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Bradley Lake Hydro Project Power Sales Agreement 1987 1
TABLE OF CONTENTS Power Sales Agreement Bradley Lake Hydroelectric Project December 8,1987 Bradley Lake Hydroelectric Project -Agreement for the Sale and Purchase of Electric Power ("Power Sales Agreement") Bradley Lake Hydroelectric Project -Agreement for the Wheeling of Electric Power and for Related Services ("Services Agreement") Bradley Lake Hydroelectric Project -Transmission Sharing Agreement Opinions of Counsel to Parties to the Power Sales Agreement: A.Alaska Power Authority B.Chugach Electric Association,Inc. Cc.Golden Valley Electric Association,Inc. D.Municipality of Anchorage d/b/a Municipal Light and Power E.City of Seward d/b/a Seward Electric System F.Alaska Electric Generation and Transmission Cooperative,Inc. G.Homer Electric Association,Inc. H.Matanuska Electric Association,Inc. A180416 8096 17 COUNTERPART _]_of 21 BRADLEY LAKE HYDROELECTRIC PROJECT AGREEMENT FOR THE SALE AND PURCHASE OF ELECTRIC POWER ("POWER SALES AGREEMENT") by and among THE ALASKA POWER AUTHORITY, An Agency Of The State Of Alaska, ("Seller"), and The CHUGACH ELECTRIC ASSOCIATION,INC., The GOLDEN VALLEY ELECTRIC ASSOCIATION,INC., The MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT AND POWER, The CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM, and The ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC., ("Purchasers") and The HOMER ELECTRIC ASSOCIATION,INC., and The MATANUSKA ELECTRIC ASSOCIATION,INC., (Additional Parties) Index Of Sections Section Recitals e e e °e e e °e.e e e °° ll. 14, 15. 16. 17. 18. 19. 20. 21. 22. Definitions .....-+..«+s.e-s. Term Of Agreement ....-.«« Exhibits e .eo e e e e e e e e es Electric Service To Be Furnished Electric Power Reserves For The Project Obligations Under Bond Resolution; Completion Of Project .... Payment Obligation ....... Annual Project Costs ...... Obligations In The Event Of Default Purchasers'Systems ...... Bond Resolution .....0... Purchasers'Consent To Supplemental Resolutions 'To Construct The Project... Establishment Of The Committee . End Of The Project .....e..e-. Records ....-.;oe ee 8 Inspection Of Facilities .... Covenants To Maintain Integrity Of _Assignment ...2.2.6 6 ©©2 « Notices,Computation Of Time And Holidays Applicable Law .....-s-s+e-s Availability Of Information .. Severability .....cee ee Agreement Section 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. Remedies Cumulative ..... Waiver Not Continuing .... Section Headings ......e.. Multiple Copies .....e.e«. Covenant To Act In Good Faith No Third Party Beneficiaries . Excess Payments .....«« Special Arrangements Regarding Capitalization Of Certain Costs Of Purchasers Efforts To Obtain Intertie .. Exhibit "A",Bond Resolution Exhibit "B",Delivery Point AEGET Exhibit "C",Description Of The Project Page 27 28 28 28 28 28 28 30 31 31 Exhibit "D",Purchasers'Percentage Shares Of Project Capacity And Of Annual Project Costs Exhibit "E",Form Of Certain Supplemental Bond Resolutions POWER SALES AGREEMENT THIS AGREEMENT dated as of December 8,1987,is entered into by and among the ALASKA POWER AUTHORITY (the "Authority")and the CHUGACH ELECTRIC ASSOCIATION,INC.,the GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.,the MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT AND POWER,the CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM,and the ALASKA ELECTRIC GENERA- TION &TRANSMISSION COOPERATIVE,INC.(individually a "Purchas- er,"and collectively the "Purchasers"),and the HOMER ELECTRIC ASSOCIATION,INC.,and the MATANUSKA ELECTRIC ASSOCIATION,INC. (as additional Parties with some,but not all,of the rights and responsibilities of Purchasers). WITNESS ET H: The Authority recites,agrees,represents and cove- nants as follows: (1)The Authority is a public corporation of the State of Alaska duly created,organized and existing pursuant to AS 44.83; (2)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 Authori- ty,to enter into this Agreement and to comply fully with the terms hereof; (3)The.Authority desires to fulfill its legisla- tively established duty of providing residents of the State of Alaska with long-term,stable,and economic sources of power and an adequate,economic,and reliable long-term supply of power;and (4)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,ag- reement,bond,note,mortgage,or other obligation of the Auth- ority,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. Each Cooperative Purchaser (as hereinafter defined) and the Homer Electric Association,Inc.("HEA")and the Mata- nuska Electric Assocation,Inc.("MEA")recites,agrees,repre- sents and covenants as follows: (1)The Purchaser is a duly organized and constitut- ed electric cooperative under the laws of the State of Alaska and is currently a borrower from the Rural Electrification Ad- ministration,United States Department of Agriculture,under the Rural Electrification Act of 1936 (7 U.S.C.§901 et seq.); * BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page l (2)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; (3)The Purchaser performs the functions of a utili- ty and is a wholesale power customer eligible to purchase power produced from a project pursuant to AS 44.83;and (4)The Purchaser's execution and performance of this Agreement will not conflict with,violate,or constitute an event of default under any other resolution,contract,ag- reement,bond,note,mortgage,or other obligation of the Pur- chaser,or with respect 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. Each Municipal Purchaser (as hereinafter defined)re- cites,agrees,represents and covenants as follows: (1)The Purchaser is a duly organized and constitut- ed municipal corporation under the Constitution and laws of the State of Alaska; (2)The Purchaser is authorized,and has taken all steps necessary pursuant to the Constitution and laws of the State of Alaska and other applicable laws and regulations,and pursuant to its charter and ordinances,to enter into this Ag- reement and to comply fully with the terms hereof; (3)The Purchaser performs the functions of a utili- ty and is a wholesale power customer eligible to purchase power produced from a project pursuant to AS 44.83;and (4)The Purchaser's execution and performance of this Agreement will not conflict with,violate,or constitute an event of default under any other charter,ordinance,resolu- tion,contract,agreement,bond,note,mortgage,or other obli- gation of the Purchaser,or with respect to any order,ruling, or decree of any court or regulatory agency to which the Pur- chaser is subject at the time the Purchaser executes this Ag- reement. NOW,THEREFORE,the parties agree as follows: Section 1.Definitions.For the purposes of this Agreement,the following definitions apply: (a)"Act"or references to AS 44.83 mean Title 44,Chapter 83 of the Alaska Statutes (AS 44.83)as the same may be amended or supplemented from time to time. * BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 2 (b)"Agreement"means this Power Sales Agree- ment. (c)"Annual Payment Obligation"means the total amount payable by a Purchaser in or for a Fiscal Year pur- suant to this Agreement. (a)"Annual Project Budget"means the budget for the Project as adopted or in effect for a particular Fiscal Year,and amended or supplemented from time to time,pursuant to Section 13. (e)"Annual Project Costs"shall have the mean- ing given it in Section 8 of this Agreement. (£)"Authority"means the Alaska Power Authori- ty as established by the Act,and any successor agency thereto. (g)"Bond Resolution"means (i)the document attached as Exhibit "A",or a resolution adopted by the Authority substantially in the form of Exhibit "A",as supplemented and amended from time to time in a manner consistent with Section 11 of this Agreement and with the provisions of the Act,or (ii)a further bond resolution, consistent with Section 11,adopted in connection with the issuance of bonds to refund the Bonds. (h)"Bonds"means bonds,notes or other evi- dences of indebtedness (including refunding bonds)issued pursuant to the Bond Resolution,the proceeds of which are used to pay or reimburse Costs of Acquisition and Con- struction and Required or Optional Project Work. (i)"Committee"means the Project Management Committee established pursuant to Section 13. (4)"Consultant"means an independent indivi- dual or firm (i)of nationwide and favorable reputation, having demonstrated expertise in the field or the matter or the item referred to it under various specific pro- visions of this Agreement,and (ii)approved by the Auth- ority and the Committee in accordance with rules of pro- cedure to be adopted by the Committee to govern such ap- proval,which approval shall not be unreasonably withheld. (k)"Cooperative Purchasers"means Chugach Electric Association,Inc.,Golden Valley Electric Associ- ation,Inc.,and Alaska Electric Generation &Transmission Cooperative,Inc.The term "Cooperative Purchasers"in-cludes Homer Electric Association,Inc.,and Matanuska Electric Association,Inc.,only to the extent specified in Section 30 of this Agreement. BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 3 (1)"Cost of Acquisition and Contruction"means the Cost of Acquisition and Construction (as defined in Section 101 of the Bond Resolution)of the Project;pro-vided,that for purposes of this Agreement the Cost of Acquisition and Construction of the Project shall not in- clude the Cost of Acquisition and Construction of Capital Improvements (as defined in Section 101 of the Bond Res- olution). (m)"Date of Commercial Operation"means the date on which engineers retained for this purpose by the Authority have reasonably declared that the Project is fully available to be operated at not less than ninety megawatts (90 MW),and its output can be scheduled on a commercial basis. (n)"Debt Service"means amounts that the Auth- ority is required to set aside for the payment of princi- pal of,premium,if any,sinking fund payments,and inter- est on the Bonds,as the same are scheduled to become due under the Bond Resolution,and not by reason of any accel- eration. (o)"Delivery Point"means the Bradley Junction facilities,as identified and further described in Exhibit B. (p)"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 megawatt- hours and electric capacity is specified and/or expressed in kilowatts or megawatts. (q)"Excess Payment Amount"means the amounts, if any,computed as provided in Section 29 and included in Annual Project Costs. (r)"Fiscal Year"means that twelve-month peri- od starting July 1 of a calendar year through and includ- ing June 30 of the succeeding calendar year.The initial Fiscal Year for purposes of this Agreement is that portion of the twelve-month period starting on the Date of Commer- cial Operation through and including the following June 30.If the portion of the period is shorter than 90 daysthepartiesshalldeterminetheinitialFiscalYear,whichmustendonaJune30andmaynotbelongerthan456days. 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.,twelve month)Fiscal Year and the expiration of this Agreement. .(s)"Municipal Purchaser"means the Municipali- ty of Anchorage d/b/a/Municipal Light and Power,and the BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 4 City of Seward d/b/a Seward Electrical System. (t)"Optional Project Work"means Project re-pairs,renewals and replacements,improvements,better- ments,additions,or expansions that do not constitute Required Project Work. (u)"Percentage Share"means the fraction,ex- pressed as a percent and set forth for each Purchaser in Exhibit D as that Exhibit may be amended from time to time,used to compute the amount of each Purchaser's en- titlement to Project Capacity and obligation to pay Annual Project Costs. (v)"Project"means the Bradley Lake Hydroelec- tric Project as described in Exhibit C. (w)"Project Capacity"means the amount of electric capacity capable of being produced by the Project (including capacity attributable to Required or Optional Project Work)at any and all times from the Date of Com- mercial Operation until the termination of this Agreement (or any renewal thereof)under the operating conditions that exist during such times,including periods when the Project may be not operating or inoperable or the opera- tion thereof is suspended,interrupted,interfered with, reduced,or curtailed,in each case in whole or in part for any reason whatsoever,after corrections for station and Project use,and depletions required under any federal license for the Project. (x)"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 de- sired results at the lowest reasonable cost consistent with good business practices,reliability,safety and rea- sonable expedition.Prudent Utility Practice is not re- quired 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 gov- ernmental agencies of competent jurisdiction and shall apply not only to functional parts of a Project,but also to appropriate structures,landscaping,painting,signs, lighting and other facilities.In evaluating whether any matter conforms to Prudent Utility Practice,the parties shall take into account (i)the nature of the parties BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 5 hereto under the laws of the State of Alaska and their statutory duties and responsibilities,and (ii)the ob- jective of integrating Project Capacity with the generat ing resources of the Purchasers,including resources available under contract,to achieve optimum utilization of the resources and achieve efficient and economical op-eration of each Purchaser's System.For purposes of this Agreement,"national standards for the industry"means Prudent Utility Practice. (y)"Purchaser"means,as of any particular time,such of the Municipality of Anchorage d/b/a Munici- pal Light and Power,Chugach Electric Association,Inc., Golden Valley Electric Association,Inc.,the City of Seward as have executed this Agreement,and the Alaska Electric Generation &Transmission Cooperative,Inc. ("AEG&T).The term "Purchaser"includes Homer Electric Association,Inc.,and Matanuska Electric Association, Inc.,only to the extent specified in Section 30 of this Agreement. (z)"Purchaser's System"means a Purchaser's electric utility system for the distribution,transmis- sion,and generation of electrical power and which is owned and operated by the Purchaser.If Purchaser's elec- tric utility system is combined with other utilities of the Purchaser,then "Purchaser's System"includes only those facilities,activities,and revenues properly alloc- able to Purchaser's electric utility service."Purchas- er's System"does not include the Project,regardless of whether the Purchaser operates the Project under a separ- ate agreement with the Authority. (aa)"Purchaser's Water Allocation"means the number of acre feet of water from the Project allocated for generation purposes by the Committee to a Purchaser from time to time,based on that Purchaser's Percentage Share. (bb)"Railbelt"means the geographic area served by the Purchasers.| (cc)"Railbelt Energy Fund"means a fund cre- ated by the legislature,the use of which is intended only for approved power supply and transmission projects in the Railbelt,. (dd)"REA"means the Rural Electrification Ad- ministration,an agency of the United States Department of Agriculture. (ee)"Recoverable Construction Cost"means an amount equal to $175,000,000 less one half the amount,if BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 6 any,by which $350,000,000 exceeds the Cost of AcquisitionandConstruction,plus the principal amount of additional Bonds (if any)issued pursuant to Section 31. (ff)"Renewal and Contingency Reserve Fund" means the Renewal and Contingency Reserve Fund established pursuant to Section 502 of the Bond Resolution. (gg)"Required Action"means an action that must be taken in order for the Authority to comply with federal or state law,the orders of licensing and regula- tory agencies,the Bond Resolution,or this Agreement. (hh)"Required Project Work"means repairs, maintenance,renewals,replacements,improvements or bet- terments required by federal or state law,a licensing or regulatory agency with jurisdiction over the Project,or this Agreement,or otherwise necessary to keep the Project in good and efficient operating condition,consistent with (1)sound economics for the Project and the Purchasers, and (2)national standards for the industry. (ii)"Revenue Fund"means the Revenue Fund est- ablished pursuant to Section 502 of the Bond Resolution. (jj)""Trustee"means the trustee appointed pur- suant to Article IX of the Bond Resolution,or that Trust- ee's successor or successors and any other corporation which may at any time be substituted in that Trustee's place under the Bond Resolution. Section 2.Term Of Agreement. (a)Effectiveness.This Agreement shall become effective on the first date when (i)the Agreement has been executed and delivered by all Purchasers and by the Authority,and (ii)each Purchaser has obtained all nec- essary approvals of this Agreement and of all transmission and/or services agreements for the transmission of Project power to the Purchasers.An approval shall not be con- sidered "necessary"for purposes of this Section 2(a)un-less,prior to or contemporaneously with deliveryof thisAgreement,the person or entity from which such approval must be obtained has been identified to the other parties in writing by the Purchaser requiring such approval.It is the intent of each Purchaser to take all steps rea- sonably within its power to obtain all necessary approvals from its governing body no later than December 1,1987. (b)Commencement of payment obligations.The payment obligations of each Purchaser under this Agreement shall commence on the Date of Commercial Operation;pro- vided,that the Purchasers shall be obligated to pay those Committee costs referenced in the last sentence of Section BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 7 13(a)regardless of whether the Date of Commercial Opera- tion occurs. (c)Termination.This Agreement shall termi- nate (i)50 years after the Date of Commercial Operation, or (ii)when no Bonds are Outstanding under the Bond Res- olution and all payment obligations under this Agreement (other than any payment obligations under Section 29)have been satisfied or provided for,whichever occurs later; provided,that if the Date of Commercial Operation does not occur before January 1,1996,then this Agreement shall terminate on January 1,1996.The parties may mu- tually agree to terminate or to renew this Agreement prior to termination,subject,however,to the written approval of the Administrator of REA if such written approval is then required,and the terms and conditions of covenants and agreements between the Authority and holders of Bonds. If such approval is then required,no amendment of this Agreement shall take effect without the written approval of the Administrator of REA. (ad)Renewal.Any Purchaser may renew this Ag- reement on the same terms and conditions as provided here- in for successive additional terms (such terms to equal forty (40)years or,if shorter,the remaining useful life of the Project),upon written notice to the Authority by the Purchaser given no less than six and no more than twenty-four months prior to the end of the term of this Agreement.Purchasers electing to renew this Agreement shall be entitled to have their Percentage Shares adjusted pro rata,based on their Percentage Shares as set forth in Exhibit D as that Exhibit exists twenty four months prior to the end of the initial term of this Agreement,so that the adjusted Percentage Shares of the Purchasers renewing this Agreement total one hundred percent (100%).No re- newing Purchaser shall be required to accept the entirety of the Percentage Share to which that Purchaser becomes entitled,but if the Percentage Shares of all renewing Purchasers do not total one hundred percent,the Authoritymayselltoanyotherutilitythatisaqualifiedpurchas- er of power under the Act any remaining Percentage Share or portion thereof upon the same terms and conditions ap- plicable to the renewing Purchasers,if the Authority rea- sonably determines that such utility is able to carry out the obligations of a Purchaser under this Agreement and that such sale to such utility will not adversely affect the tax exemption of interest on any Bonds Outstanding under the Bond Resolution that originally were issued on a tax-exempt basis.The Authority shall not be obligated to renew this Agreement if,after reasonable notice to the renewing Purchasers,Percentage Shares that total one hun- dred percent have not been sold to such Purchasers or to other qualified utility purchasers. BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 8 Section 3.Exhibits.The following exhibits are incorporated by reference into this Agreement: (a)Exhibit "A",Bond Resolution, (b)Exhibit "B",Delivery Point, (c)Exhibit "C",Description of the Project, (d)Exhibit "D",Purchasers'Percentage Shares of Project Capacity and of Annual Project Costs,and (e)Exhibit "E",Form Of Certain Supplemental Bond Resolutions. Section 4.Electric Service To Be Furnished, (a)Sale _and purchase.The Authority hereby sells,and each Purchaser hereby purchases,that Purchas- er's Percentage Share of Project Capacity (together with associated energy)from the Project in accordance with this Agreement.The actual delivery (if any)of electric capacity and associated energy to Purchasers from the Pro- ject shall be made in accordance with scheduling proce- dures adopted by the Committee. (b)Available Power.The Authority shall at all times,except when prevented by a cause or event not within the control of the Authority,make power available to the Purchasers from the Project in an amount equal to the amount the Purchasers may schedule from the Project, within the limitations imposed by available Project capab- ility,available water,and the scheduling procedures ad- opted by the Committee. (c)Required Project Work.The Authority shallmakeorcause,to be made all Required Project Work,pro-vided that funds are legally available to the Authority for this purpose.The costs of Required Project Work shall be included in Annual Project Costs in the manner set forth in Section 8(a)(iv).The Authority shall give reasonable notification to all Purchasers prior to making or causing to be made any Required Project Work.Alterna- tive methods (if any)of carrying out and funding Required Project Work shall be subject to approval by the Committee under rules of procedure to be adopted pursuant to Section 13. BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 9 (ad)Optional Project Work.The Authority shallnotmakeorcausetobemadeOptionalProjectWorkunless such Optional Project Work is approved by the Committee. Any Optional Project Work shall be at the expense of the benefitted Purchaser(s),as determined in advance by theCommittee,in proportion to the value of the benefit con- ferred upon each such Purchaser.If such Optional Project Work has an adverse impact upon the operations or finances of a Purchaser as determined by the Committee,the bene- fitted Purchaser(s)shall compensate the adversely affect- ed Purchaser(s)for the increased costs and reduced bene- fits resulting from such impact.In the event the Pur- chasers are unable to agree as to how any increased costs or compensation will be apportioned,or as to the amount of any increased costs or appropriate compensation,the parties shall submit the question to dispute resolution in accordance with the dispute resolution procedures adopted by the Committee under Section 13. Section 5.Electric Power Reserves For The Project (a)Need for reserves.The parties recognize that (i)electric power from the Project may be unavail- able periodically because of generation and transmission outages,repairs,maintenance,inspections,testing,and similar events,and (ii)under the Alaska Intertie Agree- ment or otherwise,each Purchaser is responsible for main- taining (or contracting for the use of)generation re- serves in amounts sufficient to protect its own loads in the event that Project power is unavailable. (b)Reserve procedures.Promptly after its establishment,the Committee shall adopt and implement procedures under which,in as cost-effective a manner as possible: (i)the Authority shall have the right to require the operation of specific amounts of generat- ing capacity owned by a Purchaser and made available to the Authority,and to use the power produced bysuchoperationtoprovidereservestorequestingPur- chasers for some or all Project power,to the extent such capacity would otherwise be idle or its output would otherwise not be needed by the owner of that capacity to enable that Purchaser to meet its own loads or to make power sales to other utilities; (ii)the additional costs incurred by any Purchaser in making such capacity available to the Authority and in operating the same for the Authority shall be computed equitably and reimbursed promptly to such Purchaser by the Authority;and BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 10 (iii)the costs of so reimbursing any Pur- chaser shall be included in Annual Project Costs. (c)Alternative reserves.Nothing in Section 5(b)shall: (i)relieve any Purchaser of the responsi- bility set forth in Section 5(a)(ii); (ii)require any Purchaser to make reserve capacity available to the Authority under Section 5(b)(i);or (iii)require any Purchaser to avail it- self of reserve power available from the Authority under Section 5(b)(i),or to bear any of the costs of such power if the Purchaser does not avail itself of such power,if the Purchaser chooses and is able to rely upon its own reserves to meet its loads when Project power is unavailable. Section 6.Obligations Under Bond Resolution;Com- pletion of Project. (a)Assignment orpayment to Trustee.The par- ties recognize and agree that (i)the Authority may assign its rights to receive payments under this Agreement as security for the payment of the Bonds to the Trustee under the Bond Resolution for the benefit of the holders of the Bonds,and (ii)the Authority may direct that amounts pay- able to it under this Agreement be paid directly to the Trustee. (b)Project funding.The Authority shall issue Bonds,or otherwise obtain funds (including appropria- tions),sufficient to pay or reimburse the Cost of Acqui- sition and Construction.Annual Project Costs shall in- clude Debt Service on Bonds issued to pay the Cost of Ac- quisition and Construction in an aggregate principal amount up to 'but not exceeding the Recoverable Construc tion Cost.The Authority may estimate the Recoverable Construction Cost and issue Bonds at any time in amounts up to the amount of such estimate.As soon as practicableaftertheDateofCommercialOperation,the Authority shall adjust (and re-adjust when necessary)Annual Project Costs to reflect actual Recoverable Construction Cost. (c)Covenants of the Authority.The Authority covenants that it will not cause rates for Project Power to increase by reason of any bond resolution,covenant or agreement contained in any trust indenture or trust agree-ment entered into by the Authority in connection with a power project other than the Project,nor on account of any inadequacy in its actual or projected aggregate BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 11 revenues,other than revenues from the Project,nor will the Authority include in Annual Project Costs debt service payable on debt incurred for any purpose except in respect of the Project as provided herein. (d)Project completion and operation.The Authority agrees to use its best efforts to complete the Project expeditiously and in accordance with sound engin- eering practice and with the provisions of the Bond Reso- lution.The Authority shall also use its best efforts consistent with Prudent Utility Practice to construct and complete,and to operate and maintain the Project (or to arrange for such operation and maintenance)to provide power at the lowest reasonable cost to the Purchasers in a manner that is compatible with the Purchasers'Systems and consistent with the Act,the Bond Resolution,and this Ag- reement. (e)Best efforts by Committee members.To the extent that the cost of Project power is or may be affect- ed by actions of the Committee under Section 13,each Purchaser in its capacity as a member of the Committee agrees to use its best efforts consistent with Prudent Utility Practice to assist in assuring that the Project provides power at the lowest reasonable cost to the Pur- chasers in a manner that is compatible with the Purchas- ers'Systems and consistent with the Act,the Bond Resolu- tion,and this Agreement. Section 7.Payment Obligation. (a)Payment Obligation.Each Purchaser agrees to pay its Percentage Share of Annual Project Costs for each Fiscal Year.The procedures for determining the amount of and for making such payments are set forth in Section 13 of this Agreement. (b)Purchaser's Obligations.Each Purchaser shall make payments in the amounts and at the times re- quired by this Agreement notwithstanding a suspension or reduction in the amount of power supplied by the Project. Such payments shall not be subject to any reduction,by offset or otherwise.The parties intend and interpret the foregoing two sentences to mean that the obligation to make such payments shall be absolute and unconditional and unaffected by any interruption,interference,or curtail- ment in whole or in part of power supplied by the Project. In the event that (i)the Project is no longer operable, or its operation is interrupted or curtailed for any rea- son whatsoever in whole or in part,and (ii)the Authority does not restore the Project to full operation within a reasonable time,then the Purchasers may upon reasonable notice to the Authority and at their own expense take such action as they deem necessary to so restore the Project. BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 12 The taking of such action by the Purchasers shall not al- ter each Purchaser's obligation to pay its Percentage Share of Annual Project Costs. Section 8.Annual Project Costs (a)Annual Project Costs defined.Annual Pro- ject Costs means all of the costs resulting from the own- ership,operation,maintenance of and renewals and re- placements to the Project,properly incurred or paid dur- ing each Fiscal Year,including: (i)Amounts required to be set aside by the Authority for the payment of Debt Service on Bonds issued to pay the Cost of Acquisition and Con- struction in an aggregate principal amount up to but not exceeding the Recoverable Construction Cost; (ii)Amounts required to be set aside for the payment of Debt Service on other Bonds and debt service on other obligations approved in accordance with Sections 11 and 13; (iii)Amounts required to restore the funds established under the Bond Resolution to the levels required by the Bond Resolution to be main- tained therein; (iv)Amounts which may be required to pay for Required Project Work,to the extent that such costs are not covered by insurance or Bond proceeds or by the Renewal and Contingency Reserve Fund; (v)Other amounts determined by the Com- mittee to be necessary or appropriate to supplement and to be paid into the Funds established under the Bond Resolution; .(vi)Excess Payment Amounts,if any,com- puted in accordance with Section 29; (vii)All other costs of producing and de- livering Project power (excluding depreciation)not accounted for by the payments out of funds and re- serves specified in the foregoing sections and prop- erly chargeable to the Project under the Uniform Sys- tem of Accounts,less any credits against said costsbyreasonofrevenuesfromsourcesotherthanthedi-rect sale of power to Purchasers,and also less any credits for interest earned during construction and available for Project purposes;provided,that income from interest earned on reserve funds shall be used at least annually to accumulate and maintain said reserve funds in the amounts required under the Bond BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 13 Resolution or in such greater amounts as may be de-termined by the Committee,or to reduce Annual Pro- ject Costs.Such other costs shall include: (A)Project operating and maintenance costs,in accordance with the Annual Budget adopted in accordance with Section 13; (B)Costs of Project-related insur- ance,and,to the extent permitted with respect to each Purchaser under Section 5,the costs of electric power reserves for the Project; (C)Project-specific administrative and general expenses of the Authority,such as costs of safety inspections and investigations; (D)Costs of the Committee,whether incurred by the Authority or incurred by a Pur- chaser on behalf of the Committee;and (E)Such other Project costs as the Committee may from time to time approve for in- clusion in Annual Project Costs in accordance with procedures to be adopted by the Committee. (b)Proceeds of a taking.Any payment received by the Authority as a result of a taking of the whole or any portion of the capacity,facilities,available water, or output of the Project by any state or federal govern- ment agency shall be used by the Authority,after consult- ation with the Committee,to (i)reduce Annual Project Costs,(ii)retire Bonds,or (iii)reimburse the State of Alaska for a portion of the State's capital contribution to the Project (recognizing the separate sources of Pro- ject funding under Section 6(b)),whichever of these uses or combination of such uses shall be equitable and proper under the circumstances existing at the time of the tak- ing. Section 9.Obligations In The Event Of Default. (a)Enforcement.Upon failure of a Purchaser to perform any obligation herein,the Authority may bring any suit,action or proceeding at law or in equity ("Suit"),including mandamus,injunction and action for specific performance,as may be necessary or appropriate to enforce any covenant,agreement or obligation of this Agreement against that Purchaser.The Authority may bring such Suit (i)thirty days after giving the Purchaser a written demand for performance,in the case of default by the Purchaser on any obligation other than a payment obli- gation,and (ii)immediately,in the case of default by the Purchaser on any payment obligation.Each Purchaser BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 14 shall continue to make payments in the event of any dis-pute regarding performance of any obligation by any partyunderthisAgreementorintheeventofanydisputeundertheBondResolution,and this obligation of continued pay- ment pending resolution of disputes shall be immediately enforceable by any party upon application to any court of competent jurisdiction. (b)Additional rights and remedies.In addi- tion to the Authority's rights under Section 9(a),if a 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 terminate or suspend the delivery of power to that non-paying Pur-chaser if,after consulting with the other Purchasers,the Authority reasonably determines that such termination or suspension is more effective than other available alterna- tives in minimizing adverse impacts on such other Purchas- ers. (i)If the Authority so terminates or sus- pends deliveries,the Authority shall: (A)offer to other Purchasers,on terms and conditions applicable to other power sold under this Agreement,any power not deliv- ered to the non-paying Purchaser,and if neces- sary allocate such power pro rata on the basis of Percentage Shares among Purchasers accepting such offer; (B)offer any power not sold under Section 9(b)(i)(A)to any qualified utility (in- cluding the other Purchasers)on terms and con- ditions deemed favorable by the Authority after consultation with the Committee;and (C)if the Authority projects that the amounts to be deposited into the Revenue Fund will nonetheless be insufficient to pay Annual Project Costs,increase every other Purchaser's Percentage Share of Annual Project Costs and Project Capacity pro rata to the extent and for the period necessary to compensate for such in- sufficiency;provided,that no Purchaser's Per-centage Share shall be increased by more than twenty-five (25)percent above the amount set forth in Exhibit D without the written consent of that Purchaser. (ii)If the Authority determines that the process of offering power to others under Sections 9(b)(i)(A)or (B)would delay exercise of the Author- ity's rights under Section 9(b)(i)(C),and that as a BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 15 result the Authority will be unable to make deposits when required under the Bond Resolution,the Authori- ty may exercise its rights under (C)immediately and take the actions required under (A)and (if neces- sary)under (B)as soon as practicable thereafter. 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 9(b)shall relieve any non-paying Purchaser of any payment obligation under this Agreement or relieve such Purchaser of any lia- bility for damages resulting from non-payment.Inparticular,sales of power under Section 9(b)(i)(A)and (B)are intended to reduce the financial impact of any Purchaser's non-payment on other,paying Pur- chasers.Such sales are not intended to,nor shall they,reduce the payment obligations of the non- paying Purchaser or the damages for which such non- paying Purchaser may be liable. (iii)To the extent that the Authority uses Project reserve funds to permit it to make time- ly payments under the Bond Resolution following non- payment by a Purchaser,the amount needed to replen- ish such reserve funds shall be added to the Annual Payment Obligation of the non-paying Purchaser,and if the non-paying Purchaser fails to make payment of its Annual Payment Obligation as so increased,the Authority may exercise any of the rights available to it under this Section 9(b). (c)Litigation.If Purchasers'Percentage Shares are increased pursuant to Section 9(b)(i)(C),then the Authority shall,and any other Purchaser(s)may,im- mediately initiate and diligently pursue litigation in any court of competent jurisdiction to compel full and timely payment by the non-paying Purchaser,to recover amounts needed to compensate Purchasers whose Percentage Shares have been increased,and to obtain such other relief as shall be fair and equitable.The same or similar litiga- tion against any non-paying Purchaser may also be initi- ated and pursued by the Authority and/or by any paying Purchaser if in response to any non-payment the Authority takes action pursuant to Sections 9(b)(i)(A)or (B). (d)Default by the Authority.In the event of any default by the Authority under any covenant,agreement or obligation under this Agreement with respect to a Pur-chaser,that Purchaser may,upon thirty (30)days written notice to the Authority,bring any suit,action or pro- ceeding,at law or in equity,including mandamus,injunc- tion and action for specific performance,as may be neces- sary or appropriate to enforce any covenant,agreement or obligation of this Agreement against the Authority.No BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 16 payment obligation of a Purchaser under this Agreement is subject to offset,however. Section 10.Purchasers'Systems. (a)Character of expense.The amounts payable under this Agreement are operating expenses of each Pur- chaser's System,and are valid and binding obligations of each Purchaser,payable only from the gross revenues of said Purchaser's System as a cost of purchased electric power,and not payable from any taxes. (b)Purchasers'rate covenants.In order to afford,permit,and make timely payments as specified in this Agreement,each Purchaser agrees that it will estab- lish,charge and collect rates,fees,and charges with respect to that Purchaser's System in accordance with ap- plicable law to provide revenues sufficient to meet its obligations under this Agreement and sufficient to pay, together with any other funds or monies available there- for,any and all other amounts payable from or which con- stitute or may constitute a charge and lien upon such rev- enues including,but not limited to,amounts sufficient to meet obligations to service debt incurred by the Purchaser to finance the Purchaser's System. (c)Operation and maintenance of Purchasers' Systems.Each Purchaser covenants and agrees that it wiiloperateandmaintainitsSystemingoodrepair,working order and condition,and in accordance with Prudent Utili- ty Practice. (d)Limitation on certain contracts.Each Pur- chaser 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 rev- enues of the Purchaser's System on a parity with or super- ior to the payment of its obligations under this Agree- ment,except that a Purchaser may enter into such a con-tract or agreement of notto exceed two years'durationunderwhichthePurchaser's payment obligation is on a parity with the payment of its obligations under this Ag-reement.The limitations of this Section 10(d)shall not apply to contracts or agreements creating obligations on aparitywithobligationsunderthisAgreementifawrittenopinionfromaConsultantisrenderedthat(i)the con-tract 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 willnotimpairtheabilityofthePurchasertoraiserevenues sufficient to meet its obligations under this Agreement. * BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 17 Section11.Bond Resolution. (a)Amendment or supplementation of Bond Reso- lution.Except as provided in Section 12,the Authority will not amend or supplement the Bond Resolution in any Manner,or adopt a new Bond Resolution in connection with the refunding of the Bonds,which would materially ad- versely affect the ability of a Purchaser to fulfill the terms of this Agreement or impose any increased burden or obligation,financial or otherwise,on a Purchaser,with- out the consent of the Purchaser,unless: (i)the Committee has approved the Auth- ority's proposed action by a resolution adopted by the affirmative vote of members whose Percentage Shares equal or exceed eighty percent (80%)of Pro- 'ject Capacity and of Annual Project Costs;or (ii)the Committee by majority vote of the Purchasers requests that Required Project Work be paid for out of the proceeds of Bonds,and such Work is projected to cost in excess of the amount of money then available in the Renewal and Contingency Reserve Fund established pursuant to the Bond Resolution, plus available insurance proceeds,in which event,if such Bonds can then be legally issued and can be sold,the Authority shall issue such Bonds,payable from the Revenues of the Project (as defined in the Bond Resolution),to pay the portion of such costs which exceed insurance proceeds,if any,and to re- store said Reserve Fund to its required level. (b)Insurance,The Authority will maintain physical loss insurance to the extent required by the Bond Resolution,and the Authority will consult with the Com- mittee as provided in Sections 12 and 13 with respect to the disposition of proceeds of said insurance received as a consequence of physical destruction or impairment of the Project,including but not limited to disposition for the purpose of redemption'of Bonds,replacement of the Pro-ject,or replacement of power.The Committee shall advise the Authority from time to time as to the appropriate ex- tent of insurance coverage. (c)Information.The Authority shall provide each Purchaser a copy of any report,certificate,letter, or other communication which the Authority is required to furnish to the Trustee under the Bond Resolution or that the Trustee furnishes to the Authority. Section 12.Purchasers'Consent To Supplemental Bond Resolutions To Construct The Project.The Purchasers hereby consent to the adoption by the Authority of supplemental Bond Resolutions pursuant to Section 11(a),as necessary to comply * BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 18 with the Authority's obligation to finance and construct the Project pursuant to Section 6(b)and the Authority's obligation under Section 6(d)to use its best efforts to complete the Pro- ject expeditiously and in accordance with sound engineering practices and with the provisions of the Bond Resolution.The Authority shall consult with the Purchasers regarding the pro- visions to be included in such supplemental Bond Resolutions, and shall use its reasonable best efforts to comply with the requests of the Purchasers with respect thereto.Unless other-wise approved in accordance with Section 11l(a)(i),such supple-mental Bond Resolutions shall: (a)provide that the total amounts required for the payment of Debt Service when due shall be,on an an- nual basis,as nearly equal as practicable; (b)provide that the final maturity of Bonds issued pursuant to such supplemental Bond Resolutions shall not be earlier than twenty-five (25)years from the date when the first of such Bonds is issued; (c)be substantially in the form attached here- to as Exhibit E,except to the extent that the Authority finds that modifications are necessary to sell the Bonds on a tax-exempt basis;and (d)be adopted no earlier than January 1,1989. Section 13.Establishment Of The Committee, (a)Formation and composition of the Committee. The parties agree that a Project Management Committee ("Committee")shall be established on January 15,1988,or on such earlier date as may be agreed to by the parties. The Committee shall consist of the Authority and the Pur- chasers (including as Purchasers for this purpose both Homer Electric Association,Inc.,and Matanuska Electric Association,Inc.,for themselves and for AEG&T as a Pur- chaser represented by and through those utilities).No Committee member shall obtain an additional vote through merger with,acquisition of,or assignment from any other Committee member,and AEG&T shall have no direct vote,but shall be represented by and through Homer Electric Associ- ation,Inc.,and Matanuska Electric Association,Inc., each of which shall be entitled to vote as a Purchaser member for purposes of Committee procedure.Each Commit- tee member entitled to vote shall name one representative to serve on the Committee and one designated alternate for that representative.Each such member shall notify all other members in writing of the names,addresses,and tel- ephone numbers of its representative and designated al- ternate.After it is established,the Committee shall meet not less than once each quarter.Costs of the Com- mittee (other than costs incurred by the Authority)which BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 19 are incurred prior to the Date of Commercial Operation shall be borne by the Purchasers in accordance with the Percentage Shares of each. (b)Adoption of rules of procedure.The Com- mittee shall adopt,by the affirmative vote of a majority of the Purchasers and the affirmative vote of the Authori- ty,procedural rules governing the conduct of the Commit- tee's affairs.Such rules shall address,among other mat- ters,procedures for the periodic selection of Committee officers,the conduct of Committee meetings,dispute res- olution,the approval (including possible pre-approval)of Consultants,and modification of the Committee's procedur- al rules,and,to the extent not otherwise specified in this Agreement,such rules shall also specify the applic- able voting requirements for approval of matters to be decided by the Committee.Committee approval of opera- tions and maintenance arrangements for the Project,the sufficiency of the annual budget and wholesale power rates,and the undertaking of Optional Project Work shall require the affirmative vote of a majority of the Purchas- ers and the affirmative vote of the Authority. (c)Committee responsibilities;approval by the Authority. (i)As the legal owner and licensee of the Project,the issuer of Project debt,and the agency charged by statute with various duties affecting or affected by the Project,the Authority has certain non-delegable rights,duties,and responsibilities with respect to the Project.Subject to such non- delegable rights,duties,and responsibilities,the Committee shall be responsible for the management, operation,maintenance,and improvement of the Pro- ject,in recognition that as take-or-pay purchasers of Project Capacity after the Date of Commercial Op- eration,the Purchasers have substantial long-term financial interests in,and service and planning re- sponsibilities affected by,the Project. (ii)The Committee shall take the follow- ing actions,subject to the provisions of the Bond Resolution,federal and state law,the requirements of licensing and regulatory agencies,and the rights of the Authority and the Purchasers under other pro- visions of this Agreement: (A)Arrange for the operation and maintenance of the Project,and the scheduling,production,and dispatch of Project power; (B)Establish procedures for the use of each Purchaser's Water Allocation in a manner BRADLEY LAKE PROJECT POWER SALES AGREEMENT -Page 20 consistent with the needs and desires of other Purchasers and the capabilities of the Project; (C)Adopt in each Fiscal Year (and revise as necessary or prudent during such Fisc- al Year)a budget of Annual Project Costs for that Fiscal Year,which budget shall be in an amount estimated by the Committee to be suffic- ient to pay all Annual Project Costs; (D)Establish for each Fiscal Year the estimated Annual Payment Obligation of each Purchaser,together with a schedule for each Purchaser of equal monthly payments that such Purchaser shall be required to make during that Fiscal Year,which payment schedule shall be (I) designed to recover such estimated Annual Pay- ment Obligation from that Purchaser during the Fiscal Year,and (II)revised during such Year to reflect any revisions to the budget of Annual Project Costs for that Fiscal Year; (E)Determine after the conclusion of each Fiscal Year the actual Annual Project Costs for that Fiscal Year,the actual Annual Payment Obligation of each Purchaser for that Fiscal Year,and the amount of any additional payment required from (or the amount of any refund to be returned to)each Purchaser to ensure that the total of all payments received from each Pur- chaser for each Fiscal Year is equal to that Purchaser's actual Annual Payment Obligation for that Fiscal Year; (F)Evaluate and select among altern- ative methods (if any)of carrying out and fund- ing (including through issuance of bonds)Re- quired Project Work; (G)Adopt provisions to evaluate and approve Optional Project Work,and to determine the compensation (if any)to be provided in ac- cordance with Section 4(d)of this Agreement if the Committee approves any such Optional Project Work; (H)Adopt procedures consistent with Section 13(f£)for the resolution of disputes that may arise between or among the Purchasers and the Authority concerning the interpretation of this Agreement,the obligations created by this Agreement,or the performance of such ob- ligations; BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 21 (I)Make an initial determination of "customary"insurance within the meaning of Section 714 of the Bond Resolution and determine the appropriate amount of,and obtain,insurance for or related to the Project,in addition to such insurance as may be required by the Bond Resolution; (J)Adopt maintenance schedules for the Project that do not interfere unreasonably with the operations of the Purchasers; (K)Adopt and implement procedures relating to electric power reserves for the Pro- ject in accordance with Section 5;and (L)Consider the need for and approve any additional amount to be added to the Renewal and Contingency Reserve Fund over and above the Renewal and Contingency Reserve Requirement pro- vided under the Bond Resolution. (iii)If and when no Bonds are outstanding under the Bond Resolution,and the Bond Resolution is therefore no longer effective,the Committee shall provide for the establishment of such accounts and the taking of such actions as may be necessary to manage the Project. (d)Payment obligation unimpaired.Notwith- standing any Committee action or inaction under this Ag- reement,each Purchaser's obligation to make the monthly payments necessary to pay its Purchaser's Percentage Share of Debt Service,costs of operation and maintenance,and all other amounts to be paid by Purchasers under this Ag- reement shall be absolute and unimpaired. (e)The Authority's ability to take Required Action.In the event the Committee fails to take any oftheactionssetforthinSection13(c)(ii)(C)-(E)in a timely fashion,or fails to take any other action which the Authority believes to be a Required Action,and as a result the Authority determines that it will be unable to meet any of its obligations imposed by statute,by theBondResolution,by this Agreement,or by any licensing or regulatory agency,then the Authority may (i)adopt a bud- get of Annual Project Costs,(ii)estimate the Annual Pay-ment Obligation of each Purchaser,(iii)require each Pur-. chaser to make payments on the basis of such estimated Annual Payment Obligation,and (iv)take such other actionastheAuthoritydeemsnecessarytomeet'such obligations.Failure of the Committee to adopt an Annual Project Budget by the ninetieth (90th)day prior to the beginning of a Fiscal Year shall permit the Authority to adopt an Annual ° BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 22 Project Budget pursuant to this subsection.All actions and determinations under this Section 13(e)shall be taken and made in accordance with Prudent Utility Practice. (£)Purchasers'duties and rights of review. Each Purchaser shall make payment as required by the Auth- ority as a result of any action taken by the Authority under Section 13(e),but such payment shall not constitute a waiver of any Purchaser's rights under this Agreement. Any Purchaser may seek review of such action in accordance with the dispute resolution procedures adopted by the Com- mittee,or may seek to enforce this Agreement judicially in accordance with Section 9(d)if no applicable dispute resolution procedures have been adopted. Section 14.End Of Project (a)Authority's declaration.The Authority shall declare the Project ended,and the Authority's ob- ligations to make power available to the Purchasers and to operate and maintain (or to assure the operation and main- tenance of)the Project shall also end,if and when (i) such a declaration is required under Section 14(b),or (ii)the Project can no longer be operated in accordance with Prudent Utility Practice. (b)Consultant's report.The Authority shall make the declaration described in Section 14(a)if all of the following conditions are met: (i)the Project cannot be operated at full capacity in a manner consistent with Prudent Utility Practice absent repairs,modifications,or additions ("Repairs")to the Project; (ii)a Consultant retained by the Commit- tee concludes that such Repairs are not cost- effective in comparison with other power supply alt- ernatives then available to the Purchasers;and (iii)Committee members who are Purchasers and whose Percentage Shares total eighty percent (80%)vote that such Repairs should not be undertak- en. (c)Consequences of Authority's declaration. After the Authority has declared the Project ended,each Purchaser shall complete its payment obligation for Pro- ject Capacity and associated energy delivered to such Pur-chaser before the Project ended,and shall do so by paying its Percentage Share of Annual Project Costs until all Bonds have been paid or.provision has been made for the _payment of the Bonds in accordance with the Bond Resolu- tion;provided,that from the date on which the Authority BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 23 declares the Project ended,Annual Project Costs shall no longer include (except with Committee approval)costs oth- er than those set forth in Sections 8(a)(i),8(a)(ii), 8(a)(iii),8(a)(vii)(C),and 8(a)(vii)(D). Section 15.Records.In addition to meter records, the parties shall keep log sheets and other records as may be needed for the purposes of this Agreement.In keeping books of account,each Purchaser will,to the extent that different rules are not prescribed by this Agreement or by federal and state laws or agencies,follow the system of accounts pre- scribed for public utilities and licensees by the Federal Ener- gy Regulatory Commission,except that as long as a Purchaser is a borrower from REA then it shall follow the system of accounts prescribed by REA for its electric borrowers. Section 16.Inspection Of Facilities.For purposes of this Agreement,each party may,but shall not be obligated to,inspect any other party's facilities relating to the Pro- ject at any time upon reasonable notice,but such inspection or failure to inspect shall not render the inspecting party,its officers,agents or employees,liable or responsible for any injury,loss,damage,or accident resulting from defects in such electric installation,or for violation of this Agreement. Section 17.Covenants To Maintain Integrity Of Ag- reement. (a)Retail rate approval.Each Purchaser will affirmatively and promptly pursue all administrative and judicial remedies necessary to secure Alaska Public Utili- ty Commission approval of retail rates required to meet the terms of this Agreement where Commission approval is required. (b)Compliance with law.Each Purchaser will take all necessary steps to comply with applicable federal and state laws and regulations,licenses and permits re- lating to the use and operation of the Purchaser's System. (c)Sales,mergers,and assignments.No Pur- chaser shall abandon,sell,mortgage,lease or otherwise dispose of the Purchaser's System or any assets of that System (including by sale to or merger with any other utility),or assign this Agreement or any interest there-under to any assignee or successor in interest,unless:| (1)such disposal or assignment accords with the terms of any of the Purchaser's covenants or agreements with the holders of the Purchaser's bonds, notes or other evidences of indebtedness relating to the abandonment,sale,mortgage,lease or other dis- position of property of the Purchaser's System;and BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 24 (2)such disposal or assignment is: (A)consented to in writing by a maj- ority of the Committee,including the Authori- ty's representative;or (B)made to another utility that is already a Purchaser under this Agreement and is able to meet the obligations resulting from the disposal or assignment;or (C)limited to assets that the Pur- chaser determines to be surplus to the needs of that Purchaser's System,but the depreciated value of assets so disposed of or assigned in any given year shall not exceed five percent (5%)of the depreciated value of the assets of the Purchaser's System prior to the disposal or assignment;or (D)evaluated by a Consultant and that Consultant certifies that,taking into ac- count the other obligations of the Purchaser or of the assignee or successor in interest (as the case may be),the Purchaser or the assignee or successor in interest will have (A)substantial- ly the same or greater ability to produce suf- ficient revenues to meet its payment obligations as would the Purchaser absent the transaction, and (B)the ability to perform all obligations under this Agreement. Any assignee of this Agreement must assume in writing all of the assigning Purchaser's obligations hereunder,must pay any amounts due and owing from the assigning Purchaser hereunder,and (unless the assignee is already a Purchas- er)must provide the Authority and the Purchasers with an opinion of counsel that this Agreement is enforceable against the assignee. (d)Status of Bonds.The parties will not take any action,including entry into power sales agreements, which would cause the interest on any Bond which is orig- inally issued on a tax-exempt basis to become taxable un- der the Internal Revenue Code of 1986,as the same may be amended from time to time. (e)Licenses and permits.The parties will 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,including without limitation,the Federal Energy Regulatory Commission license applicable to the BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 25 Project.The Authority will take all necessary steps tocausetheFederalEnergyRegulatoryCommissionlicenseto be renewed,if necessary,so that it is in effect during the term of this Agreement or any renewal hereof. Section 18.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 interesthereinmaybetransferredorassignedbyaPurchaseronly in accordance with the provisions of Section 17(c). (b)Specific rights and transactions.Notwith- standing Sections 17(c)and 18(a): (1)A Cooperative Purchaser shall have the right to assign its assets,including its rights un- der this Agreement for security purposes to REA,or to a lender or guarantor in connection with loans to such Cooperative Purchaser where the proceeds of such loans are used to refinance obligations of such Coop- erative Purchaser to REA or the Federal Financing Bank under Section 311 of the Rural Electrification Act or otherwise;provided,however,that (A)neither REA nor any secured lender or guarantor exercising any rights,powers or privileges with respect to this Agreement under any mortgage,deed of trust or other security agreement shall be entitled to exercise the rights of the Cooperative Purchaser under this Agree- ment unless the obligations of such Cooperative Purchaser hereunder shall have been performed,(B)no such assignment shall in any way relieve such Cooper- ative Purchaser of any obligations hereunder,and (C) no assignment shall be permitted hereunder if such assignment would adversely affect the tax exemption of interest on any Bonds Outstanding under the Bond Resolution that originally were issued on a tax- exempt basis.oO (2)A Purchaser's agreement to resell pow- er from the Project shall not be deemed a transfer or assignment of this Agreement,but neither shall any such resale of Project power relieve the Purchaser of any payment obligation under this Agreement. Section 19.Notices,Computation Of Time And Holi- days.Any notice required by this Agreement to be given to anypartyshallbeeffectivewhenitisreceivedbysuchparty,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 BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 26 same (unless otherwise specifically provided)shall be in writ- ing directed to the Authority's executive director or a Pur- chaser'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. Section 20.Applicable Law.The laws of the State of Alaska (including without limitation the equal opportunity laws set forth in AS 18.80.220,as the same may be amended from time to time)shall govern the interpretation and application of this Agreement and the actions of the parties hereunder. Section 21.Availability Of Information.The par- ties 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. Section 22.Severability. (a)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 re- maining 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. (b)Correction and substitution.If any sec- tion,paragraph,clause or provision of this Agreement or any agreement referred to in this Agreement shall be fi- nally adjudicated by a court of competent jurisdiction to be invalid or unenforceable,then and in such event thepartiesagreethattheyshallexercisetheirbestefforts to correct such invalidation and substitute appropriate agreements and contractual arrangements to achieve the intent of this Agreement. (c)References to REA.From and after the time any Cooperative Purchaser is no longer indebted to REAunderanymortgageorothersecurityagreementwithREA,all references to REA and required approvals of the Admin- istrator of REA provided for in this Agreement shall be of no further force and effect with respect to that Coopera- tive Purchaser. Section 23.Remedies Cumulative.No remedy confer- red upon or reserved to the parties hereto is intended to be BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 27 exclusive of any other remedy or remedies available hereunder or now or hereafter existing at law,in equity,by statute or otherwise,but each and every such remedy shall be cumulative and shall be in addition to every other such remedy. Section 24.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 re- spect to any other matter arising in connection with this Ag- reement,shall not be considered a waiver with respect to any subsequent default,right or matter. Section 25.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. Section 26.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. Section 27.Covenant To Act In Good Faith.In order to permit this Agreement,throughout its term,to be fully ef- fective in accordance with the original intent of the parties, each party agrees that it shall at all times act in good faith in performing its obligations and in exercising its rights under this Agreement. Section 28.No Third Party Beneficiaries.Notwith- standing that the operation of this Agreement may and is in- tended to confer benefits on third parties who are not signa- tories to this Agreement,this Agreement shall be enforceable only in accordance with its provisions expressly governing en- forcement.In promising performance to one another under this Agreement,the parties intend to create binding legal obliga- tions to and rights of enforcement in (a)one another,and (b) such assignees or successors in interest of the parties as may enjoy a right to enforce this Agreement by virture of provis- ions 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. Section 29.Excess Payments. (a)Payments in Recognition of Efforts to Ob- tain Intertie.In recognition of the Railbelt Energy Council's commitment to continue efforts to obtain a sat- isfactory transmission intertie between Fairbanks and the Kenai Peninsula,and the Railbelt Energy Council's recog- nition of the importance of such an intertie to the well- BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 28 being of the Railbelt region and the Purchasers'ratepay- ers,and in anticipation of legislative funding of such an intertie,the Purchasers agree to make the payments de- scribed below in excess of actual debt service required for retirement of Bonds issued to pay Recoverable Con- struction Costs.The Purchasers'obligations to make pay- ment under this Section 29 are not contingent upon the success of such continued efforts to obtain a satisfactory transmission intertie between Fairbanks and the Kenai Pen- insula. (b)Calculation of Excess Payment Amount.Sub- ject to the limitations set forth in Sections 29(e)and 29(f),upon the retirement of all Bonds issued to pay Re- coverable Construction Costs (and of all Bonds issued to refund such Bonds)and the consequent reduction of Debt Service includable in Annual Project Costs,there shall be added to and included in Annual Project Costs an amount (the "Excess Payment Amount")calculated as follows: (i)The average annual Debt Service on such retired Bonds,less (ii)any debt service included in Annual Project Costs that is associated with bonds or other debt issued to fund Required Project Work. In no event shall the Excess Payment Amount be negative. (c)Payment of Excess Payment Amount.Each Purchaser shall pay its Percentage Share of the Excess Payment Amount as part of that Purchaser's Annual Payment Obligation so long as that Purchaser continues to purchase Project power under this Agreement or any renewal thereof. (d)Disposition of Payments.All Excess Pay- ment Amounts received from Purchasers,and all additional charges paid pursuant to Section 29(b),shall be paid to the Authority.for deposit into the Railbelt Energy Fund. (e)Limitation.Notwithstanding any other pro- vision of this Section 29,no Purchaser's Annual Payment Obligation shall include a charge with respect to any Ex- cess Payment Amount in excess of four cents ($0.04)per kilowatthour of Project power delivered to such Purchaser. (f)Duration.The provisions of this Section 29 shall not serve to extend the term of this Agreement or any renewal thereof,and shall cease to be effective upon the expiration or termination of this Agreement (as the same may be extended through any renewal thereof). BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 29 Section 30.Special Arrangements Regarding AEG&T. (a)Contracts acknowledged.The parties recog- nize that Homer Electric Association,Inc.("HEA")and Matanuska Electric Association,Inc.("MEA"),have previ- ously entered into contracts with the Alaska Electric Gen- eration &Transmission Cooperative,Inc.("AEG&T"),and that under such contracts AEG&T is to sell and HEA and MEA are to buy electric power in amounts necessary to meet the full requirements of HEA and MEA,such power to be gen- erated by AEG&T or to be purchased by AEG&T from other suppliers.Under this Agreement,therefore,AEG&T is a Purchaser on behalf of HEA and MEA,and AEG&T's payment obligations are secured by HEA's and MEA's respective ob- ligations to provide at all times the monies necessary for the performance of AEG&T's payment obligations,as more fully described in Section 30(b). (b)Treatment of HEA and MEA as Purchasers for certain purposes.HEA and MEA shall have all the rights and obligations of individual Purchasers and/or Coopera- tive Purchasers with respect to Sections 2(a),4(d),6(e), 8(a)(vii)(D),10,13(c),13(d),15,17,18,31,and 32, unless the context otherwise requires.If AEG&T at any time fails to meet its payment obligations under this Ag- reement,then to the extent of such failure by AEG&T and for so long as such failure continues,HEA and MEA shall each be obligated to meet directly its respective share of AEG&T's payment obligations in the same manner as if HEA and MEA were individual Purchasers obligated to make pay- ment in accordance with Section 7 and Section 9.All rights and remedies available to the Authority and/or to the other Purchasers against AEG&T shall also be available to the Authority and the other Purchasers against HEA and MEA to the extent of the respective individual share of HEA and/or MEA,as applicable.For purposes of this Sec- tion 30(b),HEA's share shall be a Percentage Share of Project Capacity equal to 12.0 percent,and MEA's share shall be a Percentage Share of Project Capacity equal to13.8 percent. (c)Arrangements among HEA,MEA,and AEG&T.In accordance with the provisions of Section 30(a)and sub- ject to the provisions of Section 30(b),AEG&T as a Pur- chaser hereunder shall act on behalf of HEA and MEA for purposes of power deliveries,billing,payment,notifica-tion,and other communications under this Agreement. AEG&T shall be,on behalf of HEA and/or MEA,the Purchaser from the Authority and the re-seller to HEA and/or MEA of power to be taken by HEA and/or by MEA under this Agree-ment.Further,AEG&T will receive,on behalf of HEA and/or MEA,all billings and other communications under BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 30 this Agreement,and AEG&T will be required to pay suchbillsforandonbehalfofHEAand/or MEA from funds made available to AEG&T by HEA and/or MEA for this purpose. Section 31.Capitalization Of Certain Costs Of Pur- chasers. (a)Promptly after the Committee is formed,and before the Authority first issues Bonds,the Purchaser members of the Committee shall determine by the affirma-tive vote of members whose Percentage Shares equal or ex- ceed eighty percent (80%)of Project Capacity and of An- nual Project Costs: (i)whether and to what extent the costs borne by the Purchasers pursuant to the last sentence of Section 13(a)should be capitalized through issu- ance of additional Bonds,with the costs of debt ser- vice on those additional Bonds to be added to Annual Project Costs;and (ii)whether and to what extent the costs incurred by the individual Purchasers in conjunction with this Agreement prior to the Date of Commercial Operation should be capitalized and reimbursed through issuance of additional Bonds,and whether and to what extent the costs of debt service on those additional Bonds should be added to Annual Project Costs and allocated among Purchasers either in ac- cordance with their respective Percentage Shares or in some other manner. (b)If the Purchasers provide the AuthoritywithawrittendeterminationthatadditionalBondsshould be issued for either or both of the foregoing purposes, then notwithstanding any other provision of this Agree- ment,the Authority shall issue additional Bonds in the requisite principal amount,allocate the proceeds of such additional Bonds among the appropriate Purchasers in ac-cordance with such written determination,and include the costs of debt service on such additional Bonds in Annual Project Costs;provided,that the Authority shall not beobligatedtoissuesuchadditionalBondsunlesstheAuth- ority is reasonably able to do so in conjunction with the issuance of other Bonds;and provided further,that the allocation among Purchasers of the costs of debt service on additional Bonds issued for the purpose set forth in Section 31(a)(ii)shall be made in the manner specified insuchwrittendetermination. Section 32.Efforts To Obtain Intertie.The Pur- chasers recognize the importance of the completion of a satis- factory high-capacity Fairbanks to Kenai Peninsula transmission BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 31 intertie,and of full $218 million funding for the Project,and agree to continue all reasonable efforts to obtain sufficient state funding for such transmission intertie and Bradley Lake. IN WITNESS WHEREOF,the parties have caused this Ag- reement to be executed the day and year first above written. THE ALASKA POWER AUTHORITY By AS ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC. Pratee(ible! CHUGACH ELECTRIC ASSOCIATION,INC. By é Mn As Der den HOMER ELECTRIC ASSOCIATION,INC. wy A het AL ptew Lori,a As ALL Tw BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 32 GOLDEN VALLEY ELECTRIC ASSOCIATION,INC. oy W he ellAsGun.Wn. MATANUSKA ELECTRIC ASSOCIATION,INC. oy Kepwt2 Wy Se As By AS Je fa THE MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT AND POWER By As Ppa. THE CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM (Por llVo oreBy\'%7 Ud. As (x mA f.Maasage le BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 33 Exhibit A ALASKA POWER AUTHORITY POWER REVENUE BOND RESOLUTION 4 Adopted: w 101. 102. 103. 104. 105. 201. 202. 203. 204. 205. 301. 302. 303. 304. 305. 306. 307. 308. ALASKA POWER AUTHORITY POWER REVENUE BOND RESOLUTION Table of Contents* ARTICLE I Definitions and Statutory Authority Definitions...Lc ccc ccc wee ee ence nee n enn nnn aens Interpretation.....ccc we ee eee ee te eer ee ee eee Authority for this Resolution.................500.% Resolution to Constitute Contract............00008 Obligation of BondsS........ccc cece eee eee teens ARTICLE II Authorization and Issuance of Bonds Authorization of BondS......cc ccc cee ew eee wee ee eene General Provisions for Issuance of Bonds.......... Project ISSUC.....ccc ce ee eee cee tee ee eee eee Additional Bonds.....wee cc ce cee ect cee eee we eee Refunding Bonds......eee ee ewe et et eee eee eee e ees ARTICLE III General Terms and Provisions of Bonds Medium of Payment;Form and Date;Letters and Numbers.....cee ce ccc eee ewer meter ee ewan eens Legends......cc cece eee eee ee wee ee te eeeLaceeeeeeExecutionandAuthentication...........0cceeeeeeee Exchange of BondsS.....cece ce ee ee ee eee wae Negotiability,Transfer and Registry.............. Regulations With Respect to Exchanges and Transfers...ccc cc ce eee ee meee eer eens reer eeace Bonds Mutilated,Destroyed,Stolen or Lost........ Temporary BondS.....c ecw cece ce cee cere cet n nce ccce 15 15 18 18 19 20 21 21 21 22 22 23 23 *The Table of Contents is not part of this Resolution. 401. 402. 403. 404. 405. 406. 501. 502. 503. 504. 505. 506. 507. 508. 509. 510. sll. 601. 602. 603. 604. 701. 702. 703. ARTICLE IV Redemption of Bonds Privilege of Redemption and Redemption Price...... Redemption at the Election or Direction of the Authority...ccc cc cc ccc cece ee eee eee tenes Redemption Otherwise Than at the Authority's Election or Direction......cc eee eee ewe we ees Notice of Redemption......ccc ewe ee cee eee eee were Payment of Redeemed Bonds...........ccc ec cere ee nes ARTICLE V Establishment of Funds and Application Thereof Pledge of Revenues and Other Funds............0.00. Establishment of Funds and Accounts..............5. Construction Fund....ce cc ce ee eee Revenues and Revenue Fund......ccc ccc cece ceananes Operating Fund....cee ee ec cc ee eee ee eee Payments Into Certain Funds.......-....c2eeecccenes Debt Service Fund.....cc ewe ce cee eee eee ce ee ewes Capital Reserve Fund...ee cc ee ee ees Renewal and Contingency Reserve Fund.............. Excess Investment Earnings Fund.........cceccccces Cancellation and Destruction of Bonds............. ARTICLE VI Depositaries of Moneys,Security for Deposits and Investment of Funds Depositaries.....ccc eee ee wee cc ee cee weet eee DEpOSits...cece cece cece eee e ee ee ewe eee eeeeweesInvestmentofCertainFunds.............2ceceecees ARTICLE VII Particular Covenants of the Authority Payment of Bonds.......ccc ee ce ccc cw eee tee eee twee Extension of Payment of Bonds.............sce eevee Offices for Servicing Bonds.....ar TABLE OF CONTENTS Page 2 Page 24 24 25 25 25 25 38 39 40 40 41 4l 42 A7801FJG 704 705. 706. 707. 708. 709. 710. 711. 712. 713. 714. 715. 716. 717. 718. 719. 720. 721. 722. 801. 802. 803. 804. 805. 806. 807. 808. 809. 901. 902. Further Assurance.....2...cc ce we te ec eee ewes Power to Issue Bonds and Pledge Revenues and Other Funds...ccc ee ee eee te eens Power to Fix and Collect Rates,Fees and Charges... Creation of Liens;Sale and Lease of Property... Consulting Engineer....eeceteeeeetne Annual Budget.....ccc cece cee wee eee eee awe nes Limitations on Operating Expenses and Other COSTES...ccc ee ee cee wr we we eee ee eee ett ee eee Acquisition and Construction of Project and Its Operation and Maintenance...........-0000- Rates,Fees and Charges........ccc ee eee ee eee Power Sales Agreement......cece cence cree cee n ences INSULANCE..Lee cee ee eee eee eee eee eee wees Reconstruction;Application of Insurance Proceeds...ee cee ee ee cet ee ee ee eee ee eee eee Maintenance of Capital Reserve Fund............. Accounts and Reports.....ccc eww ec c cence s ec ccccnne Tax Covenants...cece eer ewe ce wee ew ene ew rere eces Payment of Taxes and Charges.........-..cc22200- Pledge of the State...ceeeeens Waiver of LAWS....ccc ce ecw eee eee eee General...ccc ccc wc ccc ce ewe wee eee eee ee ee eee wees ARTICLE VIII Remedies of Bondholders Events of Default...ee ee ec eee ee ee ees Account and Examination of Records After Default...cece een cn ence rnc cnc cccccscesecerveces Application of Revenues and Other Moneys After Default...ccc ccc ww ew ew ee eee ect e eens Appointment of Receiver.......ce cee eee ee eee eens Proceedings Brought by Trustee...............6..Restriction on Bondholder's Action......Fe ew weesRemediesNotExclusive.......ccc cece cece cece eee Effect of Waiver and Other Circumstances........ Notice of Default....cc ccc wc ce we eee ee eee ARTICLE IX Concerning the Fiduciaries Trustee;Appointment and Acceptance of Duties... Paying Agents;Appointment and Acceptance of DUCLSS..2...cee wc ce cee wee ee rere ree eee ener nenes TABLE OF CONTENTS Page 3 o 55 .-57 o 57 ..*538 oe 58 .60 o.61 oe 61 oe 61 .-61 os 61 oe 62 A7801FJG 904. 905. 906. 907. 908. 909. 910. 911. 912. 913. 1001. 1002. 1003. 1004. 1101. 1102. 1103. 1104. 1105. 1106. 1201. 1202. 1203. 1204. 1205 Evidence on Which Fiduciaries May Act........... Compensation.....ee eee ee eet ee tee eee eee Certain Permitted ActS.......cc cc ec eee et eeeResignationofTrustee......ceceeeeeeeene Removal of Trustee........ce ec ee we ee ens Appointment of Successor Trustee;Financial Qualifications of Trustee and Successor Trustee...we ewe tcc te eee we eens Transfer of Rights and Property to Successor TLUSTCE..Le et ee te eee eet tee eens Merger or Consolidation......cc ec ew we ee ns Adoption of Authentication..........ee wee eee ee Resignation or Removal of Paying Agent and Appointment of SUCCESSOL...ccc eee ee eee eee ARTICLE X Supplemental Resolutions Supplemental Resolutions Effective Upon Filing With the Trustee...cc ccc cc cee tc cee eens Supplemental Resolutions Effective Upon Consent Of Trustee....ccc ccc eee eee eee teens Supplemental Resolutions Effective With Consent Of Bondholders.....cc cee ec ew eee ee ee ee eee General ProviSions......ccc ccc wee cece ences ARTICLE XI Mailing.....cc.ce cee ce eee ee ees Lecce ceceeee Powers of Amendment.......ccc ccc wwe cee ere e eae Consent of Bondholders......cece ee eee ee rece eee Modification by Unanimous Consent...........0005 Exclusion of Bonds......cece cee eee eee ens Notation on Bonds.....cee cece wee eee ete ns -ARTICLE XII Miscellaneous Defeasance........eeee ee eeeee wc eee eee e eee eee e eee Evidence of Signatures of Bondholders and Ownership of BondsS....2...cece eee rec c cer erence Moneys Held for Particular Bonds................ Preservation and Inspection of Documents........ No Recourse on the Bonds.......Dee eee ee wee wee he TABLE OF CONTENTS Page 4 os 66 o.67 o.68 os 68 oe 69 .-69 .70 os 71 .'72 os 72 os 73 o-75 a 76 a 76 oe 76 A7801FJG 1206 Severability of Invalid Provisions................76 1207 Holidays........ccc ew te te ee eee eee 76 1208 Notices....cee cee ee ee eee eee eens 76 ARTICLE XIII Bond Form and Effective Date 1301.Form of Bonds and Trustee's Certificate of ; Authentication.....cc ceeeeweeeeens 77 1302.Effective Date TABLE OF CONTENTS Page 5 we eee eee ee ee eee e eee eee ete eee ee eee 82 A7801FJG ALASKA POWER AUTHORITY POWER REVENUE BOND RESOLUTION BE IT RESOLVED by the Board of Directors of the Alaska Power Authority,as follows: ARTICLE I Definitions and Statutory Authority 101.Definitions.The following terms shall,for all purposes of this Resolution,have the following meanings: "Accountant's Certificate"shall mean a certificate Signed by a firm of independent certified public accountants of recognized national standing,selected by the Authority and approved in writing by the Trustee (which approval shall not be unreasonably withheld),which may be the firm of accountants which regularly audits the books of the Authority,provided that,if the Trustee shall fail to so approve,it shall deliver to the Authority a statement of its reasons for such failure. "Act"shall mean Title 44,Chapter 83 of the Alaska Statutes (AS 44.83)as the same may be amended or supplemented from time to time. "Additional Bonds"shall mean Bonds authenticated and delivered pursuant to Section 204. "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 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 709. "Annual Project Costs"shall have the meaning given it in Section 8 of the Power Sales Agreement. "Authority"shall mean the Alaska Power AuthorityorganizedandexistingundertheAct. "Authorized Officer"shall mean the Chairman of the Board of Directors,Vice Chairman of the Board of Directors, Executive Director,Secretary or Treasurer or any officer or employee of the Authority authorized to perform specific acts or duties by resolution duly adopted by the Board of Directors. "Board of Directors"shall mean the Board of Direc- tors of the Authority. "Bond"or "Bonds"shall mean any bond or bonds,note or notes,or evidence of indebtedness or evidences of indebted-ness,as the case may be,authenticated and delivered under and pursuant to,and entitled to the benefit and security of,this Resolution. "Bondholder"or "Holder of Bonds"shall mean any person who shall be the registered owner of any Bond or Bonds. "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 Regis- trar enumerated in Section 703. "Bond Year"shall mean each period of 12 calendar months ending on each July 1. "Capital Improvements"shall mean (a)repairs, maintenance,renewals,replacements,improvements or betterments required by federal or state law,a licensing or regulatory agency with jurisdiction over the Project,or the Power Sales Agreement,or otherwise necessary to keep the Project in good and efficient operating condition,consistent with (1)sound economics for the Project and the Purchasers and (2)national standards for the industry,which Capital Improvements consti- tute Required Project Work under the Power Sales Agreement;or (b)repairs,renewals and replacements,improvements,better- ments,additions or expansions which Capital Improvements do not constitute Required Project Work,but which in each case are approved by the Committee as Optional Project Work pursuant to the Power Sales Agreement.For purposes of this Resolution, "national standards for the industry"shall mean Prudent Utility Practice. "Capital Reserve Fund"shall mean the Capital Reserve Fund established in Section 502. "Capital Reserve Requirement"shall mean (i)an amount equal to the lesser of Maximum Aggregate Debt Service or ten per cent of the proceeds of Bonds;or (ii)such other lesser amount as is required in order to maintain the tax-exempt statusoftheBonds. POWER REVENUE BOND RESOLUTION Page 2 A7801FJIG "Code"shall mean the Internal Revenue Code of 1986, as amended. "Committee"shall mean the Project Management Commit- tee established in the Power Sales Agreement. "Construction Engineer"means an independent engineer or engineering firm or corporation having a nationwide and favorable reputation and demonstrated experience in the field of construction engineering and construction management at the time retained by the Authority to perform the acts and carry out the duties provided for such Construction Engineer in this Resolu- tion. "Construction Fund"shall mean the Construction Fund established in Section 502. "Consulting Engineer"means an independent engineer or engineering firm or corporation having a nationwide and favorable reputation and demonstrated experience in the field of consulting engineering for power systems at the time retained by the Authority pursuant to Section 708 to perform the acts and carry out the duties provided for such Consulting Engineer in this Resolution. "Cost of Acquisition and Construction"shall mean all costs and expenses of planning,designing,acquiring,con- structing,installing and financing the Project or a Capital Improvement,placing the Project or a Capital Improvement in operation,and obtaining governmental approvals,certificates, permits and licenses with respect thereto,heretofore or hereaf- ter paid or incurred by or on behalf of the Authority or by any Purchaser which has heretofore entered into a contract or con- tracts with the Authority with respect to construction or acqui- sition of the Project or a Capital Improvement.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.The Cost of Acquisition and Construction shall include,but shall not be limited to:. (1)Costs of preliminary investigation and develop- ment,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; (2)Working capital and reserves in such amounts as shall be required during construction of the Project or a Capi- tal Improvement and to place the Project or a Capital POWER REVENUE:BOND RESOLUTION : Page 3 A7801EJG Improvement in operation and such additional amounts of working capital and reserves as are required by this Resolution; (3)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; (4)Amounts,if any,required by this Resolution or a Supplemental Resolution to be paid from the proceeds of Bonds issued to finance the Cost of Acquisition and Construction into any Funds or Accounts established pursuant to this Resolution; (5)The payment of principal,premium,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 antici- pation note or other note or evidence of indebtedness issued in anticipation of Bonds for the purpose of financing the Cost of Acquisition and Construction of the Project or a Capital Im- provement,including,without limitation,the Variable Rate Demand Bonds; (6)Training and testing costs incurred by the Authority which are properly allocable to acquisition and con- struction; (7)All costs of insurance applicable to the period of construction; (8)The cost of restoring and repairing in accord- ance with Prudent Utility Practice all public or private proper- ty damaged or destroyed in the construction of the Project ora 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,recon- struction or duplication of property made necessary or caused by the construction and installation of such Project or a Capital Improvement to the extent such costs are not otherwise paid out of the proceeds of insurance; (9)Legally required or permitted Federal,state and local taxes and payments in lieu of taxes applicable to the period of construction; (10)All other costs incurred by or on behalf of the Authority and properly allocable to the acquisition and con- struction of the Project ora Capital Improvement;and POWER REVENUE BOND RESOLUTION Page 4 A7801FJG (11)Costs of Issuance. "Costs of Issuance"shall mean any item of expense payable or reimbursable,directly or indirectly,by the Authori- ty and related to the authorization,offering,sale,issuance and delivery of Bonds,including,but not limited to,printing costs,costs of preparation and reproduction of documents,fil- ing and recording fees,initial fees and charges of any Fiduci- ary,legal fees and disbursements,fees and disbursements of the Consulting Engineer,fees and disbursements of other consultants and professionals,costs of credit ratings,fees and charges for preparation,execution,transportation and safekeepingof 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,including,but not limited to,the refunding of the Variable Rate Demand Bonds and any obligations of the Authority outstanding at the time of adoption of this Resolution,the proceeds of which were applied to pay the Cost of Acquisition and Construction of the Project. "Counsel's Opinion"or "Opinion of Counsel"shall mean an opinion of counsel of nationwide recognized standing in the field of municipal bonds,selected by the Authority and satisfactory to the Trustee. "Date of Commercial Operation"shall have the meaning ascribed thereto in the Power Sales Agreement. "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 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 Bond proceeds 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 PrincipalInstallmentduedateforsuchSeries(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 of such Series,whichever date is later).Such interest and Principal Installments for such Series shall becalculated on the assumption that no Bonds 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 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 12 months immediately prior to the final maturity of such POWER REVENUE.BOND RESOLUTION Page 5 A7801FJIG 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 Fund"shall mean the Debt Service Fund established in Section 502. "Depositary"shall mean any bank or trust company organized under the laws of any state of the United States or any national banking association selected by the Authority and approved in writing by the Trustee as a depositary 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. "Event of Default"shall have the meaning given to such term in Section 801. "Excess Investment Earnings"shall mean for each Bond Year,the excess of (i)the amount earned on certain investments held under this Resolution,or otherwise constituting gross proceeds of the Bonds under Section 148(f)(6)(B)of the Code,as specified in the Supplemental Resolution authorizing the issu- ance of such Bonds (excluding amounts held in the Excess Invest- ment Earnings Fund and amounts in the Revenue Fund but including unrealized gains and losses upon the retirement of such Bonds over (ii)the amount that would have been earned on such invest- ments at the yield on such Bonds (determined on a present value basis from the date of issuance of such Bonds,without adjust- ment for costs of issuance). "Excess Investment Earnings Fund"shall mean the Excess Investment Earnings Fund established in Section 502. "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 ofAmerica. "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"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 502. POWER REVENUE BOND RESOLUTION Page 6 A7801FJG "Interest Account"shall mean the Interest Account in the Debt Service Fund established in Section 502. "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: (i)Federal Obligations; (ii)obligations of the Government National Mortgage Association,the Federal National Mortgage Asso- ciation to the extent that such obligations are guaranteed by the Government National Mortgage Association,the Federal Financing Bank,the 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 con- tract 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 Investors Services,Inc.or Standard &Poor's Corporation,or their successors; (v)evidences of ownership of interests inFederalObligationsinthecustodyofabankortrust company organized under the laws of any state or any national banking association in each case having capital and surplus not less than $200,000,000 in amount; (vi)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),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 POWER REVENUE BOND RESOLUTION Page 7 A7801FJG 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; (vii)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 Authori- ty,as collateral security for such repurchase agreements; and (viii)"commercial paper"rated either A-1 or P-1l, or corporate bonds or notes,in each case issued by a United States corporation,rated in one of the two highest rating categories by any nationally recognized agency. "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 Authority's 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, Committee expenses,refunds for overpayments by Purchasers, Salaries and required Project employee costs,any taxes or payments in lieu of taxes pursuant to the Act or otherwise pursuant to law,(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 requiredto be incurred under or in connec-tion with the performance of the Power Sales Agreement,and POWER REVENUE BOND RESOLUTION Page 8 A7801FJG (iii)the fees and expenses of the Fiduciaries.Operating Expenses includes all the items listed in Section 8(a)of the Power Sales Agreement under the definition of Annual Project Costs except the items listed under Section 8(a)(i),(ii)and (iv).Operating Expenses shall not include any costs or expens- es for new construction or any allowance for depreciation. "Operating Fund"shall mean the Operating Fund estab- lished in Section 502. "Operating Reserve Account"shall mean the Operating Reserve Account established in Section 502. "Operating Reserve Account Requirement"shall mean an amount equal to 20 percent of the Operating Expense component of the Annual Budget as calculated annually,or such other amount as may be determined pursuant to the Power Sales Agreement. "Optional Project Work"shall have the meaning given it in Section 1 of the Power Sales Agreement. "Outstanding",when used with reference to Bonds, shall mean,as of any date,Bonds theretofore or thereupon being authenticated and delivered under this Resolution except: (i)Bonds cancelled by the Trustee at or prior to such date; (ii)Bonds (or portions of Bonds)for the pay- ment 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 portions of Bonds)are to be redeemed,notice of such redemption shall have been given as in Article IV provided or provision satisfactory to the Trustee shall have been made for the giving of such notice; (iii)Bonds in lieu of or in substitution for which other Bonds shall have been authenticated and deliv- ered pursuant to Article III or Section 406 or Section 1106;and (iv)Bonds deemed to have been paid as provided in subsection 2 of Section 1201. "Paying Agent"shall mean any bank or trust company organized under the laws of any state of the United States or any national banking association designated as paying agent for POWER REVENUE.BOND RESOLUTION Page 9 A7801FJG the Bonds of any Series,and its successor or successors hereaf- ter appointed in the manner provided in this Resolution. "Power Sales Agreement"shall mean the Power Sales Agreement for the purchase and sale of Project capacity (togeth- er with associated energy)dated as of be- tween the Authority and the Purchasers as the same may be amended. "Principal Account"shall mean the Principal Account in the Debt Service Fund established in Section 502. "Principal Installment"shall mean,as of any date of calculation and with respect to any Series,so long as any Bonds thereof are Outstanding,(i)the principal amount of Bonds 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 of such Series,plus the amount of the sinking fund redemption premiums,if any,which would be applicable upon redemption of such Bonds 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 of such Series,the sum of such principal amount of Bonds and of such unsatisfied balance of Sinking Fund In- stallments due on such future date plus such applicable redemp- tion premiums,if any. "Project"shall mean the Bradley Lake Hydroelectric Project,as the same is described on Exhibit C to the Power Sales Agreement. "Project Capacity"means the amount of electric capacity capable of being produced by the Project (including capacity attributable to Required or Optional Project Work)at any and all times from the Date of Commercial Operation until the termination of the Power Sales Agreement (or any renewal or replacement thereof)under the operating conditions that exist during such times,including periods when the Project may be not operating or inoperable or the operation thereof is suspended, interrupted,interfered with,reduced,or curtailed,in each case in whole or in part for any reason whatsoever,after corrections for station and Project use,and depletions required under any federal license for the Project. "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 indus- try at such time,or which,in the exercise of reasonable judg- ment in the light of the facts known at such time,could have been expected to accomplish the desired result at the lowest POWER REVENUE BOND RESOLUTION Page 10 A7801FJG reasonable cost consistent with good business practices,reli- ability,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 reason- able cost consistent with reliability,safety and expedition. Prudent Utility Practice includes due regard for manufacturers' warranties and requirements of governmental agencies of compe- tent jurisdiction and shall apply not only to functional parts of a Project,but also to appropriate structures,landscaping, painting,signs,lighting and other facilities.In evaluating whether any matter conforms to Prudent Utility Practice,there shall be taken into account (i)the nature of the Authority and Purchasers under the laws of the State of Alaska and their statutory duties and responsibilities and (ii)the objective of integrating the Project with the generating resources of the Purchasers,including resources available under contract,to achieve optimum utilization of the resources and efficient and economical operation of each Purchaser's electrical system.For purposes of this Resolution,"national standards for the indus- try"shall mean Prudent Utility Practice. "Purchasers"shall mean the entities defined as Purchasers in 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 AA or Aa or their equivalents by Standard &Poor's Corporation or Moody's Investor's Service,Inc.,or their successors. "Redemption Price"shall mean,with respect to anyBond,the principal amount thereof plus the applicable premium, if any,payable upon redemption thereof pursuant to such Bond 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 205,and any Bonds there- after authenticated and delivered in lieu of or in substitution for such Bonds pursuant to Article III or Section 406 or Section 1106. "Renewal and Contingency Reserve Fund"shall mean the Renewal and Contingency Reserve Fund established in Section 502. POWER REVENUE BOND RESOLUTION Page ll A7801FJG "Renewal and Contingency Reserve Requirement"shall mean an amount equal to $5,000,000. "Required Project Work"shall have the meaning given it in Section 1 of the Power Sales Agreement. "Resolution"shall mean this Resolution as from time to time amended or supplemented by Supplemental Resolutions in accordance with the terms hereof. "Revenue Fund"shall mean the Revenue Fund estab- lished in Section 502. "Revenues"shall mean (i)all revenues,income,rents and receipts,derived or to be derived by the Authority from,or attributable to the ownership and operation 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 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 or any contractual arrangement with respect to the use of the Project or any portion thereof or the services, output or capacity thereof,and (ii)interest received or to be received on any moneys or securities (other than in the Con- struction Fund or in the Excess Investment Earnings Fund)held pursuant to this Resolution and required to be paid into the Revenue Fund. "Series"shall mean 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 406 or Section 1106,regardless of variations in maturity,interest rate, Sinking Fund Installments,or other provisions. "Sinking Fund Installment"means,as of any particu- lar date of determination and with respect to the Outstanding Bonds of any Series,the amount required by a Supplemental Resolution to be paid in any event by the Authority on a single future date for the retirement of Bonds of such Series which Mature after said future date,but does not include any amount payable by the Authority by reason only of the maturity of a Bond. "Supplemental Resolution"shall mean any resolution supplemental to or amendatory of this Resolution,adopted by the Authority in accordance with Article X. POWER REVENUE BOND RESOLUTION Page 12 A7801FJG "Trustee"shall mean the trustee appointed pursuant to Article IX,and its successor or successors and any other corporation which may at any time be substituted in its place pursuant to this Resolution. "Variable Rate Demand Bonds"shall mean the $267,500,000 Alaska Power Authority Variable Rate Demand Bonds (Bradley Lake Hydroelectric Project)dated November 20,1985. 102.Interpretation.In this Resolution,unless the context otherwise requires: (i)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; (ii)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; (iii)Words importing persons shall include firms,associations,partnerships (including limited partnerships),trusts,corporations and other legal enti- ties,including public bodies,as well as natural persons; (iv)Words importing the redemption or redeeming of a Bond or the calling of a Bond for redemption do not include or connote the payment of such Bond at its stated maturity or the purchase of such Bond; (v)Any percentage of Bonds,for purposes of this Resolution,shall be computed on the basis of the unpaid principal amount of Bonds Outstanding at the time the computation is made or is required to be made hereun- der; (vi)Any headings preceding the text of the several Articles and Sections of this Resolution,and any table of contents or marginal notes appended to copies hereof,shall be solely for convenience of reference and shall not constitute a part of this Resolution,nor shall they affect its meaning,construction or effect; (vii)Articles and Sections mentioned by number only are the respective Articles and Sections of this Resolution so numbered;and POWER REVENUE BOND RESOLUTION Page 13 A7801FJG (viii)The term "principal"when used in connec- tion with compound interest or zero coupon or like inter- est paying Bonds shall mean the initial principal amount of such Bonds as at their date of issuance plus interest accreted thereon to the date of calculation. 103.Authority for this Resolution.This Resolution is adopted pursuant to the provisions of the Act.The Board of Directors 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 Author- ity 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. 104.Resolution to Constitute Contract.In consid- eration of the purchase and acceptance of any and all of the Bonds authorized to be issued 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 and the holders from time to time of the Bonds,a trust agreement under the Act and a security agreement under the Alaska Uniform Commercial Code.The pledge and assignment made in this Resolu- tion 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,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 over any other thereof except as expressly provided in or permitted by this Resolution. 105.Obligation of Bonds.The Bonds shall be direct and general obligations of the Authority,and the full faith and credit of the Authority are hereby pledged to the payment of the principal of and interest on the Bonds in accordance with their terms.All Bonds shall be entitled to the benefit of the continuing pledge and lien created by this Resolution to secure the full and final payment of the principal and Redemption Price of and interest on all of the Bonds. POWER REVENUE BOND RESOLUTION Page 14 A7801FJIG ARTICLE II Authorization and Issuance of Bonds 201.Authorization of Bonds.1.The Resolution provides for the authorization of Bonds of the Authority to be designated as "Power Revenue Bonds"for the purpose of providing funds for the financing or refinancing of the Project and Capital Improvements.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.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",shall include such further appropriate particular designation added to or incorpo- rated 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 be- longs. 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 202,204 and 205 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 202,204 and 205 as applica- ble 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. 202.General Provisions for Issuance of Bonds.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 Trustee and thereupon shall be authenticated by the Trustee and by it delivered to the Authority or upon its order,but only upon the receipt by the Trustee of: (a)A Counsel's Opinion to the effect that (i)the Authority has the right and power under the Act as amended to the date of such Opinion to adopt this Resolu- tion,and this Resolution has been duly and lawfully adopted 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 POWER REVENUE BOND RESOLUTION Page 15 A7801FJG is required;(ii)the Authority has the right and power under the Act as so amended to enter into the Power Sales Agreement and the Power Sales Agreement is valid and binding upon the Authority in accordance with its terms, and no other authorization for the Power Sales Agreement is required;(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;and (iv)the Bonds of such Series are valid and binding general obligations of the Authority for the payment of which the full faith and credit of the Authority are 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 Resolu- tion;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 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 provi- Sions,specify:(i)the authorized principal amount, designation and Series of such Bonds;(ii)the purposes for which such Series of Bonds is being issued,which shall be (A)the purpose specified in Section 203,(B)one of the purposes specified in Section 204,or (C)the refunding of Bonds as provided in Section 205;(iii)thedate,and the maturity date or dates,of the Bonds of such Series;(iv)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 periodi- cally 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;(v)the denominations of,and the manner of dating,numbering and lettering,the Bonds of such Series; (vi)the Paying Agent or Paying Agents and the place or POWER REVENUE BOND RESOLUTION Page 16 A7801FJG places of payment of the principal and Redemption Price, if any,of,and interest on,the Bonds of such Series; (vii)the Redemption Price or Prices,if any,and subject to Article IV,the redemption terms for the Bonds of such Series;(viii)the amount and due date of each Sinking Fund Installment,if any,for Bonds of like maturity of such Series;(ix)if so determined by the Authority, provisions for the sale of the Bonds of such Series;(x) the amount (or the method of determining the amount),if any,to be deposited from the proceeds of such Series of Bonds in the Debt Service Fund and provisions for the application thereof to the payment of all or a portion of the interest on such Series of Bonds or any other Series of Bonds;(xi)the amount to be deposited from the pro- ceeds of such Series of Bonds in the Capital Reserve Fund, such that,immediately after the authentication and delivery of such Series of Bonds,the amount in such Fund shall equal the Capital Reserve Requirement;(xii)the amount,if any,to be deposited from the proceeds of such Series of Bonds in the Renewal and Contingency Reserve Fund,such that,immediately after the authentication and delivery of such Series of Bonds,the amount in such Fund shall be not less than the Renewal and Contingency Reserve Requirement;(xiii)the amount,if any,to be deposited from the proceeds of such Series of Bonds in the Operating Reserve Account;(xiv)the method of calculating Excess Investment Earnings;(xv)the amount to be deposited from the proceeds of such Series of Bonds in the account in the Construction Fund established for the Project or the undertaking of Capital Improvements for which such Bonds are authorized to be issued;and (xvi)the form of the Bonds of such Series and of the Trustee's certificate of authentication,which forms shall be,respectively, substantially in the forms set forth in Section 1301,with such variations,omissions and insertions as are required or permitted by this Resolution;and (xvii)such other matters as shall be necessary or appropriate so as to comply with the provisions of this Resolution; (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 per- formance of any of the covenants,conditions,agreements or provisions contained in this Resolution; (e)A certificate from the Committee stating that the Supplemental Resolution authorizing such Bonds has been adopted in accordance with Section 11 of the Power Sales Agreement,provided that,the Supplemental Resolution adopted pursuant to Section 12 of the Power Sales Agreement does not require such a certificate;and POWER REVENUE BOND RESOLUTION Page 17 A7801FJG (£)Such further documents as are required by the provisions of Section 203,204 or 205 or Article X or any Supplemental Resolution adopted pursuant to Article X. 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 406 or Section 1106. 3.The Supplemental Resolution authorizing the initial Series of Bonds for the Project shall establish Princi- pal Installments for such Series. 203.Project Issue.1.There is hereby authorized an issue of Bonds under this Resolution which shall be designat- ed "Power Revenue Bonds"and which shall be issued in the aggregate principal amount not exceeding $175,000,000,pursuant to the Supplemental Resolution establishing the terms of the issue in Series from time to time,for the purpose of paying all or a portion of the Cost of Acquisition and Construction of the Project. 2.The proceeds of the initial Series of Bonds, including accrued interest shall be paid to the Trustee and deposited by the Trustee,as follows: (a)The amount,if any,necessary so that the amount in the Renewal and Contingency Reserve Fund is equal to 100%of the Renewal and Contingency Reserve Fund Requirement shall be deposited in the Renewal and Contin- gency Reserve Fund; (b)The amount,if any,necessary so that the amount in the Capital Reserve Fund is equal to the Capital Reserve Fund Requirement shall be deposited in the Capital Reserve Fund;, (c),The amount,if any,necessary so that the amount in the Operating Reserve Account is equal to the Operating Reserve Requirement shall be deposited in the Operating Reserve Account;and (d)The balance of the proceeds shall be depos- ited into the Construction Fund. 204.Additional Bonds.1.One or more Series of Additional Bonds may be authenticated and delivered upon origi- nal issuance for the purpose of paying all or a portion of the Cost of Acquisition and Construction of any Capital Improve- ments,upon compliance with the terms and conditions set forth in Section 202,and upon receipt by the Trustee of (i)evidence POWER REVENUE BOND RESOLUTION Page 18 A7801FJIG that such Capital Improvements have been approved by the Commit- tee in accordance with the Power Sales Agreement,and (ii)a written Opinion of the Consulting Engineer that neither the issuance of the Additional Bonds nor the payment of the Cost of Acquisition and Construction of the Capital Improvements will impair the ability of the Authority to pay Debt Service through collection of revenues under the Power Sales Agreement. 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.. 205.Refunding Bonds.1.One or more Series of Refunding Bonds may be authenticated and delivered upon original issuance to refund any Outstanding Bond or Bonds.Refunding Bonds shall be issued in a principal amount sufficient,together with other moneys available therefor,to accomplish such refund- ing and to make the deposits in the Funds and Accounts under this Resolution required by the provisions of the Supplemental Resolution authorizing such Bonds.Bonds issued to retire the Variable Rate Demand Bonds are not subject to the requirements of this section for Refunding Bonds. 2.Refunding Bonds of each Series shall be authen- ticated and delivered by the Trustee only upon receipt by the Trustee (in addition to the documents required by Section 202) of: (a)Irrevocable instructions to the Trustee, satisfactory to it,to give due notice of redemption,ona redemption date or dates specified in such instructions, of any of the refunded Bonds to be redeemed; (b)Irrevocable instructions to the Trustee, satisfactory to it,to give due notice provided for in Section 1201 to the Holders of the Bonds being refunded; and oy (c)Either (i)moneys (including moneys with- drawn and deposited pursuant to subsection 4 of Section 507)in an amount sufficient to effect payment at the applicable Redemption Price of the refunded Bonds to be redeemed and of the principal amount of the refunded Bonds not to be redeemed,together with accrued interest on such Bonds to the redemption date or maturity date,as the case may be,which moneys shall be held by the Trustee ina separate account irrevocably in trust for and assigned to the respective Holders of the Bonds to be refunded,or (ii)Federal Obligations in such principal amounts,of such maturities,bearing such interest,and otherwise POWER REVENUE BOND RESOLUTION Page 19 A7801FJG having such terms and qualifications,and any moneys,as shall be necessary to comply with the provisions of subsection 2 of Section 1201,which Federal Obligations and moneys shall be held in trust by the Trustee and used only as provided in said subsection 2. 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 Sup- plemental Resolution.: 4.The Supplemental Resolution authorizing a Series of Refunding Bonds may establish such funds and accounts in addition to the Funds and Accounts established herein as are necessary to provide for such refunding. ARTICLE III General Terms and Provisions of Bonds 301.Medium of Payment;Form and Date;Letters and Numbers.1.The Bonds shall be payable,with respect to interest,principal and Redemption Price,in any coin or curren- cy of the United States of America which at the time of payment is legal tender for the payment of public and private debts. 2.The Bonds of each Series shall be negotiable instruments issued in the form of fully registered Bonds.If and to the extent it is hereafter judicially determined or determined by enactment of law that coupon bonds may be issued with interest exempt from federal income taxation or if the Authority determines to issue Bonds the interest on which is not exempt from taxation,the Authority may provide for the issu- ance,execution,authorization,exchange and other details of coupon bonds by Supplemental Resolution. 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. 4.Bonds of each Series shall be dated as provided in the Supplemental Resolution authorizing such Series. 5.The principal and Redemption Price of the Bonds shall be payable upon presentation and surrender at the princi- pal corporate trust office of any Paying Agent or as may be POWER REVENUE BOND RESOLUTION Page 20 A7801FJG provided by Supplemental Resolution.Interest on Bonds shall be paid by the Trustee by check or draft mailed to the registered owners of record at the addresses of such owners appearing on the registration books maintained by the Authority for such purpose at the principal corporate trust office of the Bond Registrar or as may be provided by Supplemental Resolution. 302.Legends.The Bonds of each Series may contain or have endorsed thereon such provisions,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 commissionor brokerage board,or otherwise,as may be determined by the Authority prior to the authentication and delivery thereof. 303.Execution and Authentication.1.The Bonds shall be executed in the name of the Authority by the manual or facsimile signature of its Chairman or its Vice Chairman,and its 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 of the 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 per- sons 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 au- thorized or have held such office. 2.The Bonds of each Series shall bear thereon a certificate of authentication,in the form set forth in Section1301andanySupplementalResolutionauthorizingsuchBonds, executed manually by the Trustee.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 Trustee. Such certificate of the Trustee 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. POWER REVENUE BOND RESOLUTION Page 21 A7801FJG 304.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 306,be exchanged for an equal aggregate principal amount of Bonds of the same Series and maturity of any other authorized denominations. 305.Negotiability,Transfer and Registry.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. 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 account of,the principal and Redemption Price,if any,of and interest on such Bond and for all other purposes,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 the sum or sums so paid,and neither the Authority nor any Fiduciary shall be affected by any notice 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 treat- ing such registered owner. 306.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 Trustee shall authenticate and deliver Bonds in accordance with the provisions of this Resolution.All Bonds surrendered in any such exchanges or transfer shall 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. POWER REVENUE BOND RESOLUTION ; Page 22 A7801FJG 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. 307.Bonds Mutilated,Destroyed,Stolen or Lost.If any Bond becomes mutilated or is lost,stolen or destroyed,the Authority may execute and the Trustee shall authenticate and deliver a new Bond of like date of issue,maturity date,princi- pal 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 Authority, (ii)in the case of any such lost,stolen or destroyed Bond there is first furnished evidence of such loss,theft or de- struction satisfactory to the Authority together with indemnity satisfactory to the Authority,(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 substitu- tion 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 alleged 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 Bondholders. 308.Temporary Bonds.1.Until the definitive Bonds of any Series are prepared,the Authority may execute,in the same manner as is provided in Section 303,and upon the request of the Authority,the Trustee shall authenticate and deliver,in lieu of definitive Bonds,but subject to the same provisions,limitations and conditions as the definitive Bonds except as to the denomination thereof,one or more temporary Bonds substantially of the tenor of the definitive Bonds in lieu of which such temporary Bond or Bonds are issued,in denom- inations authorized by the Authority,and with such omissions, insertions and variations as may be appropriate to temporary Bonds.The Authority at its own expense shall prepare and execute,and,upon surrender of such temporary Bonds for ex- change and the cancellation of such surrendered temporary Bonds, the Trustee shall authenticate and without charge to the Holder thereof deliver in exchange therefor,definitive Bonds,if any, of the same aggregate principal amount and Series and maturity as the temporary Bonds surrendered.Until so exchanged,the temporary Bonds shall in all respects be entitled to the same POWER REVENUE BOND RESOLUTION Page 23 A7801FJG benefits and security as definitive Bonds authenticated and issued pursuant to this Resolution. 2.If the Authority shall authorize the issuance of temporary Bonds in more than one denomination,the Holder of any temporary Bond or Bonds may,at his option,surrender the same to the Trustee in exchange for another temporary Bond or Bonds of like aggregate principal amount and Series and maturity of any other authorized denomination or denominations,and there- upon the Authority shall execute and the Trustee shall authenti- cate and,in exchange for the temporary Bond or Bonds so surren- dered and upon payment of the taxes,fees and charges provided for in Section 306,shall deliver a temporary Bond or Bonds of like aggregate principal amount,Series and maturity in such other authorized denomination or denominations as shall be requested by such Holder. 3.All temporary Bonds surrendered in exchange either for another temporary Bond or Bonds or for a definitive Bond or Bonds shall be forthwith cancelled by the Trustee. ARTICLE IV Redemption of Bonds 401.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. 402.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 givewrittennoticetotheTrusteeofitselectionordirectionsoto 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 40 days prior to the redemption date or such shorter period as shall be acceptable to the Trustee.In the event notice of redemption shall have been given as in Section 405 provided,there shall be paid prior to the redemption date to the appropriate Paying Agents an amount in cash which,in POWER REVENUE BOND RESOLUTION Page 24 A7801FJG addition to other moneys,if any,available therefor held by such Paying Agents,will be sufficient to redeem on the redemp- tion 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. 403.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 Trustee shall select the Bonds to be redeemed,give the notice of redemption and pay out of moneys available therefor the Redemp- tion 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 507. 404.Selection of Bonds to be Redeemed.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 at random by the Trustee in such manner as the Trustee in its discretion may deem fair and appropriate. 405.Notice of Redemption.When the Trustee shall receive notice from the Authority of its election or direction to redeem Bonds pursuant to Section 402,and when redemption of Bonds is authorized or required pursuant to Section 403,the Trustee 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 of Bonds to be redeemed in part only,such notice shall also specify the respective portions of the princi-pal 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 of Bonds to be redeemed in part only,to- gether 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,postage prepaid,not less than 25 or more than 40 days before the redemption date,to the registered ownersof any Bonds or portions of Bonds which are to be redeemed,at their last addresses,if any,appearing upon the registry books. POWER REVENUE BOND RESOLUTION Page 25 A7801FJG 406.Payment of Redeemed Bonds.Notice having been given in the manner provided in Section 405,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 drawn for redemption less than all of a Bond,the Authority shall execute and the Trustee 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 author- ized denominations.If,on the redemption date,moneys for the redemption of all the Bonds or portions thereof of any like Series and maturity to be redeemed,together with interest to the redemption date,shall be held by the Paying Agents so as to be available therefor on said date and if notice of redemption shall have been mailed as aforesaid (and notwithstanding any defect therein or the lack of actual receipt thereof by any Bondholder),then,from and after the redemption date interest on the Bonds or portions thereof of such Series and maturity so called for redemption shall cease to accrue and become payable. If said moneys shall not be so 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 501.Pledge of Revenues and Other Funds.1.A pledge of the Revenues,and of all moneys,securities and funds, except the Excess Investment Earnings Fund,held or set aside ortobeheldorsetasidebytheAuthorityoranyFiduciaryunder this Resolution,is hereby made,and the same are hereby pledged and assigned to secure the payment of the principal and Redemp- tion Price of and interest on the Bonds 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 terms,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 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 POWER REVENUE BOND RESOLUTION Page 26 A7801FJIG 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. 2.The Bonds shall be direct and general obliga- tions of the Authority for the payment of which the full faith and credit of the Authority are pledged and neither the State of Alaska nor any political subdivision (other than the Authority) nor any Purchaser shall be obligated:to pay the principal or Redemption Price thereof or interest thereon and neither the faith and credit nor the taxing power of the State of Alaska or any political subdivision thereof (other than the Authority)or of any Purchaser is pledged to the payment of the principal or Redemption Price of,or interest on,the Bonds.The Authority may not pledge the full faith and credit of the State or any political subdivision thereof,except the Authority,to the payment of the Bonds and the issuance of the Bonds by the Au- thority may not directly or indirectly or contingently obligate the State or a political subdivision of the State to apply money from,or levy or pledge any form of taxation whatever to the payment of the Bonds.Nothing contained in this section shall be construed to affect any obligation of a Purchaser under the Power Sales Agreement. 3.Nothing contained in this Resolution shall be construed to prevent the Authority from acquiring,constructing or financing through the issuance of its bonds,notes or other evidences of indebtedness any facilities which do not constitute a part of the Project for the purposes of this Resolution or from securing such bonds,notes or other evidences of indebt- edness by a mortgage of the facilities so financed or by a pledge of,or other security interest in,the revenues therefrom or any lease or other agreement with 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 facili- ties nor any expenditure in connection therewith or with the financing thereof shall be payable from the Revenues or from any such Fund. 502.Establishment of Funds and Accounts.1.The following Funds and Accounts,each to be held by the Trustee, are hereby established: (1)Construction Fund, (2)Debt Service Fund,which shall consist of anInterestAccountandaPrincipalAccount, POWER REVENUE:BOND RESOLUTION Page 27 ) A7801FJG (3)Capital Reserve Fund, (4)Renewal and Contingency Reserve Fund,and (5)Excess Investment Earnings Fund. 2.The following funds,each to be held by the Authority,are hereby established: (1)Revenue Fund,and (2)Operating Fund,which shall include therein an Operating Reserve Account. 503.Construction Fund.1.There shall be paid into the Construction 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 Construction 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 Construction Fund shall be applied to the Cost of Acquisition and Construction in the manner provided in this Section 503,and until so applied are pledged for the security of and the payment to Bondholders of the principal or Redemption Price of and interest on the Bonds and shall at all times be subject to the lien of such pledge. 2.There shall be established within the Construc- tion Fund separate accounts for the Project and for each undertaking of Capital Improvements for which Bonds are author- ized to be issued. 3.The proceeds of insurance,including the pro- ceeds 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 with respect thereto,pertainingtotheperiodofconstructionthereof,shall be paid into the appropriate separate account in the Construction Fund. 4.The Trustee shall,during and upon completion of the Project or Capital Improvements,make payments from the Construction Fund in the amounts,at the times,in the manner, and on the other terms and conditions set forth in this para- graph and in paragraph 5 of this Section 503.Before any such payment shall be made,the Authority shall file with the Trust-ee: (a)its requisition therefor,stating in re- spect of each payment to be made (1)the name of the POWER REVENUE BOND RESOLUTION Page 28 A7801FJG person,firm or corporation to whom payment is due, (2)the amount to be paid,and (3)in reasonable detail the purpose for which the obligation was incurred;and (b)its certificate signed by the chief finan- cial officer of the Authority attached to the requisition certifying (1)that obligations in the stated amounts have been properly incurred by the Authority in or for the construction or acquisition of the Project or Capital Improvements,and that each item thereof is a proper charge against the Construction Fund and is a proper Cost of Construction and Acquisition of the Project or Capital Improvements and has not been paid,(2)that there has not been filed with or served upon the Authority notice of any lien,right to lien,or attachment upon,or claim affect- ing the right to receive payment of,any of the moneys payable under such requisition to any of the persons, firms or corporations named in such requisition,or if any such lien,attachment or claim has been filed with or served upon the Authority,that such lien,attachment or claim has been released or discharged in the amount in which such lien,right to lien,attachment or claim is stated in said notice,or if no amount is so stated the amount stated by the Construction Engineer as his opinion of the amount thereof,and (3)that such requisition contains no item representing payment on account of any retained percentages which the Authority is at the date of such certificate entitled to retain. Upon receipt of each such requisition and accompanying certifi- cates,the Trustee shall transfer from the Construction Fund to the credit of a special account in the name of the Authority an amount equal to the total of the amounts to be paid as set forth in such requisition but not more than the excess of such amounts over the amount stated of any lien,right to lien,attachment or claim referred to above in subparagraph (b),the amounts in such special account to be held solely for the payment of the obliga- tions set forth in such requisition.In making such transfer,the Trustee may rely upon such requisition and accompanyingcertificates. 5.If any requisition filed with the Trustee in accordance with paragraph 4 of this Section 503 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,in addition to the certificates mentioned in said paragraph 4: (a)a certificate of an Authorized Officer to the effect that such lands,easements,rights or interests have been or are being acquired and are necessary for the Project or Capital POWER REVENUE BOND RESOLUTION Page 29 A7801FJG Improvements;and (b)a Counsel's Opinion stating,in the opinion of the signer,that the Authority has authority to acquire such lands,easements,rights or interests,and that the Authority will have upon the payment of such item title in fee simple to,or perpetual easements for the purposes of the Authority 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 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. 6.As soon as practicable after the date as of which the Construction Engineer shall determine that (i)the Project or Capital Improvements conforms to the plans and specifications thereof as may be modified from time to time and is ready for normal continuous operation;(ii)acquisition, construction and installation of the Project or Capital Improve- ments has been completed in every material respect;and (iii)costs (including contingencies),as estimated by the Construction Engineer,of all work remaining to be done in order to complete such acquisition,construction and installation will not exceed 2%of the Cost of Acquisition and Construction of the Project or Capital Improvements,the Authority shall cause the Construction Engineer to file a report to that effect with the Authority and the Trustee. 7.As soon as practicable after the date referred to in paragraph 6 of this Section 503,or the Date of CommercialOperationoftheProjectorCapitalImprovements,whichever is the later,the Authority shall cause the Construction Engineer to file with the Authority and the Trustee a report setting forth,as of such later date,the following in reasonable detail with respect to the Project or Capital Improvements:(a)the total Cost of Acquisition and Construction exclusive of claims of contractors and others which are the subject of actual or prospective dispute or controversy and exclusive of the cost (including contingencies),as estimated by the Construction Engineer,of the remaining work;(b)the portion of the total Cost of Acquisition and Construction specified pursuant to clause (a)of this paragraph which has been paid in full; (c)the portion of the total Cost of Construction and POWER REVENUE BOND RESOLUTION Page 30 A7801FJG Acquisition specified pursuant to said clause (a)which remains to be paid,including all amounts which are not the subject of a dispute or controversy but are dependent upon the satisfaction of any agreements of conditions precedent to such payment; (ad)the aggregated amount of the claims of contractors and others which are the subject of a dispute or controversy; (e)the cost (including contingencies),as estimated by the Construction Engineer and as approved by the Authority of the remaining work;and (f)such amount,if any,as the Construction Engineer shall determine is necessary or desirable to be set aside in the Construction Fund for contingencies. 8.The Trustee shall at any time or from time to time after the filing with the Trustee of the report of the Construction Engineer as provided in paragraph 7 of this Sec- tion 503,withdraw from the Construction Fund the balance in the Construction Fund,or any part thereof,in the amounts,at the times,in the manner,and on the other terms and conditions set forth in this paragraph.Before any such withdrawal shall be made,the Authority shall file with the Trustee: (a)its requisition therefor,stating the amount of such withdrawal; (b)a certificate of the chief financial officer of the Authority attached to the requisition certifying (1)that the Project or Capital Improvements has been completed,and (2)that a sum (which shall not be less that the amount stated in the report of the Construction Engineer filed with the Trustee pursuant to paragraph 7 of this Section 503)stated in the certificate is sufficient to pay,and is required to be reserved in the Construction Fund to pay,all items of Cost of Acquisition and Con- struction of the Project or Capital Improvements 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 arising out of the Project or Capital Improvements;and (c)A Counsel's Opinion stating,in the opinion of the signer,that the Authority has acquired title to all property constituting a part of the Project or Capital Improvements and all property incidental thereto suffici- ent:for the purposes of the Authority,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 for its purposes to be 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 POWER REVENUE BOND RESOLUTION Page 31 A7801FJG interest is sufficient for the purposes of the Authority, and that there are no uncancelled mechanics',laborers', contractors',or materialmen's liens on any such property or any funds of the Authority or on file in any public office where the same should be filed in order to be valid liens against any fund of the Authority or any part of such property or of the Project or Capital Improvements, and that,in the opinion of the signer of such Counsel's Opinion,the time within which such liens can be filed has expired. Upon filing of such certificates and Counsel's Opinion,the balance in the separate account in the Construction Fund estab- lished therefor in excess of the amount,if any,stated in such certificate shall be transferred to the Capital Reserve Fund,if and to the extent necessary to make the amount of such Fund equal to the Capital Reserve Requirement,and any balance shall be paid over or transferred to the Revenue Fund and applied,if and to the extent a Counsel's Opinion states that such applica- tion is necessary to preserve the tax-exempt status of interest on the Bonds,to the retirement of Bonds by purchase or redemp- tion.If the Cost of Acquisition and Construction of the Project exceeds $350,000,000,the balance in the Construction Fund for the Project instead of being paid over to the Revenue Fund shall be paid to the State of Alaska.If subsequent to the filing of such certificate it shall be determined that any amounts specified in such certificate as being required for the payment of any remaining part of the Cost of Acquisition and Construction are no longer so required,such fact shall be evidenced by a certificate or certificates of an Authorized Officer of the Authority which shall be filed with the Trustee stating such fact and any amount shown therein as no longer being required shall be transferred to the Capital Reserve Fund, if and to the extent necessary to make the amount of such Fund equal to the Capital Reserve Requirement,and any balance shall be applied to the extent stated in such Counsel's Opinion.If the Cost of Acquisition and Construction of the Project exceeds $350,000,000,the balance shall be paid over to the State of Alaska.If the Cost of Acquisition and Construction of theProjectislessthan$350,000,000,Bonds of the initial Series in the amount equal to one half of the difference between $350,000,000 and the Cost of Acquisition and Construction of the Project shall be retired by purchase or redemption from money in the Construction Fund or from other available sources,including funds made available by the State of Alaska.Any balance remaining in the Construction Fund after such retirement shall then be paid to the State of Alaska. 9.The Trustee shall during the construction of the Project or Capital Improvements,pay from the appropriate separate account in the Construction Fund to the Authority,upon POWER REVENUE BOND RESOLUTION Page 32 A7801FJG its requisitions therefor signed by an Authorized Officer of the Authority,at one time or from time to time,a sum or sums not more than $250,000,such sums to be used by the Authority as a revolving fund for the purpose of paying such items of the Cost of Acquisition and Construction thereof as cannot conveniently be paid as in this Section otherwise provided.So long as the amount in such revolving fund shall at any time be less than $250,000,such revolving fund shall be reimbursed by the Trustee from time to time for such expenses so paid,by payments from the Construction Fund upon requisitions and certificates signed by an Authorized Officer and filed with the Trustee specifying the payee and the amount and particular purpose of such payment from such revolving fund for which such reimbursement is re- quired and certifying that each such amount so paid was neces- sary for the payment of an item of the Cost of Acquisition and Construction of the Project or Capital Improvements and that such expense could not conveniently be paid except from such revolving fund.In making such reimbursement the Trustee may rely upon such requisitions,and accompanying certificates. 10.Notwithstanding any of the other provisions of this Section,to the extent that other moneys are not available therefor,amounts in the Construction Fund shall be applied to the payment of principal of and interest on Bonds when due. 504.Revenues and Revenue Fund.All Revenues shall be promptly deposited by the Authority and the Trustee,as the case may be,upon receipt thereof to the credit of the Revenue Fund. 505.Operating Fund.1.As soon as practicable after deposit of Revenues in the Revenue Fund and in any case no later than the last business day of each month after the deposit,the Authority shall withdraw from the Revenue Fund and pay to the Operating Fund a sum which,together with any amount therein not set aside in the Operating Reserve Account or as a reserve for working capital,is equal to one-twelfth (or such other fraction as may be appropriate if the period with respect to which such amount is withdrawn is other than monthly)of the total moneys appropriated for Operating Expenses in the Annual Budget for the then current Fiscal Year.If and to the extent provided ina Supplemental Resolution authorizing Bonds of a Series,amounts from the proceeds of such Bonds may be deposited in the Operat- ing Fund and set aside therein as a reserve for working capital. The Authority shall establish an Operating Reserve Account Within the Operating Fund.The Operating Reserve Account shall be established and maintained at all times in an amount not less than the Operating Reserve Account Requirement.Amounts in the Operating Reserve Account may be expended for Operating Expenses to the extent other amounts in the Operating Fund are not available. POWER REVENUE BOND RESOLUTION Page 33 A7801FJG 2.Amounts in the Operating Fund shall be paid out from time to time by the Authority for reasonable and necessary Operating Expenses.Any amounts budgeted by the Committee in the Annual Budget for Annual Project Costs constituting costs of the Committee shall be paid out from time to time to the Commit- tee by the Authority. 506.Payments Into Certain Funds.As soon as practi- cable after the deposit of Revenues into the Revenue Fund and after the payment has been made to the Operating Fund pursuant to Section 505,and with at least the frequency stated below, the Authority shall apply moneys from the Revenue Fund and deposit said amounts with the Trustee on the dates set forth below and the Trustee shall deposit said amounts in the follow- ing order in the amounts and in the Funds set forth below. 1.Annually on a date or dates to be determined by Supplemental Resolution to the credit of the Excess Investment Earnings Fund in such amount as is necessary to cause the amount on deposit in the Excess Investment Earnings Fund (after a deposit therein,if any,from the Construction Fund)to be equal to the Trustee's estimate of Excess Investment Earnings for the Bond Year. 2.Semi-annually on June 1 and December 1,in the Debt Service Fund (i)for credit to the Interest Account,unless the sum on deposit therein equals or exceeds the interest due on all Bonds on the next succeeding interest payment date,an amount equal to the interest due on such interest payment date less the interest to be paid on such interest payment date from Bond proceeds held in said Account for such purpose;provided, however,that for the purposes of computing the amount on deposit in said Account,there shall be excluded the amount,if any,set aside in said Account for the payment of interest due after the next succeeding interest payment date;and (ii)for credit to the Principal Account,unless the sum on deposit therein equals or exceeds all Principal Installments due on the next succeeding July 1,an amount equal to such PrincipalInstallments;provided that the Authority may establish by Supplemental Resolution payments into the Debt Service Fund at different times and in different amounts as necessary for interest paid other than semi-annually and in fixed amounts. '3.In the Capital Reserve Fund,the amount,if any, required so that the balance in the Fund equals the Capital Reserve Requirement. 4.Semi-annually on June 1 and December1,in the Operating Reserve Account,the amount,if any,required so that the balance in the Account equals the Operating Reserve Account Requirement. POWER REVENUE BOND RESOLUTION Page 34 A7801FJG 5.In the Renewal and Contingency Reserve Fund,the amount,if any,required so that the balance in the Fund,within a period no greater than four (4)years from the initial deposit and thereafter from the most recent withdrawal therefrom,shall equal the Renewal and Contingency Reserve Requirement or such larger amount as may be determined from time to time by the Committee to be included in the calculation of Annual Project Costs pursuant to Section 8(a)(v)of the Power Sales Agreement. 507.Debt Service Fund.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 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;and (iii)out of the Interest Account,on or before any redemption date for the Bonds,the amount required for the payment of interest on the Bonds 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 purchased for retirement. 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 for which such Sinking Fund Installment was established)may,and if so directed by the Authority, 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 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.After the 60th day but on or prior to the 40th 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,shall,be applied by the Trustee tothepurchaseofBondsoftheSeriesandmaturityforwhichsuch 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 pursuant to this subsection 2 shall be made at prices not exceeding the applicable sinking fund Redemp- tion Price of such Bonds plus accrued interest,and such pur- chases shall be made by the Trustee as directed by the Au- thority.The applicable sinking fund Redemption Price of any Bonds so purchased or redeemed shall be deemed to constitute Part of the Principal Account until such Sinking Fund Install- ment date,for the purpose of calculating the amount of such Account.As soon as practicable after the 40th day preceding POWER REVENUE BOND RESOLUTION Page 35 A7801FJG the due date of any such Sinking Fund Installment,the Trustee shall proceed to call for redemption,by giving notice as pro- vided in Section 405,on such due date Bonds 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 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 shall be paid from the Operating Fund. 3.The amount,if any,deposited in the Interest Account from the proceeds of each Series of Bonds shall be set aside in such Account and applied to the payment of interest on Bonds as provided in the Supplemental Resolution relating to the issuance of such Series of Bonds. 4.In the event of the refunding of one or more Series of Bonds,the Trustee shall,upon the direction of the Authority,withdraw from the Debt Service Fund amounts accumu- lated therein with respect to Debt Service on the Bonds 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 being refunded; provided that such withdrawal shall not be made unless (a) immediately thereafter the Series of Bonds being refunded shall be deemed to have been paid pursuant to subsection 2 of Section 1201,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 paragraph (2)of Section 506. 508.Capital Reserve Fund.1.If five business days prior to 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 Capital Reserve Fund to the extent necessary to make good the deficiency. 2.Whenever the moneys on deposit in the Capital Reserve Fund shall exceed the Capital Reserve Fund Requirement, such excess shall,on the request of the Authority,be trans- ferred to the Authority for deposit in the Revenue Fund at least annually and shall be deemed "other available funds"within the meaning of Section 712 to be used for the payment of amounts required to be paid therein or for the purpose of refunds to the Purchasers pursuant to Section 13 of the Power Sales Agreement. POWER REVENUE BOND RESOLUTION Page 36 A7801EIJG 3.Whenever the amount in the Capital Reserve Fund, together with the amount in the Debt Service Fund is sufficient to pay in full all Outstanding Bonds in accordance with their terms (including principal or applicable sinking fund Redemption Price and interest thereon),the funds on deposit in the Capital 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. 4.In the event of the refunding of one or more Series of Bonds or one or more maturities within a Series of Bonds,the Trustee shall,upon the direction of the Authority, withdraw from the Capital Reserve Fund amounts accumulated therein with respect to the Bonds 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 inter- est on the Series or maturities within a Series of Bonds being refunded;provided that such withdrawal shall not be made unless (a)immediately thereafter the Series or maturities within a Series of Bonds being refunded shall be deemed to have been paid pursuant to subsection 2 of Section 1201 and (b)the amount remaining in the Capital Reserve Fund after such withdrawal shall not be less than the Capital Reserve Fund Requirement. 509.Renewal and Contingency Reserve Fund. 1.Amounts in the Renewal and Contingency Reserve Fund shall be applied to the costs of Capital Improvements,the payment of extraordinary operation and maintenance costs,and contingen- cies,including payments with respect to the prevention or correction of any unusual loss or damage in connection with the Project or to prevent a loss of Revenues therefrom,all to the extent not provided for in the then current Annual Budget or by reserves in the Operating Fund or from the proceeds of Bonds. 2.No payments shall be made from the Renewal and Contingency Reserve Fund if and to the extent that the proceedsofinsurance,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. 3.Any balance of moneys and securities in the Renewal and Contingency Reserve Fund in excess of an amount which,within a period no greater than four (4)years from the initial deposit and thereafter no greater than four (4)years from the most recent withdrawal therefrom,shall equal the Renewal and Contingency Reserve Requirement or such larger amount as may be determined from time to time by the Committee to be included in the calculation of Annual Project Costs POWER REVENUE BOND RESOLUTION Page 37 A7801FJIG pursuant to Section 8(a)(v)of the Power Sales Agreement,shall be transferred to the Revenue Fund at least annually. 510.Excess Investment Earnings Fund.Promptly after each Bond Year (but not later than 30 days after the redemption of the last Bond of a particular Series),the Trustee shall transfer from or to the Construction Fund or the Revenue Fund as provided in Sections 503 and 506 hereof,respectively, to or from the appropriate Account in the Excess Investment Earnings Fund,such amount as shall be necessary to cause the aggregate amount transferred to such Account to equal the Excess Investment Earnings for a particular Series of Bonds as of the end of such Bond Year as determined by or on behalf of the Authority;provided that no such transfers shall be necessary in respect of a particular Series of Bonds if the proceeds of such Series of Bonds are fully expended within six months of the date of issue of such Series of Bonds. All amounts in the Excess Investment Earnings Fund, including income earned from investments of the Fund,shall be held by the Trustee free and clear of the lien of this Resolu- tion,and the Trustee shall pay said amounts over to the United States from time to time as the Trustee shall determine;provid- ed that the Trustee shall so pay over to the United States in respect of each Series of Bonds,except as otherwise provided above:(1)not less frequently than once each five years after the date of issuance of such Series of Bonds,an amount equal to 90 percent of the net aggregate amount transferred to or earned in the appropriate Account in the Excess Investment Earnings Fund relating to such Series during such period (and not theretofore paid to the United States)and (2)not later than 30 days after the redemption of the last Bond of such Series,100 percent of the aggregate amount in such Account in the Excess Investment Earnings Fund. 511.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 such Bonds together with all Bonds purchased by the Trustee,shall thereupon be promptly cancelled. ARTICLE VI Depositaries of Moneys,Security for Deposits and Investment of Funds 601.Depositaries.1.All moneys held by the Trustee under the provisions of this Resolution shall be depos- ited with the Trustee and the Trustee shall,if directed by the POWER REVENUE BOND RESOLUTION Page 38 A7801FJG Authority,deposit such moneys with one or more Depositaries in trust for the Trustee.All moneys held by the Authority under this Resolution shall be deposited in one or more Depositaries in trust for the Authority.All moneys deposited under the provisions of this Resolution with the Trustee or any Depositary 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 there- of. 2.Each Depositary shall be a bank or trust company organized under the laws of any state of the United States ora 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. 602.Deposits.1.All Revenues and other moneys held by any Depositary 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 Fiduci- ary 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 Fiduci- ary,on time deposit,provided that such moneys on deposit be available for use at the time when needed.Such Fiduciary shall allow 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. 2.All moneys held under this Resolution by the Trustee or any Depositary 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 Trust- ee,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,and (b)held in such other manner as may then be required by applicable Federal or State of Alaska laws and regulations and applicable state laws and regulations of the state in which the Trustee or such Depositary (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 2 for the deposit of any moneys with them held in trust and set aside POWER REVENUE BOND RESOLUTION Page 39 A7801FJG by them for the payment of the principal or Redemption Price of or interest on any Bonds,or for the Trustee or any Depositary to give security for any moneys which shall be represented by obligations or certificates of deposit purchased as an invest- ment of such moneys. 3.All moneys deposited with the Trustee and each Depositary shall be credited to the particular Fund or Account to which such moneys belong. 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. 603.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.The Trustee shall make all such investments of moneys held by it in accordance with instructions received from any Authorized Officer of the Authority. Interest (net of that which represents a return of accrued interest paid in connection with the purchase of any investment)earned on any moneys or investments in such Funds and Accounts,other than the Construction Fund,shall be paid into the Revenue Fund,provided,however,that interest shall be paid into the Construction Fund to the extent such interest is earned to the earlier of (i)the date to which all interest is capitalized with respect to all Bonds,(ii)the date which is one year prior to the first Principal Installment date for any Bonds or (iii)the Date of Commercial Operation of the Project. Interest earned on any moneys or investments in a separate account in the Construction Fund shall be held in such account for the purposes thereof. Nothing in this Resolution shall prevent any Invest- ment 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. 604.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 liqui- dation of such investment shall be credited to such Fund and any POWER REVENUE BOND RESOLUTION ; Page 40 A7801FJG 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 or Sec.44.83.110(e)of the Act,obligations pur- chased as an investment of moneys therein shall be valued at the market value thereof exclusive of accrued interest,or otherwise as may then be required by the Code.Such computations shall be determined not less frequently than quarterly in each year. Except as otherwise provided in this Resolution,the Trustee shall sell at the best price obtainable,or present for redemption,any obligation so purchased as an investment whenev- er it shall be requested in writing by an Authorized Officer of the Authority so to do or whenever it 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 7Ol.Payment of Bonds.The Authority shall duly and punctually pay or cause to be paid,the principal or Redemption Price,if any,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. 702.Extension of Payment of Bonds.The Authority shall not directly or indirectly extend or assent to the exten- sion 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 anysuchclaimsforinterestshallbeextended,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 POWER REVENUE BOND RESOLUTION Page 41 A7801EJG Bonds and such issuance shall not be deemed to constitute an extension of maturity of Bonds. 703.Offices for Servicing Bonds.The Authority shall at all times maintain one or more agencies in the City of New York,New York,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 regis- tration,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 main- tain such agencies for the payment or redemption of Bonds. 704.Further Assurance.At any and all times the Authority shall,as far as it may be authorized by law,comply with any reasonable request of the Trustee to pass,make,do, execute,acknowledge and deliver,all and every such further resolutions,acts,deeds,conveyances,assignments,transfers and assurances as may be necessary or desirable for the better assuring,conveying,granting,pleading,assigning and confirm- ing all and singular the rights,Revenues 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.. 705.Power to Issue Bonds and Pledge Revenues and Other Funds.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 assign 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.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 provi- Sions of this Resolution are and will be valid and legally en- forceable obligations of the Authority in accordance with their terms and the terms of the Act and this Resolution.The Author- ity 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 POWER REVENUE BOND RESOLUTION Page 42 A7801EJIJG Resolution and all the rights of the Bondholders under this Resolution against all claims and demands of all persons whom- ever. 706.Power to Fix and Collect Rates,Fees and Charges.The Authority has,and will have as long as any Bonds are Outstanding,good right and lawful power to establish and collect rates and charges with respect to the use of the capa- bility of the Project and the sale of the capacity,output or service thereof subject to the terms of the Power Sales Agree- ment and other contracts relating thereto. 707.Creation of Liens;Sale and Lease of Property. l.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;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 de- rived on and after such date as the pledge of the Revenues provided in this Resolution shall be discharged and satisfied as provided in Section 1201,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. 2.No part of the Project shall be sold,leased, mortgaged or otherwise disposed of,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 only in accordance with,and in a manner that will not impair the Authority's obligations under,the provisions of the Power Sales Agreement and if (i)it shall determine that such property or facilities are not useful in the operation of the Project,or (ii)the proceeds of such sale are less than 2%of the prior Bond Year's Debt Service,or it shall file with the Trustee an opinion of the Consulting Engineer stating that the fair market value of the property or facilities exchanged are less than 2%of the prior BondYear's Debt Service or (iii)if such proceedsor fairmarketvalueexceeds2%of the prior Bond Year's Debt Service it shall file with the Trustee an opinion of the Consulting Engineer stating that the sale or exchange of POWER REVENUE BOND RESOLUTION Page 43 A7801FJG 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 712.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 Contingency Fund;and (b)In addition to the Power Sales Agreement, the Authority may lease or make contracts or grant licens- es 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 its agent of the Project and (ii)does not in any manner impair or adversely affect the rights or security of the Bondholders under this Resolution,and (iii)does not adversely affect the exemption from federal income taxation of the interest on the Bonds;and provided,further,that if the depreci- ated cost of the property to be covered by any such lease, contract,license,arrangement,easement or other right is in excess of 2%of the prior Bond Year's Debt Service the Authority shall first file with the Trustee an opinion of the Consulting Engineer that the action of the Authority with respect thereto does not impair the ability of the Authority to comply during the current or any further Fiscal Year with the provisions of Section 712.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. 708.Consulting Engineer.The Authority shall,for the purpose of performing and carrying out the duties imposed on the Consulting Engineer by this Resolution,employ an inde- pendent engineer or engineering firm or corporation having a nationwide and favorable reputation and demonstrated experience in the field of consulting engineering for power systems. 709.Annual Budget.The Authority,acting in conjunction with the Committee or separately in accordance with Section 13(e)of the Power Sales Agreement,shall adopt an Annual Budget each Fiscal Year pursuant to Section 13 of the Power Sales Agreement and shall adopt and have in effect said Annual Budget at least 90 days prior to such Fiscal Year.Each Annual Budget shall set forth in reasonable detail the estimated Revenues and Operating Expenses including Annual Project Costs for the Fiscal Year,and including provision for the estimated amount to be deposited during such Fiscal Year in each Fund and POWER REVENUE.BOND RESOLUTION Page 44 A7801EJG Account established under this Resolution and the requirements, if any,for the amounts estimated to be expended from each Fund and Account established under this Resolution.Such Annual Budget shall also set forth such detail with respect to such Revenues,Operating Expenses and other expenditures and such deposits,as shall be necessary or appropriate so as to comply with the Power Sales Agreement and the Authority may set forth such additional material as the Authority may determine.Such Annual Budget shall be revised as necessary or prudent during each Fiscal Year to reflect unanticipated changes in actual Revenues,Operating Expenses or other requirements,or if there are at any time during any such Fiscal Year extraordinary receipts or payments of unusual costs,and,if appropriate, there shall be filed with the Trustee an amended Annual Budget for the remainder of the then current Fiscal Year. 710.Limitations on Operating Expenses and Other Costs.The Authority shall not incur Operating Expenses or other costs payable from the Renewal and Contingency Reserve Fund in any Fiscal Year in excess of the reasonable and neces- sary amount of such expenses or costs,respectively,and shall not expend any amount from the Operating Fund for Operating Expenses or from the Renewal and Contingency Reserve Fund for costs payable therefrom for such Fiscal Year in excess of the respective amounts provided therefor in the Annual Budget as then in effect.Nothing in this Section contained shall limit the amount which the Authority or the Committee may expend for Operating Expenses or other costs payable from the Renewal and Contingency Reserve Fund in any Fiscal Year provided any amounts expended therefor in excess of such Annual Budget shall be received by the Authority or the Committee from some source other than the Revenues,which source shall not be reimbursable out of Revenues. 711.Acquisition and Construction of Project and Its Operation and Maintenance.1.The Authority shall use its best efforts to acquire and construct the Project,or cause the same to be acquired and constructed with due diligence and in a sound and economical manner., 2.The Authority shall at all times use its best efforts to operate or cause the Project to be operated properly and in an efficient and economical manner,consistent with the Power Sales Agreement and Prudent Utility Practice,and shall use its best efforts to maintain,preserve,reconstruct and keep the same or 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 make,or use its best efforts to cause to be made,all necessary and proper repairs, POWER REVENUE BOND RESOLUTION Page 45 A7801FJG replacements and renewals so that at all times the operation of the Project may be properly and advantageously conducted. 3.The Authority shall take all necessary steps to comply with applicable federal and state laws and regulations relating to the use and operation of the Project,including the terms of the Federal Energy Regulatory Commission license appli- cable to the Project. 712.Rates,Fees and Charges.1.The Authority, acting in conjunction with the Committee or separately under Section 13(e)of the Power Sales Agreement,shall at all times after the date of Commercial Operation charge and collect,asa wholesale power rate,from each Purchaser pursuant to the Power Sales Agreement that Purchaser's Percentage Share (as defined in the Power Sales Agreement)of Annual Project Costs.The Author- ity,acting in conjunction with the Committee or separately under Section 13(e)of the Power Sales Agreement,shall deter- mine Annual Project Costs in such amounts as shall be required to provide Revenues at least sufficient in each Fiscal Year, together with other available funds,for the payment of the sum of: (a)Operating Expenses during such Fiscal Year; (b)The amount,if any,to be paid during such Fiscal Year into the Operating Reserve Account which shall be the amount,if any,necessary to restore the Operating Reserve Account to the Operating Reserve Account Require- ment; (c)An amount equal to the Aggregate Debt Service during such Fiscal Year; (ad)The amount,if any,to be paid during such Fiscal Year into the Capital Reserve Fund,which shall be the amount,if any,necessary to restore the Capital Reserve Fund to the Capital Reserve Requirement subject to Section 716;, (e)The amount to be paid during such Fiscal Year into the Renewal and Contingency Reserve Fund which shall be the amount,if any,necessary to restore the Renewal and Contingency Reserve Fund over a period no greater than four years to the Renewal and Contingency Reserve Fund Requirement or such larger amount as may be Getermined from time to time by the Committee to be included in the calculation of Annual Project Costs pursuant to Section 8(a)(v)of the Power Sales Agreement; and , POWER REVENUE BOND RESOLUTION Page 46 A7801EFJG (£)All other charges or liens whatsoever required to be paid out of Revenues during such Fiscal Year. 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,and the Authority will enforce the payment of any and all amounts owing to the Authority pursuant to the Power Sales Agreement in accordance with its terms. 3.As required by AS 44,83.110,the Authority further will at all times maintain rates,fees or charges,and a contract entered into by it for the sale,transmission or distribution of power shall contain rates,fees or charges, sufficient (i)to pay the costs of operation and maintenance of the Project,the principal of and interest on the Bonds as the same severally become due and payable,(ii)to provide for debt service coverage as considered necessary by the Authority for the marketing of the Bonds and to provide for renewals,replace- ments and improvements of the Project,and (iii)to maintain reserves required by the terms of this Resolution. 713.Power Sales Agreement.1.The Authority shall collect and forthwith deposit in the Revenue Fund all amounts payable to it pursuant to the Power Sales Agreement or payable to it pursuant to 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.The Authority hereby pledges,assigns and transfers to the Trustee acting on behalf of the Bondholders all of its rights under the Power Sales Agreement or any other contracts for the use of the capa- bility 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 Bondholders the rights and privileges so assigned,including,without limiting the forego- ing,the rights of the Authority to receive payments thereunder. The Authority shall enforce the provisions of the Power Sales Agreement and duly perform its covenants and agreements thereun- der.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 which will in any manner materially impair or materially ad- versely affect the rights or security of the Bondholders under this Resolution.A copy of the Power Sales 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. POWER REVENUE BOND RESOLUTION Page 47 A7801EFJG 2.The Authority shall perform its obligations under the Power Sales Agreement to delegate to the Committee,consult with the Committee,and act through the Committee,with respect to the management,operation,maintenance,and improvement of the Project,including its obligation to follow procedures adopted by the Committee with respect to certain actions to be taken by the Authority under this Resolution.The Authority represents that it has the power under Section 13(e)of the Power Sales Agreement,notwithstanding any action or inaction by the Committee,to take such measures as it deems necessary to meet its obligations under this Resolution.The Authority hereby covenants that it will exercise the powers granted. pursuant to Section 13(e)of the Power Sales Agreement,if necessary,to carry out actions required to be taken under this Resolution. 714.Insurance.1.The'Authority shall keep and Maintain the Project at all times insured against such risks and in such amounts,with such deductible provisions,as are custom- ary in connection with the operation of facilities of a type and size comparable to the Project.The determination of what is customary within the meaning of the prior sentence shall be made by an independent insurance consultant employed by the Authori- ty.Without limiting the foregoing,the Authority shall carry and maintain,or cause to be carried and maintained,and pay or cause to be paid timely the premiums for,the following insur- ance with respect to the Project and the Authority: (a)ainsurance coverage for buildings,works, plants and facilities comprising the Project for all risks of direct physical loss,at all times in an amount not less than an amount necessary giving regard to co-insur- ance provisions to pay and retire and redeem all the Outstanding Bonds; (b)general public liability insurance (other than as set forth in subsection (c)of this Section)in minimum amounts per occurrence,for annual aggregate claims,and with a deductible amount,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 carry such insurance; (c)comprehensive automobile liability insur- ance; (d)workers'compensation insurance or self- insurance as required by the laws of the State of Alaska; 2.Each insurance policy required by this Section (i)shall be issued or written by a financially responsible POWER REVENUE BOND RESOLUTION Page 48 A7801FJG insurer (or insurers),or by an insurance fund established by the United States or State of Alaska or an agency or instrument- ality thereof,(ii)shall be in such form and with such provi- sions (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 as- sureds)as are generally considered standard provisions for the type of insurance involved,and (iii)shall prohibit cancel- lation 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 carried pursuant to this Section 714 shall name the Trustee,the Authority and the Purchasers 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. 3.The Authority covenants to review each year the insurance carried by the Authority with respect to the Authority and the Project and,to the extent feasible and economically prudent,will carry insurance insuring against the risks and hazards specified in this Section 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 deter- mines that the insurance required by this Section is not avail- able to the Authority at reasonable cost,and,in any case, every two (2)years,from and after July 1,1990,the Authority shall employ an independent insurance consultant for the purpose of reviewing the insurance coverage of,and the insurance required for,the Authority and the Project and making recom- mendations respecting the types,amounts and provisions of insurance that should be carried with respect to the Authority and the Project and their operation,maintenance and adminis- tration.A signed copy of the report of the independent insur- ance 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 recom- mendations contained in said report. 4.The Authority may establish a fund to provide self-insurance against the risks and hazards relating to the properties of the Project and the interests of the Authority and the Bondholders as described in this Section,and,in connection therewith,may specify and determine the matters and things set forth in paragraph 3 of this Section. POWER REVENUE BOND RESOLUTION Page 49 A7801FJG 5.Insurance maintained pursuant to this Section may be part of one or more master policies maintained by the State of Alaska so long as the form of such policy and the coverage is the same as if a separate policy was in effect. 6.The Authority shall on or before January 1 of each year,commencing January 1,1990,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. 715.Reconstruction;Application of Insurance Proceeds.1.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 the Authority declares the Project ended pursuant to Section 14 of the Power Sales Agreement,or unless the Consulting Engineer 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 interest of the Purchasers and the Bondholders.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 Authority in a special account in the Construction 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 by 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 proper- ty,or in respect to which notice in writing of intention to apply the same to the work of repairing or replacing the proper- ty 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 by pur- chase or redemption.Notwithstanding the foregoing,in the event that payments are made from the Renewal and Contingency Reserve 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 shall be deposited in the Renewal and Contingency Reserve Fund to the extent of such payments there- from. 2.If the proceeds of insurance,including the proceeds of any self-insurance fund,authorized by this Section POWER REVENUE BOND RESOLUTION Page 50 A7801FJIJG to be applied to the reconstruction or replacement of any por- tion of the Project are insufficient for such purpose,the deficiency may be supplied out of moneys in the Renewal and Contingency Reserve Fund. 3.Alternate methods (if any)of carrying out and funding Required Project Work may be determined as provided in Section 4(c)of the Power Sales Agreement. 716.Maintenance of Capital Reserve Fund.1.The Authority shall at all times maintain the Capital Reserve Fund created and established by Section 502 and do and perform or cause to be done and performed each and every act and thing with respect to the Capital 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 or of the Act. 2.In order better to secure the Bonds and to make them more marketable and to maintain in the Capital Reserve Fund an amount equal to the Capital Reserve Requirement,the Authori- ty shall,in compliance with the provisions of the Act,cause the Chairman annually,on or before the second day of January of each year and whenever the Trustee transfers funds from the Capital Reserve Fund to pay Principal Installments or interest on the Bonds,to make and deliver to the Governor of the State and the Chairmen of the House and Senate Finance Committees of the Alaska State Legislature his certificate stating the amount, if any,required to restore the Capital Reserve Fund to the Capital Reserve Requirement and requesting such amount.A copy of such certificate shall be promptly delivered to the Trustee. Any such moneys received by the Authority from the State in accordance with the provisions of the Act pursuant to any such certification shall be paid to the Trustee for deposit and credit to the Capital Reserve Fund. 717.Accounts and Reports.1.The Authority shall keep or cause to be kept proper books of 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 which,together with the Power Sales 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 then Outstanding or their repre- sentatives duly authorized in writing. 2.The Trustee shall advise the Authority promptly after the end of each month 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 POWER REVENUE BOND RESOLUTION Page 51 A7801FJG 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. 3.The Authority shall annually,within 120 days after the close of each Fiscal Year (the first such report to be filed with respect to the Fiscal Year commencing July 1,1990), file with the Trustee,and otherwise as provided by law,a copy of an annual report for such Fiscal Year,accompanied by an Accountant's Certificate,relating to the Project and including the following statements in reasonable detail:a statement of assets and liabilities as of the end of such Fiscal Year,to the extent relating to the Project;a statement of Revenues and Operating Expenses for such Fiscal Year;and a summary with respect to each Fund and Account established under this Resolu- tion of the receipts therein and disbursements therefrom during such Fiscal Year and the amount held therein at the end of such Fiscal Year.Such Accountant's Certificate shall state whether or not,to the knowledge of the signer,the Authority is in default with respect to any of the covenants,agreements or conditions on its part contained in this Resolution,and if so, the nature of such default. 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 30,1991,a certificate signed by an appropriate Authorized Officer of the Authority stating that,to the best of his knowledge and belief,the Authority has kept,observed,per- formed 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 Author- ity under this Resolution or any Event of Default or other event which,with the lapse of time specified in Section 801 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. 5.With respect to the Project and each Capital Improvement for which a Construction Engineer is retained pursu- ant to paragraph 7 of Section 503,the Authority shall cause such Construction Engineer to (A)prepare and submit to the Authority such drawings,designs,plans,specifications,surveys and reports as are necessary for the proper acquisition and construction of the Project or Capital Improvement,and approve and supervise any necessary modifications in the designs,plans and specifications thereof;(B)prepare and submit to the POWER REVENUE BOND RESOLUTION Page 52 A7801FJG Authority quarterly reports of progress during the period of construction of the Project or Capital Improvement,including data as to the date of expected completion and the comparison of estimated construction time and the Cost of Acquisition and Construction thereof with the estimates made prior to the issuance and sale of any Bonds,and an estimate of the amounts that will be needed from time to time to pay the Cost of Acqui- sition and Construction thereof and the estimated dates of such payments;(C)continuously supervise and inspect the acquisition and construction of the Project or Capital Improvement in accordance with the usual accepted practices of such inspection and supervision;and (D)upon completion and testing as required by the specifications of the Project or Capital Improvement, certify to the Authority to that effect and to the further effect that the Project (or,with respect to a Capital Improve- ment,the Project with such Capital Improvement)is ready for normal continuous operation.The Authority shall cause a copy of every report of the Construction Engineer referred to in this paragraph to be filed with the Trustee. 6.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 Bondholders at the office of the Trustee and shall be mailed to each Bondholder who shall file a written request therefor with the Authority.The Authority may charge each Bondholder requesting such reports,statements and other docu- ments a reasonable fee to cover reproduction,handling and postage. 718.Tax Covenants.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 ofinstructions from Bond Counsel,as the same may be revised from time to time,in order to assure that interest paid on the Bonds 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 suchrecipientisa"substantial user"or "related person"within the meaning of Section 147(a)of the Code. 2.The Authority shall not permit at any time or times any of the proceeds of the Bonds,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 to be an "arbitrage bond"as defined in Section 148(a)and (e)of the Code. 3.Notwithstanding any other provision of this Resolution,all money held by the Trustee in any of the funds or accounts established pursuant to this Resolution other than POWER REVENUE BOND RESOLUTION Page 53 A7801FJG money on deposit in the Debt Service Fund and the Capital Reserve Fund,shall be invested solely in obligations issued by the Treasury,in obligations guaranteed by The Federal Housing Administration,The Veterans Administration,The Federal Nation- al Mortgage Association,The Federal Home Loan Mortgage Corpora- tion,or The Government National Mortgage Association,or in such other investments as may be permitted under the regulations issued pursuant to Section 149(b)of the Code,unless,in the opinion of Counsel,another investment of such funds will not impair the exclusion of interest on the Bonds from gross income for federal income tax purposes. 4.The Authority shall not permit at any time or times any proceeds of any Bonds,Revenues or any other funds of the Authority to be used,directly or indirectly,in a manner which would result in the exclusion of any Bond from the treat- ment afforded by subsection (a)of Section 103 of the Code,as from time to time amended,except in the case of Bonds held by a person who,within the meaning of Section 147(a)of the said Code,is a "substantial user"or "related person". 5.This Section shall not apply to any Series of Bonds the interest on which is determined by the Authority not to be exempt from taxation under Section 103 of the Code,pro- vided,that no such Series of Bonds shall be issued unless a Counsel's Opinion is filed with the Trustee stating that the issuance of such Series will not cause the interest on a tax-ex- empt Bond previously issued to be subject to taxation under Sections 103 and 141-150 of the Code. 6.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 718,no person other than the Trustee or the Holders of the Bond of the specific series 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. 719.Payment of Taxes and Charges.The Authority will from time to time duly pay and discharge,or cause to be paid and discharged,all taxes,assessments and other governmen- tal charges,or required payments in lieu thereof,lawfully imposed upon the properties of the Authority 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 taxes,assessments, charges or claims which the Authority shall in good faith contest by proper legal proceedings if the Authority shall in POWER REVENUE BOND RESOLUTION Page 54 A7801 FIG all such cases have set aside on its books reserves deemed adequate with respect thereto. 720.Pledge of the State.The State of Alaska 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 the Bonds,or in any way impair the rights and remedies of the Holders of the 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 proceed- ing 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 44.83.140 of the Act. 721.Waiver of Laws.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. 722.General.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. 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 of Alaska including the debt and other limitations prescribed by the Constitution and laws of the State of Alaska. 3.The provisions of this Article are covenants and agreements by the Authority with the Trustee and the Bond- holders. ARTICLE VIII Remedies of Bondholders Section 801.Events of Default.The following shall constitute Events of Default: POWER REVENUE BOND RESOLUTION Page 55 A7801EFJG (i)if default shall be made in the due and punctual payment of the principal of or Redemption Price, if any,or any Sinking Fund Payment when and as the same shall become due on or with respect to any Bond,whether at maturity or upon call for redemption or otherwise; (ii)if default shall be made in the due and punctual payment of any installment of interest on any Bond or the unsatisfied balance of any Sinking Fund In- stallment therefor,when and as such interest installment or Sinking Fund Installment shall become due and payable; (iii)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 in this Resolution or in the Bonds contained,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 Outstanding; (iv)if there shall occur the dissolution or liquidation of the Authority or the filing by the Authori- ty of a voluntary petition in bankruptcy,or the commis- sion by the Authority of any act of bankruptcy,or adjudi- cation 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 compe- tent jurisdiction of a petition applicable to the Authori- ty 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; (v)if an order or decree shall be entered, with the consent or acquiescence of the Authority appoint- ing 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, shall not be vacated or discharged or stayed within 90 days after the entry thereof;and (vi)if judgment for the payment of money shall be rendered against the Authority as the result of the construction,improvement,ownership,control or operation of the Project,and any such judgment shall not be dis- charged 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 POWER REVENUE BOND RESOLUTION Page 56 A7801FIG 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. 802.Account and Examination of Records After Default.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 at all times shall be subject to the inspection and use of the Trustee and of its agents and attorneys. 2.The Authority covenants that if an Event of Default shall have happened and shall not have been remedied, the Authority upon demand of the Trustee,will account,as if it were the trustee of an express trust,for all Revenues and other moneys,securities and funds pledged or held under this Resolu- tion for such period as shall be stated in such demand. 803.Application of Revenues and Other Moneys After Default.1.The Authority covenants that if an Event of Default shall happen and shall 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. 2.During the continuance of an Event of Default, the Trustee shall apply all moneys,securities,funds and Reve- nues received by the Trustee pursuant to any right given or action taken under the provisions of this Article as follows and in the following order: (i)Expenses of Fiduciaries -to the payment of the reasonable and proper charges,expenses and liabil- ities 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 relating to the Project shall 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 Inter- est -to the payment of the interest and principal or Redemption Price then due on the Bonds,as follows: POWER REVENUE BOND RESOLUTION ; Page 57 A7801EFJG 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 theretofore called for redemp- tion,and,if the amount available shall not be sufficient to pay in full any installment or install- ments maturing on the same date,then to the payment thereof ratably,according to the amounts due there- on,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 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 shall not be sufficient to pay in full all the Bonds 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,with- out any discrimination or preference. 3.If and whenever all overdue installments of interest on all Bonds,together with the reasonable and proper charges,expenses and liabilities of the Trustee,and all other sums payable by the Authority under this Resolution,including the principal and Redemption Price of and accrued unpaid inter- est on all Bonds which shall then be payable by declaration or otherwise,shall either be paid by or for the account of the Authority or provision satisfactory to the Trustee shall be made for such payment,and all defaults under this Resolution or the Bonds 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 Authori- ty 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 Resolu- tion to be deposited or pledged,with the Trustee),and there- upon the Authority and the Trustee shall be restored,respec- tively,to their former positions and rights under this Resolu- tion.No such payment over to the Authority by the Trustee nor such restoration of the Authority 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. 4.The Trustee shall not take any action which will unreasonably interfere with the performance of the Power Sales Agreement. POWER REVENUE BOND RESOLUTION Page 58 A7801FJG 804.Appointment of Receiver.The Trustee shall have the right to apply in an appropriate proceeding for the appointment of a receiver of the Project. 805.Proceedings Brought by Trustee.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 attor- neys,may proceed,and upon written request of the Holders of not less than 25%in principal amount of the Bonds Outstanding shall proceed,to protect and enforce its rights and the rights of the Holders of the Bonds under this Resolution forthwith by a suit in equity or at law,whether for the specific performance of any covenant herein contained,or in aid of the execution of any power herein granted or any remedy granted under the Act,or for an accounting against the Authority as if the Authority were the trustee of an express trust,or in the enforcement of 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. 2.All rights of action under this Resolution may be enforced by the Trustee without the possession of any of the Bonds or the production thereof on the trial or other proceed- ings,and any such suit or proceedings instituted by the Trustee shall be brought in its name. 3.The Holders of not less than a majority in principal amount of the Bonds 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 pro- ceeding so directed would involve the Trustee in personal liability or be unjustly prejudicial to the Bondholders not parties to such direction. 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. 806.Restriction on Bondholder's Action.1.No Holder of any Bond shall have any right to instituteany 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, POWER REVENUE BOND RESOLUTION Page 59 A7801FJG 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 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 of Alaska 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 shall have any right in any mannerwhateverbyhisortheiractiontoaffect,disturb or prejudicethepledgecreatedbythisResolution,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,subject only to the provisions of Section 702. 2.Nothing contained in this Resolution or in the Bonds shall affect or impair the obligation of the Authority, which is absolute and unconditional,to pay at the respective dates of maturity and places therein expressed the principal of (and premium,if any)and interest on the Bonds to the respec- tive 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. 807.Remedies Not Exclusive.No remedy by the terms of this Resolution conferred upon or reserved to the Trustee or the Bondholders 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. 808.Effect of Waiver and Other Circumstances.No delay or omission of the Trustee or any Bondholder 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 con-. strued 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 Bondholders may be exercised from time to time and as often as may be deemed expedient by the Trustee or by the Bondholders. POWER REVENUE BOND RESOLUTION Page 60 A7801FJIG 809.Notice of Default.The Trustee shall promptly mail written notice of the occurrence of any Event of Default to each registered owner of Bonds then Outstanding at his address, if any,appearing upon the registry books of the Authority,and to each Purchaser. ARTICLE IX Concerning the Fiduciaries 901.Trustee;Appointment and Acceptance of Duties. 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. 902.Paying Agents;Appointment and Acceptance of Duties.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 913 for a successor Paying Agent.The Trustee may be appointed a Paying Agent. 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. 3.Unless otherwise provided,the principal corpo- rate 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. 903.Responsibilities of Fiduciaries.1.The recitals of fact herein and in the Bonds contained shall be taken as the statements of the Authority and no Fiduciary as- sumes any responsibility for the correctness of the same.No Fiduciary makes any representations as to the validity or suffi- ciency of this Resolution or of any Bonds issued thereunder or as to the security afforded by this Resolution,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 POWER REVENUE BOND RESOLUTION Page 61 A7801EJG 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 indemni- fied.Subject to the provisions of subsection 2 of this Section 903,no Fiduciary shall be liable in connection with the perfor- mance of its duties hereunder except for its own negligence, misconduct or default. 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 upon which the Trustee may rely shall be subject to the provisions of this Section 903. 904.Evidence on Which Fiduciaries May Act.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 of this 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 author- ization and protection in respect of any action taken or suf- fered by it under this Resolution in good faith and in accor- dance therewith. 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 mat- ter (unless other evidence in respect thereof be herein specif- ically 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 of this 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 evi- dence as to it may seem reasonable. POWER REVENUE BOND RESOLUTION Page 62 A7801FJIG 3.Except as otherwise expressly provided in this Resolution,any request,order,notice or other direction re- quired 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. 905.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- ing those of its attorneys,agents,and employees,incurred in and about the performance of their powers and duties under this Resolution and each Fiduciary shall have a lien therefor on any and all funds at any time held by it under this Resolution. Subject to the provisions of Section 903,the Authority further agrees to indemnify and save each Fiduciary harmless against any liabilities which it may incur in the exercise and performance of its powers and duties hereunder,and which are not due to its negligence,misconduct or default. 906.Certain Permitted Acts.Any Fiduciary may become the owner of any Bonds with the same rights it would have if it were not a Fiduciary.To the extent permitted by law,any Fiduciary may act as depositary 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 Bondholders 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 then Outstanding. 907.Resignation of Trustee.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 Bondholder,specifying the date when such resignation shall take effect,and such resignation shall take effect upon the dayspecifiedinsuchnotice,provided a successor shall have been appointed by the Authority or the Bondholders as provided in Section 909,and has accepted the appointment. 908.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 then Outstanding or their attorneys-in-fact duly authorized,excluding any Bonds 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 POWER REVENUE:BOND RESOLUTION Page 63 A7801FJG instrument in writing signed by an Authorized Officer of the Authority. 909.Appointment of Successor Trustee;Financial Qualifications of Trustee and Successor Trustee.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 then Outstanding,excluding any Bonds held by or for the account of the Authority,by an instrument or concurrent instruments in writing signed and acknowledged by such Bondholders or by their attorneys-in-fact duly authorized and delivered to such succes- sor 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 Bondholders as aforesaid,the Authority by a duly executed written instru- ment signed by an Authorized Officer of the Authority shall forthwith appoint a Trustee to fill such vacancy until a succes- sor Trustee shall be appointed by the Bondholders as authorized in this Section 909.The Authority shall mail notice to each Bondholder 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 super- seded by a Trustee appointed by the Bondholders. 2.If in a proper case no appointment of a succes- sor 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 907 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 907)or the Holder of any Bond (in any case)may apply to any court of competent jurisdiction to appoint a suc- cessor Trustee.Said court may thereupon,after such notice,if any,as such may deem proper,appoint a successor Trustee. 3.The Trustee appointed under the provisions of this Article or any successor to the Trustee shall be a bank or trust company or national banking association having capital stock and surplus aggregating at least $200,000,000,if there be such a bank or trust company or national banking association willing and able to accept the office on reasonable and custom- ary terms and authorized by law to perform all the duties im- posed upon it by this Resolution. POWER REVENUE BOND RESOLUTION Page 64 A7801FJG 910.Transfer of Rights and Property to Successor Trustee.Any successor Trustee appointed under this Resolution shall execute,acknowledge and deliver to its predecessor Trust- ee,and also to the Authority,an instrument accepting such appointment,and thereupon such successor Trustee,without any further act,deed or conveyance,shall become fully vested with all moneys,estates,properties,rights,powers,duties and obligations of such predecessor Trustee,with like effect as if originally named as trustee;but the Trustee ceasing to act shall 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 fully and certain- ly vesting and confirming in such successor Trustee all the right,title and interest of the predecessor Trustee in and to any property held by it under this Resolution,and shall 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 fully and certainly vesting in and confirming to such successor Trustee any such estates,rights,powers and duties, any and all such deeds,conveyances and instruments in writing shall,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. 911.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 shall be a party or any company to which any Fiduciary may sell or transfer all or substantially all of its corporate trust business,provided such company shall be a bank or trust company organized under the laws of any state of the United States 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 succes- sor to such Fiduciary without the execution or filing of any paper or the performance of any further act. 912.Adoption of Authentication.In any case any of the Bonds contemplated be issued under this Resolution shall have been authenticated but not delivered,any successor Trustee may adopt the certification of authentication of any predecessor Trustee 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 Trustee may authenticate such Bonds in the name of the predecessor Trustee,or in the name of the successor Trustee,and in all cases such certificate shall have the full force which it is anywhere in said Bonds or in POWER REVENUE BOND RESOLUTION Page 65 A7801FJIG this Resolution provided that the certificate of the Trustee shall have. 913.Resignation or Removal of Paying Agent and Appointment of Successor.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 Author- ized Officer of the Authority.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 or a national banking associa- tion,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. 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 if there 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 1001.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 Supplementa]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 Committee statingthatsuchSupplementalResolutionhasbeenadoptedinaccordancewithSection11ofthePowerSalesAgreement,shall be fully effective in accordance with its terms: (1)To close this Resolution against,or pro- vide limitations and restrictions in addition to the limitations and restrictions contained in this Resolution on,the authentication and delivery of Bonds or the issu- ance of other evidences of indebtedness; (2)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 POWER REVENUE BOND RESOLUTION Page 66 A7801EFJIG contrary to or inconsistent with this Resolution as theretofore in effect; (3)To add to the limitations and restrictions 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; (4)To authorize Bonds of a Series and,in connection therewith,specify and determine the matters and things referred to in Section 202,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,including without limitation the form of coupon bonds as provided in Section 301,or to amend,modify or rescind any such authorization,specifi- cation or determination at any time prior to the first authentication and delivery of such Bonds; (5)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; (6)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 Resolu- tion shall cease to be Outstanding,and (ii)such Supple- mental 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 Supple- mental Resolution and of Bonds issued in exchange or in place thereof;and (7)To appoint the Trustee. 1002.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 Committee stating that such Supplemental Resolution has been adopted in accordance with Section 11 of the Power Sales Agreement,and (iii)the filing with the Authority of an instrument in writing made by the Trustee consenting thereto,shall be fully effective in accord- ance with its terms: POWER REVENUE BOND RESOLUTION Page 67 A7801FJIG (1)To cure any ambiguity,supply any omission, or cure or correct any defect or inconsistent provision in this Resolution;or (2)To insert such provisions clarifying mat- ters or questions arising under this Resolution as are necessary or desirable and are not contrary to or incon- sistent with this Resolution as theretofore in effect. (3)To make any changes which do not in the sole opinion of the Trustee,materially and adversely affect the rights of the Bondholders. 1003.Supplemental Resolutions Effective With Consent of Bondholders.At any time or from time to time,a Supplemental Resolution may be adopted subject to consent by Bondholders 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 Committee stating that such Supplemental Resolution has been adopted in accordance with Section 11 of the Power Sales Agreement,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. 1004.General Provisions.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 704 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. 2.Any Supplemental Resolution referred to and permitted or authorized by Section 1001 and 1002 may be adopted by the Authority without the consent of any of the Bondholders, 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 an Opinion of Counsel 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., POWER REVENUE BOND RESOLUTION Page 68 A7801FJG 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 1001,1002 or 1003 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 Opinion of Counsel that such Supplemental Resolution is authorized or permitted by the provisions of this Resolution. 4.No Supplemental Resolution shall change or modify any of the rights or obligations of any Fiduciary without its written assent thereto. ARTICLE XI Amendments 1101.Mailing.Any provision in this Article for the mailing of a notice or other paper to Bondholders shall be fully complied with if it is mailed postage prepaid only to each registered owner of Bonds then Outstanding at his address,if any,appearing upon the registry books of the Authority and each Fiduciary. 1102.Powers of Amendment.Any modification or amendment of this Resolution and of the rights and obligations of the Authority and of the Holders of the Bonds thereunder,in any particular,may be made by a Supplemental Resolution,with the written consent of the Committee and,if required by the terms of a written commitment for Bond insurance,the consent of the Bond insurer,and with the written consent given as provided in Section 1103 of the holders of at least a majority in princi- pal amount of the Bonds Outstanding at the time such consent is given,and (ii)in case less than all of the several Series of Bonds then Outstanding are affected by the modification or amendment,of the Holders of at least a majority in principalamountoftheBondsofeachSeriessoaffectedandOutstandingatthetimesuchconsentisgiven,and (iii)in case the modifi- cation or amendment changes the terms of any Sinking Fund Installment,of the Holders of at least a majority in principal amount of the Bonds 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 of any specified like Series and maturity remain Outstanding the consent of the Holders of such Bonds shall not be required and such Bonds 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 POWER REVENUE:BOND RESOLUTION Page 69 A7801FJG the principal of any Outstanding Bond 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 shall reduce the percentages or otherwise affect the classes of Bonds 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 of such Series.The Trustee may in its discretion determine whether or not in accordance with the foregoing powers of amendment Bonds 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 and all Holders of the Bonds. 1103.Consent of Bondholders.The Authority may at any time adopt a Supplemental Resolution making a modification or amendment permitted by the provisions of Section 1102 to take effect when and as provided in this Section,provided that such modification or amendment receives the written consent of the Committee.A copy of such Supplemental Resolution (or brief summary thereof or reference thereto in form approved by the Trustee),together with a request to Bondholders for their consent thereto in form satisfactory to the Trustee,shall be mailed by the Authority to Bondholders (but failure to mail such copy and request shall not affect the validity of the Supplemen- tal 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 specified in Section 1102 and (b)an Opinion of Counsel 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 Bondholders and enforceable in accor- dance with its terms,and (ii)a notice shall have been mailed as hereinafter in this Section 1103 provided.Each such consent shall be effective only if accompanied by proof of the holding, at the date of such consent,of the Bonds with respect to which such consent is given,which proof shall be such as is permitted by Section 1202.A certificate or certificates executed by the Trustee and filed with the Authority stating that it has exam- ined such proof and that such proof is sufficient in accordance with Section 1202 shall be conclusive that the consents have been given by the Holders of the Bond described in such certifi- cate or certificates of the Trustee.Any such consent shall be binding upon the Holder of the Bonds signing such consent and, POWER REVENUE BOND RESOLUTION Page 70 A7801FJIG anything in Section 1202 to the contrary notwithstanding,upon any subsequent Holder of such Bonds and of any Bonds issued in exchange (whether or not such subsequent Holder has notice thereof)provided however that any consent may be revoked 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 1103 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 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 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 Supplemen- tal 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 will be effective as provided in this Section 1103,may be given to Bondholders by the Authority by mailing such notice to Bondhold- ers (but failure to mail such notice shall not prevent such Supplemental Resolution from becoming effective and binding as in this Section 1103 provided).The Authority shall file with the Trustee proof of the mailing of such notice to Bondholders. A record,consisting of the certificates or statements required or permitted by this Section 1103 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 at the expiration of 40 days after the filing with the Trustee of the proof of the mailing of such last mentioned notice,except in the event of a final decree of a court of competent jurisdiction 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 arid the Authority during such 40 day period and any such further period during which any such action or pro- ceeding 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.; 1104.Modifications by Unanimous Consent.The Resolution and the rights and obligations of the Authority and of the Holders of the Bonds thereunder may be modified or amend- ed with the written consent of the Committee in any respect by a Supplemental Resolution effecting such modification or amendment and the consents of the Holdersof all the Bonds then POWER REVENUE BOND RESOLUTION Page 71 A7801EFJG Outstanding,each such consent to be accompanied by proof of the holding at the date of such consent of the Bonds with respect to which consent is given.Such Supplemental Resolution shall take effect upon the filing (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 Coun- sel's Opinion referred to in Section 1103 and (b)with the Authority and the Trustee of the Trustee's written statement that the consents of the Holders of all Outstanding Bonds 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. 1105.Exclusion of Bonds.Bonds owned by or for the account of the Authority shall not be deemed Outstanding for the purpose of consent or other action or any calculation of Out- standing Bonds provided for in this Article XI,and the Authori- ty shall not be entitled with respect to such Bonds 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 shall furnish the Trustee a certificate of an Authorized Officer of the Authority upon which the Trustee may rely,describing all Bonds so to be excluded. 1106.Notation on Bonds.Bonds authenticated and delivered after the effective date of any action taken as in Article X or Article XI provided may,and if the Trustee so determines,shall,bear a notation by endorsement or otherwise in form approved by the Authority and the Trustee as to such action,and in that case upon demand of the Holder of any Bond Outstanding at such effective date and presentation of his Bond for the purpose at the principal corporate trust office of the Trustee or upon any transfer or exchange of any Bond Outstanding at such effective date,suitable notation shall be made on such Bond or upon any Bond issued upon any such transfer or exchange by the Trustee as to,any such action.If the Authority or the Trustee shall so determine,new Bonds so modified as in the opinion of the Trustee and the Authority to conform to such action shall be prepared,authenticated and delivered,and upon demand of the Holder any Bond then Outstanding shall be ex- changed,without cost to such Bondholder,for Bonds of the same Series and maturity then Outstanding,upon surrender of such Bonds. POWER REVENUE BOND RESOLUTION Page 72 A7801FJIG ARTICLE XII Miscellaneous 1201.Defeasance.1.If the Authority shall pay or cause to be paid,or there shall otherwise be paid,to the Holders of all Bonds 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 Resolu- tion,then the pledge and assignment of any Revenues,and other moneys and securities pledged under this Resolution and all covenants,agreements and other obligations of the Authority to the Bondholders,shall thereupon cease,terminate and become void and be discharged and satisfied.In such event,the Trust- ee shall cause an accounting for such period or periods as shall be requested by the Authority to be prepared and filed with the Authority and,upon the request of the Authority shall execute and deliver to the Authority all such instruments as may be desirable to evidence such discharge and satisfaction,and the Fiduciaries shall pay over or deliver to the Authority all moneys or securities held by them pursuant to this Resolution which are not required for the payment of principal or Redemp- tion Price,if applicable,and interest on Bonds.If the Authority shall pay or cause to be paid or there shall otherwise be paid,to the Holders of all Outstanding Bonds of a particular Series,or of a particular maturity within a Series,the princi- pal 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,such Bonds shall cease to be entitled to any lien,benefit or security under this Resolution, and all covenants,agreements and obligations of the Authority to the Holders of such Bonds shall thereupon cease,terminate and become void and be discharged and satisfied. 2.Bonds 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 of funds for such payment or redemption or other- wise)at the maturity or redemption date thereof shall be deemed to have been paid within the meaning and with the effect ex- pressed in subsection 1 of this Section 1201.Prior to the maturity or redemption date thereof,Bonds shall be deemed to have been paid within the meaning and with the effect expressed in subsection 1 of this Section 1201 if (a)in case any of said Bonds are to be redeemed on any date prior to their maturity, the Authority shall have given to the Trustee irrevocable in- struction accepted in writing by the Trustee to mail as provided in Article IV notice of redemption of such Bonds on said date, (b)there shall have been deposited with the Trustee either moneys (including moneys withdrawn and deposited pursuant to subsection 4 of Section 507)in.an amount which shall be POWER REVENUE BOND RESOLUTION Page 73 A7801EFJG sufficient,or Federal Obligations (including any Federal Obli- gations issued or held in book-entry form on the books of the Department of the Treasury of the United States of America)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 inter- est due and to become due on said Bonds on or prior to the redemption date or maturity date thereof,as the case may be, and (c)the Authority 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 that the deposit required by (b)above has been made with the Trustee and that said Bonds are deemed to have been paid in accordance with this Section 1201 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 said Bonds.Neither Federal Obligations nor moneys deposited with the Trustee pursuant to this Section 1201 nor principal or interest payments on any such Federal 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 said Bonds;provided that any cash received from such principal or interest payments on such Federal Obligations deposited with the Trustee,(A)to the extent such cash will not be required at any time for such purpose,shall be paid over to the Authority as received by the Trustee,free and clear of any trust,lien,pledge or assignment securing said Bonds 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 Federal 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 said Bonds, 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 as received by the Trustee, free and clear of any trust,lien,pledge or assignment securing said Bonds or otherwise existing under this Resolution.For the purposes of this Section 1201,Federal Obligations shall mean and include only such Federal Obligations which shall not be subject to redemption prior to their maturity other than at the option of the holder thereof. 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 which remain unclaimed for six years after the date when such Bonds 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 POWER REVENUE BOND RESOLUTION Page 74 A7801FJG moneys if deposited with the Fiduciary after the said date when such Bonds became due and payable,shall,at the written request of the Authority,be repaid by the Fiduciary to the Authority for payment into the Revenue Fund,and shall be deemed "other available funds"within the meaning of Section 712 to be used for the payment of amounts required to be paid therein or for the payment of refunds to the Purchasers pursuant to Section 13 of the Power Sales Agreement,and the Fiduciary shall thereupon be released and discharged with respect thereto and the Bond- holders shall look only to the Authority for the payment of such Bonds. 1202.Evidence of Signatures of Bondholders and Ownership of Bonds.1.Any request,consent,revocation of consent or other instrument which this Resolution may require orpermittobesignedandexecutedbytheBondholdersmaybein one or more instruments of similar tenor,and shall be signed or executed by such Bondholders in person or by their attorneys appointed in writing.Proof of the execution of any such in- strument,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 follow- ing 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 Bondholder 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 consti- tute sufficient proof of his authority. 2.The ownership of Bonds and the amount,numbers and other identification,and date of holding the same shall be proved by the registry books. 3.Any request or consent by the owner of any Bond shall bind all future owners of such Bond in respect of anything done or suffered to be done by the Authority or any Fiduciary in accordance therewith. 1203.Moneys Held for Particular Bonds.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 shall,on and after such date and pending such payment,be POWER REVENUE BOND RESOLUTION Page 75 A7801FJG set aside on its books and held in trust by it for the Holders of the Bonds entitled thereto. 1204.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 to the inspection of the Author- ity,any other Fiduciary,and any Bondholder and their agents and their representatives,any of whom may make copies thereof. 1205.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 of the Board of Directors of the Authority or officer of the Authority or any person executing the Bonds. 1206.Severability 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 cove- nants and agreements,and shall in no way affect the validity of the other provisions of this Resolution. 1207.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 author- ized 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 Resolu- tion. 1208.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 Power Authority,P.0.Box 190869,Anchorage, Alaska 99519-0869,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 [Name of Trust- ee],,Attention: ,or at such other address as the Trustee may from time to time file with the Authority (in respect of the Trustee). POWER REVENUE BOND RESOLUTION Page 76 A7801FJG ARTICLE XIII Bond Form and Effective Date 1301.Form of Bonds and Trustee's Certificate of Authentication.Subject to the provisions of this Resolution, the form of the Bonds of each Series and the Trustee's Certifi- cate of Authentication,shall be substantially the following tenor with such variations,omissions and insertions as are required or permitted by this Resolution: ALASKA POWER AUTHORITY Power Revenue Bond,Series %Due July 1, $No. ALASKA POWER AUTHORITY (herein called the "Authori- ty"),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 July,,the principal sum of Dollars in any coin or currency of the United State 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 or (such banks and any successors 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 curren- cy from the date hereof,at the rate per annum specified above, payable on the first days of January and July 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 registration books maintained by the Authority for such purpose at the principal corporate trust office of ,in the City of ,aS bond registrar. This bond is one of a duly authorized issue of bonds of the Authority designated as its "Power Revenue Bonds, Series "(herein called the "Series Bonds"), POWER REVENUE BOND RESOLUTION Page 77 A7801FJG 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 "Power Revenue Bond Resolution"and a supplemental resolution of the Authority authorizing the Series Bonds (said being herein called the "Resolution"). As provided in the Resolution,the bonds are direct and general obligations of the Authority for the payment of which the full faith and credit of the Authority is pledged, 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,and (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.Copies of the Resolution are on file at the office of the Authority and at the principal corporate trust office of ,as Trustee under the Resolu- tion,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 resolu- tions 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 in the Resolution provided.The aggregate principal amount of bonds which may be issued under the Resolution is not limited except as provided in the Resolu- tion,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 as 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 POWER REVENUE BOND RESOLUTION Page 78 A7801FJG 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 two-thirds 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 two-thirds 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 principalamountorredemptionpricethereoforintherateofinterest 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 Resolu- tion,only upon the books of the Authority kept for the purpose at the above-mentioned office of the Trustee,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 regis- tered 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 therefor as provided in the Resolution,and upon payment of the charges therein prescribed.The Authority,the Trustee and any Paying Agent may deem and treat the person in whose name this bond is registered as the absolute owner hereof for the purpose of receiving payment of,or on account of,the principal or redemp- tion price hereof and interest due hereon and for all other purposes. The bonds of the issue of which this bond is one are subject to redemption prior to maturity,upon published notice as hereinafter provided,(i)by operation of the Principal Account established under the Resolution to satisfy sinking fund installments,on any interest payment date on and after :at the principal amount thereof together with accrued interest to the redemption date,and (ii)other- wise,as a whole,or in part in inverse order of maturities,at POWER REVENUE BOND RESOLUTION Page 79 A7801FJG any time on or after ,at the respective redemption prices (expressed as percentages of the principal amount of the bonds or portions thereof to be redeemed)set forth below,in each case together with accrued interest to the redemption date; Period During Which Redemption (both dates inclusive)"Prices If less than all the bonds of like maturity are-to be redeemed,the particular bonds to be redeemed shall be selected by the Trustee. (Further Redemption provisions per the Resolution and Supplemental Resolution) The bonds of the issue of which this bond is one 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 to each registered owner not less than 25 days nor more than 40 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 avail- able 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 subdi- vision thereof,other than the Authority,nor any member of the Authority nor any Power Purchaser (as defined in the Resolution) is obligated to pay the principal,premium,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,premium,if any,or interest on this bond or the issue of which it is one. It is hereby certified and recited that all condi- tions,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 issue of bonds of which this is one, together with all other indebtedness of the Authority,complies in all respects with the applicable laws of the State of Alaska, POWER REVENUE BOND RESOLUTION Page 80 A7801FJIG 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 Trustee of the Trustee's Certificate of Authentication hereon. IN WITNESS WHEREOF,ALASKA POWER 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 af- fixed,imprinted,engraved or otherwise reproduced and attested by the facsimile signature of its Secretary or its Assistant Secretary. DATED: ALASKA POWER AUTHORITY By (Vice)Chairman ATTEST: (Assistant)Secretary [FORM OF CERTIFICATE OF AUTHENTICATION ON ALL BONDS] TRUSTEE'S CERTIFICATE OF AUTHENTICATION This bond is one of the Series -Bonds delivered pursuant to the within mentioned Resolution. Trustee, By _Authorized Officer POWER REVENUE'BOND RESOLUTION Page 81 : A7801FJG 1302.Effective Date.This Power Revenue Bond Resolution shall take effect immediately. Power Revenue Bond Resolution approved and adopted by Alaska Power Authority on ,19_. ALASKA POWER AUTHORITY By Chairman POWER REVENUE BOND RESOLUTION Page 82 : A7801FJG EXHIBIT B Delivery Point The Delivery Point of the Project and the point at which the Purchasers accept delivery shall be at the point where the 115 kV Project transmission lines connect to a 115 kV switching station (included within the Project)at Bradley Junction on the Fritz Creek -Soldotna transmission line to be built by the Hom- er Electric Association,Inc. POWER SALES AGREEMENT FOR BRADLEY LAKE ENERGY EXHIBIT B --Page 1 EXHIBIT C Description Of The Project The Bradley Lake Hydroelectric Project site is located on the Kenai Peninsula,about 105 miles south of Anchorage and 27milesnortheastofHomer,Alaska.Bradley Lake,with an exist- ing elevation of 1,080,is situated in the Kenai Mountain Range.A Project Location Map is attached. The proposed development includes raising the existing Bradley Lake level 100 feet by constructing a diversion tunnel, dam,spillway and outlet facility at the lake outlet.An 18,760 foot long,11 foot diameter concrete lined power tunnel will connect the reservoir intake works with a two 45 MW (nominal rating)unit powerhouse located just above sea level on the northeast shore of Kachemak Bay. A substation containing step-up transformers will be locat- ed at the power plant.Project transmission facilities include approximately 20 miles of two parallel,single circuit,115 kv transmission lines to connect the power plant to a 115 kV switch- ing station at Bradley Junction (which is also included within the project).The switching station will connect to a 115 kV transmission line (not included in the project)which will transmit power between Fritz Creek and Soldotna on the Kenai Peninsula.The Project also includes the Middle Fork Diversion consisting of a small diversion structure and excavated channel which diverts the upper Middle Fork flows into Bradley Lake,and the construction of a small diversion works at the headwaters of the Nuka River which diverts flows from Nuka Glacier into Bradley Lake,. The project site is remote and will be designed to be operated as an unattended plant,but will require on-site main- tenance personnel.A supervisory control and data acquisition (SCADA)system will be provided.Site access is by water or airborne transportation.To support construction,operations and maintenance of the Project,a barge basin,airstrip,con- struction camp,permanent housing facilities,and approximately _ten miles of access road will be required. Provisions for adding a third 45 MW turbine-generator will be included in the Project. A Project Location Map and general plan are attached. POWER SALES AGREEMENT FOR BRADLEY LAKE ENERGY EXHIBIT C -=Page l nwPROJECT DATA 1.Dam Concrete faced,rock fill,610 feet long,125 feet high,362,000 cubic yards rock fill,10,800 cubic yards concrete. 2.Spillway Ungated concrete ogee section,175 feet long. 3.Power Tunnel ll-foot nominal diameter,fully con- crete lined,18,760 feet long. 4.Diversion 21-foot horseshoe tunnel,440 feet long.: 5.Steel Liner/Steel 11-foot diameter,2,400 feet long Penstock tapering to 9 foot diameter manifold with 6 1/2 foot diameter branches. 6.Middle Fork Excavated channel and river diversion structure. 7.Nuka Diversion 9 foot high gravel fill dike. 8.Powerhouse Above ground,steel superstructure,160 feet long,80 feet wide,92 feet high. 9.Turbines 2 each Pelton,vertical shaft. 10.Generators 2 each;63 MVA with nominal output of 45 MW. 11.Transmission 115 kV,steel pole,2 parallel single circuits,20 Line miles long,with 115 kV switching station at Bradley Junction. 12.Barge Dock 'Sheetpile cellular structure,granular fill. 13.Access Roads |10.8 miles gravel surfaced. 14,Airstrip Gravel surfaced,2,400 feet long x 75 feet wide. POWER SALES AGREEMENT FOR BRADLEY LAKE ENERGY EXHIBIT C --Page 2 . |BRADLEY JUNCTION rw HOMERMELECTAUC ASSOCIATIONFRONTCREEK- Sn DOING US KY|TRAN SAMS SION LINE BARGE DOC! WATERFOWL TEMPORARYCONSTAUCTIONACCESSACAD Ouanny °PE ROMANE'.«cbo<MACHINESMESTINGAREA'CONST AUC HOR or”POWER ly " «ACCESSRoan SN fc REFINED-TRANSHES SIONLINEROUTE QMATLEY LAKE Dau SITE ona eroe Orvension SAeney fa, aes \y MUKA RIVEROVERSeOe 4tyVE: 2 3 - Scale m Miles ny . te, 4 **,gmae F3t608.aade Exhibit D Purchasers'Percentage Shares Of Project Capacity And Of Annual Project Costs PURCHASER Alaska Electric Generation & Transmission Cooperative,Inc. Chugach Electric Association,Inc. Golden Valley Electric Association,Inc. Municipality of Anchorage,d/b/a Municipal Light and Power City of Seward,d/b/a Seward Electric System ° POWER SALES AGREEMENT FOR BRADLEY LAKE EXHIBIT D --Page 1 PERCENTAGE SHARE 25.8 30.4. 25.9 1.0 100.00% ENERGY Exhibit E ALASKA POWER AUTHORITY RESOLUTION NO. A SUPPLEMENTAL RESOLUTION AUTHORIZING THE ISSUANCE OF §$ POWER REVENUE BONDS,FIRST SERIES BE IT RESOLVED by the Board of Directors of the Alaska Power Authority on the day of ,19 , that pursuant to the General Bond Resolution adopted on ,19 ,(hereinafter referred to as the "Resolu- tion"),this Supplemental Resolution is adopted as follows: _ARTICLE I Definitions and Authority 101.Short Title.This Resolution may hereafter becitedbytheAuthority,and is hereinafter sometimes referred to as the "First Series Resolution”. 102.Definitions.(a)All defined terms contained in the Resolution shall have the same meanings,respectively, in this First Series Resolution as such defined terms are given in Section 102 of the Resolution. (b)In addition,as used in this First Series Resolution,unless the context shall otherwise require,the following terms shall have the following respective meanings: "Bonds"or "First Series Bonds"means the Bonds of the Authority of the Series authorized by this First Series Resolution and herein designated "Power Revenue Bonds,First Series". "Series Bonds”means any First Series Bond maturing on or before (c)Unless the context shall otherwise indicate, words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders, words importing the singular number shall include the plural number and vice versa,and 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. The terms "hereby","hereof","hereto","herein", "hereunder",and any similar terms,as used in this Series Resolution,refer to this Series Resolution and such terms when used in the form of bond herein refer to said bond. 103.Authority for this Resolution.This First Series Resolution is adopted pursuant to the provisions of the Act and the Resolution. ARTICLE II Authorization,Terms and Issuance 201.Authorization,Principal Amount,Description and Series.In order to provide funds necessary for the purpose specified in Section 203,in accordance with and subject to the terms,conditions and limitations established herein and in the Resolution,a Series of Power Revenue Bonds is hereby authorized to be issued in the aggregate principal amount of §-The Authority is of the opinion and hereby determines that the issuance of the Bonds in said amount is necessary to provide sufficient funds to be used and expended for the purpose specified in Section 203.In addition to the title "Power Revenue Bond",the Bonds of such Series Shall bear the additional designation "First Series"and each as so designated shall be entitled "Power Revenue Bond,First Series".The Power Revenue First Series Bonds shall consist of $principal amount of Serial Bonds and $ principal amount of Term Bonds and shall be issued in fully registered form. 202.Purposes.The purposes for which the Series Bonds are being issued are to provide funds for deposit in the Renewal and Contingency Reserve,Capital Reserve Fund, Operating Reserve Account,and Construction Fund,respectively, all to the extent and subject to the limitations and in the amounts provided in the Resolution and in Article III hereof. 203.Issue Date.The First Series Bonds shall be | dated ,except as otherwise provided in the Resolution in the case of Bonds issued on or subsequent to 204.Maturities and Interest Rates.The Series Bonds shall mature on the anniversary of their date in RESOLUTION NO. Page 2.A7802FJG the following years and the Bonds maturing in each such year shall mature in the principal amount and bear interest from the date thereof,payable semi-annually on the first day of each month commencing 6 months and 12 months from date,at the rates set opposite such year in the following table: Amount Interest Amount Interest Years Maturing Rates Years Maturing Rates 205.Denominations,Numbers and Letters.The First Series Bonds maturing in each year shall be issued in denomina- tions of $5,000,or any whole multiple thereof not exceeding the aggregate principal amount of First Series Bonds maturing in such year,in the case of fully registered Bonds.The First Series Bonds shall be lettered A and numbered separately from 1 consecutively upwards in such order as the Trustee in its discretion shall determine. 206.Paying Agents. ,and ,are hereby appointed the Paying Agents for the Series Bonds pursuant to Section 902 of the Resolu- ,in tion. 207.Redemption at the Election of the Authority and Terms.The Bonds maturing and thereafter shall also be subject to redemption,either as a whole or in part,and in such amount or amounts of such maturity or maturities as the Authority shall elect,on any date (which date shall be deter- mined by the Authority or selected by the Trustee,subject to the provisions of,and in accordance with,the Resolution and when so determined or selected shall be deemed and is hereby set forth as the redemption date)on and after ? -and prior to their respective maturities,upon notice as provided in Article IV of the Resolution,at the respective Redemption Prices (expressed as percentages of the principal amount of such Bonds to be so redeemed)set opposite such period in the following table,plus in each case interest accrued to the redemption date: RESOLUTION NO. Page 3.A7802EJG Redemption Prices Period (Expressed as a (Both Dates Inclusive)Percentage) 208.Sinking Fund Payments.The Term Bonds shall be subject to redemption in part by operation of the Principal Account through application of Sinking Fund Payments as provid- ed in subsection 507(2)of the Resolution on and on each 1 thereafter as herein provided in each case at a Redemption Price equal to the principal amount of each Bond or portion thereof to be redeemed,together with interest accrued to the redemption date.There shall be due and the Authority shall at any and all-events be required to pay on 1 of each of the years set forth in the following table the amount set opposite each such year in said table and said amount is hereby established as and shall constitute a Sinking Fund Payment for the retirement of the Term Bonds, provided,however,that the amount set opposite sind:said table shall be payable at the stated maturity date of the Term Bonds and shall not constitute a Sinking Fund Payment: Year Sinking Fund Payments _209.Selection by Lot.If less than all of the First Series Bonds of a like maturity are to be redeemed,the particular Bonds of such maturity to be redeemed shall be selected by lot in accordance with Section 404 of the Resolu- tion.; RESOLUTION NO. Page 4.,A7802EFJG ARTICLE III Disposition of Proceeds 301.Deposits.Upon receipt of the proceeds of sale of the First Series Bonds,there shall be deposited (a)in the Capital Reserve Fund to equal the Capital Reserve Fund Require- ment immediately after delivery of the First Series Bonds,(b) in the Interest Account the amount of accrued interest on the First Series Bonds from their date to the date of delivery thereof and payment therefor,(c)in the Renewal and Contingen- cy Reserve Fund the amount necessary to cause the amount in the Fund to equal the Renewal and Contingency Reserve Requirement, and (d)in the Operating Reserve Account § 302.Construction Fund.After the deposits referred to in Section 301 hereof have been made,the balance of the proceeds of sale of the First Series Bonds shall be deposited in the First Series Bonds Account of the Construction Fund. ARTICLE IV Effective Date 401.This Resolution shall take effect immediately. RESOLUTION NO, Page 5.A7802FJG COUNTERPART 1 OF 19 BRADLEY LAKE HYDROELECTRIC PROJECT AGREEMENT FOR THE WHEELING OF ELECTRIC POWER AND FOR RELATED SERVICES ("SERVICES AGREEMENT") by and among The CHUGACH ELECTRIC ASSOCIATION,INC., and The HOMER ELECTRIC ASSOCIATION,INC., The GOLDEN VALLEY ELECTRIC ASSOCIATION,INC., The MATANUSKA ELECTRIC ASSOCIATION,INC., The MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT AND POWER, The CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM,AND ALASKA ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE,INC. Index Of Provisions And Appendices Section Heading RECITALS .«©«««©«©©«©«©©« 1 PART IES e e e e LJ e e *e e eo e 2 NATURE OF AGREEMENT ..2.«« (a)Services Provided .. (b)Non-Exclusivity Of Services 3 TERM OF AGREEMENT;RELATED MATTERS (a)Term ..2...ce «« (b)Amendments ....-« (c)Early Termination.. 4 WHEELING SERVICES ...«««« (a)Wheeling Service To Be Provided (b)Wheeling Schedules. (c)Line Losses ..... (d)Wheeling Rates ... 5 STORAGE SERVICES ....... (a)Storage Service To Be Provided (b)Storage Schedules ..«-««e (c)Losses From Spill ...... (d)Storage Charges... 6 BRADLEY LAKE ENERGY PURCHASE SERVICES . (a)Bradley Lake Energy PurchaseServicesToBeProvided. (b)Bradley Lake Energy Purchase Schedules ....«2 « (c)Priority Of Section 6 Purchases And Other Purchases .....- (d)Rates For Section 6(a)Purchases. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY INDEX OF PROVISIONS AND APPENDICES--Page 1 SeF&FBfWWWWWR=aomWmHWMWw 7 CHUGACH'S (a) (b) (c) DUTIES AND LIMITATIONS THEREON .. Duties s .e e e eo e e e e e 2 e e Limitations On Chugach's Duties .. Chugach's Priority .....e.. 8 SCHEDULING OF SERVICES .......ee... (a) (b) (c) (d) (e) (£) (g) (h) (i) 9 RIGHTS TO (a) (b) (c) Duties Of The Dispatcher ..... Requests For Wheeling Schedules ... Confirmation Of Wheeling Schedules Modified Service Schedules .... Documentation For Schedules Not Confirmed Or Not Performed .... Allocation Among Conflicting Services Requests ...«2»»««« -Assured Delivery ......««©«« Scheduling During Certain Transmission Outages .....«.-. Scheduling During Periods When Transmission Would Otherwise Be Pre-empted or Unavailable ..... ADDITIONAL TRANSMISSION CAPACITY . Specific Upgrades ......e.. Shared Upgrades ...«6 +e+2 «©« 'Opportunities to Share In New Transmission Capacity ....2 «« 10 CONSULTATION AND DISPUTE RESOLUTION ..... (a) (b) 11 APPROVALS (a) (b) Consultation ...2.««©e «e «@ Dispute Resolution ...oe eo AND RENEGOTIATION ..2 «2©«©©«« Approvals and Enforceability ... Renegotiation ..2.««««©«««» SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY INDEX OF PROVISIONS AND APPENDICES--Page 2 12 12 14 15 15 16 16 17 17 17 17 18 18 18 19 12 MISCELLANEOUS PROVISIONS ....... (a) (b) (c) (d) (e) (f) (g) (h) (i) (3) (k) (1) (m) Waiver ..2.«6 «©©«©©©we we @ Successors And Assigns ..... Performance Pending Resolution Of Disputes ....2...««©«@ Applicable Law ......e..e«e-s Section Headings ......e.«-«. Payment .2.«««©©««©©©©«« No Third Party Beneficiaries Or Liability To Third Parties ... Force Majeure ....2.««««« Other Agreements .....-e«-«>» Operation And Maintenance Of The Project .2.2.2 «©©ee ee Opinions Of Counsel ....... Counterparts ....+...ee. Relationship To Alaska Inter- tie Agreement ...««6 »««©8 «« 13 DEFINITIONS e e e e °e °°°°e °e e e e (a) (b) (c) (d) (e) (£) (g) (h) (i) (3) Agreement ..2.«©«©«©«6 «« Alaska Intertie Agreement .... Alaska.Power Authority ..... Alternate Transmission Facilities Assured Delivery ....+e. Authority .2.2.«6 ©«©©©«©«©« Bradley Lake Energy .«.2.2 2 ««« Bradley Lake Hydroelectric Project e e LJ e e e e e e e .os e e Decremental Cost .....««e« Delivery Point ..-.-.--.+s +e. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY INDEX OF PROVISIONS AND APPENDICES--Page 3 19 19 19 20 20 20 20 21 21 22 23 23 23 23 23 23 .23 24 24 24 24 24 25 25 26 Appendices Appendix Appendix Appendix Appendix Appendix (k) (1) .(m) (n) (0) (p) (q) (t) Direct Transmission ........ Dispatcher ......ee we eee Displaceable Energy ........ Displaceable Kenai Resources ... Disposal Rate ......-e.+«eee Effective Date .....e.-s oa Force Majeure ......+e ee we e- Forced Outage .....+«6 «©ew ©« Incremental Cost ......e.«ee. Modified Service Schedule ..... Offsetting Flows ......s«se«e-s Party .2.2 «©©©©©©©©©©© Power Sales Agreement ......e. Project .2.2.©©«©©©©©we ww Project Management Committee ... Protected Storage Agreement.... Soldotna Substation ......e-s Termination Date .2.6 «««©«2 «@ Wheeling Utility ......e«+.e. Computation Of Wheeling Rates Computation Of Disposal Rates 26 26 26 26 26 27 27 27 27 28 28 28 28 28 28 28 28 -28 29 Computation Of Rate For Assured Delivery Wheeling Rights And Obligations With Respect To Certain Transmission Facility Upgrades Under Section 9(a) Opinions of Counsel SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY INDEX OF PROVISIONS AND APPENDICES--Page 4 THIS AGREEMENT is entered into on December 8,1987,by and among CHUGACH ELECTRIC ASSOCIATION,INC.("Chugach"),the HOMER ELECTRIC ASSOCIATION,INC.("HEA"),the GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.("GVEA"),the MATANUSKA ELECTRIC ASSOCIATION, INC.("MEA"),the MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT AND POWER ("ML&P"),the CITY OF SEWARD d/b/a SEWARD ELEC- TRIC SYSTEM ("SES"),and the ALASKA ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE,INC.("AEG&T"),each an electric cooperative or a municipality duly organized and with its principal offices located in the State of Alaska. WITNESSETH: WHEREAS,each Party hereto is an electric utility or oper- ates an electric utility;and WHEREAS,each Party has determined that its purchase of electric power from the Bradley Lake Hydroelectric Project ("Project")pursuant to a Power Sales Agreement among the Alaska Power Authority ("Authority")and all other Parties is prudent under the circumstances and that over the expected useful life of the Project such power is likely to produce net economic ben- efits for the electric ratepayers served by that Party;and WHEREAS,the Parties have simultaneously herewith executed a Power Sales Agreement under which they will purchase power produced by the Project from and after the Date Of Commercial Operation (as defined in the Power Sales Agreement);and WHEREAS,the delivery of Bradley Lake Energy and power from the Project to the Parties requires use of electric transmission facilities;and WHEREAS,the Parties anticipate that the State of Alaska will take action to use monies in the Railbelt Energy Fund to fund construction of the transmission facilities required by the Parties for the purposes,among others,of obtaining delivery of the power purchased under the Power Sales Agreement,reducingtheeffectivecosttothePartiesandtheirelectricratepayers of power from the Project,or otherwise benefitting the electric ratepayers of the Parties for whose benefit the Railbelt Energy Fund was created;and ; WHEREAS,construction of the electric transmission facili- ties sought by the Parties has not yet been authorized or funded by the State of Alaska;and WHEREAS,under the circumstances,participation in the Pro-ject by all of the Parties can reasonably be achieved only if SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page l some alternative solution to the problem of transmitting or oth-erwise utilizing Project power is devised by the Parties,such alternative arrangements to be terminated if and when adequate alternate transmission facilities are constructed;and WHEREAS,the Parties have determined that this Agreement represents an alternative solution to the problem of transmit- ting or otherwise utilizing Project power in the immediate fu- ture,and the best solution that the Parties can agree upon at the present time after good faith negotiation;and WHEREAS,the Parties recognize that this Agreement will be superseded by other arrangements upon construction of certain additional transmission facilities,which all Parties seek,and potentially by agreement among the Parties upon a system of pow- er pooling of the generation of all Parties,which Chugach and certain other Parties seek; NOW THEREFORE,IN CONSIDERATION of the mutual covenants set forth herein,the Parties agree as follows: SECTION 1.PARTIES The Parties to this Agreement are CHUGACH ELECTRIC ASSOCI- ATION,INC.("Chugach"),the HOMER ELECTRIC ASSOCIATION,INC. ("HEA"),the GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.("GVEA"), the MATANUSKA ELECTRIC ASSOCIATION,INC.("MEA"),the MUNICI- PALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT AND POWER ("ML&P"), the CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM ("SES"),and ALASKA ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE,INC. ("AEG&T"). SECTION 2.NATURE OF AGREEMENT (a)Services Provided.At the request of any Wheeling Utility,Chugach will provide wheeling,storage,and energy pur-chase services to such Utilityfor that Utility's Bradley Lake Energy in accordance with the provisions of this Agreement. (b)Non-Exclusivity Of Services.Nothing in this Agree- ment shall (i)obligate any Party to request services from Chu- gach under this Agreement,(ii)preclude any Party from obtain- ing such services from others or from Chugach outside this Ag-reement,(iii)prevent any Party from reselling or otherwise disposing of its Bradley Lake Energy to another Party or to anyotherentity,to the extent that such resale or disposition is otherwise legally permissible,or (iv)limit the ability of any Party,including Chugach,to enter into other agreements under ° SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 2 which additional services may be provided for Bradley Lake En- ergy or under which the same and/or additional services may be provided to the Parties or to third parties for electric power from any other source;provided,that no such other agreement shall have the effect of reducing the priority access to ser- vices enjoyed by Bradley Lake Energy under this Agreement. SECTION 3.TERM OF AGREEMENT;RELATED MATTERS (a)Term. (i)Except as provided in Section 3(a)(ii),this Ag- reement shall become effective upon the Effective Date and shall continue in force until the Termination Date,subject only to the limitations set forth in Sections 3(b)and 3(c).. (ii)The following provisions of this Agreement shall become effective upon execution of this Agreement by all Parties,notwithstanding that such execution precedes the Effective Date: (A)The last sentence of Section 8(h)(ii); (B)Section 10; (C)The first two sentences of Section 11(a); (D)Section 12(b);_ (E)Section 12(c); (F)Sections 12(j)through 12(m);and (G)Section 13. (b)Amendments.This Agreement may be amended,extended, or terminated at any time by the written consent of all Parties,but no such amendment,extension,or termination shall be ef- fective unless approved by the federal and state agencies (if any)whose approval is required at the time. (c)Early Termination.Either Chugach or any Wheeling Utility shall be entitled to terminate this Agreement with re-spect to that Wheeling Utility prior to the Termination Date ifatthetimeofsuchterminationthereareavailableAlternate Transmission Facilities capable of carrying the Bradley LakeEnergyofsuchWheelingUtilityfromtheProjecttotheDeliveryPointofsuchWheelingUtility.A termination with respect to any Wheeling Utility under this Section 3(c)shall become ef-fective one year after Chugach or the Wheeling Utility has givenwrittennoticeofterminationtotheother.No such notice shall affect the rights under this Agreement of any Party other SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 3 than the Party or Parties with respect to whom the notice is given. SECTION 4.WHEELING SERVICES (a)Wheeling Service To Be Provided.At the request ofanyWheelingUtility,and in accordance with an agreed wheelingschedule,Chugach will deliver to that Wheeling Utility at thatUtility's Delivery Point or,upon request of that Wheeling Util- ity,at the Delivery Point of any other Wheeling Utility,such Bradley Lake Energy as the Wheeling Utility delivers to Chugach at the Soldotna Substation for wheeling,after adjustment forwholesaletransmissionlinelosses,if applicable. (b)Wheeling Schedules.Wheeling schedules shall be est- ablished in the manner set forth in Section 8. (c)Line Losses.Deliveries by Chugach under Section 4(a) May be accomplished by Direct Transmission or through Offsetting Flows. (i)The Dispatcher shall maintain records adequate to determine the extent to which particular deliveries are accomplished in whole or in part by each of these means. Such records shall be made available to the Wheeling Utili- ties upon reasonable request. (ii)If and to the extent deliveries are accomplished by Direct Transmission,such deliveries shall be reduced for line losses.The reduction shall be by a percentage equal to the average percentage line losses on Chugach's wholesale system,such wholesale system line losses to be determined in Chugach's periodic rate adjustment proceed- ings or (in the absence of such a proceeding)through rea- sonable line loss studies prepared by Chugach not less fre- quently than once every two years;provided,that if,afterareasonableperiodofexperienceinactualoperationunder this Agreement,Chugach's system line loss studies prepared for use in Chugach's periodic wholesale and/or retail rate adjustment proceedings demonstrate that Chugach's wholesale system line losses have increased as the direct result of Bradley Lake Energy delivered by Direct Transmission,then deliveries of such Energy through Direct Transmission shall thereafter be further reduced for line losses to the extent of the increase in Chugach wholesale system line losses attributable thereto. (iii)If and to the extent deliveries are accom- plished through Offsetting Flows,such deliveries shall not be reduced for line losses;provided,that if,after a rea-sonable period of experience in actual operation under this Agreement,Chugach's system line loss studies prepared for use in Chugach's periodic wholesale and/or retail rate SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 4 adjustment proceedings demonstrate that Chugach's wholesale system line losses have increased as the direct result of Bradley Lake Energy delivered through Offsetting Flows, then deliveries of such Energy through Offsetting Flows shall thereafter be reduced for line losses,but only to the extent of the increase in Chugach wholesale system line losses attributable thereto. (d)Wheeling Rates.For wheeling services provided under this Agreement (other than Assured Delivery service provided under Section 8 of this Agreement),each Wheeling Utility shall pay Chugach in each month an amount equal to the then-applicable wheeling rate for Bradley Lake Energy (expressed in cents per kilowatthour)multiplied by the quantity of Bradley Lake Energy (expressed in kilowatthours)delivered by that Wheeling Utility in the immediately preceding month to Chugach at the Soldotna Substation for wheeling.The applicable wheeling rates shall be established initially,and shall be changed from time to time, only in accordance with the provisions of Appendix A attached hereto and incorporated by reference herein. SECTION 5.STORAGE SERVICES (a)Storage Service To Be Provided.At the request of any Wheeling Utility,and in accordance with an agreed storage schedule,Chugach will store in its Cooper Lake Reservoir any Bradley Lake Energy of that Wheeling Utility which the Wheeling Utility cannot store in the Bradley Lake Project Reservoir and which the Wheeling Utility delivers to Chugach at the Soldotna Substation for storage.Chugach shall not be obligated to store in its Cooper Lake Reservoir any Bradley Lake Energy that can be wheeled pursuant to Section 4 of this Agreement. (b)Storage Schedules.Storage schedules shall be estab- lished in the manner set forth in Section 8.The Parties recog- nize that Chugach's ability to schedule storage of Bradley Lake Energy in the Cooper Lake Reservoir is constrained by the rate of natural inflow into that Reservoir,among other'factors. Once Bradley Lake Energy is stored in accordance with this Sec- tion 5,the energy subsequently generated from storage shall be treated as Bradley Lake Energy for purposes of wheeling and/or purchase by Chugach under this Agreement and shall be scheduled 'in the manner set forth in Section 8.The Parties recognize that Chugach's ability to generate from storage in the CooperLakeReservoirisconstrainedbyinstalledturbinecapacity, among other factors. (c)Losses From Spill.All energy storedin the CooperLakeReservoir,including but not limited to Bradley Lake Ener- gy,is subject to potential loss as a result of spill.ChugachwillnotspillwaterfromtheCooperLakeReservoirunnecessari-ly.If any spill is necessary,energy of other Parties not pro-tected under a Protected Storage Agreement will be spilled SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 5 before Chugach begins to spill any energy that is so protectedorthatbelongstoChugach.If some but not all unprotectedBradleyLakeEnergyoftheWheelingUtilitiesisspilled,such partial spill shall be allocated proportionally among the Wheel-ing Utilities based on the amounts of such Energy so stored for each,absent some other allocation procedure agreed to among the Wheeling Utilities in accordance with Section 8(f).Chugach may offer to enter into Protected Storage Agreements from time to time,but only when Chugach determines that it can prudently do so. (ad)Storage Charges.There shall be no charge for storage of Bradley Lake Energy pursuant to Section 5(a)of this Agree- ment.The applicable charges for storage pursuant to a Protect- ed Storage Agreement shall be as specified in that particular Protected Storage Agreement. SECTION 6.BRADLEY LAKE ENERGY PURCHASE SERVICES (a)Bradley Lake Energy Purchase Services To Be Provided. At the request of any Wheeling Utility,and in accordance with an agreed purchase schedule,Chugach will purchase from that Utility (subject to the provisions of Section 6(c))any Bradley Lake Energy which the Wheeling Utility delivers to Chugach at the Soldotna Substation for purchase and which Chugach can use at the time in substitution for Displaceable Energy to serve Chugach system loads.Chugach shall not be obligated to pur- chase any Bradley Lake Energy that can be wheeled or stored pur- suant to Sections 4 and 5 of this Agreement. (b)Bradley Lake Energy Purchase Schedules.Schedules for Chugach's purchases of Bradley Lake Energy under Section 6(a)shall be established in the manner set forth in Section 8. (c)PriorityOf Section 6 Purchases And Other Purchases. (i)In purchasing energy to substitute for Displace- able Energy,Chugach will give preference and priority toSection6(a)purchasesof Bradley Lake Energy over pur-chases of energy that may be available on the same terms from other sources.Chugach shall not be obligated to pur- chase Bradley Lake Energy under this Section 6,however,if and to the extent that doing so would require Chugach to forego the purchase of all or any portion of the energy available to Chugach from other sources that is less ex- pensive or,in Chugach's reasonable determination,moreusefultoChugachinoperatingitssystemreliablyandef- ficiently.Before declining to purchase Bradley Lake Ener- gy from the Wheeling Utilities in favor of purchasing ener-gy from such other sources,Chugach will notify the Wheel-ing Utilities (if reasonably possible under the circum-stances)and provide those Utilities an opportunity to of- fer Bradley Lake Energy to Chugach under this Section 6 at SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 6 the same price and on the same terms and conditions as those on which the energy from such other sources is avail- able to Chugach;Chugach shall accept such an offer by the Wheeling Utilities if the offer is timely made. (ii)Chugach may decline to purchase Bradley Lake Energy under this Section 6 if and to the extent that such purchase would impair or conflict with a prior binding ob-ligation of Chugach to purchase energy from other sources. (iii)Notwithstanding Chugach's prior obligation (as set forth in this Agreement)to purchase Bradley Lake Ener- gy from the Wheeling Utilities in accordance with the pro- visions of this Section 6,Chugach may decline to purchase such Bradley Lake Energy if and to the extent that Chugach is obligated to purchase other energy by law or by lawful order of an agency or court. (da)Rates For Section 6(a)Purchases.For all BradleyLakeEnergythatChugachpurchasesunderSection6(a)from a Wheeling Utility (other than Bradley Lake Energy purchased pur- suant to the last sentence of Section 6(c)(i),the price of which shall be determined by the offer referred to in that sen- tence),Chugach shall pay that Wheeling Utility an amount equal to the then-applicable Disposal Rate for Bradley Lake Energy (expressed in cents per kilowatthour)multiplied by the quantity of Bradley Lake Energy (expressed in kilowatthours)delivered by that Wheeling Utility to Chugach at the Soldotna Substation for purchase at the time that particular Disposal Rate was in ef- fect.The applicable Disposal Rate at the time of such delivery shall be computed in accordance with the provisions of Appendix B attached hereto and incorporated by reference herein.ChugachshallpayeachWheelingUtilityineachmonththeamountsowed by Chugach to that Utility for Bradley Lake Energy purchased byChugachintheimmediatelyprecedingmonth. SECTION 7.CHUGACH'S DUTIES AND LIMITATIONS THEREON (a)Duties.'The Parties shall at all times exercise their rights and perform their duties under this Agreement in a manner consistent with the principles of good faith and fair competi- tive acts and practices.Subject to the limitations set forth 'in Section 7(b),Chugach will in good faith and at all times: (i)confirm and perform such wheeling schedules as the Wheeling Utilities may in accordance with this Agree- ment request,and perform such Modified Service Schedules as the Wheeling Utilities may in accordance with this Ag- reement accept; (ii)use its reasonable best efforts to avoid con- flicts between Chugach's own uses of its system and the SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 7 service schedules requested or accepted by the WheelingUtilitiesunderthisAgreement; (iii)not discriminate in providing services underthisAgreementamongdifferentWheelingUtilitiesrequest- ing or accepting services of any particular type,in termi- nating this Agreement with respect to any Wheeling Utility under Section 3(c),or in exercising its rights or perform- ing its obligations with respect to certain transmission facility upgrades under Section 9;and (iv)operate,maintain,and repair the electrical facilities used to perform the services provided hereunder in accordance with Prudent Utility Practice (as the same is defined in the Power Sales Agreement)in a manner consist- ent with Chugach's obligations and rights under this Agree- ment. (b)Limitations On Chugach's Duties.Chugach's duties as set forth in the second sentence of Section 7(a)shall be limit- ed by: (i)the capability of Chugach's generation and trans- mission system as that system exists at the time,and as the capability of that system may be limited by action or inaction on interconnected systems over which Chugach has no control; (ii)Force Majeure and Forced Outage,but only to the extent that Chugach's performance is specifically excused by Force Majeure or Forced Outage under the provisions of Section 8;and (iii)Chugach's priority on the use of its generation and transmission system,as specified in Section 7(c). (c)Chugach's Priority.This Agreement shall not alter Chugach's ability and responsibility,at all times,to con- struct,operate,and maintain its generation and transmission system and to schedule the use of its resources in the manner Chugach reasonably determines to be necessary or prudent in or- der to meet,as a first priority,the safety,efficiency,and economic needs of Chugach's own system.The needs of Chugach's -own system include Chugach's performance of agreements with oth- ers under which Chugach is the buyer or seller of electric power or the provider or recipient of related services,but not agree- ments under which Chugach provides to others the wheeling ser- vices Chugach is to provide to the Wheeling Utilities under thisAgreement.In particular: (i)The Parties recognize and agree that Chugach's paramount duty to meet the safety,efficiency,and economic needs of Chugach's own system may constrain the provision of services by the Dispatcher to Wheeling Utilities under SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY | Page 8 this Agreement;provided,that Chugach will not deny suchservicestotheWheelingUtilitiesforanyotherreason; provided further,that in meeting the safety,efficiency, and economic needs of its system,Chugach shall not,to the detriment of any Wheeling Utility,operate its system dif- ferently from the manner in which Chugach could and would have prudently and economically operated that system if the Bradley Lake Energy of the Wheeling Utilities did not ex- ist. (ii)Nothing in this Agreement shall require Chugach to install or operate any generating unit that Chugach would not otherwise have installed or operated,or require Chugach to purchase any power (other than Bradley Lake En- ergy of the Wheeling Utilities)that Chugach would not oth- erwise have purchased,for the purpose of providing ser- vices to any Wheeling Utility;provided,that unless Chu-gach's performance of a previously confirmed service sched- ule is excused by Force Majeure or Forced Outage under Sec- tion 8,Chugach will operate its generating units to the extent necessary to perform any service schedule that the Dispatcher has previously confirmed in accordance with the provisions of Section 8. (iii)The Parties recognize that at the time this Agreement was entered into,Chugach had begun negotiating with producers of natural gas to agree upon new arrange- ments to replace Chugach's then-existing natural gas fuel supply arrangements;that the results of such negotiations are impossible to predict;and that the possible outcome(s) of such negotiations may include a change in the locations at which it is most economic for Chugach to generate elec- tric power for its own system use;and consequently that the availability of services under this Agreement may be affected by the outcome(s)of such negotiations. SECTION 8.SCHEDULING OF SERVICES (a)Duties Of The Dispatcher.Chugach will provide a Dis- patcher (or Dispatchers)on a 24-hour basis.Until such time as all the Parties or their successors have agreed upon and imple- mented a system of power pooling of all generating units within 'their ownership and control (under which system the output of all power generated is purchased by or otherwise equitably ac- counted for by the pool),the Dispatcher's duties shall include: (i)Dispatching power generation at the Bradley LakeProjectinaccordancewiththerequestsoftheParties,the availability of services under this Agreement,and the ap- plicable operating criteria or guidelines adopted by the Project Management Committee; SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 9 (ii)Scheduling of wheeling,storage,and energy pur- chase services for the Wheeling Utilities under this Agree- ment; (iii)Notifying the Wheeling Utilities of operating limitations that may reduce Chugach's ability to perform fully any service schedule that the Dispatcher has previ- ously confirmed;and (iv)Coordinating with HEA in order that the Dis- patcher and HEA alike will minimize,to the extent reason- ably practicable,any potential conflicts between and among (A)HEA's system operations,(B)Chugach's system opera- tions,and (C)the dispatch of Project generation and the provision of services to the Wheeling Utilities in the man- ner contemplated by this Agreement. In addition,by agreement among the Dispatcher and authorized representatives of the Wheeling Utilities (which agreement the Dispatcher shall reduce to writing and copies of which the Dis- patcher shall provide to all Parties),the Dispatcher and such representatives of the Wheeling Utilities may from time to time modify the scheduling procedures set forth in Section 8(b),in the first sentence of Section 8(c),and in Section 8(d),if and to the extent that the Dispatcher and such representatives of the Wheeling Utilities determine that such modification of scheduling procedures would suit their mutual convenience.No modification of such scheduling procedures so agreed to shall require the approval of the governing boards of the Parties in order to become effective., (b)Requests For Wheeling Schedules.Not later than 12 noon on each weekday (Monday through Thursday),each Wheeling Utility shall notify the Dispatcher of the quantity of Bradley Lake Energy for which it requests wheeling services during each hour of the immediately following day (Tuesday through Friday). Not later than 12 noon on Friday,each Wheeling Utility shall notify the Dispatcher of the quantity of Bradley Lake Energy for which it requests wheeling services during each hour of each of the immediately following three days (Saturday through Monday). Chugach reserves the right to require scheduling for all days of the week on a daily basis in accordance with the first sentence .of this Section 8(b)if Chugach determines,after a reasonableperiodofexperience,that scheduling on Fridays for the threefollowingdaysisnotsatisfactorytoChugachortoanyorall of the Wheeling Utilities. (c)Confirmation Of Wheeling Schedules.If,consistent with the duties and limitations set forth in Section 7,the Dis- patcher is able to confirm the wheeling schedules requested un-der Section 8(b),he or she shall do so through oral communica- tion with the requesting Wheeling Utilities initiated not later than 5 P.M.on each day for the immediately following day (ordays,if the second sentence of Section 8(b)applies).Once the SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY ) Page 10° Dispatcher has so confirmed a requested wheeling schedule,thenupondeliverytoChugachattheSoldotnaSubstationoftheBrad- ley Lake Energy for which that wheeling schedule has been con- firmed,Chugach shall be obligated to perform that schedule, subject only to Force Majeure,which shall excuse such perform- ance.Unless the Project Management Committee adopts and imple- ments procedures to the contrary,each Party shall be respons- ible for ensuring that it does not cause to be generated at the Bradley Lake Project any power to which that Party is not en- titled by the terms of the Power Sales Agreement and the criter- ia,guidelines,and procedures adopted by the Project Management Committee. (d)Modified Service Schedules.If,consistent with the duties and limitations set forth in Section 7,the Dispatcher is unable to confirm the wheeling schedules requested under Section 8(b),he or she shall so inform the requesting Wheeling Utili- ties through oral communication initiated not later than 5 P.M. on each day for wheeling services requested for the immediately following day (or days,if the second sentence of Section 8(b) applies).In addition: (i)In the same oral communication,the Dispatcher shall inform each Wheeling Utility of,and offer to that Utility,a Modified Service Schedule under which,to the extent possible,the Bradley Lake Energy of that Utility for which wheeling had been requested can be wheeled in part and stored in whole or in part and/or purchased in whole or in part under Sections 4,5 and 6.For purposes of calculating the type and amount of services that can be offered to individual Wheeling Utilities under Modified Service Schedules,the Dispatcher shall assume,in the first instance,that all Wheeling Utilities will accept the Modified Service Schedules offered to them. (ii)Each Wheeling Utility shall be free to accept or reject a Modified Service Schedule by oral notification to the Dispatcher within one hour of the Dispatcher's communi-cation under Section 8 (da)(i). (iii)Upon delivery to Chugach at the Soldotna Sub-station of the Bradley Lake Energy for whicha Modified Service Schedule has been offered and accepted,Chugach shall be obligated to perform that Modified Service Sched- ule,subject only to Force Majeure,which shall excuse such performance, (iv)If: (A)any Wheeling Utility rejects a Modified Ser- vice Schedule offered to it (and if the Dispatcher and that Wheeling Utility do not then agree on some dif- ferent Modified Service Schedule),and SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 11 (B)as a result of such rejection of or non- agreement upon a Modified Service Schedule by one ormoreWheelingUtilities,additional wheeling servicescanbeprovidedtotheremainingWheelingUtilityorUtilitieswhichhaveacceptedModifiedServiceSched- ules,then (C)at the request of any Wheeling Utility that has accepted a Modified Service Schedule,the Dis- patcher shall increase if possible the wheeling of the Bradley Lake Energy which such remaining Wheeling Utility or Utilities had originally requested be wheeled,provided that such Energy is delivered to Chugach at the Soldotna Substation for wheeling. (v)At the request of any Wheeling Utility which has accepted a Modified Service Schedule,the Dispatcher shall also increase the storage and/or purchase services provided to such Utility if and to the extent that the Dispatcher can do so as the result of any other Wheeling Utility'srejectionofstorageand/or purchase services offered to the latter Utility in a Modified Wheeling Schedule. (e)Documentation For Schedules Not Confirmed Or Not Per- formed.Whenever the Dispatcher determines that he or she must (1)reduce or interrupt,because of Force Majeure,deliveries of power from the Project or other services to a Wheeling Utility whose wheeling or Modified Service Schedule the Dispatcher has previously confirmed,or (ii)refuse to confirm a Wheeling Util- ity's requested wheeling schedule because of any limitation set forth in Sections 7(b)or 7(c),then the Dispatcher shall pro- vide as much oral notice to the affected Wheeling Utility as is reasonably practicable under the circumstances,such notice to include an explanation of the reason for the reduction/inter- ruption/refusal and the duration of the period during which the Dispatcher anticipates the reduction/interruption/refusal will remain necessary.At all meetings convened under Section 10, Chugach shall be prepared to describe orally,to document in writing (including with contemporaneous logs and all other rele- vant documents maintained by the Dispatcher),and to justify as proper under Section 7 such actions taken by the Dispatcher dur- ing the period since the last such meeting. (£)Allocation Among Conflicting Service Requests. (i)The Wheeling Utilities may agree upon and notify Chugach in writing of the method(s)they desire the Dis- patcher to employ in allocating among the Wheeling Utili- ties,in a practicable manner,such wheeling,storage,and energy purchase services as may be available under this Agreement at times when the Dispatcher is unable within the limitations of Sections 7(b)and 7(c)to confirm or to per- form fully the wheeling schedules requested by the Wheeling Utilities.The Dispatcher shall then employ such method(s) SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 12 until further notification from the Wheeling Utilities.Until the Wheeling Utilities so notify Chugach,however,ifanyallocationofsuchservicesbecomesnecessaryatanytimeorforanyreason,then the Dispatcher shall to the extent practicable under the circumstances allocate the available services among the requesting Wheeling Utilities in proportion to the ratio of the respective PercentageSharesofProjectCapacity(as the same are defined in the Power Sales Agreement)of the Wheeling Utilities requestingsuchservicesforanygivenday. (ii)If and to the extent that: (A)a Wheeling Utility buys from AEG&T/HEA either AEG&T/HEA's Bradley Lake Energy or elec- tric energy produced by the Soldotna No.1 gener- ating unit, (B)that Wheeling Utility requests Chugach to provide wheeling services for such energy dur- ing any given month,and (C)the total amount,in that month,of all such energy purchased by all Wheeling Utilities from AEG&T/HEA,and for which wheeling services have been requested from Chugach,will not exceed the total amount of AEG&T/HEA's Bradley Lake En- ergy generated at the Project either simultane- ously with the requested wheeling schedule or earlier during the same calendar month,then (D)all terms and conditions applicable un- der this Agreement to wheeling services provided for the Bradley Lake Energy of the Wheeling Util- ities (including without limitation the terms and conditions governing priority of wheeling ser- vices,scheduling of wheeling services,and pay- ment for wheeling services)shall also apply to Chugach's wheeling of such energy purchased by such Wheeling Utility,subject to the provisions of Section 8(f)(iii). Chugach shall not be obligated to provide services other than wheeling for such energy under this Agreement.In addition,this Agreement shall not apply to any services provided by Chugach for energy sold by AEG&T/HEA in any given month in excess of the amount specified in Section 8(f)(ii)(C). (iii)If any allocation of wheeling services for Bradley Lake Energy and Soldotna No.1 energy becomes nec- essary under this Agreement at any time,the total quantity of AEG&T/HEA's Bradley Lake Energy and/or Soldotna No.1 energy wheeled to the Wheeling Utility or Utilities which SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 13 purchase such Bradley Lake Energy and/or Soldotna No.1 en- ergy from AEG&T/HEA and which request wheeling servicesfromChugachshallbelimitedtoaquantityofenergyequaltothequantityofBradleyLakeEnergythatcouldbe wheeled to AEG&T/HEA under Section 8(f)(i)if the following hypothetical circumstances existed: (A)AEG&T/HEA's Delivery Point were the Teeland Substation; (B)AEG&T/HEA were a Wheeling Utility and re- quested Chugach to wheel AEG&T/HEA's Bradley Lake En- ergy to such Delivery Point during a period for which the Dispatcher must allocate available wheeling ser- vices under this Agreement;and (C)Under the allocation method otherwise ap-. plicable under Section 8(f)(i),AEG&T/HEA's Percentage Share of Project Capacity (as defined in the Power Sales Agreement)were included in the necessary compu- tation on the same basis and for the same purposes as the respective Percentage Shares of Project Capacity of the Wheeling Utilities requesting wheeling services at the same time for their Bradley Lake Energy. (g)Assured Delivery.Any Wheeling Utility may request at any time that the Dispatcher confirm an Assured Delivery sched- ule,for any period not to exceed two weeks,of Bradley Lake Energy which that Utility desires to have Chugach wheel.In that event: (i)The Dispatcher shall confirm such requested As- sured Delivery schedules if he or she can do so consistent with the limitations set forth in Sections 7(b)and 7(c). (ii)Upon delivery to Chugach at the Soldotna Sub- station of the Bradley Lake Energy for which an Assured Delivery schedule has been so confirmed,Chugach shall be obligated to perform that Assured Delivery Schedule,sub- ject only to'Forced Outage,which shall excuse such per- formance. (iii)The rates applicable to Bradley Lake Energy delivered in accordance with Assured Delivery schedules shall be computed in the manner set forth in Appendix C attached hereto and incorpated by reference herein. (iv)The Dispatcher shall give notice to other Wheel- ing Utilities as soon as reasonably possible of Assured Delivery Schedules confirmed by the Dispatcher. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 14 (h)Scheduling During Certain Transmission Outages. (i)The Parties recognize that Chugach's transmission facilities between the Soldotna Substation and the Univers- ity Substation are subject to periodic outages and,in par-ticular,outages caused by scheduled maintenance and repairorbynaturaleventssuchasavalanchesandslides.During any outage of such facilities,Chugach shall use its best efforts to restore such facilities to service as promptlyasisreasonablypossibleunderthecircumstances. (ii)In addition,if and to the extent that immedi- ately prior to such outage Chugach was meeting its loads south of the point of outage by operating generation north of the point of outage,then the Dispatcher shall continue to perform previously confirmed wheeling schedules and to confirm newly requested wheeling schedules under Section 8(c)to the extent that,despite such outage,the requested schedules can be performed and Chugach can continue to serve its loads south of the point of outage by the follow- ing means,rather than by means of operating Chugach's fos- sil fuel generation units located south of the point of outage: (A)Chugach continues to generate during such outage,at locations north of the point of outage, such electric power as Chugach may require to meet (I) loads for which it is responsible north of the point of outage,plus (II)loads for which it is responsible south of the point of outage,to the extent that the latter loads are not met by Chugach's own Bradley Lake Energy and any energy that is not Displaceable Energy. (B)Simultaneously,one or more Wheeling Utili- ties provides to Chugach,at the Soldotna Substation, Bradley Lake Energy equal in amount to the energy that Chugach is then generating north of the point of out- age in order to meet loads for which Chugach is re- sponsible south of the point of outage. In order to facilitate the ability of the Parties to implement this Section 8(h)(ii)at all applicable times when Bradley Lake Energy is being produced,the Parties shall each designate rep- 'resentatives promptly after this Agreement is executed,and shall authorize and instruct such representatives to negotiate, agree upon,and prepare the procedures reasonably necessary to carry out the intent and purpose of this Section 8(h)(ii). (i)Scheduling During Periods When Transmission Would Oth-erwiseBe Pre-empted Or Unavailable.At times when Chugach's own use of its transmission system makes wheeling services un- available or insufficient under other provisions of this Agree- Ment,and at times when Chugach's transmission facilities be- tween the Soldotna Substation and the University Substation are SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 15 subject to an outage but Section 8(h)(ii)does not apply,thenupontherequestofanyWheelingUtility,Chugach will continue to confirm and perform requested wheeling schedules for that Wheeling Utility if and to the extent the following conditions are met: (i)The Wheeling Utility delivers Bradley Lake En- ergy to Chugach at the Soldotna Substation in amounts not to exceed,at any point in time,the amounts of Displace- able Energy then being produced by Chugach's Displaceable Kenai Resources; (ii)Condition #1 in Appendix B applies,i.e.,the average cost of Bradley Lake Energy (as determined in ac- cordance with the methodology set forth in Appendix B)plus applicable wheeling charges (if any)for delivery of such Energy to Chugach at the Soldotna Substation exceeds at the time the Decremental Cost of the same Displaceable Kenai Resources; (iii)Chugach has the operational ability to increase the output of its generating units north of the Kenai Pen- insula in order to deliver energy to the Wheeling Utility at that Utility's Delivery Point in the amount of the Bradley Lake Energy delivered to Chugach under Section 8(i)(i);and (iv)For such deliveries,the Wheeling Utility pays Chugach the then-applicable wheeling rate computed in ac- cordance with Appendix A,plus an additional amount equal to the difference between (A)the Incremental Costs Chugach incurs in increasing the operation of its generating units north of the Kenai Peninsula,and (B)the Decremental Costs Chugach avoids in reducing the operation of its Displace- able Kenai Resources. SECTION 9.RIGHTS TO ADDITIONAL TRANSMISSION CAPACITY (a)Specific Upgrades.Some or all of the Chugach trans- mission facilities existing as of the Effective Date and used to perform this Agreement may have the potential for being upgraded from time to time to increase carrying capacity (but not neces- 'sarily reliability).If and to the extent that Chugach upgradessuchfacilitiesfromtimetotime,this Agreement shall continue to apply,and the entire capacity of such facilities as so up-graded shall be available to assist in the provision of wheelingservicesunderthisAgreementtotheextentthatsuchfacilities are not used by Chugach in accordance with Section 7(c).Chu-gach also agrees that,upon request of other Parties from timetotime,Chugach will upgrade such facilities at the expense ofsuchotherParties.If Chugach so upgrades such facilities in response to such a request,the rights and obligations of Chu-gach and of other Parties with respect to the additional trans- SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 16 mission capacity thereby created shall be governed by the pro-visions of Appendix D attached hereto and incorporated by refer-ence herein.To the extent not required by Chugach for its own system operations,the non-upgraded portion of Chugach's trans- mission facilities shall remain available on a non-discrimina- tory basis for wheeling Bradley Lake Energy to the Wheeling Utilities,without regard to any individual Wheeling Utility's participation or non-participation in the financing of any up- grade under this Section 9(a). {b)Shared Upgrades.If and to the extent that (i)as a result of any long-term change in Chugach system operations or facilities that substantially reduces the availability of ser- vices under this Agreement,an upgrade is needed in order to continue to permit Bradley Lake Energy to be delivered to the Wheeling Utilities on a basis satisfactory to those Utilities, (ii)such an upgrade would produce benefits for Chugach as well as for the Wheeling Utilities,and (iii)neither Chugach on the one hand nor the Wheeling Utilities on the other is willing to bear the costs of the upgrade without some form of cost-sharing by the others,then Chugach and the Wheeling Utilities shall in good faith attempt to negotiate a cost-sharing arrangement under which the upgrade may be accomplished in a manner that both Chu- gach and the Wheeling Utilities determine to be equitable in relation to the benefits available to each of them from the up- grade.To the extent not required by Chugach for its own system operations,the non-upgraded portion of Chugach's transmission facilities and the additional capacity attributable to Chugach's participation in any upgrade shall remain available on a non- discriminatory basis for wheeling Bradley Lake Energy to the Wheeling Utilities,without regard to any individual Wheeling Utility's participation or non-participation in the financing of any upgrade under this Section 9(b). (c)Opportunities To Share In New Transmission Capacity. If any Party undertakes,alone or together with other entities, the construction of new transmission capacity linking the Kenai Peninsula with Anchorage via a transmission corridor other than Chugach's existing transmission corridor between the Soldotna Substation and the University Substation,then each other Party shall be afforded a reasonable opportunity to participate in a non-discriminatory manner in the ownership of such new transmis- sion capacity in an amount,measured in megawatts,not less than 'each Party's Percentage Share of Project Capacity (as the latter terms are defined in the Power Sales Agreement). SECTION 10.CONSULTATION AND DISPUTE RESOLUTION (a)Consultation.The Parties shall meet not less than once each quarter,and more frequently at the specific request of any Party,for the purposes set forth in this Section.Such meetings shall,if possible,be scheduled to coincide with other meetings among the Parties,such as Project Management Committee SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 17 meetings.At such meetings,the Parties shall apprise one an-other of any planned changes in their systems,including powerpurchasesorsales,that might affect the demand for services and/or the availability of services under this Agreement. (b)Dispute Resolution.At the meetings referred to in Section 10(a),the Parties shall also review performance under this Agreement,including difficulties encountered under the Agreement by any of the Parties and allegations (if any)offailureofanyPartytoperformtheAgreementingoodfaithin accordance with its terms or intent.The Parties agree that any further procedures for dispute resolution under this Agreement shall be entrusted (if the Authority concurs)to good faith neg- otiation and adoption by the Project Management Committee,with Chugach's affirmative vote required for adoption of such proced- ures.Chugach shall not withhold its affirmative vote unreason- ably,but Chugach's reasonableness in this regard may be chal- lenged and determined only in an action to enforce this Agree- ment and shall not be determined by vote or other action of the Project Management Committee.Such procedures shall include procedures for resolution of the following categories of po- tential disputes,among others: (i)disputes over the propriety of any refusal by Chugach to confirm or to perform schedules for services under Section 8; (ii)disputes over the propriety of any notice of termination under Section 3(c),including issues relating to whether Alternate Transmission Facilities are available in an economic and not just a legal sense;provided,thatiftransmissionservicesareavailabletoaWheelingUtili- ty on such Facilities on any commercially reasonable terms, the fact that such services may be more expensive than wheeling services provided by Chugach under this Agreement shall not in itself constitute economic unavailability oftheAlternateTransmissionFacilities;and (iii)disputes over calculation of the capital costsChugachistoassumeorpayunderSection9(a)and Appendix D if pursuant to those provisions,Chugach upon notice withdraws from the Wheeling Utilities transmission capacity created by a transmission system upgrade the costs of which the Wheeling Utilities had agreed to bear. SECTION 11.APPROVALS AND RENEGOTIATION (a)Approvals And Enforceability.All Parties agree to seek and support as expeditiously as possible and in good faith all necessary approvals of this Agreement and its terms.Each Party agrees that this Agreement and each of its provisions is lawful,valid,binding,and enforceable in accordance with its terms.Each Party specifically reserves the right to seek en- SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 18 forcement of this Agreement.In any administrative or judicialactiontoenforceortointerpretthisAgreement,any Party maydisputeanyinterpretationofthisAgreementwithwhichthat Party in good faith disagrees.This Agreement in its entirety reflects the meeting of the minds among the Parties,however, and there exists no agreement among the Parties that services will be provided to the Wheeling Utilities for Bradley Lake En- ergy (and Soldotna No.1 energy purchased from AEG&T/HEA)on terms or conditions other than as set forth in this Agreement. Further,no Wheeling Utility is obligated by this Agreement to request that any services be provided to it.Consequently,if any other Party challenges (or supports any challenge to)the lawfulness and effectiveness of this Agreement or any provision thereof,then notwithstanding any other provision of this Agree- ment,Chugach may at its option terminate this Agreement with respect to that other Party.Thereafter,Chugach shall not be obligated to provide services to that other Party except to the extent,if any,that the provision of such services is required by other applicable agreement or bv applicable statutes,regula- tory orders,or principles of common law. (b)Renegotiation.Five years after the Date of Com- mercial Operation (as defined in the Power Sales Agreement),the Parties other than Chugach may by unanimous agreement select an entity other than Chugach (and such Parties shall select such an entity if Chugach requests)to dispatch generation of the Pro- ject,and if any entity other than Chugach is so selected,then Chugach shall be entitled to change the services to be provided by Chugach under this Agreement and the terms and conditions applicable to such services;provided,that no change in the entity responsible for dispatching generation of the Project, and no change in the services to be provided by Chugach or in the terms and conditions applicable to such services,shall be- come effective unless and until the Parties,including Chugach, have negotiated,agreed upon,and obtained all necessary approv- als of amendments to this Agreement under which the quality of services provided to the Wheeling Utilities is preserved in a manner satisfactory to those Utilities,and under which Chu- gach's ability to control the use of its own system for its own system purposes is preserved in a manner satisfactory to Chu- gach. SECTION 12.MISCELLANEOUS PROVISIONS (a)Waiver.Any waiver at any time by any Party of its rights with respect to any default of the other Party,or with respect to any other matter arising in connection with this Ag- reement,shall not be considered a waiver with respect to any prior or subsequent default,right or matter. (b)Successors And Assigns.This Agreement and all of the terms and provisions hereof shall be binding upon and inure to the benefit of the respective successors and assignees of the SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 19 Parties;provided,that no assignment or other transfer of thisAgreementoranyinteresthereunder(other than to a Party whichwasaPartyontheEffectiveDate)shall be effective without the prior written consent of all of the other Parties (which consent shall not be unreasonably withheld),and any successor or assignee which was not a Party on the Effective Date must,in the commercially reasonable opinion of the other Parties,be financially capable of assuming the obligations of the Party from which the successor or assignee has accepted assignment or other transfer.This Section 12(b)shall not prevent an assign- ment of a Party's rights hereunder for security purposes only, and shall not prevent a financing entity with recorded or se- cured rights from exercising all rights and remedies availabletoitunderlaworcontract,provided that performanceof thisAgreementisnottherebyimpaired.The Parties shall have the right to be reasonably notified by the financing entity prior to the time of exercise that it is exercising such rights or reme- dies. (c)Performance Pending Resolution Of Disputes.Pending resolution of any dispute,each Party shall continue to perform its obligations under this Agreement,including but not limited to the obligation to pay bills submitted by Chugach for Bradley Lake Energy services or,in Chugach's case,bills submitted to Chugach for Bradley Lake Energy sold to Chugach pursuant to the provisions of this Agreement.All Parties shall be entitled to seek immediate judicial enforcement of this continued perform- ance obligation notwithstanding the existence of a dispute. Application for such enforcement shall be made to the Superior Court for the State of Alaska,Anchorage District. (d)Applicable Law,The laws of the State of Alaska (including without limitation the equal opportunity laws set forth in AS 18.80.220,as the same may be amended from time to time)shall govern the interpretation and application of this Agreement and the actions of the Parties hereto.In addition, Chugach will comply with all other equal opportunity laws and regulations applicable to Chugach. (e)Section Headings.._The section headings in this Agree- ment 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. (f£)Payment.Any Party entitled to demand payment underthisAgreementshallendeavortorenderbillstotheappropriateotherPartyorPartiesonorbeforethe10thdayofeachcalen- dar month for services furnished (or Bradley Lake Energy pur- chased)under this Agreement during the preceding month.In such bills,if any item is designated as being estimated due to unavailability of final underlying data,then adjustments to thecorrectamounts,when such amounts are determined,shall be in- cluded in a bill for subsequent months.Payment from every Par- ty billed shall be due in the office of the billing Party by the SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 20 25th day after mailing of the bill.If such bill is delayed inthemailandnotreceivedwithintendaysofthedateshownon the postmark,then the Party billed shall immediately notify the billing Party and agree upon on a new due date,but in no event shall a billing Party be required to accept a delay in payment beyond 15 days from the date of actual receipt of the bill by the Party billed.Payment shall be mailed,directly deposited to the billing Party,or may be paid in person,to the billing Party's main office in Alaska. (g)No Third Party Beneficiaries Or Liability To Third Parties.Notwithstanding that the operation of this Agreement may and is intended to confer benefits on third parties who are not signatories to this Agreement,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)one another's assignees or successors in interest.The Parties expressly do not intend to create any obligation or liability,or promise any performance to,any third party (including without limitation the Authority or any individual or entity supplied with electric power by any of the Parties).The Parties have not created for any third party any right to enforce this Agreement. (h)Force Majeure. (i)Except as modified by Sections 12(h)(ii)and (iii),"Force Majeure"means any event,without limitation, the occurrence of which (A)is beyond the control of Chu- gach,(B)the Dispatcher did not foresee when scheduling services under this Agreement,and (C)makes it impractical or imprudent in terms of the safety,efficiency,or reli- ability of Chugach's system for the Dispatcher to perform such services as scheduled. (ii)Except in the circumstance described in Section 12(h)(iii),for purposes of this Section 12(h)and this Agreement,an event beyond the control of Chugach and un- foreseen by the Dispatcher when scheduling services shall not be considered an event of Force Majeure,and shall not excuse performance of a service schedule the Dispatcher has previously confirmed,if and to the extent that (A)the Bradley Lake Energy for which the schedule has been con- firmed is delivered to Chugach at the Soldotna Substation, and (B)the Dispatcher,in response to such event,can still perform the scheduled services by operating any andallChugachgeneratingunitsthatChugachcouldandwouldoperateatthetimetoensurecontinuityofservicetoits own retail or wholesale loads. (iii)Notwithstanding Section 12(h)(ii),an event of Force Majeure shall be considered to have occurred and Chu-gach's further performance of the previously confirmed ser-vice schedule shall be excused if and to the extent that SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 21 the event is otherwise a Force Majeure within the meaning of Section 12(h)(i)and the following conditions are met: (A)During the period in which Chugach is to perform a previously confirmed service schedule,Chugach experiences a Forced Outage of generation or transmission that prevents Chugach from using in the service of its own system loads some or all of the electric power otherwise capable of being produced by the generating units Chugach had planned to so use during such period; (B)Chugach must operate back-up generation (or purchase power)because of the Forced Outage; (C)But for the Bradley Lake service schedule, Chugach could operate other back-up generation to meet its own system loads,and such other generation has a lower Incremental Cost than the Incremental Cost of the generation that Chugach would in fact operate (or the purchase price of the power Chugach would in fact buy)in order to meet its own system loads if Chugach must also perform the Bradley Lake service schedule; and (D)The Wheeling Utility does not agree to pay Chugach,in addition to the otherwise applicable rate for the scheduled services,the difference between the Incremental Cost of the back-up generation Chugach would operate (or the power Chugach would purchase)in order to continue serving its system loads during the Forced Outage while performing the Bradley Lake ser- vice schedule,and the Incremental Cost of the less costly back-up generation that Chugach would operate for the same purpose if Chugach did.not perform the service schedule;provided,that responsibility for the payment of such difference in cost shall be divid- ed appropriately among Wheeling Utilities if two or more Wheeling Utilities choose to have Chugach performservicesfortheminthesecircumstances. (iv)To assist decision-making by the Wheeling Util- ities when Section 12(h)(iii)applies,the Dispatcher shall,as a courtesy,provide such Utilities upon request an estimate of the approximate difference in Incremental Costs (on a cents per kilowatthour basis)referred to in Section 12(h)(iii)(D),if the Dispatcher can reasonably do so under the circumstances.For actual billing purposes, however,neither Chugach nor any Wheeling Utility shall be entitled to rely upon estimates provided by the Dispatcher. (i)Other Agreements.Except as provided in Section 12(m),this Agreement does not modify,alter,or amend any other contract or agreement that may exist between or among any of the Parties,including but not limited to existing power sales agree- SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 22 ments by and among:AEG&T and HEA;AEG&T and MEA;Chugach,AEG&T, and HEA;and Chugach,AEG&T,and MEA. (3)Operation And Maintenance Of The Project.The Parties recognize and agree that the appropriate entity to operate and maintain the Project upon its completion is AEG&T and/or HEA. The Parties agree to support and assist any reasonable efforts by AEG&T and/or HEA to obtain from the Authority the right to operate and maintain the Project in accordance with applicable standards governing such operation and maintenance. (k)Opinions Of Counsel.All parties may rely on opinions of counsel and the matters referred to in such opinions,which opinions shall accord with the provisions of Appendix E attached hereto and incorporated by reference herein. (1)Counterparts.This Agreement may be executed in any number of counterparts,and each such counterpart shall be deemed to be an original instrument,but all such counterparts together shall constitute but one agreement. (m)Relationship To Alaska Intertie Agreement.All terms and conditions under which Bradley Lake Energy shall be trans- mitted over facilities owned by Chugach shall be as set forth in,or as determined in accordance with procedures established under,this Agreement.The Parties hereby acknowledge that the rights and obligations set forth in this Agreement are intended to satisfy,and are considered by the Parties to be in lieu of, the rights and obligations set forth in Article 15 (and else- where)of the Intertie Agreement relating to the transmission of Bradley Lake Energy on transmission facilities of Chugach,which rights and obligations under the Intertie Agreement the Parties hereby waive to the extent necessary to permit this Agreement to be effective in accordance with its terms.If and to the extent that the provisions of this Agreement (including without limita- tion provisions relating to the availability,scheduling and rates for wheeling services)are found to be inconsistent in any way with the provisions of the Intertie Agreement (including without limitation the provisions of Article 15 of the IntertieAgreement)as the provisionsof the Intertie Agreement relate to the transmission of Bradley Lake Energy over Chugach's trans- mission facilities,the provisions of this Agreement shall gov- ern and shall supersede the provisions of the Intertie Agree- "ment. SECTION 13.DEFINITIONS (a)Agreement.This Agreement governing wheeling and re- lated services for Bradley Lake Energy., (b)Alaska Intertie Agreement (or ""Intertie Agreement"). The Alaska Intertie Agreement dated December 23,1985,among the Alaska Power Authority,ML&P,Chugach,GVEA,AEG&T,and others. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY . Page 23 (c)Alaska Power Authority.The Alaska Power Authority,an agency of the State of Alaska,and any successor thereto as owner of the Bradley Lake Hydroelectric Project. (d)Alternate Transmission Facilities.Any transmissionfacilityorcombinationofsuchfacilities(including existingfacilitiesownedbyChugachorothers),regardless of ownership or control or routing or competing uses of such facilities,to which a Wheeling Utility has or can legally obtain access ina commercially reasonable manner (even if at greater expense than under this Agreement)and which have sufficient physical cap-ability and carrying capacity to permit the Bradley Lake EnergyofaWheelingUtilitytobetransmittedfromtheSoldotnaSub- station to the Delivery Point of that Wheeling Utility without requiring such Energy to flow between the Soldotna Substation and the University Substation over Chugach-owned transmission lines in Chugach's existing transmission corridor between those two Substations;provided,that so long as transmission servicesareavailabletoaWheelingUtilityonsuchFacilitiesonany commercially reasonable terms,the fact that such services may be more expensive than wheeling services provided by Chugach under this Agreement shall not in itself constitute lack of ac- cess to the Alternate Transmission Facilities in a commercially reasonable manner.° (e)Assured Delivery.The service of providing firm and non-interruptible scheduled delivery of Bradley Lake Energy to a Wheeling Utility,subject only to Forced Outage,as requested by the Wheeling Utility and as agreed to by Chugach under Section 8(g)in return for payment of the applicable rate for such ser- vice as computed in accordance with Appendix C. (£)Authority.See Alaska Power Authority. (g)Bradley Lake Energy.Electric energy,expressed in kilowatthours (kwh),generated at the Bradley Lake Hydroelectric Project for a Party in a manner consistent with the Power Sales Agreement and the applicable criteria,procedures,and guide- lines adopted by the Project Management Committee.As used in this Agreement,Bradley Lake Energy does not include energy pro- duced by generators other than those located at the Bradley Lake Hydroelectric Project,regardless of whether energy or capacity from such other generators is or may be sold to a Party pursuant 'to provisions of the Power Sales Agreement relating to reserves for the Project,unless,with respect to any Wheeling Utility, the energy produced by such other generators and sold to that Utility as reserve energy pursuant to the provisions of the Pow- er Sales Agreement cannot reach the Delivery Point of that Util- ity without being transmitted over Chugach's transmission facil- ities located between the Soldotna Substation and the University Substation.If a Wheeling Utility delivers any of its Bradley Lake Energy to another Party without that Energy being wheeled under this Agreement,and if the other Party at a later time makes available the same or a lesser quantity of energy to that SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 24 Wheeling Utility pursuant to a "banking"agreement or similar arrangement,then,if the Wheeling Utility so chooses,the ener- gy so made available at a later time shall be treated as Bradley Lake Energy for purposes of this Agreement and shall be provided services in the same manner as any other Bradley Lake Energy (if delivered to Chugach for such services at the Soldotna Substa- tion pursuant to a service schedule),regardless of the generat- ing facilities used by such other Party to produce such energy under such agreement or arrangement. (h)Bradley Lake Hydroelectric Project.The hydroelectric generating facilities,with a planned capacity of some 100 mega- watts and a planned annual energy output of some 360,000 mega- watthours,to be constructed by the Alaska Power Authority on the Bradley River near Homer,Alaska. (i)Decremental Cost.The expense per kilowatthour which Chugach would incur if Chugach generated a specific quantity of energy instead of obtaining the same quantity of energy during the same hour from other sources,and which Chugach can avoid by so obtaining such quantity of energy rather than generating it. For purposes of this Agreement,such expense shall be equal to the sum of the following (each as reasonably determined by Chu- gach),divided by the number of kilowatthours to be so obtained rather than generated: (i)The replacement cost of fuel and lubrication the consumption of which would occur if Chugach generated such quantity of energy and the consumption of which would be avoided if Chugach does not generate such quantity of energy, (ii)The maintenance cost that Chugach would incur if Chugach generated such quantity of energy and that Chu- gach can avoid by not generating such quantity of energy, (iii)The cost of direct labor and direct supervision that Chugach would incur if Chugach generated such quantity of energy and that Chugach can avoid by not generating such quantity of energy,and (iv)Any other costs that Chugach would incur if Chugach generated such quantity of energy and that Chugachcanavoidbynotgeneratingsuchquantityofenergy,which other costs shall be separately itemized by Chugach. In those instances when Chugach obtains Bradley Lake Energy from a Wheeling Utility and the Chugach energy displaced in the transaction is energy that Chugach would have purchased rather than energy Chugach would have generated,Decremental Cost (if applicable)shall equal the per kilowatthour purchased power expense that Chugach avoids as a result of the transaction. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 25 (3).Delivery Point.The substations (or successor substa-tions)listed below for the individual Parties,if such Parties become Wheeling Utilities for purposes of this Agreement: GVEA:Teeland Substation HEA:The "Delivery Point"as defined in the Power Sales Agreement MEA:Teeland Substation ML&P:The 230 kV switchyard at ML&P's Sulli- van Generating Station SES:Dave's Creek Substation AEGE&T:Same locations as for MEA for energy delivered to AEG&T on behalf of MEA Same locations as for HEA for energy delivered to AEG&T on behalf of HEA (k)Direct Transmission.Any delivery of Bradley Lake Energy to a Wheeling Utility that coincides with a physical flow of energy north from the Soldotna Substation,but only to the extent of such flow. (1)Dispatcher.The individual or individuals employed by Chugach to perform the duties set forth in Section 8. (m)Displaceable Energy.Energy produced or capable of being produced by Chugach's Displaceable Kenai Resources for use in load,the production of which Chugach can avoid through the purchase and the use in load of energy from non-Chugach sources, but not including such energy as Chugach may produce and use in load as a consequence of continuing to operate such Resources at the levels prudently necessary for system stability,voltage support,and related operational purposes., (n)Displaceable Kenai Resources.Generating facilities owned or operated by Chugach (or owned and operated by othersbutusedtosupplyelectricpowerforpurchasebyChugach)and located on the Kenai Peninsula,other than hydroelectric gener- 'ating facilities or other generators that produce electricityfromwindenergy,solar energy,or other renewable sources of energy the supply of which is beyond Chugach's control. (o)Disposal Rate.The rate or rates applicable to Chu-gach's purchases under Section 6 of Bradley Lake Energy and computed in accordance with Appendix C. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 26 (p)Effective Date.The first day on which both of the following conditions have been met:(i)all Parties have re- ceived satisfactory opinions of counsel and have executed and delivered this Agreement,and (ii)this Agreement has been ap- proved in its entirety by all entities whose approval is nec essary.For purposes of this provision,the approval of any entity other than a federal or state governmental body shall not be considered necessary unless that non-governmental entity is identified in writing by one or more Parties,at the time such Party or Parties execute this Agreement,as an entity whose ap- proval is necessary to permit this Agreement to become effective with respect to such Party or Parties. (q)Force Majeure.The term "Force Majeure"shall have the meaning given it in Section 12(h). (r)Forced Outage.Any event,without limitation,beyond the control of and unforeseen by Chugach,the occurrence of which interferes with the transmission of energy under this Ag- reement by rendering physically impossible or unsafe the genera- tion or transmission (over any transmission facilities or por- tions thereof)of all or a portion of the electric power that under normal conditions could safely be so generated or trans- mitted.Any Forced Outage shall constitute an event of Force Majeure under this Agreement,but events of Force Majeure are not limited to Forced Outages. (s)Incremental Cost.The expense per kilowatthour which Chugach would incur if Chugach generated a specific quantity of additional energy for delivery to another Party or Parties dur- ing a particular hour,and which Chugach can avoid by not gener- ating that energy.For purposes of this Agreement,such expense shall be equal to the sum of the following (each as reasonably determined by Chugach),divided by the number of additional kilowatthours to be so generated: (i)The replacement cost of fuel and lubrication the consumption of which would occur if Chugach generatedsuchquantity,of energy and the consumption of which wouldbeavoidedifChugachdoesnotgeneratesuchquantityof energy, (ii)The maintenance cost that Chugach would incur if Chugach generated such quantity of energy and that Chu- gach can avoid by not generating such quantity of energy, (iii)The cost of direct labor and direct supervision that Chugach would incur if Chugach generated such quantityofenergyandthatChugachcanavoidbynotgeneratingsuch quantity of energy,and (iv)Any other costs that Chugach would incur ifChugachgeneratedsuchquantityofenergyandthatChugach SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 27 can avoid by not generating such quantity of energy,whichothercostsshallbeseparatelyitemizedbyChugach. In those instances when Chugach provides a Wheeling Utility with energy obtained by purchase rather than by increasing the output of Chugach's own generation,Incremental Cost (if applicable) shall equal the per kilowatthour purchased power expense that Chugach incurs as a result of the transaction. (t)Modified Service Schedule.A schedule of services under Section 8 that provides partial wheeling,full or partial storage,and/or full or partial energy purchase services for some or all of the Bradley Lake Energy for which a Wheeling Utility initially requested wheeling services. (u)Offsetting Flows.Any delivery of Bradley Lake Energy to a Wheeling Utility that does not coincide with a physical flow of energy north from the Soldotna Substation,but only totheextentofsuchnon-coincidence. (v)Party.Any entity listed in Section 1 of this Agree- ment,other than the Alaska Power Authority. (w)Power Sales Agreement.The agreement for the sale and purchase of electric power from the Project entered into by and among the Authority and the Parties. (x)Project.See Bradley Lake Hydroelectric Project. (y)Project Management Committee.The committee composed of the Authority and the Parties established and invested with authority pursuant to the Power Sales Agreement. (z)Protected Storage Agreement.Any oral or written con- tractual arrangement entered into by Chugach outside this Agree- ment under which energy owned by another entity is stored in the Cooper Lake Reservoir and protected from spill to the extent specified by such contractual arrangement. (aa)Soldotna Substation.The Soldotna Substation owned and operated by Homer Electric Association,Inc.,or any suc- cessor facility at which Bradley Lake Energy can be and is de- livered to Chugach at Chugach's metering point by a Wheeling 'Utility for services under this Agreement. (bb)Termination Date.The earliest of the following dates: (i)The date on which the Authority terminates the Project;, (ii)The fiftieth (50th)anniversary of the Date Of Commercial Operation as defined in the Power Sales Agree- ment; SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 28 (iii)The date on which this Agreement has been term- inated with respect to each and all of the Wheeling Utili-ties pursuant to Section 3(c);or (iv)Such other date as the Parties may mutually ag- ree upon,subject to such approvals as may be necessary at the time of such agreement. (cc)Wheeling Utility.Any of the Parties other than Chu- gach and HEA (or AEG&T on behalf of HEA),but not a Party which at the time is a wholesale customer of Chugach purchasing power from Chugach pursuant to a contract (other than this Agreement) under which Chugach reimburses or otherwise assumes financial responsibility for that Party's costs of purchasing Bradley Lake Energy from the Authority.If and to the extent that HEA (or AEG&T on behalf of HEA)becomes a successor or assignee of a Wheeling Utility's Bradley Lake Energy pursuant to Section 12(b) and Chugach does not reimburse or otherwise assume financial responsibility for the costs of such Energy,then HEA (or AEG&T on behalf of HEA)shall have the option of becoming a Wheeling Utility for Bradley Lake Energy in an amount not to exceed the amount of such Energy so succeeded to by,or so assigned to,HEA (or AEG&T on behalf of HEA). IN WITNESS WHEREOF,the parties have caused this Ag- reement to be executed the day and year first above written. CHUGACH ELECTRIC ASSOCIATION,INC. By us oan | As Drenden) ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC. wd f lated!nt Loe!As SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 29. HOMER ELECTRIC ASSOCIATION,INC. oy Adak B Aobonlbr Lrr dAs GOLDEN VALLEY ELECTRIC ASSOCIATION,INC. By wil Uy.7 \as Oe,Mn /J MATANUSKA ELECTRIC ASSOCIATION,INC. THE MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT AND POWER By as__A Wg | THE CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 30 198711/108 APPENDIX A Computation Of Wheeling Rates Rates for wheeling services provided under Section 4 of this Agreement are intended to be computed on a fully allocated cost basis and to apply to all Wheeling Utilities in a "postage stamp"manner,in accordance with the following principles: 1.Basic Wheeling Rate. (a)"Formula.The basic wheeling rate shall be computed in each Chugach rate adjustment proceeding in accordance with the following formula,using actual values for each variable as de- termined for the ratemaking test year applicable to that rate adjustment proceeding: R =A+B+cCt+oDrteE x K F Where: R =The basic wheeling rate to be charged during the rate period; A =Chugach O &M expense allocated to transmis- - sion (currently REA Accounts 556 through 573),less such 0 &M expense properly al- located to Chugach's Beluga to Point Mac- Kenzie transmission segment; B =Chugach A &G expense allocated to transmis- sion (currently REA Accounts 920 through932),less such A &G expense properly al- lecated to Chugach's Beluga to Point Mac- Kenzie transmission segment; Cc =Chugach taxes allocated to transmission (currently REA Account 408),less such taxes properly allocated to Chugach's Beluga to Point MacKenzie transmission segment; D =Chugach depreciation allocated to transmis- sion (currently REA Account 403),less such depreciation properly allocated to Chugach's Beluga to Point MacKenzie transmission seg- ment; . SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX A --Page l 198711/108 E =Chugach interest expense and generation-and-transmission TIER (or other applicable gen-eration and transmission margin requirement) allocated to transmission,less interest expense and generation and transmission TIER properly allocated to Chugach's Beluga to Point MacKenzie transmission segment; F =The sum in kilowatthours of (i)Chugach's total generation (exclusive of generation for economy sales)plus purchases,and (ii) the Bradley Lake Energy of the Wheeling Utilities; and K =The applicable phase-in factor or constant as set forth below in Provision 2 of this Appendix A. (b)Notes on specific variables. (i)The Point MacKenzie Substation is not part of Chugach's Beluga to Point MacKenzie transmission segment, and the costs of that Substation shall not be excluded in determining the values for those variables from which the costs of that segment are excluded. (ii)Chugach's transmission O &M expense and A &G expense associated with Chugach's Beluga to Point MacKenzie transmission segment are not (and at this time cannot be) specifically identified and isolated from Chugach's total transmission O &M expense and A &G expense.Therefore, in computing "A"and "B"in the foregoing formula,reason- able estimates of Chugach's transmission O &M expense and A &G expense associated with Chugach's Beluga to Point MacKenzie transmission segment shall be used.Such esti- mates may be based on reasonable proxy variables,such as the percentage of total recorded annual hours of transmis- sion O &M labor represented by recorded annual hours of transmission O &M labor on Chugach's Beluga to Point Mac- Kenzie transmission segment. (iii)As provided in Section 13(cc)of this Agree- ment,neither HEA nor AEG&T on behalf of HEA is a Wheeling Utility for purposes of this Agreement (except,potential- ly,as a successor or assignee of another Wheeling Utili- ty's Bradley Lake Energy).Thus,"F"in the formula set forth above shall not include or be increased by any Brad- ley Lake Energy of HEA or AEG&T on behalf of HEA,even if such Energy is wheeled by Chugach pursuant to Section 8(f)of this Agreement at wheeling rates established under this Exhibit A. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX A --Page 2 198711/108 2.Phase-In Factor (Years 1-15)And Constant (Later Years). Beginning with the calendar year in which the Project achieves Commercial Operation,and in each of the next fourteen calendar years (Calendar Years 1 through 15 in the table below), the applicable wheeling rate shall be determined by multiplying the then-applicable base wheeling rate (as computed above)times a phase-in factor in accordance with the following table: Calendar Year Phase-In Factor a -3333 2.6 ew ew ew ew te whl th ls -3333 3B.6 2 ew ew ew ew ew el -3333 41 ew ew ew wt wl tll tlt ll -3805 5 ww ww tw wt lt lt 4278 6 2.6 6 we ew we wl tll -4750 7.6 oe ew ew ew ew eh elt -5222 B 1.1 ew ew we ew lt lt ll 5694 G9.6 ©©we ew ew ew ee -6167 10.6.«©©©©©©we ow -6639 os 7111 12.6 «©©©©©©©ow -7583 13.0.6 ew ©ew te we ww -8056 14.04 6 8 ew ew we lt hw ll ls -8528 15.6 ©©©©©©we ow -9000 Beginning on the first day of the next calendar year after Cal- endar Year 15,and in all succeeding calendar years,the base wheeling rate (as computed under heading 1 above)shall be mul- tiplied by 0.9000 as a constant.Any increase in the applicablewheelingrateresultingfromanincreaseinthephase-in factor in accordance with the table above shall become effective with- out the need for any regulatory approval other than approval ofthisAgreement. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX A --Page 3 198711/109 APPENDIX B Computation Of Disposal Rates The rates ("Disposal Rates")that Chugach will pay for Bradley Lake Energy that Chugach purchases from the Wheeling Utilities under Section 6 of this Agreement shall be computedusingthefollowingmethodologies: Rates Under Condition #1. (a)Determining whether Condition #1 exists. (1)"Condition #1"refers to the circumstance in which,at the time Chugach purchases Bradley Lake Energy of a Wheeling Utility under Section 6,the Decremental Cost to Chugach of Displaceable Energy from Chugach's Displaceable Kenai Resources is less than or equal to the sum of (A)the average cost of Bradley Lake Energy,and (B)the wheeling charge (if any)paid or to be paid by the Wheeling Utility to have delivered to the Soldotna Substation the Bradley Lake Energy that Chugach purchases from that Wheeling Util- ity. (ii)For purposes of Paragraph l(a)(i)above,the average cost of Bradley Lake Energy shall be equal to (A) Annual Project Costs (as defined in the Power Sales Agree-ment)as then adopted or officially estimated by the Pro- ject Management Committee for the Fiscal Year (as also so defined)in which the Section 6 purchase occurs,divided by(B)the expected kilowatthour output of the Project in that Fiscal Year as determined by the Project Management Commit- tee, (»)Rate computation under Condition #1. Tne applicable Disposal Rate under Condition #1 shall be equal to 95 percent of the Decremental Cost to Chugach of the Displaceable Energy from the particular Chugach Displaceable Kenai Resource(s)whose output is reduced by virtue of the pur- chase. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX B --Page 1 . 198711/109 Rates Under Condition #2. (a)Determining whether Condition #2 exists. (i)."Condition #2"refers to the circumstance in which,at the time Chugach purchases Bradley Lake Energy of a Wheeling Utility under Section 6,the Decremental Cost to Chugach of Displaceable Energy from Chugach's Displaceable Kenai Resources exceeds the sum of (A)the average cost of Bradley Lake Energy,and (B)the wheeling charge (if any) paid or to be paid by the Wheeling Utility to have deliv- ered to the Soldotna Substation the Bradley Lake Energy that Chugach purchases from that Wheeling Utility. (ii)For purposes of Paragraph 2(a)(i)above,the average cost of Bradley Lake Energy shall be determined in the manner described in Paragraph 1(a)(ii)above. (pb)Rate computation under Condition #2. The applicable Disposal Rate under Condition #2 shall be equal to the lower of (A)ninety-five percent (95%)of the Dec-remental Cost to Chugach of the Displaceable Energy from the particular Chugach Displaceable Kenai Resource(s)whose outputisreducedbyvirtueofthepurchase,or (B)an amount determ- ined by the following formula: B+W+OD 2 R = Where: R =The applicable Disposal Rate under Condition #2 (unless such rate is greater than ninety- five percent (95%)of the Decrementai Cost to Chugach of the Displaceable Energy fromtheparticularChugachDisplaceableKenai Resource(s)whose output is reduced by vir- tue of the purchase); 'B =The average cost of Bradley Lake Energy, determined in the manner described in Para- graph 1(a)(ii)above; W =The wheeling charge (if any)paid or to be paid by the Wheeling Utility to have deliv- ered to the Soldotna Substation the Bradley Lake Energy that Chugach purchases from that Wheeling Utility; ana: D =The Decremental Cost to Chugach of the Dis- placeable Energy from the particular Chugach SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX B --Page 2 198711/109 Displaceable Kenai Resource(s)whose output is reduced by virtue of the purchase. 3.Price Paid When Less Expensive Energy Is Available. Notwithstanding any other provision of this Appendix,if Chugach purchases Bradley Lake Energy from a Wheeling Utility pursuant to the last sentence of Section 6(c)(i)of this Agree- ment,then the price that Chugach pays the Wheeling Utility forsuchEnergyshallbethepriceatwhichsuchEnergywasoffered by the Wheeling Utility pursuant to the third sentence of Sec- tion 6(c)(i),rather than a rate determined in accordance with the foregoing provisions of this Appendix., SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX B --Page 3 198711/110 APPENDIX C Computation Of Rates For Assured Delivery Wheeling 1.Rate Formula. Rates for Assured Delivery wheeling services provided under Section 8(g)of this Agreement shail be computed in accordance with the following formula: R =(1.15 x B)+P R =The rate to be paid by the Wheeling Utility for each kilowatthour of Bradley Lake Energy delivered to Chugach at the Soldotna Substa- tion for wheeling on an Assured Delivery basis; 2B =The basic wheeling rate computed in accord- ance with Provision 1 of Appendix A-- (1)adjusted through use of the ap- plicable phase-in factor under Provision 2 of Appendix A,if the Assured Delivery wheeling services are to be performed in Years 1 through 15 as described in that Appendix;or (2)unadjusted by any phase-in factor or constant,if the Assured Deliv- ery wheeling services are to be performed in any year after Year .15 as described in Provision 2 of Appendix A; and: P =The Chugach outage premium (if applicable) computed in accordance with this Appendix Cc. 2.The Chugach Outage Premium. (a)When the vremium applies. The Chugach outage premium ("P"in the foregoing formula) shall apply only if the following conditions are met: SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX C --Page 1 ° 198711/110 (i)During the period in which Chugach is to perform an Assured Delivery wheeling schedule,Chugach experiencesaforcedgenerationortransmissionoutagethatprevents Chugach from using in the service of its own system loads some or all of the electric power otherwise capable of be- ing produced by the generating units Chugach had planned to so use during such period; (ii)Chugach must operate back-up generation (or pur- chase power)because of the forced outage; (iii)But for the Assured Delivery wheeling schedule, Chugach could have operated other back-up generation to meet its own system loads,and such other generation has a lower Incremental Cost than the Incremental Cost of the generation that Chugach in fact operates (or the purchase price of the power Chugach in fact buys);and (iv)In response to notification from Chugach of the foregoing facts,the Wheeling Utility chooses not to cancel or suspend the Assured Delivery schedule. (6b)Computation of the premiun. The premium shall equal the difference between (i)the In- cremental Cost of the back-up generation Chugach operates (or the power Chugach purchases)in order to continue serving its system loads during the outage,and (ii)the Incremental Cost of the less costly back-up generation that Chugach could otherwise have operated for the same purpose,but for the Assured Delivery wheeling schedule. (c)Energy to which the premium applies. The premium shall apply only to that portion of the Assured Delivery period after the hour in which Chugach provides thenotificationdescribedinParagraph2(a)(iv)above,and only totheextent,at the request of the Wheeling Utility involved,theAssuredDeliveryschedulecontinuestobeperformeddespitethatnotification. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX C -=Page 2 198711/111 APPENDIX D Rights And Obligations With Respect To Certain Transmission Facility Upgrades Under Section 9(a) 1.Applicability Of The Provisions Of This Appendix The provisions of this Appendix D shall apply with respect to the additional transmission capacity created by an upgrade (or upgrades)of the Chugach transmission facilities used to perform this Agreement if and to the extent that,pursuant to Section 9(a)of this Agreement,Chugach upgrades such facilities at the request and expense of one or more Wheeling Utilities. All references in this Appendix to "upgrades"shall mean up- grades undertaken pursuant to Section 9(a). 2.Rights To Firm Capacity. To the extent that any Wheeling Utilities request and agree to bear the expense cf an upgrade,such Utilities shall be en- titled,upon Chugach's completion of that upgrade,to enjoy the additional transmission capacity created by the upgrade on a firm basis (subject to Forced Outage)until the effective date of a Notice of Withdrawal issued by Chugach pursuant to Para- graph 3 of this Appendix. 3.Notices Of Withdrawal. (a)Upon requisite advance notice as specified in Para- graph 3(b),Chugach may withdraw from the Wheeling Utilities for bona fide operational or system planning needs of its own all or any portion of the transmission capacity to which the WheelingUtilitiesbecomeentitledunderParagraph2. (b)Withdrawal of transmission capacity under Paragraph3(a)shall be effected by a written Notice of Withdrawal from Chugach to the Wheeling Utilities.Such Notice shall become effective upon the seventh (7th)anniversary of its issuance, but no such Notice shall be issued with respect to the addition- al transmission capacity created by any particular upgrade until -the eighth (8th)anniversary of Chugach's completion of that upgrade. 4.Payment Obligations. (a)The Wheeling Utilities at whose request Chugach under- takes the upgrade shall either (i)reimburse Chugach for the capital and installation costs of that upgrade at agreed inter- vals while the installation of the upgrade is in progress,or(ii)repay Chugach in accordance with a reasonable amortization schedule (taking into account the terms ef Chugach's financing SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX D -=-Page l 198711/l111 for the upgrade,if Chugach has borrowed funds for this purpose) agreed to by Chugach and the Wheeling Utilities. (b)During the period after completion of an upgrade and prior to the effective date of any Notice of Withdrawal,for allBradleyLakeEnergy(and Soldotna No.1 energy purchased from AEG&T)transmitted over the unwithdrawn transmission capacity to which the Wheeling Utilities are entitled,the Wheeling Utili- ties shall pay Chugach (in addition to any amounts payable under Paragraph 4(a))a wheeling rate to be negotiated and agreed to by and among Chugach and such Wheeling Utilities prior to commencement of work to perform the upgrade,such rate to be subject to such approvals as may be required at the time. (c)For any Bradley Lake Energy (and Soldotna No.1 energy purchased from AEG&T)delivered to the Wheeling Utilities in excess of the amount deliverable over the transmission capacity to which such Utilities are entitled under Paragraph 2,the Wheeling Utilities shall pay Chugach the otherwise applicable wheeling rate computed in accordance with Appendix A. (ad)To the extent that (i)the Wheeling Utilities use the transmission capacity to which they are entitled under Paragraph 2 for the transmission of energy other than Bradley Lake Energy (and Soldotna No.1 energy purchased from AEG&T),and (ii)such energy is transmitted over all or any segment of Chugach's transmission system other than the segment whose capacity has been increased by the upgrade,then the Wheeling Utilities shall pay Chugach for wheeling services,although the Parties recog- nize that the wheeling rate applicable to such energy may not be the same as the wheeling rate applicable to Bradley Lake Energy (and Soldotna No.1 energy purchased from AEG&T)under this Ag- reement. (e)If,during the useful life of any upgrade,a Notice of Withdrawal becomes effective with respect to additional trans- mission capacity created by that upgrade,then Chugach shall paytotheWheelingUtilitiesanequitableamount,such amount to be calculated in a manner agreed upon by and among Chugach and «he Wheeling Utilities prior to the'commencement of work to perform the upgrade.Any dispute over the amount to be paid by ChugachunderthisParagraph4(f)shall be resolved in accordance with the dispute resolution procedures adopted pursuant to Section .10(b)(iii)of this Agreement. . SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX D --Page 2 198711/112 APPENDIX E Opinions Of Counsel Written opinions of counsel for each of the Parties shall address the following two questions (among other matters counsel may wish to include in such final opinion): (1)Whether,in counsel's independent professional opinion,the Party on whose behalf the opinion is offered has the legal power to bind itself to the provisions of this Agreement and to bind itself to perform all obliga-tions set forth in this Agreementfor the entire term of this Agreement;and (b)Whether,in counsel's independent professional opinion,the Party on whose behalf the opinion is offered has taken all actions legally required to permit that Party to execute this Agreement in a lawful manner and be bound thereby,with the result that such Party's execution ofthisAgreementwillbevalid,binding,and enforceable. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX E --Page 1 Counterpart 4 of 1l BRADLEY LAKE HYDROELECTRIC PROJECT TRANSMISSION SHARING AGREEMENT by and among The HOMER ELECTRIC ASSOCIATION,INC. and The CHUGACH ELECTRIC ASSOCIATION,INC. The GOLDEN VALLEY ELECTRIC ASSOCIATION,INC. The MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT &POWER TABLE OF CONTENTS Section RECITALS °°°e e e °e e .e .e e .e e SECTION 1.PARTIES e e e e e e e e e e e SECTION 2.CONSTRUCTION OF TRANSMISSION LINE .... (a)Construction schedule ..... (b)Capacity e e eo 8 °YY e e .e e e (c)Failure to provide voltage support ..... SECTION 3.SALE OR LEASE OF TRANSMISSION CAPABILITY . (a)Obligation to sell or lease... (b)Operation;line losses ..... (c)Use of capability.oe ©©we we SECTION 4.PAYMENT .2.2 2 2 ©©©«©««@ (a)Construction costs ..««««e (b)O &M expense .2.«««©«©«©«« (c)Initial carrying capacity ... (ad)Schedule of payments .....-« (e)Character of payments .....« (f)Tax consequences ....«««©a « (g)Purchaser's obligation ee we we SECTION 5.DUTY TO OPERATE AND MAINTAIN . SECTION 6.OUTAGES ......2.esse (a)Forced and scheduled outages .. (b)HEA'sS system .2.«««©««©©«« (c)Scheduling ..««««©©«««©«©© SECTION 7.FAILURE TO CONSTRUCT ACCORDING i TO SCHEDULE (a)Default ...2.6 ©©«©2 2 we we ew ww ew (b)Takeover ..2.©2 ©2 ©©«©©©©ow wo (c)Cooperation by HEA.......2..2 eee (d)Title .1.2.6.2 2 2 ww ew ew ew we we (e)Repayment of HEA's costs ....«ee (£)Damages .2...2.©«©©©©©©©ew ew we (g)Rights of nonowners.......-e.c.e-. SECTION 8.UPGRADING OF LINE .2.2.2.2.©2 2 ©« (a)Increased share .....««©«©«©es ee (b)Reimbursement of costs ....«2.««e (c)Treatment of costs of voltage support . (d)Shared costs .2...«««©©«©©we ew SECTION 9,INTERVENING TAPS ON TRANSMISSION LINE SECTION 10.MAJOR REPAIRS AND DOWNRATING..... (a)Major Repairs...««««©«©«©©©«©&© (b)Downrating ..2.««©©«©©«©«©«©©«©2 SECTION 11.SPECIAL PROVISIONS AFFECTING CHUGACH (a)Chugach's treatment of the transmission capability for ratemaking purposes ... (b)Deliveries to AEG&ST ....eee eee (c)Conveyance to AEG&T ....«2c 6 «ee « SECTION 12.TERM OF AGREEMENT;AMENDMENT ....« (a)Term......rr rs (b)Amendments .2.«2 2.«©©©©©©©ow SECTION 13.DISPUTE RESOLUTION ..2.«««6 «©««e SECTION 14.APPROVALS ..2.««©«©©©©«©©©© ii SECTION 15.MISCELLANEOUS PROVISIONS .... (a) (b) (c) (d) (e) (£) (g) (h) (i) (3) (k) (1) (m) Waiver .2.2.«6 2 ©©©©«©©we ow Successors and assigns ...«««««««e Performance pending resolution of disputes Applicable law ..2..«6 «©©»©ee «@ Section headings ...««««©«©©«©©«« Payment .2 ««©©«©««««©«©©©©«« No third party beneficiaries or liability to parties ..2.«6 e «©«©©«©©©©©©ew Notice and access to records .....e.«e Execution of documents ...«««««©«©«« Multiple copies ..«««««««««©«©«« Increase in Purchaser's Share ....e. Default by Purchaser .2.2.«««««©««« Relationship to Alaska Intertie Agreement SECTION 16 e NEGLIGENCE e e e e e e LJ e i e °eo e e e SECTION 17.DEFINITIONS e e e e e e e e e eo e e e e .(a) (b) (c) (d) (e) (£) (g) (h) (i) AEG&T 2.2 «©©©©©©©©©0 ew we ew ew ll Agreement .2.«©««©©©«©«©«©©«©«© Alaska Intertie Agreement oe eo we we we Alaska Power Authority ..««©«©«««» Authority ..«««©©«©«©©«©«©«©w@ we Bradley Lake Power .2.«««6 ««©««_ Bradley Lake Hydroelectric Project .... Construction Cost .....«e«=©«©«e «« Construction Loan ..««©©«««©#««e iii (J) (k) (1) (m) (n) (0) (P) (q) (r) (s) (t) (u) (v) (Ww) (x) (y) (z) ATTACHMENT ATTACHMENT ATTACHMENT ATTACHMENT Date of Commercial Operation . Delivery Point . Effective Date ...... Force Majeure Forced Outage ...... Fritz Creek Substation.. Party .2.2.«««©©«©«©«© Percentage Share ..... Power Sales Agreement... Project ......s++s.-. Project Management Committee . Prudent Utility Practice . Purchaser ......e.. Purchaser's System ..... Soldotna Substation .... Termination Date ...... Transmission Line ..... iv AGREEMENT FOR SALE OF TRANSMISSION CAPABILITY THIS AGREEMENT is entered into by and among HOMER ELECTRIC ASSOCIATION,INC,("HEA"),CHUGACH ELECTRIC ASSOCIATION,INC. ("Chugach"),GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.("GVEA"), and the MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT AND POWER ("ML&P"),each an electric cooperative or a municipality duly or- ganized and with its principal offices located in the State of Alaska. WITNESSETH: WHEREAS,each Party hereto is an electric utility or operates an electric utility;and WHEREAS,each Party has determined that its purchase of elec- tric power from the Bradley Lake Hydroelectric Project pursuant to a Power Sales Agreement among the Alaska Power Authority and all other Parties is prudent under the circumstances,and that over the expected useful life of the Project such power is likely to produce net economic benefits for the electric ratepayers served by that Party;and WHEREAS,the Parties have simultaneously herewith executed a Power Sales Agreement under which they will purchase power pro- duced by the project from and after the Date of Commercial Opera- tion (as defined in the Power Sales Agreement);and WHEREAS,the delivery of Bradley Lake energy and power from the Project to the Parties requires use of electric transmission facilities;and WHEREAS,HEA intends to construct,and is willing to commit to construct,between the Bradley Junction and the Soldotna Sub- station,a distance of approximately 46.8 miles,a 556 ACSR,115 kV transmission line,at an approximate cost of $14.1 million ("the Transmission Line");and, WHEREAS,HEA is willing to sell or lease a portion of the transmission capability of the Transmission Line to assist the Purchasers in the delivery of power and energy pursuant to the terms of this Agreement; NOW THEREFORE,IN CONSIDERATION of the mutual covenants set forth herein,the Parties agree as follows: TRANSMISSION AGREEMENT Page 1 SECTION 1.PARTIES The Parties to this Agreement are HOMER ELECTRIC ASSOCIATION, INC,("HEA"),CHUGACH ELECTRIC ASSOCIATION,INC.("Chugach"), GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.("GVEA"),and the MUNICI- PALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT AND POWER ("ML&P"). SECTION 2.CONSTRUCTION OF TRANSMISSION LINE (a)Construction schedule.HEA shall construct the Trans- mission Line in accordance with the schedule set forth in Attach- ment D,and place it into service on or before 90 days prior to the scheduled date for completion of the Project, (b)Capacity.HEA shall take such measures as appropriate to provide voltage support and stability (including the installa- tion of capacitors or the operation of generation)to the extent economically feasible,so that the ultimate operational capacity of the Transmission Line is not less than 135 MW.HEA shall con- sult with the purchasers prior to the implementation of any such measure and allow the Purchasers to review and provide comments regarding such measures. (c)Failure to provide voltage support.Notwithstanding the foregoing,HEA may elect not to provide the voltage support re- quired by Section 2(b),or it may elect to provide voltage sup- port,but to a lesser degree or at a later date,but unless and until HEA does provide such support,the right of HEA to use the Transmission Line shall be subordinate to the right of any Pur- chaser to use the Transmission Line to wheel that Purchaser's Bra- dley Lake energy,to the extent of the Purchaser's share of the capability of the Transmission Line.Any failure of HEA to pro- vide voltage support sufficient to increase the capacity of the Transmission Line to the amount required by Section 2(b)shall not reduce a Purchaser's obligation to pay for its share of the cost of providing any lesser amount of voltage support. SECTION 3.SALE OR LEASE OF TRANSMISSION CAPABILITY (a)Obligation to sell or lease.On the Date of Commercial Operation,HEA shall sell or lease and each Purchaser agrees to purchase or lease a share of the capability of the Transmission Line in an amount (stated in megawatts)equal to that Purchaser's Percentage Share (stated in megawatts)of the Project.For the purposes of this Agreement,Chugach's share of the capability of the Transmission Line shall be an amount equal to the combined Chugach,Matanuska Electric Association,Inc.and City of Seward Percentage Shares (stated in megawatts). TRANSMISSION AGREEMENT Page 2 (b)Operation;line losses.HEA shall operate the Purchas- er's Transmission Line capability as if it were part of HEA's sys- - tem and make the Purchaser's Transmission Line capability avail- able for the use of the Purchaser to deliver energy and power in the manner directed by the Purchaser.HEA shall be compensated for line losses,if any,resulting from power of the Purchasers flowing over the Transmission Line.The Project Management Com- mittee will determine the amount of line losses and the appropri- ate amounts and manner of compensation. (c)Use of capability.Nothing in this Agreement is in- tended to limit or restrict the use of the transmission capability by the Purchasers for transmitting power in addition to Bradley Lake Power.. SECTION 4.PAYMENT For transmission capability purchased pursuant to this Agree- ment,each Purchaser shall pay its share of the Construction Cost and operation and maintenance expenses as further set forth here- in. (a)Construction Costs.Within one year of the Effective Date,each Purchaser shall elect in writing whether to prepay Con- struction Costs pursuant to Section 4(a)(i)or through monthly payments pursuant to Section 4(a)(ii).A Purchaser failing to make such an election shall be deemed to have elected to pay through direct payments pursuant to Section 4 (a)(i).Construc- tion Costs shall thereafter be paid by each Purchaser in accor- dance with its election pursuant to the schedule described in Sec- tion 4(d). (i)A Purchaser electing to prepay Construction Costs shall pay a fixed portion of the Construction Cost as determinedbytheformulasetforthinAttachmentA. (ii)A Purchaser electing to pay Construction Costs on a monthly basis shall pay a portion of HEA's monthly payments on the Construction Loan as,determined by the formula set forth in At- tachment B. (b)O &M expense.In addition to making amortization pay- ments,each Purchaser shall reimburse HEA in each month for a por- tion of HEA's actual expenses associated with operating,maintain- ing and repairing the Transmission Line (O &M expense)in accor- dance with the formula set forth in Attachment C.Such expenses shall include but shall not be limited to all expenses related to providing necessary voltage support equipment for the Transmission Line installed at or between Bradley Junction and Soldotna Substa- tion,and all taxes,if any,for which HEA may become liable as a result of the sale of transmission capability. TRANSMISSION AGREEMENT Page 3 (c)Initial carrying capacity.The carrying capacity of the Transmission Line for the purposes of making the computations re- quired by Attachments A,B and C,subject to the provisions of Section 10,is 135 megawatts.. (d)}Schedule of payments. (i)A Purchaser electing to pay Construction Costs through prepayments shall make such payment within 30 days of de- mand therefor by HEA,but not before 30 days following the Date of Commercial Operation. (ii)A Purchaser electing to pay Construction Costs through monthly payments shall pay the first monthly payment on or before 30 days after the effective date of the documents evidenc- ing the Construction Loan. (e)Character of payments.The monthly amounts payable under this Agreement are operating expenses of each Purchaser's System,and are valid and binding obligations of each Purchaser, payable only from the gross revenues of said Purchaser's System as a cost of electric transmission,and not payable from any taxes. (£)Tax consequences.In the event the sale of transmission Capability or the payment arrangements contemplated by this Agree- ment result in any Party being liable for the payment of Federal income tax,the Parties shall work together to revise the Agree- ment to reduce or eliminate such liability,provided,that any such revision shall not reduce the amount of transmission capabil- ity to which a Party is entitled hereunder,nor shall HEA be obli- gated to convey any greater interest.in the Transmission Line than as is herein provided.: (g)Purchaser's obligation.Except as provided in Section 10,each Purchaser shall make payments in the amounts and at the times required by this Agreement notwithstanding a suspension or reduction in the amount of transmission capability of the Trans- mission Line. SECTION 5S.DUTY TO OPERATE AND MAINTAIN So long as HEA owns the Transmission Line,HEA will in good faith and at all times operate,maintain and repair the electrical facilities used to perform the services provided hereunder in ac cordance with Prudent Utility Practice in a manner consistent with HEA's obligations under this Agreement. TRANSMISSION AGREEMENT Page 4 SECTION 6.OUTAGES (a)Forced and scheduled outages.The Transmission Line is subject to Forced Outage and to scheduled outages for maintenance. (b)HEA's system.During any outage of the Transmission Line,absent an agreement to the contrary,a Purchaser shall not be entitled under the terms of this Agreement to the use of trans- mission capacity on HEA's system or to wheeling services over the transmission line from Bradley Junction to Soldotna substation via the Fritz Creek Substation. (c)Scheduling.HEA shall schedule outages for maintenance or upgrading of the Transmission Line in consultation with the Bradley Lake Project Management Committee. SECTION 7.FAILURE TO CONSTRUCT ACCORDING TO SCHEDULE. (a)Default.Subject to the provisions of Section 7(b),if HEA fails,in any material respect,to construct the Transmission Line in accordance with the schedule set forth in Attachment D, unless such delay is a result of Force Majeure,HEA shall be deemed to be in default hereunder and the Parties thereupon shall be entitled to assume ownership and control of the Transmission Line and to complete the construction thereof,and HEA shall as- sign and convey to the Parties entitled thereto,all of its right, title and interest in the Transmission Line. (b)Takeover.Upon default by HEA,a Party may perfect its right to construct the Transmission Line as follows: (i)The Party shall first give notice to HEA and to all of the other Parties of its election to construct the Trans- mission Line. (ii)Within 30 days from the date of receipt of the no- tice HEA shall be entitled to cure any such default. (iii)If HEA fails to cure the default within the period prescribed by subsection (ii),above,then within 45 days of the receipt of the notice referred to in subsection (i), above,each Party electing to participate in the construction of the Transmission Line shall notify the other Parties of such election. (iv)Thereafter,all Parties electing to exercise their respective rights to construct the TransmissionLine shall be entitled to do so,pursuant to such arrangements as they may agree upon among themselves. TRANSMISSION AGREEMENT Page 5 (c)Cooperation by HEA.Upon the perfection by any Parties of their rights to construct the Transmission Line as set forth in section 7(b),HEA shall deliverto such Parties all documents in its possession relating to the construction of the Transmission Line,including design documents and construction documents,and shall execute in favor of the Parties assignments of all assig- nable easements and permits,together with such other documents as may be reasonably required to transfer control of the construction of the Transmission Line to such Parties. (d)Title.Any Party which perfects its right to complete the construction of the Transmission Line pursuant to the terms hereof,shall be entitled to demand and receive from HEA a con- veyance of all of HEA's right,title,and interest in the Trans- mission Line,provided,that in the event more than one Party be- comes entitled to make such demand HEA shall have no responsibil- ity for determining the parties entitled thereto,but HEA may de- liver any instrument of conveyance to all such Parties as tenants in common. (e)Repayment of HEA's costs.In the event one or more Par- ties obtain title to the Transmission Line pursuant to the terms hereof,such Party or Parties shall pay to HEA,on or before 12 months from the date of receiving such title all sums expended by HEA for the construction of the Transmission Line. (f£)Damages.The exercise by any Party of any right under this section shall not operate to limit or restrict any Party's right to pursue any other legal remedies. (g)Rights of nonowners.In the event a Party is unable to assume an ownership share of the Transmission Line pursuant to this section,the Party(ies)assuming ownership shall be obligated to provide transmission capability to the nonowning Party in ac- cordance with the terms of this Agreement,provided,that the monthly Construction Costs provided in Section 4(a)(ii)shall re- flect the costs of the Party(ies)assuming ownership of the Trans- mission Line,, SECTION 8.UPGRADING OF LINE (a)Increased share.If after the initial construction of the Transmission Line,additional improvements constructed by HEA result in an increase of the capacity of the Transmission Line above the capacity stated in Section 2(b)no Purchaser will be entitled to any share of the increased capacity of the Transmis- sion Line,except such Purchasers as were offered and accepted an Opportunity to share in the costs of the upgrade. (b)Reimbursement of costs.A Purchaser may be equitably entitled to some financial compensation in the event the Transmis-- TRANSMISSION AGREEMENT Page 6 sion Line is upgraded,depending upon the nature of the upgrade and the arrangements entered into for the purpose of financing and allocating the capacity associated with the upgrade. (c)Treatment of costs of voltage support.Any capital cost of adding or enhancing voltage support for the Transmission Line included within the definition of Construction Cost shall not be considered to be an upgrade;rather the cost shall be treated as though it were a cost of constructing the Transmission Line and shall be paid by the Parties in accordance with the provisions of Section 4(a). (d)Shared costs.The cost of making any capital improve- ments which result in benefits to both the HEA system and to the Transmission Line will be allocated on an equitable basis. SECTION 9,INTERVENING TAPS ON TRANSMISSION LINE HEA may,at some future time,desire to place substations or taps ("facilities")along the Transmission Line in order to pro- vide for the specific needs of HEA's system.All capital and operating costs associated with such facilities,including voltage support equipment that is required as a result of the installation of such facilities,will be the responsibility of HEA.HEA agrees to allow the other Parties to review its plans for such facili- ties,and the subsequent design of such facilities,and absent compensation from HEA to the Purchasers,HEA shall propose no changes to the Transmission Line that will significantly degrade the line's reliability or result in an increase in losses to the other Parties. SECTION 10.MAJOR REPAIRS AND DOWNRATING (a)Major repairs,If after the Date of Commercial Opera- tion HEA determines that the cost of repairs which are necessary to restore the line to its carrying capacity as of the Date of Commercial Operation as subsequently enhancedby the constructionofanycapitalimprovements,will exceed the equivalent sum of$1,800,000,based upon the value of the US dollar on November 1, 1987,HEA shall submit a detailed plan and estimate of such re- pairs to the Purchasers,including alternative means of financing such repairs.The Purchasers shall review and comment on such plans and develop a joint proposal,in consultation with HEA,for such repairs and financing.If the parties cannot agree upon a plan to finance and accomplish the necessary work,HEA,after no- tice to the purchasers,may proceed with such repairs and shall>finance such work over a period representative of the remaining useful life of the Transmission Line (if it is prudent under the circumstances to finance the work over such period;if not,then over such longer or shorter period as may be prudent under the TRANSMISSION AGREEMENT ) Page 7 circumstances)and charge such cost as an operating expense,pro-vided,that if the Purchasers,within 30 days after receipt of the notice from HEA,unanimously agree to terminate this Agreement, HEA shall not proceed with such repairs under this Agreement. Such termination shall take effect on the date HEA receives notice from each of the Purchasers,and the obligations of the parties under this Agreement other than the obligation to pay Construction Costs under Section 4(a)(ii)shall terminate as of such date. (b)Downrating.If,after all measures provided in Section 2(b)have been taken,HEA reasonably determines that the carrying capacity of the Transmission Line is less than 135 MW,Attachments A,B and C shall be amended so that the value of 135 MW is re- placed by the value of the actual carrying capacity of the Trans- mission Line (stated in MW),as reasonably determined by HEA. Such amendment shall be effective on the date HEA issues a written declaration setting forth the actual carrying capacity of the Transmission Line,and the Purchaser's payment obligations shall increase as of such date in accordance with such amendment,pro- vided,that any such amendment shall operate prospectively,i.e., HEA shall not be entitled to be repaid for any sums which it otherwise would not have paid,if the amendment had been effective on the Effective Date.In the event Attachments A,B and C are amended pursuant to the terms of this Section 10(b),any Purchaser shall have the right to decrease the amount of its share of the Transmission Line's capability by a percentage not to exceed the percentage decrease in the carrying capacity of the Transmission Line. 'SECTION 11.SPECIAL PROVISIONS AFFECTING CHUGACH (a)Chugach's treatment of the transmission capability for ratemaking purposes.The costs paid by Chugach for its share of the capability of the Transmission Line shall not be included in any revenue requirement,nor included for any other purpose,in establishing rates to be paid by AEG&T to Chugach under the Agree- ment for Sale of Electric Power and Energy between HEA,Chugach, and AEG&T,effective.May 13,1986 (the "Tripartite Agreement). (b)Deliveries to AEG&T.Notwithstanding the provisions of Section 6,during any outage on the Transmission Line but only to the extent of such outage,Chugach shall be entitled to use Brad- ley Lake power in place .of other power,subject to the physical constraints of the HEA system,to satisfy all or any part of Chugach's power sales obligations to AEG&T for the benefit of HEA, and to deliver the power from Bradley Junction via the Fritz Creek substation,but such delivery shall not otherwise relieve Chugach of its obligations to provide HEA with power pursuant to the terms of the Tripartite Agreement. TRANSMISSION AGREEMENT :Page 8 (c)Conveyance to AEG&T.If HEA at any time transfers to AEG&T the ownership of the Transmission Line,Chugach shall alsotransferitsTransmissionLinecapabilitytoAEG&T under a Project Agreement among AEG&T,HEA,Chugach,and any other entities con- veying shares of the Transmission Line to AEG&T,if Chugach is then a Joint Action Member of AEG&T. SECTION 12.TERM OF AGREEMENT;AMENDMENT (a)Term.This Agreement shall become effective upon the Effective Date and shall continue in force until the Termination Date,subject only to the limitations set forth in Section 12(b), provided,that if the Date of Commercial Operation does not occur before January 1,1996,then this Agreement shall terminate on January 1,1996. (b)Amendments.This Agreement may be amended,extended,or terminated at any time by the written consent of all Parties,but no such amendment,extension,or termination shall be effective unless approved by the federal and state agencies (if any}whose approval is required at the time. SECTION 13.DISPUTE RESOLUTION. The Parties agree that any procedures for dispute resolution under this Agreement be entrusted to good faith negotiations and adoption by the Project Management Committee,with HEA's affirma- tive vote required for adoption of such procedures.HEA shall not withhold its affirmative vote unreasonably,but HEA's unreason- ableness in this regard may be challenged and determined only in an action to enforce this Agreement and shall not be determined by vote or other action of the Project Management Committee. SECTION 14.APPROVALS. All Parties agree to seek and support as expeditiously as possible and in good faith,all:necessary approvals of this Agree- ment and its terms.Each Party agrees that this Agreement and each of its provisions is lawful,valid,binding and enforceable in accordance with its terms. SECTION 15.MISCELLANEOUS PROVISIONS. (a)Waiver.Any waiver at any time by any Party of its rights with respect to any default of the other Party,or with respect to any other matter arising in connection with this Agree- ment,shall not be considered a waiver with respect to any prior or subsequent default,right or matter. TRANSMISSION AGREEMENT Page 9 (b)Successors and assigns.This Agreement and all of the terms and provisions hereof shall be binding upon and inure to the benefit of the respective successors and assignees of the Parties; provided,that no assignment or other transfer of this Agreement, or any interest hereunder (other than to an entity which is a party to the Power Sales Agreement)shall be effective without the prior written consent of all of the other Parties (which consent shall not be unreasonably withheld),and any successor or assignee which is not a party to the Power Sales Agreement must,in the commercially reasonable opinion of the other Parties,be finan- cially capable of assuming the obligations of the Party from which the successor or assignee has accepted the assignment or other transfer.This Section 15(b)shall not prevent an assignment of a Party's rights hereunder for security purposes only,and shall not prevent a financing entity with recorded or secured rights from exercising all rights and remedies available to it under law or contract,provided that performance of this Agreement is not thereby impaired.The Parties shall have the right to be reason- ably notified by the financing entity prior to the time of exer- cise that it is exercising such rights or remedies. (c)Performance pending resolution of disputes.Pending resolution of any dispute,each Party shall continue to perform its obligations under this Agreement,including but not limited to the obligation to make the payments required by this agreement. All Parties shall be entitled to seek immediate judicial enforce- ment of this continued performance obligation notwithstanding the existence of a dispute.Application for such enforcement shall be made to the Superior Court for the State of Alaska,at Kenai. (d)Applicable law.The laws of the State of Alaska (in- cluding without limitation the equal opportunity laws set forth in AS 18.80.220,as the same may be amended from time to time)shall govern the interpretation and application of this Agreement and the actions of the Parties hereto.In addition,HEA will com- ply with all other equal opportunity laws and regulations appli- cable to HEA. (e)Section headings.The section headings in this Agree- ment 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. (£)Payment.HEA shall endeavor to render bills to the ap-propriate other Party or Parties on or before the 10th day of each calendar month for charges which accrued under this Agreement dur- ing the preceding month.In such bills,if any item is designated as being estimated due to unavailability of final underlying data, then,adjustments to the correct amounts,when such amounts are determined,shall be included in a bill for subsequent months. Payment from every Party billed shall be due in the office of HEA TRANSMISSION AGREEMENT ) Page 10 by the 25th day after mailing of the bill.If such bill is de- layed in the mail and not received within ten days of the date shown on the postmark,then the Party billed shall immediately notify HEA and agree upon a new date,but in no event shall HEA be required to accept a delay in payment beyond 15 days from the date of actual receipt of the bill by the Party billed.Payment shall be mailed,directly deposited to the account of HEA,or may be paid in person,at HEA's main office in Homer,Alaska. (g)No third party beneficiaries or liability to third par- ties.Notwithstanding that the operation of this Agreement may and is intended to confer benefits on third parties who are not signatories to this Agreement,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)one another's assignees or successors in interest.The Parties expressly do not intend to create any obligation or lia- bility,or promise any performance to,any third party (including without limitation the Authority or any individual or entity sup- plied with electric power by any of the Parties).The Parties have not created for any third party any right to enforce this Agreement. (h)Notice and access to records.HEA shall apprise the Parties of any planned construction or maintenance activities on the Transmission Line,or any changes in its system that might affect the availability of capacity on the Transmission Line.HEA shall make available to a Party such books,records,or other in- formation relating to the Transmission Line,its cost,construc- tion and operation,as that Party may reasonably request. (i)Execution of documents.The Parties shall execute such other documents as may be reasonably required to effectuate the purposes of this Agreement.Any conveyance or lease executed pur- suant to this Agreement shall contain terms which are substantial- ly the same as the terms hereof. (j)Multiple copies.This Agreement shall be executed in several counterparts,each of which shall be an original,but allofwhichshallconstituteoneandthesameinstrument. (k)Increase in Purchaser's Share.If and to the extent that the amount of Bradley Lake Power delivered to a Purchaser,or a Purchaser's Percentage Share (as defined in the Power Sales Agreement),shall increase or decrease as a result of the occur- rence of an event described in Section 9(b)(i)of the Power Sales Agreement,the Purchaser's share of the Transmission Line capabil- ity shall be increased or decreased. (1)Default by Purchaser.If a Purchaser suspends,reduces, fails to make or is prevented from making payments required under this Agreement,HEA,without waiving any other rights or remedies TRANSMISSION AGREEMENT .Page 11 available to it,and upon not less than 30 days'advance written notice to the Purchaser,may terminate or suspend the right of the Purchaser to receive power over its share of the transmission cap- ability,and in such event HEA shall be entitled to the use of such transmission capability. (m)Relationshipto Alaska Intertie Agreement.Except for the rights and duties set out in this Agreement to use the Trans- mission Line from Bradley Junction to Soldotna Substation,this Agreement does not change or modify the rights and duties set out in the Alaska Intertie Agreement. SECTION 16.NEGLIGENCE Except as provided in Section 7,nothing in this Agreement shall create any obligation or duty for any Purchaser to own,con- struct,operate,maintain,inspect or perform any work related to the Transmission Line.HEA and any subsequent owner shall be solely responsible for all work related to the Transmission Line and shall be solely liable for any negligence of their officers, employees,agents or contractors with respect to the performance of this Agreement. SECTION 17.DEFINITIONS. (a)AFG&T.The Alaska Electric Generation and Transmission Cooperative,Inc. (b)Agreement.This Agreement governing sale of Transmis-sion Line capability. (c)Alaska Intertie Agreement.Alaska Intertie Agreement dated December 23,1985 among the Alaska Power Authority,Munici- pality of Anchorage,Alaska,d.b.a.Municipal Light &Power,Chu- gach Electric Association,Inc.,City of Fairbanks,Alaska,Munic- ipal Utilities System,Golden Valley Electric Association,Inc. and Alaska Electric Generation and Transmission Cooperative,Inc. (d)Alaska Power Authority.The Alaska Power Authority,an agency of the State of Alaska,and any successor thereto as owner of the Bradley Lake Hydroelectric Project. (e)Authority.See Alaska Power Authority. (£)Bradley Lake Power.Electric capacity,expressed in kilowatts (kW),generated at the Bradley Lake Hydroelectric Pro- ject for a Party in a manner consistent with the Power Sales Agreement and applicable criteria,procedures,and guidelines adopted by the Project Management Committee.As used in this Agreement,Bradley Lake Power does not include capacity produced by generators other than those located at the Bradley Lake Hydro- TRANSMISSION AGREEMENT , Page 12 electric Project,regardless of whether energy or capacity from such other generators is or may be sold to a Party pursuant to provisions of the Power Sales Agreement relating to reserves for the Project. (g)Bradley Lake Hydroelectric Project.The hydroelectric generating project as defined in the Power Sales Agreement. (h)Construction Cost.The sum of the costs,as determined in accordance with generally accepted accounting principles,as- sociated with the construction of the Transmission Line and any capital improvements installed at or between Bradley Junction and Soldotna Substation and required to provide voltage support as provided in Section 2(b),provided that the cost of the construc- tion of the Transmission Line shall not exceed the equivalent sum of $18 million and the cost of the construction of any such vol-_ tage support shall not exceed the equivalent sum of $2 million, based upon the value of the US dollar on November 1,1987. (i)Construction Loan.The sum of the funds borrowed from time to time by HEA to fund the Construction Cost,but only to the extent such funds were actually used to pay the Construction Cost, plus the costs associated with borrowing such funds. (j)Date of Commercial Operation.The date on which HEA reasonably declares sufficient carrying capacity to be available on the Transmission Line to accommodate the Purchasers'shares on a commercial basis. (k)Delivery Point.The Delivery Point located at Bradley Junction,as defined in the Power Sales Agreement. (1)Effective Date.The first day on which both of the fol- lowing conditions have been met:(i)all Parties have executed this Agreement,and (ii)this Agreement has been approved in its entirety by all entities whose approval is necessary.For pur- poses of this provision,the approval of any entity other than a federal or state governmental body shall be considered necessary only if that non-governmental entity is identified in writing by one or more Parties,at the time such Parties execute this Agree- ment,as an entity whose approval is necessary to permit this Agreement to become effective with respect to such Party or Par- ties. (m).Force Majeure.Any event,without limitation,the oc-currence of which (i)is beyond the control of HEA,and (ii)makes it impractical or imprudent in terms of safety,efficiency,or reliability to perform as agreed. (n)Forced Outage.Any event,without limitation,beyond the control of and unforeseen by HEA,the occurrence of which in- terferes with the capability of the Transmission Line to transmit TRANSMISSION AGREEMENT Page 13 energy by rendering physically impossible or unsafe the transmis- sion of all or a portion of the electric power that under normal conditions could safely be so transmitted.Any Forced Outage shall constitute an event of Force Majeure under this Agreement, but events of Force Majeure are not limited to Forced Outages. (o)Fritz Creek Substation.The Fritz Creek Substation owned and operated by HEA,or any successor facility. (p)Party.Any entity listed in Section 1 of this Agree- ment. (q)Percentage Share.The amount of Project Capacity to which a Purchaser shall be entitled under the terms of the Power Sales Agreement,as determined at the Date of Commercial Operation of the Project. (r)Power Sales Agreement.The agreement for the sale and purchase of electric power from the Project entered into by and among the Authority,the Parties,and others. (s)Project.See Bradley Lake Hydroelectric Project. (t)Project Management Committee.The committee composed of the Authority,the Parties and others and established and invested with authority pursuant to the Power Sales Agreement. (u)Prudent Utility Practice.Prudent Utility Practice as defined in the Power Sales Agreement. (v)Purchaser.Every Party except HEA. (w)Purchaser's System.A Purchaser's electric utility sys- tem for the distribution,transmission,and generation of electri- cal power and which is owned and operated by the Purchaser.If a Purchaser's electric utility system is combined with other utili- ties of the Purchaser,then "Purchaser's System"includes only those facilities,activities,and revenues properly allocable to Purchaser's electric'utility service."Purchaser's System"does not include the Project,regardless of whether the Purchaser oper- ates the Project under a separate agreement with the Authority, (x)Soldotna Substation.The Soldotna Substation owned and operated by HEA,or any successor facility. (y)Termination Date.The earliest of the following dates: (i)The date the Transmission Line is no longer used and useful and all costs associated with the Construction Loan have been paid; TRANSMISSION AGREEMENT ,Page 14 (ii).The date on which the Power Sales Agreement ter- minates as provided at Section 2(c)of the Power Sales Agree- ment;. (iii)Such other date as the Parties may mutually agree upon,subject to such approvals as may be necessary at the time of such agreement. (z)Transmission Line.The transmission line,approximately 46.8 miles in length,to be constructed by HEA between the Deliv- ery Point at Bradley Junction and the Soldotna Substation at a projected cost of approximately $14.1 million,being constructed of 556 ACSR conductor and having a projected capacity (when en- hanced by voltage support)of 135 MW and a voltage of 115 kv. IN WITNESS WHEREOF,the parties have caused this Agreement to be executed the day of December,1987. HOMER ELECTRIC ASSOCIATION,INC. ov UA BLahrlrAsFrruae-TF CHUGACH ELECTRIC ASSOCIATION,INC. 4 As prevriionl t GOLDEN VALLEY ELECTRIC ASSOCIATJON,INC. By As vn Cr Na 7 MUNICIPALITY OF sgANCHORAGE d/b/a MUNICIPAL LIGHT AND POWER By As ope TRANSMISSION AGREEMENT Page 15 ATTACHMENT A Computation of a Purchaser's Prepaid Share of Construc- tion Costs The portion of the Transmission Line's Construction Cost for which a Purchaser shall be responsible if the Purchaser assumes responsibility for prepayment of its share of the Construction Costs shall be determined by the following formula: Pp =_U_LyP135MWx Where: Pp =Principal amount (in dollars)for which thePurchaserisdirectlyresponsible Ux =(i)During the first 3 years following the Date of Commercial Operation of the Project (as determined with reference to the Power Sales Agreement),the Purchaser's Percentage Share (as determined with reference to the Power Sales Agreement)multiplied by 110 Mw, and (ii)After the first 3 years following such date,the Purchaser's actual MW share of the Project, Ly =Principal amount due under the Construction Loan *After the first three years,HEA shall repay to the Purchaser any difference between the actual payments made and the sums the Purchaser otherwise would have paid if the Purchaser had been paying pursuant to the terms of Paragraph (ii)above,rather than Paragraph (i)above,and the Purchaser shall repay to HEA the difference between any sums the Purchaser otherwise would have made if the Purchaser had been paying pursuant to the terms of said Paragraph (ii)rather than Paragraph (i),and the actual payments made. TRANSMISSION AGREEMENT .Page 1 ATTACHMENT A ATTACHMENT B Computation of a Purchaser's Share of Monthly Construction Costs Pj =U x Ly 135 MW 12 Where: Py =Monthly payment which the Purchaser shall make to HEA, u*=Same as in Attachment A, and Li =For the first two years of the term of the Construction Loan,an amount equal to the sum of the payments which HEA shall be obligated to pay in the third year of the Loan term,plus a TIER com- ponent based upon the minimum TIER re- quired by the mortgage securing the Con- struction Loan,and for each year there- after,an amount equal to the sum of the payments which HEA shall be obligated to pay in that year,plus a TIER component based upon the said minimum TIER re- quirement. The monthly payments made pursuant to this Attachment B shall terminate on the date which is two years prior to the date on which the last scheduled payment shall be due pursuant to the terms of the Construction Loan. *after the first three years,HEA shall repay to the Purchaser any difference between the actual payments made and the sums the Purchaser otherwise would have paid if the Purchaser had been paying pursuant to the terms of Paragraph (ii)above,rather than Paragraph (i)above,and the Purchaser shall repay to HEA the difference between any sums the Purchaser otherwise would have made if the Purchaser had been paying pursuant to the terms of said Paragraph (ii)rather than Paragraph (i),and the actual payments made. TRANSMISSION AGREEMENT . Page 1 ATTACHMENT B ATTACHMENT C The Purchaser's Monthly O&M Payment To HEA Pom =U x 074 135 MW +K9 Wheres: Pom =Dollars which the Purchaser must reim- burse HEA for O &M expense in each month, u*=Same as in Attachment A, K9 =Any increase in the capacity of the Transmission Line resulting from upgrades to the original Trans- mission Line, and 04 =Dollar amount of HEA's O &M expense for the Transmission Line in the preceding month (including the Transmission Line's equitable share of any HEA A &G expense properly allocated to HEA transmission in that month,and including all expen- ses of providing voltage support to the Transmission Line at or between Bradley Junction and the Soldotna Substation during that month). *after the first three years,HEA shall repay to the Purchaser any difference between the actual payments made and the sums the Purchaser otherwise would have paid if the Purchaser had been paying pursuant to the terms of Paragraph (ii)above,rather than Paragraph -(i)above,and the Purchaser shall repay to HEA the difference between any sums the Purchaser otherwise would have made if the Purchaser had been paying pursuant to the terms of said Paragraph (ii)rather than Paragraph (i),and the actual payments made, TRANSMISSION AGREEMENT Page 1 ATTACHMENT C ATTACHMENT D Schedule for Construction of the Transmission Line 1.On or before the first day of the 5th month following the June ist date which next follows the date the Authority gives notice of having awarded the contract for the construction of the Project to the successful bidder,HEA shall have placed orders for the purchase of substantially all of the major construction materials to be used in the construction of the Transmission Line. 2.On or before the first day of the 11th month following the June ist date which next follows the date the Authority gives notice of having awarded the contract for the construction of the Project to the successful bidder,HEA shall have awarded to a responsible contractor a contract for the construction of the Transmission Line and shall have given the contractor a notice to proceed under the contract. 3.On or before the first day of the 33rd month following the June 1st date which next follows the date the Authority gives notice of having awarded the contract for the construction of the Project to the successful bidder,HEA shall have completed and placed into service the Transmission Line. TRANSMISSION AGREEMENT ) Page 1 ATTACHMENT D . WOHLFORTH,FLINT &GRUENINGAPARTNERSHIPOFPROFESSIONALCORPORATIONSPETERARGETSINGER TELEPHONE JULIUS J.BRECHT ATTORNEYS AT LAW (907)276-640! CHARLES G,EVANS ROBERT 8,FLINT 900 WEST STH AVENUE,SUITE GOO TELECOPYCLARKS.GRUENING* ROBERT M.JOHNSON ROBERT S.SPITZFADEN® KENNETH E.VASSAR ERIC E.WOHLFORTH JANICE COLEMAN GRAHAM®* STEPHEN E.GREER THOMAS F.KLINKNER ROGER A,LUBOVICH BRADLEY E.MEYEN OANIEL PATRICK O'TIERNEY ANCHORAGE,ALASKA 9950!(907)276-5093 JUNEAU OFFICE 217 SECOND STREET JUNEAU,ALASKA 9980I TELEPHONE (907)586-8110 OF COUNSEL ROGER G.CONNOR RICHARD W.GARNETT,IT PATRICK RUMLEY December 8,1987JAMESA.SARAFIN JAMES R.SZENDER **ADMITTED IN NEW YORK ONLY Board of Directors Alaska Power Authority 701 East Tudor Road Anchorage,Alaska 99503 Chugach Electric Association, P.O.Box 196300 Anchorage,Alaska 99519-6300 Golden Valley Electric Association 758 Illinois Street Fairbanks,Alaska 99701 Municipality of Anchorage d/b/a Municipal Light and Power 1200 East lst Avenue Anchorage,Alaska 99501-1685 City of Seward d/b/a Seward Electric System 5th and Adams Seward,Alaska 99664 Ladies and Gentlemen: Alaska Electric Generation & Transmission Cooperative,Inc. P.O.Box 169 Homer,Alaska 99603 Homer Electric Association,Inc. 3977 Lake Street Homer,Alaska 99603 Matanuska Electric Association,Inc. P.O.Box 1148 Palmer,Alaska 99645 We have examined the Constitution and the laws of the State of Alaska (the "State")and a record of proceedings relating to the authorization of a certain agreement for the sale and purchase of electric power by and among the Alaska Power Authority (the "Authority”),Chugach Electric Association, Inc.,Golden Valley Electric Association,Inc.,the ; 'Municipality of Anchorage d/b/a Municipal Light and Power,the City of Seward d/b/a Seward Electric System,Alaska Electric Generation &Transmission Cooperative,Inc.,Matanuska Electric Association,Inc.,and Homer Electric Association,Inc.with © identifying cover date of December 8,1987,in the form presented to the Board of Directors of the Authority and on file and of record in said form in the records of the Authority (the "Power Sales Agreement"). Board of Directors Alaska Power Authority,et al. December 8,1987 Page 2. Based on our examination,and subject to the qualification hereinafter stated,we are of the opinion that: 1.The Authority is a public corporation of the State, created and existing under and pursuant to Chapter 83 of Title 44,Alaska Statutes as amended (herein called the "Act"). Under the Constitution and laws of the State,the Authority has been duly created and validly exists as a public corporation and government instrumentality,performing an essential public function with good,right and lawful authority to authorize the Power Sales Agreement. 2.The Power Sales Agreement constitutes a valid and legally binding obligation of the Authority,enforceable against the Authority in accordance with its terms,except as enforcement thereof may be limited by bankruptcy,insolvency, reorganization,moratorium,applicable equitable principles or other laws affecting the enforcement of creditors'rights generally. 3.All necessary approvals and consents for the valid authorization by the Authority of the Power Sales Agreementhavebeenobtained. 4.Neither the execution and delivery of the Power Sales Agreement on behalf of the Authority nor the performance of the Power Sales Agreement by the Authority (i)will conflict with the Act or the regulations of the Authority,(ii)will violate any law or published rule or regulation applicable to the Authority,or (iii)will result in a breach of,or default under,any resolution or other agreement or instrument known to us and to which the Authority is a party or is bound. The foregoing opinion is subject to the qualification that approval of the Alaska Public Utilities Commission is required before the Power Sales Agreement takes effect according to its terms,unless legislative action eliminating this requirement 'A7805FJIG Board of Directors Alaska Power Authority,et al. December 8,1987 Page 3. is enacted and becomes effective before other conditions to the effective date of the Power Sales Agreement occur. Very truly yours, WOHLFORTH,FLINT &GRUENING By Eric E.Wohlforth A7805FJG y HELLER,EHRMAN,WHITE &MCAULIFFE ATTORNEYS 333 BUSH STREET A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS 52S UNIVERSITY AVENUE SAN FRANCISCO,CALIFORNIA 94104-2878 PALO ALTO,CALIFORNIA 94301-1908 TELECOPIER (415)772-6268 4100 FIRST INTERSTATE CENTER:999 THIRD AVENUE TELECOPIER (41S)324-0638 TELEPHONE (415)772-6000 326-7600SEATTLE,WASHINGTON 98104-4011 TELEPHONE (415)326-7 TELEPHONE (206)447-0900 -TELECOPIER (206)447-0849 1300 S.W.FIFTH AVENUE PORTLAND,OREGON 97201-5696 TELECOPIER (503)241-0950 TELEPHONE (502)227-7400 December 8,1987 Alaska Power Authority 701 East Tudor Road (99503) P.O.Box 190869 Anchorage,Alaska 99519-0869 Homer Electric Association,Inc. 3977 Lake Street P.O.Box 429 Homer,Alaska 99603 Golden Valley Electric Association,Inc. P.O.Box 1249 Fairbanks,Alaska 99707 Matanuska Electric Association,Inc. P.O.Box 1148 Palmer,Alaska 99645 The Municipality of Anchorage d/b/a Municipal Light and Power 1200 East First Avenue Anchorage,Alaska 99501 The City of Seward d/b/a Seward Electric System P.O.Box 167 4 Seward,Alaska 99664 Alaska Electric Generation &Transmission Cooperative,Inc. c/o/Homer Electric Association 3977 Lake Street P.O.Box 429 Homer,Alaska 99603 Chugach Electric Association,Inc.-Alaska Power Authority; Bradley Lake Power Sales Agreement - Ladies and Gentlemen: We have acted as counsel to Chugach Electric Association, Inc.,an Alaska electric cooperative ("Chugach"),in Identified Parties to Bradley Lake Power Sales Agreement December 8,1987 Page 2 connection with that Agreement for the Sale and Purchase of Electric Power dated as of December 8,1987,among The Alaska Power Authority,Homer Electric Association,Inc.,Golden Val- ley Electric Association,Inc.,Matanuska Electric Associa- tion,Inc.,the Municipality of Anchorage d/b/a Municipal Light and Power,the City of Seward d/b/a Seward Electric Sys- tem,Alaska Electric Generation &Transmission Cooperative, Inc.and Chugach (the "Agreement").As used in this opinion, the terms "Purchaser"and "Project"have the meanings ascribed to them in the Agreement. In connection with this opinion,we have examined such records,documents and instruments as in our judgment are nec- essary or appropriate to enable us to render this opinion.We have assumed the authenticity of all records,documents and instruments submitted to us as originals,the genuineness of all signatures,the legal capacity of natural persons and the conformity to the originals of all records,documents and in- struments submitted to us as copies.The records,documents and instruments we have examined included the following: (a)The articles of incorporation of Chugach,cer- tified by the Alaska Commissioner of Commerce and Economic Development as of November 10, 1987 and certified to us by the general counsel of Chugach as being complete and in full force and effect as of the date of this opinion; (b)The bylaws of Chugach,certified to us by the general counsel of Chugach as being complete and in full force and effect as of the date of this opinion; (c)Records certified to us by the general counsel of Chugach as constituting all records of pro- ceedings and actions of the board of directors of Chugach relating to the transactions contem- plated by the Agreement; (d)The Agreement; (e)A certificate of compliance relating to Chugach issued by the Alaska Commissioner of Commerce and Economic Development on November 6,1987; (f)Documents certified to us by the controller of Chugach as embodying all the material terms (other than as to principal amount,term and interest rate)relating to the outstanding in- debtedness of Chugach to the United States of America,acting through the Administrator of v Identified Parties to Bradley Lake Power Sales AgreementDecember8,1987 Page 3 the Rural Electrification Administration,and the Spokane Bank for Cooperatives; (g)Power Sales Contract executed October 13,1979, between Chugach and the U.S.Department of En- ergy,acting by and through the Alaska Power Administration,relating to the Eklutna elec- tric generating plant and transmission system; (h)Wholesale Power Agreement between Chugach and the City of Seward,as amended in June 1985; (i)Agreement for Sale of Electric Power and Energy executed by representatives of-Homer Electric Association,Inc.and Chugach on September 10, 1985 and September 25,1985,respectively; (3)Agreement for the Sale and Purchase of Electric Power and Energy dated April 25,1987,among Chugach,Matanuska Electric Association,Inc. and Alaska Electric Generation and Transmission Cooperative,Inc.;and (k)Alaska Intertie Agreement dated December 23, 1985,among Chugach,the Alaska Power Authori- ty,the Municipality of Anchorage d/b/a Munici- pal Light and Power,the City of Fairbanks, Alaska,Municipal Utilities System,Golden Val- ley Electric Association,Inc.,and Alaska Electric Generation and Transmission Coopera- tive,Inc. We have relied upon certificates of the controller and general counsel of Chugach with respect to certain factual Matters relevant to this opinion.We have also obtained cer- tificates of the controller and general counsel of Chugach as to the material agreements and material instruments of Chugach and,with your consent,have limited our review to an examina- tion of the agreements and instruments identified in such cer-tificate in expressing our opinion set forth in clause (iii)of paragraph 6 below. Where our opinion relates to our "knowledge,"such know- ledge is based upon our examination of the records,documents, instruments and certificates enumerated or described above and the actual knowledge of attorneys in this firm who are pre- sently involved in substantive legal representation of Chu- -gach, Although we have represented Chugach since 1985 on mat- ters related to the Project,and have also represented other utilities in the State of Alaska on matters arising under the Identified Parties to Bradley Lake Power Sales Agreement December 8,1987 Page 4 Power Statutes (as defined below),we do not maintain an of- fice in the State of Alaska and do not hold ourselves out as experts in matters of Alaska law generally.We have,there- fore,with your consent and without independent investigation, relied upon the opinion of Margie Mac Neille,General Counsel of Chugach,dated the date of this opinion,as to the due or- ganization of Chugach and as to all matters of Alaska law other than Alaska Stat.§§10.25.010 -10.25.650 (Electric and Telephone Cooperative Act),§§42.05.010 -42.05.721 (Alaska Public Utilities Commission Act),§§44.33.600 -44.33.630 (relating to the Power Development Revolving Loan Fund)and §§44.83.010 -44.83.425 (relating to the Alaska Power Author- ity)(collectively,the "Power Statutes").To the extent that the Power Statutes are relevant to our opinion,we have based our opinion upon our review of the Power Statutes as set forth in the Alaska Statutes and the familiarity with the Power Statutes we have acquired through our representation of Chu- gach.This opinion is limited to the Power Statutes and the federal laws of the United States of America. Based upon the foregoing and our examination of such questions of law as we have deemed necessary or appropriate for the purpose of this opinion,and subject to the limita- tions and qualifications expressed below,it is our opinion that: 1.Chugach is a validly existing electric cooperative in good standing under the laws of the State of Alaska. 2.Chugach has all requisite corporate power and corpo- rate authority to enter into and perform the Agree- ment. 3.The Agreement has been duly authorized by all neces- sary corporate action on the part of Chugach and has been duly executed and delivered on behalf of Chu- gach. 4.The Agreement is a valid and binding obligation of Chugach,enforceable against Chugach in accordance with its terms,subject,as to enforcement,to (i) 'bankruptcy,insolvency,reorganization,arrangement, moratorium and other laws of general applicability relating to or affecting creditors'rights,and (ii) general principles of equity,whether such enforce- ment is considered in a proceeding in equity or at law. 5.No governmental consents,approvals,authorizations, registrations,declarations or filings are required for the execution and delivery of the Agreement on Identified Parties to Bradley Lake Power Sales Agreement December 8,1987 Page 5 behalf of Chugach and performance of the Agreement by Chugach,except to the extent indicated below. Neither the execution and delivery of the Agreement on behalf of Chugach nor the performance of the Agreement by Chugach (i)conflicts with any provi- sion of the Articles of Incorporation or Bylaws of Chugach,(ii)violates any law or published rule or regulation applicable to Chugach,or (iii)results in a breach or violation of,or constitutes a de- fault under,any term of any material agreement or instrument to which Chugach is a party or by which Chugach's properties or assets are bound and of which we have knowledge. Without limiting the effect of the qualifications and exceptions stated above,this opinion is made subject to the following (i) additional qualifications and exceptions: Under the terms of various existing financing agreements,Chugach must obtain the consents of the following entities to its execution and performance of the Agreement: (1)the Federal Financing Bank; (2)the United States of America acting through the Administrator of the Rural Electrification Administration;and (3)the Spokane Bank for Cooperatives. (ii)We are aware that the Alaska Public Utilities Com- mission ("APUC")has taken the position that APUC's approval is required before the Agreement can be- come effective and that the Attorney General of Alaska has rendered an opinion supporting APUC's position.We express'no opinion as to whether Chu- gach or any other party to the Agreement is re- quired to obtain the approval of APUC to the execu- tion or performance of the Agreement by Chugach or any other party,or whether the Agreement will be- come effective or be enforceable in the absence of such approval. (iii)Under Alaska Stat.§42.05.431(b),if APUC at any time after a wholesale power agreement becomes ef- fective finds that rates set in accordance with such agreementare not just and reasonable,APUCmayorderthepartiestonegotiateanamendmentto such agreement and if the parties should fail to agree,to use the dispute resolution procedures Identified Parties to Bradley Lake Power Sales Agreement December 8, Page 6 (iv) 1987 contained in such agreement.We express no opinion as to whether the Agreement is a wholesale power agreement over which APUC has jurisdiction for the purposes of Alaska Stat.§42.05.431(b),and there- fore we express no opinion as to whether rates set in accordance with the Agreement are enforceable to the extent APUC determines such rates are unjust or unreasonable, The Agreement by its terms will not become effec- tive until all Purchasers have obtained all neces- sary approvals of all transmission and services agreements needed to transmit Project power to the Purchasers.The parties to the Agreement have'stated that transmission and services agreements providing for transmission of Project power over facilities belonging to Chugach and the Homer Elec- tric Association,Inc.will be needed.Therefore, the Agreement will not be effective until all nec- essary approvals of such transmission and services agreements have been obtained. This opinion is rendered to you in connection with the Agreement and is solely for your benefit.This opinion may not be relied upon by you for any other purpose,or relied upon by any other person,firm or corporation for any purpose, without our prior written consent.We expressly disclaim any obligation to advise you of any developments in areas covered by this opinion that occur after the date of this opinion. Very truly yours, HELLER,EHRMAN,WHITE &McCAULIFFE py Ws ND no Eric Redman la) ELECTRIC ASSOCIATION,INC. 5601 MINNESOTA DRIVE «P.O.BOX 196300*ANCHORAGE,ALASKA 99519-6300 «PHONE 907-563-7494TELEX:CHUGACH AHG (090)25 265 TELECOPIER: 907-564-0632 December 8,1987 Alaska Power Authority 701 East Tudor Road (99503) P.O.Box 190869 Anchorage,Alaska 99519-0869 Homer Electric Association,Inc. 3977 Lake Street P.O.Box 429 Homer,Alaska 99603 Golden Valley Electric Association,Inc. P.O.Box 1249 Fairbanks,Alaska 99707 Matanuska Electric Association,Inc. P.O.Box 1148 Palmer,Alaska 99645 The Municipality of Anchorage d/b/a Municipal Light and Power 1200 East First Avenue Anchorage,Alaska 99501 The City of Seward d/b/a Seward Electric System P.O.Box 167 Seward,Alaska 99664 Alaska Electric Generation &Transmission Cooperative,Inc.c/o/Homer Electric Association 3977 Lake Street P.O.Box 429 Homer,Alaska 99603 Re:Chugach Electric Association,Inc.-Alaska Power Authority;Bradley Lake Power Sales Aqreement Ladies and Gentlemen: I am General Counsel for Chugach Electric Association,Inc.,an Alaska electric cooperative ("Chugach"). In connection with this opinion,I have examined such records, documents and instruments as in my judgment are necessary or Identified Parties to Bradley Lake Power Sales Agreement December 8,1987 Page 2 appropriate to enable me to render this opinion.I have assumed the authenticity of all records,documents and instruments submitted to me as originals,the genuineness of all signatures, the legal capacity of natural persons and the conformity to the originals of all records,documents and instruments submitted to me as copies.The records,documents and instruments I have examined included the following: (a)The articles of incorporation of Chugach; (b)The bylaws of Chugach; (c)The Agreement for the Sale and Purchase of Electric Power dated as of December 8,1987,among The Alaska Power Authority,Homer Electric Association,Inc., Golden Valley Electric Association,Inc.,Matanuska Electric Association,Inc.,the Municipality of Anchorage d/b/a Municipal Light and Power,the City of Seward d/b/a Seward Electric System,Alaska Electric Generation &Transmission Cooperative,Inc.and Chugach (the "Agreement"); (d)All records of proceedings and actions of the board of directors of Chugach relating to the transactions contemplated by the Agreement; (e)Documents embodying the material terms (other than as to principal amount,term and interest rate)relating to the outstanding indebtedness of Chugach to the United States of America,acting through the Admini- strator of the Rural Electrification Administration, and the Spokane Bank for Cooperatives; (f)Power Sales Contract executed October 13,1979, between Chugach and the U.S.Department of Energy, acting by and through the Alaska Power Authority, relating to the Eklutna electric generating plant and transmission system; (g)Wholesale Power Agreement between Chugach and the City of Seward,as amended in June 1985; (h)Agreement for Sale of Electric Power and Energy executed by representatives of Homer Electric Association,Inc.and Chugach on September 10,1985 and September 25,1985,respectively; Identified Parties to Bradley Lake Power Sales Agreement December 8,1987 Page 3 (i)Agreement for the Sale and Purchase of Electric Power and Energy dated April 25,1987,among Chugach, Matanuska Electric Association,Inc.and Alaska Electric Generation and fTransmission Cooperative, Inc.;and (3)Alaska Intertie Agreement dated December 23,1985, among Chugach,the Alaska Power Authority,the Munici- pality of Anchorage d/b/a Municipal Light and Power, the City of Fairbanks,Alaska,Municipal Utilities System,Golden Valley Electric Association,Inc.,and Alaska Electric Generation and Transmission Cooperative,Inc. This opinion is limited to the laws of the State of Alaska other than Alaska Stat.§§42.05.010 -42.05.721 (Alaska Public Utilities Commission Act),§§44.33.600 -44.33.630 (relating to the Power Development Revolving Loan Fund)and §§44.83.0100 - 44.83.425 (relating to the Alaska Power Authority).I express no opinion with respect to Alaska Stat.§§42.05.010 -42.05.721, 44.33.600 -44.33.630 or §§44.83.0110 -44.83.425. Based upon the foregoing and my examination of such questions of law as I have deemed necessary or appropriate for the purpose of this opinion,and subject to the limitations and qualifications expressed below,it is my opinion that: 1.Chugach has been duly organized and is a validly ex- isting electric cooperative in good standing under the laws of the State of Alaska. 2.Chugach has all requisite corporate power and corpo- rate authority to enter into and perform the Agree- ment. 3.The Agreement has been duly authorized by all neces- Sary corporate action on the part of Chugach and has been duly executed and delivered on behalf of Chugach. 4.The Agreement is a valid and binding obligation of Chugach,enforceable against Chugach in accordance with its terms,subject,as to enforcement,to (i) bankruptcy,insolvency,reorganization,'arrangement, moratorium and other laws of general applicability relating to or affecting creditors'rights and (ii) general principles of equity,whether such enforcement is considered in a proceeding in equity or at law. Identified December 8, Page 4 Parties to Bradley Lake Power Sales Agreement 1987 No governmental consents,approvals,authorizations, registrations,declarations or filings are required for the execution and delivery of the Agreement on behalf of Chugach and performance of the Agreement by Chugach,except to the extent indicated below. Neither the execution and delivery of the Agreement on behalf of Chugach nor the performance of the Agreement by Chugach (i)conflicts with any provision of the Articles of Incorporation or Bylaws of Chugach or (ii) violates any law or published rule or regulation ap- plicable to Chugach. Without limiting the effect of the qualifications and exceptions stated above,this opinion is made subject to the following additional (i) (ii) qualifications and exceptions: Under the terms of various existing financing agreements,Chugach must obtain the consents of the following entities to its execution and performance of the Agreement: (1)the Federal Financing Bank; (2)the United States of America acting through the Administrator of the Rural Electrification Administration;and (3)the Spokane Bank for Cooperatives. The Agreement by its terms will not become effective until all Purchasers have obtained all necessary approvals of all transmission and services agreementsneededtotransmitProjectpowertothePurchasers. The parties to the Agreement have stated that transmission and service agreements providing for transmission of Project power over facilities belong- ing to Chugach and the Homer Electric Association, 'Inc.will be needed.Therefore,the Agreement will not be effective until all necessary approvals of such transmission and services agreements have been obtained. This opinion is rendered to you in connection with the Agreement and is solely for your benefit.This opinion may not be relied upon by you for any other purpose,or relied upon by any other person,firm or corporation for any purpose,without my prior written consent;provided,however,that Heller,Ehrman,White & Identified Parties to Bradley Lake Power Sales Agreement December 8,1987 Page 5 McAuliffe may rely on this opinion in rendering to you its opinion of this date.I expressly disclaim any obligation to advise you of any developments in areas covered by this opinion that occur after the date of this opinion. Sincerely, CHUGACH ELECTRIC ASSOCIATION,INC. yig (lic ofall.Matgie Mac NeilleGeneralCounsel Linpsay,Hart,NEIL &WEIGLERLawYERS ABS Boripino SuiTg 1800 Jzrreeson Place 2-416 Kupan Minami .222 S.W.CoLuMBIA 350 N.TH,SurTe 400Curyropa-xu PoRTLAND,OREGON 97201-6618 Boisz,ipaso 68702 Toxyo 102 JaPan TELEPHONE (503)226-1101 (208)896-8844 (03)2390-2815 TELECOPIER (803)226-0079 TELEX 494-7032 345 CALIFORNIA STREET Scitz 2200 San FRANCISCO,CALIFORNIA 94104 (415)084-5858 1001 FourrH AvENur Plaza December 8 '1987 (Szarigst Bupa.)Suite 3200 SZaTTLE,WASHINGTON 98154 {206)629-4711 2011 Eryx Street,N.W. WasuHinoton,D.C.20036 (202)206-3006 To the Parties on the Attached List of Addressees Re:Power Sales Agreement dated as of December 8,1987 entered into by and among the Alaska Power Authority, the Chugach Electric Association,Inc.,the Homer Electric Association,Inc.,the Golden Valley Electric Association,Inc.,the Matanuska Electric Association, Inc.,the Municipality of Anchorage d/b/a Municipal Light and Power,the City of Seward d/b/a Seward Electric System,and the Alaska Electric Generation & Transmission Cooperative,Inc. Gentlemen: We have acted as counsel to Golden Valley Electric Association,Inc.,an Alaska electric cooperative ("GVEA")in connection with the authorization and execution by GVEA of the Agreement dated as of December 8,1987 entered into by and among the Alaska Power Authority (the "APA"),the Chugach Electric Association,Inc.,the Golden Valley Electric Association,Inc., the Municipality of Anchorage d/b/a Municipal Light and Power, the City of Seward d/b/a Seward Electric System,and the Alaska Electric Generation &Transmission Cooperative,Inc.and the Homer Electric Association,Inc.and the Matanuska Electric Association,Inc.(the "Power Sales Agreement").All capitalized terms not otherwise defined herein shall have the meanings set forth in the Power Sales Agreement. As to questions of fact material to our opinion,we have relied upon representations of GVEA.contained in the Power Sales Agreement,certified proceedings and other certifications of public officials furnished to us and certifications by GVEA, without undertaking to verify the same by independent investigation.In our examination,we have assumed the genuineness of all signatures on original documents,theauthenticityofalldocuments:submitted to us as originals,theconformitywiththeoriginalofalldocumentssubmittedtousas copies,and the due execution and delivery of all documents when due execution and delivery are a prerequisite to the effectiveness thereof.In the course of our representation of GVEA with respect to the Power Sales Agreement,we have examined Originals or copies,certified or otherwise identified to our satisfaction,of the following: Linpsay,Hart,NEIL &WEIGLER Legal Opinion December 8,1987 Page 2 (i)GVEA's articles of incorporation and the adopted and filed amendments thereto; (ii)the bylaws of GVEA,as amended; (iii)a resolution of the Board of Directors of GVEA dated November 5,1987 authorizing the execution and delivery of the Power Sales Agreement; (iv)the Power Sales Agreement; (v)a certificate of legal existence relating to GVEA issued by the Commissioner of Commerce and Economic Development of the State of Alaska on November 20,1987; (vi)an Amending Loan Contract dated as of May 26, 1947,between GVEA and the United States of America acting through the Administrator of the Rural Electrification Administration (the "REA")as modified by amendments dated as of January 24,1951,August 21,1951,June 19,1952,July 2, 1956 and July 14,1958; (vii)a Mortgage dated as of May 27,1947,among GVEA and the REA,as amended and supplemented by Supplemental Mortgages dated as of January 25,1951,August 22,1951,June 21,1952,February 20,1953,September 5,1955,July 3,1956 and July 15,1958;, (viii)an Amending Loan Contract dated as of October 7, 1959,between GVEA and the REA,as modified by amendments dated as of July 11,1962,June 11,1964,July 7,1965, August 8,1968,October 1,1969,October 25,1971,August 21, 1972,July 11,1973,April 15,1976,February 9,1977, May 13,1977,October 2,1978,March 29,1982,September 10, 1982 and September 5,1985; (ix)Loan Agreements dated as of August 21,1972, July 11,1973,April 15,1976,May 13,1977,June 6,1978, October 2,1978,March 29,1982,September 10,1982 and September 5,1985,among GVEA and the National Rural Utilities Cooperative Finance Corporation (the "CFC"); Amending Loan Agreements both dated as of May 23,1983,among GVEA and the CFC;and Intermediate Term Loan Agreement dated as of November 22,1976,among GVEA and the CFC; Linpsay,HarT,NEIL &WEIGLER Legal Opinion December 8,1987 Page 3 (x)a Supplemental Mortgage dated as of October 8, 1959,among GVEA and the REA as amended and supplemented by Supplemental Mortgages dated as of July 12,1962, November 20,1963,June 12,1964,July 8,1965,October 30, 1969 and October 26,1971,and to which the CFC was added as a secured party by Supplemental Mortgage and Security Agreement dated as of December 11,1972,as amended andsupplementedbySupplementalMortgagesandSecurity Agreements dated as of August 27,1973,May 23,1977 and June 26,1978; (xi)various promissory notes made by GVEA in favor of the United States of America,the CFC,and the Federal Financing Bank,the forms of which GVEA officials have represented to us do not deviate in any material respect (other than as to original principal amount,date and interest rate)from those of all other promissory notes from GVEA to the payees identified therein; (xii)Alaska Intertie Agreement dated as of December 23,1985 among the Municipality of Anchorage,d/b/a Municipal Light and Power,the APA,Chugach Electric Association,Inc.,the City of Fairbanks,Alaska d/b/a Fairbanks Municipal Utilities System,GVEA,and AlaskaGenerationandTransmissionCooperative,Inc.; (xiii)a General Certificate of GVEA dated December 8, 1987;and (xiv)such other records,documents and instruments of officers and representatives of GVEA and other persons and such other laws as we have deemed appropriate pursuant to our examination as described in paragraph 3 below,as a basis for the opinions expressed herein. This opinion is limited to the federal laws of the United States and the laws of the State of Alaska. Based upon this examination,we are of the opinion, under existing law and as of the date hereof,and subject to limitations and qualifications set forth below,as follows: l.GVEA is a validly existing electric cooperative in good standing under the laws of the State of Alaska. 2.The Power Sales Agreement has been duly authorized, executed and delivered by GVEA and is a valid and binding Linpsay,HarT,NEIL &WEIGLER Legal Opinion December 8,1987 Page 4 obligation of GVEA enforceable against GVEA in accordance with its terms,assuming the due authorization,execution and delivery of the Power Sales Agreement by the other parties thereto and assuming prior approval of the Power Sales Agreement by the Alaska Public Utilities Commission (the "APUC"),the CFC and the REA. 3.Neither the execution and delivery of the Power Sales Agreement on behalf of GVEA nor the performance of the Power Sales Agreement by GVEA (i)conflicts with any provision of the articles of incorporation or bylaws of GVEA,(ii)violates any law or published rule or regulation applicable to GVEA,or (iii)results in a breach or violation of,or constitutes a default under,any term of any material agreement or instrument to which GVEA is a party or by which GVEA's properties or assets are bound and of which we have knowledge.For purposes of the preceding sentence,our "knowledge"is based solely upon information we have obtained by examining the documents specifically listed above in (i)through (xiii),by relyingwithoutanyindependentinvestigationonrepresentationsmade byGVEA's officers and staff as to the existence or nonexistence of any other agreement or instrument that may conflict with,or be violated by GVEA's execution,delivery or performance of the Power Sales Agreement,and by making inquiries of attorneys inthisfirmwhoareactivelyinvolvedinlegalrepresentationof GVEA. We have assumed for purposes of this opinion that each other party to the Power Sales Agreement has been duly organized, has the general power and authority to execute and perform the Power Sales Agreement and that the Power Sales Agreement has been duly executed and delivered on each other party's behalf,andthatthePowerSalesAgreementisa.valid and binding obligationofsuchpartyenforceableagainstsuchpartyinaccordancewith its terms;and we express no opinion with respect to such matters. It should be understood that the rates of GVEA are and the charges under the Power Sales Agreement may be subject to the continuing jurisdiction of the APUC.GVEA's ability to make payments to APA at any time during the term of the Power Sales Agreement,notwithstanding any prior approval by the APUC,could be adversely affected by a ruling of the APUC preventing GVEA from recovering the payments made by GVEA under the Power Sales Agreement or other of its costs and expenses in its rates and charges.GVEA's obligation to make payments under the Power Sales Agreement,notwithstanding any prior approval by the PUC, Linpsay,Hart,NEIL &WEIGLER Legal Opinion December 8,1987 Page 5 may be subject to an order of the APUC directing renegotiation of the payment obligation upon a finding that the amounts to be paid by GVEA are unjust and unreasonable. It also should be understood that the Power Sales Agreement may be subject to bankruptcy,insolvency, reorganization,moratorium and other similar laws affectingcreditors'rights heretofore and hereafter enacted to the extent constitutionally applicable and that its enforcement may also besubjecttotheexerciseofjudicialdiscretioninappropriate cases. The Power Sales Agreement by its terms will not become effective until all Purchasers have obtained all necessary approvals of all required transmission and/or services agreements needed to transmit Project power to the Purchasers.The parties to the Power Sales Agreement have stated that transmission and/or service agreements providing for transmission of Project power over facililties belonging to Chugach Electric Association,Inc. and the Homer Electric Association,Inc.,are so required. Therefore,the Power Sales Agreement will not be effective until all necessary approvals of such transmission and/or service agreements have been obtained in accordance with the terms of the Power Sales Agreement. This opinion is for the sole benefit of the parties named in the attached list of addressees.Neither this opinion nor any extract from this letter or reference to this letter shall be furnished to,quoted from,or relied upon by any other person,firm or corporation,without our express written permission.We expressly disclaim any obligation to advise you of any developments in areas covered by this opinion that occur after the date of this opinion. Respectfully submitted, LINDSA HART,L 4s LERBy:'alll [Ronald L.Saxtdén DEGkat073/5 Linpsay,Hart,NEIL &WEIGLER LIST OF ADDRESSEES Legal Opinion Dated as of December 8,1987 Alaska Power Authority 701 East Tudor Road (99503) P.O.Box 190869 Anchorage,AK 99519-0869 Chugach Electric Association,Inc. 5601 Minnesota Drive P.O.Box 196300 Anchorage,AK 99519-6300 Golden Valley Electric Association,Inc. P.O.Box 1249 Fairbanks,AK 99707 Municipality of Anchorage d/b/a Municipal Light and Power 1200 East First Avenue Anchorage,AK 99501 City of Seward d/b/a Seward Electric System P.O.Box 167 Seward,AK 99664 Alaska Electric Generation & Transmission Cooperative,Inc. c/o Homer Electric Association,Inc./ 3977 Lake Street P.O.Box 429 Homer,AK 99603 Homer Electric Association,Inc. 3977 Lake Street P.QO.Box 429 Homer,AK 99603 Matanuska Electric Association,Inc. P.O.Box 1148 Palmer,AK 99645 DEGkat073/6 LalLAW OFFICES OF PRESTON,THORGRIMSON,ELLIS &HOLMAN 5400 COLUMBIA SEAFIRST CENTER 701 FIFTH AVENUEWASHINGTON,O.C.ANCHORAGE 1733 NEW YORK AVE.,N.W.,SUITE SOO SEATTLE,WASHINGTON 98104-7011 420 L STREET,SUITE 404 wasningroy Og 20006-4759 (206)623-7580 ANCHORAGE Menoes ee”TELEX 904059 wsH TELECOPY (907)276-1365TELECOPY(202)331-1026 TELEX 4740035 TELECOPY (206)623-7022 SPORANE PORTLAND SEAFIRST FINANCIAL CENTER 3200 U.S.BANCORP TOwER SUITE 14860 it SW.FIFTH AVENUE SPOKANE,NGTON 9920)-PORTLAND,OREGON 97204-3.{s00)e24.2100 ease December 8 U 1987 .(503)228-3200 eesTELECOPY(809)456-0146 TELECOPY ($03)248-9085 Alaska Power Authority 701 East Tudor Road Anchorage,Alaska 99519-0869 Chugach Electric Association,Inc. 5601 Minnesota Drive P.O.Box 196300 Anchorage,Alaska 99519-0300 Golden Valley Electric Association,Inc. 758 Illinois Street Fairbanks,Alaska 99701 The City of Seward a/b/a Seward Electric System 5th &Adams Seward,Alaska 99664 Alaska Electric Generation &Transmission Cooperative,Inc. 3977 Lake Street P.O.Box 169 Homer,Alaska 99603 Homer Electric Association,Inc. P.O.Box 169 . Homer,Alaska 99603 Matanuska Electric Association,Inc. 248 E.Elmwood ' P.O.Box 2929 Palmer,Alaska 99645 Re:Bradley Lake Hydroelectric Project Power Sales Agreement Ladies and Gentlemen: We have acted as counsel for the Municipality of Anchorage, Alaska,@/b/a Municipal Light and Power (the "Municipality”)in connection with that Agreement for the Sale and Purchase of Electric Power (the "”Agreement”)by and among the Alaska Power Authority,Chugach Electric Association,Inc.,Golden Valley Parties to Bradley Lake Hydroelectric Project Power Sales Agreement December 8,1987 Page 2 Electric Association,Inc.,the Municipality,the City of Seward d/b/a Seward Electric System,the Alaska Electric Generation & Transmission Cooperative,Inc.,Homer Electric Association,Inc., and Matanuska Electric Association,Inc.,dated as of December 1, 1987.As used in this opinion,the term "Party”shall mean a party to the Agreement,and the terms "Project”and "Purchaser” shall have the meanings ascribed thereto in the Agreement. In connection with this opinion,we have examined the laws of the State of Alaska,the Home Rule Charter (”Charter”)of the Municipality,the Anchorage Municipal Code,and certain ordin- ances,resolutions and proceedings of the Municipality relating to the Agreement.We have also examined originals or copies of such documents,records and instruments as in our judgment were necessary or appropriate to enable us to render our opinion. Such copies have been identified to our satisfaction as being true forms or copies of the originals thereof,but we have not undertaken to verify the same by independent investigation. These documents,records and instruments include the following: (a)The Agreement; (b)Ordinance No.AO 86-60(S),as amended by AO 86-103(S), authorizing issuance of the Senior Lien Refunding Electric Revenue Bonds,1986 Series A; (c)Ordinance No.AO 83=-58(S),authorizing issuance of the Junior Lien Refunding Electric Revenue Bonds,1983; (ad)Power Sales Contract executed October 13,1979 between the Municipality and the United States Department of Energy,acting by and through the Alaska Power Adminis- tration,relating to the Eklutna electric generatingplantandtransmissionsystem; (e)Alaska Intertie Agreement dated as of December 23,1985 among the Municipality,the Alaska Power Authority, Chugach Electric Association,Inc.,the City of Fair- banks,Alaska d/b/a Fairbanks Municipal Utilities System,Golden Valley Electric Association,Inc.,and Alaska Generation and Transmission Cooperative,Inc. In addition,we have relied on,and assumed the accuracy of, certain representations of fact set forth in the Agreement or certified to us by appropriate officials of the Municipality.We have assumed the authenticity of all signatures on all documents reviewed by us in connection with this opinion.This opinion is limited to the federal laws of the United States and the laws of the State of Alaska. * i. _Parties to Bradley Lake Hydroelectric Project Power Sales Agreement December 8,1987 Page 3 v. For purposes of this opinion,we have assumed that,with respect to all Parties other than the Municipality,the Parties are duly organized,validly existing,and in good standing under the laws of the State of Alaska;that the Agreement has been dulyauthorized,executed and delivered by the respective Parties thereto and constitutes a legal,valid and binding obligation thereof,enforceable against said Parties in accordance with its terms;and we express no opinion with respect to these matters. Based upon our examination,we are of the opinion,as of the date hereof and under existing law,that: 1.The Municipality is duly organized and validly existing as a municipal corporation under the Constitution and laws of the State of Alaska,with full legal right,power and authority to enter into the Agreement and to perform all of its obligations and covenants thereunder; 2.The Agreement has been duly authorized,executed and delivered by the Municipality; 3.The Agreement constitutes a legal,valid and binding agreement and obligation of the Municipality,enforceable against the Municipality in accordance with its terms,except as enforce- ment may be limited by bankruptcy,insolvency,reorganization, moratorium or similar laws limiting creditors'rights generally, by general principles of equity which are within the discretion of the courts,or by applicable laws affecting remedies; 4.Neither the execution and delivery of the Agreement, nor the performance by the Municipality of the terms and condi- tions thereof constitutes a breach of or default under (i)any applicable law or published rule or regulation of the Munici- pality,the State of Alaska,or the United States,or (ii)any material provision of any agreement or instrument of which we have knowledge and to which the Municipality is a party or is otherwise subject or bound.For purposes of the preceding sentence,our knowledge is based solely upon information we have obtained by examining the documents specified above and by assuming the accuracy,without independent investigation,of representations made and certified to by the Municipal Attorney as to the existence or lack thereof of any other decree,order, contract or matter which may be in conflict with the execution, delivery,or performance of the Agreement. Without limiting the qualifications and exceptions stated above,this opinion is expressly made subject to the following additional qualifications and exceptions: Parties to Bradley Lake Hydroelectric Project Power Sales Agreement December 8,1987 Page 4 1.The Agreement by its terms will not become effective unless and until all Purchasers have obtained all necessary approvals from the entities whose approval of the Agreement is required.The Municipality is subject to Order No.3 in Docket No.U-86-96 of the Alaska Public Utilities Commission (the "Commission”),and required thereby to obtain advance approval of the Agreement by the Commission.Therefore,the Agreement will not become effective until Commission approval is obtained. 2.We express no opinion as to whether under AS 42.05.431(b)the rate provisions of the Agreement are enforceable to the extent rates are found by the Commission to be unjust or unreasonable. 3.The Agreement by its terms will not become effective unless and until all Purchasers have obtained all necessary approvals of all required transmission and/or services agreements needed to transmit Project power to the Purchasers.The Munici- pality represents that transmission and/or services agreements providing for transmission of Project power over facilities belonging to the Homer Electric Association and the Chugach Electric Association are so required.The Agreement will not become effective until such transmission and/or services agree- ments are duly authorized,executed,and delivered,and all necessary approvals of such agreements have been obtained. 4.The Municipality's action approving the Agreement is subject to the referendum power.If a referendum petition challenging that action is filed with the Clerk of the Munici- pality prior to February 8,1988,the action will be suspendeduntilsuchtimeastheMunicipalClerkmakesafindingthatthe referendum petition is insufficient or upon certification of a majority vote against repeal of the Municipality's action,asprovidedintheCharter. This opinion is furnished to you at the direction of the Municipality as a condition of,and simultaneously with,the execution and delivery of the Agreement by all Parties thereto. It is solely for your benefit,and is not to be used,circulated, quoted,referred to,delivered to or relied on by any other person or in any other connection without our written consent. Very truly yours, PRESTON,THORGRIMSON, ELLIS &HOLMAN DHR:dlb:22 DAVIO H.THORSNESS JAMES M,POWELL BRIAN J.BRUNOIN MARCUS R.CLAPP KENNETH ®JACOBUS GARY W.GANTZ JERRY E,MELCHER JOE M.HUDDLESTON SIGURO E.MURPHY CARL J.D.BAUMAN FRED B,ARVIOSON DENNIS M.BUMP® MARY K.HUGHES FRANK A,PFIFFNER HUGHES THORSNESS GANTZ POWELL &BRUNDIN ATTORNEYS AT LAW RALPH R.BEISTLINE® GOROON VJ TANS R,CRAIG HESSER ROBERT L.MANLEY JAMES M.GORSKI TIMOTHY R.BYRNES JAMES M,SEEDORF RONALDO E.NOEL® FREDERICK J,OOSEN MICHAEL L,LESSMEIER®® STEVEN 8S.TERVOOREN MATTHEW K.PETERSON JOSEPH R.D.LOESCHER KENNETH D,LOUGEES December 8,1987 EARL M.SUTHERLAND JOHN 6.THORSNESS THOMAS R.LUCAS GREGORY W.LESSMEIER*® OONNA P WALKER WILLIAM M.WALKER®** DAVID S,CARTER MARILYN MAY JOHN G.FRANK** ANN S.BROWN? BRIAN D.BYORKQUIST JAMES N.BARKELEY TIMOTHY R,REOFORD SHELDON E.WINTERS**® Alaska Power Authority 701 East Tudor Road P.O.Box 190869 Anchorage,Alaska 99519-0869 Chugach Electric Association, P.O.Box 199600 Anchorage,Alaska 99519-9600 Golden Valley Electric Association, 758 Illinois Street Fairbanks,Alaska 99701 The Municipality of Anchorage d/b/a Municipal Light and Power 1200 East First Avenue Anchorage,Alaska 99501 1685 Alaska Electric Generation & Transmission Cooperative, 3997 Lake Street Homer, Homer Electric Association,Inc. Alaska 99603 P.O.Box 169 Homer,Alaska 99603 Matanuska Electric Association, P.O.Box 2929 Palmer,Alaska 99645 JOHN J.NOVAK JOHN H.TINDALL DAVID H,KNAPP MICKALE C.CARTER MATTHEW G.REYNOLOS BRYAN M.EMMAL* ROBERT A.SPARKS® SUSAN D.MURTO PAUL H.CRAGAN* JOSEPH S.SLUSSER® JAMES F,KLASEN OF COUNSEL JOHN C.HUGHES RICHARD O.GANTZ Inc. Inc. Inc. ' Inc. RE:Bradley Lake Power Sales Agreement Our File No.50-2095 Ladies and Gentlemen: 509 WEST THIRD AVENUE ANCHORAGE,ALASKA 99501-2273 TELEPHONE (907)274-7522 TELECOPIER:{907}274-7525 TELEX:090-26376 (DENALI} *"ONE SEALASKA PLAZA SuITe 303 JUNEAU,ALASKA 99801-1249 TELEPHONE (907)586-5912 TELECOPIER:(907)463-3020 *°*200 CHENEGA STREET 0.BOX 767 VALDEZ,ALASKA 99688-0767 TELEPHONE (907)835-2988 *590 UNIVERSITY AVENUE SUITE 200 FAIRBANKS,ALASKA 99709-3652 TELEPHONE (907)479-3161 TELECOPIER (907)479-3167 acety roANCHORAGE We are counsel to the City of Seward,Alaska,d/b/a Seward Electric System,and have examined the Agreement for the Sale and Purchase of Electric Power (the "Agreement")dated December 8, Bradley Lake Power Sales Agreement HucGues Toorsness Gantz PowELyt&BRUNDIN December 8,1987 ATTORNEYSATLAW Page 2 1987,between the City of Seward and the above-referenced parties.In connection with this opinion,we have examined originals,or copies identified to our satisfaction as being true copies,of such records,documents,and instruments which in our judgment are necessary or appropriate to enable us to render this opinion.Those documents include the laws of the State of Alaska, the Home Rule Charter of the City of Seward and certain ordinances,resolutions and proceedings of the City of Seward. This opinion is being delivered to you at the direction of the City of Seward as a condition of,and simultaneously with,the execution and delivery of the Agreement by all parties thereto. Based upon our examination,we are of the opinion,as of the date hereof and under existing law,that: 1.Under the Constitution and laws of the State of Alaska, the City of Seward has been duly organized and is validly existing as a municipal corporation. 2.Subject to the qualifications hereinafter stated,the Agreement has been duly authorized by and constitutes a valid and legally binding obligation of the City of Seward, enforceable against the City in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency,reorganization,moratorium,applicable equitable Principles or other laws affecting the enforcement of creditors'rights generally. 3.All necessary approvals and consents for the valid authorization by the City of the Agreement have been obtained except as stated below. 4.Neither the consumation of any of the transactions contemplated in the Agreement by the City of Seward nor fulfillment of the terms of the Agreement by the City will conflict with,result in a breach of,or constitute a default under any legislation or regulations affecting the City or the terms of any resolution or other agreement or instrument known to us and to which the City is a party or bound,or any order or regulations applicable to the City of any court, regulatory body,administrative agency,governmental body or arbitrator having jurisdiction over the City. This opinion is qualified by the following: 1.We understand that certain of the parties are subject to the jurisdiction of the Alaska Public Utilities Commission (the "Commission")and that the Agreement may not become effective unless and until all required approvals by that Bradley Lake Power Sales Agreement HucuHes THorsness Gantz PowE..&BRUNDIN December 8,1987 ATTORNEYSATLAW Page 3 Commission have been obtained or the legal requirement of approval has been removed.Even if approval is obtained,it appears the rates set forth in the Agreement may be subject to review by the Commission in accordance with A.S.42.05.431(b). 2.The Agreement by its terms will not become effective unless and until all transmission and/or services agreements needed to transmit project power to the Purchasers have been Guly authorized,executed and approved. 3.The City of Seward's action approving the Agreement is subject to the referendum power.If a referendum petition challenging that action is filed with the Clerk of the City of Seward within the time prescribed by law the action will be suspended until such time as the referendum petition is determined to be insufficient or upon certification of a Majority vote against repeal of the City's action,as provided in the Charter of the City of Seward. Very truly yours, HUGHES,THORSNESS,GANTZ, POWELL &BRUNDIN ay:Zt Warn Fred B.Arvidson City Attorney City of Seward FBA:ajw 3905S LAW OFFICES OF KEMPPEL,HUFFMAN AND GINDER A PROFESSIONAL CORPORATION ROGER R.KEMPPEL 255 E.FIREWEED LANE,SUITE 200 RICHARD R.HUFFMAN PETER C.GINDER ANCHORAGE,ALASKA 99503 DARREL J.GARDNER DONALD C.ELLIS MARY ELLEN FLAHERTY TELECOPIER (907)276-2493 BOBBY DEAN SMITH December 8,1987 VICTOR C.KRUMM (907)277-1604 Alaska Power Authority 701 E.Tudor Road Anchorage,Alaska 99503 Chugach Electric Association,Inc. 5601 Minnesota Drive P.O.Box 196300 Anchorage,Alaska 99519-6300 Homer Electric Association,Inc. 3977 Lake Street Homer,Alaska 99603 Golden Valley Electric Association,Inc. P.O.Box 1249 Fairbanks,Alaska 99707 Matanuska Electric Association,Inc. P.O.Box 2929 Palmer,Alaska 99645 The Municipality of Anchorage d/b/a Municipal Light &Power 1200 E.First Avenue Anchorage,Alaska 99501 The City of Seward d/b/a Seward Electric System Fifth &Adams Seward,Alaska 99664 Alaska Electric Generation & Transmission Cooperative,Inc. P.O.Box 169 Homer,Alaska 99603 All Parties To The Bradley Lake Power Sales Agreement December 8,1987 Page 2 Re:Bradley Lake Power Sales Agreement Ladies and Gentlemens: We have acted as counsel for Alaska Electric Generation &Transmission Cooperative,Inc.(hereinafter "AEG&T") in conjunction with that Agreement for the Sale and Purchase of Electric Power dated as of December 1,1987,among the Alaska Power Authority;Chugach Electric Association,Inc.;Golden Valley Electric Association,Inc.;the Municipality of Anchorage d/b/a Municipal Light &Power;the City of Seward d/b/a Seward Electric System;Homer Electric Association,Inc.;Matanuska Electric Association,Inc.;and AEG&T,hereinafter "Agreement." As used herein,the terms "Project"and "Agreement"shall have the respective meanings ascribed thereto in the Agreement. This opinion is being delivered to you at the direction of AEG&T as a condition of,and simultaneous with,the execution and delivery of the Agreement by all parties thereto.For pur- poses of this opinion,we have assumed that,with respect to all parties other than AEG&T,the parties are duly organized,validly existing,and in good standing under the laws of the state of Alaska;that the Agreement has been duly authorized,executed and delivered by the respective parties thereto and constitutes a legal,valid and binding obligation thereof,enforceable against said parties in accordance with its terms,and we express no opinion with respect to these matters. In connection with this opinion,we have examined orig- inals,or copies identified to our satisfaction as being true copies,of such records,documents and instruments which in our judgment are necessary or appropriate to enable us to render this opinion.These records,documents and instruments include the following: (a)the articles of incorporation of AEG&T,as amended to date; (b)the bylaws of AEG&T,as amended to date; (c)all records of proceedings and actions of the board of directors of AEG&T relating to the transactions contemplated by the Agreement; All Parties To The Bradley Lake Power Sales Agreement December 8, Page 3 (d) (e) (f) (g) (h) (i) 1987 the Agreement; the Wholesale Power Contract between AEGS&T and Matanuska Electric Association,Inc.,dated April 8,1986; the Wholesale Power Contract between AEG&T and Homer Electric Association,Inc.,dated April 8, 1986; the Agreement for the Sale and Purchase of Electric Power and Energy (tripartite power sales agreement) by and among Chugach Electric Association,Inc.; Matanuska Electric Association,Inc.:;and AEG&T dated April 25,1987; the Agreement for the Sale of Electric Power and Energy dated September 1985 by and between Chugach Electric Association,Inc.;Homer Electric Association,Inc.;and AEG&T; a Mortgage and Security Agreement dated July 24, 1985,among AEG&T and the United States of America acting through the Administrator of the Rural Electrification Administration; We have relied upon certificates of officers of AEG&T with respect to certain factual matters material to this opinion. In addition,we have relied upon such certificates and assurances from public officials as we have deemed necessary or appropriate to enable us to render this opinion.We have assumed the authen- ticity of all signatures on all documents reviewed by us in con- nection with this opinion.' This opinion is limited to the federal laws of the United States and to the laws of the State of Alaska. All Parties To The Bradley Lake Power Sales Agreement December 8,1987 Page 4 Based upon the foregoing and our examination of such questions of law as we have deemed necessary or appropriate for the purpose of this opinion,and subject to the limitations and qualifications set forth below,it is our opinion,as of the date hereof,that: 1.AEG&T is a duly organized and existing corporation in good standing under the laws of the state of Alaska;its bylaws have been duly adopted,and its articles of incorporation and the bylaws that are now in effect have been duly adopted and are now in effect; 2.AEG&T has all requisite corporate power and authority to enter into and perform the Agreement; 3.The Agreement has been duly authorized by all necessary corporate action on behalf of AEG&T and has been duly executed and delivered on behalf of AEG&T; 4.The Agreement is a valid and binding obligation of AEG&T,enforceable against AEG&T in accordance with its terms, subject,as to enforceability,to (i)bankruptcy,insolvency, reorganization,arrangement,moratorium and other laws of general applicability relating to or affecting creditors'rights and (ii)general principles of equity,whether such enforceability is considered in a proceeding in equity or at law; 5.No governmental consents,approvals,authoriza- tions,registrations,declarations or filings are required for the execution and delivery of the Agreement on behalf of AEG&T, and performance of the Agreement by AEG&T,except such as have been obtained or made or noted herein; 6.Neither the execution and delivery of the Agreement on behalf of AEG&T nor the performance of the Agreement by AEG&T (i)conflicts with any provision of the articles of incorporation or bylaws of AEG&T,(ii)violates any law or published rule or regulation applicable to AEG&T,or (iii)results in a breach or violation of,or constitutes a default under,any term of any material agreement or instrument to which AEG&T is a party or by which AEG&T's properties or assets are bound and of which we have knowledge.For purposes of the preceding sentence,our "knowledge"is based solely upon information we have obtained by examining the documents specifically listed above,by relying without any independent investigation on representations made by All Parties To The Bradley Lake Power Sales Agreement December 8,1987 Page 5 AEG&T management and staff personnel as to the existence or non- existence of any other agreement or instrument that may conflict with,or be violated by,AEG&T's execution,delivery or perform- ance of the Agreement,and by the actual knowledge of attorneys in this firm who are presently involved in substantive legal representation of AEG&T. Without limiting the effect of the qualifications and exceptions stated above,this opinion is made subject to the following additional qualifications and exceptions: (a)Under the terms of various existing financing arrangements,AEG&T must obtain the consents of the United States of America,acting through the Administrator of the Rural Electrification Administration,for the execution and performance of the Agreement. (b)The Agreement by its terms will not become effec- tive unless and until all parties have obtained all necessary approvals from all entities whose approval of the Agreement is required. (c)We are aware that the Alaska Public Utilities Commission ("APUC")has taken the position that the APUC's approval is required before the Agreement can become effective and that the Attorney General of Alaska has rendered an opinion supporting the APUC's position.We express no opinion as to whether AEG&T or any of the parties to the Agreement are required to obtain the approval of the APUC to the execution or perform- ance of the Agreement by AEG&T or any other party or whether the Agreement will become effective or be enforceable in the absence of such approval. (d)Under AS 42.05.431(b),if the APUC at any timeafterawholesalepoweragreementbecomeseffectivefindsthat rates set in accordance with such agreement are not just and reasonable,it may order the parties to negotiate an amendment to such agreement and,if the parties should fail to agree,to use the dispute resolution procedures contained in such agree- ment.We express no opinion as to whether the Agreement is a wholesale power agreement over which the APUC has jurisdiction for the purposes of AS 42.05.431(b),and therefore we express no opinion as to whether the rate provisions contained in the Agreement are enforceable to the extent rates may be found to be unjust or unreasonable. All Parties To The Bradley Lake Power Sales Agreement December 8,1987 Page 6 (e)The Agreement by its terms will not become effec- tive until all purchasers have obtained all necessary approval of all required transmission and/or service agreements needed to transmit Project power to the purchasers.The parties to the Agreement have stated that transmission and/or service agreements providing for transmission of Project power over facilities belonging to Chugach Electric Association,Inc.and Homer Electric Association,Inc.are so required.Therefore,the Agreement will not be effective until all necessary approvals of such transmission and/or service agreements have been obtained. This opinion is rendered to you in connection with the Agreement and is solely for your benefit.This opinion may not be relied upon by you for any other purpose,or relied upon by any other person,firm or corporation for any purpose,without our prior written consent.We expressly disclaim any obligation to advise you of any developments in areas covered by this opin- ion that occur after the date of this opinion. Sincerely, KEMPPEL,HUFFMAN AND GINDER,PyC. {on -{>Roger R.Kemppel RRK:lka MEMBERS OF THE FIRMS Edgar Paul Boyko,J...LL.M.Paui L.Davis,J.D...LLM.Filiott T.Dennis,J.D. °C.R.Baldwin,J.D. ASSOCIATES Thomas A.Flippen.H,J.D. Ronald D.Flansburg,J.D. ACCOUNTING DEPARTMENT LAW OFFICES OF BOYKO,DAVIS &DENNIS,PC and C.R.BALDWIN,PC ANCHORAGE OFFICE 733 West Fourth Avenue,Suite 4(mt Anchorage,Alaska 99501-2185 Area 907/272-5464 *KENAI OFFICE P.O.Box 4210 Kenai,Alaska 99611 Ares 907/283-7167 AFFILIATE OFFICE Miller.Boyko &Belt Diane J.Heard _1200 E. Anchorage,Alaska 99501-1685 AN ASSOCIATION OF PROFESSIONAL CORPORATIONS December 8,1987 Alaska Power Authority 701 E.Tudor Road P.O.Box 190869 Anchorage,Alaska 99519-0869 Chugach Electric Association,Inc. 5601 Minnesota Drive P.O.Box 196300 Anchorage,Alaska 99519-6300 Golden Valley Electric Association,758 Illinois Street Fairbanks,Alaska 99701 Inc. The Municipality of Anchorage d/b/a Municipal Light and Power ist Avenue :The City of Seward :Matanuska Electric Association, "Alaska Electric Generation &Transmission Cooperative, Homer, d/b/a Seward Electric System5th&Adams ;Seward,Alaska 99664 Inc. 3977 Lake Street'ae Alaska 99603 Inc. 248 E.™ Palmer, Elmwood - Alaska 99645 Homer Electric Association,Inc.-Alaska Power Authority;Bradley Lake Power Sales Agreement Res: oe Gentlemen: I have acted as counsel to Homer Electric Association, Inc.,an Alaska electric cooperative ("HEA"),in connection with the authorization and execution of the Agreement for the Sale and Purchase of Electric Power dated December 8, 1987,among the Alaska Power Authority,Chugach Electric Association,Inc.,Golden Valley Electric Association,Inc., 'the Municipality of Anchorage d/b/a Municipal Light and 110 Juniper Street San Diego.Catifornia 92101 Bradley Lake Power Group December 8,1987 Page 2 Power,the City of Seward d/b/a Seward Electric System, Alaska Electric Generation &Transmission Cooperative,Inc., Matanuska Electric Association,Inc.,and HEA (the "Agree- ment").As used in this opinion,the terms "Purchaser,"and "Project,"have the meanings ascribed to them in the Agree- ment. This opinion is being delivered to you at the direction of HEA as a condition of,and simultaneously with,the execution and delivery of the Agreement by all parties thereto.For purposes of this opinion,I have assumed that, with respect to all parties other than HEA,the parties are duly organized,validly existing,and in good standing under the laws of the state of Alaska;that the Agreement has been duly authorized,executed and delivered by the respective parties thereto and constitutes a legal,valid and binding obligation thereof,enforceable against said parties in accordance with its terms;and I express no opinion with respect to these matters. In connection with this opinion,I have examined orig- inals,or copies identified to my satisfaction as being true copies,of such records,documents and instruments which in my judgment are necessary or appropriate to enable me to render this opinion.These records,documents and instru- ments include the following: (1)The articles of incorporation of HEA,as amended to date; Pr (2)The bylaws of HEA,as amended to date; (3)All records of proceedings and actions of the board of directors of HEA relating to the transactions con- templated by this Agreement;| (4)The Agreement; (5)A certificate of compliance relating to HEA issued by the Alaska Commissioner of Commerce and Economic Development on December 1,1987; (6)REA and CFC mortgages and loan agreements; Bradley Lake Power Group December 8,1987 Page 3 I have relied upon certificates of officers of HEA with respect to certain factual matters material to this opinion. In addition,I have relied upon such certificates and as- surances from public officials as I have deemed necessary or appropriate to enable me to render this opinion. This opinion is limited to the federal laws of the United States and the laws of the State of Alaska. Based upon the foregoing and my examination of such questions of law as I have deemed necessary or appropriate for the purpose of this opinion,and subject to the limita- tions and qualifications set forth below,it is my opinion that: (1)HEA is a validly existing electric coopera- tive in good standing under the laws of the State of Alaska. (2)HEA has all requisite corporate power and authority to enter into and perform the Agreement. (3)The Agreement has been duly authorized by all necessary corporate action on the part of HEA and has been duly executed and delivered on behalf of HEA. (4)The Agreement is a valid and binding obliga- tion of HEA,enforceable against HEA in accordance with its terms,subject,as to enforceability,to (i)bankruptcy, insolvency,reorganization,arrangement,moratorium and other laws of general applicability relating to or affecting creditors'rights and (ii)general principles of equity,whether such enforceability is considered in a proceeding inequityoratlaw. (5)No governmental consents,approvals,author- izations,registrations,declarations or filings are re- quired for the execution and delivery of the Agreement on behalf of HEA and performance of the Agreement by HEA, except such as have been obtained or mde. (6)Neither the execution and delivery of the Agreement on behalf of HEA nor the performance of the Agree- Bradley Lake Power Group December 8,1987 Page 4 ment by HEA (i)conflicts with any provision of the articles of incorporation or bylaws of HEA,(ii)violates any law or published rule or regulation applicable to HEA or (iii) results in a breach or violation of,or constitutes a de- fault under,any term of any material agreement or instru- ment to which HEA is a party or by which HEA's properties or assets are bound and of which I have knowledge. Without limiting the effect of the qualifications and exceptions stated above,this opinion is made subject to the following additional qualifications and exceptions; (1)Under the terms of various existing financing arrangements,HEA must obtain the consents of the United States of America acting through the Administrator of the Rural Electrification Administration (REA)and the National Rural Utilities Cooperative Finance Corporation (CFC)for the execution and performance of the Agreement. (2)I am aware that the Alaska Public Utilities Com- mission ("APUC")has taken the position that APUC's approval is required before the Agreement can become effective,and that the Attorney General of Alaska has rendered an opinion supporting APUC's position.I express no opinion as to whether HEA or any other party to the Agreement is required to obtain the approval of APUC to the execution or perfor- mance of the Agreement by HEA or any other party,or whether the Agreement will become effective or be enforceable in the absence of such approval. (3)Under AS 42.05.431(b),if APUC at any time after a wholesale power agreement becomes effective finds that rates set in accordance with such agreement are not just and reasonable,it may order the parties to negotiate an amend- ment to such agreement and if the parties should fail to agree,to use the dispute resolution procedures contained in such agreement.I express no opinion as to whether the Agreement is a wholesale power agreement over which APUC has jurisdiction for the purposes of AS 42.05.431(b),and there- fore I express no opinion as to whether the rate provisions contained in the Agreement are enforceable to the extent rates may be found to be unjust or unreasonable, Bradley Lake Power Group December 8,1987 : Page 5 (4)The Agreement by its terms will not become effec- tive until all Purchasers have obtained all necessary ap- provals of all required transmission and/or services agree- ments needed to transmit Project power to the Purchasers. The parties to the Agreement have stated that transmission and/or service agreements providing for transmission of Project power over facilities belonging to HEA and Chugach Electric Association,Inc.,are so required.Therefore,the Agreement will not be effective until all necessary ap- - provals of such transmission and/or service agreements have been obtained. This opinion is rendered to you in connection with the Agreement and is solely for your benefit.This opinion may not be relied upon by you for any other purpose,or relied upon by any other person,firm or corporation for any pur- pose,without my prior written consent.I expressly dis- claim any obligation to advise you of any developments in areas covered by this opinion that occur after the date of this opinion. HOGE AND LEKISCH ANOREW E.HOGE A PROFESSIONAL CORPORATION PETER A,LEKISCH DAVIO S.JOHNSON ATTORNEYS AT LAW JOHN W.COLVER «DAVID W.RIDENOUR437e”STREET,SUITE SOO +ANCHORAGE,ALASKA 99501-2366 (907)276-1726 December 8,1987 Alaska Power Authority 701 East Tudor Road P.O.Box 190869 Anchorage,AK 99519-0869 Chugach Electric Association,Inc. P.0.Box 199600 Anchorage,AK 99519-9600 Golden Valley Electric Association,Inc. 758 Illinois Street Fairbanks,AK 99701 The Municipality of Anchorage a/b/a Municipal Light and Power 1200 East 1st Avenue Anchorage,AK 99501-1685 The City of Seward G/b/a Seward Electric System 5th &Adams Seward,AK 99664 Alaska Electric Generation &Transmission Cooperative,Inc. 3997 Lake Street Homer,AK 99603 Homer Electric Association,Inc. P.O.Box 169 Homer,AK 99603 Matanuska Electric Association,Inc. P.O.Box 2929 : Palmer,AK 99645 Re:Matanuska Electric Association,Inc.-Alaska Power Authority;Bradley Lake Power Sales Contract Ladies and Gentlemen: Bradley Lake Power Group Page 2 We have acted as counsel to Matanuska Electric Association,Inc.,an Alaska electric cooperative (”"MEA”),in connection with that Agreement for the Sale and Purchase of Electric Power dated December 8,1987,among The Alaska Power Authority ("APA”),Chugach Electric Association,Inc.,Golden Valley Electric Association,Inc.,the Municipality of Anchorage d/b/a Municipal Light and Power,the City of Seward d/b/a Seward Electric System,Alaska Electric Generation &Transmission Cooperative,Inc.,Homer Electric Association,Inc.and MEA (the "Agreement”).As used in this opinion,the term ”"Project”has the meaning ascribed to it in the Agreement. This opinion is being delivered to you at the direction of MEA as a condition of,and simultaneously with,the execution and delivery of the Agreement by all parties thereto.For purposes of this opinion,we have assumed that,with respect to all parties other than MEA,the parties are duly organized, validly existing,and in good standing under the laws of the State of Alaska;that the Agreement has been duly authorized, executed and delivered by the respective parties thereto and constitutes a legal,valid and binding obligation thereof, enforceable against said parties in accordance with its terms; and we express no opinion with respect to these matters. In connection with this opinion,we have examined originals,or copies identified to our satisfaction as being truecopies,or such records,documents and instruments which in our judgment are necessary or appropriate to enable us to render this opinion.These records,documents and instruments included the following: 1.The articles of incorporation of MEA,as amended to date; 2.The bylawsof MEA,as amended to date; 3.All records of proceedings and action of the board of directors of MEA relating to the transactions contemplated by this Agreement; 4.The Agreement; 5.Mortgages and loan agreements with the United States of America acting through the Administrator of the Rural Electrification Administration and the National Rural Utilities Cooperative Finance Corporation; 6.A certificate of compliance relating to MEAissuedbytheAlaskaCommissionerofCommerceandEconomic Development on November 10,1987. Bradley Lake Power Group Page 3 We have relied upon certificates of officers of MEA with respect to certain factual matters material to this opinion. In addition,we have relied upon such certificates and assurances from public officials as we have deemed necessary or appropriate to enable us to render this opinion.We have assumed the authenticity of all signatures on all documents reviewed by us in connection with this opinion. This opinion is limited to the federal laws of the United States and the laws of the State of Alaska. Based upon the foregoing and our examination of such questions of law as we have deemed necessary or appropriate for the purpose of this opinion,and subject to the limitations and qualifications set forth below,it is our opinion that: 1.MEA is a validly existing electric cooperative in good standing under the laws of the State of Alaska. 2.MEA has all requisite corporate power and authority to enter into and perform the Agreement. 3.The Agreement has been duly authorized by all necessary corporate action on the part of MEA and has been duly executed and delivered on behalf of MEA. 4.The Agreement is a valid and binding obligation of MEA,enforceable against MEA in accordance with its terms,subject,as to enforceability,to (i)bankruptcy,insolvency,reorganization,arrangement,moratorium and other laws of general applicability relating to or affecting creditors' rights and (ii)general principles of equity,whether such enforceability is considered in a proceeding in equity or at law. 5.No government consents,approvals, authorizations,registrations,declarations or filings are required for the execution and delivery of the Agreement on behalf of MEA and performance of the Agreement by MEA,except such as have been obtained or made. 6.Neither the execution and delivery of theAgreementonbehalfofMEAnortheperformanceoftheAgreement by MEA (i)conflicts with any provision of the articles of incorporation or bylaws of MEA,(ii)violates any law or published rule or regulation applicable to MEA or (iii)results in a breach or violation of,or constitutes a default under,any term of any material agreement or instrument to which MEA is a party or by which MEA's properties or assets are bound and of Bradley Lake Power Group Page 4 which we have knowledge.For purposes of the preceding sentence, our "knowledge”is based solely upon information we have obtained by examining the documents specifically listed above,by relying without any independent investigation on representations made by MEA management and staff personnel as to the existence or nonexistence of any other agreement or instrument that may conflict with,or be violated by MEA's execution,delivery or performance of the Agreement,and by the actual knowledge of attorneys in this firm who are presently involved in substantive legal representation of MEA. Without limiting the effect of the qualifications and exceptions stated above,this opinion is made subject to the following additional qualifications and exceptions: 1.Under the terms of various existing financing arrangements,MEA must obtain the consents of the United States of America acting through the Administrator of the Rural Electrification Administration and the National Rural Utilities Cooperative Finance Corporation for the execution and performance of the Agreement. 2.The Agreement by its terms will not become effective unless and until all parties have obtained all necessary approvals from the entities whose approval of the Agreement is required.We are aware that the Alaska Public Utilities Commission (”APUC”)has taken the position that the APUC's approval is required before the Agreement can become effective,and that the Attorney General of Alaska has rendered an opinion supporting the APUC's position.MEA is involved in various dockets before the APUC.MEA is subject to the jurisdiction of the APUC.The Agreement is subject to approval by the APUC. 3.The rates of MEA are and the charges under the Agreement may be subject to the continuing jurisdiction of the APUC.MEA's ability to make payments to the APA at any time during the term of the Agreement,notwithstanding any prior approval by the APUC,could be adversely affected by a ruling of the APUC preventing MEA from recovering the payments made by MEA under the Agreement or other of its costs and expenses in its rates and charges.MEA's obligation to make payments under the Agreement,notwithstanding any prior approval by the APUC,may be subject to an order of the APUC directing renegotiation of the payment obligation upon a finding that the amounts to be paid byMEAareunjustandunreasonable. 4.The Agreement by its terms will not become effective until all parties have obtained all necessary approvals of all required transmission and/or services agreements needed to Bradley Lake Power Group Page 5 transmit Project power to the parties under the Agreement.The parties to the Agreement have represented that transmission and/or service agreements providing for transmission of Project power over facilities belonging to Chugach Electric Association, Inc.and the Homer Electric Association,Inc.,are so required. Therefore,the Agreement will not be effective until such transmission and/or services agreements have been duly authorized and executed and all necessary approvals of such agreements have been obtained. This opinion is rendered to you in connection with the Agreement and is solely for your benefit.This opinion may not be relied upon by you for any other purpose,or relied upon by any other person,firm or corporation for any purpose,without our prior written consent.We expressly disclaim any obligation to advise you of any developments in areas covered by this opinion that occur after the date of this opinion. Very truly yours, HOGE AND LEKISCH Andrew E.Hoge AEH/ms 3954-24/PSOPLTR.117/ms 8096 17