model consent to assignment for project finance ... consent to assignment for project finance...

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NEWYORK 8429204 (2K)

Model Consent to Assignment for Project Finance Transactions

(with Commentary)

Project Finance and Development Committee, ABA Section of Business Law*

INTRODUCTION

The model Consent to Assignment and accompanying commentary have been prepared

by the Project Finance and Development Committee of the American Bar Association’s Section

of Business Law as a reference available for use by practitioners when negotiating and

documenting the terms of a project finance transaction requiring such an agreement.

* The members of the Project Finance and Development Committee of the American Bar

Association’s Section of Business Law wish to thank the members of its Model Subcommittee,

particularly, Arthur A. Cohen (chair), Sarah Biser, Richard H. Brody, Sylvia Fung Chin, Bruce

Fowler, Micaela Garcia-Ribeyro, Herbert A. Glaser, Maryam Khosharay, Alison Manzer, Erlyne

Nazaire, Joshua B. Nickerson, Koro Nuri, Lewis Smith, and Stephen T. Whelan for their input

and dedication as the principal contributors to this model document over the past three years.

This model Consent to Assignment has not been approved by the governing body of the

American Bar Association or its Section of Business Law, and accordingly the views expressed

herein are solely those of the Project Finance and Development Committee. This model Consent

to Assignment reflects a consensus of the Project Finance and Development Committee and does

not necessarily reflect the views of individual members or their firms, organizations, or

associations on any particular point.

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The commentary is intended to provide an understanding of the constituent elements of

the model Consent to Assignment, how those elements work together as a whole, and, where

appropriate, why they are used. This form is normative and is intended only as a point of

departure for the drafter. It is expected that practitioners will revise the form to address the

specific circumstances of each transaction (including the degree of experience and relative

bargaining power of the contracting parties) and of the underlying contract to which the Consent

to Assignment relates (including provisions of the contract that are identified during the due

diligence process to be of concern to the lenders).

When securing financing for a project, a Consent to Assignment would typically be used

to facilitate the rights of lenders that have taken a security interest in all of the project assets as

collateral for the financing. This collateral typically includes the physical assets of the project

and all material contracts as well (for example, on a power project these may include power

purchase agreements, turbine supply agreements, construction agreements, land agreements,

etc.).

As secured parties, the lenders (directly or through an agent, nominee, or receiver) will

have the right, upon the occurrence of an uncured default of the borrower, to realize on their

security interest and take possession of the project. Lenders need the right to take possession of

the project to exercise their remedies properly, which in most cases include the right to sell the

secured assets, as well as the right to take any steps necessary to complete the project where

applicable.

In order to maximize the value of the project for purposes of any eventual sale to a third-

party purchaser, the lenders need to ensure that upon taking possession of the project and

exercising their rights, the project is “intact” to the maximum extent possible. This means

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preserving not only the physical assets comprising the project, but all material contracts as well.

For this reason, the lenders’ security interest must be as comprehensive as possible.

Lenders typically require each counterparty to a material project contract to enter into a

Consent to Assignment (sometimes referred to as an “Acknowledgement and Consent” or a

“Lenders’ Direct Agreement”). Such an agreement typically contains the explicit consent of the

counterparty to the collateral assignment of the contract described therein and also provides the

lenders with additional rights and remedies, thus enhancing the comprehensiveness of their

security in the project through direct privity of contract with such counterparty. A Consent to

Assignment also typically requires the counterparty to grant certain rights to the lenders,

including the right to receive notices of any contract defaults, the right to cure any defaults

(without being required to assume the obligations of the borrower under the contract), the right to

extended cure periods for the lenders after expiry of the borrower’s rights to cure, and the right

of the lenders (either directly or through an agent, nominee, or receiver) to “step-in” and assume

the rights and benefits of the borrower under the underlying contract. Other matters often

covered under a Consent to Assignment include consent to the exercise and enforcement of

rights and remedies by the lenders under their security agreement, rights of the lenders to assign

the contract upon realization and enforcement of their security interest, limitations on amending,

modifying or terminating the contract without the consent of the lenders, rights of the lenders to

require the counterparty to enter into a replacement contract on the same terms and conditions if

the contract is terminated through an uncured default or by operation of law, and other matters

designed to preserve the value of the contract.

In transactions where the borrower has granted a counterparty (such as a power off-taker)

a security interest or lien in project assets or step-in rights, the Consent to Assignment (or

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concurrent documentation) would typically provide for the subordination of the counterparty’s

security interest or lien and, if applicable, subordination of the counterparty’s step-in rights to

those of the lenders. The documentation would also commonly include standstill provisions to

preclude the counterparty from exercising any of its remedies during the lenders’ cure period.

It should be noted that (i) the taking of security over a material contract and (ii) the

exercise of step-in rights are standard provisions in most projects and should not pose

irreconcilable issues for commercial counterparties. With respect to governmental or quasi-

governmental entities, specific procurement or other laws may be applicable, such as public

tender requirements, which could complicate the lenders’ ability to exercise their step-in rights

and require governmental approvals or waivers prior to the exercise of such step-in rights.

Lenders and counterparties should be attuned to the fact that if the lenders exercise their step-in

rights, they may be required in certain situations to pay for debts outstanding under the assigned

agreement. Lenders in possession will be motivated to preserve the project, to operate it in

accordance with good industry practices, and to maximize its value for potential sale to a third-

party purchaser. The Consent to Assignment is entered into for the benefit of the lenders so as to

enable the project financing to take place; it should not be viewed as a form of credit

enhancement for the benefit of the counterparty.

The Project Finance and Development Committee hopes that the model Consent to

Assignment will serve to expedite and increase efficiency when drafting and negotiating such

agreements. The model Consent to Assignment is intended to serve as a common reference tool

and a starting point for drafting such agreements. The goal has been to provide the model

Consent to Assignment as a reasonable first draft to be provided by lenders to a counterparty,

since Consents to Assignment are typically drafted initially by the lenders. It is recognized that

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many of the points included in the model will be negotiated among the parties, and the footnotes

discuss many of the issues that may arise in such discussions. There will inevitably be a wide

range of outcomes to these negotiations, and this model is not intended to limit or restrict that

process.

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MODEL CONSENT TO ASSIGNMENT

(with Commentary)

This CONSENT TO ASSIGNMENT (this “Agreement”), dated as of [_____], by and

among [____________], a [____________] organized and existing under the laws of

[___________] (the “Borrower”), [__________] organized and existing under the laws of

[___________] (the “Contracting Party”), and [__________], a banking corporation organized

and existing under the laws of [__________], as agent for the Lenders (together with its

successors in such capacity, the “Collateral Agent”).1

RECITALS

WHEREAS, the Borrower will construct, operate, maintain, and own a [_______] facility

and ancillary equipment located in [________] (the “Project”);

WHEREAS, the Borrower and the Contracting Party have entered into that certain [__

__] Agreement, dated as of [__ __] ([as amended by an Amending Agreement dated as of the

1 It is not uncommon for material project contracts to be guaranteed by the parent company of

the counterparty (for example, the obligations of a local subsidiary may be guaranteed by its

international parent, if the local subsidiary is not viewed as having sufficient financial resources

to satisfy claims relating to the contract). In that case, a Consent to Assignment is typically also

obtained from the parent company, or both the parent company and its subsidiary are made party

to the same Consent to Assignment, so that the Lender has the benefit of the parent guarantee.

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date hereof]2 (the “Assigned Agreement”), pursuant to which the Contracting Party agrees to [set

out basis of agreement];

WHEREAS, the Borrower, the Collateral Agent, and the financial institutions that are or

from time to time may become a party thereto (the “Lenders”), have entered into that certain

Loan Agreement, dated as of [_____] (the “Loan Agreement”), and the related documents set

out in Schedule 1 (together with the Loan Agreement, the “Loan Documents”) pursuant to

which the Lenders have agreed to extend credit in an aggregate amount of [US$]___________

for the purpose of financing the Project (the “Loans”);

WHEREAS, as security for the Loans and all other obligations under the Loan

Documents, the Borrower has assigned all of its right, title, and interest in, to, and under, and

granted a security interest in, the Assigned Agreement (the “Security Interest”) to the Collateral

Agent pursuant to one or more security documents (collectively, the “Security Agreement”); and

2 Sometimes, the Lender will identify omissions or errors in a material project contract during its

legal diligence review and will require that those errors or omissions be rectified in an amending

agreement. That amending agreement (and any previous amendments to the contract) should also

be subject to the Consent to Assignment. Some practitioners include the amendments in the

Consent to Assignment itself. If amendments are included, care should be taken to ensure that

the amendments survive termination of the Consent to Assignment, since a third-party purchaser

would normally want to have the benefit of the corrections to the omissions and errors in the

original material project contract. For this reason, it may be preferable to include any

amendments in a separate agreement.

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WHEREAS, it is a condition precedent to the obligation of the Lenders to make the

Loans under the Loan Agreement that the Contracting Party execute and deliver this Agreement.

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable

consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be

legally bound, the parties hereto hereby agree as follows:

SECTION 1: DEFINITIONS AND INTERPRETATION

1.01 Definitions. For purposes of this Agreement, the following terms shall have the

following meanings:

“Affiliate” means, with respect to a specified Person, another Person that directly, or

indirectly through one or more intermediaries, Controls, is Controlled by, or is under common

Control with the specified Person.

“Agreement” is defined in the Preamble.

“Assigned Agreement” is defined in the second Recital.

“Authorized Officer” means (i) with respect to any Person that is a corporation, the chief

executive officer, the chief operating officer, the president, any vice president, the treasurer, or

the chief financial officer of such Person, (ii) with respect to any Person that is a partnership, any

officer identified in clause (i) of a general partner of such Person, or any individual that is a

general partner of such Person, or (iii) with respect to any Person that is a limited liability

company, any manager, the president, any vice president, the treasurer, or the chief financial

officer of such Person, and any officer identified in clause (i) of the managing member of such

Person.

“Borrower” is defined in the Preamble.

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“Business Day” means any day that is not a Saturday, a Sunday, or a day on which

commercial banks are authorized or required to be closed in [New York, New York or]

[________].

“Charter Documents” means, with respect to any Person, the founding act, charter,

articles of incorporation, by-laws, memorandum and articles of association, enabling statute,

partnership agreement, limited liability company agreement, operating agreement, deed of

foundation, or such other documents or instruments that are required to be executed, registered,

or lodged in the place of incorporation or organization of such Person and that establish the legal

existence of such Person and the rights and obligations of the owners thereof.

“Collateral Agent” is defined in the Preamble.

“Contracting Party” is defined in the Preamble.

“Control” means the possession, directly or indirectly, of the power to direct or cause the

direction of the management or policies of a Person, whether through the ability to exercise

voting power, by contract or otherwise. “Controlling” and “Controlled” shall have meanings

correlative thereto.

“Debt Termination Date” means the day the obligations of the Borrower and its

Affiliates under the Loan Documents have been indefeasibly paid in cash in full and all

commitments of the Lenders thereunder have terminated.

“Default” means any failure, default, breach, or other circumstance that would permit the

Contracting Party to exercise any of its remedies under the Assigned Agreement.

“Default Notice” is defined in Section 2.04(a)(i).

“Governmental Approval” means any consent, registration, filing, agreement, certificate,

license, approval, permit, authority, exemption, or similar requirement from, by, or with any

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Governmental Authority, whether given by express action or deemed given by failure to act

within any specified time period.

“Governmental Authority” means any national, supranational, regional or local

government or governmental, administrative, fiscal, legislative, judicial, or government-owned

body, department, commission, authority, tribunal, agency, or entity, or central bank (or any

Person whether or not government owned and howsoever constituted or called that exercises the

functions of the central bank) having jurisdiction over the relevant matter or matters.

“Lender Cure Period” is defined in Section 2.04(a)(ii).

“Lenders” is defined in the third Recital.3

“Lenders’ Representative” means any of the following as notified to the Contracting

Party from time to time by the Collateral Agent:

(a) the Collateral Agent;

(b) a receiver, manager, or receiver and manager, of the Borrower appointed by the

Lenders; and

(c) any other Person appointed by the Lenders.4

3 Some Consents to Assignment specify that “Required Lenders” must approve the taking of

certain actions. However, in order to avoid allowing counterparties to be involved in determining

how decisions are made by the Lenders, it is better practice to refer exclusively to “Lenders” in

the Consent to Assignment, which allows the Lenders to manage their decision making privately

in the credit agreement or any intercreditor agreement.

4 Contracting Parties sometimes request the right to approve such Person. Lenders typically resist

such approval right and, if accepted, usually require that any such approval not be unreasonably

withheld, conditioned, or delayed.

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“Liens” means any mortgage, pledge, charge, assignment, hypothecation, security

interest, title retention, preferential right, trust arrangement, right of set-off, counterclaim, or

banker’s lien, or other privilege or priority of any kind having the effect of security, including

any designation of loss payees or beneficiaries or any similar arrangement under or with respect

to any insurance policy of one creditor over another arising by operation of law.

“Loan Agreement” is defined in the third Recital.

“Loan Default” means a default or event of default, pursuant to any Loan Document, or

any other event that causes, or entitles the Collateral Agent or the Lenders to cause, acceleration

of the obligations of the Borrower under the Loan Documents, or otherwise entitles the

Collateral Agent to exercise its rights under the Security Agreement.

“Loan Documents” is defined in the third Recital.

“Loans” is defined in the third Recital.

“Officer’s Certificate” means a duly executed certificate of an Authorized Officer of the

Borrower (whose name and position appears on a certificate of incumbency attached thereto)

certifying to certain matters on behalf of the Borrower.

“Person” means any natural person, corporation, company, limited liability company,

partnership, firm, voluntary association, joint venture, trust, unincorporated organization, or any

other entity whether acting in an individual, fiduciary, or other capacity.

“Project” is defined in the first Recital.

“Replacement Agreement” is defined in Section 5.02.

“Security Agreement” is defined in the fourth Recital.

“Security Interest” is defined in the fourth Recital.

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“Step-In Date” means the date on which the Contracting Party receives a Step-In Notice5

or such other later date as may be specified in that Step-In Notice.

“Step-In Notice” means a notice to the Contracting Party of the exercise of step-in rights

pursuant to Section 4.01 and advising the Contracting Party as to the identity of the Lenders’

Representative.

“Step-In Period” means the period from the Step-In Date up to and including the earliest

of:

(a) the Step-Out Date;

(b) the date the Assigned Agreement is terminated in accordance with its terms

(provided that the Contracting Party has, to the extent applicable, complied with

its obligations in this Agreement, including Section 2.04 with respect to such

termination); and

(c) the date that a transfer of the Borrower’s rights and obligations under the

Assigned Agreement to a Suitable Substitute pursuant to Section 5.01 becomes

effective.

“Step-Out Date” means the date on which the Contracting Party receives a Step-Out

Notice6 or such other later date as may be specified in that Step-Out Notice.

“Step-Out Notice” means a notice to the Contracting Party that the Step-In Period is

terminated as of the Step-Out Date pursuant to Section 4.02.

5 Some Contracting Parties may request a mandatory interval of several days after receipt of a

Step-In Notice or Step-Out Notice to allow them to coordinate actions required to be taken as a

result of the start or finish of the Step-In Period.

6 See supra note 5.

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“Suitable Substitute” means the Collateral Agent or any Person that:

(a) either alone or jointly or in concert with its Affiliates, acquires a material portion

of the Borrower’s rights in the Project;

(b) has the legal capacity, power, and authority to become a party to and perform the

obligations of the Borrower under the Assigned Agreement; and

(c) has financial resources available to it sufficient to enable it to perform the

obligations of the Borrower under the Assigned Agreement, the foregoing as

determined in the reasonable judgment of the Lenders or the Lenders’

Representative.7

“Termination Date” is defined in Section 9.08.

“Transfer Date” is defined in Section 5.01.

“Transfer Notice” is defined in Section 5.01.

1.02 Interpretation. The parties have participated jointly in the negotiation and drafting

of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this

Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of

proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the

7 Contracting Parties sometimes request greater specificity as to the requirements for being a

Suitable Substitute and may seek an objective standard as opposed to a determination that is

based on the Lenders’ reasonable judgment. In some cases they also negotiate for their own

approval rights to avoid having a competitor step in and to ensure they are satisfied that the

entity selected has adequate financial and technical capabilities and is organized in an acceptable

jurisdiction.

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provisions of this Agreement. Except as otherwise expressly provided, the following rules of

interpretation shall apply to this Agreement:

(a) the definitions of terms shall apply equally to the singular and plural forms of the

terms defined;

(b) wherever the context may require, any pronoun shall include the corresponding

masculine, feminine, and neuter forms;

(c) the words “include,” “includes,” and “including” (and similar formulations) shall

be deemed to be followed by the phrase “without limitation”;

(d) the word “will” shall be construed to have the same meaning and effect as the

word “shall”;

(e) unless the context requires otherwise, any definition of or reference to any

agreement, instrument, or other document herein shall be construed as referring to

such agreement, instrument, or other document as from time to time amended,

restated, supplemented, or otherwise modified (subject to any restrictions on such

amendments, supplements, or modifications set forth herein or therein) and shall

include any appendices, schedules, exhibits, clarification letters, side letters, and

disclosure letters executed in connection therewith;

(f) any reference to any Person shall be construed to include such Person’s

successors and assigns to the extent permitted under the applicable

documentation;

(g) any reference to any applicable law shall be construed as referring to such

applicable law as amended from time to time;

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(h) the words “herein,” “hereof,” and “hereunder,” and words of similar import, shall

be construed to refer to this Agreement in its entirety and not to any particular

provision hereof;

(i) all references to the Preamble, Recitals, Articles, Sections, Appendices, Exhibits,

and Schedules shall be construed to refer to the Preamble, Recitals, Articles, and

Sections of, and Appendices, Exhibits and Schedules to, this Agreement;

(j) the words “asset” and “property” shall be construed to have the same meaning

and effect and to refer to any and all tangible and intangible assets and properties,

including cash, securities, accounts, and contract rights;

(k) all references to the “Collateral Agent” shall be deemed to refer to the Collateral

Agent, and/or any attorney-in-fact, agent, designee, nominee, or assignee thereof

acting on behalf of the Collateral Agent (regardless of whether so expressly

provided); and

(l) section and subsection headings in this Agreement are provided for convenience

of reference only and shall not affect the Agreement’s construction or

interpretation and shall not constitute a part of this Agreement for any other

purpose or be given any substantive effect.

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SECTION 2: CONSENT AND RIGHT TO CURE

2.01 Acknowledgement of Financing Arrangements.

(a) The Contracting Party acknowledges that (i) pursuant to the Loan Documents, the

Lenders have agreed to provide the Loans to the Borrower in connection with the

Project; (ii) the Lenders are extending the Loans to the Borrower in reliance upon

the execution, delivery, and performance by the Contracting Party of the Assigned

Agreement and this Agreement; and (iii) pursuant to the Security Agreement, the

Borrower has granted the Security Interest to the Collateral Agent as first priority

security for the payment and performance of the obligations and liabilities of the

Borrower arising under or in connection with the Loan Documents.

(b) [The Contracting Party acknowledges having received a copy of the Security

Agreement.8]

8 Either the Borrower or the Lenders may not wish to provide a copy of the Security Agreement

to the Contracting Party. For example, a general security agreement might include information

(e.g., in disclosure schedules) that the Borrower does not want to share with the Contracting

Party. Conversely, some Contracting Parties may refuse to consent to an agreement that they

have not been able to review. In these cases, it may be desirable to have a separate security

document that deals only with the Assigned Agreement, so that the Contracting Party is only

required to consent to a simple, single-purpose document that includes only information of which

it is already aware (i.e., information on the Assigned Agreement). If section 2.01(b) is not

included, the bracketed text in section 2.02(a) should also be omitted.

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2.02 Consent to Collateral Security.

(a) The Contracting Party consents to the granting of the Security Interest to the

Collateral Agent [under and pursuant to the terms of the Security Agreement].9

(b) The Contracting Party agrees to continue performance of the Assigned Agreement

notwithstanding the entering into of the Security Agreement.

(c) The Contracting Party agrees that the Collateral Agent has the right but not the

obligation, in the exercise of its rights and remedies under the Security Agreement

or under or in respect of any other Loan Documents,10

to make all demands, give

all notices, take all actions, and exercise all rights of the Borrower (whether or not

9 The wording of this clause will vary depending on the terms of the assignment (or anti-

assignment) provisions of the Assigned Agreement. Alternate language for this clause might be

“In accordance with Section [reference assignment or other relevant section] of the Assigned

Agreement, the Contracting Party consents to the Security Interest created by the Security

Agreement” or “the Contracting Party waives compliance with Section [reference assignment or

other relevant section] of the Assigned Agreement with respect to the Security Interest created by

the Security Agreement, and agrees that the granting of the Security Interest and the entering into

of the Security Agreement does not constitute a breach of or default under the Assigned

Agreement.”

10 Borrowers may negotiate to have these rights of the Lenders exercisable only following a

Default or Loan Default. Any such limitation agreed to by the Lenders would appropriately be

included in the Security Agreement or other separate agreement, so as to avoid involving the

Contracting Party in any dispute about the occurrence thereof.

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the Borrower has then been dissolved, liquidated, or wound-up) in and under the

Assigned Agreement in accordance with its terms.11

(d) The Contracting Party agrees that any enforcement by the Collateral Agent of a

security interest in any stock or other ownership interests in the Borrower shall

not constitute a Default [or “Change of Control”12

] of the Borrower under the

Assigned Agreement or an assignment thereof.

(e) The Contracting Party acknowledges and agrees that none of the following shall

constitute, in and of itself, a default or breach by the Borrower under the Assigned

Agreement: (i) the creation of a security interest in the Assigned Agreement as

described in Section 2.01 above; (ii) the foreclosure or other enforcement by the

Collateral Agent or any of the Lenders of the rights and remedies accorded to

them pursuant to the Security Agreement or any of the Loan Documents or

otherwise available to them as a matter of law; (iii) the acquisition of the

Assigned Agreement by the Collateral Agent or any Suitable Substitute, in

accordance with this Agreement, as a result of foreclosure (or acceptance of an

absolute assignment of the Assigned Agreement in lieu of foreclosure); or (iv) the

assignment of the Assigned Agreement by the Collateral Agent to any Suitable

Substitute in accordance with this Agreement.

11

Contracting Parties sometimes request notice before the Collateral Agent exercises such rights.

12 Bracketed language is needed only if the Assignment Agreement contains language relating to

a change of control or similar event.

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(f) The Contracting Party agrees that neither the Collateral Agent nor any Lender

shall be subject to any assumption, liability, duty, or obligation under the

Assigned Agreement, except as provided in Section 3.03.

(g) The Contracting Party agrees that (i) no further consent or other acknowledgment

to the transactions described in subsections (a) through (e) above shall be required

from the Contracting Party in connection with or otherwise relating to such

transactions; provided, however, that if requested by the Collateral Agent, the

Contracting Party shall execute any acknowledgments or other similar

instruments reasonably requested, and (ii) no such transaction shall constitute a

breach of, or default under, the Assigned Agreement.

(h) The Contracting Party agrees that, as provided in Section 2.04, the Collateral

Agent may take steps to cure a Default under the Assigned Agreement without

thereby assuming any of the obligations or liabilities of the Assigned Agreement,

such assumption arising only to the extent provided in Section 3.03.

(i) Prior to the Debt Termination Date, the Contracting Party shall not take any

action to wind-up, liquidate, dissolve, or appoint a receiver, manager, or receiver

and manager of the Borrower or to institute, approve, or consent to a voluntary or

involuntary arrangement or any other bankruptcy or insolvency proceedings in

relation to the Borrower.13

13

The enforceability of this provision should be reviewed in light of relevant local laws. A

Contracting Party may resist limitations on its right to commence bankruptcy-related actions

against the Borrower. As an alternative, the Contracting Party could be required to notify the

Collateral Agent before bringing any such action against the Borrower sufficiently in advance to

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2.03 Notices Under Assigned Agreement. Concurrently with delivery to the Borrower,

the Contracting Party shall deliver to the Collateral Agent in accordance with Section 9.01 copies

of all notices, demands, requests, and other documents delivered by the Contracting Party to the

Borrower under the Assigned Agreement.14

2.04 Notice and Right to Cure.15

permit the Collateral Agent to address and try to resolve the concerns underlying the Contracting

Party’s decision to commence such an action.

14 The scope of the documents to be provided under this provision is dependent on the underlying

contract to which it relates. It may be appropriate to limit the scope to material notices.

15 The requirement to provide the Collateral Agent with notice of any Defaults and time to cure

gives the Lenders an opportunity to keep the project arrangements intact. The Lenders will seek

the longest cure period possible, so they have the best chance to evaluate the circumstances and

effects of the Borrower’s default under the Assigned Agreement and whether it is worthwhile to

cure the default, as well as the manner in which to effect any cure (if it is a non-monetary

default). The size of the lending group and the means by which it makes decisions will also

affect the time period required by the Lenders to make such determinations. The characteristics

of the project are also important in determining the necessary cure period. For example, a

complex, specialized, or remote project may require more time due to difficulties in mobilizing

the necessary resources to effect a cure. Since the Contracting Party must continue performing

longer than it would have been required to perform under the terms of the Assigned Agreement,

the Contracting Party will seek to minimize the additional cure period given to the Lenders. For a

monetary default, thirty days is a typical time period. For a non-monetary default, the Lenders

frequently request ninety days, and, depending upon the significance of the Assigned Agreement

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(a) Upon the occurrence of any Default, the Contracting Party shall:

(i) give the Collateral Agent written notice thereof (a “Default Notice”),

which notice shall specify in reasonable detail, as of the date of such

Default Notice:

(A) the nature of the Default;

(B) any amount owed by Borrower to the Contracting Party;

(C) any other existing liabilities or unperformed obligations then

outstanding;

(D) any other liabilities or obligations of the Borrower that are likely to

fall due within [180] days after the date of the Default Notice; and

to the project and the other factors discussed above, may seek 180 days or more for the extended

cure period. The most controversial aspect of the extended cure provision will be the right of the

Lenders to take “such longer period as may reasonably be required” to effect the cure of a non-

monetary default. From the Contracting Party’s perspective, if the Lenders exercise their cure

right, the Contracting Party may be in a better position than obtaining no cure at all and possibly

needing to litigate against the Borrower, which may have little or no ability to satisfy any

judgment. The Contracting Party’s willingness to grant significant additional cure periods to the

Lenders will be driven largely by the value to it of the Borrower’s performance and whether or

not the Contracting Party can readily sell its product or service to, or obtain the product or

service offered by the Borrower from, a third party.

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(ii) afford the Collateral Agent or its designee a period of [30]16

days from

receipt of the Default Notice to cure the Default in the case of any

monetary Default and, in the case of any non-monetary Default, [180]

days from receipt of the Default Notice or such longer period as may

reasonably be required so long as the Collateral Agent or its designee has

commenced and is diligently pursuing appropriate commercially

reasonable action to cure the non-monetary Default,17

each of which time

periods (each such time period, as extended pursuant to this Section, a

16

All references to time periods included herein have been bracketed in recognition of the fact

that they will have to be individually negotiated based on various factors specific to each

transaction.

17 This further extended cure period will be a heavily negotiated point with the Contracting Party.

However, if the Borrower is in bankruptcy proceedings (at least in the United States), the rights

of the Contracting Party to terminate or exercise other remedies under the Assigned Agreement

may be limited by the automatic stay in any event, and the Contracting Party may be willing to

agree to this additional period of forbearance in exchange for the hope of a cure by the Lenders.

The Contracting Party may negotiate for the right to terminate the Assigned Agreement for

excessive defaults at some point, by limiting the number of occasions on which the Lenders are

permitted to cure the defaults of the Borrower, either by reference to a stated annual limit, a limit

over the term of the Assigned Agreement, or a combination thereof, such as “In no event shall

the Contracting Party be required to accept a cure by the Collateral Agent whether of a monetary

or non-monetary Default on more than [_____] occasions during the term of the Assigned

Agreement.”

-23-


“Lender Cure Period”) shall be extended by the number of days in any

residual cure period remaining to the Borrower under the Assigned

Agreement, and, in the case of a non-monetary Default, also be subject to

extension:

(A) if possession of the Project is necessary to cure any non-monetary

Default18

and the Collateral Agent has commenced foreclosure or

other appropriate proceedings to obtain possession of the Project,

the Contracting Party shall afford the Collateral Agent or its

designee a reasonable period of time, not to exceed [180] days, to

complete such proceedings before the cure periods specified herein

commence;19

and

18

It may not be possible or practical for the Lenders to undertake the cure of a non-monetary

default unless and until they have taken possession of the project through foreclosure

proceedings, a deed in lieu of foreclosure, or through the exercise of other arrangements under

the terms of the security agreement. The Lenders will seek to obtain the agreement of the

Contracting Party that it will forbear from exercising its termination rights under the Assigned

Agreement until the Lenders have had a reasonable opportunity to exercise their foreclosure

rights or otherwise obtain possession of the project and to arrange for a third party to operate the

project and carry out the obligations of the Borrower under the Assigned Agreement.

19 Contracting Parties sometimes negotiate to condition this extension of cure of monetary

defaults through the following language: “provided that the Collateral Agent cures or agrees to

cure all monetary Defaults upon completion of such foreclosure proceedings.”

-24-


(B) if the Collateral Agent is prohibited from curing any Default by

any process, stay, or injunction issued by any Governmental

Authority or pursuant to any bankruptcy or insolvency proceeding

or other similar proceeding involving the Borrower, then the cure

periods specified herein shall be extended for the period of such

prohibition.20

(b) Upon the cure by the Collateral Agent of any Default of the Borrower under the

Assigned Agreement, there will no longer be deemed to be any such Default

under the Assigned Agreement, such Default will be deemed to have no effect

under the Assigned Agreement, and the Contracting Party shall not be entitled to

cancel, terminate, or suspend performance under the Assigned Agreement or

exercise any other rights or remedies under the Assigned Agreement as a result of

such Default.

20

Some Contracting Parties may request language such as the following be included: “provided,

however, that if at any time during the Lender Cure Period, the Lenders have determined that

they will not cure the Default, the Collateral Agent shall promptly notify the Contracting Party of

such determination and, following such notice, the Contracting Party shall have the right to

suspend or terminate the Assigned Agreement or exercise its other remedies for such Default, all

in accordance with the terms of the Assigned Agreement.” However, Lenders do not typically

include such a limitation in an initial draft, as it is more common for Lenders to reserve the

entirety of a cure period before being obligated to notify the Contracting Party of a decision

whether or not to cure the default.

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(c) The Contracting Party will accept payment and/or performance from the

Collateral Agent during the Lender Cure Period without requiring any assumption

of liability by the Collateral Agent (or the Lenders) or the issuance of a Step-In

Notice.

SECTION 3: LIMITATION OF ACTIONS

3.01 Obligation of Contracting Party During Lender Cure Period and Step-In

Period.

(a) At any time during a Lender Cure Period other than during a Step-In Period

(which is covered by subsection (b)), whether or not permitted by the Assigned

Agreement, the Contracting Party shall not cancel, terminate, or suspend

performance under the Assigned Agreement, or initiate proceedings against the

Borrower in connection with, or exercise any other rights or remedies it may have

under, the Assigned Agreement arising out of any Default. Any such Default by

the Borrower shall be deemed cured upon completion of foreclosure proceedings

or other acquisition or transfer of the Borrower’s rights and obligations under the

Assigned Agreement in accordance with Section 5.01; provided, however, that the

Contracting Party shall retain the rights against the Borrower provided in the

proviso to Section 5.01(b)(iii).21

21

A Contracting Party may seek to negotiate a carve-out to the blanket waiver in certain

situations where it believes that certain defaults (including, but not limited to, (a) failure to

obtain or maintain specific permits or (b) failure to provide essential services) prevent the

Contracting Party from being able to comply with its own obligations or otherwise cause the

Contracting Party to suffer ongoing material adverse effects. The Contracting Party may

-26-


(b) At any time during a Step-In Period, whether or not permitted by the Assigned

Agreement, the Contracting Party shall not cancel, terminate, or suspend

performance under the Assigned Agreement, or initiate proceedings against the

Borrower in connection with, or exercise any other rights or remedies it may have

under, the Assigned Agreement arising from:

(i) any Default arising prior to the Step-In Date;22

(ii) any Default arising as a result of the delivery of a Step-In Notice or the

enforcement of the rights under the Security Agreement;

(iii) a monetary Default arising during the Step-In Period, provided that such

monetary Default is cured within the Lender Cure Period23

applicable to

such Default; or

negotiate for the right to exercise certain rights or to be relieved from certain obligations in those

specific situations. Some Contracting Parties may also negotiate for a defined time limit within

which the Lenders may resolve even non-curable defaults.

22 Some Contracting Parties may negotiate to condition step-in rights upon cure of monetary

defaults prior to the Step-In Date. Most Lenders will resist such a condition and will make clear

that the obligation to make current payments or deliveries already provides a disincentive to step-

in. If current payments are made during the Step-In Period, the Contracting Party is not left in

any worse circumstance, and maintains its rights and benefits against the Borrower, none of

which are required to be waived by the terms of this Agreement.

23 The Lenders’ responsibility for payments during the Step-In Period in most instances is met by

using funds in the Borrower’s accounts, such as a reserve account or operations and maintenance

account, which have been pledged to the Lenders, or by providing some form of acceptable

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(iv) a non-monetary Default arising during the Step-In Period, unless none of

the Collateral Agent, the Lenders’ Representative, or the Borrower has

commenced, within the Lender Cure Period applicable to such Default,

and diligently pursued, commercially reasonable action to cure the

Default.24

(c) Notwithstanding the occurrence of a Default by the Borrower, the Contracting

Party shall continue to perform its obligations under the Assigned Agreement, and

shall maintain the Assigned Agreement in full force and effect in accordance with

its terms, unless the Default is not cured during the Lender Cure Period; provided,

however, that in the event such Default is not cured within the Lender Cure

Period, the Contracting Party shall nonetheless continue to perform its obligations

credit support to ensure payment to the Contracting Party. If step-in has occurred as a

consequence of non-economic breaches, the Borrower may be able to continue to pay in

accordance with the Assigned Agreement.

24 The Contracting Party is not harmed by the continued provision of goods and services under

the Assigned Agreement during the Step-In Period and any attempt by the Contracting Party to

recover its defaulted amounts from the Lenders would be an additional and unintended benefit.

The rights of the Contracting Party are not waived with regard to the cure of any Default, other

than as limited by the terms of this Agreement, the limitation essentially being a continuation of

the Assigned Agreement despite the Default. The Lenders retain during the Step-In Period the

additional cure periods, beyond what is provided in the Assigned Agreement. Such additional

cure periods are typically needed by the Lenders to coordinate internal requirements and

approvals.

-28-


under the Assigned Agreement if the Collateral Agent delivers a Step-In Notice or

Transfer Notice prior to expiration of the Lender Cure Period.25

3.02 No Transfer of or Amendment to Assigned Agreement.

(a) Whether or not permitted by the Assigned Agreement, the Contracting Party shall

not cancel, terminate, assign, or otherwise transfer its interest in the Assigned

Agreement without the prior written consent of the Collateral Agent or as

otherwise permitted by this Agreement.26

(b) The Contracting Party shall not amend, supplement, waive, or otherwise modify

the Assigned Agreement or consent to or waive any non-compliance with the

Assigned Agreement unless the Contracting Party provides the Collateral Agent

with the proposed amendment, supplement, waiver, other modification, or consent

not less than [15] Business Days prior to the proposed date of the execution

thereof and the Collateral Agent consents thereto.27

25

Requiring the Contracting Party to continue performance under the Assigned Agreement

pending cure by the Lenders will enable the Lenders to maintain the status quo to the extent

possible notwithstanding the breach of the Assigned Agreement by the Borrower. The

Contracting Party may negotiate for a right to suspend its performance after an agreed time

period if the default has not been cured.

26 Some Contracting Parties may negotiate to add further language clarifying that this provision

does not relate to a change of control (or sale of substantially all of the assets) of the Contracting

Party.

27 Appropriate language should be considered if the Assigned Agreement involves other

approvals in due course, such as change orders in an Engineering and Procurement Contract.

-29-


3.03 Limitation of Liability Under Assigned Agreement.28

The Collateral Agent and

the Lenders shall have no responsibility for the payment, performance, or observance of any

obligation, requirement, or condition of the Assigned Agreement except to the extent expressly

assumed pursuant to (A) a Step-In Notice and then only those obligations arising during the

applicable Step-In Period or (B) the assumption by the Collateral Agent of the Borrower’s rights

and obligations under the Assigned Agreement by foreclosure, deed in lieu of foreclosure, or

other similar legal action.

28

This provision states positively the limited obligations of the Collateral Agent and the Lenders

by limiting liability to explicitly assumed obligations. Other sections limit the assumption of any

liabilities or obligations by the Lenders and the Collateral Agent.

-30-


SECTION 4: STEP-IN AND STEP-OUT

4.01 Step-In Rights.29

29

This Agreement recognizes the important differences between cure rights and step-in rights.

Although both are frequently available to the Lenders where a default exists, each has different

consequences for the parties to the Assigned Agreement. Cure rights give the Lenders the right,

but not the obligation, to perform a specific obligation or covenant in the Assigned Agreement

on the Borrower’s behalf where the Borrower has failed to perform. Performance by the Lenders

prevents the termination or cancellation of the Assigned Agreement by the Contracting Party.

The Lenders’ exercise of the cure right has no effect on the contractual relationship between the

Borrower and the Contracting Party and the Borrower remains solely liable for the performance

of all the obligations set out in the Assigned Agreement. Where the Lenders believe that the

Borrower’s failure to perform is a one-time event and expect the Borrower to perform its

obligations in the future, the Lenders will typically exercise cure rights rather than step-in rights.

By contrast, a step-in right gives the Lenders the right to perform or to designate a nominee to

perform the Borrower’s obligations under the Assigned Agreement for a specified period

(referred to as the Step-In Period). The potential for liability of the party stepping in makes the

use of a designee the usual choice for the Lenders, and it would be very rare for the Lenders or

the Collateral Agent to step in directly. Following the exercise of the step-in right and for the

duration of the Step-In Period: (i) the Lenders, or their designee, would be required to perform

all of the Borrower’s obligations and would have the right to exercise all of the Borrower’s rights

under the Assigned Agreement; and (ii) the Borrower would continue to be liable under the

Assigned Agreement, but the Contracting Party in most cases would also have recourse to the

entity stepping in for all obligations and liabilities that arise during the Step-In Period.

-31-


(a) Without prejudice to the right of the Collateral Agent to enforce the Security

Interest or any of its other rights under the Security Agreement or other Loan

Documents, the Collateral Agent may give the Contracting Party a Step-In Notice

prior to cancellation or termination of the Assigned Agreement in accordance

with its terms and the terms of this Agreement at any time:

(i) during which a Default or a Loan Default has occurred and is continuing

(whether or not notice of such Default or Loan Default has been delivered

to the Borrower); or

(ii) during the Lender Cure Period.

(b) The Step-In Notice shall designate a Lenders’ Representative to assume, jointly

and severally with the Borrower, all of the Borrower’s rights, and any obligations

arising during the Step-In Period,30

under the Assigned Agreement.

(c) During the Step-In Period, the Contracting Party shall deal with the Lenders’

Representative instead of the Borrower in connection with all matters related to

the Assigned Agreement. The Borrower agrees to be bound by all such dealings

between the Contracting Party and the Lenders’ Representative to the same extent

as if such dealings had been between the Contracting Party and the Borrower.

30

Some Contracting Parties may request that the Lenders’ Representative execute and deliver an

instrument formally assuming the specified obligations prior to any step in.

-32-


4.02 Step-Out Rights.

(a) The Collateral Agent or the Lenders’ Representative may, at any time during the

Step-In Period, deliver a Step-Out Notice to the Contracting Party to terminate the

Step-In Period on the Step-Out Date.

(b) On the Step-Out Date:

(i) the rights and obligations of the Lenders’ Representative in relation to the

Borrower under the Assigned Agreement arising prior to the Step-Out

Date will be reassumed by the Borrower or, if so notified by the Lenders’

Representative, a Suitable Substitute to the exclusion of the Lenders’

Representative;

(ii) the Contracting Party will no longer be required to deal with the Lenders’

Representative and will deal with the Borrower or, if so notified by the

Lenders’ Representative, a Suitable Substitute in connection with all

matters related to the Assigned Agreement from and after that date; and

(iii) the Lenders’ Representative shall be and is hereby released from all

obligations and liabilities under the Assigned Agreement (other than those

that have arisen during the Step-In Period), and the Contracting Party shall

deliver a document to the Lenders’ Representative acknowledging such

release, if requested.

SECTION 5: TRANSFERS AND REPLACEMENT AGREEMENT

5.01 Transfer.

(a) Notwithstanding anything in the Assigned Agreement to the contrary, the

Collateral Agent may, at any time during the continuation of a Default or Loan

-33-


Default, deliver to the Contracting Party written notice (a “Transfer Notice”) that

it intends to arrange for the transfer of the Borrower’s (or, if applicable, the

Lenders’ Representative’s) rights and obligations under the Assigned Agreement

to a Suitable Substitute. The Transfer Notice shall specify a Business Day not less

than [15] days from the date on which the Contracting Party receives the Transfer

Notice (the “Transfer Date”) for the transfer of the Borrower’s (or, if applicable,

the Lenders’ Representative’s) rights and obligations under the Assigned

Agreement to the Suitable Substitute.31

(b) On the Transfer Date32

:

(i) subject to the proviso in clause (iii) below, the Borrower (and, if

applicable, the Lenders’ Representative) and the Contracting Party will be

released from, and shall have no further rights or obligations to each other

under, the Assigned Agreement from and after such Transfer Date, and the

Suitable Substitute and the Contracting Party will assume those same

rights and obligations toward each other;

(ii) the Contracting Party, the Borrower, and the Collateral Agent will enter

into, and the Collateral Agent shall cause the Suitable Substitute and, if

applicable, the Lenders’ Representative to enter into, all such agreements

31

Some Contracting Parties will negotiate to allow transfers only where there has been a

foreclosure by the Collateral Agent, but this condition is very rarely accepted by Lenders.

32 Some Contracting Parties may negotiate to condition any transfers on payment of certain past

due amounts.

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or other documents as are reasonably necessary to give effect to the

foregoing, including:

(A) an agreement between the Contracting Party and the Suitable

Substitute, on substantially the same terms as the Assigned

Agreement; and

(B) an agreement between the Contracting Party, any lender to (or

investor in) the Suitable Substitute (or its or their agent), and the

Suitable Substitute on substantially the same terms as this

Agreement; and

(iii) any Default under the Assigned Agreement and any other continuing

ground for cancellation or termination by the Contracting Party of the

Assigned Agreement, suspension of performance under the Assigned

Agreement, or exercise of any other remedies under the Assigned

Agreement will be deemed not to have occurred or be continuing between

the Contracting Party and the Suitable Substitute, and the Contracting

Party shall not be entitled to cancel, terminate, or suspend performance, or

exercise any other rights or remedies it may have under, the Assigned

Agreement, or any agreement entered into pursuant to Section 5.01(b)(ii),

as a result of such Default;33

provided, however, that the Contracting Party

33

If there is any provision of the Assigned Agreement that would trigger a “new” default as a

result of any right of the Contracting Party to proceed against the Borrower in respect of any

prior losses, the Lenders will want to be sure that such right is waived or removed from the

Assigned Agreement or otherwise dealt with satisfactorily.

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thereafter shall have the right to proceed against the Borrower in respect of

any uncompensated monetary losses suffered by it prior to any

foreclosure, acquisition or transfer.34

(c) Following any Transfer, the Collateral Agent (and, if applicable, the Lenders’

Representative) shall be released from all obligations under the Assigned

Agreement and this Agreement.

5.02 Replacement Agreement. If the Assigned Agreement terminates or would

terminate as a result of any bankruptcy or insolvency law or proceeding affecting the Borrower

or any other default under the Assigned Agreement that is not of a curable nature, then the

Contracting Party shall, at the option of the Collateral Agent, enter into a new agreement (a

“Replacement Agreement”) with the Collateral Agent or a Suitable Substitute on substantially

the same terms as the Assigned Agreement, save and except that the term shall be only for the

then-remaining term of the Assigned Agreement at the time the Assigned Agreement was

terminated; provided, however, that the Contracting Party’s obligation to enter into a

Replacement Agreement is conditional upon the Collateral Agent exercising its foregoing option

within [90] days after termination of the Assigned Agreement.35

34

If there is any existing intercreditor agreement, subordination agreement, or other agreement to

coordinate rights in collateral or otherwise, among the Lenders and the Contracting Party,

appropriate revisions should be considered thereto and hereto.

35 It is not uncommon for a Contracting Party to request that one or more of the following

additional conditions to entry into a replacement agreement be included: “(x) paying all sums

that would, at the time of the execution and delivery thereof, be due under the Assigned

Agreement but for such termination, (y) otherwise fully curing any defaults under the Assigned

-36-


SECTION 6: PAYMENT OBLIGATIONS

6.01 Payments. Notwithstanding any provision to the contrary contained in the Assigned

Agreement, the Contracting Party shall pay all amounts payable by it under the Assigned

Agreement in the manner required by the Assigned Agreement directly into the account specified

in Exhibit A or to such other Person or account as shall be specified from time to time by the

Collateral Agent to the Contracting Party in writing, in immediately available funds and in the

lawful currency of [the United States of America] on the date such amounts are due. The

Borrower hereby releases the Contracting Party from all liability for making payments to the

Collateral Agent in accordance with the requirements of this Section.

6.02 No Set-offs. All payments required to be made by the Contracting Party under the

Assigned Agreement shall be made without any set-off, recoupment, abatement, withholding,

reduction, or defense whatsoever, except as expressly permitted under the Assigned Agreement.

SECTION 7: REPRESENTATIONS AND WARRANTIES

The Contracting Party makes the following representations and warranties, which shall

survive the execution and delivery of this Agreement and the Assigned Agreement and the

consummation of the transactions contemplated hereby and thereby.

7.01 Organization. The Contracting Party is an organization duly organized, validly

existing, and in good standing under the laws of the jurisdiction of its organization, and is duly

qualified, authorized to do business, and in good standing as a foreign [_____] in every

Agreement existing immediately prior to the termination of the Assigned Agreement that are

capable of being cured, and/or (z) paying all reasonable costs and expenses, including legal fees,

incurred by the Contracting Party in connection with such default and termination, and the

preparation, execution, and delivery of the Replacement Agreement.”

-37-


jurisdiction in which the failure to be so qualified could reasonably be expected to have a

material adverse effect on its ability to perform under this Agreement or the Assigned

Agreement. It has all requisite power and authority, corporate and otherwise, to enter into and

to perform its obligations hereunder and under the Assigned Agreement, and to carry out the

terms hereof and thereof and the transactions contemplated hereby and thereby.

7.02 Authorization. The execution, delivery, and performance by the Contracting Party

of this Agreement and the Assigned Agreement have been duly authorized by all necessary

organizational or other action on the part of the Contracting Party and do not require any

approval, consent, or authorization of any other Person, except approvals or consents that have

previously been obtained and that are in full force and effect.

7.03 Binding Agreements. Each of this Agreement and the Assigned Agreement (a)

has been duly executed and delivered on behalf of the Contracting Party by an Authorized

Officer of the Contracting Party and constitutes the legal, valid and binding obligation of the

Contracting Party, enforceable against the Contracting Party in accordance with its terms,

except as the enforceability thereof may be limited by (i) bankruptcy, insolvency,

reorganization, or other similar laws affecting the enforcement of creditors’ rights generally

and (ii) general equitable principles (whether considered in a proceeding in equity or at law)

and (b) is admissible in evidence without the need of any filing, registration, notarization, or

other action.

7.04 Litigation. There are no actions, suits, proceedings or, to the Contracting Party’s

knowledge, claims or investigations at law or in equity (if applicable) pending or threatened

before any Governmental Authority, arbitral tribunal, or other body that could reasonably be

expected to succeed on the merits and that (a) could adversely affect the performance by the

-38-


Contracting Party of its obligations hereunder or under the Assigned Agreement, (b) could

modify or otherwise adversely affect the Governmental Approvals referred to in this

Agreement, (c) could have a material adverse effect on the condition (financial or otherwise),

business, or operations of the Contracting Party, or (d) questions the validity, binding effect, or

enforceability hereof or of the Assigned Agreement, any action taken or to be taken pursuant

hereto or thereto or any of the transactions contemplated hereby or thereby.

7.05 Compliance with Other Instruments, Etc. The Contracting Party is not in

violation of its Charter Documents and the execution, delivery, and performance by the

Contracting Party of this Agreement and the Assigned Agreement and the consummation of the

transactions contemplated hereby and thereby will not result in any violation of, breach of, or

default under any term of its Charter Documents, or of any contract or agreement to which it is

a party or by which it or its property is bound, or of any license, permit, franchise, judgment,

writ, injunction, decree, order, charter, law, ordinance, rule, or regulation applicable to it.

7.06 Governmental Approvals. No Governmental Approval is required to be obtained

by the Contracting Party in connection with the execution, delivery, or performance of the

Assigned Agreement or this Agreement or the consummation of the transactions contemplated

hereunder or thereunder, except such Governmental Approvals that have previously been

obtained and that are in full force and effect.36

36

Contracting Parties may seek to exclude from this representation certain Governmental

Approvals that they anticipate being able to obtain in the ordinary course of business; Lenders

will typically need sufficient information and support to be able to allow such an exception.

-39-


7.07 No Default or Amendment. Neither the Contracting Party nor, to its knowledge,

any other party37

to the Assigned Agreement is in default of any of its obligations under the

Assigned Agreement. The Contracting Party and, to its knowledge, each other party to the

Assigned Agreement have complied with all conditions precedent to the respective obligations

of each such party to perform under the Assigned Agreement.38

No event or condition exists

that would either immediately, or with the passage of any applicable grace period or giving of

notice or both, enable either the Contracting Party to terminate or suspend its obligations under

the Assigned Agreement or excuse the Contracting Party or the Borrower from liability for

non-performance thereunder.

7.08 No Previous Assignments. The Contracting Party has no notice of, and has not

consented to, any previous assignment by the Borrower of all or any part of its rights under the

Assigned Agreement. Except for this Agreement, the Contracting Party is not party to any

agreement that provides any rights to any Person (other than the Borrower) in respect of the

Assigned Agreement.39

37

Some Contracting Parties may be reluctant to make a representation as to the defaults of

another party, even on a “knowledge” basis.

38 In some cases, Lenders may want to include expressly additional provisions or conditions

precedent in this representation.

39 Sometimes, there may be other consents to assignment in favor of other parties with a stake in

the project, or such additional parties may become parties to the primary consent. If there is more

than one consent to assignment, there should be an agreement that sets out when and how the

affected parties can exercise their respective rights. Typically, Lenders will want the ability to

exercise rights exclusively or in the first instance, with the rights of other parties suspended (for

-40-


7.09 Representations and Warranties. All representations, warranties, and other

statements made by the Contracting Party in the Assigned Agreement were true and correct as

of the date when made and are true and correct as of the date hereof.40

7.10 Corrupt Practices Laws. Neither the Contracting Party nor any of its officers,

directors, employees, agents, or Affiliates acting on its behalf has taken any action in

connection with the Assigned Agreement or with respect to the Project that violates [the

Foreign Corrupt Practices Act of 1977, as amended, or]41

any [other] applicable law,

regulation, order, decree, or directive having the force of law relating to bribery, kick-backs, or

similar business practices.

7.11 Suspension and Debarment. No event has occurred and no condition exists that

is likely to result in the suspension or debarment of the Contracting Party from contracting

with the government of the United States [or of [_____]42

] or any agency or instrumentality

thereof, and the Contracting Party is not now and has not been subject to any such suspension

or debarment within the three-year period immediately preceding the date hereof.

7.12 No Immunity. The Contracting Party has no immunity from jurisdiction of any

court or from any legal process (whether through service of notice, attachment prior to

instance, until following the Debt Termination Date) or only being exercisable after some agreed

period of time if the Lenders have not remedied the Borrower’s defaults to the other parties.

40 Depending on the language in the Assigned Agreement, the Contracting Party may negotiate

to clarify that certain representations and warranties are (i) subject to a materiality qualification

and/or (ii) expressly made only as of a specified date.

41 This language would be needed only for non-U.S. transactions.

42 Add any other applicable jurisdiction.

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judgment, attachment in aid of execution, execution, sovereign immunity, or otherwise) with

respect to itself or its property.43

7.13 Copy of Assigned Agreement. Attached as Exhibit B is a full, true, and complete

copy of the Assigned Agreement as in effect on the date hereof. The Assigned Agreement is in

full force and effect44

and has not been amended, modified, or supplemented in any manner

other than as attached.45

SECTION 8: DELIVERABLES46

43

Certain Contracting Parties (e.g., Governmental Authorities) may have immunity from

jurisdiction or process. Even if it is not possible to obtain this representation and warranty, the

Collateral Agent should seek to have the Contracting Party waive such immunity pursuant to

section 9.13.

44 Some Contracting Parties may request the addition of a knowledge qualifier with respect to

this statement.

45 Language would be modified if there have been any amendments. If the Assigned Agreement

contemplates change orders or similar arrangements, such as an Engineering and Procurement

Contract, the following language may be appropriate to consider: “Attached as Exhibit C are

copies of all present and past change orders and variations in connection with the Assigned

Agreement and all other alterations to the scope, specifications, or other requirements of the

works, services, or other matters contemplated by the Assigned Agreement (a “Change Order”).

There are no pending Change Orders, and no event has occurred that could reasonably be

expected to result in a Change Order.”

46 Historically, Consents to Assignment included a requirement for a legal opinion from the

Contracting Party’s legal counsel. The current prevailing practice in most domestic transactions

-42-


The Contracting Party shall deliver to the Collateral Agent, each of the following

documents:

8.01 Certificates and Organizational Documents. Officer’s Certificate, certifying and

attaching (i) true and correct copies of the Charter Documents of the Contracting Party certified

(to the extent applicable) by its jurisdiction of organization, (ii) required resolutions of its board

of directors, members, or other body authorizing the execution, delivery, and performance of the

Assigned Agreement and this Agreement, (iii) a long-form certificate of good standing, status, or

compliance for the Contracting Party from its jurisdiction of organization, or equivalent, and

(iv) the name and title, and bearing specimen signatures, of any officers of the Contracting Party

authorized to sign the Assigned Agreement and this Agreement.

[8.02 Financial Statements. Latest (i) unaudited consolidated balance sheet of the

Contracting Party as at the end of its most recent fiscal quarter and the related unaudited

consolidated statements of income and retained earnings and of cash flows and (ii) audited

consolidated balance sheet and related statements of operations, stockholders’ equity, and cash

flows as of the end of and for its most recent fiscal year, setting forth in each case in comparative

form the figures for the previous fiscal year. Such quarterly and financial information are to be

provided within [___] days of the execution hereof, and thereafter, on a continuous basis within

[___] days after the end of each fiscal quarter until termination of the Assigned Agreement.47

]

is not to require a legal opinion; however, inclusion of such a deliverable is still sometimes

sought by Lenders in international transactions as well as in transactions where required by

governmental entities, whether domestic or international.

47 Lenders will determine on a case-by-case basis whether it is necessary for the Contracting

Party to provide such financial information.

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SECTION 9: MISCELLANEOUS PROVISIONS

9.01 Notices.

(a) For the purpose of subsection (b) hereof, the addresses for notices or

communications are as set forth below:

Address for notices or communication to the Contracting Party:

Address:

Attn:

E-mail:

Fax:

Address for notices or communication to the Collateral Agent:

Address:

Attn:

E-mail:

Fax:

Address for notices or communication to the Borrower:

Address:

Attn:

E-mail:

Fax:

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(b) Any notice or other communication in respect of this Agreement shall be given in

any manner set forth below to the address or number set forth in subsection (a)

above and will be deemed effective as indicated:

(i) when in writing and delivered in person or by courier, on the date

it is delivered;

(ii) when sent by facsimile transmission, electronic transmission, or

portable document format, on the date transmitted; or

(iii) when sent by certified or registered mail (return receipt requested),

on the date that mail is delivered or its delivery is attempted;

unless, in each case, the date of any delivery is not a Business Day or the

notice or other communication is delivered after the close of business on a

Business Day, in which case the notice or other communication shall be

deemed given and effective on the first following day that is a Business

Day.

-45-


9.02 Governing Law; Submission to Jurisdiction.48

THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES

UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED,

ENFORCED, AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF [_____]

(WITHOUT APPLICATION OF ANY PROVISION THEREOF THAT WOULD REQUIRE

THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION). EACH PARTY

IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS FOR ITSELF AND ITS

PROPERTY IN ANY LEGAL ACTION OR PROCEEDING AGAINST IT ARISING OUT OF

OR IN CONNECTION WITH THIS AGREEMENT, OR FOR RECOGNITION AND

ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO (I) THE NON-

EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF [_____]; (II) ANY OTHER

FEDERAL COURT OF COMPETENT JURISDICTION IN ANY OTHER JURISDICTION

WHERE IT OR ANY OF ITS PROPERTY MAY BE FOUND; AND (III) APPELLATE

COURTS FROM ANY OF THE FOREGOING AND (B) CONSENTS THAT ANY SUCH

ACTION OR PROCEEDING MAY BE BROUGHT IN OR REMOVED TO SUCH COURTS,

AND WAIVES ANY OBJECTION OR RIGHT TO STAY OR DISMISS ANY ACTION OR

PROCEEDING THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY

48

Ideally, the applicable law governing the Consent to Assignment will match the applicable law

chosen under the other financing documents. If the Contracting Party is a government entity, it

may not agree to submit itself to the laws of another sovereign. Should the Contracting Party

insist on the application of the laws of its own jurisdiction or the jurisdiction whose laws govern

the Assigned Agreement and such jurisdiction differs from the governing laws of the other

financing documents, the Lenders should seek advice of local counsel in such jurisdiction.

-46-


SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR

PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO

PLEAD OR CLAIM THE SAME.

9.03 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY

IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL

ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE ASSIGNED

AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.

9.04 Counterparts. This Agreement may be executed in any number of counterparts and

by different parties hereto in separate counterparts, each of which when so executed and

delivered shall be deemed an original, but all such counterparts together shall constitute but one

and the same instrument; signature pages may be detached from multiple separate counterparts

and attached to a single counterpart so that all signature pages are physically attached to the same

document. Delivery of an executed signature page of this Agreement by facsimile transmission,

electronic transmission, or portable document format shall be effective as delivery of a manually

executed counterpart of the Agreement by such party.

9.05 Severability. Any provision of this Agreement that is prohibited or unenforceable in

any jurisdiction shall not invalidate the remaining provisions hereof and any such prohibition or

unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in

any other jurisdiction.

9.06 Amendments, Waivers. No amendment, modification, or waiver of any of the

provisions of this Agreement will be effective unless in writing (including a writing evidenced

by a facsimile transmission, electronic transmission, or portable document format) and signed by

-47-


the Collateral Agent and the Contracting Party,49

and waiver shall be a waiver only with respect

to the specific instance involved and shall in no way impair the rights of the parties making such

waiver or the obligations of the other parties to such party in any other respect or at any other

time.

9.07 Remedies Cumulative. The rights and remedies of the parties under this Agreement

are cumulative, not alternative, and are not exclusive of any rights or remedies provided by law.

9.08 Termination.50

This Agreement shall terminate upon the earlier of (i) [180] days

after the valid termination or expiration of the Assigned Agreement in accordance with its

respective terms and the terms of this Agreement and (ii) receipt of notice by the Contracting

Party from the Collateral Agent that the Debt Termination Date has occurred (the “Termination

Date”). On the Termination Date, this Agreement shall be deemed terminated and, subject to

Section 9.14, each of the parties shall be released, relieved, and discharged from any obligation

or liability hereunder other than any liabilities accruing on or prior to the Termination Date.

9.09 Assignment.

(a) This Agreement may be assigned by the Collateral Agent without the consent of

the other parties. Upon an assignment of this Agreement by the Collateral Agent,

the Collateral Agent will be released from its obligations hereunder.

49

Borrower’s counsel may request that Borrower’s consent be required if the amendment in

question would adversely affect Borrower’s material rights or obligations under the Assigned

Agreement or the Loan Agreement and other Loan Documents.

50 The termination of the Consent to Assignment should occur automatically once the Debt

Termination Date has occurred. Since the Contracting Party is not privy to this information, the

Collateral Agent should give notice to the Contracting Party of the Debt Termination Date.

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(b) This Agreement may not be assigned by the Borrower without the prior written

consent of the Collateral Agent in accordance with the Security Agreement.

(c) This Agreement may be assigned by the Contracting Party only in connection

with an assignment of the Assigned Agreement (without limiting any rights of the

Collateral Agent hereunder or any rights of the Borrower under the Assigned

Agreement relating to assignment by the Contracting Party) and only with the

prior written consent of the Collateral Agent. The Contracting Party agrees that

any permitted assignment of the Assigned Agreement will not be effected without

concurrently assigning this Agreement to the assignee of the Assigned Agreement

and such assignee agreeing to be bound by the terms hereof.

9.10 Further Assurances. The Contracting Party agrees to take all actions the Collateral

Agent shall reasonably request to complete and evidence the transactions provided for in this

Agreement.51

Without limiting the generality of the foregoing, the Contracting Party shall take

whatever action the Collateral Agent may reasonably request in connection with the transactions

provided for in this Agreement, including (i) to effectuate the terms of this Agreement, including

to perfect Liens in favor of the Collateral Agent over the Assigned Agreement in [_______] and

elsewhere, (ii) to file or record any assumption, transfer, or release provided for in this

Agreement, including the execution of any transfer or assignment, and (iii) to give any notice,

order, or direction, or make any necessary registration.

51

The Contracting Party may request that such actions be taken at the Borrower’s cost and

expense. This is frequently resisted by Lenders and is an issue for negotiation.

-49-


9.11 Entire Agreement. This Agreement constitutes the entire agreement and

understanding of the parties with respect to its subject matter and supersedes all oral

communication and prior writings with respect thereto.

9.12 Conflict of Documents. In the event of any ambiguity, conflict, or inconsistency

between the provisions of this Agreement and the Assigned Agreement, the provisions of this

Agreement shall prevail and govern to the extent of such ambiguity, conflict, or inconsistency.

9.13 Waiver of Sovereign Immunity.52

If the Contracting Party now or hereafter has a

right to claim sovereign immunity for itself or any of its assets, the Contracting Party hereby

waives any such immunity to the fullest extent permitted by the laws of the applicable

jurisdiction. This waiver includes immunity from arbitration, suit, or action, including under the

doctrine of sovereign immunity or any other doctrine, whether arising by statute or otherwise,

and the Contracting Party agrees not to raise any such defense or claim in matters arising out of

or relating to this Agreement. The Contracting Party hereby acknowledges that its rights and

obligations hereunder are private and commercial and not governmental in nature.

52

Insert this provision if the Contracting Party is a national or local government or a subdivision

or agency thereof. Should the waiver of sovereign immunity be needed, it is crucial to confirm

that the Contracting Party has the authority to waive its sovereign immunity under applicable

local laws. Generally, there are two types of immunity, both of which are waived by this

provision: (i) immunity as it relates to jurisdiction that stems from the theory that it would be

inappropriate for one state’s courts to call another state under its jurisdiction and (ii) immunity as

it relates to the execution of a judgment against the state that stems from the theory that it would

be improper for the courts of one state to seize the property of another state.

-50-


9.14 Survival. Sections 7.10, 9.02, 9.03, 9.07, 9.11, and 9.13 through 9.17 shall survive

and shall continue in full force and effect after the Termination Date.

9.15 Relationship of Parties. This Agreement is not intended to and does not create or

establish between the Parties any relationship as partners, joint venturers, employer and

employee, master and servant, or, except as expressly provided in this Agreement, of principal

and agent.

9.16 Actions by Designees. All actions permitted to be taken by the Collateral Agent

under this Agreement may be taken by any attorney-in-fact, agent, designee, nominee, or

assignee thereof. The Lenders reserve the right to designate a new or replacement Lenders’

Representative or Collateral Agent from time to time by written notice to the Contracting Party.

9.17 Indemnification. At all times after the date hereof, the Contracting Party shall

defend, indemnify, and hold harmless the Collateral Agent and each Lender, their respective

successors and assigns, and their respective directors, officers, employees, and agents to the

same extent and in the same manner that the Contracting Party has agreed to defend, indemnify,

and hold harmless the Borrower pursuant to the Assigned Agreement.53

[Remainder of page intentionally left blank]

53

Some Contracting Parties may negotiate to reduce the scope of, or eliminate, this section.

-51-


IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as of the date

first written above

[BORROWER]

By:

Name:

Title:

[CONTRACTING PARTY]

By:

Name:

Title:

[COLLATERAL AGENT]

By:

Name:

Title:

-52-


Schedule 1

List of Loan Documents

-53-


Exhibit A

Payment Instructions

[Bank]

ABA No. [_____]

Attn: [_____]

Account No. [_____]

References: [_____]

Draft: 3/26/12

-54-

Exhibit B

Assigned Agreement

[to be attached]