HECO Exhibit 10.7(f)

 

EXHIBIT A

 

GUARANTEE AGREEMENT

 

between

 

BLACK RIVER ENERGY, LLC

 

and

 

HAWAII ELECTRIC LIGHT COMPANY, INC.

 

THIS GUARANTEE AGREEMENT (“Guarantee”) is made this 15 day of July 2004 by and
between HAWAII ELECTRIC LIGHT COMPANY, INC., a Hawaii corporation (“HELCO”),
with principal offices in Hilo, Hawaii, and BLACK RIVER ENERGY, LLC, a Delaware
limited liability company (“Guarantor”), with principal offices in Charlotte,
North Carolina.

 

W I T N E S S E T H:

 

WHEREAS, HELCO is a regulated public utility engaged in the business of
generation, transmission and distribution of electric power to customers on the
island of Hawaii, Hawaii; and

 

WHEREAS, TPS Hawaii, Inc., a Florida corporation (“TPS Hawaii”), owns 50% of the
outstanding interests of Hamakua A, LLC, a Delaware limited liability company
(“Hamakua A”), which owns a 98% limited partner interest in Hamakua Energy
Partners L.P., a Hawaii limited liability partnership (“HEP”), and TPS Hamakua,
Inc., a Florida corporation (“TPS Hamakua”) owns a 1% general partner interest
in HEP; and

 

WHEREAS, HEP is party to that certain Power Purchase Agreement, dated as of
October 22, 1997, by and between HEP and HELCO, as amended (the “PPA”) ; and

 

WHEREAS, TPS Hawaii and TPS Hamakua have entered into an acquisition agreement
pursuant to which TPS Hawaii and TPS Hamakua have agreed to sell all of their
outstanding equity interests in each of HEP and Hamakua A (the “TPS Interests”)
to BR LANDING, LLC, a Delaware limited liability company (“Buyer”) and a
wholly-owned subsidiary of Guarantor, which in turn is a wholly-owned subsidiary
of EIF Hamakua, LLC, a Delaware limited liability company; and

 

WHEREAS, TECO Energy, Inc. a Florida corporation, (“TECO”), the ultimate parent
company of TPS Hawaii and TPS Hamakua, has guaranteed HEP’s performance under
the PPA pursuant to a Guarantee Agreement, dated November 8, 1999, by and
between TECO and HELCO (the “TECO Guarantee”); and

 

WHEREAS, under the PPA, HELCO has certain rights of first refusal, or similar
preference rights of purchase, that may be triggered or otherwise activated in
the event that HEP should sell or transfer its interests in the Facility (the
“HELCO Rights”).

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Although they do not believe that the transfer of the TPS Interests to Buyer
will trigger the HELCO Rights or any requirement to obtain HELCO’s consent,
TECO, TPS Hawaii, TPS Hamakua, HEP, Black River Energy and EIF Hamakua, LLC
would like to obtain HELCO’s acknowledgement and consent to the transactions
described herein; and

 

WHEREAS, as part of the consideration to them for the sale of the TPS Interests
to Buyer, TECO, TPS Hawaii and TPS Hamakua would like to obtain from HELCO the
termination of the TECO Guarantee and the release of TECO thereunder; and

 

WHEREAS, although HELCO does not necessarily concur with the conclusion that the
HELCO Rights will not be triggered by the transfer of the TPS Interests to
Buyer, HELCO is willing to waive the HELCO Rights with respect to such sale, to
acknowledge and consent to such sale, and to terminate the TECO Guarantee and
release TECO thereunder, all on the terms and conditions set forth in that
certain Consent and Agreement dated on or about the date hereof (the “Consent
and Agreement”); and

 

WHEREAS, among the terms and conditions set forth in the Consent and Agreement
is the requirement that Guarantor enter into this Guarantee with HELCO;

 

WHEREAS, to induce HELCO to enter into the Consent and Agreement, Guarantor is
willing to enter into this Guarantee with HELCO; and

 

WHEREAS, in connection with Guarantor’s purchase in May 2004 of the interests in
HEP and Hamakua A theretofore owned by one or more entities affiliated with J.A.
Jones, Inc., a Delaware corporation, Guarantor entered into a guarantee on
similar terms dated May 26, 2004 (the “Jones Replacement Guarantee”).

 

NOW, THEREFORE, in consideration of these premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Guarantor hereby represents, warrants, covenants and agrees with HELCO as
follows:

 

1. Definitions. All capitalized terms used herein and not defined herein, and
which are defined in, or by reference in, the PPA, as the PPA may be amended
from time to time in accordance with its terms, shall have the meanings
specified in the PPA. The term “Letter of Credit” shall have the meaning
specified in the Consent and Agreement.

 

2. Guarantee and Letter of Credit.

 

a. Subject to the limitations contained in Section 3, and without amending or
modifying the Jones Replacement Guarantee in any way, Guarantor hereby
guarantees to HELCO the due and punctual payment, as and when due, of fifty
percent (50%) (the “Proportionate Share”) of all sums payable by HEP to HELCO as
the result of the non-performance of obligations under the PPA or other events
or circumstances during the term of the PPA. This Guarantee is in addition to
the Jones Replacement Guarantee and constitutes a separate and

 

 

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additional obligation of Guarantor, with respect to any sums payable by HEP to
HELCO under the PPA. In no event shall HELCO have recourse against Guarantor,
pursuant to this Guarantee, in excess of the lesser of its Proportionate Share
of HEP’s payment obligations or the limits set forth in Section 3 below.

 

b. This Guarantee is a primary and original obligation of Guarantor and is an
absolute, unconditional, continuing and irrevocable guarantee and is in no way
conditioned or contingent upon any attempt to collect payment from or proceed
against HEP except as stated otherwise herein. This Guarantee shall remain in
full force and effect until the earlier to occur of the following events: (i)
all of HEP’s obligations under the PPA including, without limitation, any
obligations for breach thereof, have been fulfilled, (ii) this Guarantee has
been substituted for in accordance with Section 21.1 of the PPA or (iii) the
termination of the PPA; provided that obligations arising prior to such
termination date shall survive such termination. Any notice required to be given
by HELCO to HEP under the PPA shall also be given by HELCO to Guarantor at:

 

Black River Energy, LLC

6000 Fairview

Charlotte, N.C. 28287

Attention: Mr. William Garnett

Telephone: (704) 553-3243

Facsimile: (704) 553-3037

 

(or such other address as Guarantor may designate in writing to HELCO).
Guarantor shall have the same opportunity to cure defaults by HEP under the PPA
as HEP shall have; provided, however, that no time period provided in the PPA
for cure shall be extended or start anew by virtue of this sentence.

 

c. In the event that the PPA shall be terminated as a result of the rejection or
disaffirmance thereof by any trustee, receiver or liquidating agency of HEP or
any of its properties, in any assignment for the benefit of creditors or any
bankruptcy, insolvency, reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar proceeding, Guarantor’s obligations
hereunder shall continue to the same extent as if such PPA had not been so
rejected or disaffirmed. Guarantor shall, and does hereby waive all rights and
benefits which might relieve, in whole or in part, Guarantor from the
performance of its duties and obligations hereunder by reason of any such
proceeding, and Guarantor agrees that it shall be liable for all sums and
obligations guaranteed by this Guarantee without regard to any modification,
limitation or discharge of the liability of HEP that may result from any such
proceeding.

 

d. As a material obligation of Guarantor under this Guarantee, Guarantor shall,
from the date first written above through the thirtieth (30th) day

 

 

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following the period this Guarantee is to remain in full force and effect
pursuant to the second sentence of Section 2(b) hereof, maintain or cause to be
maintained in full force and effect a Letter of Credit as required by the
Consent and Agreement, and shall, no later than thirty (30) days prior to the
expiration of the term of any Letter of Credit then in effect, replace or cause
to be replaced such Letter of Credit by delivery to HELCO of a newly issued
Letter of Credit, and any failure to maintain such Letter of Credit in full
force and effect as aforesaid, including but not limited to any failure to
replace a Letter of Credit no later than thirty (30) days prior to the
expiration of the term thereof, shall constitute grounds for HELCO to draw the
full amount of the Letter of Credit regardless of whether or not HELCO would
then be permitted to demand payment from Guarantor under this Guarantee. Any
such amounts drawn on the Letter of Credit pursuant to the preceding sentence
shall be (i) held by HELCO, as security for Guarantor’s performance of its
obligation to maintain the Letter of Credit as aforesaid, until such time as a
new Letter of Credit is issued and delivered to HELCO, and (ii) upon the
issuance and delivery of a new Letter of Credit as aforesaid, paid to Guarantor
or its designee without interest.

 

3. Guarantee Limits. Guarantor’s obligations under Section 2(a) of this
Guarantee in the aggregate shall be limited to the amounts shown below with
respect to sums as payable by HEP to HELCO pursuant to the PPA as the result of
events or circumstances during the period shown opposite such amounts:

 

Period

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   Amount

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From Phase 2 In-Service Date to End of Term

   $ 1,500,000

 

4. Generally. Guarantor shall not be liable under Section 2 of this Guarantee to
any extent greater than 50% of the liability it would have incurred if it had
been the contracting party (in place of HEP) under the PPA, and all the
representations and warranties made by Guarantor in Section 5 hereof in respect
of this Guarantee were true in respect of the PPA as well as the Guarantee and
notwithstanding any bankruptcy or insolvency of the HEP. In addition, Guarantor
shall have no obligation under Section 2(a) of this Guarantee for any claim for
payment, performance or otherwise attributable to events or circumstances during
the period prior to the Phase 2 In-Service Date, not asserted by HELCO in
writing within one hundred eighty (180) days after the Phase 2 In-Service Date.

 

5. Representations and Warranties. Guarantor represents and warrants as follows:

 

a. Guarantor has full power, authority and legal right to execute and deliver
and perform its obligations under this Guarantee. This Guarantee has been duly
executed and delivered by Guarantor and constitutes a legal, valid and

 

 

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binding obligation of Guarantor, enforceable in accordance with its terms,
except to the extent that such enforcement may be limited by any bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting generally the
enforcement of creditors’ rights from time to time in effect and general
principles of equity.

 

b. No consent, authorization or approval of, or filing with, any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or has been required in respect of
Guarantor in connection with the execution, delivery or performance by Guarantor
of this Guarantee, or the compliance by Guarantor with any of the remedies and
provisions hereof.

 

c. The execution and delivery of, and performance by Guarantor of its
obligations under this Guarantee will not result in a violation of, or be in
conflict with, any provision of the articles of organization or the operating
agreement of Guarantor, or result in a violation of, or be in conflict with, or
constitute a default or any event which would, with notice or lapse of time, or
both, become a default under, any mortgage, indenture, contract, agreement or
other instrument to which Guarantor is a party or by which it or its property is
bound, or result in a violation of, or be in conflict with, or result in a
breach of any term or provision of any judgment, order, decree or award of any
court, arbitrator or governmental or public instrumentality binding upon
Guarantor or its property, which individually or in the aggregate would
materially adversely affect Guarantor’s ability to perform its obligations under
this Guarantee.

 

d. Guarantor is not in default, and no conditions exists which, with notice or
lapse of time, or both, would constitute a default by Guarantor under any
mortgage, loan agreement, deed or trust, indenture or other agreement with
respect thereto, evidence of indebtedness or other instrument of a material
nature, to which it is party or by which it is bound, or in violation of, or in
default under, any rule, regulation, order, writ, judgment, injunction or decree
of any court, arbitrator or federal, state, municipal or other governmental
authority, commission, board, bureau, agency, or instrumentality, domestic or
foreign, which individually or in the aggregate would materially adversely
affect Guarantor’s ability to perform its obligations under this Guarantee.

 

e. There is no action, suit, proceeding, inquiry or investigation, at law or in
equity, or before or by any court, public board or body, pending against
Guarantor, or of which Guarantor has otherwise received official notice, or
which to the knowledge of Guarantor is threatened against Guarantor, wherein an
adverse decision, ruling or finding would have a material adverse effect on the
Guarantor’s financial position or its ability to perform its obligations under
this Guarantee.

 

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f. All agreements, representations and warranties contained herein or made in
writing by or on behalf of Guarantor in connection with the transaction
contemplated hereby shall survive the execution and delivery of this Guarantee.

 

6. Notice. Guarantor shall give written notice to HELCO and HEP within ten (10)
days after (i) the occurrence of any event or circumstance that results in any
of the representations and warranties made by Guarantor in Section 5 ceasing to
be accurate, or (ii) the occurrence, with respect to Guarantor, of any of the
events specified in paragraphs (10) or (11) of Section 7.1A of the PPA as
constituting an Event of Default upon the occurrence thereof with respect to
HEP. Such notice shall describe, with reasonable particularity, the event or
circumstances that has caused such result and shall specify the effect thereof
on all representations and warranties of Guarantor that are affected thereby.

 

7. Miscellaneous.

 

a. Severability. If any term or provision of this Guarantee or the application
thereof to any person, entity or circumstance shall to any extent be invalid or
unenforceable, the remainder of this Guarantee, or the application of such term
or provision to persons, entities or circumstances other than those as to which
it is invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Guarantee shall be valid and enforceable to the fullest extent
permitted by law.

 

b. No Waiver. Except as specifically provided otherwise herein, the failure of
either party to enforce at any time any of the provisions of this Guarantee, or
to require at anytime performance by the other party of any of the provisions
thereof, shall in no way be construed to be a waiver of such provision, nor in
any way to affect the validity of this Guarantee or any part hereof, or the
right of such party thereafter to enforce every such provision.

 

c. Modification. No modification or waiver of all or any part of this Guarantee
shall be valid unless it is reduced to writing and signed by both parties.

 

d. Governing Law and Interpretation. Interpretation and performance of this
Guarantee shall be in accordance with, and shall be controlled by, the laws of
the State of Hawaii, other than the laws thereof that would require reference to
the laws of any other jurisdiction.

 

e. Counterparts. This Guarantee may be executed in several counterparts and all
such executed counterparts shall constitute one agreement, binding on both
parties thereto, notwithstanding that both parties may not be signatories to the
original or the same counterpart.

 

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f. Successors and Assigns. This Guarantee shall be binding upon Guarantor and
its successors and assigns and all persons claiming under or through Guarantor
or any such successor or assigns, and shall inure to the benefit of, and be
enforceable by, HELCO.

 

g. Consolidation. In the event that HELCO brings an action to enforce this
Guarantee during the pendency of any proceeding (arbitration or otherwise)
between HELCO and HEP, Guarantor shall have the option to join such enforcement
action with any such pending proceeding. Moreover, Guarantor shall have the
option to join any such proceeding first brought against Guarantor with any
subsequent proceeding brought against HEP. In each of the cases described above,
such joinder option shall extend until such time as a final judgment is rendered
in the relevant proceeding.

 

IN WITNESS WHEREOF, HELCO and Guarantor have caused this Guarantee to be
executed by their respective duly authorized officers as of the date first above
written.

 

HELCO:

 

GUARANTOR:

HAWAII ELECTRIC LIGHT COMPANY, INC.

 

BLACK RIVER ENERGY, LLC

By

 

/s/ Richard A. von Gnechten

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By

 

/s/ William A. Garnett

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Name:

 

Richard A. von Gnechten

 

Name:

 

William A. Garnett

Its:

 

Financial Vice President

 

Its:

 

President

By

 

/s/ Lorie Ann Nagata

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By

 

 

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Name:

 

Lorie Ann Nagata

 

Name:

   

Its:

 

Treasurer

 

Its:

   

 

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