.2. "Holder" or "Holders" shall mean any person or persons who shall be the registered owner of any Bonds or Parity Obligations. "Independent Consultant" shall mean an independent individual or firm of engineers or any other consultant that is nationally recognized and has expertise with respect to electric power projects comparable to the Project at the time retained pursuant to Section 7.8 to carry out the duties and responsibilities given to such Independent Consultant by this Resolution. For purposes hereof, "independent" means a person who is in fact independent and does not have any substantial interest, direct or indirect, in the Authority or the Purchaser or Project Purchaser. "Installment Payments" shall mean the amounts payable by the Project Purchaser to the Authority pursuant to Section 2.3 of the Project Sale Agreement. "Interest Account" shall mean the Interest Account in the Debt Service Fund established in Section 5.2. "Investment Securities" shall mean and include any of the following securities, if and to the extent the same are at the time legal for investment of the Authority's funds: $0004139.08 (i) Federal Obligations; (ii) obligations of the Government National Mortgage Association, the Federal National Mortgage Association to the extent that such obligations are guaranteed by the Government National Mortgage Association, the Federal Financing Bank, the 8 Federal Intermediate Credit Banks, Federal Banks for Cooperatives, Federal Land Banks, Federal Home Loan Banks, Farmers Home Administration and Federal Home Loan Mortgage Association; (iii) new housing authority bonds issued by public agencies or municipalities and fully secured as to the payment of both principal and interest by a pledge of annual contributions under an annual contributions contract or contracts with the United States of America; or project notes issued by public agencies or municipalities and fully secured as to the payment of both principal and interest by a requisition or payment agreement with the United States of America; (iv) direct and general obligations of any state of the United States of America, to the payment of the principal of and interest on which the full faith and credit of such state is pledged, provided that at the time of their purchase under this Resolution such obligations are rated not less than Aa or AA or their equivalents by Moody's and Standard & Poor's, respectively; (v) certificates of deposit, whether negotiable or nonnegotiable, issued by any bank or trust company organized under the laws of -any state of the United States of America or any national banking association (including any Fiduciary and their affiliates), provided that such certificates of deposit shall be purchased directly from such a bank, trust company or national banking association and shall be either (1) continuously and fully insured by the Federal Deposit Insurance Corporation, or (2) continuously and fully secured by Qualified Collateral, which shall have a market value (exclusive of accrued interest) at all times at least equal to 100% of the principal amount of such certificates of deposit and shall be lodged with the trust department of the Trustee or with a Federal Reserve Bank or branch, as custodian, by the bank, trust company or national banking association issuing each such certificate of deposit required to be so secured; (vi) repurchase agreements with banks which are members of the Federal Reserve System or with government bond dealers recognized as primary dealers by the Federal Reserve Bank of New York that are secured by Federal Obligations or the obligations referred to in paragraph (ii) (herein called "Other Obligations"), having a current market value at least equal to 100% of the amount of the repurchase agreement, marked to market weekly, and which Federal Obligations or Other Obligations shall have been deposited in trust by such bank or dealer with the trust department of the Trustee or with a Federal Reserve Bank or branch, or with another third party custodian approved by the Trustee, by such bank or dealer and by the Authority, as collateral security for such repurchase agreements; (vii) "commercial paper" rated either A-1 or P-1, or corporate bonds or notes, in each case issued by a United States corporation, rated in one of the two highest rating categories by Standard & Poor's and Moody's; (viii) investment agreements with any corporation, including banking or financial institutions, the corporate debt of which is rated, at the time of investment, "Aa" 9 or better by Moody's and "AA'' or better by Standard & Poor's, or secured in the same manner as repurchase agreements in paragraph (vi); (ix) guaranteed investment contracts or similar funding agreements issued by banking or financial institutions or insurance companies, the corporate debt of which, at the time of investment, is rated (a) "Aa" or better by Moody's, (b) "AA" or better by Standard & Poor's or (c) "AA" or better by Best's, and the contract is pari passu with senior debt, or the contract is rated in one of the two highest rating categories by Standard & Poor's or Moody's or Best's; and (x) units of a taxable government money market fund consisting of obligations guaranteed by the full faith and credit of the United States of America and repurchase agreements secured as provided in paragraph (vi), including money market mutual funds from which any Fiduciary or its affiliates receive a fee for investment advisory or other services to the fund. "Maximum Aggregate Debt Service" shall mean, as of any date of calculation, the greatest amount of Aggregate Debt Service payable in any unexpired Bond Year. "Minimum R&R Fund Requirement" shall mean $500,000. "Moody's" shall mean Moody's Investors Service, Inc., and its successors. "Operating Expenses" shall mean (i) the operation, maintenance, administrative and general expenses of the Project, and shall include, without limiting the generality of the foregoing, costs of investigations, insurance, ordinary repairs of the Project which do not entail the acquisition and installation of a unit of property (as generally prescribed by the Federal Energy Regulatory Commission), fuel costs, rents, engineering expenses, legal and financial advisory expenses, salaries and required employee costs, any taxes or payments in lieu of taxes pursuant to the Act or otherwise pursuant to law and Reimbursable Administrative Costs and Reimbursable Extraordinary Administrative Costs (as such terms are defined in the Operations and Maintenance Agreement), (ii) any other current expenses or obligations required to be paid by the Authority under the provisions of this Resolution or by law, all to the extent properly allocable to the Project, or required to be incurred under or in connection with the performance of the Power Sales Agreement, the Operations and Maintenance Agreement or the Project Sale Agreement, and (iii) the fees and expenses of the Fiduciaries. Operating Expenses shall not include any costs or expenses for new construction or any allowance for depreciation. "Operations and Maintenance Agreement" shall mean the Operations and Maintenance Agreement dated as of July 15, 1998 between the Authority and the Purchaser as the same may be amended. "Option Agreement" shall mean that certain Snettisham Option Agreement dated as of July 15, 1998, between the Authority and the Project Purchaser as the same may be amended. 10 Wl041J9.011 "Outstanding", when used with reference to Bonds or Parity Obligations, shall mean, as of any date, Bonds or Parity Obligations theretofore or thereupon being authenticated and delivered under this Resolution except: (i) Bonds or Parity Obligations cancelled by the Trustee at or prior to such date; (ii) Bonds or Parity Obligations (or portions of Bonds or Parity Obligations) for the payment or redemption of which moneys equal to the principal amount or Redemption Price thereof, as the case may be, with interest to the date of maturity or redemption date, shall be held in trust under this Resolution and set aside for such payment or redemption (whether at or prior to the maturity or redemption date), provided that if such Bonds or Parity Obligations (or portions of Bonds or Parity Obligations) are to be redeemed, notice of such redemption shall have been given as provided in Article IV or provision satisfactory to the Trustee shall have been made for the giving of such notice; (iii) Bonds or Parity Obligations in lieu of or in substitution for which other Bonds or Parity Obligations, respectively, shall have been authenticated and delivered pursuant to Article III or Section 4.6 or Section 11.6; and (iv) Bonds or Parity Obligations deemed to have been paid as provided m Subsection 12.1.2. "Parity Obligations" shall mean any bonds, notes or other evidences of indebtedness (including any such indebtedness issued to refund Outstanding Parity Obligations) issued by the Purchaser, or by any issuer other than the Authority for the Purchaser or Project Purchaser, that are authenticated and delivered by the Trustee and are to be secured on a parity of lien with Outstanding Bonds. "Parity Obligation Instrument" shall mean any indenture, trust agreement, loan agreement or other instrument authorizing the incurrence and issuance of a Parity Obligation or a Series of Parity Obligations. "Paying Agent" shall mean any bank or trust company organized under the laws of any state of the United States of America or any national banking association designated as paying agent for the Bonds or Parity Obligations of any Series, and its successor or successors hereafter appointed in the manner provided in this Resolution and the applicable Parity Obligation Instrument. "Pledge Agreement" shall mean the Pledge Agreement under which Alaska Energy and Resources Company pledges all of the outstanding stock of the Project Purchaser to the Authority pursuant to the requirements of the Option Agreement. 11 :l0004139.08 "Power Sales Agreement" shall mean the Agreement for the Sale and Purchase of the Electric Capability of the Snettisham Hydroelectric Project dated as of July 15, 1998 between the Authority and the Purchaser as the same may be amended. "Principal Account" shall mean the Principal Account m the Debt Service Fund established in Section 5 .2. "Principal Installment" shall mean, as of any date of calculation and with respect to any Series, so long as any Bonds or Parity Obligations thereof are Outstanding, (i) the principal amount of Bonds or Parity Obligations of such Series due on a certain future date for which no Sinking Fund Installments have been established, or (ii) the unsatisfied balance of any Sinking Fund Installments due on a certain future date for Bonds or Parity Obligations of such Series, plus the amount of the sinking fund redemption premiums, if any, which would be applicable upon redemption of such Bonds or Parity Obligations on such future date in a principal amount equal to said unsatisfied balance of such Sinking Fund Installments, or (iii) if such future dates coincide as to different Bonds or Parity Obligations of such Series, the sum of such principal amount of Bonds or Parity Obligations and of such unsatisfied balance of Sinking Fund Installments due on such future date plus such applicable redemption premiums, if any. "Project" shall mean the Snettisham Hydroelectric Project, as the same is described in the Power Sales Agreement. · "Project Capability" shall mean the entire capability of the Project to generate and transmit electric energy at any and all times, including periods when the Project may not be operating or may be inoperable or the operation thereof is curtailed, in each case in whole or in part for any reason whatsoever. "Project Costs" shall mean the amounts required to be paid by the Purchaser pursuant to Section 6(c) of the Power Sales Agreement. "Project Expansions" shall mean Project improvements, betterments, additions and expansions (other than Project Repairs) that are consistent with Prudent Utility Practice. "Project Fund" shall mean the Project Fund established in Section 5.2. "Project Note" shall mean the promissory note or other instrument given by the Project Purchaser to the Authority to evidence the Project Purchaser's obligation to pay the Purchase Price of the Project in accordance with the Project Sale Agreement. "Project Purchaser" shall mean Snettisham Electric Company, an Alaska corporation that is on the date hereof a wholly owned subsidiary of Alaska Energy and Resources Company and is under common control with the Purchaser. "Project Repairs" shall mean repairs, maintenance or replacements of existing parts, fixtures or equipment with respect to the Project, which (i) are required .by f~deral or state la': or the Power Sales Agreement or are otherwise necessary to keep the Project m good and efficient 12 operating condition, consistent with Prudent Utility Practice, and (ii) are chargeable to the capital account of the Project under the Code. Repairs, maintenance or replacements of existing parts, fixtures or equipment which result in improvement of the Project are not excluded from this definition. "Project Sale Agreement" shall mean the Project Sale Agreement substantially in the form of Exhibit A to the Option Agreement, that meets the requirements of this Resolution, provides for the sale by the Authority to the Project Purchaser of all or substantially all of the property, facilities and assets comprising the Project, and evidences and secures the Project Purchaser's obligation to pay Installment Payments and perform all other obligations of the Project Purchaser thereunder. "Prudent Utility Practice" shall mean at a particular time any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry at such time, or which, in the exercise of reasonable judgment in light of facts known at such time, could have been expected to accomplish the desired results at the lowest reasonable cost consistent with good business practices, reliability, safety and reasonable expedition. Prudent Utility Practice is not required to be the optimum practice, method or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts which could have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliabi\ity, safety and expedition. Prudent Utility Practice includes due regard for manufacturers' warranties and the requirements of governmental agencies of competent jurisdiction and shall apply not only to functional parts of the Project, but also to appropriate structures, landscaping, painting, signs, lighting and other facilities. In evaluating whether any matter conforms to Prudent Utility Practices, there shall be taken into account, among other things, (a) the nature of the Authority and the Purchaser under the laws of the State and their statutory duties and responsibilities and (b) the objectives of (i) complying with environmental and safety regulations and management agreements, (ii) minimizing the financial risk of the Authority and the Purchaser and (iii) providing the Purchaser with flexibility in the conduct of its business affairs. For purposes of this Resolution, "national standards for the industry" shall mean Prudent Utility Practice. "Purchase Agreement" shall mean the agreement between the Authority and the U.S. Department of Energy dated February 10, 1989 relating to the purchase of the Project by the Authority, as amended. "Purchaser" shall mean Alaska Electric Light and Power Company and its permitted successors and assigns under the Power Sales Agreement. "Qualified Collateral" shall mean: (i) Obligations described under items (i), (ii) and (iii) of the definition of Investment Securities; (ii) direct and general obligations of any state of the United States of America which are rated not less than A or its equivalent by both Standard & Poor's and Moody's. 13 . "Rating Agency" means each nationally recognized securities rating agency rating any senes ofBonds at the request of the Authority. "Rebate Amount" shall mean the rebate amount, if any, payable to the United States of America in respect of any Series of tax-exempt Bonds or tax-exempt Parity Obligations pursuant to section 148(f) of the Code. "Rebate Fund" shall mean the Rebate Fund established in Section 5.2. "Redemption Price" shall mean, with respect to any Bond or Parity Obligation, the principal amount thereof plus the applicable premium, if any, payable upon redemption thereof pursuant to such Bond or Parity Obligation or this Resolution. "Refunding Bonds" shall mean all Bonds, whether issued in one or more Series, authenticated and delivered on original issuance pursuant to Section 2.4. "Renewal and Replacement Fund" shall mean the Renewal and Replacement Fund established in Section 5 .2. "Renewal and Replacement Fund Contribution" shall mean (a) initially, $1,800,000 to be deposited in the Renewal and Replacement Fund from proceeds of the first Series of Bonds issued hereunder, and (b) thereafter, the amount required to be deposited in the Renewal and Replacement Fund pursuant to Section 7( c) of the Power Sales Agreement and Section 7.16 of the Project Sale Agreement. "Reserve Fund Credit Facility" shall mean any bond insurance, letter of credit, guaranty, surety bond or similar credit enhancement device providing for or securing the payment of all or part of the principal of and interest on the Outstanding Bonds or Parity Obligations, issued by an institution which has been assigned a credit rating of at least A by Moody's and Standard & Poor's. "Resolution" shall mean this Resolution as from time to time amended or supplemented by Supplemental Resolutions in accordance with the terms hereof "Retained Revenues" shall mean (a) all Reimbursable Administrative Costs and Reimbursable Extraordinary Administrative Costs or Additional Payments payable or reimbursable to the Authority pursuant to the Power Sales Agreement or the Project Sale Agreement, (b) all payments pursuant to Section 6(c)(i)(C)(3) of the Power Sales Agreement or Section 2.4(ii) of the Project Sale Agreement constituting Margin on Additional Bonds and Refunding Bonds, (c) all payments of attorneys' fees and costs pursuant to Section 18(h) of the Power Sales Agreement or Section 9.4 of the Project Sale Agreement, and (d) all payments pursuant to the indemnification provisions of Section 6 or 7 of the Operations and Maintenance Agreement or Section 7.19 of the Project Sale Agreement. "Revenue Account" shall mean the Revenue Account in the Revenue Fund established in Section 5.2. 14 "Revenue Fund" shall mean the Revenue Fund established in Section 5.2. "Revenues" shall mean (i) all revenues, income, rents and receipts, derived or to be derived by the Authority from, or attributable to the ownership, operation and/or sale of, the Project, including all revenues attributable to the Project or to payment of the costs thereof including, without limitation, all revenues received or to be received by the Authority under (A) the Power Sales Agreement or any other contract for the sale of power, energy, transmission or other service from the Project or any part thereof, (B) any contractual arrangement with respect to the use of the Project or any portion thereof or the services, output or capacity thereof, or (C) the Project Sale Agreement, and (ii) interest received or to be received on any moneys or securities (other than in the Project Fund or in the Rebate Fund) held pursuant to this Resolution, including investment earnings transferred from the Debt Service Reserve Fund to the Revenue Fund pursuant to Section 5.7.2 and investment earnings retained in the Debt Service Fund as a credit against Project Costs or Installment Payments. Notwithstanding the foregoing, "Revenues" shall not include Retained Revenues. "Security Agreement" shall mean the Security Agreement under which the Authority is debtor and the Trustee is secured party granting to the Trustee a security interest in the Project personal property. "Series" shall mean (i) all of the Bonds authenticated and delivered on original issuance and identified pursuant to this Resolution or a Supplemental Resolution authorizing such Bonds as a separate Series of Bonds, and any Bonds thereafter authenticated and delivered in lieu of or in substitution for such Bonds pursuant to Article III or Section 4.6 or Section 11.6, regardless of variations in maturity, interest rate, Sinking Fund Installments, or other provisions; and (ii) all of the Parity Obligations authenticated and delivered by the Trustee on original issuance that are identified by their authorizing documents as a separate series of Parity Obligations. "Sinking Fund Installment" means, as of any particular date of determination and with respect to the Outstanding Bonds or Parity Obligations of any Series, the amount required by a Supplemental Resolution or Parity Obligation Instrument to be paid in any event by the Authority or the issuer of the Parity Obligations on a single future date for the retirement of Bonds or Parity Obligations of such Series which mature after said future date, but does not include any amount payable by the Authority or the issuer of the Parity Obligations by reason only of the maturity of a Bond or Parity Obligation. "Standard & Poor's" shall mean Standard & Poor's Rating Services, a division of the McGraw-Hill Companies, Inc. and its successors. "State" shall mean the State of Alaska. "Supplemental Resolution" shall mean any resolution supplemental to or amendatory of this Resolution, adopted by the Authority in accordance with Article X. 15 S00041)9.08 "Surplus Account" shall mean the Surplus Account in the Revenue Fund established in Section 5.2. "Tax Exemption and Nonarbitrage Certificate" shall mean the Tax Exemption and Nonarbitrage Certificate dated August 18, 1998, executed by the Authority and the Purchaser relating to the financing of the Project. "Trustee" shall mean the trustee appointed pursuant to Article IX, and its successor or successors and any other corporation or association which may at any time be substituted in its place pursuant to this Resolution. "Unassigned Authority Rights" shall mean all of the rights of the Authority to receive Reimbursable Administrative Costs and Reimbursable Extraordinary Administrative Costs under the Power Sales Agreement, to receive Additional Payments under the Project Sale Agreement, to be reimbursed for attorneys' fees and costs under Section 18(h) ofthe Power Sales Agreement and Section 9.4 of the Project Sale Agreement, to be indemnified under Sections 6 and 7 of the Operations and Maintenance Agreement and Section 7.19 of the Project Sale Agreement, and to give or withhold any consent to amendments, changes, modifications, alterations and termination of the Power Sales Agreement, the Operations and Maintenance Agreement and the Project Sale Agreement, and to accept or not accept any Annual Budget or amendment thereto presented by the Purchaser or the Project Purchaser pursuant tq the foregoing contracts. 1.2 Interpretation. In this Resolution, unless the context otherwise requires: 1.2.1 The terms "hereby," "hereof," "hereto," "hereunder," "herein" and any similar terms used herein refer to this Resolution, and the term "hereafter" shall mean after, and the term "heretofore" shall mean before, the date of adoption of this Resolution~ 1.2.2 Words of the masculine gender shall mean and include correlative words of the feminine and neuter genders, and words importing the singular number shall mean and include the plural number and vice versa; 1.2.3 Words importing persons shall include firms, associatiOns, partnerships (including limited partnerships), trusts, corporations and other legal entities, including public bodies, as well as natural persons~ 1.2.4 Words importing the redemption or redeeming of a Bond or Parity Obligation or the calling of a Bond or Parity Obligation for redemption do not include or connote the payment of such Bond or Parity Obligation at its stated maturity or the purchase of such Bond or Parity Obligation; 1.2.5 Any percentage of Bonds and Parity Obligations, for purposes of t~is Resolution, shalt be computed on the basis of the unpaid principal amount of Bonds and Panty Obligations Outstanding at the time the computation is made or is required to be made hereunder; 16 1.2.6 Any headings preceding the text of the several Articles and Sections of this Resolution, a?d any table of contents or marginal notes appended to copies hereof, shall be solely for convemence of reference and shall not constitute a part of this Resolution, nor shall they affect its meaning, construction or effect; 1.2. 7 Articles and Sections mentioned by number only are the respective Articles and Sections of this Resolution so numbered; and 1.2.8 The term "principal" when used in connection with compound interest or zero coupon or like paying Bonds or Parity Obligations shall mean the initial principal amount of such Bonds or Parity Obligations as at their date of issuance plus interest accreted thereon to the date of calculation. 1.3 Authority for this Resolution. This Resolution is adopted pursuant to the provisions of the Act. The Authority has ascertained and hereby determines and declares that adoption of this Resolution is necessary to carry out the powers and duties expressly provided by the Act, that each and every act, matter, thing or course of conduct as to which provision is made in this Resolution is necessary or convenient in order to carry out and effectuate the purposes of the Authority in accordance with the Act and to carry out powers expressly given in the Act, and that each and every covenant or agreement herein contained and made is necessary, useful-or convenient in order to better secure the Bonds and are contracts or agreements necessary, useful and convenient to carry out and effectuate the corporate purposes of the Authority under the Act. 1.4 Resolution to Constitute Contract. In consideration of the purchase and acceptance of any and all of the Bonds and Parity Obligations authorized to be issued or secured hereunder by those who shall hold the same from time to time, this Resolution shall be deemed to be and shall constitute a contract between the Authority, the Trustee, and the Holders from time to time of the Bonds and Parity Obligations, a trust agreement under the Act and a security agreement under the Alaska Uniform Commercial Code. The pledge and assignment made in this Resolution and the covenants and agreements herein set forth to be performed on behalf of the Authority shall be for the equal benefit, protection and security of the Holders of any and all of the Bonds and Parity Obligations, all of which, regardless of the time or times of their authentication and delivery or maturity, shall be of equal rank without preference, priority or distinction of any of the Bonds or Parity Obligations over any other thereof except as expressly provided in or permitted by this Resolution. 1.5 Obligation of Bonds. The Bonds shall be special and limited obligations of the Authority, and principal of and premium, if any, and interest thereon shall be payable from and secured by the Revenues and other sources identified or described in Article V hereof Notwithstanding anything to the contrary in this Resolution or the Bonds, the Bonds do not and shall not represent or constitute a general obligation debt or pledge of the faith and credit or the taxing power of the Authority (it being understood that the Authority has no taxing power) or the State or of any political subdivision, municipality or other local agency thereof All Bonds and Parity Obligations shall be entitled to the benefit ofthe continuing pledge and lien created by this Resolution to secure the full and final payment of the principal or Redemption Price of and interest on all of the Bonds and Parity Obligations. Any Parity Obligations that may be issued 17 SOOG4139.08 shall not be obligations of the Authority and shall be entitled to the benefit, protection and security of this Resolution only as expressly set forth herein, and under no circumstances shall be secured by or entitled to payment from any assets of the Authority except as expressly set forth herein. ARTICLE II. Authorization and Issuance of Bonds 2.1 Authorization ofBonds. 2.1.1 The Resolution provides for the authorization of Bonds of the Authority to be designated as "Power Revenue Bonds, Series (Snettisham Hydroelectric Project)" for the purpose of providing funds for the financing or refinancing of Costs of Acquisition and Construction. The aggregate principal amount of the Bonds which may be executed, authenticated and delivered under this Resolution is not limited except as may hereafter be provided in this Resolution, or as may be limited by the Power Sales Agreement or by law. 2.1.2 The Bonds may, if and when authorized by the Authority pursuant to one or more Supplemental Resolutions, be issued in one or more Series, and the designation thereof, in addition to the name "Power Revenue Bonds, Series (Snettisham Hydroelectric Project)," shall include such further appropriate particular designation added to or incorporated in such title for the Bonds of any particular Series as the Authority may determine. Each Bond shall bear upon its face the designation so determined for the Series to which it belongs. 2. 1.3 Nothing contained in this Resolution shall be deemed to preclude or restrict the consolidation pursuant to a Supplemental Resolution of any Bonds of two or more separate Series authorized pursuant to such Supplemental Resolution to be issued pursuant to any of the provisions of Sections 2.3 and 2.4 into a single Series of Bonds for purposes of sale and issuance; provided that each of the tests, conditions and other requirements contained in Sections 2.3 and 2.4 as applicable to each such separate Series shall be met and complied with. Except as otherwise provided in this subsection or in such Supplemental Resolution, such a consolidated Series shall be treated as a single Series for all purposes of this Resolution. 2.2 General Provisions for Issuance ofBonds. 2.2.1 All (but not less than all) the Bonds of each Series shall be executed by the Authority for issuance under this Resolution and delivered to the Bond Registrar and thereupon shall be authenticated by the Bond Registrar and delivered to or as directed by the Authority, but only upon the receipt by the Bond Registrar and the Trustee of: (i) :50004139.08 (a) A Counsel's Opinion to the effect that: the Authority had the right and power under the Act as amended to the date of such Opinion to adopt this Resolution, and this Resolution has been duly and lawfully adopted 18 by the Authority, is in full force and effect and is valid and binding upon the Authority in accordance with its terms, and no other authorization for this Resolution is required; (ii) (A) If the Authority is the owner of the Project, the Power Sales Agreement and the Operations and Maintenance Agreement are legal, valid and binding contractual obligations in full force and effect; the right to enforce the Power Sales Agreement and the Operations and Maintenance Agreement has been validly assigned by the Authority to the Trustee; and that Debt Service on the Bonds of such Series is included in the computation of Project Costs payable under the Power Sales Agreement or (B) if the Authority is not the owner of the Project, the Project Sale Agreement, the Power Sales Agreement and the Operations and Maintenance Agreement are legal, valid and binding contractual obligations in full force and effect and that Debt Service on the Bonds of such Series is included in the computation of Installment Payments payable under the Project Sale Agreement and Project Costs payable under the Power Sales Agreement; (iii) this Resolution creates the valid pledge and assignment which it purports to create of the Revenues, moneys, securities and funds held or set aside under this Resolution subject only to the provisions of this Resolution permitting the application thereof for the purposes and on the terms and the conditions set forth in this Resolution; (iv) the Deed of Trust is a legal, valid and binding obligation in full force and effect and creates a lien on the real property and improvements constituting the Project, subject only to such other liens, charges, conditions or encumbrances as will not under any circumstances cause the possession and use of the property for its purposes to be materially disturbed; and (v) the Bonds of such Series are valid and binding special and limited obligations of the Authority payable from and secured by the Revenues and other sources pledged as provided in this Resolution, and entitled to the benefits of this Resolution and of the Act as amended to the date of such Opinion, and such Bonds have been duly and validly authorized and issued in accordance with law, including the Act as amended to the date of such Opinion, and in accordance with this Resolution; provided, that such Opinion may take exception for limitations imposed by or resulting from bankruptcy, insolvency, moratorium, reorganization or other laws affecting creditors' rights generally; (b) A written order as to authentication and delivery of such Bonds, signed by an Authorized Officer of the Authority; (c) A copy of the Supplemental Resolution authorizing such Bonds, certified by an Authorized Officer of the Authority, which shall, to the extent necessary and not already fixed by the Resolution, among other provisions, specify: (i) the authorized principal amount, designation and Series of such Bonds; 19 50004139.08 (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) the purposes for which such Series of Bonds is being issued, which shall be (A) the financi_ng of all or a portion of the Costs of Acquisition and Construction, or (B) the refundmg of Bonds or Parity Obligations as provided in Section 2.4; the date, maturity date or dates, and Principal Installments of the Bonds of such Series; the interest rate or rates or the maximum rate of interest of the Bonds of such Series or the method of calculating the interest rate, which interest rate may be determinable at one or more specified times or periodically by reference to an index or other reference point, an interest accreting or compound interest, zero coupon, or like method of interest rate or yield calculation and the interest payment dates therefor, provided that the interest rate shall be identical for all such Bonds of like maturity; the denominations of, and the manner of dating, numbering and lettering, the Bonds of such Series; the Paying Agent or Paying Agents and the place or places of payment of the principal and Redemption Price, if any, of, and interest on, the Bonds of such Series; the Redemption Price or Prices, if any, and subject to Article IV, the redemption terms for the Bonds of such Series; the amount and due date of each Sinking Fund Installment, if any, for Bonds of like maturity of such Series; the amount, if any, to be deposited from the proceeds of such Series of Bonds into the Debt Service Fund for the payment of all or a portion of the interest on such Series of Bonds; the amount, if any, to be deposited from the proceeds of such Series ofBonds into the Debt Service Reserve Fund to cause the amount therein, including the amount available to be drawn under any Reserve Fund Credit Facility, to equal the Debt Service Reserve Requirement; and the amount, if any, to be deposited from the proceeds of such Series of Bonds into the Renewal and Replacement Fund; whether the Series ofBonds is to be issued pursuant to Subsections 3.5.3 through 3.5.8; the amount to be deposited from the proceeds of such Series of Bonds in the account in the Project Fund established for the Project or the undertaking of Capital Improvements for which such Bonds are authorized to be issued; and such other matters as shall be necessary or appropriate so as to comply with the provisions of this Resolution or to provide for the issuance and delivery of the Bonds; (d) Except in the case of Refunding Bonds, a certificate of an Authorized Officer of the Authority stating that the Authority is not in default in the performance of any of the covenants, conditions, agreements or provisions contained in this Resolution, the Pow~r Sales Agreement or the Project Sale Agreement, as applicable, and any other agreement m 20 ~041)9.08 respect of the Bonds to which the Authority is a party (other than a default that will be cured by the issuance of such Bonds); (e) A certificate from the Purchaser or the Project Purchaser, as applicable stating that neither the Purchaser nor the Project Purchaser, as applicable, is in default in th~ performance of any of the covenants, conditions, agreements or provisions contained in the Power Sales Agreement, the Project Sale Agreement or any other agreement in respect of the Bonds and Parity Obligations to which the Purchaser or the Project Purchaser is a party (other than a default that will be cured by the issuance of such Bonds), and that the Purchaser or the Project Purchaser, as applicable, has approved the Supplemental Resolution authorizing such Bonds; (f) An opinion of counsel to the Purchaser to the effect that the Power Sales Agreement and the Operations and Maintenance Agreement are legal, valid and binding contractual obligations of the Purchaser in full force and effect and that Debt Service on the Bonds of such Series is included in the computation of Project Costs payable under the Power Sales Agreement; (g) If the Project Purchaser is the owner of the Project, an opinion of counsel to the Project Purchaser and the Purchaser that the Project Sale Agreement, the Power Sales Agreement, and the Operations and Maintenance Agreement are legal, valid and binding contractual obligations of the Project Purchaser and the Purchaser in full force and effect and that Debt Service on the Bonds of such Series is included in the comrutation of Installment Payments payable under the Project Sale Agreement and Project Costs payable under the Power Sales Agreement; and (h) Such further documents as are required by the provisions of Section 2.3 or 2.4 or Article X or any Supplemental Resolution adopted pursuant to Article X. 2.2.2 After the original issuance of Bonds of any Series, no Bonds of such Series shall be issued except in lieu of or in substitution for other Bonds of such Series pursuant to Article III or Section 4.6 or Section 11.6. 2.3 Additional Bonds. 2.3.1 After the issuance of the first Series of Bonds to finance the Costs of Acquisition and Construction one or more Series of Additional Bonds designated as "Power Revenue Bonds, Series (Snettisham Hydroelectric Project)," may be authenticated and delivered pursuant to one or more Supplemental Resolutions establishing the terms of the Series from time to time for the purpose of paying all or a portion of the Costs of Acquisition and Construction, upon compliance with the terms and conditions set forth in Section 2.2, and upon compliance with the following terms and conditions: (a) The principal amount of any Series of Additional Bonds shall not exceed (i) the Independent Consultant's estimate of the reas.onable ~?sts of Acquisition and Construction to be financed with the proceeds of such Senes, plus (u) the Costs of Issuance of 21 such Series, plus (iii) capitalized interest, if any, thereon, plus (iv) the amount of funds required to be deposited into the Debt Service Reserve Fund to cause the amount therein to equal the Debt Service Reserve Requirement, plus (v) the amount of funds, if any, required to be deposited in the Renewal and Replacement Fund; (b) The Independent Consultant shall have delivered a report to the Authority, the Trustee, the Purchaser and/or the Project Purchaser (i) determining that the net proceeds of the Series of Additional Bonds together with other funds, if any, on deposit in the Project Fund will be sufficient to pay the Costs of Acquisition and Construction to be so financed; (ii) projecting annual Project Costs for each of the five years immediately following the issuance of such Additional Bonds and concluding that, based on such projected annual Project Costs, the resulting schedule of rates and charges required to be charged by the Purchaser to meet such annual Project Costs will be reasonable; and (iii) (A) stating whether and what portion, if any, of the Costs of Acquisition and Construction are necessary to meet regulatory requirements applicable to the Project; (B) determining whether and what portion, if any, of the stated principal amount of the Series-of Additional Bonds is subject to the Capital Improvements Financing Limit; (C) calculating the amount of the Capital Improvements Financing Limit that will be in effect immediately following the issuance of the Series of Additional Bonds; and (D) stating, based on such determinations and calculations, whether issuance of the Series of Additional Bonds is subject to the requirement of Subsection 2.3.l(c); (c) If, based on the report of the Independent Consultant required by Subsection 2.3 .1 (b), the issuance of the Series of Additional Bonds will cause the Capital Improvements Financing Limit to be exceeded, the Purchaser or the Project Purchaser shall have delivered or caused to be delivered to the Authority and the Trustee written confirmation of the underlying rating then in effect with respect to the Outstanding Bonds and Parity Obligations issued by Standard & Poor's (which may be a contemporaneous rating requested by Purchaser and obtained at Purchaser's expense, with the reasonable cooperation of the Authority and the Trustee), and written confirmation from Standard & Poor's that the issuance of the Series of Additional Bonds will not result in the withdrawal or reduction of that underlying rating then in effect with respect to the Outstanding Bonds and Parity Obligations; and (d) If the Project Purchaser is the owner of the Project, an amended or additional Project Note shall have been authorized and executed by the Project Purchaser and delivered to the Trustee to evidence the obligation of the Project Purchaser to make the additional Installment Payments required to pay such Additional Bonds. 2.3 .2 The proceeds, including accrued interest, of the Additional Bonds of each Series shall be applied simultaneously with the delivery of such Bonds, as provided in the Supplemental Resolution authorizing such Series. 22 S0004139Jl8 2.4 Refunding Bonds. 2.4.1 One or more Series of Refunding Bonds may be authenticated and delivered upon original issuance to refund any Outstanding Bonds or Parity Obligations. Refunding Bonds shall be issued in a principal amount sufficient, together with other moneys available therefor, to accomplish such refunding and to make the deposits in the Funds and Accounts under this Resolution required by the provisions of the Supplemental Resolution authorizing such Bonds. 2.4.2 Refunding Bonds of each Series shall be authenticated and delivered by the Bond Registrar only upon receipt by the Bond Registrar (in addition to the documents required by Section 2.2) of: (a) Either (i) a certificate of the Authority showing that there will be no increase in Maximum Aggregate Debt Service as a result of the issuance of such Refunding Bonds, or (ii) a report of the Independent Consultant projecting the annual Project Costs and/or Installment Payments for each of the five years immediately following the issuance of such Refunding Bonds and concluding that, based on such projected annual Project Costs and/or Installment Payments, the resulting schedule of rates and charges required to be charged by the Purchaser to meet such annual Project Costs and/or Installment Payments will be reasonable. - (b) Irrevocable instructions to the Bond Registrar to give due notice of redemption, on a redemption date or dates specified in such instructions, of any of the refunded Bonds or Parity Obligations to be redeemed; (c) Irrevocable instructions to the Bond Registrar to give due notice provided for in Section 12.1 to the Holders of the Bonds or Parity Obligations being refunded; and (d) Either (i) moneys (including moneys withdrawn and deposited pursuant to Subsections 5.6.4 or 5.7.4) in an amount sufficient to effect payment at the applicable Redemption Price of the refunded Bonds or Parity Obligations to be redeemed and of the principal amount of the refunded Bonds or Parity Obligations not to be redeemed, together with accrued interest on such Bonds or Parity Obligations to the redemption date or maturity date, as the case may be, which moneys shall be held by the Trustee in a separate account irrevocably in trust for and assigned to the respective Holders of the Bonds or Parity Obligations to be refunded, or (ii) Federal Obligations in such principal amounts, of such maturities, bearing such interest, and otherwise having such terms and qualifications, and any moneys, as shall be necessary to comply with the provisions of Subsection 12.1.2, which Federal Obligations and moneys shall be held in trust by the Trustee and used only as provided in said Subsection 12.1.2. 2.4.3 The proceeds, including accrued interest, of the Refunding Bonds of each Series shall be applied simultaneously with the delivery of such Bonds for the purposes of making deposits in such Funds and Accounts under this Resolution as shall be provided by the Supplemental Resolution authorizing such Series of Refunding Bonds and shall be applied to the refunding purposes thereof in the manner provided in said Supplemental Resolution. 23 50004139.08 . 2.4.4 The Supplemental Resolution authorizing a Series of Refunding Bonds may estabhsh such funds and accounts in addition to the Funds and Accounts established herein as are necessary to provide for such refunding. 2.5 Parity Obligations. 2.5 .1 If the Authority declines to issue Additional Bonds to finance Costs of Acquisition and Construction of completing the Project or of other Capital Improvements or to refund Bonds or Parity Obligations on tenns satisfactory to the Purchaser or the Project Purchaser, as applicable, the Purchaser or the Project Purchaser, as applicable, may cause one or more Series of Parity Obligations to be authenticated and delivered by the Bond Registrar pursuant to one or more Parity Obligation Instruments from time to time for the purpose of paying all or a portion of such Costs of Acquisition and Construction of completing the Project or of other Capital Improvements or refunding Outstanding Bonds or Parity Obligations, upon compliance (and only upon compliance) with the following tenns and conditions: (a) There shall be delivered to the Authority and the Trustee (i) a certificate of an authorized representative of the Purchaser or the Project Purchaser stating that no default then exists under the Power Sales Agreement or the Project Sale Agreement, as applicable, and all payments required to be made under the Power Sales Agreement or the Project Sale Agreement, as applicable, are current; (ii) a Counsel's Opinion that issuance of Parity Obligations will not adversely affect the tax-exempt status of any Outstanding tax-exempt Bonds; and (iii) the opinions of counsel to the Purchaser and the Project Purchaser required by paragraphs (t) and (g) of Section 2.2.1 as if the Series of Parity Obligations were a Series of Additional Bonds; (b) Prior to the issuance of any Series ofParity Obligations, the Authority, the Trustee, the Purchaser and the Project Purchaser, as applicable, shall supplement and amend the Power Sales Agreement or the Project Sale Agreement, as applicable, and this Resolution, to the extent necessary, to cause Debt Service on such Series of Parity Obligations to be included in Project Costs and Installment Payments as applicable, and, if the Project Purchaser is the owner of the Project, an amended or additional Project Note shall have been authorized and executed by the Project Purchaser and delivered to the Trustee to evidence the obligation of the Project Purchaser to make the additional Installment Payments required to pay such Parity Obligations; (c) The Parity Obligation Instrument shall, to the extent reasonably practicable, cause payment dates for the Parity Obligations to be the same as payment dates for the Bonds, and shall appoint the Trustee to act as trustee, paying agent and registrar in respect to the Parity Obligations on behalf of the Holders thereof and, upon the occurrence of any default with respect to the Parity Obligations, for the purposes of enforcing any and all remedies against the Purchaser or Project Purchaser, as applicable, for such default upon substantially the same terms as it so acts in respect of the Bonds; (d) The principal amount of any Series of Parity Obligations shall_ ~~t exceed (i) the Independent Consultant's estimate of the re~sonable C~sts of Acqutsttto~ and Construction to be financed with the proceeds of such Senes, and/or (n) the cost of refundmg the Outstanding Bonds or Parity Obligations to be refunded with the proceeds of such Series; plus 24 500()4139.08 (iii) the Costs of Issuance of such Series, plus (iv) capitalized interest, if any, thereon, plus (v) the amount of funds, if any, required to be deposited into the Debt Service Reserve Fund to cause the amount therein to equal the Debt Service Reserve Requirement, plus (vi) the amount of funds, if any, required to be deposited in the Renewal and Replacement Fund; (e) If such Series is to be issued to finance Costs of Acquisition and Construction, the Independent Consultant shall have delivered a report to the Authority, the Trustee, and the Purchaser and/or the Project Purchaser (i) determining that the net proceeds of the Series of Parity Obligations together with other funds, if any, on deposit in the Project Fund will be sufficient to pay the Costs of Acquisition and Construction to be so financed; (ii) projecting annual Project Costs and/or Installment Payments for each of the five years immediately following the issuance of such Parity Obligations and concluding that, based on such projected annual Project Costs and/or Installment Payments, the resulting schedule of rates and charges required to be charged by the Purchaser to meet such annual Project Costs and/or Installment Payments will be reasonable~ and (iii) (A) stating whether and what portion, if any, of the Costs of Acquisition and Construction are necessary to meet regulatory requirements applicable to the Project; (B) determining whether and what portion, if any, of the stated principal amount of the Series of Parity Obligations is subject to the Capital Improvements Financing Limit~ (C) calculating the amount of the Capital Improvements Financing Limit that will be in effect immediately following the issuance of the Series of Parity Obligations; ·and (D) stating, based on such determinations and calculations, whether issuance of the Series of Parity Obligations is subject to the requirement of Subsection 2.3.l(c), which shall be applicable to and satisfied in connection with such Series of Parity Obligations as if such Series were a Series of Additional Bonds; (f) If such Series is to be issued to finance the cost of refunding Outstanding Bonds or Parity Obligations, the issuer of such Series shall have delivered to the Trustee either (i) a certificate of the Purchaser and/or the Project Purchaser showing that there will be no increase in Maximum Aggregate Debt Service as a result of the issuance of such refunding Parity Obligations or (ii) a report of the Independent Consultant projecting the annual Project Costs and/or Installment Payments for each of the five years immediately following the issuance of such refunding Parity Obligations and concluding that, based on such projected annual Project Costs and/or Installment Payments, the resulting schedule of rates and charges required to be charged by the Purchaser to meet such annual Project Costs and/or Installment Payments will be reasonable, and (iii) the requirements of paragraphs (b), (c) and (d) of Section 2.4.2 and of Sections 2.4.3 and 2.4.4 shall be satisfied in connection with such Series ofParity Obligations as if such Series were a Series of Refunding Bonds. (g) The Parity Obligation Instruments pursuant to which the Parity Obligations are incurred and issued shall include (i) a cross default provision with the Power Sales Agreement or the Project Sale Agreement, as applicable, the Resolution and any other Parity Obligation Instrument; (ii) provisions causing the rights and obligatio_ns of the Holders of the Parity Obligations in respect ofthe Project and Revenues to be substanttally the _same as the rights and obligations of the Holders of Bonds; (iii) provisions causing the remedtes upon an "event of default" (however defined) thereunder to be substantial1y the same as the remedies provided for Events of Default under the Resolution and the Power Sales Agreement or the 25 !10004139.08 Project Sale Agreement, as applicable, and requiring the Holders of such Parity Obligations to cooperate with the Trustee so that the interests of the Holders of all Bonds and Parity Obligations shal.l b~ equall~ protected; (iv) pro~isions requiring the Purchaser or the Holders of the Parity Obhgattons to mform the Trustee Immediately upon the occurrence of an "event of default" (ho~ever ?efi~ed) thereu~der; (~).covenants to maintain the tax-exempt status of tax-exempt Panty ObligatiOns; and (v1) provisions for compliance with continuing disclosure requirements applicable to such Parity Obligations. ARTICLE III. General Terms and Provisions ofBonds 3.1 Medium ofPayment; Form and Date: Letters and Numbers. 3 .1.1 The Bonds shall be payable, with respect to interest, principal and Redemption Price, in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. 3.1.2 The Bonds of each Series shall be negotiable instruments issued in -the form of fully registered Bonds. 3 .1.3 Each Bond shall be lettered and numbered as provided in this Resolution or the Supplemental Resolution authorizing the Series of which such Bond is a part and so as to be distinguished from every other Bond. 3.1.4 Bonds of each Series shall be dated as provided m the Supplemental Resolution authorizing such Series. 3.1.5 The principal and Redemption Price of the Bonds shall be payable upon presentation and surrender at the principal corporate trust office of any Paying Agent or as may be provided by Supplemental Resolution. Interest on Bonds shall be paid by the Paying Agent by check or draft mailed by first class mail to the registered owners of record as of the 15th day of the month preceding each interest payment date at the addresses of such owners appearing on the Bond Register or as may be provided by Supplemental Resolution. 3.2 Legends. The Bonds of each Series may contain or have endorsed thereon such prov1s1ons, specifications and descriptive words not inconsistent with the provisions of this Resolution as may be necessary or desirable to comply with custom, the rules of any securities exchange or commission or brokerage board, or otherwise, as may be determined by the Authority prior to the authentication and delivery thereof 3.3 Execution and Authentication. 3.3 .I The Bonds shall be executed in the name of the Authority by the manual or facsimile signature of its Chairman, its Vice Chairman or its Executive Director, and its 26 corporate seal (or a facsimile thereof) shall be impressed, imprinted, engraved or otherwise reproduced thereon and attested by the manual or facsimile signature of the Secretary or an Assistant Secretary ofthe Authority, or in such other manner as may be required or permitted by law. In case any one or more of the officers who shall have signed or sealed any of the Bonds shall cease to be such officer before the Bonds so signed and sealed shall have been authenticated and delivered by the Trustee, such Bonds may, nevertheless, be authenticated and delivered as herein provided, and may be issued as if the persons who signed or sealed such Bonds had not ceased to hold such offices. Any Bond of a Series may be signed and sealed on behalf of the Authority by such persons as at the time of the execution of such Bonds shall be duly authorized to hold the proper office in the Authority, although at the date borne by the Bonds of such Series such person may not have been so authorized or have held such office. 3.3.2 The Bonds of each Series shall bear thereon a certificate of authentication, in the form set forth in Exhibit A hereto and any Supplemental Resolution authorizing such Bonds, executed manually by the Bond Registrar. Only such Bonds as shall bear thereon such certificate of authentication shall be entitled to any right or benefit under this Resolution and no Bond shall be valid or obligatory for any purpose until such certificate of authentication shall have been duly executed by the Bond Registrar. Such certificate of the Bond Registrar upon any Bond executed on behalf of the Authority shall be conclusive evidence that the Bond so authenticated has been duly authenticated and delivered under this Resolution and that-the Holder thereof is entitled to the benefits of this Resolution. 3.4 Exchange of Bonds. Bonds, upon surrender thereof at the principal corporate trust office of the Bond Registrar with a written instrument of transfer satisfactory to the Bond Registrar, duly executed by the registered owner or his duly authorized attorney, may, at the option of the registered owner thereof, and upon payment by such registered owner of any charges which the Bond Registrar may make as provided in Section 3 .6, be exchanged for an equal aggregate principal amount of Bonds of the same Series and maturity of any other authorized denominations. 3.5 Negotiability. Transfer and Registry: Bond Depository. 3 .5.1 Bonds shall be transferable only upon the books of the Authority, which shall be kept for such purposes at the principal corporate trust office of the Bond Registrar, by the registered owner thereof in person or by his attorney duly authorized in writing, upon surrender thereof together with a written instrument of transfer satisfactory to the Bond Registrar duly executed by the registered owner or his duly authorized attorney. Upon transfer of any such Bond, the Authority shall issue in the name of the transferee a new Bond or Bonds of the same aggregate principal amount and Series and maturity as the surrendered Bond. 3.5.2 The Authority and each Fiduciary may deem and treat the person in whose name any Bond shall be registered upon the books of the Authority as the absolute owner of such Bond whether such Bond shall be overdue or not, for the purpose of receiving payment of, or on acco~nt of the principal and Redemption Price, if any, of and interest on such Bond and for all other purp~ses, and all such payments so made to any such registered owner or upon his order shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of 27 !1000-4139' 08 the. sum or sums so paid, and neither the Authority nor any Fiduciary shall be affected by any nottce to the contrary. The Authority agrees to indemnify and save each Fiduciary harmless from and against any and all loss, cost, charge, expense, judgment or liability incurred by it, acting in good faith and without negligence under this Resolution, in so treating such registered O'YI11er. 3.5.3 A Supplemental Resolution may provide that (i) the Bonds may be initially issued in the form of a separate single authenticated fully registered bond in the amount of each separate stated maturity of the Bonds and (ii) upon initial issuance, the ownership of such Bond may be registered in the registry books kept by the Trustee in the name of the nominee of a Bond Depository or in the name of the Bond Depository. With respect to Bonds registered in the registry books kept by the Trustee in the name of a nominee of a Bond Depository or in the name of the Bond Depository, the Authority and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the records of the Bond Depository, its nominee or any participant with respect to any ownership interest in the Bonds, (ii) the delivery to any participant, any beneficial owner or any other person, other than the nominee or Bond Depository, of any notice with respect to the Bonds, including any notice of redemption, or (iii) the payment to any participant, any beneficial owner or any other person, other than the nominee or Bond Depository, of any amounts with respect to ·the principal or Redemption Price of or interest on the Bonds. The Authority and each Fiduciary may treat as and deem the nominee or Bond Depository to be the absolute owner of each Bond for the purpose of payment of the principal or Redemption Price of and interest on such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Paying Agent shall pay the principal or Redemption Price of and interest on the Bonds only to or upon the order of the nominee or Bond Depository, and all such payments shall be valid and effective to fully satisfy and discharge the Authority's obligation with respect to the principal or Redemption Price of and interest on the Bonds to the extent of the sum or sums so paid. No person other than the nominee or Bond Depository shall receive an authenticated Bond evidencing the obligation of the Authority to make payments of principal or Redemption Price of and interest pursuant to this Resolution. Upon delivery by the nominee or Bond Depository to the Bond Registrar of written notice to the effect that the Bond Depository has determined to substitute a new nominee in place of the existing nominee, the Bond Registrar shall issue a new registered bond to the new nominee in exchange for each bond surrendered which was registered in the name of the old nominee to such new nominee of the Bond Depository. 3.5.4 Upon receipt by the Authority and the Bond Registrar of written notice from the Bond Depository to the effect that the Bond Depository is unable or unwilling to discharge its responsibilities and no substitute depository willing to undertake the functions of the Bond Depository hereunder can be found which is willing and able to undertake such functions upon reasonable and customary terms, then the Bonds shall no longer be restricted to being registered in the Bond Register in the name of the ~ominee of the Bo~d Depository, ?ut may be registered in whatever name or names the benefictal owners transfernng or exchangmg Bonds shall designate, in accordance with the provisions of this Resolution. 28 S00041)9 .08 3. 5. 5 If the Authority determines that it is in the best interests of the beneficial owners that they be able to obtain Bond certificates, the Authority may notify the Bond Depository and the Bond Registrar, whereupon the nominee or Bond Depository will notify the participants, of the availability through the nominee or Bond Depository of Bond certificates. In such event, the Bond Registrar shaH issue, transfer and exchange Bond certificates as requested to the Bond Depository and any other Holders in appropriate amounts, and whenever the Bond Depository requests the Authority and the Bond Registrar to do so, the Bond Registrar and the Authority will cooperate with the Bond Depository by taking appropriate action after reasonable written notice {i) to make available one or more separate certificates evidencing the Bonds to any nominee or participant having Bonds credited to its Bond Depository account or (ii) to arrange for another securities depository to maintain custody of certificates evidencing the Bonds. 3.5.6 So long as any Bond is registered in the name of a nominee of the Bond Depository, a11 payments with respect to the principal or Redemption Price of and interest on such Bond and all notices with respect to such Bond shaH be made and given, respectively, to the nominee or Bond Depository. 3.5.7 In connection with any notice or other communication to be provided to Holders pursuant to this Resolution by the Authority or any Fiduciary with respect to any consent or other action to be taken by Holders, the Authority or the Fiduciary, as the case may be, shall establish a record date for such consent or other action and give the nominee or Bond Depository notice of such record date not less than 15 calendar days in advance of such record date to the extent possible. 3.5.8 As used in this section "participant" means any person or other entity for whom the Bond Depository holds Bonds under this section. 3.6 Regulations With Respect to Exchanges and Transfers. In all cases in which the privilege of exchanging or transferring Bonds is exercised, the Authority shall execute and the Bond Registrar shall authenticate and deliver Bonds in accordance with the provisions of this Resolution. All Bonds surrendered in any such exchanges or transfer shal1 forthwith be delivered to the Trustee and cancelled by the Trustee. For every such exchange or transfer of Bonds, whether temporary or definitive, the Authority or the Bond Registrar may make a charge sufficient to reimburse it for any tax, fee or other governmental charge required to be paid with respect to such exchange or transfer. Neither the Authority nor the Bond Registrar shall be required (a) to transfer or exchange Bonds of a Series which could be redeemed for a period of 15 days next preceding any selection of such Bonds to be so redeemed or thereafter until after the first mailing of any notice of redemption; or (b) to transfer or exchange any Bonds called for redemption. 3.7 Bonds Mutilated. Destroyed, Stolen or Lost. If any Bond becomes mutilated or is lost, stolen or destroyed, the Authority may execute and the Bond Registrar shall authenticate and deliver a new Bond oflike date of issue, maturity date, principal amount and interest rate per annum as the Bond so mutilated, lost, stolen or destroyed, provided that (i) in the case of such mutilated Bond such Bond is first surrendered to the Trustee, (ii) in the case of any such lost, stolen or destr~yed Bond there is first furnished evidence of such loss, theft or destruction 29 ~04139.011 satisfactory to the Authority and Trustee together with indemnity satisfactory to the Authority and Trustee, (iii) all other reasonable requirements of the Authority are complied with, and (iv) expenses in connection with such transaction are paid by the Holder. Any Bonds surrendered for exchange shall be cancelled. Any such new Bonds issued pursuant to this Section in substitution for Bonds alleged to be destroyed, stolen or lost shall constitute original additional contractual obligations on the part of the Authority, whether or not the Bonds so a1leged to be destroyed, stolen or lost be at any time enforceable by anyone, and shall be equally secured by and entitled to equal and proportionate benefits with all other Bonds issued under this Resolution in any moneys or securities held by the Authority or any Fiduciary for the benefit of the Holders. ARTICLE IV. Redemption ofBonds 4.1 Privilege of Redemption and Redemption Price. Bonds subject to redemption prior to maturity pursuant to this Resolution or a Supplemental Resolution shall be redeemable, upon notice as provided in this Article IV, at such times, at such Redemption Prices and upon such terms in addition to the terms contained in this Article IV as may be specified in this Resolution or in the Supplemental Resolution authorizing such Series. 4.2 Redemption at the Election or Direction of the Authority. In the case of any redemption of Bonds at the election or direction of the Authority, the Authority shall give written notice to the Trustee of its election or direction so to redeem, of the redemption date, of the Series, and of the principal amounts of the Bonds of each maturity of such Series to be redeemed (which Series, maturities and principal amounts thereof to be redeemed shall be determined by the Authority in its sole discretion, subject to any limitations with respect thereto contained in this Resolution and the Supplemental Resolution with respect to such Series). Such notice shall be given at least 45 days prior to the redemption date or such shorter period as shall be acceptable to the Trustee. If notice of redemption has been given as provided in Section 4.5, there shall be paid prior to the redemption date to the appropriate Paying Agents an amount in cash which in addition to other moneys, if any, avail.ble therefor held by such Paying Agents, will be sufficient to redeem on the redemption date at the Redemption Price thereof, plus interest accrued and unpaid to the redemption date, all of the Bonds to be redeemed. The Authority shall promptly notify the Trustee in writing of all such payments by it to a Paying Agent. 4.3 Redemption Otherwise Than at the Authority's Election or Direction. Whenever by the terms of this Resolution the Trustee is required or authorized to redeem Bonds otherwise than at the election or direction of the Authority, the Bond Registrar shall select the Bonds to be redeemed and give the notice of redemption and the Trustee shall pay out of moneys available therefor the Redemption Price thereof, plus interest accrued and unpaid to the redemption date, to the appropriate Paying Agents in accordance with the terms of this Article IV and, to the extent applicable, Section 5.7. 30 4.4 Selection of Bonds to be Redeemed: Allocation to Sinking Fund Installments. If less than all of the Bonds of like maturity of any Series shall be called for prior redemption, the particular Bonds or portions of Bonds to be redeemed shall be selected by lot by the Bond Registrar in such manner as the Bond Registrar in its discretion may deem fair and appropriate. If the Authority shall elect to redeem Bonds subject to Sinking Fund Installments under the optional redemption provisions above the par amount of the Bonds so redeemed (irrespective of their actual redemption prices) shall be credited against one or more Sinking Fund Installments for those Bonds (as allocated by the Authority in a certificate filed with the Trustee prior to mailing notice of redemption or, if the Authority fails to notify the Bond Registrar of its selection, then pro rata among the Sinking Fund Installments) beginning not earlier than 60 days after the date of the optional redemption, and the Authority shall promptly notify the Bond Registrar in writing of the manner in which the credit for the Bonds so redeemed has been allocated. 4.5 Notice of Redemption. When the Bond Registrar shall receive notice from the Authority of its election or direction to redeem Bonds pursuant to Section 4.2, and when redemption of Bonds is authorized or required pursuant to Section 4.3, the Bond Registrar shall give notice, in the name of the Authority, of the redemption of such Bonds, which notice shall specify the Series and maturities of the Bonds to be redeemed; the redemption date and the place or places where amounts due upon such redemption will be payable and, if less than all of .the Bonds of any like Series and maturity are to be redeemed, the letters and numbers or other distinguishing marks of such Bonds so to be redeemed and, in the case ofBonds to be redeemed in part only, such notice shall also specify the respective portions of the principal amount thereof to be redeemed. Such notice shall further state that on such date there shall become due and payable upon each Bond to be redeemed the Redemption Price thereof, or the Redemption Price of the specified portions of the principal thereof in the case ofBonds to be redeemed in part only, together with interest accrued to the redemption date, and that from and after such date interest thereon shall cease to accrue and be payable. Such notice shall be given by mailing such notice, first class mail, postage prepaid, not less than 30 or more than 60 days before the redemption date, to the registered owners of any Bonds or portions of Bonds which are to be redeemed, at their last addresses, if any, appearing upon the registry books. 4.6 Payment of Redeemed Bonds. Notice having been given in the manner provided in Section 4.5, the Bonds or portions thereof so called for redemption shall become due and payable on the redemption date so designated at the Redemption Price, plus interest accrued and unpaid to the redemption date, and, upon presentation and surrender thereof at the office specified in such notice, such Bonds, or portions thereof, shall be paid at the Redemption Price, plus interest accrued and unpaid to the redemption date. If there shall be selected for redemption less than all of a Bond, the Authority shall execute and the Bond Registrar shall authenticate and the Paying Agent shall deliver, upon the surrender of such Bond, without charge to the owner thereof, for the unredeemed balance of the principal amount of the Bond so surrendered, at the option of the owner thereof, Bonds of like Series and maturity in any of the authorized denominations. If, on the redemption date, money sufficient to pay the Redemption Price of all the Bonds or portions thereof of any like Series and maturity to be redeemed, together with interest to the redemption date, is on deposit with the Paying Agents and available for such purpose and if notice of redemption has been mailed as provided herein (and notwithstanding 31 500041)9.08 any defect therein or the lack of actual receipt thereof by any Holder), then, from and after the redemption date, interest on the Bonds or portions thereof of such Series and maturity called for redemption shall cease to accrue and become payable. If sufficient money is not on deposit with the Paying Agents and available on the redemption date, such Bonds or portions thereof shall continue to bear interest until paid at the same rate as they would have borne had they not been called for redemption. ARTICLE V. Establishment of Funds and Application Thereof 5.1 Pledge of Revenues and Other Funds and Assets. 5 .1.1 A pledge of the Revenues, and of all moneys, securities and funds, except the Rebate Fund, held or set aside or to be held or set aside by the Authority or any Fiduciary under this Resolution, is hereby made, and the same are hereby pledged and assigned to secure the payment of the principal or Redemption Price of and interest on the Bonds and Parity Obligations and any Sinking Fund Installments for the retirement thereof, subject only to the provisions of this Resolution permitting the payment, setting apart or appropriation thereof for or to the purposes and on the tenns, conditions, priorities and order set forth in or provided under this Resolution. This pledge shall be valid and binding from the time when it is made; the Revenues so pledged and then or thereafter received by the Authority or any Fiduciary under this Resolution shall immediately be subject to the lien of such pledge without any physical delivery or further act; and the lien of such pledge and the obligation to perform the contractual provisions hereby made shall be valid and binding as against all parties having claims of any kind in tort, contract or otherwise against the Authority, irrespective of whether such parties have notice thereof. 5.1.2 The Bonds shall be further secured by the lien on and security interest in the Project real property and improvements thereon, Project personal property therein and Project leasehold interests and rights of way conveyed, granted and assigned to the Trustee by the Deed ofTrust. 5.1.3 The Bonds shall be special and limited obligations of the Authority, and principal or Redemption Price of and interest thereon shall be payable from and secured by the Revenues and other sources identified or described in this Article V. Notwithstanding anything to the contrary in this Resolution or the Bonds, the Bonds do not and shall not represent or constitute a general obligation debt or pledge of the faith and credit or the taxing power of the Authority (it being understood that the Authority has no taxing power) or the State or of any political subdivision, municipality or other local agency thereof. Nothing contained in this Section shall be construed to affect any obligation of the Purchaser under the Power Sales Agreement or the Project Purchaser under the Project Sale Agreement. 5.1.4 Nothing contained in this Resolution shall be construed to prevent the Authority from acquiring, constructing or financing through the issuance of its general obligation 32 ~0413908 bond~ or revenue bonds, n_ores or other evidences of indebtedness any facilities which do not constitute a part o.f the ProJe~t for the purposes of this Resolution or from securing such bonds, notes or other evidences of mdebtedness by a mortgage of the facilities so financed or by a pl~dge of, or other security interest in, the revenues therefrom or any lease or other agreement w1th respect thereto or any revenues derived from such lease or other agreement; provided that such bonds, notes or other evidences of indebtedness shall not be payable out of or secured by the Revenues or any Fund held under this Resolution and neither the cost of such facilities nor any expenditure in connection therewith or with the financing thereof shalt be payable from the Revenues or from any such Fund. 5.2 Establishment of Funds and Accounts. The following Funds and Accounts, each to be held by the Trustee, are hereby established: (a) Project Fund, (b) Debt Service Fund, which shall consist of an Interest Account and a Principal Account, (c) Debt Service Reserve Fund, (d) Renewal and Replacement Fund, (e) Rebate Fund, and (f) Revenue Fund, which shall consist of a Revenue Account and a Surplus Account. 5.3 Project Fund. 5.3.1 There shall be paid into the Project Fund the amounts required to be so paid by the provisions of this Resolution and any Supplemental Resolution, and there may be paid into the Project Fund, at the option of the Authority, any moneys received for or in connection with the Project by the Authority from any other source, unless required to be otherwise applied as provided by this Resolution. Amounts in the Project Fund shall be applied to the Costs of Issuance and Costs of Acquisition and Construction in the manner provided in this Section 5.3, and until so applied are pledged for the security of and the payment to Holders of the principal or Redemption Price of and interest on the Bonds and Parity Obligations and shall at all times be subject to the lien of such pledge. 5.3.2 There shall be established within the Project Fund separate accounts for the acquisition of the Project and for each undertaking of Capital Improvements for which Bonds or Parity Obligations are authorized to be issued. 5.3.3 The proceeds of insurance, including the proceeds of any self insurance fund maintained pursuant to this Resolution against physical loss of or damage to the Project or Capital Improvements, or of contractor's performance bonds or other assurances of completion 33 500114139.!18 with respect thereto, pertaining to the period of construction thereof, shall be paid into the appropriate separate account in the Project Fund. 5.3.4 The Trustee shall make payments from the Project Fund for Costs of Issuance and Costs of Acquisition and Construction of the Project and other Capital Improvements upon the receipt of a written requisition (substantially in the form of Exhibit B hereto) signed by an Authorized Officer of the Authority (so long as the Authority is the owner of the Project) or by an Authorized Officer of the Project Purchaser (after the Project Purchaser shall have become the owner of the Project) stating in respect of each payment to be made (1) the name of the payee, which may be the Authority, the Purchaser or the Project Purchaser in the case of reimbursement of prior expenditures for costs incurred by the Authority, the Purchaser or the Project Purchaser, as applicable, (2) the amount to be paid, (3) that the payment is due, is a proper Cost of Issuance or Cost of Acquisition and Construction, has not been the basis for any previous disbursement, ( 4) that the services have been performed, or property, materials and equipment or other work covered by the requisition have been incorporated into the Project, and (5) in the case of any requisition to pay the purchase price of the Project pursuant to the Purchase Agreement, that all conditions precedent to the purchase by the Authority of the Project pursuant to the Purchase Agreement (other than the payment of the purchase price therefor) have been satisfied. Notwithstanding the foregoing, the Trustee may disburse money from the Project Fund to the Debt Service Fund to pay interest on the Bonds without a requisition or . further authorization from the Authority to the extent directed in any Supplemental Resolution. 5.3.5 If any requisition filed with the Trustee in accordance with Subsection 5.3 .4 contains any item for the payment of the cost and expense of acquisition of any lands, easements, or rights or interests in or relating to lands, there shall be attached to such requisition, before any transfer or payment with respect to such item shall be made, a Counsel's Opinion stating, in the opinion of the signer, that the Authority or the Project Purchaser, as applicable, has authority to acquire such lands, easements, rights or interests, and that the Authority or the Project Purchaser, as applicable, will have upon the payment of such item title in fee simple to, or perpetual easements for the purposes of the Authority or the Project Purchaser, as applicable, over and through, such lands subject to no lien, charge or encumbrance thereon or affecting the title thereto except such as will not under any circumstances cause the possession and use of the property by the Authority for its purposes to be materially disturbed, or, if such payment be a payment for an option to purchase or a quitclaim deed or a lease or a release or on a contract to purchase or be a payment to the United States of America or the State of Alaska or any political subdivision, or to a public utility, for the acquisition of a right or interest in lands less than a fee simple or a perpetual easement, or if such payment be a part payment for any such purpose, the written approval, by the signer of such Counsel's Opinion, of such payment as proper, and of the acquisition of such lesser right or interest as sufficient, for the purposes of the Authority or the Project Purchaser, as applicable. 5.3.6 The Trustee shall at any time or from time to time withdraw from the Project Fund the balance in the Project Fund, or any part thereof, for deposit in other Funds or Accounts as provided in this Subsection 5.3.6, upon receipt of 34 $0004139.08 (a) a written requisition signed by an Authorized Officer of the Authority (so long as the Authority is the owner of the Project) or by an Authorized Officer of the Project Purchaser (after the Project Purchaser shall have become the owner of the Project) together with a certificate stating (1) the amount of such withdrawal; (2) that the Project or other Capital Improvements financed in whole or in part out of proceeds of Bonds have been completed, and (3) that a sum stated in the certificate is required to be reserved in the Project Fund to pay all Costs of Acquisition and Construction then remaining unpaid, including the estimated amount of any such items the amount of which is not finally determined, and all claims against the Authority or the Project Purchaser, as applicable, arising out of the Project or other Capital Improvements; and (b) a Counsel's Opinion stating, in the opinion of the signer, that the Authority or the Project Purchaser, as applicable, has acquired title to all property constituting a part of the Project or Capital Improvements and all property incidental thereto sufficient for the purposes of the Authority or the Project Purchaser, as applicable, free from all liens, charges, conditions or encumbrances except such as will not under any circumstances cause the possession and use of the property by the Authority or the Project Purchaser, as applicable, for its purposes to be materially disturbed, and that, as to such parts of the Project or Capital Improvements as constitute real property acquired, constructed or installed under a right or interest less than a fee simple or perpetual easement, the right or interest is sufficient for the purposes of the Authority or the Project Purchaser, as applicable. Upon filing of such requisition, certificate(s) and Counsel's Opinion, the balance in the separate account in the Project Fund established therefor in excess of the amount, if any, stated in such documents shall be deposited in the Debt Service Reserve Fund, if and to the extent necessary to make the amount of such Fund equal to the Debt Service Reserve Requirement, and any balance shall be deposited in the Revenue Fund and applied for the purposes thereof, except that, if and to the extent such balance constitutes proceeds of tax-exempt Bonds or Parity Obligations or other funds treated as replacement proceeds thereof, such balance shall be applied in any permitted or required manner approved by a Counsel's Opinion, including without limitation redemption, defeasance or purchase of tax-exempt Bonds or Parity Obligations that financed those proceeds or replaced such other funds, that will preserve the tax-exempt status of interest on such Bonds or Parity Obligations. If subsequent to the filing of such documents it shall be determined that any amounts specified therein as being required for the payment of any remaining part of the Costs of Acquisition and Construction are no longer so required, such fact shall be evidenced by a further certificate or certificates of an Authorized Officer of the Authority or the Project Purchaser, as applicable, which shall be filed with the Trustee stating such fact, and any amount shown therein as no longer being required shall be applied in the same manner as described in the preceding sentence. 5.3. 7 Notwithstanding any of the other provisions of this Section, to the extent that other moneys are not available therefor, amounts in the Project Fund shall be applied to the payment of principal of and interest on Bonds when due. 5.4 Revenues and Revenue Fund. All Revenues and amounts, if any, required to be transferred from the Project Fund pursuant to Subsection 5.3.6 shall be promptly deposited by 35 ~04139.08 the Trustee upon receipt thereof to the credit of the Revenue Account of the Revenue Fund and used and applied to make the deposits and payments required by Section 5.5 and transfer (if any) required by Section 5.9 .1. Any amounts remaining in the Revenue Account after making the deposits required by Section 5.5 and transfer (if any) required by Section 5.9.1 shall be transferred to the Surplus Account. If on the 45th day following the end of each Bond Year the amount on deposit in the Debt Service Reserve Fund is at least equal to the Debt Service Reserve Requirement, the amount on deposit in the Renewal and Replacement Fund is at least equal to the Minimum R&R Fund Requirement, and no Event of Default shall have occurred and be continuing, then the Trustee shall refund to the Purchaser or the Project Purchaser, as applicable, any money then on deposit in the Surplus Account, free and clear of the lien and pledge of this Resolution; provided, however, that, if on the 45th day following the end of any Bond Year the amount on deposit in the Debt Service Reserve Fund is not at least equal to the Debt Service Reserve Requirement, the amount on deposit in the Renewal and Replacement Fund is not at least equal to the Minimum R&R Fund Requirement, or there has occurred an Event of Default that has not been cured, the Trustee shall first apply such money in accordance with this Resolution to remedy any such deficiency or Event of Default and thereafter refund the balance to the Purchaser or the Project Purchaser, as applicable. 5.5 Payments Into Certain Funds. As soon as_ practicable after the deposit of Revenues into the Revenue Account of the Revenue Fund, and with at least the frequency stated below, the Trustee shall use and apply moneys in the Revenue Account of the Revenue Fund to make deposits in the Funds set forth below in the priority and amounts as follows: (a) In the Debt Service Fund (i) monthly on the fifteenth (15th) day of each month, commencing September 15, 1998, for credit to the Interest Account, an amount equal to one-sixth (1/6) of the interest due on all Bonds and Parity Obligations the next succeeding interest payment date (except that the monthly deposits required prior to the initial interest payment date for any Series shall be the amount determined by dividing the interest due on the initial interest payment date by the number of complete months to elapse from the delivery date of such Series to the initial interest payment date for such Series), taking into account amounts, if any, on deposit in the Interest Account and the Project Fund to be used for such purpose; and (ii) monthly on the fifteenth (15~ day of each month, commencing September 15, 1998, for credit to the Principal Account, an amount equal to one-twelfth (1/12) of such Principal Installments due on the nex1: succeeding January 1 (except that, if the Principal Installment for any Series will become due less than one year from the date of delivery of such Series, then the monthly deposits prior to such initial payment date with respect to such Series shall be the amount determined by dividing the amount of such initial Principal Installment by the number of complete months to elapse from the delivery date of such Series to the date for the payment of the initial Principal Installment for such Series), taking into account amounts on deposit in the Principal Account and available for such purpose. (b) In the Debt Service Reserve Fund, the amount, if any, required so that the balance in the Fund equals the Debt Service Reserve Requirement, and then all amounts required to be paid to the provider of any Reserve Fund Credit Facility under any agreement relating to such Reserve Fund Credit Facility. 36 (c) Semiannually on each January 15 and July 15, commencing on the fifteenth (15th) day of the first full Fiscal Year, for credit to the Renewal and Replacement Fund, an amount equal to one-half (112) of the applicable Renewal and Replacement Fund Contribution for the Fiscal Year. (d) Annually not later than 45 days after the end of each Bond Year or on a date or dates to be detennined by Supplemental Resolution, to the credit of the Rebate Fund in such amount as is necessary to cause the amount on deposit in the Rebate Fund (after a deposit therein, if any, from the· Debt Service Reserve Fund) to be equal to the Authority's estimate of Rebate Amount for the Bond Year. (e) To pay other charges or liens required by this Resolution to be paid out of Revenues during such Fiscal Year. 5.6 Debt Service Fund. 5.6.1 The Trustee shall pay out of the Debt Service Fund to the respective Paying Agents (i) out of the Interest Account, on or before each interest payment date for any of the Bonds or Parity Obligations the amount required for the interest payable on such date; (ii) out of the Principal Account, on or before each Principal Installment due date, the amount required for the Principal Installment payable on such due date; (iii) out of the Principal Account, on or before any redemption date for the Bonds or Parity Obligations, the Redemption Price of such Bonds or Parity Obligations, and (iv) out of the Interest Account, on or before any redemption date for the Bonds or Parity Obligations, the amount required for the payment of interest on the Bonds or Parity Obligations then to be redeemed. Such amounts shall be applied by the Paying Agents on and after the due dates thereof The Trustee shall also pay out of the Interest Account the accrued interest included in the purchase price of Bonds or Parity Obligations purchased for retirement. 5.6.2 Amounts accumulated in the Principal Account with respect to any Sinking Fund Installment (together with amounts accumulated in the Interest Account with respect to interest on the Bonds or Parity Obligations for which such Sinking Fund Installment was established) may, and if so directed by the Authority with respect to such Bonds or by the issuer of such Parity Obligations, shall, be applied by the Trustee, on or prior to the 60th day preceding the due date of such Sinking Fund Installment, to (i) the purchase of the Bonds or Parity Obligations of the Series and maturity for which such Sinking Fund Installment was established, or (ii) the redemption at the applicable sinking fund Redemption Price of such Bonds or Parity Obligations. After the 60th day but on or prior to the 45th day preceding the due date of such Sinking Fund Installment, any amounts then on deposit in the Principal Account may, and if so directed by the Authority with respect to such Bonds or by the issuer of such Parity Obligations, shall, be applied by the Trustee to the purchase of Bonds or Parity Obligations ofthe Series and maturity for which such Sinking Fund Installment was established in an amount not exceeding that necessary to complete the retirement of the unsatisfied balance of such Sinking Fund Installment. All purchases of any Bonds or Parity Obligations pursuant to this Subsection 5.6.2 shall be made at prices not exceeding the applicable sinking fund Redemption Price of such Bonds or Parity Obligations plus accrued interest, and such purchases 37 50004139.08 shall be made by the Trustee as directed by the Authority with respect to such Bonds or by the issuer of such Parity Obligations. The applicable sinking fund Redemption Price of any Bonds or Parity Obligations so purchased or redeemed shall be deemed to constitute part of the Principal Account, until such Sinking Fund Installment date, for the purpose of calculating the amount of such Account. As soon as practicable after the 45th day preceding the due date of any such Sinking Fund Installment, the Trustee shall proceed to call for redemption, by giving notice as provided in Section 4.5, on such due date Bonds or Parity Obligations of the Series and maturity for which such Sinking Fund Installment was established in such amount as shall be necessary to complete the retirement of the unsatisfied balance of such Sinking Fund Installment. The Trustee shall pay out of the Principal Account to the appropriate Paying Agents, on or before such redemption date, the amount required for the redemption of the Bonds or Parity Obligations so called for redemption, and such amount shall be applied by such Paying Agents to such redemption. All expenses in connection with the purchase or redemption of Bonds or Parity Obligations shall be paid from the Revenue Fund. 5.6.3 The amount, if any, deposited in the Interest Account from the proceeds of each Series of Bonds or Parity Obligations shall be set aside in such Account and applied to the payment of interest on such Bonds or Parity Obligations as provided in the Supplemental Resolution or Parity Obligation Instrument relating to the issuance of such Series of Bonds. 5.6.4 In the event of the refunding of one or more Series of Bonds or Parity Obligations, the Trustee shall, upon the direction of the Authority or the issuer of the Parity Obligations, respectively, withdraw from the Debt Service Fund amounts accumulated therein with respect to Debt Service on the Bonds or Parity Obligations being refunded and deposit such amounts with itself as Trustee to be held for payment of the principal or Redemption Price, if applicable, and interest on the Series of Bonds or Parity Obligations being refunded; provided that such withdrawal shall not be made unless (a) immediately thereafter the Series of Bonds or Parity Obligations being refunded shall be deemed to have been paid pursuant to Subsection 12.1.2, and (b) the amount remaining in the Debt Service Fund after such withdrawal shall not be less than the requirement of such Fund pursuant to Subsection 5.5(a). 5.7 Debt Service Reserve Fund. 5. 7.1 If on any date on which a Principal Installment or interest is due the amount in the Debt Service Fund shall be less than the amount required to be in such Fund to pay said Principal Installment or interest, the Trustee shall apply amounts from the Debt Service Reserve Fund to the extent necessary to make good the deficiency. 5. 7.2 Money and investments held in the Debt Service Reserve Fund shall be valued fifteen ( 15) days following each interest payment date for the Bonds and Parity Obligations. If the value of the moneys and investments on deposit in the Debt Service Reserve Fund shall exceed the Debt Service Reserve Requirement, such excess shall, on the request of the Authority, be transferred at least annually first to the Rebate Fund to the extent of any Rebate Amount payable in respect ofinvestments held in the Debt Service Reserve Fund, and then to the Revenue Fund to be used to make the deposits and payments required therefrom. If the value of the moneys and investments on deposit in the Debt Service Reserve Fund shall be less than the 38 Debt Service Reserve Requirement, the Trustee shall give written notice of the deficiency to the Authority and the Purchaser or Project Purchaser, as applicable, and the Authority shall cause the amount of money and investments therein to be restored to the Debt Service Reserve Req~irement pursuant to the Power Sales Agreement or the Project Sale Agreement, as apphcable, not later than 60 days prior to the next succeeding interest payment date for any Outstanding Bonds or Parity Obligations. 5.7.3 Whenever the amount in the Debt Service Reserve Fund, together with the amount in the Debt Service Fund, is sufficient to pay in full all Outstanding Bonds and Parity Obligations in accordance with their terms (including principal or applicable sinking fund Redemption Price and interest thereon), the funds on deposit in the Debt Service Reserve Fund shall be transferred to the Debt Service Fund. Prior to said transfer, all investments held in the Debt Service Fund shall be liquidated to the extent necessary in order to provide for the timely payment of principal and interest (or Redemption Price) on Bonds and Parity Obligations. 5.7.4 In the event of the refunding of one or more Series of Bonds or Parity Obligations or one or more maturities within a Series of Bonds or Parity Obligations, the Trustee shall, upon the direction of the Authority or the issuer of the Parity Obligations, respectively, withdraw from the Debt Service Reserve Fund amounts accumulated therein with respect to the Bonds or Parity Obligations being refunded and deposit such amounts with itself as Trustee to be held for the payment of the principal or Redemption Price, if applicable, and interest on the Series or maturities within a Series of Bonds or Parity Obligations being refunded; provided that such withdrawal ~hall not be made unless (a) immediately thereafter the Series or maturities within a Series ofBonds or Parity Obligations being refunded shall be deemed to have been paid pursuant to Subsection 12. 1.2 and (b) the amount remaining in the Debt Service Reserve Fund after such withdrawal shall not be less than the Debt Service Reserve Requirement with respect to all Outstanding Bonds and Parity Obligations. 5.7.5 All or any part ofthe Debt Service Reserve Requirement may be provided through a Reserve Fund Credit Facility, which shall be held by the Trustee, and the amount available to be drawn upon under that Reserve Fund Credit Facility shall be credited against the Debt Service Reserve Requirement, subject to the following requirements. The Reserve Fund Credit Facility shall not be cancelable on less than 3 years' notice. On receipt of a notice of cancellation of any Reserve Fund Credit Facility or upon notice that the entity providing the Reserve Fund Credit Facility no longer meets the requirements specified in the definition thereof herein, the Authority shall either (1) provide a substitute Reserve Fund Credit Facility in the amount required to make up the deficiency created in the Debt Service Reserve Fund, or (2) create a special fund with the Trustee and deposit therein from Revenues, on or before the 25th day of each of the _36 succeeding calendar months (commencing with the 25th day of the calendar month next following the date of the notice) l/36th of the amount sufficient, together with other money and investments on deposit in the Debt Service Reserve Fund, to equal the Debt Service Reserve Requirement in effect as of the date the cancellation or disqualification of the entity becomes effective. Amounts on deposit in that special fund shall not be available to pay Debt Service or for any other purpose, and shall be transferred t~ the ~.ebt Service Reserve Fund on the effective date of any cancellation of a Reserve Fund Credtt Fac1hty to make up all or part of the deficiency caused thereby. Amounts in that special fund may be transferred back to 39 ~1)4139.08 the Revenue Fund and used for any purpose of that fund if and when a qualifying Reserve Fund Credit Facility is obtained. Amounts deposited in the Debt Service Reserve Fund to make payments to the provider of a Reserve Fund Credit Facility shall be paid to such provider as required by any agreement relating to such Reserve Fund Credit Facility and consistent with Section 5.5. 5.8 Renewal and Replacement Fund. Amounts in the Renewal and Replacement Fund shall be applied, pursuant to a requisition by the Purchaser approved by the Authority (if the Authority is the owner of the Project) and filed with the Trustee, to the payment of costs of Project Repairs, as provided in the Power Sales Agreement and the Operations and Maintenance Agreement. No payments shall be made from the Renewal and Replacement Fund if and to the extent that the proceeds of insurance, including the proceeds of any self insurance fund, or other moneys recoverable as the result of damage, if any, are available to pay the costs otherwise payable from such Fund. 5.9 Rebate Fund. 5.9.1 The Trustee shall establish within the Rebate Fund a separate account for each Series of tax-exempt Bonds and tax-exempt Parity Obligations. Within 45 days after the end of each Bond Year the Authority shall cause the Rebate Amount to be determined with respect to the gross proceeds of each Series of tax-exempt Bonds and tax-exempt Parity Obligations held in all Funds under this Resolution for such Bond Year. The Trustee, at the direction of the Authority, shall transfer from excess earnings received on investments in the Debt Service Reserve Fund (to the extent permitted by Section 5.7.2) and/or from the Revenue Fund, as applicable, such amount as shall be necessary to cause the amount held in such account to equal the Rebate Amount for such Series of tax-exempt Bonds or tax-exempt Parity Obligations accrued as of the end of such Bond Year and not previously paid to the United States of America. The Trustee shall not be responsible for calculating Rebate Amounts, for the adequacy or correctness of any rebate report, or for enforcing compliance with rebate filing or reporting requirements. 5.9.2 Moneys in the Rebate Fund shall be applied by the Trustee to pay rebate amounts due the United States, as provided in Section 148(f) of the Code. All moneys in the Rebate Fund shall be held by the Trustee free and clear of the lien of this Resolution. If at any time, the amount held in any account in the Rebate Fund exceeds the accrued and unpaid Rebate Amount attributable to any Series of tax-exempt Bonds or tax-exempt Parity Obligations for which such account is maintained, then the Trustee, at the direction of the Authority, shall transfer such excess to the Revenue Fund. 5.9.3 If and to the extent necessary the Authority shall take all action required to cause amounts equal to the Rebate Amount to be included as Operating Expenses and therefore as Project Costs. 5.10 Cancellation and Destruction of Bonds. All Bonds paid or redeemed, either at or before maturity, shall be delivered to the Trustee when such payment or redemption is made, and 40 ~0~139.08 such Bonds, together with all Bonds purchased by the Trustee, shall thereupon be promptly cancelled and destroyed. 6.1 Depositories. ARTICLE VI. Depositories ofMoneys, Security for Deposits and Investment of Funds 6.1.1 All moneys held by the Trustee under the provisions of this Resolution shall be deposited with the Trustee and the Trustee shall, if directed by the Authority, deposit such moneys with one or more Depositories in trust for the Trustee. All moneys held by the Authority under this Resolution shall be deposited in one or more Depositories in trust for the Authority. All moneys deposited under the provisions of this Resolution with the Trustee or any Depository shall be held in trust and applied only in accordance with the provisions of this Resolution, and each of the Funds established by this Resolution shall be a trust fund for the purposes thereof. 6.1.2 Each Depository shall be a bank or trust company organized under the laws of any state of the United States of America or a national banking association and willing and able to accept the office on reasonable and customary terms and authorized by law to act in accordance with the provisions of this Resolution. 6.2 Deposits. 6.2.1 All Revenues and other moneys held by any Depository under this Resolution may be placed on demand or time deposit, if and as directed by the Authority, provided that such deposits shall permit the moneys held to be available for use at the time when needed. The Authority shall not be liable for any loss or depreciation in value resulting from any investment made pursuant to this Resolution. Any such deposit may be made in the commercial banking department of any Fiduciary which may honor checks and drafts on such deposit with the same force and effect as if it were not such Fiduciary. All moneys held by any Fiduciary, as such, may be deposited by such Fiduciary in its banking department on demand or, if and to the extent directed by the Authority and acceptable to such Fiduciary, on time deposit, provided that such moneys on deposit be available for use at the time when needed. Such Fiduciary shall atlow and credit on such moneys such interest, if any, as it customarily allows upon similar funds of similar size and under similar conditions or as required by law. 6.2.2 All moneys held under this Resolution by the Trustee or any Depository shall be (a) either (1) continuously and fully insured by the Federal Deposit Insurance Corporation, or (2) continuously and fully secured by lodging with the Trustee, any Federal Reserve Bank or branch, or another third party custodian approved by the Trustee and the Authority, Qualified Collateral having a market value (exclusive of accrued interest) not less than 100% of the amount of such moneys, or (b) held in such other manner as may then be 41 ~139.08 required by applicable federal or State laws and regulations and applicable state laws and regulations of the state in which the Trustee or such Depository (as the case may be) is located, regarding security for, or granting a preference in the case of, the deposit of trust funds; provided, however, that it shall not be necessary for the Fiduciaries to give security under this Subsection 6.2.2 for the deposit of any moneys with them held in trust and set aside by them for the payment of the principal or Redemption Price of or interest on any Bonds or Parity Obligations, or for the Trustee or any Depository to give security for any moneys which shall be represented by obligations or certificates of deposit purchased as an investment of such moneys. 6.2.3 All moneys deposited with the Trustee and each Depository shall be credited to the particular Fund or Account to which such moneys belong. 6.2.4 The Trustee may, and upon the written request of the Authority shall, commingle any of the funds or accounts established pursuant to this Resolution into a separate fund or funds, provided, however, that all Funds or Accounts held by the Trustee hereunder shall be accounted for and credited to the correct Fund or Account notwithstanding such commingling. 6.3 Investment of Certain Funds. Moneys held in any Fund or Account shall be invested and reinvested by the Trustee to the fullest extent practicable in Investment Securities which mature not later than such times as shall be necessary to provide moneys when needed-for payments to be made from such Funds and Accounts in accordance with written instructions received from any Authorized Officer of the Authority. Investment earnings on moneys or investments held by the Trustee in any separate Fund or Account shall be credited to and used for the purposes of that particular Fund or Account as specified herein. The Trustee shall be entitled to assume, absent receipt of written notice to the contrary, that any investment which at the time of purchase is a permitted Investment Security remains a permitted Investment Security. Nothing in this Resolution shall prevent any Investment Securities acquired as investments of funds held under this Resolution from being issued or held in book-entry form on the books of the Department of Treasury of the United States of America. 6.4 Valuation and Sale of Investments. Obligations purchased as an investment of moneys in any Fund created under the provisions of this Resolution shall be deemed at all times to be part of such Fund and any profit realized from the liquidation of such investment shall be credited to such Fund and any loss resulting from the liquidation of such investment shall be charged to the respective Fund. In computing the amount in any Fund created under the provisions of this Resolution for any purpose provided in this Resolution, obligations purchased as an investment of mone_ys therein shall be valued fifteen (IS) days after each interest payment date for the Bonds and Panty Obligations at the market value thereof exclusive of accrued interest, or otherwise as may then be required by the Code. Except as otherwise provided in this Resolution, the Trustee shall sell at the best pric.e obtainable, or present for redemption, any obligation so purchased as. an investment whenever ~t shall be requested in writing by an Authorized Officer of the Authonty so to do or whenever 1t 42 shall be necessary in order to provide moneys to meet any payment or transfer from any Fund held by it. The Trustee shall not be liable or responsible for making any such investment in the manner provided above or for any loss resulting from any such investment. ARTICLE VII. Particular Covenants of the Authority 7.1 Payment of Bonds. The Authority shall duly and punctually pay or cause to be paid from the Revenues and other sources provided herein, the principal or Redemption Price, of every Bond and the interest thereon, at the dates and places and in the manner mentioned in the Bonds according to the true intent and meaning thereof. 7.2 Extension of Payment of Bonds. The Authority shall not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of claims for interest, by the purchase or funding of such Bonds or claims for interest or by any other arrangement, and in case the maturity of any of the Bonds or the time for payment of any such claims for interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any default under this Resolution, to the benefit of this Resolution or to any payment out of Revenues or Funds established by this Resolution, including the investments, if any, thereof, pledged under this Resolution or the moneys (except moneys held in trust for the payment of particular Bonds or claims for interest pursuant to this Resolution) held by the Fiduciaries, except subject to the prior payment of the principal of all Bonds Outstanding the maturity of which has not been extended and of such portion of the accrued interest on the Bonds as shall not be represented by such extended claims for interest. Nothing herein shall be deemed to limit the right of the Authority to issue Refunding Bonds and such issuance shall not be deemed to constitute an extension of maturity of Bonds. 7.3 Offices for Servicing Bonds. The Authority shall at all times maintain one or more agencies as may be provided by Supplemental Resolution where Bonds may be presented for payment and shall at all times maintain one or more agencies where Bonds may be presented for registration, transfer for registration, transfer or exchange, and where notices, demands and other documents may be served upon the Authority in respect of the Bonds or of this Resolution. The Authority hereby appoints the Trustee as Bond Registrar to maintain an agency for the registration, transfer or exchange of Bonds, and for the service upon the Authority of such notices, demands and other documents and the Trustee shall continuously maintain or make arrangements to provide such services. The Authority hereby appoints the Paying Agent or Agents in such city as its respective agents to maintain such agencies for the payment or redemption ofBonds. 7.4 Further Assurance. At any and all times the Authority shall, as far as it may be authorized by Jaw, comply with any reasonable request of the Trustee to pass, make, do, execute, acknowledge and deliver, all and every such further resolution~, acts, deeds, conveyan~es, assignments, transfers and assurances as may be necessary or des1rable for the better assunng, conveying, granting, pleading, assigning and confirming all and singular the rights, Revenues 43 50004139.08 and other moneys, securities and funds hereby pledged or assigned, or intended so to be, or which the Authority may become bound to pledge or assign. 7.5 Power to Issue Bonds and Pledge Revenues and Other Funds and Assets. The Authority is duly authorized under the Act and all other applicable laws to create and issue the Bonds and to adopt this Resolution and to pledge and grant a lien on and security interest in the Project, the Revenues and other moneys, securities and funds purported to be subject to the lien of this Resolution in the manner and to the extent provided in this Resolution and the Deed of Trust. Except to the extent otherwise provided in this Resolution, the Revenues, and other moneys, securities and funds so pledged are and will be free and clear of any pledge, lien, charge or encumbrance thereon or with respect thereto prior to, or of equal rank with, the pledge and assignment created by this Resolution, and all corporate or other action on the part of the Authority to that end has been and will be duly and validly taken. The Bonds and the provisions of this Resolution are and will be valid and legally enforceable obligations of the Authority in accordance with their terms and the terms of the Act and this Resolution. The Authority shall at all times, to the extent permitted by law, defend, preserve and protect the pledge and assignment of the Revenues and other moneys, securities and funds pledged under this Resolution and all the rights of the Holders under this Resolution against all claims and demands of all persons whomever. 7.6 Power to Collect Charges. The Authority has, and will have as long as any Bonds are Outstanding, good right and lawful power to collect (i) charges with respect to the use and sale of the Project Capability, subject to the terms of the Power Sales Agreement and the Operations and Maintenance Agreement, or (ii) payments of the Purchase Price under and as defined by the Project Sale Agreement. 7.7 Creation of Liens: Sale and Lease of Property: Sale of Project to Project Purchaser. 7.7.1 The Authority shall not issue any bonds, notes or other evidences of indebtedness, other than the Bonds, secured by a pledge of or other lien or charge on the Revenues (including amounts which the Authority may thereafter be entitled to expend for Operating Expenses) and shall not create or cause to be created any lien or charge on such Revenues or on any amounts held by any Fiduciary under this Resolution other than to secure Bonds and Parity Obligations; provided, however, that neither this Section nor any other provision of this Resolution shall prevent the Authority from issuing bonds or notes or other obligations for the purposes of the Authority payable out of, or secured by a pledge of, Revenues to be derived on and after such date as the pledge of the Revenues provided in this Resolution shall be discharged and satisfied as provided in Section 12.1, or from issuing bonds or notes or other obligations for the purposes of the Authority which are secured by a pledge of amounts which is and shall be in all respects subordinate to the provisions of this Resolution and the lien and pledge created by this Resolution and shall not be accelerated in the event of default. 7.7.2 So long as the Authority is the owner of the Project, the Authority shall not create or cause to be created any encumbrance, lien or charge on the Project, and no part of 44 300041J9.08 the Project shall be sold, leased, mortgaged or otherwise disposed of, except as provided in Sections 5 .1.2 and 7. 7.3 and except as follows: (a) The Authority may sell or exchange at any time and from time to time any property or facilities constituting part of the Project provided (i) it shall determine that such property or facilities are not useful in the operation of the Project, or (ii) it shall file with the Trustee a certificate of an Authorized Officer of the Authority stating that the fair market value of the property or facilities sold or exchanged does not exceed $500,000 or (iii) if such fair market value exceeds $500,000 it shall file with the Trustee an opinion of the Independent Consultant stating that the sale or exchange of such property or facilities will not impair the ability of the Authority to comply during the current or any future Fiscal Year with the provisions of Section 7.12. The proceeds of any such sale or exchange not used to acquire other property necessary or desirable for the safe or efficient operation of the Project shall forthwith be deposited in the Renewal and Replacement Fund and be credited against any Renewal and Replacement Fund Contribution required for the current or any future Fiscal Year; (b) In addition to the Power Sales Agreement and the Operations and Maintenance Agreement, the Authority may lease or make contracts or grant licenses for the operation of, or make arrangements for the use of, or grant easements or other rights with respect to, any part of the Project, provided that any such lease, contract, license, arrangement, easement or right (i) does not impede the operation by the Authority or the Purchaser or their respective agents of the Project and (ii) does not in any manner impair or adversely affect the rights or security of the Holders under this Resolution, and (iii) does not adversely affect the exemption from federal income taxation of the interest on tax-exempt Bonds or tax-exempt Parity Obligations; and provided, further, that if the depreciated cost of the property to be covered by any such lease, contract, license, arrangement, easement or other right is in excess of $500,000 the Authority shall first file with the Trustee an opinion of the Independent Consultant that such action of the Authority with respect thereto does not impair the ability of the Authority to comply during the current or any future Fiscal Year with the provisions of Section 7.12. Any payments received by the Authority under or in connection with any such lease, contract, license, arrangement, easement or right in respect of the Project or any part thereof shall constitute Revenues and shall be deposited in the Revenue Fund. 7.7.3 The Authority may sell the Project to the Project Purchaser in the manner contemplated by and subject to the terms and conditions of the Option Agreement, and subject to the following additional terms and conditions: (a) The Project Purchaser shall have delivered or caused to be delivered to the Authority and the Trustee: (i) (ii) 50004139.08 evidence satisfactory to the Authority that the Project Purchaser has received all regulatory approvals legally required for the Project Purchaser to own the Project~ and Either: 45 (A) ( 1) a written plan for defeasing all Outstanding Bonds and Parity Obligations in accordance with the requirements of Article XII, and (2) money and/or Defeasance Obligations sufficient to provide for the defeasance of all Outstanding Bonds and Parity Obligations in accordance with such defeasance plan and the requirements of Article XII~ or (B) (1) the Project Sale Agreement certified by the Authority and the Project Purchaser to have been duly authorized, executed and delivered by the Authority and the Project Purchaser and to be in full force and effect, together with the Project Note, duly authorized and executed by the Project Purchaser and delivered to the Trustee; (2) a Counsel's Opinion addressed to the Authority and the Trustee to the effect that the Project Sale Agreement, the Project Note, the Power Sales Agreement, and the Operations and Maintenance Agreement are legal, valid and binding obligations in full force and effect, except only as enforcement may be limited by bankruptcy, insolvency, moratorium and other laws affecting creditors' rights generally and that Debt Service is included in Installment Payments payable under the Project Sale Agreement and in Project Costs payable under the Power Sales Agreement; (3) a written opmton of the Independent Consultant addressed to the Authority and the Trustee that the sale of the Project pursuant to the Project Sale Agreement does not impair the ability of the Authority to comply during the current or any future Fiscal Year with the provisions of Section 7 .12~ ( 4) a Counsel's Opinion addressed to the Authority and the Trustee to the effect that the sale of the Project to the Project Purchaser pursuant to the Project Sale Agreement does not adversely affect the exclusion of interest on any tax-exempt Bonds or any tax-exempt Parity Obligations then Outstanding from gross income of the Holders thereof for federal income tax purposes; (5) a Counsel's Opinion addressed to the Authority and the Trustee to the effect that, upon the insolvency of any shareholder holding more than 49% of the stock of the Project Purchaser, the Project Purchaser or its assets and liabilities would not be substantively consolidated with that insolvent stockholder under applicable bankruptcy or insolvency laws~ 46 ( 6) written confirmation of the underlying rating then in effect with respect to the Outstanding Bonds and Parity Obligations issued by Standard & Poor's (which may be a contemporaneous rating requested by Purchaser and obtained at Purchaser's expense, with the reasonable cooperation of the Authority and the Trustee), and written confirmation from Standard & Poor's that the sale of the Project to the Project Purchaser by itself will not result in the withdrawal or reduction of that underlying rating then in effect with respect to the Outstanding Bonds and Parity Obligations; and (7) a certificate of an Authorized Officer of the Authority that no default then exists under the Resolution and ail conditions applicable to a purchase of the Project by the Project Purchaser pursuant to the Option Agreement have been met. (b) The Authority shall provide or cause to be provided to each NRMSIR in accordance with Section 7.17.6(a)(B)(x) and to the Trustee: (i) A copy of the written notice given by the Project Purchaser to the Authority pursuant to the Option Agreement to exercise the Project Purchaser's option to purchase the Project; and (ii) Notice that the Project has been sold to the Project Purchaser, such notice to be given within 30 days after the Project Purchaser has become the owner of the Project. 7.8 Independent Consultant. The Authority shall, for the purpose of performing and carrying out the duties imposed on the Independent Consultant by this Resolution, cause to be selected and employed as provided in the Power Sales Agreement or Project Sale Agreement an independent individual or firm of engineers or any other consultants or corporation that meets the requirements of the definition oflndependent Consultant herein. 7.9 Annual Budget. The Authority shall cause to be prepared and adopted an Annual Budget for the Project for each Fiscal Year pursuant to the Power Sales Agreement or the Project Sale Agreement, as applicable, and shall cause such Annual Budget to be filed with the Trustee at least ten (10) days prior to such Fiscal Year. Each Annual Budget shall set forth in reasonable detail the estimated Revenues and Operating Expenses, including Project Costs and Installment Payments for the Fiscal Year, and including provision for the estimated amount to be deposited in and expended from each Fund and Account established under this Resolution. If the Authority, the Purchaser or the Project Purchaser is required to incur extraordinary Operating Expenses or to make unanticipated expenditures for Project Repairs not reflected in the Annual Budget then in effect, the Authority shall cause to be prepared, adopted and filed with the Trustee not later than 30 days following the incurrence of such expenses or expenditures an amended Annual Budget reflecting all required adjustments in estimated Revenues and Operating Expenses. 47 »:104139.08 7.10 Limitations on Operating Expenses and Other Costs. So long as the Authority is the owner of the Project, the Authority shall not incur or permit to be incurred Operating Expenses or other costs payable from the Renewal and Replacement Fund in any Fiscal Year in excess of the reasonable and necessary amount of such expenses or costs, respectively, and shall not expend or permit to be expended any amount for Operating Expenses or from the Renewal and Replacement Fund for costs payable therefrom for such Fiscal Year in excess of the respective amounts provided therefor in the Annual Budget or amended Annual Budget as then in effect; provided, that the foregoing shall not prohibit the Authority or the Purchaser from incurring or expending any Operating Expenses or any costs for Project Repairs that, in accordance with Prudent Utility Practice, are necessary or appropriate to be made in connection with or as a result of any emergency involving the Project or any portion thereof endangering life or property. Nothing contained in this Section shall limit the amount which the Authority or the Purchaser may expend for Operating Expenses or other costs payable from the Renewal and Replacement Fund in any Fiscal Year provided any amounts expended therefor in excess of such Annual Budget shall be received by the Authority or the Purchaser from some source other than the Revenues, which source shall not be reimbursable out of Revenues. 7.11 Acquisition ofthe Project and Its Operation and Maintenance. 7 .11.1 The Authority shalt acquire the Project in accordance with the terms of the Purchase Agreement. 7.11.2 So long as the Authority is the owner of the Project, the Authority shall at all times use its best efforts to cause the Project to be operated properly and in an efficient and economical manner, consistent with the Power Sales Agreement and the Operations and Maintenance Agreement (during their terms) and with Prudent Utility Practice, and shall use its best efforts to cause the same to be so maintained, preserved, reconstructed and kept, with the appurtenances and every part and parcel thereof, in good repair, working order and good condition, and shall from time to time use its best efforts to cause to be made all necessary and proper repairs, replacements and renewals so that at all times the operation of the Project may be properly and advantageously conducted. 7 .11.3 So long as the Authority is the owner of the Project, the Authority shall take or cause to be taken all necessary steps to comply with applicable federal and State laws and regulations relating to the licensing, use and operation of the Project. 7.12 Charges and Expenses. 7 .12.1 So long as the Authority is the owner of the Project, the Authority shall at all times charge and collect the Project Costs required to be paid by the Purchaser pursuant to the Power Sales Agreement and the Operations and Maintenance Agreement, and on and after the date that the Project Purchaser becomes the owner of the Project the Authority shall at all times charge and collect the Installment Payments required. to be paid by .the Pro)ect Purchaser pursuant to the Project Sale Agreement. The Authonty shall de!ermme Pr~Ject Costs a~d Installment Payments, as applicable, in such amounts as shall be reqmred to prov1de Revenues. m each Fiscal Year equal to one and ten one-hundredths ( 1.1 0) times the Aggregate Debt Serv1ce 48 payable during the Bond Year that commences during such Fiscal Year and at least sufficient for the payment of: (a) Aggregate Debt Service payable during the Bond Year that commences during such Fiscal Year; (b) The amount, if any, to be paid during such Fiscal Year into the Debt Service Reserve Fund, which shall be the amount, if any, necessary to restore the Debt Service Reserve Fund to the Debt Service Reserve Requirement or as required to maintain a Reserve Fund Credit Facility; (c) The greater of the amount necessary to restore the Renewal and Replacement Fund to the Minimum R&R Fund Requirement or the Renewal and Replacement Fund Contribution to be paid during such Fiscal Year into the Renewal and Replacement Fund; and (d) All other charges or liens whatsoever required to be paid out of Revenues during such Fiscal Year, including without limitation any Rebate Amount. 7.12.2 The Authority will not furnish or supply, or cause to be furnished-or supplied, any use, output, capacity or service of the Project, free of charge to any person, firm or corporation, public or private, except to the extent ordered by the Alaska Public Utilities Commission or other regulatory authority, and the Authority will enforce the payment of any and all amounts owing to the Authority pursuant to the Power Sales Agreement and the Project Sale Agreement in accordance with their respective terms. 7.13 Power Sales Agreement; Operations and Maintenance Agreement; Project Sale Agreement. The Authority shall collect and forthwith deposit with the Trustee for credit to the Revenue Fund all amounts payable to it pursuant to the Power Sales Agreement, the Operations and Maintenance Agreement and the Project Sale Agreement, exclusive of Retained Revenues. The Authority hereby pledges, assigns and transfers to the Trustee, acting on behalf of the Holders, all of its rights (exclusive of Unassigned Authority Rights and the right to receive Retained Revenues) under the Power Sales Agreement, the Operations and Maintenance Agreement and the Project Sale Agreement, or any other contracts for the use of the capability of the Project or the sale of the output, capacity or service of the Project or any part thereof and the Trustee shall enjoy and hold for the benefit of the Holders the rights and privileges so assigned, including, without limiting the foregoing, the rights of the Authority to receive payments thereunder. The Authority shall enforce the provisions of the Power Sales Agreement, the Operations and Maintenance Agreement and the Project Sale Agreement and duly perform its covenants and agreements thereunder. The Authority will not consent or agree to or permit any termination, rescission of or amendment to or otherwise take any action under or in connection with the Power Sales Agreement, the Operations and Maintenance Agreement or the Project Sale Agreement which will in any manner lessen, postpone or restrict payment obligations thereunder or which otherwise will in any manner materially impair or materially adversely affect the rights or security of the Holders under this Resolution. Nor will the Authority consent or agree to any amendment of the Power Sales Agreement, the Operations and Maintenance Agreement or the 49 SOOO.CIJ9.08 Project Sale Agreement unless the Authority shall have received an opinion of the Independent Consultant that such amendment does not impair the ability of the Authority to comply during the current or any future Fiscal Year with the provisions of Section 7 .12. Notwithstanding the foregoing limitations, the Authority may consent or agree to any amendment of the Power Sales Agreement, the Operations and Maintenance Agreement or the Project Sales Agreement that is authorized by a Supplemental Resolution adopted with the consent of the Holders pursuant to Section 10.3. A copy of the Power Sales Agreement, the Operations and Maintenance Agreement and the Project Sale Agreement certified by an Authorized Officer of the Authority shall be filed with the Trustee, and a copy of any such amendment certified by an Authorized Officer of the Authority shall be filed with the Trustee. 7.14 Insurance. 7.14.1 So long as the Authority is the owner of the Project, the Authority shall cause the Project to be at all times insured against such risks and in such amounts, with such deductible provisions, or provide for a source of self insurance, as is customary in connection with the operation of facilities of a type and size comparable to the Project and as may reasonably and economically be obtained or secured. The determination of what is "customary" and what may be "reasonably and economically obtained or secured" within the meaning of the prior sentence shall be made by an independent insurance consultant selected and employed as provided in the Power Sales Agreement. 7.14.2 Each insurance policy required by this Section (i) shall be issued or written by a financially responsible insurer (or insurers), or by an insurance fund established by the United States of America or State or an agency or instrumentality thereof, (ii) shall be in such form and with such provisions (including, without limitation and where applicable, loss payable clauses payable to the Trustee, waiver of subrogation clauses, provisions relieving the insurer of liability to the extent of minor claims and the designation of the named assureds) as are generally considered standard provisions for the type of insurance involved, and (iii) shall prohibit cancellation or substantial modification by the insurer without at least thirty days' prior written notice to the Trustee and the Authority. Without limiting the generality of the foregoing, all insurance policies, and other arrangements to the extent feasible, carried pursuant to this Section 7.14 shall name the Trustee, the Authority and the Purchaser as parties insured thereunder as the respective interest of each of such parties may appear, and loss thereunder shall be made payable and shall be applied as provided in this Resolution. 7.14.3 The Authority covenants, to the extent feasible and economically prudent, to carry insurance insuring against the risks and hazards to the Authority and the Project to the same extent that other entities comparable to the Authority and owning or operating facilities of the size and type comparable to the Project, and taking into account any special circumstances of the Project, carry such insurance. In the event that the Authority determines that t~e insurance required by this Section is not available to the Authority at reason~ble cost, and, m any ca~e, every five years from and after the date of issuance of the first Senes of Bonds, the Authonty shall cause to be selected and employed as provided in the Operations and Maintenance Agreement an independent insurance consultant or the State division of risk. management ~the "consultant") for the purpose of reviewing the insurance coverage of, and the msurance requ1red 50 for, the ~~thority .and the Project and making recommendations respecting the types, amounts and prov1s1ons of msurance that should be carried with respect to the Authority and the Project and their operation, maintenance and administration. A signed copy of the report of the consultant shall be filed with the Trustee and copies thereof shall be sent to the Authority, and the insurance requirements specified hereunder, including any and all of the dollar amounts set forth in this Section, shall be deemed modified or superseded as necessary to conform with the recommendations contained in said report. 7.14.4 The Authority may provide under arrangements with the State self insurance against the risks and hazards relating to the properties of the Project and the interests of the Authority and the Holders as described in this Section, and, in connection therewith, may specify and determine the matters and things set forth in Subsection 7.14.3. 7.14.5 Insurance maintained pursuant to this Section may be part of one or more master policies maintained by the State so long as the form of such policy and the coverage is the same as if a separate policy was in effect. 7.14.6 The Authority shall on or before January 1 of each year submit to the Trustee a certificate verifying that all minimum insurance coverages required by this Resolution are in full force and effect as of the date of such Authority Certificate. 7.14.7 The provisions of this Section 7.14 shall apply to the Authority only so long as the Authority is the owner of the Project. 7.15 Reconstruction: Application oflnsurance Proceeds. 7.15.1 So long as the Authority is the owner of the Project, if any useful portion of the Project shall be damaged or destroyed, the Authority shall, as expeditiously as possible, continuously and diligently prosecute or cause to be prosecuted the reconstruction or replacement thereof, unless a determination has been made to end the Project pursuant to Section 15 of the Power Sales Agreement, or unless the Independent Consultant in an opinion or report filed with the Trustee shall state that such reconstruction and replacement is not consistent with Prudent Utility Practice or is not in the best interests of the Purchaser and the Holders. The proceeds of any insurance, including the proceeds of any self insurance fund, paid on account of such damage or destruction shall be held by the Trustee in a special account in the Project Fund and made available for, and to the extent necessary be applied to, the cost of such reconstruction or replacement. Pending such application, such proceeds may be invested at the direction of the Authority in Investment Securities which mature not later than such time as shall be necessary to provide moneys when needed to pay such costs of reconstruction or replacement. The proceeds of any insurance, including the proceeds of any self insurance fund, not applied within 36 months after receipt thereof by the Authority to repairing or replacing damaged or destroyed property, or in respect to which notice in writing of intention to apply the same to the work of repairing or replacing the property damaged or destroyed shall not have been given to the Trustee by the Authority within such 36 months, or which the Authority shall at any time notify the Trustee are not to be so applied, in excess of $5,000,000 shall be used to retire Bonds and Parity Obligations on a pro rata basis in proportion to the Outstanding principal amount of each 51 SOO~I39Jl8 Series by purchase or redemption to the extent provided by the Supplemental Resolution and Parity Obligation Instrument authorizing the Bonds and Parity Obligations and the terms thereof Notwithstanding the foregoing, in the event that payments are made from the Renewal and Replacement Fund for any such repairing of property damaged or destroyed prior to the availability of insurance proceeds, including the proceeds of any self~insurance fund therefor, such proceeds when received by the Authority shall be deposited in the Renewal and Replacement Fund to the extent of such payments therefrom. 7.15.2 If the proceeds of insurance, including the proceeds of any self insurance fund, authorized by this Section to be applied to the reconstruction or replacement of any portion of the Project are insufficient for such purpose, the deficiency may be supplied out of moneys in the Renewal and Replacement Fund. 7.15.3 Alternate methods (if any) of carrying out and funding Project Repairs may be determined as provided in the Power Sales Agreement. 7.15.4 The provisions of this Section 7.15 shall apply to the Authority only so long as the Authority is the owner of the Project. 7.16 Maintenance of Debt Service Reserve Fund. The Authority shall at all times maintain the Debt Service Reserve Fund with the Trustee created and established by Section 5.2 and do and perform or cause to be done and performed each and every act and thing with respect to the Debt Service Reserve Fund provided to be done or performed on behalf of the Authority or the Trustee under the terms and provisions of Article V hereof 7.17 Accounts and Reports. 7. 17.1 The Authority shall keep or cause to be kept proper books and records made of its transactions relating to the Project and each Fund and Account established under this Resolution and relating to its costs and charges under the Power Sales Agreement and the Project Sale Agreement and which, together with the Power Sales Agreement and the Project Sale Agreement and all other books and papers of the Authority, including insurance policies, relating to the Project, shall at all times be subject to the inspection of the Trustee and the Holders of an aggregate of not less than 5% in principal amount of the Bonds and Parity Obligations then Outstanding or their representatives duly authorized in writing. 7.17.2 The Trustee shall advise the Authority promptly after the end of each month in its regular statements of the respective transactions during such month relating to each Fund and Account held by it under this Resolution. The Authority shall have the right upon reasonable notice and during reasonable business hours to audit the books and records of the Trustee with respect to the Funds and Accounts held by the Trustee under this Resolution. 7.17 .3 (a) The Authority, so long as the Authority owns the Project, and, thereafter, the Project Purchaser, shall annually, within 120 days after the close of each Fiscal Year file with the Trustee a copy of its audited financial statements for such Fiscal Year, including the following, setting forth in reasonable detail: 52 S0004139.08 (i) a balance sheet for the Project showing assets, liabilities and equity at the end of such Fiscal Year; and (ii) a statement of the Project's revenues and expenses in accordance with the categories of classifications established by the Authority or the Project Purchaser, as applicable, for its operating and program purposes. The financial statements shall be accompanied by an opinion of an Accountant stating that the financial statements audited present fairly the financial position of the Authority or the Project Purchaser, as applicable, at the end of the Fiscal Year, the results of its operations and its cash flows for the period examined, in conformity with generally accepted accounting principles. (b) Any such audited financial statements may be presented on a consolidated or combined basis with other reports of the Authority or the Project Purchaser, as applicable, but only to the extent that such basis of reporting shall be consistent with that required hereunder. 7.17.4 The Authority shall file with the Trustee (a)forthwith upon becoming aware of any Event of Default or default in the performance·by the Authority of any covenant, agreement or condition contained in this Resolution, a certificate signed by an Authorized Officer of the Authority and specifying such Event of Default or default and (b) within 120 days after the end of each Fiscal Year, commencing with the Fiscal Year ending June 30, 1999, a certificate signed by an Authorized Officer of the Authority stating that, to the best of his knowledge and belief, the Authority has kept, observed, performed and fulfilled each and every one of its covenants and obligations contained in this Resolution and there does not exist at the date of such certificate any default by the Authority under this Resolution or any Event of Default or other event which, with the lapse of time specified in Section 8.1, would become an Event of Default, or, if any such default or Event of Default or other event shall so exist, specifying the same and the nature and status thereof. 7.17. 5 The reports, requested statements and other documents required to be furnished to the Trustee pursuant to any provisions of this Resolution shall be available for the inspection of Holders at the office of the Trustee and shall be mailed to each Holder who shall file a written request therefor with the Trustee. The Authority shall request the Purchaser and the Project Purchaser to provide to the Trustee copies of their annual financial statements, and the Trustee shall send a copy to each Holder which has requested it. The Trustee may charge each Holder requesting such reports, statements and other documents a reasonable fee to cover reproduction, handling and postage. 7 .17.6 Compliance with Continuing Disclosure Requirements. (a) Authority Undertaking to Provide Notice of Material Events. To meet the conditions of paragraph (d)(2) of United States Securities and Exchange Commission ("SEC") Rule 15c2-12 (the "Rule"), as applicable to a participating underwriter for the Bonds, the Authority undertakes (the "Undertaking") for the benefit of the Holders to provide or cause to be 53 500Mil9.08 provided, either directly or through a designated agent (A) so long as the Authority is the owner of the Project, to each nationally recognized municipal securities information repository designated by the SEC in accordance with the Rule (each "NRMSIR"), and to the state information depository, if any, established in the State and recognized by the SEC (the "SID"), the Authority's annual financial statements as described in paragraph (b) below, and (B) to each NRMSIR or the MSRB and the SID, timely notice of the occurrence of any of the following events with respect to the Bonds, if material: (i) principal and interest payment delinquencies; (ii) non-payment related defaults~ (iii) unscheduled draws on debt service reserves reflecting financial difficulties; (iv) unscheduled draws on credit enhancements reflecting financial difficulties; (v) substitution of credit or liquidity providers, or their failure to perform; (vi) adverse tax opinions or events affecting the tax-exempt status of the Bonds; (vii) modifications to rights of Holders of the Bonds; (viii) Bond calls (other than scheduled mandatory redemptions of term Bonds, if any); (ix) defeasances; (x) release, substitution, or sale of property securing repayment of the Bonds and (xi) rating changes; and timely notice of a failure by the Authority to provide the required annual financial information by the date specified in paragraph (b )(iii). (b) Provision of Annual Financial Statements. The Authority's annual financial statements provided in accordance with paragraph (a): (i) Shall be prepared (except as noted in the financial statements) in accordance with applicable generally accepted accounting principles, as such principles may be changed from time to time; (ii) Shall be audited; (iii) Shall be provided to each NRMSIR and the SID, not later than the last day of the ninth month after the end of each Fiscal Year of the Authority, as such Fiscal Year may be changed as required or permitted by State law, commencing with the Authority's Fiscal Year ending June 30, 1999; and (iv) May be provided in a single or multiple documents, and may be incorporated by reference to other documents that have been filed with each NRMSIR and the SID, or, if the document incorporated by reference is a "final official statement" with respect to other obligations of the Authority, that has been filed with the MSRB. (c) Amendment of Undertaking. The Undertaking is subject to amendment after the primary offering of the Bonds without the consent of any Holder of any Bond, or of any broker, dealer, municipal securities dealer, participating underwriter, rating agency, NRMSIR, the SID or the MSRB, under the circumstances and in the manner permitted by the Rule. The Authority will give notice to each NRMSIR or the MSRB, and the SID, if any, of the substance (or provide a copy) of any amendment to the Undertaking and a brief statement of ~he. reasons :or the amendment. In addition, if the amendment changes the type of annual financ1al mformatton to be provided, the annual financial information containing the amended fina~cial inf?rmation will include a narrative explanation of the effect of that change on the type of mformat1on to be provided. 54 (d) Beneficiaries. The Undertaking evidenced by this Section 7.17.6 shall inure to the benefit of participating underwriters and beneficial owners of Bonds, and shall not inure to the benefit of or create any rights in any other person. (e) Termination of Undertaking. The Authority's obligations under this Undertaking shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. In addition, the Authority's obligations under this Undertaking shall terminate if those provisions of the Rule which require the Authority to comply with this Undertaking become legally inapplicable in respect of the Bonds for any reason, as confirmed by Counsel's Opinion or other counsel familiar with federal securities laws delivered to the Authority, and the Authority provides timely notice of such termination to each NRMSIR or the MSRB and the SID. (f) Remedy for Failure to Comply with Undertaking. As soon as practicable after the Authority learns of any failure to comply with the Undertaking, the Authority will proceed with due diligence to cause such noncompliance to be corrected. No failure by the Authority or other obligated person to comply with the Undertaking shall constitute a default in respect of the Bonds. The sole remedy of any Holder shall be·to take such actions as that Holder deems necessary and appropriate, including seeking a writ of mandate or order of specific performance from an appropriate court, to compel the Authority or other obligated person to comply with the Undertaking. (g) Continuing Disclosure by Purchaser. Pursuant to Section 12(d) of the Power Sales Agreement, the Purchaser has undertaken all responsibility for compliance with continuing disclosure requirements relating to the Purchaser and the Project, and the Authority shall have no liability to the Holders of the Bonds or any other person with respect to such disclosure matters. Notwithstanding any other provision of this Resolution, failure of the Trustee to comply with any of its obligations under this Subsection 7.17.6 or failure of the Purchaser or any dissemination agent, to comply with the continuing disclosure provisions of the Power Sales Agreement shall not be considered an Event of Default; however, the Trustee shall, at the request of the Holders of at least 25% aggregate principal amount of Outstanding Bonds and upon receipt of indemnification against any cost, expense or liability, including without limitation fees and costs of its attorneys, satisfactory to the Trustee, or any Holder may, take such actions as may be necessary and appropriate, including seeking specific performance by court order, to cause the Purchaser to comply with its obligations under Section 12(d) of the Power Sales Agreement or (in the case of the Holder) to cause the Trustee to comply with its obligations under this Subsection 7.17.6. (h) Trustee to Forward Information. The Trustee shall provide notice to the Authority and the Purchaser of any of the events listed in Subsection 7.17.6(a) of which the officer of the Trustee responsible for administering this Resolution has actual notice (including notice from the Authority) or knowledge and, upon a written determination by the Authority or the Purchaser, as applicable, given to the Trustee that any such event is material, shall, in its capacity as dissemination agent ("Dissemination Agent") provide notice of such event to each NRMSIR or to the MSRB, and to the SID. In addition, the Trustee, in its capacity as 55 50004139.08 Dissemination Agent, shall forward to each NRMSIR, the MSRB and the SID, as applicable, all information delivered to the Trustee by the Authority or the Purchaser, as applicable, with instructions to forward that information to those entities pursuant to this Subsection 7.17.6 and Section 7(e) of the Power Sales Agreement, it being understood that the Trustee has no responsibility for the content, format or timeliness of such information. The failure of the Trustee to provide notice to the Authority pursuant to this paragraph shall not relieve the Authority of its responsibility to provide notice of material events pursuant to Subsection 7.17.6(a). Nomithstanding the foregoing, the Trustee shall have no duty or obligation hereunder to the Authority, any Holder of Bonds or any other person (including without limitation any underwriter of the Bonds) to monitor the Authority's compliance with the Undertaking. 7.18 Tax Covenants. 7 .18.1 The Authority shall at all times do and perform all acts and things necessary or desirable including, but not limited to, compliance with provisions of a letter of instructions from Bond Counsel, as the same may be revised from time to time, in order to assure that interest paid on the Bonds and Parity Obligations shall, for the purposes of federal income taxation, be excludable from the gross income of the recipients thereof and exempt from such taxation, except in the event that such recipient is a "substantial user" or "related person" within the meaning of Section 147(a) of the Code. 7 .18.2 The Authority shall not permit at any time or times any of the proceeds of the Bonds and Parity Obligations, Revenues or any other funds of the Authority to be used directly or indirectly to acquire any securities or obligations the acquisition of which would cause any Bond or Parity Obligation to be an "arbitrage bond" as defined in Section 148(a) and (e) of the Code. 7 .18.3 The Authority shall not permit at any time or times any proceeds of any Bonds or Parity Obligations, Revenues or any other funds of the Authority or the Project to be used, directly or indirectly, in a manner which would result in the exclusion of any Bond or Parity Obligation from the treatment afforded by subsection (a) of Section 103 of the Code, including without limitation in a manner that would cause the Project to fail to qualify as a facility for the local furnishing of electric energy within the meaning of Section 142(a)(8) of the Code, except in the case of Bonds or Parity Obligations held by a person who, within the meaning of Section 147(a) of the Code, is a "substantial user" or "related person". 7.18.4 This Section shall not apply in respect of any Bond or Parity Obligation that is not issued as a Bond or Parity Obligation the interest on which is intended to be excluded from gross income of the Holder thereof for federal income tax purposes, and shall apply in respect of any Bond or Parity Obligation only insofar as actions relating thereto are reasonably within the control of the Authority. 7.18.5 Notwithstanding any other provision of this Resolution to the contrary, upon the Authority's failure to observe, or refusal to comply with, the covenants in this Section 7 .18, no person other than the Trustee or the Holders of Bonds of the specific Series 56 affected shall be entitled to exercise any right or remedy provided to the above Holders under this Resolution on the basis of the Authority's failure to observe, or refusal to comply with, the covenant. 7.19 Payment of Taxes and Charges. The Authority will from time to time duly pay and discharge, or cause to be paid and discharged, from the Revenues and other sources provided herein all judgments, taxes, assessments and other governmental charges, or required payments in lieu thereof, lawfully imposed upon the Project or upon the rights, Revenues, income, receipts and other moneys, securities and funds of the Authority when the same shall become due (including all rights, moneys and other property transferred, assigned or pledged under this Resolution), and all lawful claims for labor and material and supplies, except those judgments, taxes, assessments, charges or claims which the Authority shall in good faith contest by proper legal proceedings, if the Authority shall in all such cases have set aside on its books reserves deemed adequate with respect thereto. 7.20 Pledge of the State. The State pledges to and agrees with the Holders of the Bonds that the State will not limit or alter the rights and powers vested in the Authority by the Act to fulfill the terms of the contracts made by the Authority under this Resolution with the Holders of Bonds, or in any way impair the rights and remedies of the Holders of Bonds until the Bonds, together with the interest on them with interest on unpaid installments of interest, and all costs and expenses in connection with an action or proceeding by or on behalf of the Holders of the Bonds, are fully met and discharged. This pledge is included in this Resolution under the specific authority of 44.88.130 of the Act. 7.21 Waiver ofLaws. The Authority shall not at any time insist upon or plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or extension law now or at any time hereafter in force which may affect the covenants and agreements contained in this Resolution or in the Bonds, and all benefit or advantage of any such law is hereby expressly waived by the Authority. 7.22 General. 7 .22.1 The Authority shall do and perform or cause to be done and performed all acts and things required to be done or performed by or on behalf of the Authority under the provisions of the Act and this Resolution. 7 .22.2 Upon the date of authentication and delivery of each Series of Bonds, all conditions acts and things required by law and this Resolution to exist, to have happened and to have been' performed precedent to and in the issuance of such Bonds shall exist, have happened and have been performed and the issue of such Bonds, together with all other indebtedness of the Authority, shall comply in all respects with the applicable laws of the State including the debt and other limitations prescribed by the Constitution and laws of the State. 7 .22.3 The provisions of this Article are covenants and agreements by the Authority with the Trustee and the Holders. 57 500041)9.08 (i) (ii) (iii) (iv) (v) (vi) $0004139.08 ARTICLE VIII. Remedies ofHolders 8.1 Events ofDefault. The following shall constitute Events ofDefault: if default shall be made in the due and punctual payment of the principal or Redemption Price when and as the same shall become due on or with respect to any Bond or Parity Obligation, whether at maturity or upon call for redemption or otherwise; if default shall be made in the due and punctual payment of any installment of interest on any Bond or Parity Obligation or the unsatisfied balance of any Sinking Fund Installment therefor, when and as such interest installment or Sinking Fund Installment shall become due and payable; if default shall be made by the Authority in the performance or observance of any other of the covenants, agreements or conditions on its part contained in this Resolution, the Bonds, the Power Sales Agreement, the Operations and Maintenance Agreement or the Project Sale Agreement, and such default shall continue for a period of 60 days after written notice thereof to the Authority by the Trustee or to the Authority and to the Trustee by the Holders of not less than 25% in principal amount of the Bonds and Parity Obligations Outstanding (or, if cure cannot be completed within such 60-day period through the exercise of diligence and the Authority commences the required cure within such 60-day period and continues the cure with diligence and it is reasonably anticipated that the default could be cured within 180 days, the Authority shall have 180 days following receipt of such notice to effect the cure); if there shall occur the dissolution or liquidation of the Authority or the filing by the Authority of a voluntary petition in bankruptcy, or the commission by the Authority of any act of bankruptcy, or adjudication of the Authority as a bankrupt, or assignment by the Authority for the benefit of its creditors, or the entry by the Authority into an agreement of composition with its creditors, or the approval by a court of competent jurisdiction of a petition applicable to the Authority in any proceeding for its reorganization instituted under the provisions of the federal bankruptcy act, as amended, or under any similar act in any jurisdiction which may now be in effect or hereafter enacted; if default shall be made in the due and punctual payment of Project Costs payable under the Power Sales Agreement and/or Installment Payments payable under the Project Sale Agreement; if default shall be made by the Purchaser or Project Purchaser in the performance or observance of any of the covenants, agreements or conditions on its part contained in the Power Sales Agreement, the Operations and Maintenance Agreement or the Project Sale Agreement other than payment of Project Costs and/or Installment Payments payable 58 under such agreements, and such default shall continue for a period of 60 days after written notice thereof to the Authority by the Trustee or to the Authority and to the Trustee by the Holders of not less than 25% in principal amount of the Bonds and Parity Obligations Outstanding (or, if cure cannot be completed within such 60-day period through the exercise of diligence and the Purchaser or Project Purchaser, as applicable, commences the required cure within such 60-day period and continues the cure with diligence and it is reasonably anticipated that the default could be cured within 180 days, the Purchaser or Project Purchaser, as applicable, shall have 180 days following receipt of such notice to effect the cure)~ (vii) if there shall occur the dissolution or liquidation of the Purchaser or Project Purchaser or the filing by or against the Purchaser or Project Purchaser of a petition in bankruptcy, or the commission by the Purchaser or Project Purchaser of any act of bankruptcy, or adjudication of the Purchaser or Project Purchaser as a bankrupt, or assignment by the Purchaser or Project Purchaser for the benefit of its creditors, or the entry by the Purchaser or Project Purchaser into an agreement of composition with its creditors, or the approval by a court of competent jurisdiction of a petition applicable to the Purchaser or Project Purchaser in any proceeding for its reorganization instituted under the provisions of the federal bankruptcy act, as amended, or under any similar act in any jurisdiction which may now be in effect or hereafter enacted; (viii) if an order or decree shall be entered, with the consent or acquiescence of the Authority or the Purchaser or Project Purchaser, appointing a receiver or receivers of the Project, or any part thereof, or of the rents, fees, charges or other Revenues therefrom, or if such order or decree, having been entered without the consent or acquiescence of the Authority or the Purchaser or Project Purchaser, shall not be vacated or discharged or stayed within 90 days after the entry thereof; and (ix) if judgment for the payment of money shall be rendered against the Authority or the Purchaser or Project Purchaser as the result of the construction, improvement, ownership, control or operation of the Project, and any such judgment shall not be discharged within 90 days after the entry thereof, or an appeal shall not be taken therefrom or from the order, decree or process upon which or pursuant to which such judgment shall have been granted or entered, in such manner as to set aside or stay the execution of or levy under such judgment, or order, decree or process or the enforcement thereof 8.2 Account and Examination of Records After Default. 8.2.1 The Authority covenants that if an Event of Default shall have happened and shall not have been remedied, the books of record and account of the Authority and all other records of the Project available to the Authority shall at all times be subject to the inspection and use ofthe Trustee and of its agents and attorneys. 8.2.2 The Authority covenants that if an Event of Default shall have happened and shall not have been remedied, the Authority upon demand ofthe Trustee, will account, as if 59 JOO~ll9.08 it were the trustee of an express trust, for all Revenues and other moneys, securities and funds pledged or held under this Resolution for such period as shall be stated in such demand. 8.3 Application ofRevenues and Other Moneys After Default. 8.3.1 The Authority covenants that if an Event of Default shall happen and shal1 not have been remedied, the Authority upon the demand of the Trustee, shall pay over or cause to be paid over to the Trustee (i) forthwith, all moneys, securities and funds then held by the Authority in any Fund or Account under this Resolution, and (ii) all Revenues as promptly as practicable after receipt thereof. 8.3 .2 During the continuance of an Event of Default, the Trustee shall apply all moneys, securities, funds and Revenues received by the Trustee pursuant to any right given or action taken under the provisions of this Article as fo11ows and in the following order: (i) Expenses of Fiduciaries -to the payment of the reasonable and proper fees, charges, expenses including, but not limited to, fees and expenses of their attorneys, and liabilities of the Fiduciaries; (ii) Operating Expenses -to the payment of the amounts required for reasonable and necessary Operating Expenses. For this purpose the books of record and accounts of the Authority and the Purchaser relating to the Project sha11 at all times be subject to the inspection of the Trustee and its representatives and agents during the continuance of such Event of Default; (iii) Principal or Redemption Price and Interest -to the payment of the interest and principal or Redemption Price then due on the Bonds and Parity Obligations, as follows: First: Interest -To the payment to the persons entitled thereto of all installments of interest then due in the order of the maturity of such installments, together with accrued and unpaid interest on the Bonds and Parity Obligations theretofore called for redemption, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; and Second: Principal or Redemption Price-To the payment to the persons entitled thereto of the unpaid principal or Redemption Price of any Bonds and Parity Obligations which shall have become due, whether at maturity or by call for redemption, in the order of their due dates, and, if the amount available sha11 not be sufficient to pay in full all the Bonds and Parity Obligations due on any date, then to the payment thereof ratably, according to the amounts of principal or Redemption Price due on such date, to the persons entitled thereto, without any discrimination or preference. 60 8.3.3 If and whenever all overdue installments of interest on all Bonds and Parity Obligations, together with the reasonable and proper fees, charges, expenses, including, but not limited to, fees and expenses of its attorneys, and liabilities of the Trustee, and all other sums payable by the Authority under this Resolution and by the Purchaser under the Parity Obligations, including the principal or Redemption Price of and accrued unpaid interest on all Bonds and Parity Obligations which shall then be payable by declaration or otherwise, shall either be paid by or for the account of the Authority or the Purchaser, as applicable, or provision satisfactory to the Trustee shall be made for such payment, and all defaults under this Resolution or the Bonds and the Parity Obligations shall be made good or secured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall be made therefor, and the Trustee shall pay over to the Authority or the Purchaser or Project Purchaser as their respective interest may appear all moneys, securities and funds then remaining unexpended in the hands of the Trustee (except moneys, securities and funds deposited or pledged, or required by the terms of this Resolution and the Parity Obligations to be deposited or pledged, with the Trustee), and thereupon the Authority, the Trustee and the Purchaser or Project Purchaser shall be restored, respectively, to their former positions and rights under this Resolution. No such payment over to the Authority· or the Purchaser or Project Purchaser by the Trustee nor such restoration of the Authority, the Purchaser or Project Purchaser and the Trustee to their former positions and rights shall extend to or affect any subsequent default under this Resolution or impair any right consequent thereon. 8.3 .4 The Trustee shall not take any action which will unreasonably interfere with the performance of the Power Sales Agreement, the Operations and Maintenance Agreement or the Project Sale Agreement. 8.4 Acceleration. 8.4.1 Upon the occurrence of any Event of Default (other than an Event of Default defined in clause (iii) or clause (vi) of Section 8.1), the Trustee may, with the consent of the Bond Insurer, and shall, at the direction of the Bond Insurer, declare by a notice in writing delivered to the Authority, the Bond Insurer and the Purchaser or Project Purchaser, as applicable, the principal of all Bonds and Parity Obligations then Outstanding (if not then due and payable), and the interest accrued thereon, to be due and payable immediately. Upon that declaration, interest on the Bonds and Parity Obligations shall accrue to the date determined by the Trustee for the tender of payment to the Holders pursuant to that declaration; provided, that interest on any unpaid principal of Bonds and Parity Obligations Outstanding shall continue to accrue from the date determined by the Trustee for the tender of payment to the Holders of such Bonds and Parity Obligations until such time as all principal has been paid on any such Bonds and Parity Obligations. 8.4.2 The provisions of Section 8.4.1 are subject to the condition that if, at any time after declaration of acceleration and prior to the entry of a judgment in a court for enforcement hereunder (after an opportunity for hearing by the Authority and the Purchaser or Project Purchaser, as applicable), 61 (i) All sums payable hereunder (except the principal of and interest on Bonds and Parity Obligations which have not reached their stated maturity date but which are due and payable solely by reason of that declaration of acceleration), plus interest to the extent permitted by law on any overdue installments of interest at the rate borne by the Bonds and Parity Obligations in respect of which the default shall have occurred, shall have been duly paid or provision shall have been duly made therefor by deposit with the Trustee, and (ii) all existing Events of Default shall have been cured or waived, then and in every case, the Trustee shall waive the Event of Default and its consequences and shall rescind and annul that declaration. No waiver or rescission and annulment shall extend to or affect any subsequent Event of Default or shall impair any rights consequent thereon. 8.5 Appointment of Receiver. The Trustee shall have the right to apply in an appropriate proceeding for the appointment of a receiver of the Project and other assets pledged under this Resolution or the Deed of Trust, pending resolution of such proceeding .. 8.6 Proceedings Brought by Trustee. 8.6.1 If an Event of Default shall happen and shall not have been remedied, then and in every such case, the Trustee, by its agents and attorneys, may, and upon written request of the Holders of not less than 25% in principal amount of the Bonds and Parity Obligations Outstanding shall, pursue any one or more of the following remedies to the extent permitted by applicable law: (a) by mandamus, or other suit, action or proceeding at law or in equity, protect and enforce its rights and the rights of the Holders of the Bonds and Parity Obligations and require the Authority, the Purchaser or the Project Purchaser to carry out any agreements with or for the benefit of the Holders and to perform their respective duties under the Act, this Resolution, the Bonds, the Power Sales Agreement, the Operations and Maintenance Agreement and the Project Sale Agreement, to the extent permitted under the applicable provisions of those agreements, the Act or this Resolution~ (b) bring suit upon the Bonds and Parity Obligations; (c) by action or suit require the Authority, the Purchaser or the Project Purchaser to account as if it were the trustee of an express trust for the Holders of the Bonds and Parity Obligations; (d) foreclose the Deed of Trust and the security interest in Project personal property thereunder or exercise any remedies thereunder; (e) foreclose the Pledge Agreement or exercise any remedies thereunder; (f) by action or suit in equity enjoin any acts or things which may be unlawful or in violation of the rights of the Holders of the Bonds and Parity Obligations; or (g) enforce any other legal or equitable right as the Trustee, being advised by counsel, shall deem most effectual to enforce any of its rights or to perform any of its duties under this Resolution. 8.6.2 All rights of action under this Resolution may be enforced by the Trustee without the possession of any of the Bonds or Parity Obligations or the production thereof on the trial or other proceedings, and any such suit or proceedings instituted by the Trustee shall be brought in its name. 62 :!00041)9.011 8.6.3 The Holders of not less than a majority in principal amount of the Bonds and Parity Obligations at the time Outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, provided that the Trustee shall have the right to decline to follow any such direction if the Trustee shall be advised by counsel that the action or proceeding so directed may not lawfully be taken, or if the Trustee in good faith shall determine that the action or proceeding so directed would involve the Trustee in personal liability or be unjustly prejudicial to the Holders not parties to such direction. 8.6.4 Upon commencing a suit in equity or upon other commencement of judicial proceedings by the Trustee to enforce any right under this Resolution, the Trustee shall be entitled to exercise any and all rights and powers conferred in this Resolution and provided to be exercised by the Trustee upon the occurrence of any Event of Default. The Authority and the issuer of any Parity Obligation are obligated and fully liable (but only from the sources provided herein) for the amounts due on their respective Bonds and Parity Obligations, and the Trustee shall have the right to sue on Bonds and Parity Obligations and obtain a judgment against the Authority or the issuer of any Parity Obligation for satisfaction of the amounts due on their respective Bonds and Parity Obligations (but only from the sources provided herein) either before, after or without a judicial foreclosure of the Deed of Trust under A.S. 09.45.170 - 09.45.220. 8.7 Restriction on Action by Holders of Bonds and Parity Obligations. 8.7.1 No Holder of any Bond or Parity Obligation shall have any right to institute any suit, action or proceeding at law or in equity for the enforcement of any provision of this Resolution or the execution of any trust under this Resolution or for any remedy under this Resolution, unless such Holder shall have previously given to the Trustee written notice of the happening of an Event of Default, as provided in this Article, and the Holders of at least 25% in principal amount of the Bonds and Parity Obligations then Outstanding shall have filed a written request with the Trustee, and shall have offered it reasonable opportunity either to exercise the powers granted in this Resolution or by the Act or by the laws of the State or to institute such action, suit or proceeding in its own name, and unless such Holders shall have offered to the Trustee adequate security and indemnity against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee shall have refused to comply with such request for a period of 60 days after receipt by it of such notice, request and offer of indemnity, it being understood and intended that no one or more Holders of Bonds or Parity Obligations shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the pledge created by this Resolution, or to enforce any right under this Resolution, except in the manner therein provided; and that all proceedings at law or in equity to enforce any provision of this Resolution shall be instituted, had and maintained in the manner provided in this Resolution and for the equal benefit of all Holders of the Outstanding Bonds and Parity Obligations, subject only to the provisions of Section 7 .2. 8.7.2 Nothing contained in this Resolution or in the Bonds or Parity Obligations shall affect or impair the obligation of the Authority from the sources provided herein or of the Purchaser and the Project Purchaser, respectively, which is absolute and unconditional, to pay at 63 S00041)9,08 the respective dates of maturity and places therein expressed the principal or Redemption Price of and interest on the Bonds and Parity Obligations to the respective Holders thereof, or affect or impair the right of action, which is also absolute and unconditional, of any Holder to enforce such payment of his Bond or Parity Obligation. 8.8 Remedies 1\ot Exclusive. No remedy by the terms of this Resolution conferred upon or reserved to the Trustee or the Holders is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Resolution or existing at law, including under the Act, or in equity or by statute on or after the date of adoption of this Resolution. 8.9 Effect of\\'aiver and Other Circumstances. No delay or omission of the Trustee or any Holder to exercise any right or power arising upon the happening of an Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or be an acquiescence therein; and every power and remedy given by this Article to the Trustee or to the Holders of Bonds or Parity Obligations may be exercised from time to time and as often as may be deemed expedient by the Trustee or by the Holders of Bonds or Parity Obligations. 8.10 Notice of Default. The Trustee shall promptly mail written notice of ·the occurrence of any Event of Default of which it has actual knowledge to each registered owner of Bonds and Parity Obligations then Outstanding at his address, if any, appearing upon the registry books maintained by the Trustee for the Authority and the issuer of any Parity Obligations, and to the Purchaser. The Trustee shall be deemed to have actual notice of any default under Section 8.1(i) and (ii). 8.11 Consent of Bond Insurer upon Event of Default. Anything in this Resolution to the contrary notwithstanding, upon the occurrence and continuance of an Event of Default, the Bond Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the Holders or the Trustee for the benefit of the Holders under this Resolution, including, without limitation; (i) the right to accelerate the principal of the Bonds as described in Section 8.4, and (ii) the right to annul any declaration of acceleration, and the Bond Insurer shall also be entitled to approve any waivers of Events ofDefault. ARTICLE IX. Concerning the Fiduciaries 9.1 Trustee: Appointment and Acceptance ofDuties. The Trustee shall be appointed by a Supplemental Resolution. The Trustee shall signify its acceptance of the duties and obligations imposed upon it by this Resolution by executing and delivering to the Authority a written acceptance thereof, and by executing such acceptance the Trustee shall be deemed to have accepted such duties and obligations with respect to all the Bonds thereafter to be issued, but only, however, upon the terms and conditions set forth in this Resolution. 64 ~139.08 9.2 Paying Agents: Appointment and Acceptance ofDuties. 9.2.1 The Authority shall appoint one or more Paying Agents for the Bonds of each Series, and may at any time or from time to time appoint one or more other Paying Agents having the qualifications set forth in Section 9.13 for a successor Paying Agent. The Trustee may be appointed a Paying Agent. 9.2.2 Each Paying Agent shall signify its acceptance of the duties and obligations imposed upon it by this Resolution by executing and delivering to the Authority and to the Trustee a written acceptance thereof. 9.2.3 Unless otherwise provided, the principal corporate trust offices of the Paying Agents are designated as the respective offices or agencies of the Authority for the payment of the interest on and principal or Redemption Price of the Bonds. 9.3 Responsibilities of Fiduciaries. 9.3.1 The recitals of fact herein and in the Bonds contained shall be taken as the statements of the Authority and no Fiduciary assumes any responsibility for the correctness of the same. No Fiduciary makes any representations as to the validity or sufficiency of this Resolution or of any Bonds issued thereunder or as to the security afforded by this Resolution or the Power Sales Agreement, and no Fiduciary shall incur any liability in respect thereof The Trustee shall, however, be responsible for its representation contained in its certificate of authentication on the Bonds. No Fiduciary shall be under any responsibility or duty with respect to the application of any moneys paid by such Fiduciary in accordance with the provisions of this Resolution to the Authority or to any other Fiduciary. No Fiduciary shall be under any obligation or duty to perform any act which would involve it in expense or liability or to institute or defend any suit in respect thereof, or to advance any of its own moneys, unless properly indemnified. Subject to the provisions of Subsection 9.3.2, no Fiduciary shall be liable in connection with the performance of its duties hereunder except for its own negligence, misconduct or default. 9.3.2 The Trustee, prior to the occurrence of any Event of Default and after the curing of all Events of Default which may have occurred, undertakes to perform such duties and only such duties are specifically set forth in this Resolution. In case an Event of Default has occurred (which has not been cured), the Trustee shall exercise such of the rights and powers vested in it by this Resolution, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. Any provision of this Resolution relating to action taken or to be taken by the Trustee or to evidence matters upon which the Trustee may rely shall be subject to the provisions of this Section 9.3. 9.3.3 Before taking action under this Resolution or Deed of Trust (except for making all required payments to Holders when due, mandatory redemption or acceleration of maturity of the Bonds and Parity Obligations as required herein), the Trustee may require indemnity satisfactory to it be furnished against all liability, which indemnity shall include 65 500041J9.08 payment of its fees, extraordinary expenses, and reasonable attorney's fees and protection against all liability, except liability which is adjudicated to have resulted from its negligence or willful misconduct in connection with such action. The Trustee shall be under no obligation to institute any suit, to take any proceeding under this Resolution, to enter any appearance or in any way defend any suit in which it may be a defendant, or to take any steps in the execution of the trusts hereby created or in the enforcement of any rights and powers hereunder, until it shall have been satisfied that repayment of all costs and expenses, outlays and counsel fees and other reasonable disbursements in connection therewith, and satisfactory indemnity against all risk and liability, has been provided for. The Trustee's rights to receive compensation, reimbursement and indemnification of money due and owing hereunder shall survive the Trustee's resignation or removal, the payment ofthe Bonds and Parity Obligations and the defeasance of this Resolution. 9.4 Evidence on Which Fiduciaries May Act. 9.4.1 Each Fiduciary, upon receipt of any notice, resolution, request, consent, order, certificate, report, opinion, bond or other paper or document furnished to it pursuant to any provision ofthis Resolution, shall examine such instrument to determine whether it conforms to the requirements of this Resolution and shall be protected in acting upon any such instrument believed by it to be genuine and to have been signed or presented by the proper party or parties. Each Fiduciary may consult with counsel, who may or may not be of counsel to the Authority, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it under this Resolution in good faith and in accordance therewith. 9.4.2 Whenever any Fiduciary shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action under this Resolution, such matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate of an Authorized Officer of the Authority and such certificate shall be full warrant for any action taken or suffered in good faith under the provisions ofthis Resolution upon the faith thereof; but in its discretion the Fiduciary may in lieu thereof accept other evidence of such fact or matter or may require such further or additional evidence as to it may seem reasonable. 9.4.3 Except as otherwise expressly provided in this Resolution, any request, order, notice or other direction required or permitted to be furnished pursuant to any provision thereof by the Authority to any Fiduciary shall be sufficiently executed in the name of the Authority by an Authorized Officer of the Authority. 9.5 Compensation. The Authority shall pay to each Fiduciary from time to time reasonable compensation for all services rendered under this Resolution, and also all reasonable expenses, charges, counsel fees and other disbursements, includ!ng those of its att~rneys, agen~s and employees, incurred in and about the performance of their powers and dutie~ under this Resolution and each Fiduciary shall have a lien ther~for on any and all funds at any time held by it under this Resolution. 66 .500041J9.08 9.6 Certain Permitted Acts. Any Fiduciary may become the owner of any Bonds or Parity Obligations with the same rights it would have if it were not a Fiduciary. To the extent permitted by law, any Fiduciary may act as depository for, and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Holders of Bonds or Parity Obligations or to effect or aid in any reorganization growing out of the enforcement of the Bonds or this Resolution, whether or not any such committee shall represent the Holders of a majority in principal amount of the Bonds and Parity Obligations then Outstanding. 9.7 Resignation ofTrustee. The Trustee may at any time resign and be discharged of the duties and obligations created by this Resolution by giving not less than 60 days' written notice to the Authority, and mailing notice thereof to each Holder, specifying the date when such resignation shall take effect, and such resignation shall take effect upon the day specified in such notice, provided a successor shall have been appointed by the Authority or the Holders as provided in Section 9.9, and has accepted the appointment. 9.8 Removal of Trustee. The Trustee may be removed at any time by an instrument or concurrent instruments in writing, filed with the Trustee, and signed by the Holders of a majority in principal amount of the Bonds and Parity Obligations then Outstanding or their attorneys-in-fact duly authorized, excluding any Bonds and Parity Obligations held by or for -the account of the Authority. The Authority may remove the Trustee at any time except during the existence of an Event of Default, for such cause as shall be determined in the sole discretion of the Authority, by filing with the Trustee an instrument in writing signed by an Authorized Officer of the Authority. 9.9 Appointment of Successor Trustee: Financial Qualifications of Trustee and Successor Trustee. 9.9.1 In case at any time the Trustee shall resign or shall be removed or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or if a receiver, liquidator or conservator of the Trustee, or of its property, shall be appointed, or if any public officer shall take charge or control of the Trustee, or of its property or affairs, a successor may be appointed by the Holders of a majority in principal amount of the Bonds and Parity Obligations then Outstanding, excluding any Bonds and Parity Obligations held by or for the account of the Authority, by an instrument or concurrent instruments in writing signed and acknowledged by such Holders or by their attorneys-in-fact duly authorized and delivered to such successor Trustee, notification thereof being given to the Authority and the predecessor Trustee; provided, nevertheless that unless a successor Trustee shall have been appointed by the Holders as ' aforesaid, the Authority by a duly executed written instrument signed by an Authorized Officer of the Authority shall forthwith appoint a Trustee to fill such vacancy until a successor Trustee shall be appointed by the Holders as authorized in this Section 9.9. The Authority shall mail notice to each Holder of any such appointment made by it within 20 days after such appointment. Any successor Trustee appointed by the Authority shall, immediately and without further act, be superseded by a Trustee appointed by the Holders. 67 mD4139.oa 9.9.2 If in a proper case no appointment of a successor Trustee shall be made pursuant to the foregoing provisions of this Section within 45 days after the Trustee shall have given to the Authority written notice as provided in Section 9. 7 or after a vacancy in the office of the Trustee shall have occurred by reason of its inability to act, removal, or for any reason whatsoever, the Trustee (in the case of its resignation under Section 9. 7) or the Holder of any Bond or Parity Obligation (in any case) may apply to any court of competent jurisdiction to appoint a successor Trustee. Said court may thereupon, after such notice, if any, as such may deem proper, appoint a successor Trustee. 9.9.3 The Trustee appointed under the proviSlons of this Article or any successor to the Trustee shaii be a bank or trust company or national banking association having capital stock and surplus aggregating at least $100,000,000, if there be such a bank or trust company or national banking association willing and able to accept the office on reasonable and customary terms and authorized by law to perform all the duties imposed upon it by this Resolution. 9.10 Transfer of Rights and Property to Successor Trustee. Any successor Trustee appointed under this Resolution shaii execute, acknowledge and deliver to its predecessor Trustee, and also to the Authority, an instrument accepting· such appointment, and thereupon such successor Trustee, without any further act, deed or conveyance, shaii become fully vested with ail moneys, estates, properties, rights, powers, duties and obligations of such predecessor Trustee, with like effect as if originaiiy named as trustee; but the Trustee ceasing to act shaii nevertheless, on the written request of the Authority, or of the successor Trustee, execute, acknowledge and deliver such instrument of conveyance and further assurance and do such other things as may reasonably be required for more fuily and certainly vesting and confirming in such successor Trustee ail the right, title and interest of the predecessor Trustee in and to any property held by it under this Resolution, and shaii pay over, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set forth. Should any deed, conveyance or instrument in writing from the Authority be required by such successor Trustee for more fuily and certainly vesting in and confirming to such successor Trustee any such estates, rights, powers and duties, any and ail such deeds, conveyances and instruments in writing shail, on request, and so far as may be authorized by law, be executed, acknowledged and delivered by the Authority. Any such successor Trustee shall promptly notify the Paying Agents of its appointment as Trustee. 9.11 Merger or Consolidation. Any company into which any Fiduciary may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shaii be a party or any company to which any Fiduciary may seii or transfer all or substantiaiiy all of its corporate trust business, provided such company shail be a bank or trust company organized under the laws of any state of the United States of America or a national banking association and shall be authorized by law to perform all the duties imposed upon it by this Resolution, shall be the successor to such Fiduciary without the execution or filing of any paper or the performance of any further act. 9.12 Adoption of Authentication. In case any of the Bonds contemplated to be issued under this Resolution shall have been authenticated but not delivered, any successor Bond 68 mG-1139.08 Registrar may adopt the certification of authentication of any predecessor Bond Registrar so authenticating such Bonds and deliver such Bonds so authenticated; and in case any of the said Bonds shall not have been authenticated, any successor Bond Registrar may authenticate such Bonds in the name of the predecessor Bond Registrar, or in the name of the successor Bond Registrar, and in all cases such certificate shall have the full force which it is anywhere in said Bonds or in this Resolution provided that the certificate of the Bond Registrar shall have. 9.13 Resignation or Removal of Paying Agent and Appointment of Successor. 9.13.1 Any Paying Agent may at any time resign and be discharged of the duties and obligations created by this Resolution by giving at least 60 day's written notice to the Authority, the Trustee and the other Paying Agents. Any Paying Agent may be removed at any time by an instrument filed with such Paying Agent and the Trustee and signed by an Authorized Officer. Any successor Paying Agent shall be appointed by the Authority with the approval of the Trustee, and shall be a bank or trust company organized under the laws of any state of the United States of America or a national banking association, having capital stock and surplus aggregating at least $25,000,000, and willing and able to accept the office on reasonable and customary terms and authorized by law to perform all the duties imposed upon it by this Resolution. 9.13 .2 In the event of the resignation or removal of any Paying Agent, such Paying Agent shall pay over, assign and deliver any moneys held by it as Paying Agent to its successor, or ifthere be no successor, to the Trustee. In the event that for any reason there shall be a vacancy in the office of any Paying Agent, the Trustee shall act as such Paying Agent. ARTICLE X. Supplemental Resolutions 10.1 Supplemental Resolutions Effective Upon Filing With the Trustee. For any one or more of the following purposes and at any time or from time to time, a Supplemental Resolution of the Authority may be adopted, which, upon the filing with the Trustee of (i) a copy thereof certified by an Authorized Officer of the Authority and (ii) a certificate of the Purchaser stating that such Supplemental Resolution has been approved by the Purchaser shall be fully effective in accordance with its terms: (a) To close this Resolution against, or provide limitations and restrictions in addition to the limitations and restrictions contained in this Resolution on, the authentication and delivery of Bonds or the issuance of other evidences of indebtedness; (b) To add to the covenants and agreements of the Authority in this Resolution, other covenants and agreements to be observed by the Authority which are not contrary to or inconsistent with this Resolution as theretofore in effect; 69 ~04119.118 (c) To add to the limitations and restnct1ons in this Resolution, other limitations and restrictions to be observed by the Authority which are not contrary to or inconsistent with this Resolution as theretofore in effect· ' (d) To authorize Bonds of a Series and, in connection therewith, specify and determine the matters and things referred to in Section 2.2, and also any other matters and things relative to such Bonds which are not contrary to or inconsistent with this Resolution as theretofore in effect, or to amend, modify or rescind any such authorization, specification or determination at any time prior to the first authentication and delivery of such Bonds; (e) To specify and determine matters and things under Section 2.5 relating to the issuance of Parity Obligations which are not contrary to or inconsistent with this Resolution as theretofore in effect; (f) To confirm, as further assurance, any pledge or assignment under, and the subjection to any lien, pledge or assignment created or to be created by, this Resolution, of the Revenues or of any other moneys, securities or funds; (g) To modify any of the provisions of this Resolution in any other respect whatever, provided that (i) such modification shall be, and be expressed to be, effective only after all Bonds of each Series Outstanding at the date of the adoption of such Supplemental Resolution shall cease to be Outstanding, and (ii) such Supplemental Resolution shall be specifically referred to in the next text of all Bonds of any Series authenticated and delivered after the date of the adoption of such Supplemental Resolution and of Bonds issued in exchange or in place thereof; and (h) To appoint the Trustee. 10.2 Supplemental Resolutions Effective Upon Consent of Trustee. For any one or more of the following purposes and at any time from time to time, a Supplemental Resolution may be adopted, which, upon (i) the filing with the Trustee of a copy thereof certified by an Authorized Officer of the Authority, (ii) a certificate of the Purchaser (unless the Purchaser is in default under the Power Sales Agreement or the Project Purchaser is in default under the Project Sale Agreement) stating that such Supplemental Resolution has been approved by the Purchaser, and (iii) the filing with the Authority of an instrument in writing made by the Trustee consenting thereto, shall be fully effective in accordance with its terms: (a) To cure any ambiguity, supply any omission, or cure or correct any defect or inconsistent provision in this Resolution; or (b) To insert such provisions clarifying matters or questions arising under this Resolution as are necessary or desirable and are not contrary to or inconsistent with this Resolution as ther:etofore in effect. 70 .5()00.11 )9.08 10.3 Supplemental Resolutions Effective With Consent of Holders. At any time or from time to time, a Supplemental Resolution may be adopted subject to consent by Holders in accordance with and subject to the provisions of Article XI, which Supplemental Resolution, upon the filing with the Trustee of (i) a copy thereof certified by an Authorized Officer of the Authority and (ii) a certificate of the Purchaser (unless the Purchaser is in default under the Power Sales Agreement or the Project Purchaser is in default under the Project Sale Agreement) stating that such Supplemental Resolution has been approved by the Purchaser, and upon compliance with the provisions of said Article XI, shall become fully effective in accordance with its terms as provided in said Article XI. 10.4 General Provisions. 1 0.4.1 The Resolution shall not be modified or amended in any respect except as provided in and in accordance with and subject to the provisions of this Article X and Article XI. Nothing in this Article X or Article XI contained shall affect or limit the right or obligation of the Authority to adopt, make, do, execute, acknowledge or deliver any resolution, act or other instrument pursuant to the provisions of Section 7.4 or the right or obligation of the Authority to execute and deliver to any Fiduciary any instrument which elsewhere in this Resolution it is provided shall be delivered to said Fiduciary. 10.4.2 Any Supplemental Resolution referred to and permitted or authorized by Section 10.1 and 10.2 may be adopted by the Authority without the consent of any of the Holders, but shall become effective only on the conditions, to the extent and at the time provided in said Sections, respectively. The copy of every Supplemental Resolution when filed with the Trustee shall be accompanied by a Counsel's Opinion stating that such Supplemental Resolution has been duly and lawfully adopted in accordance with the provisions of this Resolution, is authorized or permitted by this Resolution, and is valid and binding upon the Authority and enforceable in accordance with its terms. 1 0.4.3 The Trustee is hereby authorized to accept the delivery of a certified copy of any Supplemental Resolution referred to and permitted or authorized by Sections 10.1, 10.2 or 10.3 and to make all further agreements and stipulations which may be therein contained, and the Trustee, in taking such action, shall be fully protected in relying on a Counsel's Opinion that such Supplemental Resolution is authorized or permitted by the provisions of this Resolution. 10.4.4 No Supplemental Resolution shall change or modify any of the rights or obligations of any Fiduciary without its written assent thereto. 10.5 Amendments Prior to Delivery of Bonds. Amendments to this Resolution and to the First Series Resolution, not substantial in nature but required in the Counsel's Opinion to effectuate delivery of the Bonds in accordance with the Bond Purchase Agreement or the Official Statement issued in connection with the Bonds, may be effected by certificate of the Executive Director filed with the Trustee prior to the delivery of any Bonds. The certificate shall state the amendment whether the same is in the nature of a clerical correction or consists of the completion 'or an omission, or otherwise, and from and after the delivery of the certificate this 71 ~04139.08 Resolution or the First Series Resolution, as the case may be, shall be considered as if originally adopted with such change. ARTICLE XI. Amendments 11.1 Mailing. Any provision in this Article for the mailing of a notice or other paper to Holders shall be fully complied with if it is mailed postage prepaid only to each registered owner of Bonds or Parity Obligations then Outstanding at his address, if any, appearing upon the Bond Register and each Fiduciary. 11.2 Powers of Amendment. Any modification or amendment of this Resolution and of the rights and obligations of the Authority and ofHolders of the Bonds and Parity Obligations thereunder, in any particular, may be made by a Supplemental Resolution, and with the written consent given as provided in Section 11.3 of the Holders of at least a majority in principal amount of the Bonds and Parity Obligations Outstanding at the time such consent is given, and (i) in case less than all ofthe several Series of Bonds and Parity Obligations then Outstanding are affected by the modification or amendment, of the Holders -of at least a majority in principal amount of the Bonds and Parity Obligations of each Series so affected and Outstanding at·the time such consent is given, and (ii) in case the modification or amendment changes the terms of any Sinking Fund Installment, of the Holders of at least a majority in principal amount of the Bonds and Parity Obligations of the particular Series and maturity entitled to such Sinking Fund Installment and Outstanding at the time such consent is given; provided, however, that if such modification or amendment will, by its terms, not take effect so long as any Bonds or Parity Obligations of any specified like Series and maturity remain Outstanding the consent of the Holders of such Bonds or Parity Obligations shall not be required and such Bonds and Parity Obligations shall not be deemed to be Outstanding for the purpose of any calculation of Outstanding Bonds under this Section. No such modifications or amendment shall permit a change in the terms of redemption or maturity of the principal of any Outstanding Bond or Parity Obligation or any installment of interest thereon or a reduction in the principal amount or the Redemption Price thereof or in the rate of interest thereon without the consent of the Holder of such Bond or Parity Obligation, or shall reduce the percentages or otherwise affect the classes of Bonds and Parity Obligations the consent of the Holders of which is required to effect any such modification or amendment, or shall change or modify any of the rights or obligations of any Fiduciary without its written assent thereto. For the purposes of this Section, a Series shall be deemed to be affected by a modification or amendment of this Resolution if the same adversely affects or diminishes the rights of the Holders of Bonds or Parity Obligations of such Series. The Trustee may in its discretion determine whether or not in accordance with the foregoing powers of amendment Bonds or Parity Obligations of any particular Series or maturity would be affected by any modification or amendment of this Resolution and any such determination shall be binding and conclusive on the Authority, the issuers of Parity Obligations and all Holders of Bonds and Parity Obligations. 11.3 Consent of Holders. The Authority may at any time adopt a Supplemental Resolution making a modification or amendment permitted by the provisions of Section 11.2 to 72 50004139.08 take effect when and as provided in this Section, provided that such modification or amendment receives the written consent of the Purchaser. A copy of such Supplemental Resolution (or brief summary thereof or reference thereto in form provided by the Authority to the Trustee), together with a request to Holders for their consent thereto in form satisfactory to the Trustee, shall be mailed by the Authority to Holders (but failure to mail such copy and request shall not affect the validity of the Supplemental Resolution when consented to as in this Section provided). Such Supplemental Resolution shall not be effective until (i) there shall have been filed with the Trustee (a) the written consents of Holders of the percentages of Outstanding Bonds and Parity Obligations specified in Section 11.2 and (b) a Counsel's Opinion stating that such Supplemental Resolution has been duly and lawfully adopted and filed by the Authority in accordance with the provisions of this Resolution, is authorized or permitted by this Resolution, and is valid and binding upon the Authority, the Fiduciaries and the Holders of Bonds and Parity Obligations and enforceable in accordance with its terms, and (ii) a notice shall have been mailed as hereinafter in this Section 11.3 provided. Each such consent shall be effective only if accompanied by proof of the holding, at the date of such consent, of the Bonds and Parity Obligations with respect to which such consent is given, which proof shall be such as is permitted by Section 12.2. A certificate or certificates executed by the Trustee and filed with the Authority stating that it has examined such proof and that such proof is sufficient in accordance with Section 12.2 shall be conclusive that the consents have been given by the Holders of Bonds and Parity Obligations described in such certificate or certificates of the Trustee. Any such consent shall be binding upon the Holders of Bonds and Parity Obligations signing such consent and, anything in Section 12.2 to the contrary notwithstanding, upon any subsequent Holder of such Bonds and Parity Obligations and of any Bonds and Parity Obligations issued in exchange (whether or not such subsequent Holder has notice thereof) provided however that any consent may be revoked in writing by any Holder of such Bonds by filing with the Trustee, prior to the time when the written statement of the Trustee hereinafter in this Section 11.3 provided for is filed, such revocation. The fact that a consent has not been revoked may likewise be proved by a certificate of the Trustee filed with the Authority to the effect that no revocation thereof is on file with the Trustee. At any time after the Holders of the required percentages of Bonds and Parity Obligations shall have filed their consents to the Supplemental Resolution, the Trustee shall make and file with the Authority a written statement that the Holders of such required percentages of Bonds and Parity Obligations have filed such consents. Such written statements shall be conclusive that such consents have been filed. At any time thereafter, notice stating in substance that the Supplemental Resolution (which may be referred to as a Supplemental Resolution adopted by the Authority on a stated date, a copy of which is on file with the Trustee) has been consented to by the Holders of the required percentages of Bonds and Parity Obligations, and will be effective as provided in this Section 11.3, may be given to Holders by the Authority by mailing such notice to Holders (but failure to mail such notice shall not prevent such Supplemental Resolution from becoming effective and binding as in this Section 11.3 provided). The Authority shall file with the Trustee proof of the mailing of such notice to Holders. A record, consisting of the certificates or statements required or permitted by this Section 11.3 to be made by the Trustee, shall be proof of the matters therein stated. Such Supplemental Resolution making such amendment or modification shall be deemed conclusively binding upon the Authority, the Fiduciaries and the Holders of all Bonds and Parity Obligations at the expiration of 40 days after the filing with the Trustee of the proof of the maili.ng. o~ s~ch last mentioned notice, except in the event of a final decree of a court of competent JUnsdictton 73 300041)9.08 l I setting aside such Supplemental Resolution in a legal action or equitable proceeding for such purpose commenced within such 40 day period; provided, however, that any Fiduciary and the Authority during such 40 day period and any such further period during which any such action or proceeding may be pending shall be entitled in their absolute discretion to take such action, or to refrain from taking such action, with respect to such Supplemental Resolution as they may deem expedient. 11.4 Modifications by Unanimous Consent. The Resolution and the rights and obligations of the Authority and of the Holders of Bonds and Parity Obligations thereunder may be modified or amended with the written consent of the Purchaser in any respect by a Supplemental Resolution effecting such modification or amendment and the consents of the Holders of all the Bonds and Parity Obligations then Outstanding, each such consent to be accompanied by proof of the holding at the date of such consent of the Bonds and Parity Obligations with respect to which consent is given. Such Supplemental Resolution shall take effect upon the fit ing (a) with the Trustee of (i) a copy thereof certified by an Authorized Officer of the Authority, (ii) such consents and accompanying proofs and (iii) the Counsel's Opinion referred to in Section 11.3 and (b) with the Authority and the Trustee of the Trustee's written statement that the consents of the Holders of all Outstanding Bonds and Parity Obligations have been filed with it. No mailing of any Supplemental Resolution (or reference thereto or summary thereof) or of any request or notice shall be required. No such modification or amendment, however, shall change or modify any of the rights or obligations of any Fiduciary without its written assent thereto. 11.5 Exclusion of Certain Bonds and Parity Obligations. Bonds owned by or for the account of the Authority' and Parity Obligations owned by or for the account of the issuer of such Parity Obligations shall not be deemed Outstanding for the purpose of consent or other action or any calculation of Outstanding Bonds and Parity Obligations provided for in this Article XI, and the Authority and the issuer of such Parity Obligations shall not be entitled with respect to such Bonds or Parity Obligations to give any consent or take any other action provided for in this Article. At the time of any consent or other action taken under this Article, the Authority and the issuer of such Parity Obligations shall furnish the Trustee a certificate of an Authorized Officer of the Authority upon which the Trustee may rely, describing all Bonds and Parity Obligations so to be excluded. 11.6 Notation on Bonds and Parity Obligations. Bonds and Parity Obligations authenticated and delivered after the effective date of any action taken as provided in Article X or Article XI may, and if the Bond Registrar so determines, shall, bear a notation by endorsement or otherwise in form approved by the Authority or the issuer of such Parity Obligations and the Bond Registrar as to such action, and in that case upon demand of the Holder of any Bond or Parity Obligation Outstanding at such effective date and presentation of his Bond or Parity Obligation for the purpose at the principal corporate trust office of the Bond Registrar or upon any transfer or exchange of any Bond or Parity Obligation Outstanding at such effective date, suitable notation shall be made on such Bond or Parity Obligation or upon any Bond or Parity Obligation issued upon any such transfer or exchange by the Bond Registrar as to any such action. If the Authority or issuer of such Parity Obligations or the Bond Registrar shaH so determine, new Bonds or Parity Obligations so modifted as in the opinion of the Bond Registrar 74 :!00041 )9. 011 l l and the Authority or the issuer of such Parity Obligations to conform to such action shall be prepared, authenticated and delivered, and upon demand of the Holder any Bond or Parity Obligation then Outstanding shall be exchanged, without cost to such Holder, for Bonds or Parity Obligation of the same Series and maturity then Outstanding, upon surrender of such Bonds or Parity Obligations. ARTICLE XII. Miscellaneous 12.1 Defeasance. 12.1.1 If the Authority and the issuers of Parity Obligations shall pay or cause to be paid, or there shall otherwise be paid, to the Holders of all Bonds and Parity Obligations the principal or Redemption Price, if applicable, and interest due or to become due thereon, at the time and in the manner stipulated therein and in this Resolution and the Parity Obligation Instruments, then the pledge and assignment of any Revenues and other moneys and securities pledged under this Resolution and the security interests granted hereby, and all covenants, agreements and other obligations of the Authority and the issuers of ~arity Obligations to the Holders, shall thereupon cease, terminate and become void and be discharged and satisfied, and the Deed of Trust shall be reconveyed of record and a termination statement shall be filed with respect to the Security Agreement. In such event, the Trustee shall cause an accounting for such period or periods as shall be requested by the Authority and the issuers of Parity Obligations to be prepared and filed with the Authority and the issuers of Parity Obligations and, upon the request of the Authority and the issuers of Parity Obligations shall execute and deliver to the Authority and the issuers of Parity Obligations all such instruments as may be desirable to evidence such discharge and satisfaction, and the Fiduciaries shall pay over or deliver to the Authority and the issuers of Parity Obligations as their respective interests may appear all moneys or securities held by them pursuant to this Resolution which are not required for the payment of principal or Redemption Price, if applicable, and interest on Bonds and Parity Obligations, which moneys and securities shall be used first to pay any amounts owed to the Authority or any issuer of Parity Obligations and the remaining balance shall be paid to the Purchaser or the Project Purchaser as their interests may appear. If the Authority or an issuer of Parity Obligations shall pay or cause to be paid or there shall otherwise be paid, to the Holders of all Outstanding Bonds or Parity Obligations of a particular Series, or of a particular maturity within a Series, the principal or Redemption Price, if applicable, and interest due or to become due thereon, at the times and in the manner stipulated therein and in this Resolution or the Parity Obligation Instrument, such Bonds or Parity Obligations shall cease to be entitled to any lien, benefit or security under this Resolution, and all covenants, agreements and obligations of the Authority or the issuer of such Parity Obligations to the Holders of such Bonds or Parity Obligations shall thereupon cease, terminate and become void and be discharged and satisfied. 12.1.2 Bonds or Parity Obligations or interest installments for the payment or redemption of which moneys shall have been set aside and shall be held in trust by the Paying Agents (through deposit by the Authority or the issuer of such Parity Obligations of funds for 75 $0004119.08 l I such payment or Redemption or otherwise) at the maturity or redemption date thereof shall be deemed to have been paid within the meaning and with the effect expressed in Subsection 12.1.1. Prior to the maturity or redemption date thereof, Bonds or Parity Obligations shall be deemed to have been paid within the meaning and with the effect expressed in Subsection 12.1.1 if (a) in case any of such Bonds or Parity Obligations are to be redeemed on any date prior to their maturity, the Authority or the issuer of such Parity Obligations shall have given to the Trustee irrevocable instructions accepted in writing by the Trustee to mail as provided in Article IV with respect to Bonds and as provided in the Parity Obligation Instrument with respect to Parity Obligations notice of redemption of such Bonds or Parity Obligations on such date, (b) there shall have been deposited with the Trustee either moneys (including moneys withdrawn and deposited pursuant to Sections 5.6.4 and 5.7.4) in an amount which shall be sufficient, or Defeasance Obligations (including any Defeasance Obligations issued or held in book-entry form on the books of the Department of the Treasury of the United States of America) which shall not contain provisions permitting the redemption thereof other than at the option of the Holder the principal of and the interest on which when due will provide moneys which, together with the moneys, if any, deposited with the Trustee at the same time, shall be sufficient to pay when due the principal or Redemption Price, if applicable, and interest due and to become due on such Bonds or Parity Obligations on or prior to the redemption date or maturity date thereof, as the case may be, and (c) the Authority or the issuer of such Parity Obligations shall have given the Trustee in form satisfactory to it irrevocable instructions to mail, as soon as practicable, a notice to the Holders of such Bonds or Parity Obligations that the deposit required by (b) above has been made with the Trustee and that such Bonds or Parity Obligations are deemed to have been paid in accordance with this Section 12.1 and stating such maturity or redemption date upon which moneys are to be available for the payment of the principal or Redemption Price, if applicable, and interest on such Bonds or Parity Obligations. Neither Defeasance Obligations nor moneys deposited with the Trustee pursuant to this Section 12.1 nor principal or interest payments on any such Defeasance Obligations shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal or Redemption Price, if applicable, and interest on such Bonds or Parity Obligations; provided that any cash received from such principal or interest payments on such Defeasance Obligations deposited with the Trustee, (A) to the extent such cash will not be required at any time for such purpose, after verification by an Accountant, shall be paid over to the Authority or the issuer of such Parity Obligations as received by the Trustee, free and clear of any trust, lien, pledge or assignment securing such Bonds or Parity Obligations or otherwise existing under this Resolution, and (B) to the extent such cash will be required for such purpose at a later date, shall, to the extent practicable, be reinvested in Defeasance Obligations maturing at times and in amounts sufficient to pay when due the principal or Redemption Price, if applicable, and interest to become due on such Bonds or Parity Obligations, on or prior to such redemption date or maturity date thereof, as the case may be, and interest earned from such reinvestment shall be paid over to the Authority or the issuer of such Parity Obligations as received by the Trustee, free and clear of any trust, lien, pledge or assignment securing such Bonds or Parity Obligations or otherwise existing under this Resolution. For the purposes of this Section 12.1, Defeasance Obligations shall mean and include only such Defeasance Obligations which shall not be subject to redemption prior to their maturity other than at the option of the Holder thereof. 76 $000<11)9.08 12.1.3 Anything in this Resolution to the contrary notwithstanding, any moneys held by a Fiduciary in trust for the payment and discharge of any of the Bonds or Parity Obligations which remain unclaimed for six years after the date when such Bonds or Parity Obligations have become due and payable, either at their stated maturity dates or by call for earlier redemption, if such moneys were held by the Fiduciary at such date, or for six years after the date of deposit of such moneys if deposited with the Fiduciary after the said date when such Bonds or Parity Obligations became due and payable, shall, at the written request of the Authority or the issuer of such Parity Obligations, respectively, be repaid by the Fiduciary to the Authority for payment into the Revenue Fund to be used for the purposes thereof or to the issuer of such Parity Obligations for application in accordance with the Parity Obligation Instrument, and the Fiduciary shall thereupon be released and discharged with respect thereto and the Holders shall look only to the Authority or the issuer of such Parity Obligations for the payment of such Bonds or Parity Obligations. 12.1.4 Not\.Vithstanding anything in this Resolution to the contrary, in the event that the principal of and/or interest due on any Bonds or Parity Obligations shall be paid by a Bond Insurer pursuant to a Bond Insurance Policy, the Bonds or Parity Obligations so paid shall remain Outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid by the Authority, and the assignment and pledge of the Revenues and other funds and assets pledged under this Resolution, and all covenants, agreements and other obligations of the Authority to the Holders, shall continue to exist and shall run to the benefit of the Bond Insurer, and the Bond Insurer shall be subrogated to the rights of such Holders. 12.2 Evidence of Signatures of Holders and Ownership of Bonds and Parity Obligations. 12.2.1 Any request, consent, revocation of consent or other instrument which this Resolution may require or permit to be signed and executed by the Holders may be in one or more instruments of similar tenor, and shall be signed or executed by such Holders in person or by their attorneys appointed in writing. Proof of the execution of any such instrument, or of any instrument appointing any such attorney, shall be sufficient for any purpose of this Resolution (except as otherwise therein expressly provided) if made in the following manner, or in any other manner satisfactory to the Trustee, which may nevertheless in its discretion require further and other proof in cases where it deems the same desirable: The fact and date of the execution by any Holder or his attorney of such instruments may be proved by a guarantee of the signature thereon by a bank or trust company or by the certificate of any notary public or other officer authorized to take acknowledgements of deeds, that the person signing such request or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such notary public or other officer. Where such execution is by an officer of a corporation or partnership, such signature guarantee, certificate or affidavit shall also constitute sufficient proof of his authority. 12.2.2 The ownership of Bonds and Parity Obligations and the amount, numbers and other identification, and date of holding the same shall be proved by the registry books. 77 5()004139.08 12.2.3 Any request or consent by the owner of any Bond or Parity Obligation shall bind all future owners of such Bond or Parity Obligation in respect of anything done or suffered to be done by the Authority or any Fiduciary in accordance therewith. 12.3 Moneys Held for Particular Bonds or Parity Obligations. The amounts held by any Fiduciary for the payment of the interest, principal or Redemption Price due on any date with respect to particular Bonds or Parity Obligations shall, on and after such date and pending such payment, be set aside on its books and held in trust by it for the Holders of the Bonds or Parity Obligations entitled thereto. 12.4 Preservation and Inspection of Documents. All documents received by a Fiduciary under the provisions of this Resolution shall be retained in its possession and shall be subject at all reasonable times during regular hours with reasonable notice to the inspection of the Authority, any other Fiduciary, and any Holder and their agents and their representatives, any ofwhom may make copies thereof. 12.5 No Recourse on the Bonds. No recourse shall be had for the payment of the principal of or interest on the Bonds or for any claim based thereon or on this Resolution against any member or officer of the Authority or any person executing the Bonds. 12.6 Severabilitv of Invalid Provisions. If any one or more of the covenants provided in this Resolution on the part of the Authority or any Fiduciary to be performed should be contrary to law, then such covenant or covenants or agreement or agreements shall be deemed severable from the remaining covenants and agreements, and shall in no way affect the validity of the other provisions of this Resolution. 12.7 Holidays. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in this Resolution, shall be a legal holiday or a day on which banking institutions in the city in which is located the principal office of the Trustee are authorized by law to remain closed, such payment may be made or act performed or right exercised on the next succeeding day not a legal holiday or a day on which such banking institutions are not authorized by law to remain closed, with the same force and effect as if done on the nominal date provided in this Resolution. 12.8 Notices. It shall be sufficient service of any notice, request, complaint, demand or other paper on the Authority or the Trustee, as the case may be, if the same shall be duly mailed by registered or certified mail and addressed to it at Alaska Industrial Development and Export Authority, 480 West Tudor Road, Anchorage, Alaska 99503-6690, Attention: Executive Director, or to such other address as the Authority may from time to time file with the Trustee (in respect of the Authority) or at U.S. Bank Trust National Association, 601 Union Street, Suite 2120, Seattle, Washington 98101, Attention: Diana Woodard, or at such other address as the Trustee may from time to time file with the Authority (in respect of the Trustee). 78 50004139.08 ARTICLE XIII. Bond Form and Effective Date 13.1 Form ofBonds and Bond Registrar's Certificate of Authentication. Subject to the provisions of this Resolution, the form of the Bonds of each Series and the Bond Registrar's Certificate of Authentication, shall be substantially in the form of Exhibit A attached hereto, with such variations, omissions and insertions with respect to capital appreciation bonds and otherwise as are required or permitted by this Resolution and as fixed by or pursuant to Supplemental Resolution. 13.2 Effective Date. This Snettisham Power Revenue Bond Resolution shall take effect immediately. Dated at Anchorage, Alaska, this 22"d day of July, 1998. (SEAL) ATTEST: ·-. '-·-· .-~ ----- 79 ~04139.08 EXHffiiTA BOND FORM ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY Power Revenue Bond, __ Series (Snettisham Hydroelectric Project) ____ %Due January I, __ $ _____ _ No. ___ _ ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY (herein called the "Authority"), a public corporation of the State of Alaska organized and existing under and by virtue of the laws of the State of Alaska, acknowledges itself indebted to, and for value received hereby promises to pay to or registered assigns, on the first day of the principal sum of ________ Dollars in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts, upon presentation and surrender of this Bond at the principal corporate trust office of -----:----------(such bank and any successor thereto being referred to herein as the "Paying Agents"), at the option of the registered owner hereof, and to pay to the registered owner the interest on such principal sum in like coin or currency from the date hereof, at the rate per annum specified above, payable on the first days of and in each year, until the Authority's obligation with respect to the payment of such principal sum shall be discharged by check or draft mailed to the registered owner of record hereof as of the 15th day of the calendar month next preceding such interest payment date at the address of such owner appearing on the Bond Register maintained at the principal corporate trust office of --------m as Bond Registrar. This Bond is one of a duly authorized issue of bonds of the Authority designated as its "Power Revenue Bonds, Series (Snettisham Hydroelectric Project)" (herein called the " Series Bonds"), in the aggregate principal amount of $ issued pursuant to the (herein called the "Act"), and under and pursuant to a resolution of the Authority, adopted entitled "Snettisham Power Revenue Bond Resolution" and a supplemental resolution of the Authority authorizing the ---Series Bonds (such resolutions being herein called the "Resolution"). As provided in the Resolution, the Bonds are special and limited obligations of the Authority, which are secured as to payment of the principal and redemption price thereof, and interest thereon, in accordance with their terms and the provisions of the Resolution by (i) the proceeds of the sale of the Bonds, (ii) the Revenues (as defined in the Resolution), (iii) all funds established by the Resolution including the investments, if any, thereof, subject only to the provisions of the Resolution permitting the application thereof for the purposes and on the terms and conditions set forth in the Resolution; and (iv) the Deed of Trust with respect to the Project. I !500~139.08 Copies of the Resolution are on file at the office of the Authority and at the principal corporate trust office of U.S. Bank Trust National Association as Trustee under the Resolution, or its successor as Trustee (herein called the "Trustee"), and reference to the Resolution and any and all supplements thereto and modifications and amendments thereof and to the Act is made for a description of the pledge and assignment and covenants securing the Bonds, the nature, extent and manner of enforcement of such pledge and assignment, the rights and remedies of the registered owners of the bonds with respect thereto, the limitations on such rights and remedies and the terms and conditions upon which the Bonds are issued and may be issued thereunder. As provided in the Resolution, Bonds of the Authority may be issued from time to time pursuant to supplemental resolutions in one or more series, in various principal amounts, may mature at different times, may bear interest at different rates and may otherwise vary as provided in the Resolution. The aggregate principal amount of Bonds which may be issued under the Resolution is not limited except as provided in the Resolution, and all Bonds issued and to be issued under the Resolution are and will be equally secured by the pledge and assignment and covenants made therein, except an otherwise expressly provided or permitted in the Resolution. To the extent and in the manner permitted by the terms of the Resolution, the provisions of the Resolution, or any resolution amendatory thereof or supplemental thereto, may be modified or amended by the Authority, with the written consent of the owners of at least a majority in principal amount of the Bonds then outstanding under the Resolution, and, in case less than all of the Series of Bonds would be affected thereby, with such consent of at least a majority in principal amount of the bonds of each Series so affected then outstanding under the Resolution, and, in case such modification or amendment would change the terms of any sinking fund installment, with such consent of at least a majority in principal amount of the bonds of the particular Series and maturity entitled to such sinking fund installment then outstanding; provided, however, that, if such modification or amendment will, by its terms, not take effect so long as any Bonds of any specified like Series and maturity remain outstanding under the Resolution, the consent of the owners of such Bonds shall not be required and such bonds shall not be deemed to be outstanding for the purpose of the calculation of outstanding Bonds. No such modification or amendment shall permit a change in the terms of redemption or maturity of the principal of any outstanding Bond or of any installment of interest thereon or a reduction in the principal amount or redemption price thereof or in the rate of interest thereon without the consent of the owner of such Bond, or shall reduce the percentages or otherwise affect the classes of Bonds the consent of the owners of which is required to effect any such modification or amendment, or shall change or modify any of the rights or obligations of the Trustee or of any Paying Agent without its written assent thereto. This Bond is transferable as provided in the Resolution, only upon the Bond Register, by the registered owner hereof in person, or by his duly authorized attorney, upon surrender of this Bond together with a written instrument of transfer satisfactory to the Trustee duly executed by the registered owner or his duly authorized attorney, and thereupon a new registered Bond or Bonds and in the same aggregate principal amounts, shall be issued to the transferee in exchange theref~r as provided in the Resolution, and upon payment of the charges therein prescribed. The Authority, the Trustee, the Bond Registrar and any Paying Agent may deem and treat the p7r~on in whose name this Bond is registered as the absolute owner hereof for the purpose of recetvmg 2 j00041)9.011 payment of, or on account of, the principal or redemption price hereof and interest due hereon and for all other purposes. This Bond and the Series Bonds are subject to optional, extraordinary optional, sinking fund installment and mandatory redemption prior to maturity on the dates and subject to the terms of the Resolution. If less than all the Bonds of like maturity are to be redeemed, the particular bonds to be redeemed shall be selected by lot by the Bond Registrar. This Bond and the Bonds of this issue are payable upon redemption at the above- mentioned offices of the Paying Agents. Notice of redemption, setting forth the place of payment, shall be mailed by first class mail to each registered owner not less than 30 days nor more than 60 days prior to the redemption date, all in the manner and upon the terms and conditions set forth in the Resolution. If notice of redemption shall have been given as aforesaid, the Bonds or portions thereof specified in said notice shall become due and payable on the redemption date therein fixed, and if, on the redemption date, moneys for the redemption of all the Bonds and portions thereof to be redeemed, together with interest to the redemption date, shall be available for such payment on said date, then from and after the redemption date interest on such Bonds or portions thereof so called for redemption shall cease to accrue and be payable. Neither the State of Alaska nor any political subdivision thereof, other than the Authority but only to the extent of Revenues available therefor, nor any member of the Authority nor the Purchaser (as defined in the Resolution) is obligated to pay the principal, Redemption Price, if any, or interest on this Bond and the issue of which it is one and neither the faith and credit nor the taxing power of the State of Alaska or any political subdivision thereof is pledged to the payment of the principal of, Redemption Price, if any, or interest on this Bond or the Bonds of this issue. It is hereby certified and recited that all conditions, acts and things required by law and the Resolution to exist, to have happened and to have been performed precedent to and in the issuance of this Bond, exist, have happened and have been performed and that the __ _ Series Bonds complies in all respects with the applicable laws of the State of Alaska, including, particularly, the Act and is within every debt and other limit prescribed by said laws of the State of Alaska. This Bond shall not be entitled to any benefit under the Resolution or be valid or become obligatory for any purpose until this Bond shall have been authenticated by the execution by the Bond Registrar of the Bond Registrar's Certificate of Authentication hereon. IN WITNESS WHEREOF, ALASKA INDUSTRIAL DEVELOP:MENT AND EXPORT AUTHORITY has caused this Bond to be signed in its name and on its behalf by the facsimile signature of its Chairman or its Vice Chairman, and its corporate seal (or facsimile thereof) to be hereunto affixed, imprinted, engraved or otherwise reproduced and attested by the facsimile signature of its Secretary or its Assistant Secretary. 3 .50004139.08 DATED: __________ _ ATTEST: ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY By __________________________ __ (Vice) Chairman (Assistant) Secretary [FORM OF CERTIFICATE OF AUTHENTICATION ON ALL BONDS] BOND REGISTRAR'S CERTIFICATE OF AUTHENTICATION This Bond is one of the Power Revenue Bonds, Series (Snettisham Hydroelectric Project), delivered pursuant to the within mentioned Resolution. Bond Registrar By __________________________ __ Authorized Officer 4 $0004139.08 EXHIDITB FORM OF REQUISITION ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY PROJECT FUND REQUISITION SNEITISHAM HYDROELECTRIC PROJECT Date: -------- Requisition No. ___ _ Amount: ------ To: U.S. Bank Trust National Association, as Trustee As required by Subsection 5.3.4 of Resolution No. G98-09, Snettisham Power Revenue Bond Resolution, you are hereby directed by this requisition to make the following payment from the Project Fund: (A} By [wire transfer] to: (B) To the payee to reimburse qualifying amounts paid to date for Costs of Issuance or Costs of Acquisition and Construction. This requisition is for an amount that is due and is a proper Cost of Issuance or Cost of Acquisition and Construction, which has not been the basis for any previous disbursement. Additionally, the services have been performed, or the property, materials, equipment or other work covered by the requisition have been incorporated into the Project. [If the requisition is to pay the purchase price of the Project: All conditions to the purchase by the Authority of the Project pursuant to the Purchase Agreement have been satisfied.] Authorized Officer 5 50()1).4!)9.08 50004146.07 ExhibitD OPTION AGREEMENT D-1 141002 08/17/98 16:22 FAX ... ·------........ ·~--...... ~··--·-··-·,.. .. ---.. ··--·~-"""'-·····--~.;....,..~ JUNEAU RECORDING PISTRICI SNETTISHAM OPTION AGREEMENT COP.Y TillS AGREEMENT is dated August 18, 1998, by the ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY, a public corporation of the State of Alaska whose address is 480 West Tudor Road, Anchorage, Alaska 99503 (the "Authority''), and SNEmSHAM ELECTRIC COMPANY, an Alaska corporation whose address is 5601 Tonsgard Court, Juneau, Alaska 99801 ("Affiliate''), and approved by ALASKA ELECTRIC LIGHT AND POWER COMPANY, an Alaska corporation whose address is 5601 Tonsgard Court, Juneau, Alaska 99801 (the "Power Purchaser"). A. Pursuant to the Alaska Power Adnrlnistration Asset Sale and Termination Act, the United States Department of Energy, Alaska Power Administration ("USDOE'') is authorized to sell to the Authority the Snettisham hydroelectric project (the "Project"). The Authority ha! entered into an agreement with USDOE dated February 10, 1989, together with amendments thereto, expressing the terms and conditions for the purchase and sale of the Project. · B. Pursuant to its Snettisham Power Revenue Bond Resolution, Resolution No. G98-09 as supplemented by Resolution No. 098-10, each adopted on July 22, 1998 (together and as hereafter amended, the "Resolution''), the Authority has authorized the issuance of its Power Revenue Bonds, First Series (Snettisham Hydroelectric Project) (the "First Series Bonds''), in the pri.ticipal amount of $100,000,000 to finance the Costs of Acquisition and Construction of the Project and certain related costs and expenses. C. Pursuant to that certain Agreement for the Sale and Purchase of the Electric Capability of the Snettisham Hydroelectric Project of even date herewith between the Authority and the Power Purchaser (and as hereafter amended, the "Power Sales Agreement''), the Authority has agreed to sell, and the Power Purchaser bas agreed to buy, all ofthC Capability of the Project as defined in the Power Sales Agreement 'Ib.e Power Sales Agreement, among other things, secures the payment of debt service on all Bonds and Parity Obligations issued to finance the Costs of Acquisition and Construction of the Project and any Capital Improvements (as such terms are defined in the Rrsolution) and bas been collaterally assigned to the Trustee as security for payment of such Bonds and Parity Obligations. D. Both the Power Purchaser and Affiliate are wholly owned subsidiaries under tbe common control of Alaska Energy and Resources Company, an Alaska corporation, and the Authority desires, subject to the requirements of the Resolution and the tmms and conditions of this Agreement, to grant to AffiUate an option to purchase the Project at any time after five (S) years after the issue date of the First Series Bonds. 08117/98 16:22 FAX COPY E. The parties intend that a sale of the Project to Affiliate pursuant to this Agreement shall not, by itself, constitute a default under, or require mandatory redemption of, or result in a change in the payment terms and conditions of Bonds and Parity Obligations then Outstanding or in a change in the payment exPectations of the Holders of such Bonds and Parity Obligations, and that such Bonds and Parity Obligations shall cont;inue to be subject to redemption (including redemptions pursuant to any defeasance plan pursuant to this Agreement) only in accordance with their terms. F. In consideration of the Authority's execution and delivery of this Agreement, Affiliate has caused Alaska Energy and Resources Company to grant to the Authority a security interest in all of the outstanding common stock of Affiliate by executing and delivering to the Authority that certain Pledge Agreement dated as of July 15, 1998. G. Any capitalized term used and not otherwise defined in this Agreement has the meaning given such term in the Power Sales Agreement or the Resolution. NOW, THEREFORE, the parties agree as follows: Section 1. Option to Purchase Project Prior to End of Term · (a) Affiliate's Option Prior to End of Term. At any time after five (5) years from 141003 the Effective Date until the end of the Term of the Power Sales Agreement, Affiliate shall have an option to purchase the Project, including the real property described on the attached Exhibit D which is located in the Juneau Recording District, First Judicial District, State of A.lask:a. from the Authority subject to the requirements of Section 7.7.3 of the Resolution and the terms and conditions of this Agreement To exercise this option. Affiliate shall deliver to the Authority written notice of the Affiliate's election to do so at least 120 days prior to a purchase date specified in such notice (the "Purchase Date"). Upon Affiliate's delivery of such notice to the Authority, the Authority shall sell the Project to the Affiliate on the Purchase Date, subject to the requirements of Section 7. 7.3 of the Resolution and the terms and conditions of this Agreement. The conveyance and sale of the Project to Affiliate shall be subject to the Deed of Trust on the Project granted by the Authority in favor of the Trustee to secure all Outstanding Bonds and Parity Obligations issued cr secured under the terms of the Resolution. (b) Purchase Price of Prqject. The purchase price of the Project (the "Purchase Price") shall be an amount cqnal to the sum of (a) (i) the aggregate total principal amollllt of all outstanding Bonds and Parity Obligations, plus (ii) all unpaid interest to accrue thereon (including, with respect to any Additional Bonds issued by the Authority. the Margin) to the date that all outstanding Bonds and Parity Obligations have been paid, redeemed and retired in full, whether upon redemption or prepayment prior to maturity or at the scheduled matmi.ty thereof: plus (iii) any premium payable on any such ~on or prepayment date, plus (iv) all unpaid liabilities accrued and to accrue for arbitrage rebate or other costs related to or otherwise payable in respect of the Bonds and Parity Obligations to the date that all outstanding Bonds and Parity Obligations have been paid, redeemed and retired in full, whether upon redemption or prepayment prior to m$rity or at the scheduled maturity thereof, and (b) any accrued and unpaid Project Costs that are required w be paid by the POW"Cr Purcba:icr to 2 ...... , ... OS/17/98 16:22 FAX the Authority prior to or on the Purchase Date pursuant to the Power Sales Agreement. (c) Purchase of Project Pursuant to froject Sale Agreement. Unless Affiliate elects to provide for payment of the Purchase Priee of the Project by the defeasance of all Outstanding Bonds and Parity Obligations, the Purchase Price shall be payable in Installment Payments in accordance with the terms. conditions and requirementS of a Project Sale Agreement substantially in the form attached hereto as Exhibit A. Affiliate's obligation to pay such Installment Payments shall be further evidenced by Affiliate's execution and delivery of a Project Note substantially in the form attached hereto as Exhibit B and secured by a pledge to the Trustee of all of the outstanding stock of A:ffiliate pursuant to a Pledge Agreement substantially in the form attached hereto as Exhibit C. A purchase of the Project by Affiliate pursuant to such Project Sale Agreement shall be subject to the terms and conditions of Section 7.7.3 of the Resolution and the following conditions: · (i) The Authority shall transfer and assign to Affiliate and be released from, and Affiliate shall accept, assume and agree to be bound by, all ofthe Authority's rights and obligations in. to and under the P'>wer Sales Agreement and the 0 & M Agreement, subject to a first priority lien and security interest in favor of the Trustee on all amounts payable by the Power Purchaser for Project Costs pursuant to the Power Sales Agreement and the 0 & M Agreement; (ii) There shall have been delivered to the Authority and the Trustee an opinion of .:ounsel to Affiliate and the Power Purchaser to the effect that (A) the Power Sales Agreement and the 0 & M Agreement are the legal, valid and binding obligations of Affiliate and the Power Purchaser enforceable in accordance with their respective terms, except as such enforcement may be limited by bankruptcy, insolvency, moratorium or other laws affecting creditors' rights generally; and (B) the Project Note and the Pledge Agreement are the legal, valid and binding obligations of Affiliate and Alaska Energy and Resources Company, respectively, enforceable in accordance with their respective terms, except as such enforcement may be limited by bankruptcy, insolvency, moratorium or other laws affecting creditors' rights generally; (iii) The Affiliate shall have paid or reimbursed the Authority for all reasonable costs and expenses incurred by it in connection with the sale of the Project, including without limitation all attorneys• fees, fees and expenses of the Trustee, transfer taxes and title insurance premiums; and 141004 (iv) There shall have been appointed to the board of directors of ~te at least one "independent director" within the meaning of Standard & Poor's criteria for special purpose entities. (d) Payment of ptm;bas Price by DefeaSance of Outstandin~ Bonds and Parity QbUptions. As an altemative to purcha..Png the Pro~ect ~ to a Project S~e ~t, Affiliate may cause the Purchase Price to be pa1d or proVIded for by delivering to the Authority, the issuers of all Parity Ob~o~ .and the Trustee a. written plan .for dcfeasing all · outstanding Bonds and Parity ObUgattODB m accordance Wlth the ~ of -&. 3 08/17/98 16:22 FAX COPf Resolution and irrevocably depositing in trust with the Trustee or other Fiduciary on the Purchase Date cash and/or Federal Obligations sufficient to defease all outstanding Bonds and Parity Obligations in accordance with the requirements of the Resolution, and paying (or causing to be paid) to the Authority any portion of the Purchase Price constituting Reimbursable Administrative Costs or Reimbursable Extraordinary Administrative Costs then owed to the Authority under the Power Sales Agreement. · Section 2. Option to Purchase Project at End of Term ~005 If the Project has not been purchased earlier, at least three (3) years prior to the last day of the Term of the Power Sales Agreement, Affiliate shall deliver to the Authority written notice stating whether or not Affiliate elects to purchase the Project on the last day of the Term at the Purchase Pdce calculated as of such date. If Affiliate gives notice of its election to purchase the Project, Affiliate shall be irrevocably obligated to purchase, and the Authority shall be irrevocably obligated to sell, the Project on the last day of the Term at the Purchase Price. upon compliance only with the conditions set forth in Section l{c)(ili) of this Agreement. Any and all obligations of the Affiliate with respect to such purchase and sale of the Project shall survive the Term of the Power Sales Agreement. Section 3. Action by Authority The Authority shall not be required to take any action or incur any cost or expense in connection with the sale of the Project to Affiliate or the defeasance and redemption or prepayment of the outstanding Bonds or Parity Obligations unless and until the Authority shall have received written notice of Affiliate's intention to exercise the option granted by this Agreement and Affiliate shall have made arrangements satisfactory to the Authority (which may include the deposit of funds in escrow) for the payment of all costs and expenses of the Authority as required by this Agreement, whether or not the purchase· is actually consummated. 4 08117/98 16:22 FAX Section 4. Suecesson; Assignment This Agreement shall be binding upon and inure to the benefit of the Authority and any governmental successor thereto, and also shall ;be binding upon and inure to the benefit of Affiliate and its corpo~ successors. This Agreement shall not be a.ssi.gp.able by Affiliate to any other person or entity, and any such purported assignment shall be void. IN WITNESS WHEREOF, the parties hav~ caused this Agreement to be executed the day and year first above written. ALASKA INDUSTRIAL DEVELOPI\1ENT AND EXPORT AUTHORITY By: SNETTISHAM ELECTRIC COMPANY By: L) . ."ce·a',) Q .. ~ . Its: P.n«4 ,,. ,t;: APPROVED: ALASKA ELECTRIC LIGHT AND POWER COMPANY Its: Pl't.A4· •• « :C::: STATE OF ALASKA ) )ss Ia] 006 nnRD JUDICIAL DISTRICT ) ~ TinS IS TO CERTIFY that on this 1/ ~y of 1998, before me, the UDdersigncd, a Notary Public in and for the State of A.1BSka, y commissioned aDd swom as such, personally appemed D. Randy Simmons, known to me to be the Bxecutive Director of ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY, an public corporation of the State of Alaska. the corporation that executed s 08/17/98 16:22 FAX ··--~ ...... ., --· -... ' . .. . . .. -·· . . ... --lal 007 ·----..... __ .... _ ·-- the foregoing instrument, and he acknowledged that he executed said instrument as the free and voluntary act and deed of said corporation for the uses and purposes therein mentioned, and that he was authorized to execute said instrument. WITNESS my official hand and seal the day and year in this certificate first hereinabove written. · cmCIAJ. SEAL STATE OF AtASKA NOTARY PUBliC JEANNIE D. JUDD My Comm. •xpiiMI Jur>e 27, 1999 STATE OF ALASKA ) JUDICIAL DISTRICT ) ~ )ss \TinS IS TO CERTIFY that on this /K.J/..day of .Ar~~ 1998, before me, the undersigned, a Notary Public in and for the SAte ~Alaska. d y commissioned and sw~~sonally appeared W~UJG./A, ' tl,r5 , known to me to be the of SNEffiSHAM ELECTRIC COMPANY, an Alaska corporation, the corporation that executed the foregoing instrument, and he/she acknowl· edged that he/she executed said instrument as the free and voluntary act and deed of said corporation for the uses and purposes therein mentioned, and that he/she was authorized to execute said instrument. I WITNESS my official hand and seal the day and year in this certificate first hereinabove wn-. .l!tt--- STATE OF ALASKA ) Notary Public in and for~~/. My commission expires: ~ )ss f:f/$1. roDICIAL DISTRICT ) M TillS IS TO CERTIFY that on this ~day of vJf-1998, before me, the undersigned, a Notary Public in and f9 , e State f AI y commissioned and~S!'f .~nally appeared · 1 I known to me to be the ~ f.¢C of ALASKA ELE C UGHT AND POWER COMP , an Alaska corporation, the corporation that executed the foregoing instrument, and be/she acknowledged that he/she executed said instrument as the free and voluntmy act and deed of said corporation for the uses ~ pw:poses therein mentioned, and that he/she · was authorized to execute said instrument. 6 08/17/98 16:22 FAX WITNESS my official hand and seal the day and year in this certificate first hereinabove written. £ 111.. WREN RECORDED RETURN TO: WmiiiD G. Toaldll Futer Pepper & Sllefelm.a PLLC 1111 Tlllrd AnDue, Suite 3400 Se11tle. WA 98101-3299 No~ in and for~"' My commission expires: .!::f¥D- COPY STATE BUSINESS NO CHARGE FOR RECORDING 7 la!008 EXHIBIT A FORM OF PROJECT NOTE Snettisham Electric Company (the "Company"), a corporation for profit duly organized and validly existing under the laws of the State of Alaska and qualified to transact business in the state of Alaska, for value received, promises to pay to the Alaska Industrial Development and Export Authority (the "Authority"), or its assigns, the principal sum of ______ _ DOLLARS ($ and to pay interest on the unpaid balance of such principal sum from and after the date hereof in such amounts and representing such annual interest rate or rates as may be necessary to provide for payment of the Purchase Price of the Project as described herein. This Project Note has been executed and delivered by the Company to the Authority pursuant to a certain Project Sale Agreement (the "Agreement") dated as of , , between the Authority and the Company. Pursuant to the Agreement, the Authority has sold to the Company, and the Company has purchased from the Authority, the Project financed with proceeds received from the sale of the Authority's Power Revenue Bonds, First Series (Snettisham Hydroelectric Project) (the "Bonds") [to be supplemented on the Purchase Date for other then-outstanding Bonds or Parity Obligations, if any], in the outstanding aggregate principal amount of $ , in consideration of payment by the Company of the Purchase Price (as defined in the Agreement) of the Project in Installment Payments at the times and in the amounts set forth in the Agreement and in this Project Note. The Bonds were issued pursuant to and are secured by the Authority's Snettisham Power Revenue Bond Resolution, Resolution No. G98-09, as supplemented by a First Series Resolution, Resolution No. G98-10, each adopted by the Authority on July 22, 1998 (together, the "Resolution"), and a Deed of Trust on the Project granted by the Authority to U.S. Bank Trust National Association, as trustee (the "Trustee"). Pursuant to the Resolution, the Authority has assigned all of its right, title and interest (except Unassigned Authority Rights) in and to the Agreement and this Project Note to the Trustee as additional security for the Bonds, and the Company hereby acknowledges and consents to such assignment. Pursuant to the Agreement, the Company has purchased the Project subject to the Deed of Trust. All capitalized terms not otherwise defmed in this Project Note shall have the meanings set forth in the Resolution and the Agreement. To provide funds to pay the principal of and redemption premium, if any, and interest on the Bonds as and when due as specified in the Resolution and the Bonds, the Company hereby agrees to and shall make Installment Payments of the Purchase Price in immediately available funds by 9:00 a.m. Seattle time on the dates and in the amounts specified in Section 2.3 of the Agreement. If payment or provision for payment in accordance with the Resolution is made in respect of the principal of and redemption premium, if any, and interest on the Bonds from moneys other than Installment Payments, this Project Note shall be deemed paid to the extent such payments or provision for payment of Bonds has been made. Subject to the foregoing, all Installment Payments shall be in the full amount required hereunder. - 1 - SQ026016.01 The obligation of the Company to make the payments required hereunder shall be absolute and unconditional and the Company shall make such payments without abatement, diminution or deduction regardless of any cause or circumstances whatsoever including, without limitation, any defense, set-off, recoupment or counterclaim which the Company may have or assert against the Authority, the Trustee or any other person. The Company may prepay this Project Note, subject to applicable notice and other requirements set forth in the Agreement and the Resolution, (i) in whole or in part on any date on which the Bonds are subject to optional redemption pursuant to Section 401 of the First Series Resolution; provided that any such prepayment shall include payment of premium, if any, applicable to the redemption of the Bonds; and (ii) in whole on any date on which the Bonds are subject to redemption pursuant to Section 402 of the First Series Resolution if any of the events described in Section 8.3 of the Agreement shall have occurred. The Company shall prepay this Project Note in whole or in part upon a Determination of Taxability at the earliest practicable date selected by the Trustee, but in no event later than one hundred and eighty (180) days following the Trustee's receipt of notification of the Determination of Taxability, on which Bonds are subject to mandatory redemption pursuant to Section 403 of the First Series Resolution. Whenever an Event of Default under Section 8.1 of the Resolution (other than an Event of Default as defined in Section 8.1 (iii) thereof) shall have occurred and, as a result thereof, the principal of and any premium on all Bonds then outstanding, and interest accrued thereon, shall have been declared to be immediately due and payable pursuant to Section 8.3 of the Resolution, the unpaid principal amount of and any prepayment penalty and accrued interest on this Project Note shall also be due and payable on the date on which the principal of and premium and interest on the Bonds shall have been declared due and payable; provided that the annulment of a declaration of acceleration with respect to the Bonds shall also constitute an annulment of any corresponding declaration with respect to this Project Note. The Company is personally obligated and fully liable for the amount due under this Project Note. To the extent, if any, that this Project Note is deemed to be secured by the Deed of Trust, the Trustee as assignee of this Project Note and beneficiary of the Deed of Trust has the right to sue on this Project Note and obtain a personal judgment against the Company either before or after a judicial foreclosure of the Deed of Trust under AS 09.45.170-09.45.220. IN WITNESS WHEREOF, the Company has caused this Project Note to be executed in its name by its duly authorized officer as of _____ ~ SNEIDSHAM ELECTRIC COMPANY. By __________________________ ___ Title: -2- $0026016.01 SNETIISHAM HYDROELECTRJC PROJECT PROJECT SALE AGREEMENT between ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY A Public Corporation of the State of Alaska ("Authority") and SNETIISHAM ELECTRIC COMPANY An Alaska Corporation ("Affiliate or "Project Purchaser'') TABLE OF CONTENTS Section 1. Defmitions ................................................................................................................... 2 Section 2. Sale and Purchase of Project; Purchase Price and Payment Terms ............................ 7 2.1 Sale and Purchase ofProject. .............................................................................................. 7 2.2 Purchase Price of Project. ........................................................................ : .......................... 8 2.3 Payment Terms; Project Note ............................................................................................. 8 2.4 Additional Payments ......................................................................................................... 10 2 5 Obl' . U d.. 1 . 1gat1ons neon 1t1ona ................................................................................................ 10 2.6 Place of Payments ............................................................................................................. 11 2.7 Term of Agreement. .......................................................................................................... 11 Section 3. Security ..................................................................................................................... 11 3.1 Pledge Agreement. ............................................................................................................ 11 3.2 Prior Mortgage and Security Interests of Trustee; Assignment of Agreement and Project Note .................................................................................................................................. 11 3.3 Action on Project Note ...................................................................................................... 11 3.4 Other Instruments .............................................................................................................. 11 Section 4. Conveyance of Title to Property ............................................................................... 12 Section 5. Condition of Property; Disclaimer of Warranties ..................................................... 12 5.1 Condition of Property ....................................................................................................... 12 5.2 Disclaimer of Warranties .................................................................................................. 12 Section 6. Representations of Project Purchaser ........................................................................ 13 6.1 Corporate Existence .......................................................................................................... 13 6.2 Authority to Execute Agreement. ..................................................................................... 13 6.3 Licenses and Approvals .................................................................................................... 14 6.4 Assignment and Assumption of Power Sales Agreement and 0 & M Agreement. ......... 14 Section 7. Affirmative Covenants ofProject Purchaser ............................................................ 14 7.1 Creation of Liens ............................................................................................................... 14 7.2 Sale of Property ................................................................................................................. 14 7.3 Lease or Grant of Use ofProject. ...................................................................................... 15 7.4 Independent Consultant .................................................................................................... 15 7.5 Annual Budget. ................................................................................................................. 15 7.6 Operation and Maintenance of Project. ............................................................................ 15 7. 7 Limitation on Operating Expenses and Other Costs ......................................................... 16 7.8 Collection of Revenues ..................................................................................................... 16 7.9 No Free Service ................................................................................................................. 16 7.10 Performance of this Agreement, Power Sales Agreement, 0 & M Agreement and Deed of Trust. ................................................................................................................... 16 7.11 Insurance....................................................................................................................... 17 7.12 Reconstruction; Application of Insurance Proceeds. ...................................................... 18 7.13 Books and Records........................................................................................................ 19 7.14 Tax Covenants............................................................................................................... 19 7.15 Payment of Taxes and Charges...................................................................................... 20 7.16 Renewal and Replacement Fund.................................................................................... 20 7. 17 Maintenance of Power Purchaser's System. .. . .. .. .. .. .. .. .. . .. . .. . .. .. .. . . ... .. . .. .. . .. .. .. .. .. .. .. . . .. .. .. .. 20 7.18 Assignment of Rights under Agreement........................................................................ 20 7.19 Indemnification by Project Purchaser. ................................... ........................................ 20 Section 8. Prepayment and Redemption Provisions. . . . . ... ... . .. .. .. .. ... ... .. .. .. .. .. .. .. .. .. .. .. .. .... .......... 22 8.1 Redemptions General. ....... .... ...... .. ............ .... ........ ...... .............. .... . ....... ............ .... ........ 22 8.2 Optional Prepayment of Purchase Price. .... . .. .... .. ... .. ...... . .... .. ............. ..... ... ...... .... .... . ... .. 22 8.3 Extraordinary Optional Redemption. ............................................................................. 22 8.4 Mandatory Redemption in Event of a Determination of Taxability ................................ 23 8.5 Amounts Payable on Prepayment.................................................................................. 24 Section 9. Events of Default and Remedies. . .. . . .. .. . .. . .. . .. .. ... .. .. . .. . . . . . . .. .. . . . .. .. . . . .. . .. .. . .. .... . .. . . . .. .. . 24 9.1 Events ofDefault........................................................................................................... 24 9.2 Remedies on Default. . ... . .. .. ..... . .. .. .. ........ .... .. .. .. .. .. ..... .. .... . .... .. .. .. .... .. .. .. . . .. .. .. .. .. ...... .... .. . 26 9.3 No Remedy Exclusive. ..... .. .. ... . ..... ... .. . . .. .. .. . . .. ... . .. .. .. .. .. .. .. .. . . .. .. . . .. .. .. .. .. .. .... .... .. .. .. .. .. .. .. . 26 9.4 Agreement to Pay Attorneys' Fees and Expenses........................................................... 27 9.5 No Waiver..................................................................................................................... 27 9.6 Notice of Default........................................................................................................... 27 Section 10. Successors; Assignment......................................................................................... 27 Section 11. Assignment of Authority's Rights.......................................................................... 27 EXHIBIT A-Form of Project Note 11 PROJECT SALE AGREEMENT THIS AGREEMENT is executed this __ day of by the ALASKA INDUS1RIAL DEVELOP.rviENT AND EXPORT AUTI:IORITY, a public corporation of the State of Alaska (the "Authority"), and SNEffiSHAM ELECTRIC COMPANY, an Alaska corporation (referred to herein as the "Affiliate" or the "Project Purchaser"). RECITALS -------- A. Pursuant to its Snettisharn Power Revenue Bond Resolution, Resolution No. G98- 09, as supplemented by and Resolution No. G98-10, each adopted on July 22, 1998 (together, the "Resolution"), the Authority issued its Power Revenue Bonds, First Series (Snettisharn Hydroelectric Project), in the principal amount of $100,000,000 to fmance the acquisition and certain capital improvements to the Snettisham hydroelectric project (the "Project"). B. Pursuant to that certain Agreement for the Sale and Purchase of the Electric Capability of the Snettisham Hydroelectric Project dated as of July 15, 1998 (the "Power Sales Agreement"), between the Authority and Alaska Electric Light and Power Company (the "Power Purchaser"), the Authority has agreed to sell, and the Power Purchaser has agreed to buy, all of the Capability of the Project as defined in the Power Sales Agreement. The Power Sales Agreement, among other things, secures the payment of debt service on all Bonds and Parity Obligations issued to finance the Costs of Acquisition and Construction of the Project and Capital Improvements (as such terms are defined in the Resolution) and has been collaterally assigned to the Trustee appointed pursuant to the Resolution as security for payment of such Bonds and Parity Obligations. C. Pursuant that certain Snettisharn Option Agreement dated July 15, 1998 (the "Option Agreement"), between the Authority and Affiliate and approved by the Power Purchaser, the Authority granted to Affiliate an option to purchase the Project at any time after five years after the issue date of the First Series Bonds subject to the requirements of the Resolution and the terms and conditions of the Option Agreement. D. Affiliate has delivered written notice to the Authority of its election to exercise its option to purchase the Project on and has executed and delivered to the Authority this Project Sale Agreement, all in accordance with the Option Agreement. E. The parties intend that a sale of the Project to the Project Purchaser pursuant to this Agreement shall not, by itself, constitute a default under, or require mandatory redemption of, or result in a change in the payment terms and conditions of Outstanding Bonds an~ ParitJ.: O~ligations or in a change in the payment expectations of the Holders of such Bo~ds and Panty O~liga~ons, ~d that such Bonds and Parity Obligations shall continue to be subject to redemption (mcluding redemptions pursuant to any defeasance plan pursuant to this Agreement) only in accordance with their terms. F. Any capitalized term used and not otherwise defined in this Agreement has the meaning given such term in the Power Sales Agreement or the Resolution. NOW, THEREFORE, the parties agree as follows: Section 1. Definitions. "Accountant" shall mean a nationally recognized firm of certified public accountants selected by the Authority. "Accountant's Certificate" shall mean a certificate signed by a firm of independent certified public accountants of recognized national standing, selected by the Authority, which may be the firm of accountants which regularly audits the books of the Authority. "Act" shall mean Title 44, Chapter 88 of the Alaska Statutes (AS 44.88) and 1996 SLA, Ch. 111, Section 25, as the same may be amended or supplemented from time to time. "Additional Bonds" shall mean Bonds other than the First Series Bonds authenticated and delivered pursuant to the Resolution. "Additional Payments" means the amounts required to be paid by the Project Purchaser pursuant to the provisions of Section 2.4 hereof. "Affiliate" shall mean Snettisham Electric Company, an Alaska corporation. "Aggregate Debt Service" for any period shall mean, as of any date of calculation, the sum of the amounts of Debt Service for such period with respect to the Outstanding Bonds and Parity Obligations of all Series. "Annual Budget" shall mean the annual budget, as amended or supplemented, adopted or in effect for a particular Fiscal Year as provided in Section 7.5. "Authority" shall mean the Alaska Industrial Development and Export Authority organized and existing under the Act "Average Aggregate Debt Service" shall mean, as of any date of calculation, the sum of the remaining Aggregate Debt Service divided by the number of Bond Years such Bonds and Parity Obligations are scheduled to remain Outstanding. "Bond" or "Bonds, shall mean any bond or bonds, note or notes, or evidence of indebtedness or evidences of indebtedness, as the case may be, issued by the Authority and authenticated and delivered under and pursuant to, and entitled to the benefit and security of, the Resolution. 2 "Bond Year" shall mean each period of 12 calendar months ending on December 31; except, however, that the first Bond Year for any Series of Bonds shall begin on the issue date of that Series and shall end on the immediately succeeding December 31. "Capital Improvements" shall mean Project Repairs and/or Project Expansions. "Code" shall mean the Internal Revenue Code of 1986, as amended, including applicable Treasury regulations thereunder. "Debt Service" for any period shall mean, as of any date of calculation and with respect to any Series, an amount equal to the sum of (i) interest accruing during such period on Bonds or Parity Obligations of such Series, except to the extent that such interest is to be paid from deposits in the Interest Account in the Debt Service Fund made from proceeds of Bonds or Parity Obligations and (ii) that portion of each Principal Installment for such Series which would accrue during such period if such Principal Installment were deemed to accrue daily in equal amounts from the next preceding Principal Installment due date for such Series (or, if there shall be no such preceding Principal Installment due date, from a date one year preceding the due date of such Principal Installment or from the date of issuance of the Bonds or Parity Obligations of such Series, whichever date is later). Such interest and Principal Installments for such Series shall be calculated on the assumption that no Bonds or Parity Obligations of such Series Outstanding at the date of calculation will cease to be Outstanding except by reason of the payment of each Principal Installment on the due date thereof. For the purposes of this definition (x) interest and Principal Installments with respect to interest accreting on compound interest or zero coupon or like interest paying Bonds shall be deemed to accrue in the twelve (12) months immediately prior to the final maturity of such Bonds; and (y) the Authority may determine that interest will accrue on variable rate Bonds at a rate equal to the actual rate during a prior period. "Debt Service Reserve Requirement" shall mean an amount equal to the least of (i) Maximum Aggregate Debt Service, (ii) 125% of Average Aggregate Debt Service, or (ii) 10% of proceeds of the Bonds and Parity Obligations. "Deed of Trust" means the Deed of Trust on the Project dated as of July 15, 1998, granted by the Authority for the benefit of the Trustee to secure all Bonds and Parity Obligations issued or secured under the terms of the Resolution. "Event of Default" shall have the meaning given to such term in Section 9.1. "Fiscal Year" means that twelve-month period starting January 1 of a calendar year through and including December 31 of the same calendar year. The initial Fiscal Year for purposes of this Agreement is that portion of the twelve-month period starting on the ~chase Date thr~ugh and including the following December 31. If that portion of the calendar year 1s shorter than nmety (90) days the parties shall determine the initial Fiscal Year, which must end on a December 31 and may not be longer than 456 days. The last Fiscal Year for purposes o~ this Agreemen~ shall be that portion of the twelve-month period between the end of the last full (1.e., 12-month) F1scal Year and the expiration of this Agreement. 3 "Holder" or "Holders" shall mean any person or persons who shall be the registered owner of any Bonds or Parity Obligations. "Independent Consultant" shall mean an independent individual or firm of engineers or any oth~ consultant that is nationally recognized and has expertise with respect to electric power proJects comparable to the Project at the time retained pursuant to Section 7.4 to carry out the duties and responsibilities given to such Independent Consultant by this Agreement. For purposes hereof, "independent" means a person who is in fact independent and does not have any substantial interest, direct or indirect, in the Authority, Affiliate or the Power Purchaser. "Installment Payments" shall mean the amounts payable by the Project Purchaser to the Authority pursuant to Section 2.3 of this Agreement. "Maximum Aggregate Debt Service" shall mean, as of any date of calculation, the greatest amount of Aggregate Debt Service payable in any unexpired Bond Year. "Operating Expenses" shall mean (i) the operation, maintenance, administrative and general expenses of the Project, and shall include, without limiting the generality of the foregoing, costs of investigations, insurance, ordinary repairs of the Project which do not entail the acquisition and installation of a unit of property (as generally prescribed by the Federal Energy Regulatory Commission), fuel costs, rents, engineering expenses, legal and financial advisory expenses, salaries and required employee costs, any taxes or payments in lieu of taxes pursuant to the Act or otherwise pursuant to law and Reimbursable Administrative Costs and Reimbursable Extraordinary Administrative Costs (as such terms are defmed in the Power Sales Agreement), (ii) any other current expenses or obligations required to be paid by the Authority under the provisions of the Resolution or by law, all to the extent properly allocable to the Project, or required to be incurred under or in connection with the performance of the Power Sales Agreement or the 0 & M Agreement, and (iii) the fees and expenses of the Fiduciaries. Operating Expenses shall not include any costs or expenses for new construction or any allowance for depreciation. "0 & M Agreement" shall mean the Operations and Maintenance Agreement dated as of July 15, 1998 between Affiliate, as assignee of the Authority on and after the Purchase Date, and the Power Purchaser, as the same may be amended. "Parity Obligations" shall mean any bonds, notes or other evidences of indebtedness (including any such indebtedness issued to refund Outstanding Parity Obligations) issued by the Power Purchaser, or by any issuer other than the Authority for the Power Purchaser, that are authenticated and delivered by the Trustee and are to be secured by the Project and Revenues on a parity of lien with Outstanding Bonds. "Permitted Encumbrances" means, as of any particular time, the following liens and encumbrances against the Project: the reversionary interest of the Alaska Department of Natural Resources described in Section 4, the Deed of Trust and all other liens and encumbrances pennitted under the Deed of Trust. 4 "Power Purchaser" shall mean Alaska Electric Light and Power Company and its pennitted successors and assigns under the Power Sales Agreement. "Power Sales Agreement" shall mean the Agreement for the Sale and Purchase of the Electric Capability of the Snettisham Hydroelectric Project dated as of July 15, 1998 between Affiliate, as assignee of the Authority on and after the Purchase Date, and the Power Purchaser, as the same may be amended. "Principal Installment" shall mean, as of any date of calculation and with respect to any Series, so long as any Bonds or Parity Obligations thereof are Outstanding, (i) the principal amount of Bonds or Parity Obligations of such Series due on a certain future date for which no Sinking Fund Installments have been established, or (ii) the unsatisfied balance of any Sinking Fund Installments due on a certain future date for Bonds or Parity Obligations of such Series, plus the amount of the sinking fund redemption premiums, if any, which would be applicable upon redemption of such Bonds or Parity Obligations on such future date in a principal amount equal to said unsatisfied balance of such Sinking Fund Installments, or (iii) if such future dates coincide as to different Bonds or Parity Obligations of such Series, the sum of such principal amount of Bonds or Parity Obligations and of such unsatisfied balance of Sinking Fund Installments due on such future date plus such applicable redemption premiums, if any. "Project" means the Project as defmed in the Power Sales Agreement. "Project Capability" shall mean the entire capability of the Project to generate and transmit electric energy at any and all times, including periods when the Project may not be operating or may be inoperable or the operation thereof is curtailed, in each case in whole or in part for any reason whatsoever. "Project Costs" shall have the meaning given it in the Power Sales Agreement. "Project Expansions" shall mean Project improvements, betterments, additions and expansions (other than Project Repairs) that are consistent with Prudent Utility Practice. "Project Note" shall mean the promissory note in substantially the form attached hereto as Exhibit A given by the Project Purchaser to the Authority to evidence the Project Purchaser's obligation to pay the Purchase Price in accordance with this Agreement. "Project Purchaser" shall mean the Affiliate. "Project Repairs" shall mean repairs, maintenance or replacements of existing parts, fixtures or equipment with respect to the Project, which (i) are required. by ~ederal or state laV.: or the Po'?'er Sales Agreement or are otherwise necessary to keep the Project m good and efficient operating condition, consistent with Prudent Utility Practice, and (ii) are chargeable to the capital account of the Project under the Code. Repairs, maintenan~ or replacements of exis~g p~! fixtures of equipment which result in improvement of the Project are not excluded from this definition. "Project Sale Agreement" or "Agreemenf' shall mean this Project Sale Agreement. 5 "Property" shall mean, collectively, the real and personal property comprising the Project described on Exhibit A attached hereto. "Prudent Utility Practice" shall mean at a particular time any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry at such time, or which, in the exercise of reasonable judgment in light of facts known at such time, could have been expected to accomplish the desired results at the lowest reasonable cost consistent with good business practices, reliability, safety and reasonable expedition. Prudent Utility Practice is not required to be the optimum practice, method or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts which could have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability, safety and expedition. Prudent Utility Practice includes due regard for manufacturers' warranties and the requirements of governmental agencies of competent jurisdiction and shall apply not only to functional parts of the Project, but also to appropriate structures, landscaping, painting, signs, lighting and other facilities. In evaluating whether any matter conforms to Prudent Utility Practices, there shall be taken into account, among other things, (a) the nature of the Authority and the Power Purchaser under the laws of the State of Alaska and their statutory duties and responsibilities and (b) the objectives of (i) complying with environmental and safety regulations and management agreements, (ii) minimizing the financial risk of the Authority and the Power Purchaser and (iii) providing the Power Purchaser with flexibility in the conduct of its business affairs. For purposes of the Resolution, "national standards for the industry" shall mean Prudent Utility Practice. "Purchase Date" shall mean or such earlier or later date selected by the parties, by mutual agreement, on which the purchase and sale of the Project is completed. "Purchase Price" shall mean the amount determined in accordance with Section 2.2 of this Agreement. "Rebate Amount" shall mean the rebate amount, if any, payable to the United States of America in respect of any Series of Bonds or tax-exempt Parity Obligations pursuant to section 148(f) of the Code. "Redemption Price" shall mean, with respect to any Bond or Parity Obligation, the principal amount thereof plus the applicable premium, if any, payable upon redemption thereof pursuant to such Bond or Parity Obligation or the Resolution. "Renewal and Replacement Fund Contribution" shall mean the amount required to be contributed annually to the Renewal and Replacement Fund by the Project Purchaser pursuant to this Agreement from payments made by the Power Purchaser for that purpose pursuant to the Power Sales Agreement "Resolution" shall mean the Authority's Snettisham Power Revenue Bond Resolution, Resolution No. 098-09, as supplemented by Resolution No. 098-10, each adopted on July 22, 6 ~150.117 1998, and as from time to time amended or supplemented by other Supplemental Resolutions in accordance with the terms thereof. "Revenue Fund" shall mean the Revenue Fund established by the Authority pursuant to Section 5.2 of the Resolution. "Revenues" shall mean all revenues, income, rents and receipts, derived or to be derived by the Project Purchaser from, or attributable to the ownership, operation and/or sale of, the Project, including all revenues attributable to the Project or to payment of the costs thereof including, without limitation, all revenues received or to be received by the Project Purchaser under the Power Sales Agreement or under any other contract for the sale of power, energy, transmission or other service from the Project or any part thereof, any contractual arrangement with respect to the use of the Project or any portion thereof or the services, output or capacity thereof. "Sinking Fund Instalhnent" means, as of any particular date of determination and with respect to the Outstanding Bonds or Parity Obligations of any Series, the amount required by a Supplemental Resolution or Parity Obligation Instrument to be paid in any event by the Authority or the issuer of the Parity Obligations on a single future date for the retirement of Bonds or Parity Obligations of such Series which mature after said future date, but does not include any amount payable by the Authority or the issuer of the Parity Obligations by reason only of the maturity of a Bond or Parity Obligation. "State" shall mean the State of Alaska. "Supplemental Resolution" shall mean any resolution supplemental to or amendatory of the Resolution, adopted by the Authority in accordance with the Resolution. "Trustee" shall mean the trustee appointed pursuant to the Resolution, initially U.S. Bank Trust National Association and its successor or successors and any other corporation or association which may at any time be substituted in its place pursuant to the Resolution. "Unassigned Authority Rights" means all of the rights of the Authority to receive Additional Payments under Section 2.4 hereof, to be held harmless and indemnified under Section 7.20 hereof, to be reimbursed for attorney's fees and expenses under Section 9.4 hereof, and to give or withhold consent to amendments, changes, modifications, alterations and termination of this Agreement to the extent required or permitted hereunder. Section 2. Sale and Purchase of Project; Purchase Price and Payment Terms. 2.1 Sale and Purchase of Project. Subject to the terms and conditions of this Agreement, on the Purchase Date the Authority shalLsell, assign an~ transfer the Projec~ to the Project Purchaser, and the Project Purchaser shall purchase the Project from the Autho?ty. In conjunction with such sale and purchase, effective on the Purchase Date, the Authonty ~so transfers and assigns to the Project Purchaser and shall be released from, and the Project Purchaser accepts assumes and agrees to be bound by, all of the Authority's rights and obligations in, to ~d under the Power Sales Agreement and the 0 & M Agreement, subject to a 7 first priority lien and security interest in favor of the Trustee on all amounts payable by the Power Purchaser for Project Costs pursuant to the Power Sales Agreement and the 0 & M Agreement. 2.2 Purchase Price of Project. The purchase price of the Project (the "Purchase Price") shall be an amount equal to the sum of (a) (i) the aggregate total principal amount of all outstanding Bonds and Parity Obligations on the Purchase Date, plus (ii) all unpaid interest to accrue thereon (including, with respect to any Additional Bonds issued by the Authority, the Margin) from and after the Purchase Date to the date that all Outstanding Bonds and Parity Obligations have been paid, redeemed and retired in full, whether upon redemption or prepayment prior to maturity or at the scheduled maturity thereof, plus (iii) any premium payable on any such redemption or prepayment date, plus (iv) all unpaid liabilities accrued and to accrue after the Purchase Date for all Rebate Amounts or other costs related to or otherwise payable in respect of tax-exempt Bonds and Parity Obligations to the date that all Outstanding Bonds and Parity Obligations have been paid, redeemed and retired in full, whether upon redemption or prepayment prior to maturity or at the scheduled maturity thereof, and (b) any accrued and unpaid Project Costs payable to the Authority as of the Purchase Date. The Project Purchaser shall receive a credit against the Purchase Price for the aggregate total amount of all money and Investment Securities on deposit with and held by the Trustee in all Funds under the Resolution on the Purchase Date. 2.3 Payment Terms; Project Note. In consideration of the sale of the Project to the Project Purchaser, the Project Purchaser shall make or cause to be made, in accordance with Section 2.3 and the Project Note, payments of the Purchase Price in installments, payable to the Trustee for the account of the Revenue Fund, as follows: (a) Commencing on the tenth (1Oth) day of the month following the Purchase Date, and on the tenth (1Oth) day of each month thereafter: 508041511.111 (i) An amount equal to one-sixth (116) of the interest due on all Bonds and Parity Obligations on the next succeeding interest payment date plus an amount equal to one-twelfth (l/12) of the Principal Installment(s) due on the next succeeding principal payment date for all Bonds and Parity Obligations; . provided, that semiannually on each January 1 and July 1 the monthly amounts payable pursuant to this clause (a)(i) shall be adjusted to give the Project Purchaser credit for the income earned during the immediately preceding six months on amounts on deposit in the Debt Service Fund; and provided, further, that the monthly amount payable pursuant to this clause (a)(i) in respect of interest prior to the initial interest payment date for a Series of Bonds or Parity Obligations shall be the amount deteniD.ned by dividing the interest due on the initial interest payment date by the n.umber of complete months to elapse from the delivery date of such Series to the initial interest payment date for such Series, and the monthly amount payable pursuant to this clause (a)(i) in respect of the initial Principal Installment for a Series of Bonds or Parity Obligations shall be the amount determined by dividing the amount of such initial Principal Installment by the 8 number of complete months to elapse from the delivery date of such Series to the date for payment of the initial Principal Installment for such Series. (ii) For deposit in the Renewal and Replacement Fund, an amount equal to 1/12 of the Renewal and Replacement Fund Contribution for the then current Fiscal Year. (iii) Any additional amount required so that the amount available to the Authority in the Fiscal Year to be deposited with the Trustee as Revenues will not be less than the debt service coverage percentage required by Section 7.12.1 of the Resolution. (b) The amount, if any, required to increase the amount on deposit in the Debt Service Reserve Fund to an amount not less than the Debt Service Reserve Requirement not later than the date specified by the Resolution and/or to reimburse the provider of any Reserve Fund Credit Facility for any draws thereon as required by the terms thereof. (c) The amount, if any, required to increase the amount on deposit in the Renewal and Replacement Fund to an amount not less than the Minimum R&R Fund Requirement not later than the end of any Fiscal Year in which the amount on deposit in the Renewal and Replacement Fund shall be less than the Minimum R&R Fund Requirement. (d) On any redemption or prepayment date for Bonds or Parity Obligations as a result of an optional or extraordinary optional redemption of such Bonds or Parity Obligations pursuant to Section 8.1 or a mandatory redemption of such Bonds or Parity Obligations in the event of a Determination of Taxability as required by Section 8.2 and applicable provisions of the Bonds and the Resolution, the principal amount of such Bonds or Parity Obligations, together with any applicable redemption or prepayment premium, and accrued interest to the redemption date. (e) Annually, not later than 45 days after the end of each Bond Year, or on a date or dates to be determined by Supplemental Resolution, for deposit in the Rebate Fund, such amount as is necessary to cause the amount on deposit in the Rebate Fund (after a deposit, if any, therein from excess earnings in the Project Fund and/or the Debt Service Reserve Fund) to be equal to the estimated Rebate Amount for that Bond Year. (f) The amount necessary to discharge any Project-related liens on Project assets and to pay all other reasonable costs and expenses as may be incurred by the Authority or the Trustee under the Resolution in connection with the Bonds and Parity Obligations, including but not limited to costs of calculation and payment of arbitrage rebate amounts and fees and expenses of the Trustee for acting as such under the Resolution. (g) The Project Purchaser agrees that, during any time that (i) the amount on deposit in the Debt Service Reserve Fund is less than the Debt Service Reserve Requirement, (ii) the Project Purchaser has failed to make a required deposit to the Renewal and Replacement Fund, or (iii) an Event of Default has occurred and is continuing for more than 30 9 days under this Agreement, the Power Sales Agreement or the Resolution, Project Purchaser shall cause all Revenues to be paid to the Trustee within one ( 1) Business Day of receipt by the Project Purchaser. The Project Purchaser acknowledges and agrees that, under the terms of the Resolution, the Trustee will deposit all Revenues received from the Project Purchaser in the Revenue Fund and will transfer money on deposit in the Revenue Fund to the Debt Service Fund, the Debt Service Reserve Fund, the Renewal and Replacement Fund and the Rebate Fund, all in accordance with Section 5.5 of the Resolution, and each such deposit by the Trustee shall constitute an "Installment Payment." The Trustee will, under the terms of the Resolution, deposit in the Surplus Account of the Revenue Fund any of such payments and other revenues in excess of the amount required for the deposits to be made under Section 5.5 of the Resolution, and release to the Project Purchaser free and clear of the lien and pledge of the Resolution. (h) The Project Purchaser's obligation to pay the Purchase Price by making the Installment Payments required by this Section 2.3 shall be evidenced by the Project Note, and all Installment Payments shall be held and disbursed in accordance \\lith the Resolution and this Agreement Upon payment in full, in accordance with the Resolution, of all Principal Installments and interest accrued on all Bonds and Parity Obligations, whether at maturity or by redemption or otherwise, or upon provision for the payment thereof having been made in accordance with the provisions of the Resolution, and upon payment by the Project Purchaser of any other amounts required to be paid hereunder, the Project Note shall be deemed fully paid, the obligations of the Project Purchaser thereunder shall be terminated and the Project Note shall be surrendered by the Trustee to the Project Purchaser for cancellation. Unless the Project Purchaser is entitled to a credit under express terms of this Agreement or the Project Note, all payments on the Project Note shall be in the full amount required thereunder. 2.4 Additional Payments. In addition to payment of the Purchase Price, the Project Purchaser shall (i) pay to or reimburse the Authority for (i) all reasonable costs and expenses incurred by it in connection with the sale of the Project, including without limitation all attorneys' fees, fees and expenses of the Trustee, transfer taxes and title insurance premiums, which amounts shall be paid on or before the Purchase Date, and (ii) the Margin \\lith respect to any issue of Additional Bonds, which shall be paid in equal monthly installments on the tenth (lOth) day of each month. The amounts payable under this Section 2.4 shall be referred to herein as "Additional Payments." 2.5 Obligations Unconditional. The obligations of the Project Purchaser to make Installment Payments, Additional Payments and any other payments required of the Project Purchaser hereunder or under the Resolution shall be absolute and unconditional, and the Project Purchaser shall make such payments without abatement, diminution or deduction regardless of any cause or circumstances whatsoever including, without limitation, any suspension or reduction in the Capability of the Project, any interruption, interference or curtailment in wh~le or in part of Power supplied by the Project, or any defense, set-off, recoupment or counterclru.m which the Project Purchaser may have or assert against the Authority, the Trustee or any other person. 10 . 2.6 Place of Payments. Project Purchaser shall make all Installment Payments dtrectly to the Trustee in accordance with the payment instructions of the Trustee. Additional Payments shall be made directly to the person or entity to whom or to which they are due. 2.7 Term of Agreement. The term of this Agreement shall commence on the Purchase Date and shall terminate on the later of December 31, 203 8, or the date on which no Bond or Parity Obligation remains Outstanding under the terms of the Resolution. Section 3. Security 3.1 Pledge Agreement. To secure payment of the Purchase Price and payment and performance of all other obligations of the Project Purchaser under this Agreement and the Project Note, the Project Purchaser has previously caused Alaska Energy and Resources Company to have executed and delivered to the Authority on the issue date of the Authority's Power Revenue Bonds, First Series (Snettisham Hydroelectric Project) that certain Pledge Agreement dated as of July 15, 1998, by and between Alaska Energy and Resources Company as Pledgor for the benefit of the Authority, which Pledge Agreement has been assigned by the Authority to the Trustee, pledging all of the outstanding stock of the Project Purchaser. To further secure payment of the Purchase Price and payment and performance of all other obligations of the Project Purchaser under this Agreement and the Project Note, the Project Purchaser assigns to the Authority and grants a perfected security interest in (i) the Revenues, (ii) all of its rights under the Power Sales Agreement to receive payments from the Power Purchaser, and (iii) all of its rights under the 0 & M Agreement. 3.2 Prior Mortgage and Security Interests of Trustee; Assignment of Agreement, Project Note. The Project Purchaser acknowledges that the Project is subject to the Deed of Trust, that Project Purchaser is purchasing the Project subject to the Deed of Trust, and that the Authority pursuant to the Resolution has granted and assigned to the Trustee for the benefit of the Holders of all Bonds and Parity Obligations a prior security interest in all Revenues of the Project, including without limitation Authority's rights under the Power Sales Agreement to receive payments from the Power Purchaser, and all of its rights under the 0 & M Agreement, this Agreement, the Project Note and the Pledge Agreement. The Project Purchaser accepts and agrees to such assignment. . 3.3 Action on Project Note. The Project Purchaser will be personally obligated and fully liable for the amounts due under the Project Note and this Agreement. To the extent, if any, that the Deed of Trust is deemed to secure this Agreement and the Project Note, the Trustee as beneficiary of the Deed of Trust shall have the right to sue on the Project Note and this Agreement and obtain a personal judgment against the Project Purchaser for satisfaction of the amount due under the Project Note and this Agreement either before or after a judicial foreclosure of the Deed of Trust under AS 09.45.170-09.45.220. 3.4 Other Instruments. The Project Purchaser shall, at ·the request of the Authority or the Trustee, execute and cause to be filed on the Purchase Date in accordance with the requirements of the UCC, financing statements in form and substance sati~factory to the Authority and the Trustee, and, from time to time thereafter, shall execute and dehver such other 11 documents (including, but not limited to, continuation statements as required by the UCC) as rna~ b~ necessary or re~on~bly req~ested by the Authority or the Trustee in order to perfect or mamtam perfected secunty mterests m the Project and the Revenues granted by the Authority or the Project Purchaser or give public notice thereof. Section 4. Conveyance of Title to Property. The Authority covenants that it is lawfully seized of the estate in the Property and has the right to convey and assign the Property. On the Purchase Date, the Authority shall execute, ackno~ledge and deliver to Project Purchaser a special warranty deed and bill of sale to convey title to the Property to Project Purchaser, through recordation, free and clear of any defects or encumbrances except for Permitted Encumbrances. The Project Purchaser expressly acknowledges that the Authority's title to any real property that has been acquired by the Authority under conveyances from the Alaska Department of Natural Resources and that is included in the Property may be encumbered with a condition that such real property be used for purposes of generating electric power, that the grantor Alaska Department ofNatural Resources has a reversionary interest in such real property to the extent that it is not used for that purpose, and that failure to meet that condition could result in the reverter of title to such real property to the Alaska Department of Natural Resources according to the laws of the State of Alaska. Section 5. Condition of Property; Disclaimer of Warranties. 5.1 Condition of Property. The Authority sells the Property to the Project Purchaser, and the Project Purchaser purchases the Property from the Authority "as is" without any warranties or indemnities from the Authority (other than those described in Section 4) or the State of Alaska, including without limitation, without any warranties or indemnities regarding Pollution or Hazardous Substances, as such terms are defined in the O&M Agreement. 5.2 Disclaimer of Warranties. EXCEPT AS TO ANY WARRANTIES OF TITLE TO BE PROVIDED IN THE AUTHORITY'S WARRANTY DEED, THE AUTHORITY MAKES NO REPRESENTATIONS OR WARRANTIES, AND HEREBY DISCLAIMS ALL WARRANTIES, WITH RESPECT TO, AND SHALL HAVE NO LIABILITY FOR: (l)THE CONDITION OF THE PROPERTY OR ANY BUILDING, STRUCTURE OR IMPROVEMENTS THEREON OR THE SUITABILITY, HABITABILITY, MERCHANTABILITY OR FITNESS OF THE PROPERTY AND PROJECT FOR PROJECT PURCHASER'S INTENDED USE OR FOR ANY USE WHATSOEVER; (2) COMPLIANCE WITH ANY BUILDING, ZONING OR FIRE LAWS OR REGULATIONS OR WITH RESPECT TO THE EXISTENCE OF OR COMPLIANCE WITH ANY REQUIRED PERMITS, OF ANY GOVERNMENTAL AGENCY; (3) THE PRESENCE OF ANY HAZARDOUS SUBSTANCES IN, ON, OR ABOUT THE PROPERTY OR IN ANY IMPROVEMENTS ON THE PROPERTY, INCLUDING WITHOUT LIMITATION ASBESTOS OR UREA- FORMALDEHYDE, OR THE PRESENCE OF ANY ENVIRONMENTALLY HAZARDOUS WASTES OR MATERIALS ON OR UNDER THE PROPERTY; (4)THE ACCURACY OR COMPLETENESS OF ANY PLANS AND SPECIFICATIONS, REPORTS, OR OTHER MATERIALS PROVIDED TO PROJECT PURCHASER; OR (5) ANY OTHER MATIER RELATING TO THE CONDITION OF THE PROPERTY OR USE OR OPERATION OF THE 12 PROJECT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE AUTHORITY SHALL HAVE NO LIABILITY TO PROJECT PURCHASER WITH RESPECT TO THE CONDITION OF THE PROPERTY UNDER COMMON LAW, OR ANY FEDERAL, STATE, OR LOCAL LAW OR REGULATION, INCLUDING BUT NOT LIMITED TO LAWS RELATED TO POLLUTION OR HAZARDOUS SUBSTANCES, AS SUCH TERMS ARE DEFINED IN THE O&M AGREEMENT, AND PROJECT PURCHASER HEREBY W AlVES ANY AND ALL CLAIMS WHICH THE PROJECT PURCHASER HAS OR MAY HAVE AGAINST THE AUTHORITY WITH RESPECT TO THE CONDITION OF THE PROPERTY. PROJECT PURCHASER ACKNOWLEDGES TO AUTHORITY THAT PROJECT PURCHASER HAS FULLY INSPECTED THE PROPERTY AND ASSUMES THE RESPONSIBILITY AND RISKS OF ALL DEFECTS AND CONDITIONS OF THE PROPERTY, INCLUDING SUCH DEFECTS AND CONDITIONS, IF ANY, THAT CANNOT BE OBSERVED BY CASUAL INSPECTION. AUTHORITY AND PROJECT PURCHASER ACKNOWLEDGE THAT THIS DISCLAIMER HAS BEEN SPECIFICALLY NEGOTIATED. THE PROVISIONS OF THIS PARAGRAPH SHALL SURVIVE THE CLOSING OF THIS AGREEMENT AND SALE OF THE PROPERTY TO THE PROJECT PURCHASER AND NOT MERGE INTO THE WARRANTY DEED AND BILL OF SALE. Section 6. Representations of Project Purchaser. The Project Purchaser represents to the Authority as follows: 6.1 Corporate Existence. Project Purchaser has been duly incorporated and validly exists as a corporation in good standing under the laws of the State, is duly qualified to do business as a corporation in the State, has all corporate powers, authorizations, consents, and approvals required to carry on its various businesses as now conducted, and is not in violation of any provision of its Articles of Incorporation or its Bylaws, each as amended, which violation would affect its obligations under this Agreement and the Project Note or any of the transactions contemplated hereby or thereby. 6.2 Authority to Execute Agreement. It has full power and authority to execute, deliver and perform this Agreement and the Project Note and to enter into and carry out the transactions contemplated by those documents. Execution, delivery and performance under this Agreement and the Project Note do not violate any provision of law applicable to the Project Purchaser or the Project Purchaser's Articles of Incorporation or its Bylaws, each as amended, and do not materially conflict with or result in a default under any agreement or instrument to which the Project Purchaser is a party or by which it is bound (or, to the extent of any such conflict or default, the same has been waived). This Agreement and the Project Note have been duly authorized, executed and delivered by the Project Purchaser and all steps necessary have been taken to constitute this Agreement and the Project Note valid binding obligations of the Project Purchaser in accordance with their respective terms except as those terms may be limited by applicable bankruptcy, insolvency, reorganization1· morato~um or similar .laws rel~ti~g to or affecting the enforcement of creditors' rights generally or by the effect of general pnnctples of equity (regardless of whether enforceability is considered in a proceed~g ~ equity or .at law) or in the case of rights in the nature of indemnity thereunder, as may be linuted by applicable law and principles of public policy. 13 6.3 Licenses and Approvals. By the Purchase Date, the Project Purchaser shall have received and shall then hold all regulatory approvals legally required for the Project Purchaser to own the Project. 6.4 Assignment and Assumption of Power Sales Agreement and 0 & M Agreement. Project Purchaser has full power and authority to accept the Authority's assignment of the Authority's rights and obligations under the Power Sales Agreement and the 0 & M Agreement, and all steps necessary have been taken to constitute the Power Sales Agreement and the 0 & M Agreement valid binding obligations of the Project Purchaser and the Power Purchaser in accordance with their respective terms, except as those terms may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors' rights generally or by the effect of general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law) or in the case of rights in the nature of indemnity thereunder, as may be limited by applicable law and principles of public policy. Acceptance of the assignment of the Authority's rights and obligations under the Power Sales Agreement and the 0 & M Agreement does not violate any provision of law applicable to the Project Purchaser or the Project Purchaser's Articles of Incorporation or its Bylaws, each as amended, and does not materially conflict with or result in a default under any agreement or instrument to which the Project Purchaser is a party or by which it is bound (or, to the extent of any such conflict or default, the same has been waived). Section 7. Affirmative Covenants of Project Purchaser. Project Purchaser covenants and agrees to observe and perform the following covenants as owner of the Project from and after the Purchase Date until the date on which all Bonds and Parity Obligations have been retired: 7.1 Creation of Liens. Project Purchaser shall not create or permit any liens or encumbrances on or against the Project, other than the Deed of Trust and any Permitted Encumbrance thereunder and any lien in favor of the Trustee securing the Bonds and Parity Obligations, and shall take all actions necessary to promptly remove any such lien or encumbrance from the Project. 7.2 Sale of Property. The Project Purchaser shall not sell, transfer or otherwise dispose of any Property constituting the Project, except that the Project Purchaser may sell or exchange at any time and from time to time any property or facilities constituting part of the Project provided (i) it shall determine that such property or facilities are not useful in the operation of the Project, or (ii) it shall file with the Trustee a certificate of an Authorized Officer of the Project Purchaser stating that the fair market value of the Property sold or exchanged does not exceed $500,000, or (iii) if such or fair market value exceeds $500,000, it shall file with the Authority and the Trustee an opinion of the Independent Consultant stating that the sale or exchange of such Property will not impair the ability of the Project Purchaser during the current or any future Fiscal Year to pay the Installment Payments required by Section 2.3. The proceeds of any such sale or exchange not used to acquire o~er prop7rty necessary or desirable. f~r the safe or efficient operation of the Project shall forthWith be patd to the Trustee for depostt m the 14 Renewal ~d ~eplace~ent Fund and shall be credited against any Renewal and Replacement Fund Contnbutwn reqmred for the current and any future Fiscal Year. 7.3 Lease or Grant of Use of Project. Except as provided in the Power Sales Agreement and the 0 & M Agreement, the Project Purchaser shall not permit any other person to use any property or facilities constituting the Project under any contract, lease, license, easement or other use arrangement, except the Project Purchaser also may lease or make contracts or grant licenses for the operation of, or make arrangements for the use of, or grant easements or other rights with respect to, any part of the Project, provided that any such lease, contract, license, arrangement, easement or right (i) does not impede the operation by the Project Purchaser or the Power Purchaser or their respective agents of the Project, (ii) does not relieve the Project Purchaser from its obligations under this Agreement or the Project Note; (iii) does not materially impair the purposes of the Act to be accomplished by the operation of the Project as provided in the Power Sales Agreement; (iv) does not in any manner impair or adversely affect the rights or security of the Holders under the Resolution; and (v) does not adversely affect the exemption from federal income taxation of the interest on the Bonds; and provided, further, that if the depreciated cost of the property to be covered by any such lease, contract, license, arrangement, easement or other right is in excess of $500,000 the Project Purchaser shall first file with the Authority and Trustee an opinion of the Independent Consultant that such action does not impair the ability of the Project Purchaser during the current or any future Fiscal Year to pay the Installment Payments required by Section 2.3. Any payments received by the Project Purchaser under or in connection with any such lease, contract, license, arrangement, easement or right in respect of the Project or any part thereof shall constitute Revenues. 7.4 Independent Consultant. The Project Purchaser shall cause an independent individual or firm of engineers or any other consultants or corporation that meets the requirements of the definition of Independent Consultant herein to be selected and employed to carry out the duties imposed on the Independent Consultant under this Agreement, the Power Sales Agreement, the 0 & M Agreement and the Resolution. 7.5 Annual Budget. The Project Purchaser shall prepare and file (or cause to be prepared and filed) with the Authority and the Trustee at least ten (1 0) days prior to each Fiscal Year an Annual Budget for the Project for such Fiscal Year. Each Annual Budget shall set forth in reasonable detail the estimated Revenues and Operating Expenses, including Project Costs and Installment Payments for the Fiscal Year, and including provision for the estimated amount to be deposited in and expended from each Fund and Account established under the Resolution. If the Project Purchaser or the Purchaser is required to incur extraordinary unanticipated Operating Expenses or to make unanticipated expenditures for Project Repairs not reflected in the Annual Budget then in effect, the Project Purchaser shall cause to be prepared, adopted and filed with the Authority and the Trustee not later than 30 day~ following . the incurrence of such expenses or expenditures on amended Annual Budget reflectmg all requtred adjustments in estimated Revenues and Operating Expenses. 7.6 Operation and Maintenance of Project. The Project Purc~aser shall be solely responsible for the operation and maintenance of the Project and shall use .Its ?est e~orts to operate and maintain the Project (or cause the Project to be operated and mamtaJ.ned) man 15 efficient and economical manner consistent with Prudent Utility Practice, the Power Sales Agreement and the 0 & M Agreement, and applicable federal and state laws and regulations relating to the licensing, use and operation of the Project. The Project Purchaser shall use its best efforts to cause the Project to be so maintained, preserved, reconstructed and kept, with the appurtenances and every part and parcel thereof, in good repair, working order and good condition, and shall from time to time use its best efforts to cause to be made all necessary and proper repairs, replacements and renewals so that at all times the operation of the Project may be properly and advantageously conducted. 7.7 Limitation on Operating Expenses and Other Costs. The Project Purchaser shall not incur or permit the incurrence of Project Operating Expenses or expenditures from the Renewal and Replacement Fund in excess of the reasonable and necessary amounts of such expenses or costs, respectively, and shall not expend or permit to be expended any amount for Operating Expenses or from the Renewal and Replacement Fund for costs payable therefrom for such Fiscal Year in excess of the respective amounts provided therefor in the Annual Budget or amended Annual Budget as then in effect; provided, that the foregoing shall not prohibit the Project Purchaser from incurring or expending any Operating Expenses or any costs for Project Repairs that, in accordance with Prudent Utility Practice, are necessary or appropriate to be made in connection with or as a result of any emergency involving the Project or any portion thereof endangering life or property. Nothing in this Section contained shall limit the amount which the Project Purchaser or the Purchaser may expend for Operating Expenses or other costs payable from the Renewal and Replacement Fund in any Fiscal Year provided any amounts expended therefor in excess of such Annual Budget shall be received by the Project Purchaser or the Purchaser from some source other than the Revenues, which source shall not be reimbursable out of Revenues. 7.8 Collection of Revenues. The Project Purchaser shall collect or otherwise cause the Project to produce, and pay or cause to be paid to the Trustee, revenues at least sufficient to pay the Purchase Price of the Project and all Installment Payments in full when due, including but not limited to Debt Service on all Outstanding Bonds and Parity Obligations, amounts required to maintain the Debt Service Reserve Fund at the Debt Service Reserve Requirement or reimburse the provider of any Reserve Fund Credit Facility for draws thereon, amounts required to maintain the Renewal and Replacement Fund at the level recommended by the Independent Consultant and in any event not less than the Minimum R & R Fund Requirement, and all other Installment Payments payable in respect of the Project and Outstanding Bonds and Parity Obligations. 7.9 No Free Service. The Project Purchaser shall not furnish or supply (or permit to be furnished or supplied) any use, output, capacity or service of the Project free of charge to any person, firm or corporation, public or private, except to the extent ordered by the Alaska Public Utilities Commission or other regulatory authority, and shall enforce payment of all amounts owing therefor. 7.10 Performance of this Agreement, Power Sales Agreement, 0 & M Agreement and Deed of Trust. The Project Purchaser shall perform its obligations under this Agreement, the Power Sales Agreement, the 0 & M Agreement and the Deed of Trust, shall 16 enforce performance by Power Purchaser of its obligations under the Power Sales Agreement and the 0 & M Agreement, and shall not permit or agree to any termination or amendment of or action thereunder that would in any manner lessen, postpone or restrict payment obligations there~der or that otherwise would materially impair or materially adversely affect the ability of the ProJect Purchaser to make or cause to be made the Installment Payments required by Section 2.3 of materially impair or materially adversely affect the rights or security of the Holders of Bonds and Parity Obligations. 7.11 Insurance. (a) The Project Purchaser shall insure the Project (or cause the Project to be insured) at all times against such risks and in such amounts, with such deductible provisions, or provide for a source of self insurance, as is customary in connection with the operation of facilities of a type and size comparable to the Project and as may reasonably and economically be obtained or secured. The determination of what is "customary" and what may be "reasonably and economically obtained or secured" within the meaning of the prior sentence shall be made by a nationally recognized, independent insurance broker or consultant with expertise in insuring projects comparable to the Project selected and retained by the Project Purchaser (the "insurance consultant"). (b) Each insurance policy required by this Section (i) shall be issued or written by a financially responsible insurer (or insurers), or by an insurance fund established by the United States of America or State of Alaska or an agency or instrumentality thereof, (ii) shall be in such form and with such provisions (including, without limitation and where applicable, loss payable clauses payable to the Trustee, waiver of subrogation clauses, provisions relieving the insurer of liability to the extent of minor claims and the designation of the named assureds) as are generally considered standard provisions for the type of insurance involved, and (iii) shall prohibit cancellation or substantial modification by the insurer without at least thirty days' prior written notice to the Trustee and the Authority. Without limiting the generality of the foregoing, all insurance policies, and other arrangements to the extent feasible, carried pursuant to this Section shall name the Trustee, the Authority and the Project Purchaser as parties insured thereunder as the respective interest of each of such parties may appear, and loss thereunder shall be made payable and shall be applied as provided in this Agreement and the Resolution. (c) The Project Purchaser covenants to the extent feasible and economically prudent, to carry insurance insuring against the risks and hazards to the Project Purchaser and the Project to the same extent that other entities comparable to the Project Purchaser and owning or operating facilities of the size and type comparable to the Project, and taking into account any special circumstances of the Project, carry such insurance. If the Project Purchaser determines that the insurance required by this Section in not available to the Project Purchaser at reasonable cost, and, in any case, every five years, from and after the Purchase ·Date, the Project Purchaser shall cause the insurance consultant to review the ins~ce coverage of, and the insurance required for, the Project Purchaser and the Project and make recommendations respecting the types, amounts and provisions of insurance that should be carried with respect to the Project Purchaser and the Project and their operation, maintenance and administration. A signed copy of the report of the insurance consultant shall be filed with the 17 Trustee and copies thereof shall be sent to the Authority, and the insurance requirements specified thereunder, including any and all of the dollar amounts set forth in this Section shall be deemed modified or superseded as necessary to conform with the recommendations codtained in that report of the insurance consultant. (d) Insurance maintained pursuant to this Section may be part of one or more master policies maintained by the Project Purchaser so long as the form of such policy and the coverage is the same as if a separate policy was in effect. (e) The Project Purchaser shall on or before January 1 of each year submit to the Trustee and the Authority a certificate verifying that all minimum insurance coverages required by this Agreement are in full force and effect as of the date of such certificate. 7.12 Reconstruction; Application of Insurance Proceeds. If any useful portion of the Project shall be damaged or destroyed, the Project Purchaser shall, as expeditiously as possible, continuously and diligently prosecute or cause to be prosecuted the reconstruction or replacement thereof, unless a determination has been made to end the Project pursuant to Section 15 of the Power Sales Agreement, or unless the Independent Consultant in an opinion or report filed with the Trustee and the Authority shall state that such reconstruction and replacement is not consistent with Prudent Utility Practice or is not in the best interests of the Project Purchaser and the Holders. The proceeds of any insurance paid on account of such damage or destruction shall be paid to and held by the Trustee in a special account in the Project Fund and made available for, and to the extent necessary be applied to, the cost of such reconstruction or replacement. Pending such application, such proceeds may be invested at the direction of the Project Purchaser in Investment Securities which mature not later than such time as shall be necessary to provide moneys when needed to pay such costs of reconstruction or replacement. The proceeds of any insurance not applied by the Project Purchaser within 36 months after receipt thereof to repairing or replacing damaged or destroyed property, or in respect to which notice in writing of intention to apply the same to the work of repairing or replacing the property damaged or destroyed shall not have been given to the Trustee by the Project Purchaser within such 36 months, or which the Project Purchaser shall at any time notify the Trustee are not to be so applied, in excess of $5,000,000 shall be used to retire Bonds and Parity Obligations on a pro rata basis in proportion to the Outstanding principal amount of each Series by purchase or redemption to the extent provided by the Supplemental Resolution and Parity Obligation Instrument authorizing the Bonds and Parity Obligations and the terms thereof. Notwithstanding the foregoing, in the event that payments are made from the Renewal and Replacement Fund for any such repairing of property damaged or destroyed prior to the availability of insurance proceeds, such proceeds when received by the Trustee shall be deposited in the Renewal and Replacement Fund to the extent of such payments therefrom. If the proceeds of insurance authorized by this Section to be applied to the reconstruction or replacement of any portion of the Project are insufficient for such purpose, the deficiency may be supplied out of moneys in the Renewal and Replacement Fund. 18 500041~07 7.13 Books and Records. (a) The Project Purchaser shall keep or cause to be kept proper books and records of all transactions relating to the Project, the Power Sales Agreement, the 0 & M Agreement and this Agreement, subject to inspection by the Authority and the Trustee and by the Holders of Bonds and Parity Obligations as required by the Resolution, and to timely provide the Authority and the Trustee with the financial and operating reports and notices of events as required by the Resolution. (b) The Project Purchaser shall annually, within 120 days after the close of each Fiscal Year, file with the Trustee and the Authority a copy of its audited financial statements for such Fiscal Year, including the following, setting forth in reasonable detail: (i) a balance sheet for the Project Purchaser showing assets, liabilities and equity at the end of such Fiscal Year; (ii) a statement of the Project Purchaser's revenues and expenses for such Fiscal Year, and (iii) a statement of cash flows as of the end of such Fiscal Year. The financial statements shall be accompanied by an opinion of an Accountant stating that the financial statements audited present fairly the fmancial position of the Project Purchaser at the end of the Fiscal Year, the results of its operations and its cash flows for the period examined, in conformity with generally accepted accounting principles. Any such audited fmancial statement may be presented on a consolidated or combined basis with other reports of the Project Purchaser, but only to the extent that such basis of reporting shall be consistent with that required hereunder. (c) The Project Purchaser shall file with the Trustee and the Authority (i) forthwith upon becoming aware of any Event of Default or default in the performance by the Project Purchaser of any covenant, agreement or condition contained in this Resolution, a certificate signed by an Authorized Officer of the Project Purchaser and specifying such Event of Default or default and (ii) within 120 days after the end of each Fiscal Year, a certificate signed by an Authorized Officer of the Project Purchaser stating that, to the best of his knowledge and belief, the Project Purchaser has kept, observed, performed and fulfilled each and every one of its covenants and obligations contained in this Agreement and there does not exist at the date of such certificate any default by the Project Purchaser under this Agreement or any Event of Default or other event which, with the lapse of time specified in Section 9.1, would become an Event of Default, or, if any such default or Event of Default or other event shall so exist, specifying the same and the nature and status thereof. 7.14 Tax Covenants. So long as any tax-exempt Bonds or tax-exempt Parity Obligations are outstanding, the Project Flu-chaser shall do or cause to be done all things required to maintain the exclusion of interest on tax-exempt Bonds and any tax-exempt Parity Obligations from gross income of the Holders thereof for federal income tax purposes, and_ not to. us~ or permit the use of the Project or proceeds of tax-exempt Bonds or tax-exempt Partty Obhgattons 19 or other amounts treated as proceeds thereof or take any other action that would cause interest on ~ax-exempt Bonds or any tax-exempt Parity Obligations to cease to be excluded from gross mcome of the Holders thereof for federal income tax purposes, except for Bonds held by a person who, within the meaning of Section 147(a) of the Code, is a "substantial user" of the Project or "related person." In particular, but without limitation of the generality of the foregoing covenant, so long as any tax-exempt Bonds or tax-exempt Parity Obligation are outstanding, the Project Purchaser shall use and operate the Project as facilities for the local furnishing of electric energy within the meaning of Section 142(a)(8) of the Code as and to the extent applicable to tax-exempt Bonds and Parity Obligations. 7.15 Payment of Taxes and Charges. The Project Purchaser shall timely pay and discharge (or cause to be paid and discharged) all taxes, assessments and other governmental charges, or required payments in lieu thereof, imposed on the Project and the revenues thereof, and all lawful claims for labor and materials and supplies, except such as are contested in good faith by proper legal proceedings. 7.16 Renewal and Replacement Fund. Pursuant to the Resolution, the Authority has established the Renewal and Replacement Fund held by the Trustee exclusively for Project purposes, including payment or reimbursement of the cost of Project Repairs and associated engineering, construction and administration costs, into which all Renewal and Replacement Fund Contributions have been deposited. The Project Purchaser shall continue to maintain (or cause to be maintained) the Renewal and Replacement Fund with respect to the Project as required by the Resolution, this Agreement and the Power Sales Agreement. Upon the retirement of all Bonds and Parity Obligations, the amount remaining in the Renewal and Replacement Fund shall be paid first to the Authority for any accrued and unpaid Installment Payments and then to the Project Purchaser. 7.17 Maintenance of Power Purchaser's System. The Project Purchaser, pursuant to the Power Sales Agreement, shall cause the Power Purchaser to maintain its electric utility system within the City and Borough of Juneau, Alaska, together with any other system directly interconnected therewith for the distribution, transmission and generation of Electric Power that is owned by the Power Purchaser, in good standing under the Power Purchaser's certificate of public convenience and necessity issued by APUC, and to operate and maintain such system in accordance with Prudent Utility Practice in such manner as will permit the Power Purchaser to timely pay in full all Project Costs required to be paid under the Power Sales Agreement and 0 & M Agreement and as will permit the Project Purchaser to timely pay in full all Installment Payments and Additional Payments required by this Agreement. 7.18 Assignment of Rights under Agreement. Except as provided in the Power Sales Agreement and the 0 & M Agreement and in Section 7 hereof, the Project Purchaser agrees that it shall not assign its rights, interests, or obligations hereunder. 7.19 Indemnification by Project Purchaser. The Project Purchaser releases the Authority from, agrees that the Authority shall not be liable for,_ and indemnify the Autho~ity against, all liabilities, claims, costs and expenses imposed upon, mcurred by or asserted ag~st the Authority, without gross negligence or intentional misconduct on the part of the Authonty 20 relating to any of the following: (a) any loss or damage to property or injury to or death of or loss by any person that may be occasioned by any cause whatsoever pertaining to the construction maintenan~e, operation and use ofthe Project; (b) any breach or default on the part of the Projec; Purchaser rn the performance of any covenant or agreement of the Project Purchaser under this Agreement, the Project Note or any related document, or arising from any act or failure to act by ~e Pr.oject Purchaser, or any of its agents, contractors, servants, employees or licensees; (c) any v10latJ.on by the Project Purchaser of any contract, agreement or restriction relating to the Project; (d) any fraud or misrepresentation or omission contained in the information relating or pertaining to the financial condition of the Project Purchaser which, if known to a purchaser of Bonds might be considered a material factor in a decision whether or not to purchase Bonds; (e) the performance of this Agreement and the Resolution; (f) the trading, redemption or servicing of· Bonds, and the provision of any information or certification furnished in connection therewith concerning the Bonds, the Project or the Project Purchaser (including, without limitation, the Resolution, this Agreement and any information furnished by the Project Purchaser for, and included in, or used as a basis for preparation of, any certifications, information statements or reports furnished by the Authority), and any other information or certification obtained from the Project Purchaser to assure the exclusion of the interest on the Bonds from gross income for federal income tax purposes; (g) the Project Purchaser's failure to comply with any requirement of this Agreement or the Code pertaining to such exclusion of that interest including the covenants in Section 7.14 hereof; (h) any law, ordinance or regulation (including any environmental law or hazardous waste law) violation in connection with the Project; and (i) any claim, action or proceeding brought with respect to the matters set forth in (a), (b), (c), (d), (e), (t), (g) and (h) above. The Project Purchaser agrees to indemnify the Trustee for and to hold it harmless against all liabilities, claims, costs and expenses incurred without negligence or bad faith on the part of the Trustee, on account of any action taken or omitted to be taken by the Trustee in accordance with the terms of this Agreement, the Bonds, the Project Note or the Resolution or any action taken at the request of or with the consent of the Project Purchaser, including the costs and expenses of the Trustee in defending itself against any such claim, action or proceeding brought in connection with the exercise or performance of any of Is powers or duties under this Agreement, the Bonds, the Resolution or the Project Note. In case any action or proceeding is brought against the Authority or the Trustee in respect of which indemnity may be sought hereunder, the party seeking indemnity promptly (but in any event within thirty (30) days of learning of such action or proceeding) shall give notice (the "Project Purchaser Notice") of that action or proceeding to the Project Purchaser, and the Project Purchaser upon receipt of that notice shall have the right to assume the defense of the action or proceeding; provided, however that if the party seeking indemnity has been advised in an opinion of counsel that there may be legal defenses available to it which are adverse to or in conflict with those available to the Project Purchaser or other indemnified parties, which in the opinion of counsel should be handled by separate counsel, the Project Purchaser shall not have the right to assume the. defense of such action on behalf of the indemnified party, but the Project Purchaser shall be responstble for the reasonable fees and expenses of the indemnified party in conducting its defense; provided, furth~r, that failure of a party to give that notice shall not relieve the Project Purchase~ from any of .1ts obligations under this Section unless that failure prejudices the defense of the act10n or proceedmg 21 by the Project Purchaser; and provided further that the Company shall not be obligated to make any payments with respect to fees and expenses incurred prior to the giving of the Project Purchaser Notice. At its own expense, an indemnified party may employ separate counsel and participate in the defense. The Project Purchaser shall not be liable for any fees and expenses incurred without the consent of the Project Purchaser, which consent shall not be unreasonably withheld. The Project Purchaser shall not be liable for any settlement made without the consent of the Company, which consent may be withheld at the Project Purchaser's sole discretion. The indemnification set forth above is intended to and shall include the indemnification of all affected officials, directors, board members, officers, legal counsel, staff and employees of the Authority and the Trustee, respectively. This indemnification is intended to and shall be enforceable by the Authority and the Trustee, respectively, to the full extent permitted by law, and shall survive the payment in full of the Bonds, the termination of this Agreement, and the resignation or removal of the Trustee. Section 8. Prepayment and Redemption Provisions. 8.1 Redemptions General. (a) So long as no Event of Default shall have occurred and be continuing, the Project Purchaser shall have the right, but only upon the request and direction of the Power Purchaser, to direct the Authority to redeem Bonds or Parity Obligations pursuant to any provisions of the Resolution that permit the Authority to direct the Trustee to redeem Bonds or Parity Obligations in an optional or extraordinary optional redemption. (b) Any such direction by the Project Purchaser to the Authority pursuant to Section 8.1(a) shall be subject to the limitations that (i) any excess proceeds of tax- exempt Bonds or tax-exempt Parity Obligations transferred from the Project Fund to the Revenue Fund pursuant to Section 5.3.6 of the Resolution that are required by an Opinion of Counsel to be used to redeem such Bonds or Parity Obligations shall be used only for that purpose~ and (ii) the Project Purchaser shall not direct that any funds held by the Trustee in the Rebate Fund or in other Funds under the Resolution reasonably expected to be required to pay any Rebate Amount be used to carry out any optional or extraordinary optional redemption. 8.2 Optional Prepayment of Purchase Price. The Project Purchaser, at its option, may pay the remaining balance of the Purchase Price or any portion thereof in advance at the times and Redemption Prices and after notice to the Authority and the Trustee in the manner provided in the Resolution. The Project Purchaser shall pay the Redemption Price of any Bonds or Parity Obligations so called for redemption at the times and in the manner required by the Resolution. 8.3 Extraordinary Optional Redemption. The Project Purchaser may direct the redemption of the unpaid principal balance of all Outstanding Bonds and Parity Obligations in accordance with the applicable provisions of the Resolution upon the occurrence of any of the following events: 22 (a) The Project shall have been damaged or destroyed to such an extent that, in the Project Purchaser's reasonable judgment, (1) the Project cannot reasonably be expected to be restored, within a period of twelve (12) months, to the condition immediately preceding such damage or destruction, or (2) the normal use and operation of the Project are reasonably expected to be prevented for a period of twelve (12) consecutive months. (b) Title to, or the temporary use of, all or a significant part of the Project shall have been taken under the exercise of the power of eminent domain (1) to such extent that the Project cannot, in the Project Purchaser's reasonable judgment reasonably be expected to be restored within a period of twelve (12) months to a condition of usefulness comparable to that existing prior to the taking, or (2) as a result of the taking, normal use and operation of the Project are reasonably expected, in the Project Purchaser's reasonable judgment, to be prevented for a period of twelve (12) consecutive months. (c) As a result of any changes in the Constitution of the State, the Constitution of the United States of America, or state or federal laws or as a result of legislative or administrative action (whether state or federal) or by fmal decree, judgment or order of any court or administrative body (whether state or federal) entered after the contest thereof by the Authority or the Project Purchaser in good faith, this Agreement shall have become void or unenforceable or impossible of performance in accordance with the intent and purpose of the parties as expressed in this Agreement, or if unreasonable burdens or excessive liabilities shall have been imposed with respect to the Project or the operation thereof including, without limitation, federal state or other ad valorem, property, income or other taxes not being imposed on the date of this Agreement other than ad valorem taxes presently levied upon privately owned property used for the same general purpose as the Project or the facility of which it is a part. (d) The Project Purchaser shall have delivered to the Authority and the Trustee an Opinion of Counsel to the effect that, as a result of a change in federal tax law that applies to any outstanding tax-exempt Bonds or tax-exempt Parity Obligations, interest on such Bonds or Parity Obligations is no longer excluded from gross income of the Holders thereof for federal income tax purposes. If the Project Purchaser determines to direct any such extraordinary optional redemption of Bonds and Parity Obligations, the Project Purchaser shall, within ninety (90) days following the event permitting the redemption of the Bonds and Parity Obligations, give notice to the Authority and to the Trustee specifying the date on which the Project Purchaser will deliver the funds required for that redemption to the Trustee, which date shall be not more than ninety (90) days from the date that notice is mailed and shall make arrangements satisfactory to the Trustee for the giving of the required notice of redemption. 8.4 Mandatory Redemption in Event of a Determination of Taxability. If, as provided in the Bonds and the Resolution, the Bonds or any Parity Obligations become subject to mandatory redemption because a Determination of Taxability (as such term is defmed in the Resolution) shall have been made with respect thereto, the Project Purchaser shall deliver to the Trustee, upon the date requested by the Trustee, the amount needed to pay the Redemption Price 23 500041.50.07 of the Bonds or Parity Obligations in accordance with the mandatory redemption provisions relating thereto set forth in the Bonds and the Resolution. 8.5 Amounts Payable on Prepayment. The amount payable by the Project Purchaser to the Trustee in the event of an optional, extraordinary optional or mandatory redemption shall be the sum of the following: (i) An amount of money which, when added to the money and investments held to the credit of the Debt Service Fund and, in the case of a redemption of all Outstanding Bonds and Parity Obligations, the Debt Service Reserve Fund and the Renewal and Replacement Fund, will be sufficient pursuant to the provisions of the Resolution to pay, at the applicable Redemption Price, and discharge all then Outstanding Bonds and Parity Obligations to be redeemed on the earliest applicable redemption date, that amount to be paid to the Trustee, plus (ii) An amount of money equal to the Additional Payments relating to the Bonds or Parity Obligations accrued and to accrue until actual final payment and redemption of the Bonds or Parity Obligations, that amount or applicable portions thereof to be paid to the Trustee or to the persons to whom those Additional Payments are or will be due, plus (iii) Any other amounts due and payable by Project Purchaser to Authority or Trustee under this Agreement or the Resolution. Section 9. Events of Default and Remedies. 9.1 Events of Default. Each of the following shall be an Event of Default under this Agreement: (a) Any Installment Payment or Additional Payment shall not be paid on or prior to the date on which that Installment Payment or Additional Payment is due and payable; (b) The Project Purchaser shall fail to deliver to the Trustee, or cause to be delivered on its behalf, the money needed to redeem any outstanding Bonds or Parity Obligations in the manner and upon the date requested in writing by the Trustee as provided in Section 8.2 of this Agreement; (c) The Project Purchaser shall fail to observe and perform any other agreement, term or condition contained in this Agreement, and the continuation of such failure for a period of thirty (30) days after notice thereof shaJl have been given to the Project Purchaser by the Authority or the Trustee, or for such longer period as the Authority and the Trustee may agree to in writing; provided, that if the failure is other than the payment of money and is of such nature that it can be corrected but not within the applicable period, that failure shall not constitute an Event of Default so long as the Project Purchaser institutes curative action within the applicable period and diligently pursues that action to completion; 24 (d) The Project Purchaser shall: (i) admit in writing its inability to pay its debts generally as they become due; (ii) have an order for relief entered in any case commenced by or against it under the federal bankruptcy laws, as now or hereafter in effect; (iii) commence a proceeding under any other federal bankruptcy, insolvency, reorganization or similar law, or have such a proceeding commenced against it and either have an order of insolvency or reorganization entered against it or have the proceeding remain undismissed and unstayed for ninety (90) days; (iv) make an assignment for the benefit of creditors; or (v) have a receiver or trustee appointed for it or for the whole or any substantial part of its property; (e) Any material representation or warranty made by the Project Purchaser herein or any statement in any report, certificate, financial statement or other instrument furnished in connection with this Agreement or with the purchase of the Bonds shall at any time prove to have been false or misleading in any material respect when made or given; (f) The Project Purchaser shall fail to enforce the Power Sales Agreement in accordance with its terms and shall fail to charge and collect amounts due under the Power Sales Agreement; and (g) The occurrence of an Event of Default under the Resolution. Notwithstanding the foregoing, if, by reason of Force Majeure, the Project Purchaser is unable to perform or observe any agreement term or condition hereof which would give rise to an Event of Default under subsection (c) hereof, the Project Purchaser shall not be deemed in default during the continuance of such inability. However, the Project Purchaser shall promptly give notice to the Trustee and the Authority of the existence of an event of Force Majeure and shall use commercially reasonable efforts to remove the effects thereof provided that the settlement of strikes, lockouts, or other industrial disturbances shall be entirely within its discretion. The term Force Majeure shall mean, without limitation, the following: (i) acts of God; strikes, lockouts or other industrial disturbances acts of public enemies; orders or restraints of any kind of the government of the United States of America or of the State or any of their departments, agencies, political subdivisions or officials, or any civil or military authority; insurrections; civil disturbances; riots; epidemics; landslides; lightning; earthquakes; fires; hurricanes; tornadoes; storms; droughts; floods; arrests; restraint of government and people; explosions; breakage, malfunction or accident to facilities, machinery, transmission pipes or canals; partial or entire failure of utilities; shortages of labor, materials, supplies or transportation; or (ii) any cause, circumstance or event not reasonably within the control of the Project Purchaser that has a material adverse effect on the business, operations, assets, financial condition or business prospects of the Project Purchaser. 25 The occurrence of an Event of Default under subsection (d) above, and the exercise of remedies upon any such default, shall be subject to any applicable limitations of federal bankruptcy law affecting or precluding that default or exercise during the pendency of or immediately following any bankruptcy, liquidation or reorganization proceedings. 9.2 Remedies on Default. Whenever an Event of Default shall have happened and be continuing, any one or more of the following remedial steps may be taken: (a) If acceleration of the principal amount of the Bonds has been declared pursuant to the Resolution, the Trustee shall declare all Installment Payments and Additional Payments to be immediately due and payable~ (b) The Authority or the Trustee may have access to, inspect, examine and make copies of the books, records, accounts and fmancial data of the Project Purchaser pertaining to the Project; and (c) The Authority or the Trustee may pursue all remedies now or hereafter existing at law or in equity to collect all amounts then due and thereafter to become due under this Agreement or the Project Note or to enforce the performance and observance of any other obligation or agreement of the Project Purchaser under those instruments. Any amounts collected as Installment Payments or applicable to Installment Payments and any other amounts which would be applicable to payment of principal of and interest on the Bonds collected pursuant to action taken under this Section shall be applied first to payment of the fees and expenses of the Trustee and the Authority in connection with such Event of Default and the collection of Installment Payments, and then shall be paid into the Debt Service Fund and applied in accordance with the provisions of the Resolution or, if the outstanding Bonds have been paid and discharged in accordance with the provisions of the Resolution, shall be paid as provided in the Resolution for transfers of remaining amounts in the Debt Service Fund. The provisions of this Section are subject to the further limitation that the rescission by the Trustee of its declaration that all of the Bonds are immediately due and payable also shall constitute an annulment of any corresponding declaration made pursuant to paragraph (a) of this Section and a waiver and rescission of the consequences of that declaration and of the Event of Default with respect to which that declaration has been made, provided that no such waiver or rescission shall extend to or affect any subsequent or other default or impair any right consequent thereon. 9.3 No Remedy Exclusive. No remedy conferred upon or reserved to the Authority or the Trustee by this Agreement is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or the Project Note, or now or hereafter existing at law, in equity or by statute. No delay or omission to exercise any right or po~er accruing upon any default shall impair that night or power or shall be construed to be a watver thereof but any such night and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Authority or the Trustee to exercise any remedy 26 rese~ed to it in this Section, it shall not be necessary to give any notice, other than any notice reqmred by law or for which express provision is made herein. 9.4 Agreement to Pay Attorneys' Fees and Expenses. If an Event of Default occurs and the Authority or the Trustee incurs expenses, including reasonable attorneys' fees, in connection with the enforcement of this Agreement or the Project Note or the collection of sums due thereunder, the Project Purchaser shall reimburse the Authority and the Trustee as applicable, for the reasonable expenses so incurred upon demand. ' 9.5 No Waiver. No failure by the Authority or the Trustee to insist upon the strict performance by the Project Purchaser of any provision hereof shall constitute a waiver of their right to strict performance and no express waiver shall be deemed to apply to any other existing or subsequent right to remedy the failure by the Project Purchaser to observe or comply with any provision hereof. 9.6 Notice of Default. The Project Purchaser shall provide written notice to the Trustee immediately if it becomes aware of the occurrence of any Event of Default hereunder or of any fact, condition or event which, with the giving of notice or passage of time or both, would become an Event of Default. Section 10. Successors; Assignment. This Agreement shall be binding upon and inure to the benefit of the Authority and any governmental successor thereto, and also shall be binding upon and inure to the benefit of Project Purchaser and its corporate successors. This Agreement shall not be assignable by Project Purchaser to any other person or entity, and any such purported assignment shall be void. Section 11. Assignment of Authority's Rights. To secure the payment of the Bonds and Parity Obligations in accordance with their terms the Authority hereby assigns to the Trustee, for the benefit of the Holders, without recourse, all of its rights, title and interest in this Agreement and the Project Note, except for the Unassigned Authority Rights. The Authority's duties hereunder are not assigned. By such assignment, the Trustee shall succeed to all the rights and privileges of the Authority hereunder to the extent of such assignment. ALL REFERENCES TO THE AUTHORITY HEREIN SHALL BE TREATED AS REFERENCES TO THE TRUSTEE, ACTING AS ASSIGNEE AND DELEGATEE OF THE AUTHORITY TO THE EXTENT THAT THE RIGHTS OF THE AUTHORITY HAVE BEEN ASSIGNED TO THE TRUSTEE, EXCEPT THAT THOSE REFERENCES CONTAINED IN THE AUTHORITY UNASSIGNED AUTHORITY RIGHTS SECTIONS SHALL BE TREATED AS REFERRING TO THE AUTHORITY ONLY. The Project Purchaser hereby consents to the assignment of rights set forth in this Section 11 and agrees to faithfully render the performance of all of its duties and obligations hereunder to the Trustee except for the Unassigned Authority Rights, which shall be rendered only to or at the direction of the Authority. 27 When all principal of and premium, if any, and interest due on the Bonds and the Parity Obligations and all amounts owed to the Trustee under the Resolution are fully paid, all obligations of the Trustee hereunder shall terminate, and the Trustee shall release and assign to the Authority any remaining interest it has in the Deed ofTrust, the Project Note and this Agreement. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed the day and year first above written. ALASKA INDUSTRIAL DEVELOPl\1ENT AND EXPORT AUTHORITY By: Its: SNETTISHAM ELECTRIC CO:MP ANY By: ---------------------------------- Its: 28 Nores ________________________ __ S000414'2.06 SNETTISHAM HYDROELECTRJC PROJECT OPERATIONS AND MAINTENANCE AGREEMENT between ALASKA ELECTRIC LIGHT AND POWER COMPANY ("Operator") and ALASKA INDUSTRJAL DEVELOPMENT AND EXPORT AUTHORITY A Public Corporation of the State of Alaska ("Authority") TABLE OF CONTENTS Section 1. Definitions ................................................................................................................. 1 Section 2. Responsibilities of Operator ..................................................................................... 5 (a) Preparation of Annual Operating Budget .................................................... 5 (b) Relationship of the Parties ........................................................................... 6 (c) Services ........................................................................................................ 6 (d) Manner of Performance ............................................................................... 6 (e) Emergency ................................................................................................... 6 (f) Limitations ................................................................................................... 7 (g) Subcontracting ............................................................................................. 7 (h) Provision of Power to Alaska Department ofFish and Game ..................... 7 Section 3. Payment of O&M Expenses and Project Work ........................................................ 7 (a) Payment of O&M Expenses ......................................................................... 7 (b) Project Work ................................................................................................ 8 Section 4. Inspections, Books and Records ............................................................................... 9 (a) Inspections ................................................................................................... 9 (b) Books and Records .................................................................................... 1 0 Section 5. Insurance ................................................................................................................. 1 0 (a) Evidence ofinsurance ................................................................................ 10 (b) Insurance Premhnns ................................................................................... 1 0 (c) Insurance Proceeds ..................................................................................... 11 (d) Warranty and Other Recoveries ................................................................. 11 (e) Insurance Consultant. ................................................................................. 11 (f) Coverage .................................................................................................... 11 Section 6. Environmental Matters ............................................................................................ 13 (a) Liability for Environmental Contamination ............................................... 13 (b) Environmental Standards ........................................................................... 13 (c) Remediation ............................................................................................... 14 (d) Permits ....................................................................................................... 14 (e) Insurance .................................................................................................... 14 (f) Hazardous Substances ................................................................................ 15 Section 7. Indemnity; Limitation of Liability .......................................................................... 15 (a) Indemnitylflold Harmless .......................................................................... 15 (b) Notice ofClaimsffender ............................................................................ 16 (c) Release ....................................................................................................... 16 (d) Limitation of Liability ............................................................................... 16 (e) General ....................................................................................................... 16 Section 8. Dispute Resolution .................................................................................................. 16 (a) General ........................................ ; .............................................................. 16 (b) Independent Consultant. ............................................................................ 17 (c) Judicial Review/Binding Arbitration ......................................................... 17 (d) Selection of Arbitrator(s) ........................................................................... 17 (e) Procedures .................................................................................................. 18 (f) Hearing -Law -Appeal Limited ................................................................ 18 50004142.06 i (g) Provisional Remedies............................................................................. 18 (h) Attomeys 1 Fees and Costs....................................................................... 19 Section 9. Term; Termination of Agreement; Assignment................................................... 19 (a) Term...................................................................................................... 19 (b) Termination of Agreement. .... . .. ........ .... .. .. .. .. .. .. .. ........... ... .. ....... ............ 19 (c) Assignment. . .. .. .. .. .. .. .. .. ... . .. .. . . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 19 Section 10. Miscellaneous..................................................................................................... 19 (a) Power Sales Agreement. ........................................................................ 19 (b) Notices, Computation Of Time And Holidays. .. .. .. . .. .. .. .. . .. .. .. .. .... .. .. .. ... .. 19 (c) Applicable Law...................................................................................... 20 (d) Availability Of Information.................................................................... 20 (e) Severability............................................................................................ 20 (f) Waiver Not Continuing.......................................................................... 20 (g) Construction of Agreement. . .. .. .. .... .. .................. .... .. .. .. .. .. .. .... .. .. . ..... .. .. .. 20 (h) Covenant To Act In Good Faith. ....... ...... .......................... .... .............. ... 21 (i) No Third-Party Beneficiary.................................................................... 21 G) Section Headings. ... ...... .. .... .. .... .... ...... .. .... ................ .............. .... ...... ..... 21 (k) Multiple Copies...................................................................................... 21 EXHIBIT A-Form of Requisition Request EXHIBIT B -Services To be Performed S0004142.06 11 OPERATIONS AND MAINTENANCE AGREEMENT THIS OPERATIONS AND MAINTENANCE AGREEMENT (the "Agreement") is dated as of July 15, 1997, by the ALASKA ELECTRIC LIGHT AND POWER COMPANY, an Alaska corporation (the "Operator"), and the ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY, a public corporation of the State of Alaska (the "Authority"). RECITALS A. The Authority has purchased the Snettisham hydroelectric project (the "Project") from the United States Department of Energy, Alaska Power Administration. B. The Operator currently owns and operates an electric utility system within the ~ity and Borough of Juneau. C. Pursuant to the Power Sales Agreement dated the date hereof (the "Power Sales Agreement") between the Operator and the Authority, the Operator has agreed to purchase and the Authority has agreed to sell electric power generated by the Project. D. The Authority and the Operator have agreed that the Operator shall perform operation and maintenance services for the Project as more fully described in this Agreement. The parties intend and agree that ( 1) the Operator shall have responsibility for operating the Project, except as otherwise provided herein; (2) the Authority's responsibilities under this Agreement and the Power Sales Agreement shall be primarily those related to Project fmance, as distinct from Project operations; and, therefore (3) this Agreement and the Power Sales Agreement shall be implemented and interpreted at all times in a manner that allows the Operator the maximum Project-related operating flexibility consistent with the Authority's responsibilities under this Agreement, the Power Sales Agreement and the Resolution (as defined below). NOW, THEREFORE, the parties agree as follows: Section 1. apply: Definitions. For the purposes of this Agreement, the following definitions "Additional Bonds" means any bonds of the Authority (including any bonds issued to refund the Bonds) issued pursuant to the Resolution on a parity of lien with the Bonds on the Project and Project revenues. "Administrative Procedures" has the meaning set forth in Exhibit B. "Agreement" means this Operations and Maintenance Agreement. "Annual Operating Budget" has the meaning set forth in Section 2(a). 1 50004142.06 "APUC" means the Alaska Public Utilities Commission, and/or any successor thereto. "Authority" means the Alaska Industrial Development and Export Authority and/or any successor agency thereto. "Bonds" means all bonds, notes, or other evidences of indebtedness issued by the Authority pursuant to the Resolution, the proceeds of which are used to finance or refinance the acquisition or construction of the Project and pay and/or reimburse related costs of acquisition or construction of the Project and Project Work. "Dispute Resolution" means the process described in Section 8. "Electric Power" or "Power" means electric energy or electric capacity or both. Where the context of this Agreement requires a distinction, electric energy is specified and/or expressed in kilowatthours or megawatthours and electric capacity is specified and/or expressed in kilowatts or megawatts. "Enforcement or Remedial Action" means any action taken by any person or entity to enforce compliance with, or to collect or impose penalties, fines, or other sanctions, including any claim for damages, under any Environmental Law. "Environmental Law" means any Federal, state or local laws, ordinances, codes, regulations, rules, orders, or decrees, relating to, or imposing liability or standards of conduct concerning any environmental matters, including, but not limited to, Pollution, air pollution, water pollution, noise control, soil condition, industrial hygiene, Hazardous Substances (including the treatment, storage, use or disposal of Hazardous Substances). "Environmental Liabilities" means claims or liabilities for any damages, remediation (including, without limitation, costs incurred in connection with any investigation of site conditions or any clean up, remedial, removal action or restoration work), fines, penalties, judgments, costs and expenses (including, without limitation, costs of defense, settlement, and reasonable attorneys' fees), charges, forfeitures, or liens relating to Pollution or Hazardous Substances. "Fiscal Year" means that twelve-month period starting January 1 of a calendar year through and including December 31 of the same calendar year. The initial Fiscal Year for purposes of this Agreement is that portion of the twelve-month period starting on the "Effective Date," as defmed in the Power Sales Agreement, through and including the following December 31. If that portion of the calendar year is shorter than ninety (90) days the parties shall determine the initial Fiscal Year, which must end on a December 31 and may not be longer than 456 days. The last Fiscal Year for purposes of this Agreement shall be that portion of the twelve-month period between the end of the last full (i.e., 12-month) Fiscal Year and the expiration of this Agreement. "Hazardous Substance" means any flammables, explosives, radioactive materials, crude or refined petroleum, pollutants, contaminants, or any hazardous, toxic, or dangerous waste, 2 S0004142.06 substance, or material, including asbestos, defined as such in (or for purposes of) the Comprehensive Environmental Response, Compensation, and Liability Action (42 U.S.C.A. Sec. 9601 et.seq.), any so-called "Superfund" or "Superlien" law, or any other Environmental Law, including Alaska Statues Title 46, Chapters .03, .08 and .09, as now or at any time hereafter in effect. "Independent Consultant" means an independent individual or firm of engineers or any other consultant that is nationally recognized and has expertise with respect to electric power projects comparable to the Project, selected by agreement of the Authority and the Operator and meeting the requirements of the Resolution. For purposes hereof, "independent" means a person who is in fact independent and does not have any substantial interest, direct or indirect, in the Authority or the Operator. "Insurance Consultant" means a nationally recognized insurance broker or consultant with expertise in insuring projects comparable to the Project, selected by agreement of the Authority and the Operator and meeting the requirements of the Resolution. "Necessary Approvals" has the meaning specified in the Power Sales Agreement. "O&M Costs" has the meaning set forth in Section 2(a)(i). "Operator" means Alaska Electric Light and Power Company. "Operating Procedures" has the meaning set forth in Exhibit B. "Parity Obligations" means any bonds, notes or other evidences of indebtedness (including any such indebtedness issued to refund outstanding Parity Obligations) issued by the Operator, or by any issuer other than the Authority for the Operator, that are authenticated and delivered by the Trustee and are to be secured by the Project and Project revenues on a parity of lien with outstanding Bonds. "Pollution" means the contamination or altering of waters, land, subsurface land or air of the state in a manner which creates a nuisance or makes waters, land, subsurface land or air unclean, or noxious, or impure, or unfit so that they are actually or potentially harmful or detrimental or injurious to public health, safety or welfare, to domestic, commercial, industrial or recreational use, or to livestock, wild animals, birds, fish or other aquatic life. "Power Sales Agreement" means the Power Sales Agreement dated the date hereof between the Operator and the Authority, as the same may be amended, supplemented and modified from time to time. "Project" means the Project as defined in the Power Sales Agreement. "Project Expansions" means Project improvements, betterments, additions and expansions (other than Project Repairs) that are consistent with Prudent Utility Practice. 3 50004142.06 "Project Repairs" means repairs, maintenance or replacements of existing parts, fixtures or equipment with respect to the Project, which (i) are required by federal or state law or this Agreement or are otherwise necessary to keep the Project in good and efficient operating condition, consistent with Prudent Utility Practice, and (ii) are chargeable to the capital account of the Project under the Code. Repairs, maintenance or replacements of existing parts, fixtures or equipment which result in improvement of the Project are not excluded from this definition .. "Project Work" means Project Repairs and/or Project Expansions. "Prudent Utility Practice" shall mean at a particular time any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry at such time, or which, in the exercise of reasonable judgment in light of facts known at such time, could have been expected to accomplish the desired results at the lowest reasonable cost consistent with good business practices, reliability, safety and reasonable expedition. Prudent Utility Practice is not required to be the optimum practice, method or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts which could have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability, safety and expedition. Prudent Utility Practice includes due regard for manufacturers' warranties and the requirements of governmental agencies of competent jurisdiction and shall apply not only to functional parts of the Project, but also to appropriate structures, landscaping, painting, signs, lighting and other facilities. In evaluating whether any matter conforms to Prudent Utility Practices, the parties shall take into account, among other things, (a) the nature of the parties hereto under the laws of the State of Alaska and their statutory duties and responsibilities and (b) the objectives of (i) complying with environmental and safety . regulations and management agreements, (ii) minimizing the financial risk of the parties hereto and (iii) providing the Operator with flexibility in the conduct of its business affairs. For purposes of this Agreement, "national standards for the industry" means Prudent Utility Practice. "Reimbursable Administrative Costs" means those expenses of the Authority specific to the operation, maintenance and administration of the Project limited to (a) direct out-of-pocket expenses of a Project-specific nature, such as insurance, license fees, Project-specific travel costs, and the like; (b) Project-specific legal and consulting fees, including but not limited to the cost of inspections pursuant to Section 4 and the Independent Consultant and Insurance Consultant, if retained by the Authority; and (c) an appropriate pro rata portion of the salary and salary-related expenses of any Authority employees for time worked directly by those employees on Project matters. Reimbursable Administrative Costs of the Authority shall not include (a) any share of the Authority's general overhead, or administrative and general costs, whether allocated or not, or (b) any fees or costs of professional services retained by the Authority that are not specific to the Project. This definition is intended to reflect that the Authority's responsibilities under the Power Sales Agreement and this Agreement do not normally include operation of the Project; that the Authority is not expected to possess, develop, or contract for significant Project-related operational expertise or capabilities; and that the Authority's Project-:-related costs should normally be limited to those reasonably necessary to allow the Authority to perform its other responsibilities under the Power Sales Agreement, which are primarily related to fmancing. 4 50004142.06 "Reimbursable Extraordinary Administrative Costs" means those expenses of the Authority specific to the operation, maintenance and administration of the Project limited to those that (a) would properly have been Reimbursable Administrative Costs in the Annual Operating Budget, had they been anticipated at the time the Annual Operating Budget was prepared; and (b) arose unexpectedly and/or in an emergency; and (c) the Operator either agrees should be reimbursed before such Costs are incurred, or circumstances have reasonably prevented the Authority from seeking such advance agreement. Any disagreement regarding Reimbursable Extraordinary Administrative Costs may be submitted to Dispute Resolution. "Renewal and Replacement Fund" or "R & R Fund" means the Renewal and Replacement Fund established by the Authority pursuant to the Resolution and Section 7 of the Power Sales Agreement. "Requisition Request" means a request in the form of Exhibit A hereto for a withdrawal from the R & R Fund, as such form may be amended by agreement of the Authority and the Operator. "Resolution" means the Snettisham Power Revenue Bond Resolution adopted by the Authority on July 22, 1998, as the same may be amended, modified or supplemented from time to time pursuant to Supplemental Resolutions adopted in accordance with the provisions of the Resolution. Section 2. Responsibilities of Operator (a) Preparation of Annual Operating Budget. The Operator shall operate and maintain the Project in accordance with an operating plan and budget that is prepared by the Operator and accepted by the Authority for each Fiscal Year during which this Agreement is in effect as provided below. (i) Prior to each October 1, the Authority shall deliver to the Operator an itemized description of the Authority's estimated Reimbursable Administrative Costs for the following Fiscal Year. No later than each November 1, the Operator shall prepare and deliver to the Authority a proposed Annual Operating Budget for the following Fiscal Year. Each Annual Operating Budget shall set forth in reasonably specific detail all costs and expenses reasonably expected to be incurred during such Fiscal Year for the operation and maintenance of the Project (collectively, the "O&M Costs"), including the Authority's Reimbursable Administrative Costs and all Project Repairs consistent with Prudent Utility Practices. The Annual Operating Budget shall indicate whether any O&M Cost included therein is to be borne by the Operator or paid out of a withdrawal from the R & R Fund in accordance with the provisions of Section 3(b ). (ii) If within forty-five (45) days of receipt by the Authority of a proposed Annual Operating Budget from the Operator, the Authority does not notify the Operator in writing of any questions, comments, objections or 5 50004142.06 suggested modifications which it may have with respect to the proposed Annual Operating Budget, it shall be deemed to be accepted. If the Authority provides such written notice, the parties shall cooperate with each other in attempting to agree on a mutually acceptable Annual Operating Budget. (iii) If the parties are unable to agree on any particular line item of the proposed Annual Operating Budget, either party may submit the matter for Dispute Resolution. Subject to the provisions of Section 3(b )(ii), and pending resolution of any disputed line items submitted for Dispute Resolution, the appropriate line items from the last Fiscal Year's Annual Operating Budget shall be deemed to apply until a resolution is reached as to the disputed items. (iv) If the Operator is required to incur extraordinary O&M Costs or to make unanticipated expenditures for Project Repairs not reflected in the Annual Operating Budget then in effect, the Operator shall cause to be prepared, adopted and filed with the Authority and the Trustee not later than 30 days following the incurrence of such expenses or expenditures an amended Annual Operating Budget reflecting all required adjustments in estimated O&M Costs. (b) Relationship of the Parties. The Operator shall perform the services hereunder as an independent contractor. Nothing in this Agreement shall be deemed to imply that Operator is a partner, joint venturer, agent or representative of the Authority. Legal title to all property purchased by the Operator under the terms of this Agreement for Project Work, as opposed to Operator's inventory and equipment for operation and maintenance of Operator's System, shall pass immediately to and vest in the Authority as a Project asset upon the passage of title from the vendor or supplier thereof. (c) Services. The Operator shall be responsible for the management, operation, maintenance, and improvement of the Project, in recognition that the Operator has a substantial long-term financial interest in, and service and planning responsibilities affected by, the Project. The Operator shall perform all services for the operation and maintenance of the Project, including the services set forth on Exhibit B. (d) Manner of Performance. The Operator shall perform all services hereunder in a good, workmanlike and commercially reasonable manner with the standard of diligence and care normally employed by duly qualified persons in the performance of comparable work. The Operator shall in all material respects perform all services hereunder in accordance with (i) the Operating Procedures (including any operation and maintenance manuals included therein), the Administrative Procedures and all w~ties, (ii) all applicable laws, regulations, codes, permits, licenses and standards (including all Necessary Approvals), (iii) the Power Sales Agreement, (iv) the Annual Operating Budgets, (v) P~dent Utility Practice and (vi) this Agreement. (e) Emergency. In the event of any emergency involving the Project or any portion thereof endangering life or property, the Operator shall, subject to Section 3(b)(ii) hereof, take such action as may be reasonable and necessary to prevent, avoid or mitigate, injury, damage 6 50004142.06 or loss and shall, as soon as practicable, report any such injury, damage or loss, including the Operator's response thereto, to the Authority. (f) Limitations. Notwithstanding any other provision in this Agreement or the Power Sales Agreement to the contrary, the Operator may not, without the prior written consent of the Authority: (i) enter into any contracts that in any way bind the Authority or subject the Authority to any liability; (ii) permit or suffer any liens or encumbrances on the Project; (iii) take any action which is likely to have a material adverse impact on the revenues necessary to pay debt service on the Bonds or any Additional Bonds or Parity Obligations; or (iv) take any action in respect of the Project other than in the ordinary course of performing the services to be provided hereunder or as contemplated by the Power Sales Agreement. (g) Subcontracting. The Operator may subcontract work on the operation or maintenance of the Project to the extent authorized in the then effective Annual Operating Budget or with the written approval of the Authority, which shall not be unreasonably withheld. The Operator shall, in any contract or agreement with subcontractors performing work with respect to the operation or maintenance of the Project, require that all indemnities and waivers of subrogation it obtains, if any, and that any stipulation to be named as an additional insured it obtains, if any, also be extended to waive rights of subrogation against both the Authority and the State of Alaska and to add them both as additional named indemnitees and as additional insureds. (h) Provision of Power to Alaska Department ofFish and Game. The Operator shall comply with the terms of the Snettisham Hydroelectric Project Hatchery Coordination Agreement with the Alaska Department of Fish and Game, including the obligation to provide Power to the Department in accordance with the terms of such Agreement. Section 3. (a) for as follows: Payment of O&M Expenses and Project Work Payment of O&M Expenses. All O&M Expenses shall be paid or provided (i) The Operator shall pay to the Authority all Reimbursable Administrative Costs included in an Annual Operating Budget on the dates provided in Section 6(c)(i){B)(l) of the Power Sales Agreement. (ii) In the event of any unforeseen event with respect to the Project (including any unexpected or unplanned disruption of service, any Project failure or any damage to any portion of the Project), the Operator shall pay to the 7 50004142.06 Authority all Reimbursable Extraordinary Administrative Costs as provided in Section 6(c)(i)(B)(2) of the Power Sales Agreement; provided that, the Authority shall give the Operator such advance notice of any Reimbursable Extraordinary Administrative Costs as is reasonable under the circumstances and, if the Operator objects to the nature or amount of any such Reimbursable Extraordinary Administrative Costs, the Operator shall pay the Reimbursable Extraordinary Administrative Costs and, thereafter, may submit the matter for Dispute Resolution. (iii) At such time as is necessary to perform any item of Project Repairs that, as provided in the applicable Annual Operating Budget and Section 3(b)(i), is to be paid out of withdrawals from the R & R Fund, the Operator shall submit a Requisition Request for such item and shall apply the amount disbursed from the R & R Fund to the payment thereof. (iv) Except as provided in the foregoing clause (iii), the Operator shall bear all O&M Costs and shall pay all such O&M Costs payable to third parties to such parties when due, as set forth in the Annual Operating Budget. (v) Within sixty (60) days after the end of each calendar year, the Authority shall submit to the Operator an accounting of actual expenses incurred by the Authority within the categories of Reimbursable Administrative Costs and Reimbursable Extraordinary Administrative Costs for which the Operator made payments during the preceding year under the Power Sales Agreement. To the extent that Operator payments exceeded actual expenses incurred in these categories, the Authority shall promptly refund the difference to the Operator. (b) Project Work. (i) All scheduled Project Repairs for any Fiscal Year shall be included in the Annual Operating Budget for. that Fiscal Year. Each Annual Operating Budget shall indicate whether any item of scheduled Project Repairs shall be paid out of withdrawals from the R & R Fund or shall be paid by the Operator; provided, however, that in no event shall any item of scheduled Project Repairs less than $5,000 be paid for out of the R & R Fund. The Operator shall undertake all Project Repairs in accordance with the applicable Annual Operating Budget. (ii) In the event of an emergency involving the Project or any portion thereof endangering life or property, the Operator may immediately make any Project Repairs or changes in Project operation the Operator reasonably believes are necessary under the circumstances; provided that, the Operator shall give the Authority notice thereof as soon as possible. As soon as the emergency situation has been contained, the Operator shall notify the Authority of the nature 8 50004142.06 and estimated cost of any further Project Repairs or changes in Project operation that the Operator believes are necessary to restore the Project. With the approval of the Authority, the Operator may proceed with the further Project Repairs or changes in Project operation and, if the parties agree, the cost thereof may be withdrawn from the R & R Fund. If the parties disagree as to whether any such further Project Repairs or changes in Project operation are necessary, either party may submit the matter for Dispute Resolution. If, as a result of such process, it is determined that such further Project Repairs or changes in Project operation are necessary, the Operator shall undertake such Project Repairs. (iii) In the event either party determines that Project Work (other than Project Work described in Section 3(b)(i) or (ii)) should be performed and paid in whole or in part out of withdrawals from the R & R fund and/or fmanced through Additional Bonds or Parity Obligations, such party shall give the other party notice of the nature and estimated cost thereof and the manner in which such party proposes to pay for and/or finance the proposed Project Work. If the parties fail to agree regarding the manner of payment for the proposed Project Work or, in the case of Project Work proposed by the Authority, regarding the necessity for the Project Work, either party may submit the matter for Dispute Resolution. The Operator may agree to perform Project Work proposed by the Authority, but shall not be obligated to do so unless it is determined to be necessary through the Dispute Resolution process and the cost thereof is fmanced by the Authority (if such financing is requested by the Operator). If it is not agreed by the parties or determined through Dispute Resolution that Project Work proposed by the Operator shall be paid in whole or part out of the R & R Fund and/or financed by Additional Bonds or Parity Obligations, the Operator may nevertheless undertake such Project Work, provided, that it has been agreed by the parties or determined in the Dispute Resolution process that performing such Project Work would not interfere unreasonably with the Project or the Operator's ability to perform its obligations under this Agreement or the Power Sales Agreement. (iv) If financing is required to pay the cost of any Project Work contemplated by Section 3(b )(ii) or (iii), the Authority may, at its option, issue Additional Bonds, subject to the conditions set forth in Section 5(b) of the Power Sales Agreement, and apply the net proceeds thereof to the payment of such Project Work. If the Authority declines to issue Additional Bonds for such purpose, the Operator shall be entitled to finance the cost of the Project Work with Parity Obligations, subject to the conditions set forth in the Resolution. Section 4. Inspections, Books and Records (a) Inspections. The Authority shall have full right of access to the Project, and the Operator shall cooperate with inspections of the Project by the Authority. Such inspections may occur at any time upon reasonable notice to the Operator. 9 50004142.06 (b) Books and Records. The Authority shall have the right to inspect the Operator's books and records relating to the operation of the Project, and the Operator shall retain all such information for a minimum of three (3) years or for such longer period as the Authority may reasonably request. Section 5. Insurance (a) Evidence oflnsurance. Evidence of the insurance required under this Agreement must be provided to the Authority upon the effective date of this Agreement. Such evidence shall be in a form and substance reasonably satisfactory to the Authority, executed by the carrier's representative and issued to the Authority, shall consist of a certificate of insurance or the policy declaration page with required endorsements attached thereto, and must provide a thirty (30) day prior notice of cancellation, nonrenewal or significant reduction in limit or coverage form. Acceptance by the Authority of deficient evidence does not constitute a waiver of Agreement requirements. The requirements for insurance coverages ofthe kinds and with the limits stated in this Section 5 shall not be construed as a representation that such insurance coverage is adequate or limits the Operator's liability. The obligation to obtain and maintain earthquake, flood and debt service coverage under the All Risk Property Insurance (Section 5(±)( 4)), debt service coverage under Section 5(±)(5), and pollution liability coverage under Section 6(e) shall be subject to the general availability of such coverage at reasonable cost and under reasonable terms and conditions prevailing at the time of original issuance and any renewals or replacements thereof. If, after utilizing its reasonable best efforts, the Operator is unable to obtain adequate insurance under such terms and conditions, as reasonably determined by the Operator, the Operator may request·a written waiver of the relevant insurance requirement. The request shall outline the steps taken by the Operator to obtain such insurance and shall disclose the terms and conditions and premium quotations received. Upon the written determination of the Authority in conjunction with the State of Alaska Division of Risk Management that a reasonable basis exists to believe either that a waiver of such insurance will not materially affect the Authority and State of Alaska's risk with regard to the Project, or that the insurance coverage in question is not available under reasonable terms and conditions prevailing at the time of such request, the Authority will approve the requested waiver. Disputes regarding changes in insurance coverage shall be referred to the Insurance Consultant pursuant to Section 5(e). (b) Insurance Premiums. The Operator shall be responsible for obtaining and paying the cost of insurance coverage for the Project. Notwithstanding the foregoing, if any insurance coverage under this Agreement is obtained by the Authority, the premiums with respect thereto shall be included in Reimbursable Administrative Costs reimbursable to the Authority as provided in Section 3(a)(i). Project property insurance shall be acquired from the source that is best able to provide such coverage at the lowest possible cost consistent with Prudent Utility Practice, which may include placement with the State of Alaska excess insurance program, the Operator's acquisition in the private market, or a combination of both. The Project, if otherwise eligible, may be included in any future Authority or State of Alaska self-insurance program for 10 50004142.06 hydroelectric facilities, provided that the allocable cost of such program is included in Reimbursable Administrative Costs reimbursable to the Authority as provided in Section 3(a)(i). (c) Insurance Proceeds. The proceeds of any insurance coverage shall be used to repair, replace or otherwise restore the Project to at least as good condition or state of repair as it was in prior to the occurrence with respect to which such proceeds were payable, unless the Authority and the Operator otherwise agree and such agreement does not conflict with the provisions of the Resolution. (d) Warranty and Other Recoveries. (i) The Authority shall tender to the Operator enforcement of any warranty or other agreement relating to the operation and performance of the Project. Any amounts recoverable under any warranty or other agreement shall be applied to the repair and replacement of the affected portion of the Project. Any remaining warranty payments shall be deposited in the R & R Fund. (ii) If a judgment is obtained or other recovery is received from any person or entity that performed any Project Work, the proceeds thereof (A) shall be paid to the Operator, to the extent the Operator paid for such Project Work, (B) shall be deposited into the R & R Fund, to the extent a withdrawal therefrom was made to pay for all or part of such Project Work and (C) in any other case, shall be applied to the repayment of all outstanding Bonds, Additional Bonds or Parity Obligations at the earliest possible date any prepayment may be made without premium. (e) Insurance Consultant. Subject to the provisions of the Resolution, the parties shall retain an Insurance Consultant to review no less frequently than every five (5) years the Project's insurance coverage and recommend changes that are necessary or appropriate with respect to the Project; provided, that, to the extent any recommended changes would result in an increase in premiums, the Insurance Consultant shall have determined that such changes are commercially reasonable in light of the benefits to be obtained and Prudent Utility Practice. If the parties disagree as to whether any changes recommended by the Insurance Consultant should be implemented, either party may submit the matter for Dispute Resolution. The Operator may expand the Project's insurance coverage at any time without the approval of the Authority or the Insurance Consultant. The Operator may decrease or limit the coverages set forth below only with the written approval of the Authority. Disputes regarding changes in insurance coverage requested by the Operator shall be submitted for Dispute Resolution. (f) Coverage. Without limiting the Operator's indemnity obligations under this Agreement, in addition to any coverage agreed upon, and unless otherwise agreed, pursuant to Section S(e), the Operator shall provide and maintain the following policies of insurance, with responsible insurance companies acceptable to the Authority and State of Alaska Division of Risk Management: 11 50004142.06 ( 1) Commercial General Liability with a combined limit of not less than $1 million primary and $4 million umbrella ($5 million total), which shall include, but not be limited to: • Premises and Operations • Independent Contractors • Owners and Contractors Protective • Products/Completed Operations • Broad Form Property Damage • Blanket Contractual -Covering all written contracts (including but not limited to Section 7(a) hereof) • Explosion, Collapse, and Underground • Personal Injury • Incidental Malpractice This insurance shall protect against claims which may arise out of, or result from, operations relating to the Project on or away from the site. The policy shall contain a "cross-liability" or "severability of interest" clause or endorsement. The Authority and the State of Alaska shall be named as additional named insureds. (2) Automobile Liability with a combined single limit of not less than $5 million, which shall include, but not be limited to: • All Owned Vehicles • All Hired Vehicles • All Non-owned Vehicles all while used in the operation and management of the Project. The Authority and the State of Alaska shall be named as additional insureds. (3) Workers' Compensation and Employer's Liability Insurance with a sub limit of not less than $1 million in compliance with the laws of the State of Alaska, and where applicable, insurance in compliance with any other statutory obligations, whether federal or state, pertaining to the compensation of injured employees, and including Voluntary Compensation. The Workers' Compensation Insurance shall contain a waiver of subrogation clause in favor of the Authority and the State of Alaska. ( 4) All Risk Property Insurance (including earthquake and flood) on property of every kind and descripti_on forming part of the Project in an amount, and with such deductibles, that is reasonable and consistent with industry practice. The Authority and the State of Alaska shall be named as loss payee on any property loss settlement The Operator shall be obligated to pay all applicable deductibles. The policy shall contain a waiver of subrogation clause in favor of the Authority and the State of Alaska. 12 S0004l42.06 (5) Insurance Covering Payment of Debt Service, subject to the limitations of Section 5( a). The Operator's insurance coverage for Commercial General Liability under clause (1) or Automobile Liability under clause (2) for action or inaction of the Operator shall be primary insurance with respect to the Authority and the State of Alaska, its officers, agents, and employees. Any insurance or self insurance maintained by the Authority or the State shall be in excess of the Operator's insurance and shall not contribute with it. Section 6. Environmental Matters (a) Liability for Environmental Contamination. (i) Pre-Transfer Owner Liabilities. In the Purchase Agreement and Transition Plan (as such terms are defined in the Power Sales Agreement), the Authority and USDOE have provided that the Authority is not obligated to assume, and does not assume, responsibility for any claims filed or legal proceedings initiated by any other parties concerning the Project and arising from actions or alleged actions of the USDOE while USDOE controlled Project assets, regardless of the date on which such claims may be asserted or proceedings may be initiated. To the extent the foregoing applies to potential Environmental Liabilities ofUSDOE as the pre-transfer owner of the Project, and except as limited by paragraph (ii) below, the parties hereto acknowledge that neither the Authority nor the Operator are obligated to assume, and do not assume, any or all of such potential Environmental Liabilities. (ii) Operator Liabilities. The Operator shall be responsible for any and all potential Environmental Liabilities related to opera ton of the Project to the extent such liabilities arise during any period (including the pre-transfer period) in which the Operator served or serves as Project operator. If at any time a different entity serves as Project operator, then such entity shall be responsible for the potential Environmental Liabilities of the Project operator that may arise during such time. (iii) Post-Transfer Owner Liabilities. The potential Environmental Liabilities for which the Operator shall be responsible as Project operator under paragraph (a)(ii) above shall include, but not be limited to, any and all potential Environmental Liabilities that (A) might otherwise be liabilities, in whole or in part, of the Authority in its capacity as the post-transfer owner of the Project, and (B) arise during any period in which the Operator served or serves as Project operator. This inclusion reflects the division of Project responsibilities between the Operator and the Authority set forth throughout this Agreement and the Power Sales Agreement, and particularly in Recital "D" above. (b) Environmental Standards. The Operator shall abide by, and shall cause its employees, agents, and any subcontractors it employs to abide by all applicable rules and 13 50004142.06 regulations for the Project related to fire, safety, health, Pollution, and environmental protection. The Operator shall provide any required or appropriate hazard information and training to all of its employees or agents who will be performing work at the Project, including a description of the Hazardous Substances present or likely to be present at the Project and instructions and information regarding the potential health hazard of, and how to work safely with, such Hazardous Substances. (c) Remediation. Subject to the Operator's liability in subparagraph (a) above and Section 7, the Authority and the Operator shall, in consultation with any governmental agency with authority to conduct, monitor or oversee any Enforcement or Remedial Action, determine what action, if any, is required by applicable law to investigate, remove, or remediate any condition of Pollution or in relation to Hazardous Substances. (d) Permits. The Operator shall prepare and submit any reports and apply for and procure all permits or authorizations required to operate the Project in full compliance with any and all applicable or relevant federal, state, and local statues or ordinances, rules and regulations, financial responsibility requirements, permit conditions, and orders related to safety and working conditions, transportation or disposal of Hazardous Substances, and environmental protection. (i) The Operator shall provide the Authority with copies of any and all applications for any permit or authorization, and copies of any and all correspondence with any federal, state, or local government authority related to any such permit or authorization, including, but not limited to, any application for any such permit or authorization, any monitoring or other test reports, notices of inspection, notices of violations, manifests, reports of any spill or release, and any communication related to compliance with any such permit or authorization. (ii) The Authority shall have reasonable access to all data, test results, reports, or other documentation or information supplied to and/or developed or generated by the Operator in connection with its use of the Project relating to any Environmental Law, including without limitation, those related to safety and working conditions, transportation or disposal of Hazardous Substances. The Authority covenants and agrees to keep confidential all such information, to the extent permitted under state law. (e) Insurance. Notwithstanding any other obligation under this Agreement to provide insurance coverage, and without limiting the Operator's indemnity obligations under this Agreement, the Operator shall make a reasonable good faith effort to acquire, provide and maintain, insurance coverage for liability for Pollution, subject to the limitation of Section S(a). The named insureds on any such policy shall include the Authority, the Operator, all of their contractors and subcontractors, and the State of Alaska. Such insurance shall be considered to be primary of any other insurance carried by the Authority and the State of Alaska through self insurance or otherwise. This insurance shall also contain a "cross liability" or "severability of interest" clause or endorsement. 14 50004142.06 (f) Hazardous Substances. The Operator shall transport and dispose of any Hazardous Substances in accordance with all applicable laws. Section 7. Indemnity; Limitation of Liability (a) Indemnity/Hold Harmless. Notwithstanding any other rights, obligations or limitations of liability under this Agreement, the Operator will at all times defend, indemnify and hold harmless the Authority and the State of Alaska, their officials, officers, employees, agents and representatives (collectively "Authority") from and against any and all claims, losses, damages, costs, charges, expenses, judgments and liabilities, including Environmental Liabilities described under Section 6( a)(ii) and (iii) of this Agreement, and including reasonable attorneys' fees (including attorneys' fees in establishing indemnification of whatsoever nature), collectively referred to herein as "losses," directly or indirectly resulting from, arising out of, or related to one or more claims, as hereinafter defined, which allegedly or actually arise or result, directly or indirectly, from, or are in any way connected with: (i) the performance or nonperformance of any provision or requirement of this Agreement by Operator, its officers, employees, subcontractors, agents or servants; (ii) any of the acts or omissions of Operator, its officers, employees, subcontractors, agents or servants at any of the Project facilities; or (iii) the failure of Operator, its officers, employees, subcontractors, agents, or servants to comply in any respect with the provisions and requirements of all applicable permits, licenses, laws, statutes, regulations, ordinances, codes, orders and all other legal requirements of federal, state, regional, county and local government authorities and agencies having jurisdiction over the Project facilities or relevant activities of the Operator. (i) The obligations of the Operator hereunder shall apply to all losses or claims, or both, that result from, arise out of, or are related to any event, occurrence, condition or relationship, whether such losses or claims, or both, are asserted. (ii) The term "claims" as used in this Section shall mean all claims, lawsuits, causes of action, damages, penalties, charges, judgments, losses, liabilities of any character or kind and other legal actions and proceedings of whatsoever nature, including but not limited to claims, lawsuits, causes of action, damages, penalties, charges, judgments, losses, liabilities of any character or kind and other legal actions and proceedings involving bodily or personal injury or death of any person or damage to any property (including but not limited to persons employed by the Authority, the Operator or any other person and all property owned or claimed by the Authority, the Operator, any affiliate of the Operator or any other person). The term "claims" or "losses" as used in this Section shall not include claims or losses (as defined above) initiated by the Authority against its own officers, employees, subcontractors, agents or servants. (iii) The Operator shall pay all royalties and license fees. The Operator shall defend all suits or claims for any and all infri~gements of any patents which may occur in the Operator's performance of this Agreement and shall save the Authority harmless from loss qn account thereof. 15 50004142.06 (iv) The Parties do not under this Article waive or surrender any indemnity available under any federal, regional, state or local law. (b) Notice of Claimsffender. In case any action shall be brought against the Authority in respect of which indemnity may be sought against the Operator, the Authority shall promptly notify the Operator in writing and the Operator shall have the right to assume the investigation and defense thereof, including the employment of counsel and the payment of all expenses. The Authority may tender any such cause of action, lawsuit, claim or other proceeding brought against the Authority to the Operator and such tender shall immediately be accepted by the Operator. Reasonable attorney fees or costs incurred by the Authority prior to such tender of defense shall be the complete and sole responsibility of the Operator. The Authority shall have the right to employ separate counsel in any such action and participate in the investigation and defense thereof, but the fees and expenses of such counsel following the Authority's tender of defense shall be paid by the Authority unless the employment of such counsel has been authorized by the Operator and the Operator shall control the defense of claims against which it is providing indemnity hereunder. (c) Release. The Authority and the State of Alaska shall not be liable to the Operator for, and the Operator hereby releases the Authority from, all liability for any injuries, damages or destruction to all or any part or parts of any property owned or claimed by the Operator that directly or indirectly results from, arises out of or relates to the Project or any part thereof, except where that liability arises from the Authority's sole negligence or intentionally wrongful acts or omissions. (d) Limitation of Liability. Notwithstanding any other provision of this Agreement, the Authority shall not be liable, and the Operator hereby releases the Authority from liability, for consequential and indirect damages, such as loss of profit, loss of use, loss of revenue, extra cost of producing profits or any other special or incidental damages of any nature sustained in connection with or as a result of any issue or dispute that could be subject to binding arbitration under Section 8(d) below, including any issue or dispute regarding the Project Work the Operator performs under this Agreement, whether such consequential or indirect damages are sought in contract, warranty, tort (including negligence, in whole or in part, but excluding fraud, gross negligence and willful misconduct), strict liability or otherwise. (e) General. Except to the extent prohibited by law, the limitations, releases from liability and indemnity provisions in this Agreement shall extend to the Authority's officers, employees and agents. The provisions of this Section 7 shall survive the expiration, termination, cancellation or assignment of this Agreement, as to any events occurring during the term of the Agreement which may give rise to claims or losses as defmed above. Section 8. Dispute Resolution (a) General. In the event that (i) the Authority and the Operator shall fail to resolve a material issue or dispute or (ii) a dispute arises between the Authority and the Operator 16 50004142.06 regarding the application or interpretation of any provision of this Agreement, the provisions of this Section 8 shall apply. (b) Independent Consultant. In the event of a dispute or issue referred to in Section 8(a) above (other than a dispute regarding the selection or removal of the Independent Consultant, which dispute shall be subject to binding arbitration described in Sections 8( d) through 8(h) below), upon written notice given by one party to the other and to the Independent Consultant, the issue or dispute shall be submitted to the Independent Consultant for resolution. Within ten ( 1 0) days after delivery of such notice, each party shall submit to the Independent Consultant a written statement setting forth such party's position with respect to the issue in question. Within twenty-five (25) days following delivery of such notice the Independent Consultant shall deliver to the parties its written determination of the issue. Unless a party elects to have the determination of the Independent Consultant reconsidered through judicial review or binding arbitration, as provided in Sections 8(c) through (i) below, the Operator and the Authority shall abide by the decision of the Independent Consultant. Any decision by the Independent Consultant with respect to an issue or dispute submitted hereunder shall be consistent with Prudent Utility Practice and shall, to the greatest extent reasonably possible under the circumstances, have the effect of assuring the adequacy of revenues necessary to pay debt service on all outstanding Bonds, Additional Bonds and Parity Obligations. (c) Judicial Review/Binding Arbitration. If either party chooses to not abide by the decision of the Independent Consultant or if the Independent Consultant declines to make a determination, then the parties may mutually agree to submit the issue or dispute to binding arbitration described in Sections 8(d) through 8(h) below; however, the parties may mutually agree to modify any provision or procedure regarding binding arbitration. If the parties do not mutually agree to resolve the issue or dispute through binding arbitration, then either party may file suit in an Alaska State Court of competent jurisdiction to obtain a de novo review of the issue or dispute. Either party may call the Independent Consultant as a witness or submit affidavits of the Independent Consultant as part of its case. (d) Selection of Arbitrator(s). If the expenditure or other amount in question is less than $250,000, there shall be one neutral arbitrator; if the expenditure or other amount in question is $250,000 or more, there shall be three neutral arbitrators. The arbitrator(s) shall be selected and qualified as follows: (i) Promptly following the demand for arbitration, each party shall submit to the other party a list of names of firms or individuals who would be acceptable to such party. If the parties cannot agree on the identity of the arbitrator(s) within ten (10) days of the arbitration demand, the arbitrator(s) shall be selected by the administrator of the American Arbitration Association ("AAA") regional office for Anchorage. (ii) Each of the arbitrators shall be an individual with demonstrated experience in electric utility operations and fmance. 17 50004142.06 (e) Procedures. The arbitration shall be conducted in accordance with the AAA Commercial Arbitration Rules with Expedited Procedures, in effect on the date hereof, as modified by this Agreement. There shall be no dispositive motion practice. As may be shown to be necessary to ensure a fair hearing, the arbitrator(s) may authorize limited discovery and may enter pre-hearing orders regarding (without limitation) scheduling, document exchange, witness disclosure and issues to be heard. The arbitrator(s) shall not be bound by the rules of evidence or ofcivil procedure, but may consider such writings and oral presentations as reasonable business people would use in the conduct of their day-to-day affairs, and may require the parties to submit some or all of their case by written declaration or such other manner of presentation as the arbitrator(s) may determine to be appropriate. The parties intend to limit live testimony and cross-examination to the extent necessary to ensure a fair hearing on material issues. Either party may call the Independent Consultant as a witness or submit affidavits of the Independent Consultant as part of its case. All statutes of limitations which would otherwise be applicable shall apply to any arbitration proceeding hereunder. (i) Hearing-Law-Appeal Limited. The arbitrator(s) shall take such steps as maybe necessary to hold a private hearing within ninety (90) days of the initial demand for arbitration and to conclude the hearing within three (3) days; and the written decision of the arbitrator(s) shall be made not later than fourteen (14) calendar days after the hearing. The parties have included these time limits in order to expedite the proceeding, but they are not jurisdictional, and the arbitrator(s) may for good cause afford or permit reasonable extensions or delays, which shall not affect the validity of the award. The written decision shall contain a brief statement of the clairn(s) determined and the award made on each claim. In making the decision and the award, the arbitrator(s) shall apply applicable substantive law. Absent fraud, collusion or willful misconduct by an arbitrator, the award shall be final, and judgment may be entered in any court having jurisdiction thereof. The arbitrator(s) may award injunctive relief or any other remedy available from a judge (including the joinder of parties or consolidation of this arbitration with any other arbitration arising under the Operations and Maintenance Agreement or the Power Sales Agreement involving common issues of law or fact or which may promote judicial economy), but shall not have the power to make any award payable by the Authority (except an award for attorneys' fees and costs under Section 8(h), an award determining that an amount is properly payable out of the R & R Fund, or an award of reimbursement of amounts paid to the Authority as Reimbursable Extraordinary Administrative Costs), and shall not have the power to award punitive or exemplary damages. The decision and award of the arbitrators need not be unanimous; rather, the decision and award of two arbitrators shall be final. The parties confirm that by agreeing to binding arbitration, they intend to give up their right to have such disputes decided in court by a judge or jury. (g) Provisional Remedies. Pending selection of the arbitrator(s), either party may request the AAA to appoint unilaterally an arbitrator for the limited purpose of awarding temporary or preliminary relief, however the arbitrator appointed for this purpose shall cease to have any power to enter orders after the arbitrator(s) is selected pursuant to paragraph (d) above. Any temporary or preliminary relief shall be limited to relief that the arbitrator(s) could award. This award may be immediately entered in any federal or state court having jurisdiction over the parties even though the decision on the underlying dispute may still be pending. Once the arbitrator(s) is selected pursuant to paragraph (d) above, the arbitrator(s) may, upon request of a 18 50004142.06 party, issue a superseding order to modify or reverse such temporary or preliminary relief or may confirm such relief pending a full hearing on the merits on the underlying dispute. Any such initial or superseding order of temporary or preliminary relief may be immediately entered in any federal or state court having jurisdiction over the parties even though the decision on the underlying dispute may remain pending. Such relief may be granted by the arbitrator(s) only after notice to and opportunity to be heard by the opposing party unless the party applying for such relief demonstrates that its purpose would be rendered futile by giving notice. (h) Attorneys' Fees and Costs. If the party submitting a matter for resolution to the Independent Consultant, arbitration, or court does not prevail, such party shall pay all of the costs and expenses of the Independent Consultant, the arbitration and the other party (including such other party's reasonable attorney's fees). If the party submitting a matter for resolution to the Independent Consultant, arbitration, or court prevails, such party shall pay one-half of all of the costs and expenses of the Independent Consultant and arbitration, and the other party shall pay the other one-half; and each party shall be responsible for its own costs and expenses (including attorneys' fees). If the party submitting a matter for resolution to the Independent Consultant prevails before the Independent Consultant but loses in arbitration or judicial review requested by the other party, such party shall pay one-half of all of the costs and expenses of the Independent Consultant and arbitration, and the other party shall pay the other one-half; and each party shall be responsible for its own costs and expenses (including attorneys' fees). If more than one issue or dispute are submitted for resolution, the award of attorneys' fees and costs shall be separately made for each issue or dispute on a prorated basis. Unless otherwise directed by this subsection (h), the Authority's attorney's fees shall not be chargeable to the Operator as a Reimburseable Administrative Cost or as a Reimburseable Extraordinary Administrative Cost. Section 9. Term; Termination of Agreement; Assignment (a) Term. Unless earlier terminated pursuant to Section 9(b) below, this Agreement shall remain in effect until the termination of the Power Sales Agreement. (b) Termination of Agreement. 'This Agreement shall be subject to termination by the Authority as provided in Section lO(b) of the Power Sales Agreement. (c) Assignment. Neither the Operator nor the Authority may assign their rights or obligations under this Agreement, except to the assignee in connection with a permitted assignment under Section 14 of the Power Sales Agreement. Section 10. Miscellaneous (a) Power Sales Agreement. 'This Agreement implements the terms of the Power Sales Agreement, and is not intended to modify the terms thereof in any respect. In the event of any conflict between this Agreement and the Power Sales Agreement, the terms of the Power Sales Agreement shall control. (b) Notices, Computation Of Time And Holidays. Any notice required b~ this Agreement to be given to any party shall be effective when it is received by such party, and m 19 50004142.06 computing any period of time from such notice, such period shall commence at 12:01 p.m. prevailing time at the place of receipt on the date of receipt of such notice. Whenever this Agreement calls for notice to or notification by any party the same (unless otherwise specifically provided) shall be in writing directed to the Authority's executive director or the Operator's general manager. If the date for making any payment or performing any act is a day on which banking institutions are closed in the place where payment is to be made or a legal holiday, payment may be made or the act performed on the next succeeding day which is neither a legal holiday nor a day when banking institutions are closed in such place. (c) Applicable Law. The laws of the State of Alaska shall govern the interpretation and application of this Agreement. (d) Availability Of Information. The parties shall make available to each other, for inspection and copying during business hours, all books, records, plans and other information relating to any calculation or determination to be made pursuant to this Agreement. (e) Severability. (i) Severability Generally. If any section, paragraph, clause or provision of this Agreement or any agreement referred to in this Agreement shall be finally adjudicated by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall be unaffected by such adjudication and all the remaining provisions of this Agreement shall remain in full force and effect as if such section, paragraph, clause or provision or any part thereof so adjudicated to be invalid had not been included herein. (ii) Correction and Substitution. If any section, paragraph, clause or provision of this Agreement or any agreement referred to in this Agreement shall be finally adjudicated by a court of competent jurisdiction to be invalid or unenforceable, then and in such event the parties agree that they shall exercise their reasonable best efforts to correct such invalidation and substitute appropriate agreements and contractual arrangements to achieve the intent of this Agreement. (f) Waiver Not Continuing. Any waiver at any time by either party to this Agreement of its rights with respect to any default of the other party hereto, or with respect to any other matter arising in connection with this Agreement, shall not be considered a waiver with respect to any subsequent default, right or matter. (g) Construction of Agreement. Both the Authority and Operator have participated in the drafting of this Agreement and have been advised by separate counsel. Neither party shall be considered the drafter for purposes of applying rules of construction in any disputes arising under this Agreement. This Agreement shall be construed in harmony with the Resolution; however, where the terms cannot be harmonized, the terms of the Resolution shall control. 20 50004142.06 (h) Covenant To Act In Good Faith. In order to permit this Agreement, throughout its term, to be fully effective in accordance with the original intent of the parties, each party agrees that it shall at all times act in good faith and with fair dealing in performing its obligations and in exercising its rights under this Agreement. (i) No Third-Party Beneficiary. Notwithstanding that the operation of this Agreement may and is intended to confer benefits on third parties who are not signatories to this Agreement, this Agreement shall be enforceable only in accordance with its provisions expressly governing enforcement. In promising performance to one another under this Agreement, the parties intend to create binding legal obligations to and rights of enforcement in (i) one another, and (ii) such assignees or successors in interest of the parties as may enjoy a right to enforce this Agreement by virtue of provisions of this Agreement that expressly create such a right in such assignees or successors in interest. By entering into this Agreement, the parties expressly do not intend to create any obligation or promise any performance to any other third party, nor have the parties created for any other third party any right to enforce this Agreement. (j) Section Headings. The section headings in this Agreement are for convenience only, and do not purport to, and shall not be deemed to, defme, limit or extend the scope or intent of the section to which they pertain. (k) Multiple Copies. This Agreement shall be executed in several counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument IN WITNESS WHEREOF, the parties have caused this Agreement to be executed the day and year first above written. .50004142.06 ALASKA ELECTRIC LIGHT AND POWER COMPANY By: iJ -rl e .u a. c...-~ William A Corbus Its: President/General Manager ALASKA INDUSTRIAL DEVELOPMENT AND 21 EXHIBIT A -FORM OF REQUISITION REQUEST ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY Date: Page 1 of Snettisham Hydro Project Replacement and Renewal R & R Order No: SN Description of Work: Agency Approval Date: Task Location: Estimated Start Date: Maint. & Related Work Order. Estimated Completion Date: ·- Improvements: Replacements: Related Work Order: Contained in R&R 31 year Schedule: j Cost Estimate in 3 year R&R Schedule: Item Description Direct or Benefits Materials Admin. Other Totals Contract 0/H Costs I I . I """:':-~~. r.:.~ ,f';:!.'t. ,.....,..,.._ __ ~-. -~·; !~:\ ~.:: .. - ' ~ . ' ' ·: .. '. .. ~ .. . ~· . . ~·· ~ ... ~ i .• :--:n ' l. -.• ~ ~i ~ : .. __ _... .. . . :..: ..... ~ -~·· a r.,lil ·" •• . .,..: I . I AEL&P Estimator Signature: Date: AEL&P Authorized Signature: Date: AIDEA Deputy Director-Energy: Date: Signature of AEA Operations Manager: Date: EXHffiiTB SERVICES TO BE PERFORMED The Operator shall perform the following services under this Agreement in accordance with the Annual Operating Budget for the applicable Fiscal Year, federal and state law and the requirements of licensing and regulatory agencies and Prudent Utility Practices: 1. Provide operation of the Project dispatch and control equipment on a continuous 24-hour daily basis. 2. In accordance with the Annual Operating Budget, purchase or contract for materials, equipment, services, and supplies for the Project. 3. Maintain business records, which shall in all material respects be (i) in compliance with all applicable laws, regulations, permits, licenses, and standards, (ii) consistent with this Agreement and (iii) consistent with those requirements relating to accounting, reporting, and other administrative matters set forth in the Power Sales Agreement. 4. Maintain Operating Procedures, which shall in all material respects be (i) in compliance with all applicable laws, regulations, codes, permits, licenses, and standards (including all safety, environmental, and security requirements), (ii) consistent with this Agreement and all manuals and instructions relating to the Project and the equipment therein and (iii) consistent with those requirements relating to the operation and maintenance of the Project set forth in the Power Sales Agreement and in any operation and maintenance manuals relating to the Project. The Operating Procedures shall provide for preventative and ordinary maintenance of the Project, compliance with manufacturers and dealers operation, maintenance and warranty requirements for Project equipment and vehicles of any kind, inventory control and tracking of equipment history. The Authority shall have the right to approve the Operating Procedures delivered by the Operator, and, if the Authority does not approve such procedures, the Authority and Operator shall mutually agree on a set of Operating Procedures. Subject to the Authority's reasonable approval, the Operator shall prepare and deliver to the Authority from time to time any amendment or modification to the Operating Procedures that the Operator may deem necessary in its performance of the services. If the parties are unable to agree on the Operating Procedures, either party may submit the matter for Dispute Resolution. 5. Conduct scheduled technical, operation and maintenance inspections of the Project features and copy the Authority on all inspection reports. !10004142.06 B-1 . . 6. Read, maintain and operate all Project metering devices in accordance w1th operatmg procedures and make all readings, records, relevant graphs, and/or magnetic tapes available to the Authority. 7. Hire and maintain a work force and administrative personnel as necessary for the smooth and efficient operation of the Project. 8. Provide regular training for its employees as follows: (i) Regular Training. Establish a regular training program for its personnel designed to keep such personnel informed of existing Operating Procedures and any additions or modifications thereto and provide such training for such personnel throughout the term of this Agreement. (ii) New Personnel. Select and train all replacement and additional personnel employed by the Operator at the Project in accordance with the Operators regular training procedures. (iii) Employment of Licensed Personnel. Whenever required by applicable laws, regulations, codes, or standards, employ only licensed personnel to perform professional services. 9. Take all appropriate actions to preserve the Authority's rights under equipment warranties and make all appropriate warranty claims in a timely manner. 10. Perform all accounting and related functions for the Authority relating to the Project. 11. Prepare and file all reports to federal, state and local governmental agencies relating to the Project. 12. Handle governmental relations, all perm1ttmg matters and regulatory compliance, and assist the Authority in securing appropriate permits, approvals and licenses and in renewing and maintaining all required permits, approvals, and licenses including, but not limited to, filing all reports and notices and disbursing funds for all payments in connection therewith. 13. Maintain full and accurate books, records, and accounts of the Project in accordance with generally accepted accounting principles and administer and be responsible for all cost accounting, cash management, purchasing, personnel and payroll functions relating to the performance of the services. 14. Remove and dispose of waste generated at the Project in accordance with the Operating Procedures. 15. Prepare status reports as follows: S0004142.06 B-2 (i) Quarterly. Within thirty (30) days after the end of each calendar quarter following the date hereof, deliver to the Authority a report, in form and substance reasonably satisfactory to the Authority, summarizing, in appropriate detail, the results of operations of the Project during the preceding quarter. (ii) Annually. Within sixty (60) days after the end of each Fiscal Year, deliver to the Authority a report, in form and substance reasonably satisfactory to the Authority, summarizing in appropriate detail the result of operations of the Project during the preceding Fiscal Year. (iii) Additional Information. Provide such additional information with respect to the Operator's or its subcontractor's performance of services hereunder the Authority Owner may reasonably request or as required by applicable laws, regulations, or permits. 16. Obtain and maintain the insurance to be provided by the Operator under Section 5 of this Agreement and perform such other obligations with respect to such insurance as set forth in Section 5. 17. Pay all taxes, charges and assessments for the Project and all income (other than taxes imposed on the income of the Authority), payroll, unemployment, sales, use, excise, import duty, and gross receipts tax and corporate and professional business taxes and fees incurred in or resulting from the performance of the services. 18. Initiate and maintain reasonable security precautions and programs to protect against vandalism, theft, or other similar actions. 19. Initiate and maintain reasonable safety precautions and programs necessary to comply with all applicable safety laws and other safety requirements to prevent injury to persons or damage to property on, about, or adjacent to the Project. 20. Report to the Authority any protective relay or protective alarm actions in the quarterly operations report. Upon the Authority's request, provide the Authority with copies of all relay certification reports. 21. Oversee and supervise any subcontractors or agents retained by the Operator in the performance of the services. 22. Maintain an inventory of spare parts. 23. Perform all Project Work in a workmanlike and expeditious manner. 24. Operate and maintain the Project in accordance with Prudent Utility Practices, all applicable fedef1!.1, state and local laws, all relevant governmental permits and 50004142.06 B-3 licenses, the terms of this Agreement and the Power Sales Agreement and the operating and maintenance manuals for the Project. 25. Perform all other services as may be necessary or appropriate in connection with the full and proper operation and maintenance of the Project. .50004142.06 B-4