Exhibit 10.1.14

 

 

 

 

 

 

 

 

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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

OPAL GEO LLC

 

Dated as of December 16, 2016

 

 

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TABLE OF CONTENTS

 

Page

ARTICLE I DEFINITIONS  1     Section 1.1 Definitions  1 Section 1.2 Other
Definitional Provisions 2       ARTICLE II CONTINUATION; OFFICES; TERM      2  
 

SectioN 2.1

Formation of the Company 2 Section 2.2 Name, Office and Registered Agent 2
Section 2.3 Purpose 3 Section 2.4 Term 3 Section 2.5 Organizational and
Fictitious Name Filings; Preservation of Limited Liability 3 Section 2.6 No
Partnership Intended 3       ARTICLE III RIGHTS AND OBLIGATIONS OF THE MEMBERS 4
    Section 3.1  Membership Interests 4 Section 3.2 Approval Rights  4 Section
3.3 Management Rights 5 Section 3.4   Other Activities  5 Section 3.5 No Right
to Withdraw  5 Section 3.6 Limitation of Liability of Members 5 Section 3.7  No
Liability for Deficits 6 Section 3.8 Company Property 6 Section 3.9  Retirement,
Resignation, Expulsion, Incompetency, Bankruptcy or Dissolution of a Member 7
Section 3.10 Withdrawal of Capital 7 Section 3.11  Representations and
Warranties 7       ARTICLE IV CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS 8    
Section 4.1  Capital Contributions  8 Section 4.2 Capital Accounts 8 Section 4.3
Capital Contributions of the Class B Member 9 Section 4.4 Capex Contribution 11
Section 4.5 Contributions for Partnership Adjustments 11 Section 4.6 Working
Capital Loans 11 Section 4.7  OFC2 Financing 11       ARTICLE V ALLOCATIONS 12  
  Section 5.1 Allocations 12 Section 5.2 Adjustments 13 Section 5.3 Tax
Allocations 15 Section 5.4  Other Allocation Rules 16

 

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ARTICLE VI DISTRIBUTIONS  17     Section 6.1 Distributions 17 Section 6.2
Withholding Taxes 18 Section 6.3 Limitation upon Distributions 18 Section 6.4 No
Return of Distributions 19 Section 6.5 Substitute Payments 19     ARTICLE VII
ACCOUNTING AND RECORDS  19     Section 7.1 Reports  19 Section 7.2 Books and
Records and Inspection  22 Section 7.3 Bank Accounts, Notes and Drafts 23
Section 7.4  Financial Statements 24 Section 7.5  Partnership Status and Tax
Elections 24 Section 7.6  Company Tax Returns  25 Section 7.7 Tax Audits 27
Section 7.8 Cooperation 29 Section 7.9 Fiscal Year 29 Section 7.10   Tax Year 29
Section 7.11  Target Internal Rate of Return Determination 30     ARTICLE VIII
MANAGEMENT  34     Section 8.1 Managing Member 34 Section 8.2 Major Decisions 35
Section 8.3 Fundamental Decisions  36 Section 8.4 Insurance   36 Section 8.5
Notice of Material Breach 36 Section 8.6  Anti-Corruption Laws and Sanctions 37
    ARTICLE IX TRANSFERS  37     Section 9.1 Prohibited Transfers 37 Section 9.2
Conditions Applicable to All Transfers 37 Section 9.3 Conditions Applicable to
All Transfers of Class B Membership Interests 39 Section 9.4 Certain Permitted
Transfers 39 Section 9.5 Right of First Offer  40

Section 9.6

Flip Purchase Option

41

Section 9.7

Buy-Out Event

42

Section 9.8

Regulatory and Other Authorizations and Consents

43

Section 9.9

Admission

43

Section 9.10

Security Interest Consent

43

Section 9.11

Regulatory Compliance

44

   

ARTICLE X DISSOLUTION AND WINDING-UP

45

   

Section 10.1

Events of Dissolution

45

Section 10.2

Distribution of Assets

45

Section 10.3

Deficit Capital Accounts

47

Section 10.4

In-Kind Distributions

48

Section 10.5

Certificate of Cancellation

49

 

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ARTICLE XI INDEMNIFICATION

49

   

Section 11.1

Indemnifications

49

Section 11.2

Direct Claims

49

Section 11.3

Third Party Claims

50

Section 11.4

Certain Obligation of the Class A Members

51

Section 11.5

After-Tax Basis

51

Section 11.6

No Duplication

52

Section 11.7

Survival

52

Section 11.8

Final Date for Assertion of Indemnity Claims

52

Section 11.9

Mitigation and Limitations on Losses

53

Section 11.10

Sole Remedy

53

Section 11.11

Payment of Indemnification Claims

53

   

ARTICLE XII COVENANTS

53

   

Section 12.1

Geothermal Matters

53

Section 12.2

Compliance with Senior Notes and Certain Other Material Contracts

54

Section 12.3

Certain Tax Matters

55

   

ARTICLE XIII MISCELLANEOUS

56

   

Section 13.1

Notices

56

Section 13.2

Amendment

57

Section 13.3

Partition

57

Section 13.4

Waivers and Modifications

57

Section 13.5

Severability

57

Section 13.6

Successors; No Third-Party Beneficiaries

57

Section 13.7

Entire Agreement

58

Section 13.8

Governing Law

58

Section 13.9

Further Assurances

58

Section 13.10

Counterparts

58

Section 13.11

Dispute Resolution

58

Section 13.12

Confidentiality

60

Section 13.13

Joint Efforts

61

Section 13.14

Specific Performance

61

Section 13.15

Survival

61

Section 13.16

Letter of Credit Reimbursement Obligations

61

Section 13.17

Recourse Only to Member

62

 

 

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ANNEX I  Definitions

 

SCHEDULES  

 

Schedule 1

Project Companies and Projects

 

Schedule 4.2(d)

Capital Accounts

 

Schedule 4.3(b)

Deferred Contributions Schedule

 

Schedule 8.1(a)

Managing Member Responsibilities

 

Schedule 8.4

Insurance

 

Schedule 9

Transfer Representations and Warranties

 

EXHIBITS

 

Exhibit A

[Reserved]

 

Exhibit B

Form of Certificate for Class A Membership Interest

 

Exhibit C

Form of Certificate for Class B Membership Interest

 

Exhibit D

Form of Operations Report

 

Exhibit E

Form of Distribution Report

 

Exhibit F

Form of Working Capital Loan Note

 

Exhibit G

Form of Production Report

 

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Amended and Restated
LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

OPAL GEO LLC

 

This Amended and Restated Limited Liability Company Agreement (this “Agreement”)
of Opal Geo LLC, a Delaware limited liability company (the “Company”), dated as
of December 16, 2016 (the “Effective Date”), between OrLeaf LLC, a Delaware
limited liability company (“OrLeaf”) and JPM Capital Corporation, a Delaware
corporation (“JPM”), is adopted, executed and agreed to, for good and valuable
consideration, by the Members (as defined below).

 

Preliminary Statements

 

1.     The Company was formed by the filing of its Certificate of Formation with
the Secretary of State of the State of Delaware on November 17, 2016 (the
“Certificate of Formation”).

 

2.     The Company owns one hundred percent (100%) of the limited liability
interests in OFC 2 LLC (the “Intermediate Company”) as described in Schedule 1.A
hereto.

 

3.     The Company owns, directly or indirectly, an interest in each of the
limited liability companies listed in Schedule 1.B hereto, as further described
in Schedule 1.B. The companies listed on Schedule 1.B are collectively referred
to as the “Project Companies” and along with the Intermediate Company are
collectively referred to as the “Subject Companies”, and individually as a
“Subject Company.” Each of the Project Companies owns and operates one or more
geothermal power projects (collectively, the “Projects”), as further described
on Schedule 1.B.

 

4.     Pursuant to the Equity Contribution Agreement between Ormat, OrLeaf and
JPM, dated as of December 16, 2016 (the “Contribution Agreement”), JPM agreed to
make a capital contribution to the Company in exchange for one hundred percent
(100%) of the Class B Membership Interests (as defined below) in the Company in
accordance with the Contribution Agreement and JPM will be admitted as a Member
of the Company.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Members hereby agree to adopt
this Agreement with respect to various matters relating to the Company and the
Members to read as follows:

 

ARTICLE I
DEFINITIONS

 

Section 1.1     Definitions. Capitalized terms used but not otherwise defined
herein shall have the meanings given to such terms in Annex I hereto.

 

 

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Section 1.2     Other Definitional Provisions.

 

(a)     All terms in this Agreement shall have the defined meanings when used in
any certificate or other document made or delivered pursuant hereto unless
otherwise defined therein.

 

(b)     As used in this Agreement and in any certificate or other documents made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in any such certificate or other document to
the extent not defined, shall have the respective meanings given to them under
GAAP. To the extent that the definitions of accounting terms in this Agreement
or in any such certificate or other document are inconsistent with the meanings
of such terms under GAAP, the definitions contained in this Agreement or in any
such certificate or other document shall control.

 

(c)     The words “hereof,” “herein,” “hereunder,” and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement. Section references contained in this
Agreement are references to Sections in this Agreement unless otherwise
specified. The term “including” shall mean “including without limitation.”

 

(d)     The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.

 

(e)     Any date specified for action that is not a Business Day shall mean the
first Business Day after such date.

 

(f)     Any agreement, instrument or statute defined or referred to herein or in
any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein.

 

(g)     Any references to a Person are also to its permitted successors and
assigns.

 

ARTICLE II
CONTINUATION; OFFICES; TERM

 

Section 2.1     Formation of the Company. The Company was formed as a Delaware
limited liability company by the filing of the Certificate of Formation, dated
as of November 17, 2016 (the “Formation Date”), with the Secretary of State of
the State of Delaware pursuant to the Act.

 

Section 2.2     Name, Office and Registered Agent.

 

(a)     The name of the Company shall be “Opal Geo LLC” or such other name or
names as may be agreed to by the Members from time to time. The principal office
of the Company shall be 6225 Neil Road, Suite 300, Reno, NV 89511-1136. The
Managing Member may at any time change the location of such office to another
location, provided that the Managing Member gives prompt written notice of any
such change to the Members and the registered agent of the Company.

 

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(b)     The registered office of the Company in the State of Delaware is located
at c/o HIQ Corporate Services, Inc., 3500 South Dupont Highway, Dover, Delaware
19901. The registered agent of the Company for service of process at such
address is HIQ Corporate Services, Inc. The registered office and registered
agent may be changed by the Managing Member at any time in accordance with the
Act provided that the Managing Member gives prompt written notice of any such
change to all Members. The registered agent’s primary duty as such is to forward
to the Company at its principal office and place of business any notice that is
served on it as registered agent.

 

Section 2.3     Purpose. The nature of the business or purpose to be conducted
or promoted by the Company is: (i) to acquire, own, hold or dispose of, directly
or indirectly, the limited liability company interests in the Subject Companies
and/or the Projects; (ii) to enter into the Transactions Documents to which it
is a party, and to engage in the transactions contemplated by the Transaction
Documents; and (iii) to engage in any lawful act or activity, enter into any
agreement and to exercise any powers permitted to limited liability companies
formed under the Act that are incidental to or necessary, suitable or convenient
for the accomplishment of the purposes specified above.

 

Section 2.4     Term. The term of the Company commenced on November 17, 2016,
and shall continue indefinitely or until the Company is dissolved in accordance
with the terms hereof or as otherwise provided by law (the “Termination Date”).

 

Section 2.5     Organizational and Fictitious Name Filings; Preservation of
Limited Liability. Prior to the Company’s conducting business in any
jurisdiction other than Delaware, the Managing Member shall cause the Company to
register as a foreign limited liability company and file such fictitious or
trade names, statements or certificates in such jurisdictions and offices as
necessary or appropriate to conduct the Company’s business. The Managing Member
may take any and all other actions as may be reasonably necessary or appropriate
to perfect and maintain the status of the Company as a limited liability company
or similar type of entity under the laws of Delaware and any other state or
jurisdiction other than Delaware in which the Company engages in business and
continue the Company as a limited liability company and to protect the limited
liability of the Members as contemplated by the Act.

 

Section 2.6     No Partnership Intended. Other than for purposes of determining
the status of the Company under the Code and the applicable Treasury Regulations
and under any applicable state, municipal or other income tax law or regulation,
the Members intend that the Company not be a partnership, limited partnership,
joint venture or other arrangement and this Agreement shall not be construed to
suggest otherwise.

 

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ARTICLE III
RIGHTS AND OBLIGATIONS OF THE MEMBERS

 

Section 3.1     Membership Interests.

 

(a)     The Membership Interests comprise 1,000 Class A Membership Interests
(the “Class A Membership Interests”) and 1,000 Class B Membership Interests (the
“Class B Membership Interests”).

 

(b)     The Class A Membership Interests and the Class B Membership Interests
shall (i) have the rights and obligations ascribed to such Membership Interests
in this Agreement and the Act; (ii) be evidenced solely by certificates in the
forms annexed hereto as Exhibit B and Exhibit C, respectively, or such other
form as may be prescribed from time to time by any Legal Requirements; (iii) be
recorded in a register of Membership Interests; (iv) be transferable only on
recordation of such Transfer in the register of Membership Interests, upon
compliance with the provisions of Article IX hereof and upon presentation of the
certificates duly endorsed for Transfer, or accompanied by assignment
documentation in accordance with Article IX hereof; (v) be “securities” governed
by Article 8 of the UCC in any jurisdiction (x) that has adopted revisions to
Article 8 of the UCC substantially consistent with the 1994 revisions to
Article 8 adopted by the American Law Institute and the National Conference of
Commissioners on Uniform State Laws and (y) whose laws may be applicable, from
time to time, to the issues of perfection, the effect of perfection or
non-perfection, and the priority of a security interest in Membership Interests
in the Company; and (vi) be personal property.

 

(c)     The Company shall be entitled to treat the registered holder of a
Membership Interest, as shown in the register of Membership Interests referred
to in Section  of this Agreement as the Member for all purposes of this
Agreement, except that the Managing Member may record in the register of
Membership Interests any security interest of a secured party pursuant to any
security interest permitted by this Agreement.

 

(d)     If a Member transfers all of its Membership Interest to another Person
pursuant to and in accordance with the terms set forth in Article IX, the
transferor shall automatically cease to be a Member.

 

Section 3.2     Approval Rights. Any authorization, consent or approval of
(i) Major Decisions prior to the Flip Date and (ii) Fundamental Decisions at any
time during the term hereof, shall require the affirmative authorization,
consent (including, without limitation in the form provided in Section 8.2(b) or
8.3(b) of this Agreement, as applicable) or approval of Class A Members owning
more than fifty percent (50%) of the outstanding Class A Membership Interests
and Class B Members owning more than eighty percent (80%) of the outstanding
Class B Membership Interests (each a “Super-Majority Vote”). Except for Major
Decisions and Fundamental Decisions as described above, and except with respect
to Other Consent Matters, which shall require a separate vote, authorization,
consent or approval as and to the extent required under the relevant provision
of this Agreement, no separate vote, authorization, consent or approval of
either the Class A Members, acting as a class, the Class B Members, acting as a
class, or the Class A Members and Class B Members acting jointly, shall be
required to authorize or approve any decision, determination, action, or other
matter by or of the Company, any and all of which shall be decided, determined,
undertaken, or otherwise acted upon by the Managing Member as set forth in
Section 8.1(a).

 

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Section 3.3     Management Rights. No Member other than the Managing Member
shall have any right, power or authority to take part in the management or
control of the business of, or transact any business for, the Company, to sign
for or on behalf of the Company or to bind the Company in any manner whatsoever.
Except as otherwise provided herein, the Managing Member shall not hold out or
represent to any third party that any other Member has any such power or right
or that any Member is anything other than a member in the Company. A Member
shall not be deemed to be participating in the control of the business of the
Company by virtue of its possessing or exercising any rights set forth in this
Agreement or the Act or any other agreement relating to the Company.

 

Section 3.4     Other Activities. Notwithstanding any duty otherwise existing at
law or in equity, any Member or the Managing Member may engage in or possess an
interest in other business ventures of every nature and description,
independently or with others, even if such activities compete directly with the
business of the Company, and neither the Company nor any of the Members shall
have any rights by virtue of this Agreement in and to such independent ventures
or any income, profits or property derived from them.

 

Section 3.5     No Right to Withdraw. Except as otherwise expressly provided in
this Agreement, no Member shall have any right to voluntarily resign or
otherwise withdraw from the Company without the prior written consent of the
remaining Members of the Company representing at least ninety-five percent (95%)
of the remaining Membership Interests, in their sole and absolute discretion.

 

Section 3.6     Limitation of Liability of Members.

 

(a)     Each Member’s liability shall be limited as set forth in the Act and
other applicable Legal Requirements. Except as otherwise required by the Act,
the debts, obligations and liabilities of the Company, whether arising in
contract, tort or otherwise, shall be the debts, obligations and liabilities
solely of the Company, and the Members of the Company shall not be obligated
personally for any of such debts, obligations or liabilities solely by reason of
being a Member of the Company. In no event shall any Member or the Managing
Member be liable under this Agreement to another Member for any lost profits of,
or any consequential, punitive, special or incidental damages incurred by, such
Member arising from a breach of this Agreement, provided that this shall in no
way limit any such liability of a Member or the Managing Member to another
Member under any other Transaction Document; provided, further, that to the
extent PTCs are lost as a result of representations made by the Class A Member
in the Transaction Documents not being true and correct in any respect when made
or deemed made, or the breach of any covenant, obligation or agreement by
Class A Member or an Affiliate of the Class A Member, the value of such lost
PTCs shall be recoverable as damages and will not constitute consequential,
punitive, special, incidental or exemplary damages, whether or not the
underlying loss of production constitutes consequential damages for which no
recovery hereunder is permitted.

 

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(b)     Each of the Members shall be fully protected in relying in good faith
upon the records of the Company and upon such information, opinions, reports or
statements presented to the Company by any other Person who is a Member, or any
officer or employee of the Company, or by any other individual as to matters the
Members reasonably believe are within such other individual’s professional or
expert competence, including information, opinions, reports or statements as to
the value and amount of the Assets, liabilities, profits or losses of the
Company or any other facts pertinent to the existence and amount of Assets from
which distribution to the Members might properly be paid.

 

(c)     To the extent that, at law or in equity, a Member, in its capacity as a
member or manager of the Company or otherwise, has duties (including fiduciary
duties) and liabilities relating thereto to the Company or to any Member or
other Person bound by this Agreement, such Member, acting under this Agreement
shall not be liable to the Company or to any Member or other Person bound by
this Agreement for its good faith reliance on the provisions of this Agreement;
provided, that this Section 3.6(c) shall not be construed to limit obligations
or liabilities therefor, in each case as expressly stated in this Agreement or
any other Transaction Document. The provisions of this Agreement, to the extent
that they restrict the duties and liabilities of a Member, in its capacity as a
member or manager of the Company or otherwise, otherwise existing at law or in
equity, are agreed by the Members to replace such other duties and liabilities
of such Member.

 

(d)     OrLeaf, in its capacity as a Member or Managing Member, shall not have
any liability for breach of contract (except as provided in (i) and (ii) below)
or breach of duties (including fiduciary duties) of a member or manager to the
Company or to any other Person that is a party to or is otherwise bound by this
Agreement, in each case, to the fullest extent permitted by the Act; provided,
that (i) this Agreement shall not limit or eliminate liability for any
(x) obligations expressly imposed on OrLeaf, as Member or Managing Member,
pursuant to this Agreement or any other Transaction Document or (y) act or
omission that constitutes a bad faith violation of the implied contractual
covenant of good faith and fair dealing or (z) fraud, willful misconduct or
gross negligence and (ii) this Section 3.6(d) shall not limit or eliminate
liabilities expressly stated in this Agreement or any other Transaction
Document.

 

(e)     Liability to the Company, any Class B Member or any other Person bound
by this Agreement for damages resulting from a breach or breaches by the
Operator of any of its obligations, covenants or agreements under any O&M
Agreement shall be separate and distinct from liabilities of OrLeaf in its
capacity as a Class A Member; and damages resulting from such breach or breaches
shall not be subject to the same aggregate indemnification limitations contained
in Article XI regarding Class B Member Indemnified Costs.

 

Section 3.7     No Liability for Deficits. Except to the extent otherwise
provided by law with respect to third-party creditors of the Company and in
Section 10.3(b), none of the Members shall be liable to the Company for any
deficit in its Capital Account, nor shall such deficits be deemed Assets of the
Company.

 

Section 3.8     Company Property. All property owned by the Company, whether
real or personal, tangible or intangible and wherever located, shall be deemed
to be owned by the Company, and no Member, individually, shall have any
ownership of such property.

 

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Section 3.9     Retirement, Resignation, Expulsion, Incompetency, Bankruptcy or
Dissolution of a Member. The retirement, resignation, expulsion, Bankruptcy or
dissolution of a Member shall not, in and of itself, dissolve the Company. The
successors in interest to the bankrupt Member shall, for the purpose of settling
the estate, have all of the rights of such Member, including the same rights and
subject to the same limitations that such Member would have had under the
provisions of this Agreement to Transfer its Membership Interest. A successor in
interest to a Member shall not become a substituted Member except as provided in
this Agreement.

 

Section 3.10     Withdrawal of Capital. No Member shall have the right to
withdraw capital from the Company or to receive or demand distributions (except
as to distributions of Distributable Cash as set forth in Article VI) or return
of its Capital Contributions until the Company is dissolved in accordance with
this Agreement and applicable provisions of the Act. No Member shall be entitled
to demand or receive any interest on its Capital Contributions.

 

Section 3.11     Representations and Warranties. Each Member hereby represents
and warrants to the Company and each other Member that the following statements
are true and correct as of the date it becomes a Member (both immediately before
and after the time it becomes a Member):

 

(a)     That Member is duly incorporated, organized or formed (as applicable),
validly existing, and (if applicable) in good standing under the law of the
jurisdiction of its incorporation, organization or formation; if required by
applicable law, that Member is duly qualified and in good standing in the
jurisdiction of its principal place of business, if different from its
jurisdiction of incorporation, organization or formation; and that Member has
full power and authority to execute and deliver this Agreement and to perform
its obligations hereunder, and all necessary actions by the board of directors,
shareholders, managers, members, partners, trustees, beneficiaries, or other
applicable Persons necessary for the due authorization, execution, delivery, and
performance of this Agreement by that Member have been duly taken.

 

(b)     That Member has duly executed and delivered this Agreement and the other
documents contemplated herein, and they constitute the legal, valid and binding
obligation of that Member enforceable against it in accordance with their terms
(except as may be limited by Bankruptcy, insolvency or similar laws of general
application and by the effect of general principles of equity, regardless of
whether considered at law or in equity).

 

(c)     That Member’s authorization, execution, delivery, and performance of
this Agreement does not and will not (i) conflict with, or result in a breach,
default or violation of, (A) the Organizational Documents of such Member,
(B) any material contract or agreement to which that Member is a party or is
otherwise subject, or (C) any law, rule, regulation, order, judgment, decree,
writ, injunction or arbitral award to which that Member is subject; or
(ii) require any consent, approval or authorization from, filing or registration
with, or notice to, any Governmental Body or other Person, unless such
requirement has already been satisfied.

 

(d)     That Member is a “United States person” within the meaning of
Section 7701(a)(30) of the Code.

 

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(e)     That Member is an Unrelated Person.

 

(f)     That either (i) no part of the aggregate Capital Contribution made by
that Member, constitutes Assets of any “employee benefit plan” within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended (“ERISA”), or other “benefit plan investor” (as defined in
U.S. Department of Labor Reg. §§2510.3-101 et seq.) or Assets allocated to any
insurance company separate account or general account in which any such employee
benefit plan or benefit plan investor (or related trust) has any interest or
(ii) the source of the funding used to pay the Capital Contribution made by that
Member is an “insurance company general account” within the meaning of
Department of Labor Prohibited Transaction Exemption 95-60, issued July 12,
1995, and there is no employee benefit plan, treating as a single plan all plans
maintained by the same employer or employee organization, with respect to which
the amount of the general account reserves and liabilities for all contracts
held by or on behalf of such plan exceeds ten percent (10%) of the total
reserves and liabilities of such general account (exclusive of separate account
liabilities) plus surplus, as set forth in the National Association of Insurance
Commissioners “Annual Statement” filed with such Member’s state of domicile.

 

(g)     That Member is an “Accredited Investor” as such term is defined in
Regulation D under the Securities Act of 1933, as amended (the “Securities
Act”). That Member has had a reasonable opportunity to ask questions of and
receive answers from the Company concerning the Membership Interests and the
Company, and all such questions have been answered to the full satisfaction of
that Member. That Member understands that the Membership Interests have not been
registered under the Securities Act in reliance on an exemption therefrom, and
that the Company is under no obligation to register the Membership Interests.
That Member will not transfer the Membership Interests in violation of the
Securities Act or any other applicable securities laws. That Member is
purchasing the Membership Interests for its own account and not for the account
of any other Person and not with a view to distribution or resale to others.

 

ARTICLE IV
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS

 

Section 4.1     Capital Contributions. The Class B Member will make a Capital
Contribution to the Company on the Effective Date as described in Article II of
the ECA. Except as provided in this Article IV and Section 10.3(b), no Member
will be required to make any Capital Contributions to the Company after the
Effective Date.

 

Section 4.2     Capital Accounts.

 

(a)     A capital account (a “Capital Account”) will be established and
maintained for each Member. If there is more than one Member in a class, then
each of the Members in that class will have a separate Capital Account.

 

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(b)     A Member’s Capital Account will be increased by (i) the amount of money
the Member contributes to the Company, (ii) the net value of any property the
Member contributes or is deemed to contribute to the Company (i.e., the fair
market value of the property net of liabilities secured by the property that the
Company is considered to assume or take subject to under Section 752 of the
Code), and (iii) the income and gain the Member is allocated by the Company,
including any income and gain that are exempted from tax. A Member’s Capital
Account will be decreased by (i) the amount of Distributable Cash distributed or
deemed distributed to the Member by the Company, (ii) the net value of any
property distributed to the Member by the Company (i.e., the fair market value
of the property net of liabilities secured by the property that the Member is
considered to assume or take subject to under Section 752 of the Code),
(iii) any expenditures of the Company described in Section 705(a)(2)(B) of the
Code (i.e., that cannot be capitalized or deducted in computing taxable income)
that are allocated to the Member; and (iv) losses and deductions that are
allocated to the Member.

 

(c)     The Company’s property will be revalued, and the Capital Accounts of the
Members will be reset to reflect that revaluation as directed by Treasury
Regulation Section 1.704-1(b)(2)(iv)(f), immediately prior to the following
events: (i) if any new or existing Member makes more than a de minimis Capital
Contribution in exchange for a new or additional Membership Interest, (ii) if
Distributable Cash or other property is distributed by the Company to a Member
to redeem its Membership Interest, or (iii) if the Company is liquidated.

 

(d)     The Capital Account balances and Capital Interest of each Member on the
Closing Date are shown in Schedule 4.2(d).

 

(e)     If all or a portion of a Membership Interest in the Company is
Transferred in accordance with the terms of this Agreement, then the transferee
will succeed to the Capital Account of the transferor to the extent it relates
to the Membership Interest so Transferred.

 

(f)     The provisions of this Agreement relating to maintenance of Capital
Accounts are intended to comply with Treasury Regulation Section 1.704-1(b), and
will be interpreted and applied in a manner consistent with such Treasury
Regulation or any successor provision.

 

Section 4.3     Capital Contributions of the Class B Member.

 

(a)     Subject to Section 4.3(b) below, on each Deferred Contribution Date the
Class B Member shall contribute its Deferred Contribution to the Company in the
amount equal to the product of the applicable Deferred Contribution Payment Rate
multiplied by the MWh of Excess Production; provided that, notwithstanding
anything to the contrary herein, the aggregate obligation of the Class B Member
to make contributions to the Company under this Section 4.3(a) shall not exceed
the Deferred Contribution Cap.

 

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(b)     Without limiting its obligation under Section 4.3(a), if (i) the Class B
Member cannot determine the amount of the Deferred Contribution it is required
to make on any Deferred Contribution Date under Section 4.3(a) because the
applicable Production Report has not been delivered to such Class B Member as
required pursuant to Section 7.1(f), (ii) a good faith dispute pursuant to
Section 13.11(b) is ongoing with such Class B Member as to whether the Flip Date
has occurred, or (iii) a good faith dispute pursuant to Section 7.1(h) is
ongoing involving such Class B Member with respect to the calculation of items
in a Production Report, the Class B Member’s obligation to make such Deferred
Contribution (in the case of clause (i) or (ii) above) or the disputed portion
of such Deferred Contribution (in the case of clause (iii) above) shall
automatically be extended until the later of such Deferred Contribution Date or
fifteen (15) days following the delivery of such Production Report (unless a
good faith dispute is ongoing pursuant to Section 7.1(h) in respect of such
Production Report) or resolution of such dispute pursuant to Section 7.1(h) or
Section 13.11(b), as applicable. If the Class B Member makes a Deferred
Contribution pursuant to Section 4.3(a) which constitutes an Overpayment which
is later determined pursuant to Section 7.1(g) to have been greater than the
amount of the Deferred Contribution required to be made pursuant to
Section 4.3(a), such excess amount will be returned to such Class B Member from
the Class A Member within ten (10) Business Days of such notification, and if a
Class B Member makes a Deferred Contribution pursuant to Section 4.3(a)
resulting in an Underpayment which is later determined pursuant to
Section 7.1(g) to have been less than the amount of the Deferred Contribution
required to be made pursuant to Section 4.3(a), such shortfall shall within ten
(10) Business Days of such notification be contributed to the Company by such
Class B Member. In addition, notwithstanding anything herein to the contrary, if
(x) the Class A Member, in its capacity as the Managing Member, shall have
breached Section 8.2, Section 8.3, or any covenant contained in Article XII in
any material respect and such breach shall not have been cured, otherwise
remedied, or waived or (y) the Class A Member shall have breached any of its
representations and warranties under Article III of the Contribution Agreement,
under Section 3.11 hereof or breached its covenant under Article VI of the
Contribution Agreement or Article XII hereof and such breach has or is
reasonably likely to have a Material Adverse Effect or has or is reasonably
likely to have a materially adverse effect with respect to the Class B Member,
then upon the occurrence of any of the preceding in clause (x) or (y), the
Class B Member shall have no obligation to make any Deferred Contributions under
Section 4.3(a) until such breach or default shall have been cured, remedied or
waived, in which case, the Class B Member shall be obligated to make all
Deferred Contributions which it would have been required to make under
Section 4.3(a) no later than 30 days following the cure, remedy or waiver of
such breach or default and no interest shall accrue on any such obligations
during such period.

 

(c)     In the event that the Class B Member fails to make any Deferred
Contribution under Section 4.3(a) within 20 Business Days from the date such
Deferred Contribution is required to be made in accordance with Section 4.3(a)
(subject to any extension or suspension of such obligation under Section 4.3(b)
or Section 4.7, or amounts subject to any ongoing dispute pursuant to
Section 7.1(h) or Section 13.11(b), a “Class B Contribution Default”) (such
undisputed amount being a “Class B Defaulted Contribution”), the Company shall
distribute to the Class A Member the distributions of Distributable Cash
otherwise distributable (assuming no Class B Defaulted Contribution had
occurred) to the defaulting Class B Members pursuant to Section 6.1 in an amount
up to the Class B Defaulted Contribution and thereby reduce the amounts
otherwise owed by the Class B Member with respect to the Class B Defaulted
Contribution. Effective immediately upon the occurrence of a Class B
Contribution Default, and for as long thereafter as such Class B Contribution
Default shall be continuing, the Class B Defaulted Contribution then due and
payable shall bear interest at a rate that is equal to eight percent (8%),
calculated on a per annum basis, and such amounts shall be immediately due and
payable by the Class B Members upon the Class A Member’s demand.

 

(d)     All payments required to be made under this Section 4.3 shall be made by
wire transfer in immediately available funds.

 

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Section 4.4     Capex Contribution. OrLeaf, or any Affiliate of OrLeaf, may make
(but will have no obligation to make) Capital Contributions to the Company or
any Subject Company for any capital expenditures that the Managing Member
determines (in its sole discretion and without any requirement for consent or
other action by any Class B Member) is reasonable or advisable (any such
contribution, a “Capex Contribution”).

 

Section 4.5     Contributions for Partnership Adjustments. In the event the
Company receives a notice of final partnership adjustment with respect to which
an “imputed underpayment” within the meaning of Section 6225(b) of Title XI of
the Bipartisan Budget Act of 2015 (P.L. 114-74) (“Title XI”) and the Partnership
Representative does not elect the application of Section 6226 of Title XI, each
Member will be obligated to make a Capital Contribution to the Company in an
amount equal to its allocable share of the imputed underpayment (and any
associated penalties, interest and additions to tax, as applicable) as
determined by the Partnership Representative and calculated in a manner that
takes into account the allocation of tax risks between the Members reflected in
this Agreement and agreed by the Class B Member; provided, any dispute among the
Members with respect to any such amount shall be subject to a dispute resolution
process consistent with Section 13.11.

 

Section 4.6     Working Capital Loans. OrLeaf, or any Affiliate of OrLeaf, may
make (but will have no obligation to make) loans to the Company or any Subject
Company, when and as needed (as determined by the Managing Member and without
any requirement for consent or other action by any Class B Member), sufficient
to cover working capital, maintenance and other similar expenditure needs of the
Company or any of the Subject Companies in an aggregate principal amount
outstanding at any time not to exceed ten million dollars ($10,000,000) for the
Company and all Subject Companies, combined (any such loan, a “Working Capital
Loan”). All Working Capital Loans shall be unsecured and repaid out of
Distributable Cash of the Company (if the Company is the borrower) or available
cash flow of the relevant Subject Company (if such Subject Company is the
borrower) before any distributions of Distributable Cash to members of such
entity. Any Working Capital Loans made by OrLeaf or an Affiliate of OrLeaf shall
(a) be unsecured and evidenced by a note substantially in form of Exhibit F
hereto and (b) otherwise be on terms equivalent in all material respects to
loans that would be available from a third party lender that is not an Affiliate
of OrLeaf.

 

Section 4.7     OFC2 Financing. Notwithstanding anything to the contrary in this
Agreement, the Members agree, that:

 

(a)     upon any draw upon or depletion of any security (such as a letter of
credit) or reserve amount required to be provided and maintained under any of
the OFC2 Note Purchase Agreement, OFC2 Indenture or any other Loan Document (as
defined in the OFC2 Note Purchase Agreement), then unless otherwise agreed by
the consent of Class B Members owning more than 80% of the Class B Membership
Interests following good faith review of the consent request, (x) no
Distributable Cash will be distributed to the Class A Member and (y) such
Distributable Cash that would otherwise have been distributed to the Class A
Member will instead be used to replenish, replace or reinstate any such security
or reserve amount; provided, that, if such Distributable Cash is not adequate to
cause the security or reserve amount to be replenished, replaced or reinstated
in full within 30 days, then the Class B Member may (but shall not be obligated
to) advance the funds needed to replenish, replace or reinstate the full balance
of the security or reserve amount then outstanding (a “Class B Member Loan”),
and such Class B Member Loan shall be unsecured and shall bear interest at a
rate equal to the lesser of (A) ten percent (10%) or (B) the highest rate of
interest that may be charged by the Class B Member in accordance with applicable
law. Interest on and the principal amount of any Class B Member Loan shall be
paid on each Distribution Date from Distributable Cash prior to the making of
any payments provided for in Section 6.1. Interest on any Class B Member Loan
shall accrue, and if not paid in accordance with the immediately preceding
sentence of this Section 4.7(a), be compounded to the principal amount thereof
on each Distribution Date;

 

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(b)     following an OFC2 Distribution Block, and not withstanding anything to
the contrary in Section 4.7(a) above, (i) an amount up to (63.25%) of
Distributable Cash generated by ORNI 37 that would otherwise have been
distributed to the Class A Member shall be used to remedy the event or events
giving rise to the OFC2 Distribution Block (other than with respect to an OFC2
Distribution Block as a result of Section 10.5(a)(viii) of the OFC2 Note
Purchase Agreement) and (ii) the Class B Member shall not be obligated to make
Deferred Contributions under Section 4.3 (and no interest shall accrue on any
such withheld Deferred Contributions) until such time that the event or events
giving rise to such OFC2 Distribution Block are remedied, at which time the
Class B Member shall be obligated to make within 30 days all Deferred
Contributions which it would have otherwise been required to make under
Section 4.3(a); and

 

(c)     following an OFC2 Foreclosure, (i)  an amount up to (63.25%) of
Distributable Cash generated by ORNI 37 that would otherwise have been
distributed to the Class A Member will be distributed to the Class B Member on
each Distribution Date following such OFC2 Foreclosure until the earlier to
occur of the Flip Date and achievement of the Target Internal Rate of Return
(for the avoidance of doubt, using the calculation rules and conventions in
Section 7.11(a) through (d)) and (ii) the Class B Member shall not be obligated
to make Deferred Contributions under Section 4.3.

 

ARTICLE V
ALLOCATIONS

 

Section 5.1     Allocations. For purposes of maintaining Capital Accounts,
except as otherwise provided in Section 10.2 and after giving effect to
Section 5.2, all items of Company income and loss, gain, deduction and credit
(including items associated with any interest deductions) will be allocated
among the Members as follows:

 

(a)     for the period from the Closing Date through the Target Flip Date,
ninety-nine percent (99%) to the Class B Member and one percent (1%) to Class A
Member;

 

(b)     after the Target Flip Date (if the Flip Date has not yet occurred) until
the Flip Date, (i) ninety-nine percent (99%) to the Class B Member and one
percent (1%) to Class A Member for so long as any one of the PTC Eligible
Projects is generating PTCs and (ii) five percent (5%) to the Class B Member and
ninety-five percent (95%) to Class A Member if PTCs are no longer available to
any of the Projects; and

 

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(c)     from and after the Flip Date, five percent (5%) to the Class B Member
and ninety-five percent (95%) to Class A Member.

 

(d)     Notwithstanding the foregoing, if the Class B Member would have a
deficit Capital Account balance in excess of the amounts the Class B Member is
obligated to restore pursuant to the penultimate sentence of Treasury
Regulations Section 1.704.2(g)(1) and 1.704-2(i)(5) as of the end of any Tax
Year ending on or after the Flip Date, income and gain of the Company (but not
loss or deductions of the Company) shall be allocated ninety-nine percent (99%)
to the Class B Member up to the amount of such deficit, and one percent (1%) to
the Class A Member until the Class B Member’s deficit Capital Account balance is
not in excess of the amounts that such Class B Member is deemed obligated to
restore.

 

Section 5.2     Adjustments. The following adjustments will be made in the
allocations in Section 5.1 in the following order of priority to comply with
Treasury Regulation Section 1.704-1(b):

 

(a)     Except as provided in Treasury Regulations Section 1.704-2(f), if there
is a net decrease in Company Minimum Gain during any Tax Year, each Member shall
be allocated Company items of income and gain for such Tax Year (and, if
necessary subsequent Tax Years) in an amount equal to such Member’s share of the
net decrease in Company Minimum Gain, determined in accordance with Treasury
Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Member pursuant thereto. The Company items to be so allocated shall be
determined in accordance with Treasury Regulations Sections 1.704-2(f)(6) and
1.704-2(j)(2). This Section 5.2(a) is intended to comply with the minimum gain
chargeback requirement in Treasury Regulations Section 1.704-2(f) and shall be
interpreted consistently therewith. For each Tax Year in which there is an
increase in Company Minimum Gain, each Member’s share of such increase shall be
determined pursuant to Treasury Regulations Section 1.704-2(g)(1).

 

(b)     If there is a net decrease in Minimum Gain Attributable to Member
Nonrecourse Debt during any Tax Year, determined in accordance with Treasury
Regulation Section 1.704-2(i)(3), then, except as provided in Treasury
Regulation Section 1.704-2(i)(4), each Member who has a share of Minimum Gain
Attributable to Member Nonrecourse Debt, determined in accordance with Treasury
Regulation Section 1.704-2(i)(5), will be allocated items of income and gain for
such Tax Year (and, if necessary, subsequent Tax Years) in an amount equal to
such Member’s share of the net decrease in Minimum Gain Attributable to Member
Nonrecourse Debt. The items of Company income or gain to be allocated will be
determined in accordance with Treasury Regulation Sections 1.704-2(i)(4) and
1.704-2(j)(2). This subsection (b) is intended to comply with Treasury
Regulation Section 1.704-2(i)(4) and will be applied and interpreted in
accordance with such Treasury Regulation.

 

(c)     Nonrecourse Deductions, to the extent they exist and can be separately
allocated, will be allocated among the Members in the same proportions as the
allocations of income and loss were made for the Tax Year pursuant to
Section 5.1(a) through (c), as in effect at the time the Nonrecourse Deduction
arises, or if applicable, Section 10.2(a)(iv), as in effect at the time the
Nonrecourse Deduction arises. The Members intend that these allocations will
follow the allocations of significant items of partnership income and loss
allocable to property securing the indebtedness and will be reasonably
consistent with allocations that have substantial economic effect and in
compliance with Treasury Regulation Section 1.704-2(b) and (e)(2).

 

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(d)     Any Member Nonrecourse Deductions will be allocated in accordance with
Treasury Regulation Section 1.704-2(i) to the Member who bears the economic risk
of loss for the Member Nonrecourse Debt to which such Member Nonrecourse
Deductions relate.

 

(e)     In the event any Member unexpectedly receives any adjustments,
allocations or distributions described in Treasury Regulation
Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6) resulting in any deficit in such
Member’s Adjusted Capital Account, items of income and gain will be specially
allocated to such Member in any amount and manner sufficient to eliminate, to
the extent required by the Treasury Regulations, the deficit in such Member’s
Adjusted Capital Account as quickly as possible. The items of income or gain to
be allocated will be determined in accordance with Treasury Regulation
Section 1.704-1(b)(2)(ii)(d). This subsection (e) is intended to comply with
Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and will be applied and
interpreted in accordance with such Treasury Regulation; provided, that the
special allocation pursuant to this subsection (e) will be made only if and to
the extent that such Member would have a deficit in its Adjusted Capital Account
balance after all of the other special allocations provided for in this
Section 5.2 have been tentatively made as if this subsection (e) were not in
this Agreement.

 

(f)     No items of loss or deduction will be allocated to any Member to the
extent that any such allocation would cause the Member to have, or increase the
amount of, an existing deficit in such Member’s Adjusted Capital Account at the
end of any Tax Year. All items of loss or deduction in excess of the limitation
set forth in this subsection (f) will be allocated among such other Members that
have positive Adjusted Capital Accounts, pro rata, in proportion to such
Adjusted Capital Accounts, until each such Member’s positive Adjusted Capital
Account is reduced to zero; provided, that this subsection (f) will apply only
to the extent that such Member would have a deficit in its Adjusted Capital
Account after all of the other allocations provided for in this Section 5.2 have
been tentatively made as if this subsection (f) and subsection (e) above were
not in this Agreement.

 

(g)     In the event any Member has a deficit in such Member’s Adjusted Capital
Account at the end of any Tax Year, each such Member will be specially allocated
items of income and gain as quickly as possible to eliminate such deficit in its
Adjusted Capital Account; provided, that an allocation pursuant to this
subsection (g) will be made if and only to the extent that such Member would
have a deficit in its Adjusted Capital Account in excess of such sum after all
of the other allocations provided for in Section 5.1 and this Section 5.2 have
been tentatively made as if this subsection (g) and subsection (e) above were
not in this Agreement.

 

(h)     To the extent an adjustment to the adjusted tax basis of any Company
Asset pursuant to Sections 734(b) or 743(b) of the Code is required to be taken
into account in determining the Capital Accounts of the Members under Treasury
Regulation Section 1.704-1(b)(2)(iv)(m), the amount of such adjustment to the
Capital Accounts will be treated as an item of gain (if the adjustment increases
the basis of the Asset) or loss (if the adjustment decreases such basis) and
such gain or loss will be specially allocated among the Members in a manner
consistent with the manner in which their Capital Accounts are required to be
adjusted pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m) as
contemplated by Section 4.2 hereof.

 

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(i)     The allocations required by Section 5.2(a) through (h) are intended to
comply with the requirements of Treasury Regulation Sections 1.704-1(b),
1.704-1(d)(4) and 1.704-2. It is the intent of the Members that, to the extent
the Company can do so consistently with the Treasury Regulations, the net amount
of the allocations under this Article V to each Member will be the net amount
that would have been allocated to each Member if this Agreement did not contain
Section 5.2(a) through (h).

 

(j)     Upon a transfer of a Company Asset that constitutes “capital gain
property” within the meaning of Treasury Regulation Section 1.755-1(a)(1), then
notwithstanding any other provision of this Section 5.2 or Section 10.2, any
item of gain resulting from such transfer shall be allocated first to any Member
that has a deficit in its Capital Account and thereafter as set forth in
Sections 5.1(a), (b) and (c). For the avoidance of doubt, gain for purposes of
this Section 5.2(j) shall not include any gain for which Sections 1245(a)(1) or
1250(a) of the Code would apply.

 

Section 5.3     Tax Allocations.

 

(a)     Except as otherwise provided in this Section 5.3, for federal, state and
local income tax purposes each item of income, gain, deduction and loss of the
Company will be allocated to the Members in the same manner as the correlative
item computed for purposes of the Capital Accounts is allocated and credited or
debited pursuant to Sections 5.1 and 5.2. Allocations pursuant to this
Section 5.3 are solely for purposes of federal, state and local taxes and will
not affect, or in any way be taken into account in computing, any Member’s
Capital Account or share of income, gain, deduction or loss or items thereof or
distributions pursuant to any provision of this Agreement.

 

(b)     In order to remove book/tax discrepancies attributable to an Asset
contributed to the Company by a Member or with respect to which an adjustment to
the Gross Asset Value was made pursuant to subsection (b) of the definition of
“Gross Asset Value,” items of taxable income, gain, loss and deduction will be
allocated solely for federal, state and local income tax purposes as follows:

 

(i)     Items of Company income, gain, loss and deduction with respect to any
property contributed to the Company (including income, gain, loss and deduction
determined with respect to the alternative minimum tax) will be allocated among
the Members in accordance with Section 704(c) of the Code and the Treasury
Regulations thereunder so as to take account of any variation between the
adjusted basis of such property to the Company for federal income tax purposes
and its initial Gross Asset Value. The Company will use the “remedial method”
described in Treasury Regulation Section 1.704-3(d).

 

(ii)     In the event the Gross Asset Value of any Company Asset is adjusted
pursuant to subsection (b) of the definition of “Gross Asset Value,” subsequent
allocations of Company taxable income, gain, loss and deduction with respect to
such Asset will take account of any variation between the adjusted basis of such
Asset (including such adjusted basis for alternative minimum tax purposes) and
its Gross Asset Value in the same manner as under Section 704(c) of the Code and
the Treasury Regulations thereunder, and, if such property was originally
contributed to the Company by a Member, will be allocated in accordance with
subsection (i) above.

 

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(c)     If any portion of gain recognized from the disposition of an Asset by
the Company represents the “recapture” of previously allocated deductions by
virtue of the application of Section 1245 or 1250 of the Code (“Recapture
Gain”), such Recapture Gain will be allocated, solely for income tax purposes in
accordance with Treasury Regulation Sections 1.1245-1(e)(2) and (3) and
1.1250-1(f).

 

(d)     To the extent that an adjustment to the adjusted tax basis of any Asset
of the Company is made pursuant to Section 743(b) of the Code as a result of a
Transfer of a Membership Interest in the Company, any adjustment will affect the
transferee only and will not affect the Capital Account of the transferring
Member or the transferee. In such case, the transferee will be required to agree
to provide to the Company (i) information about the allocation of any step-up or
step-down in basis to the Assets of the Company and (ii) the depreciation or
amortization method for any step-up in basis to the Assets of the Company.

 

Section 5.4     Other Allocation Rules.

 

(a)     If the respective Membership Interests or allocation ratios described in
this Article V of the existing Members in the Company change or if a Membership
Interest is Transferred in compliance with this Agreement to any other Person,
then, for the Tax Year in which the change or Transfer occurs, all Company items
resulting from the operations of the Company shall be allocated, as between the
Members for the Tax Year in which the change occurs or between the transferring
Member and the transferee, by taking into account their varying interests using
the interim closing of the books method permitted by Treasury Regulations
Section 1.706-1(c)(2)(ii), unless otherwise agreed in writing by all the
Members.

 

(b)     The Members agree that excess Nonrecourse Liabilities of the Company
allocated to the Members under Treasury Regulation Section 1.752-3(a)(3) will be
allocated in accordance with the sharing percentages set forth in
Section 5.1(c). The allocations required by this subsection (b) are intended to
comply with the requirements of Treasury Regulation Section 1.752-3(a)(3) and
Revenue Ruling 95-41.

 

(c)     To the extent permitted by Treasury Regulation Section 1.704-2(h)(3) and
1.704-2(i)(6), the Members will endeavor to treat distributions of Distributable
Cash as having been made from the proceeds of a Nonrecourse Liability or a
Member Nonrecourse Debt only to the extent such distribution would cause or
increase a deficit in the Adjusted Capital Account for any member.

 

(d)     Unless otherwise required by applicable law, the Company shall not treat
any portion of the Existing Indebtedness as “recourse” debt for purposes of
Section 752 of the Code or Treasury Regulation Section 1.704-2 as a result of
the obligation of any Member to make contributions of cash to the Company under
Article IV of this Agreement.

 

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(e)     For the avoidance of doubt, income and interest accrued on the Existing
Indebtedness prior to the Closing Date and cash from the operation of the
Projects prior to the Closing Date (including cash trapped in any reserve
account) shall be for the sole account of the Class A Member and shall not be
subject to the allocation provisions set forth in this Article V or the
distribution provisions set forth in Article VI.

 

ARTICLE VI
DISTRIBUTIONS

 

Section 6.1     Distributions.

 

(a)     Except as provided otherwise in this Section 6.1, Section 4.3,
Section 4.6, Section 4.7 or Section 10.2, Distributable Cash will be distributed
to the Members as follows:

 

(i)     for periods prior to the Target Flip Date, two and one-half percent
(2.5%) percent to the Class B Member and ninety-seven and one-half percent
(97.5%) to the Class A Member;

 

(ii)     after the Target Flip Date (if the Flip Date has not yet occurred)
until the Flip Date, one hundred percent (100%) to the Class B Member; and

 

(iii)     from and after the Flip Date, two and one-half percent (2.5%) to the
Class B Member and ninety-seven and one-half percent (97.5%) to the Class A
Member;

 

provided, however, in the event a Material Adverse Change in Tax Law occurs, the
applicable Distributable Cash sharing ratios set forth in this Section 6.1(a)
shall be adjusted to the extent necessary (with up to one hundred percent (100%)
of Distributable Cash distributed to the Class B Member) to cause the Flip Date
to occur as close to, and if possible on, the date that is two years from the
Flip Date projected in the Tracking Model immediately prior to the occurrence of
such Material Adverse Change in Tax Law.

 

(b)     Notwithstanding anything herein to the contrary, but subject to
Section 6.1(d), Distributable Cash shall be distributed on each Distribution
Date zero percent (0%) to the Class B Member and one hundred percent (100%) to
the Class A Member, in an amount equal to the Capital Contributions made by the
Class B Member pursuant to Section 4.3.

 

(c)     Distributions of Distributable Cash pursuant to this Section 6.1 will be
made by the Managing Member on each Distribution Date.

 

(d)     Notwithstanding anything herein to the contrary, without the consent of
the Class B Member, no distributions shall be made to any Class A Member
hereunder so long as (i) a payment default under any Senior Note shall have
occurred and be continuing, (ii) the Managing Member reasonably expects that a
payment default under any Senior Note will or is reasonably likely to occur on
or prior to the next applicable Distribution Date, or (iii) the Company has not
complied with its obligations (and such obligations have not been voluntarily
satisfied by OrLeaf or its Affiliates) under Section 4.7; provided, however,
that to the extent there is Distributable Cash in excess of such payment default
under any Senior Note plus the amount of any debt service reserve requirement
deficiency, the Managing Member shall make a distribution of such Distributable
Cash.

 

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(e)     If a Class B Contribution Default has occurred and is continuing, any
Distributable Cash required to be distributed to the Class B Member under this
Agreement will instead be distributed to the Class A Member in an amount not to
exceed the Class B Defaulted Contribution, and such cash shall reduce on a
dollar for dollar basis the outstanding amount of the Class B Defaulted
Contribution.

 

(f)     Notwithstanding any other provision of this Agreement, if on any
Distribution Date within a Tax Year that begins on and after the Flip Date, (x)
the sum of PTCs actually generated and allocated to the Class B Member and
Distributable Cash distributed to the Class B Member, within that Tax Year is
not at least equal to (y) (i) the Highest Marginal Rate multiplied by (ii) the
excess of income and gain allocated to the Class B Member for such Tax Year
(plus any gain recognized by the Class B Member under Code Section 731(a)) over
the amount of any unused losses previously allocated to the Class B Member that
were suspended under Code Section 704(d) that become usable by the Class B
Member during the Tax Year, then a portion of the Distributable Cash otherwise
distributable to the Class A Member equal to that shortfall shall instead be
distributed to the Class B Member.

 

Section 6.2     Withholding Taxes. If the Company is required to withhold taxes
with respect to any allocation or distribution of Distributable Cash to any
Member pursuant to any applicable federal, state or local tax laws, the Company
may, after first notifying the Member and permitting the Member, if legally
permitted, to contest the applicability of such taxes, withhold such amounts and
make such payments to taxing authorities as are necessary to ensure compliance
with such tax laws. Any funds withheld by reason of this Section 6.2 shall
nonetheless be deemed distributed to the Member in question for all purposes
under this Agreement. If the Company did not withhold from actual distributions
of Distributable Cash any amounts it was required to withhold, the Company may,
at its option, (i) require the Member to which the withholding was credited to
reimburse the Company for such withholding, or (ii) reduce any subsequent
distributions of Distributable Cash by the amount of such withholding. This
obligation of a Member to reimburse the Company for taxes that were required to
be withheld shall continue after such Member Transfers its Membership Interests
in the Company. Each Member agrees to furnish the Company with any
representations and forms as shall reasonably be requested by the Company to
assist it in determining the extent of, and in fulfilling, any withholding
obligations it may have.

 

Section 6.3     Limitation upon Distributions. No distribution or deemed
distribution of Distributable Cash shall be made: (a) if such distribution of
Distributable Cash would violate any contract or agreement to which the Company
is then a party or any Legal Requirement then applicable to the Company, (b) to
the extent that the Managing Member determines, in accordance with the Prudent
Operator Standard, that any amount otherwise distributable should be retained by
the Company to pay, or to establish a reserve for the payment of, any liability
or obligation of the Company or any Subject Company, whether liquidated, fixed,
contingent or otherwise, or to hedge an existing investment, including funding
reserve accounts for spare parts and operational and maintenance costs for the
Projects, or (c) to the extent that the Managing Member, in accordance with the
Prudent Operator Standard, determines that the Distributable Cash is
insufficient to permit such distribution or deemed distribution.

 

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Section 6.4     No Return of Distributions. Any distribution of Distributable
Cash or deemed distribution or property pursuant to this Agreement shall be
treated as a compromise within the meaning of Section 18-502(b) of the Act and,
to the fullest extent permitted by law, any Member receiving or deemed to
receive the payment of any such money or distribution of any such property shall
not be required to return any such money or property to any Person, the Company
or any creditor of the Company. However, if any court of competent jurisdiction
holds that, notwithstanding the provisions of this Agreement, any Member is
obligated to return such money or property, such obligation shall be the
obligation of such Member and not of the other Members. Without limiting the
generality of the foregoing, a deficit Capital Account of a Member shall not be
deemed to be a liability of such Member nor an Asset or property of the Company.

 

Section 6.5     Substitute Payments. If the Company or any Subject Company
receives any payments designated as compensation for any lost electrical
production (including, without limitation, PTCs associated with such lost
electrical production and any gross up amounts related thereto) relating to the
construction, development, maintenance, testing and/or operation of any of the
Projects (including any payment or indemnity received pursuant to Section 12.1
or any power purchase agreement with respect to any curtailment thereunder but
excluding any payment of liquidated damages), the Managing Member shall
determine the characterization of such payment (i.e., as a payment for lost PTCs
or a payment for lost revenues under a power purchase agreement) and shall
distribute such payment to the Members as appropriate, it being understood and
agreed by the Members that a payment characterized as a payment for lost PTCs
shall be distributed to the Members in accordance with the ratios set forth in
Section 5.1 and all items of income associated therewith shall be allocated to
the Members in accordance with Section 5.1, and a payment characterized as a
payment for lost revenues under a power purchase agreement shall be distributed
to the Members in accordance with the ratios set forth in Section 6.1; provided
that any such determination, and any amendments to this Agreement required to
implement such determination, shall be subject to obtaining the consent of the
Members.

 

ARTICLE VII
ACCOUNTING AND RECORDS

 

Section 7.1     Reports.

 

(a)     The Managing Member shall prepare and deliver (or cause to be prepared
and delivered) to each Member on or before the 20th day after the end of each
month, a written report (each, an “Operations Report”), in the form attached
hereto as Exhibit D and such other relevant operational information as may from
time to time be reasonably requested by a majority (by voting power) of the
Class B Members.

 

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(b)     The Managing Member shall prepare (or cause to be prepared), and shall
submit to each Member, an annual capital and operating budget for each Subject
Company no later than 30 calendar days prior to the start of each Fiscal Year
(the “Annual Budget”). The Annual Budget for each Fiscal Year will become
effective automatically for any Fiscal Year, (A) if the aggregate expense amount
reflected in the Annual Budget for any Fiscal Year does not exceed by more than
ten percent (10%) the budgeted expense amount reflected in the immediately
preceding Annual Budget, or (B) 15 calendar days after the Annual Budget is sent
to each Member as provided in this Section, unless within such period a Class B
Member holding fifty percent (50%) or more of the outstanding Class B Membership
Interests gives the Managing Member written notice stating in reasonable detail
which items of the Annual Budget they question or object to and the reasons for
such question or objection, in which case the Annual Budget shall become
effective with respect to (x) those items that are not subject to question or
objection as set forth in the Annual Budget as submitted to Members and
(y) pending resolution of any question or objection, the amount of any item
subject to a question or objection shall be deemed to be ten percent (10%)
greater than the amount in the immediately preceding Annual Budget, or (C) upon
approval by Super-Majority Vote with respect to any item subject to question or
objection that is not otherwise resolved by the Members, or (D) otherwise, as
provided in Section 13.11. Upon approval of a Super-Majority Vote, the Managing
Member may request that any budgeted amount reflected in the Base Case Model for
any Fiscal Year be prospectively adjusted to give effect to any increases in
costs or expenses that the Managing Member believes will affect budgeted amounts
for more than one Fiscal Year.

 

(c)     The Managing Member shall prepare and deliver (or cause to be prepared
and delivered) to each Member on or before the 30th day after the end of each
month a report setting forth the calculation of distributions of Distributable
Cash for such month determined in accordance with Article VI hereof (the
“Distribution Report”) in the form attached hereto as Exhibit E and such other
relevant operational information as may from time to time be reasonably
requested by a Class B Member holding twenty-five percent (25%) or more of the
outstanding Class B Membership Interests.

 

(d)     The Managing Member shall calculate (or cause to be calculated) at least
annually whether the Class B Members have reached the Target Internal Rate of
Return, and shall send the Class B Members, within 120 days after the end of
each Fiscal Year in which the Target Internal Rate of Return was not achieved, a
report showing where it believes the Class B Members are in relation to the
Target Internal Rate of Return (the “Target IRR Report”).

 

(e)     The Managing Member shall notify (or cause to be notified) the Class B
Members in writing at least ten days before the Distribution Date following the
month in which it believes the Class B Members achieved the Target Internal Rate
of Return or at least 30 days before making any liquidating distributions, in
connection with a liquidation of the Company pursuant to Section 10.1, if it
believes the Class B Members will achieve the Internal Rate of Return as a
consequence of the liquidating distributions (the “Target IRR Notice”). The
Target IRR Notice will include the Managing Member’s Internal Rate of Return
calculations and, in the case of a notice delivered in connection with a
liquidation, the allocations and distributions that the Managing Member proposes
to make to the Class B Members under Section 10.2 in light of the calculations.

 

(f)     On or before the 15th day following each Fiscal Year, the Managing
Member shall deliver (or cause to be delivered) to the Members a written report
(each a “Production Report”), in the form attached hereto as Exhibit G, setting
forth a calculation of the PTCs generated by the Projects and allocated to the
Class B Members for such preceding Fiscal Year. The Production Report shall also
set forth (i) Production eligible for PTCs during the Deferred Contribution
Period, (ii) the projected allocation of gross income related to such Production
to the Class B Member for such Deferred Contribution Period, (iii) the estimated
Excess Production and (iv) the amounts owing by each Class B Member pursuant to
Section 4.3(a) in respect of such Excess Production.

 

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(g)     Annually, together with the delivery of the proposed Tax Return to the
Class B Members in accordance with Section 7.6, a written report setting forth
the following:

 

(i)     The aggregate total of Excess Production generated by the PTC Eligible
Projects;

 

(ii)     The aggregate total of Excess Production allocated to each of the Class
B Members, as reflected on the Schedules K and K-1 of the Tax Returns filed by
the Company, including such proposed Tax Return (or equivalent reporting under
successor forms and procedures), as such Tax Returns shall have been amended or
adjusted, and as such aggregate total shall have been adjusted based on a
redetermination of the Flip Date in accordance with Section 13.11, or as a
result of any tax audit, investigation, claim or controversy involving the
Company that is the subject of Section 7.7;

 

(iii)     The aggregate amount that would be payable by each Class B Member
under Section 4.3(a) based on the amount described in clause (i) above taking
into consideration any extension of the due date for such amount pursuant to
Section 4.3(b).

 

(iv)     The aggregate total actually contributed by each Class B Member
pursuant to Section 4.3(a) and Section 4.3(b);

 

(v)     Any excess of the amount described in clause (iii) over the amount
described in clause (iv) (an “Underpayment”); and

 

(vi)     Any excess of the amount described in clause (iv) over the amount
described in clause (iii) (an “Overpayment”).

 

(h)     If a Class B Member holding twenty-five percent (25%) or more of the
outstanding Class B Membership Interests disputes (in good faith) the
calculation of any items in a Production Report, then such Class B Member shall
notify the Managing Member not more than 30 Business Days after such Class B
Member has received the applicable Production Report from the Managing Member.

 

(i)     In such event, such Class B Member and the Managing Member shall
consider the issues raised or in dispute and discuss such issues with each other
and attempt to reach a mutually satisfactory agreement. If notice of dispute is
not given by such Class B Member within such period, each Production Report will
be final and binding on the Members.

 

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(ii)     If the dispute as to the calculations is not promptly resolved within
ten Business Days of such notification of the dispute, such Class B Member and
the Managing Member shall each promptly present their interpretations to the
Independent Accounting Firm, and shall instruct the Independent Accounting Firm
to determine the correct amount of the calculations in dispute and to resolve
the dispute promptly. The Independent Accounting Firm will make a determination
as to each of the items in dispute, which must be (i) in writing, (ii) furnished
to each Member and made in accordance with this Agreement, and which
determination, absent manifest error, will be conclusive and binding on all
Members. Each Member shall use reasonable efforts to cause the Independent
Accounting Firm to render its decision as soon as reasonably practicable,
including by promptly complying with all reasonable requests by the Independent
Accounting Firm for information, books, records and similar items.

 

(iii)     In the event the Independent Accounting Firm determines that any of
the calculations in dispute were incorrect in any material respect, the fees and
expenses of the Independent Accounting Firm shall be borne by the Class A
Member. In all other cases, the fees and expenses of the Independent Accounting
Firm up to five hundred thousand dollars ($500,000), in the aggregate, shall be
borne by the Company, and thereafter shall be borne by such Class B Member.

 

(iv)     The Class B Members will contribute to the Company the full amount then
due and owing, if any, within five Business Days following (x) the receipt of
the written determination of the Independent Accounting Firm or (y) reaching a
mutually satisfactory agreement under clause (i), above.

 

(i)     Except as otherwise required under Section 8.3, the Managing Member
shall provide (or cause to be provided) (i) all reports, notices, or other
written communication relating to any dispute, potential default or event of
default in connection with the Senior Notes, (ii) any Officer’s Certificate and
Request for Withdrawal delivered by the Subject Companies (other than ORNI 37)
to the Administrative Agent (under and as defined in the OFC2 Note Purchase
Agreement) pursuant to Section 10.5 of the OFC2 Note Purchase Agreement and
(iii) any other required report or formal, written notice received or delivered
by the Company, or any of its subsidiaries, from or, as applicable, to the
trustee under any Loan Document (as defined in the OFC2 Note Purchase
Agreement), in each case, to the Class B Member within five Business Days of
receipt or delivery of such reports, notices, or other written communication.

 

Section 7.2     Books and Records and Inspection.

 

(a)     The Managing Member shall cause the Company to keep and maintain (or to
be kept and maintained on behalf of the Company), full and accurate books of
account, financial records and supporting documents, which shall reflect,
completely, accurately and in reasonable detail in all material respects each
transaction of the Company and such other matters as are usually entered into
the records or maintained by Persons engaged in a business of like character or
as are required by law, and all other documents and writings of the Company. The
books of account, financial records, and supporting documents and the other
documents and writings of the Company shall be kept and maintained at the
principal office of the Company. The financial records and reports of the
Company shall be kept in accordance with GAAP and kept on an accrual basis.

 

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(b)     In addition to and without limiting the generality of Section 7.2(a),
the Managing Member shall cause the Company to keep and maintain (or to be kept
and maintained on behalf of the Company) at the Company’s principal office:

 

(i)     true and full information regarding the status of the financial
condition of the Company, including any financial statements for the three most
recent years;

 

(ii)     promptly after becoming available, a copy of the Company’s federal,
state, and local income Tax Returns for each year;

 

(iii)     minutes of the proceedings of the Members and the Managing Member;

 

(iv)     a current list of the name and last known business, residence or
mailing address of each Member and the Managing Member;

 

(v)     a copy of this Agreement and the Certificate of Formation, and all
amendments thereto, together with executed copies of any written powers of
attorney pursuant to which this Agreement and such Certificate of Formation and
all amendments thereto and copies of written consents of Members;

 

(vi)     true and full information regarding the amount of cash and a
description and statement of the agreed value of any other property and services
contributed by each Member, and the date upon which each became a Member;

 

(vii)     copies of records that would enable a Member to determine the Member’s
relative shares of the Company’s distributions and the Member’s relative voting
rights; and

 

(viii)     all records related to the production and sale of electricity by the
Subject Companies bearing on the qualification of such sales for PTCs.

 

(c)     Upon at least five Business Days prior notice to the Managing Member,
all books and records of the Company shall be open to inspection and copying by
any of the Members or their Representatives during business hours and at such
Member’s expense, for any purpose reasonably related to such Member’s interest
in the Company, provided that any such inspection or copying is conducted in a
manner which does not unreasonably interfere with the Company’s business.

 

Section 7.3     Bank Accounts, Notes and Drafts.

 

(a)     All funds not required for the immediate needs of the Company may be
placed in Permitted Investments, which investments shall have a maturity
appropriate for the anticipated cash flows needs of the Company. All Company
funds shall be deposited and held in accounts which are separate from all other
accounts maintained by the Members and the Managing Member, and the Company’s
funds shall not be commingled with any other funds of any other Person,
including the Managing Member, any Member or any of their Affiliates (other than
the Company itself).

 

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(b)     The Members acknowledge that the Managing Member may maintain Company
funds in accounts, money market funds, certificates of deposit, other liquid
Assets in excess of the insurance provided by the Federal Deposit Insurance
Corporation, or other depository insurance institutions and that the Managing
Member shall not be accountable or liable for any loss of such funds resulting
from failure or insolvency of the depository institution, so long as any such
maintenance of funds is in compliance with the first sentence of Section 7.3(a).

 

(c)     Checks, notes, drafts and other orders for the payment of money shall be
signed by such Persons as the Managing Member from time to time may authorize.
When the Managing Member so authorizes, the signature of any such Person may be
a facsimile.

 

Section 7.4     Financial Statements.

 

(a)     As soon as practical after the end of each Quarter, but in any event
within 60 calendar days after the end of each Quarter (excluding the Quarter
ending December 31 of each year), the Managing Member shall furnish (or cause to
be furnished) to each Member unaudited consolidated financial statements with
respect to such Quarter for the Company consisting of (i) a balance sheet
showing the Company’s financial position as of the end of such Quarter,
(ii) profit and loss statements for the Company for such Quarter, and (iii) a
statement of cash flows for the Company for such Quarter.

 

(b)     As soon as practical after the end of each Fiscal Year, but in any event
within 120 calendar days after the end of the Fiscal Year, the Managing Member
shall furnish (or cause to be furnished) each Member consolidated financial
statements with respect to such Fiscal Year for the Company that are audited and
certified by the Accounting Firm as presenting fairly in all material respects
the financial conditions and results of operations of ORNI 37 LLC and OFC 2 LLC
in accordance with GAAP consistently applied, subject only to normal year-end
audit adjustments, consisting of (i) a balance sheet showing the Company’s
financial position as of the end of such Fiscal Year, (ii) profit and loss
statements for the Company for such Fiscal Year, (iii) a statement of cash flows
for the Company for such Fiscal Year and (iv) related footnotes.

 

Section 7.5     Partnership Status and Tax Elections.

 

(a)     The Members intend that the Company will be taxed as a partnership for
United States federal, state and local income tax purposes. The Members agree
not to elect to be excluded from the application of Subchapter K of Chapter 1 of
Subtitle A of the Code or any similar state statute and agree not to elect for
the Company to be treated as a corporation, or an association taxable as a
corporation, under the Code or any similar state statute.

 

(b)     The Company shall make the following elections on the appropriate Tax
Returns:

 

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(i)     to the extent permitted under Section 706 of the Code, to adopt as the
Company’s Tax Year the 12 month period ending on December 31 effective as of
December 31, 2016;

 

(ii)     to adopt the accrual method of accounting;

 

(iii)     an election under Section 754 of the Code to adjust the bases of the
Company’s properties;

 

(iv)     to elect to amortize the organizational expenses of the Company ratably
over a period of 180 months as permitted by Section 709(b) of the Code;

 

(v)     [reserved]

 

(vi)     to elect under Section 59(e) of the Code to amortize intangible
drilling and development costs over 60 months; and

 

(vii)     the Company and each Subject Company shall elect not to claim bonus
depreciation on any Project pursuant to Section 168(k)(7) of the Code (or the
equivalent successor provision).

 

The Managing Member shall make no other tax elections for the Company, except as
specifically provided in this Agreement, without the approval in writing by
Members representing a Super-Majority Vote, such approval not to be unreasonably
withheld, provided, however, that the Managing Member may elect to extend the
time for filing any tax returns required to be filed by the Company or any
Subsidiary Company without the prior approval of any other Member.

 

(c)     The Company shall file an election under Section 6231(a)(1)(B)(ii) of
the Code and the Treasury Regulation thereunder to treat the Company as a
partnership to which the provisions of Sections 6221 through 6234 of the Code,
inclusive, apply.

 

Section 7.6     Company Tax Returns.

 

(a)     Preparation of Tax Returns. The Tax Matters Partner shall prepare, or
cause to be prepared by the Accounting Firm, and timely file (on behalf of the
Company) all federal, state and local tax returns required to be filed by the
Company. Each Member shall furnish to the Tax Matters Partner all pertinent
information in its possession relating to the Company’s operations that is
reasonably necessary to enable the Company’s tax returns to be timely prepared
and filed.

 

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(b)     Preparation of Consistent Return. The Tax Matters Partner shall use good
faith efforts to prepare, or cause to be prepared by the Accounting Firm, for
each Tax Year, the Company’s federal income tax return, including Schedule K-1s
(the “Tax Return”) in a manner that constitutes either a Consistent Return or an
Excepted Non-Conforming Return. For purposes of this Agreement, a “Consistent
Return” shall mean a Tax Return prepared on a basis consistent with the Fixed
Tax Assumptions and other provisions in this Agreement and with Section 2.3 of
the Contribution Agreement, and an “Excepted Non-Conforming Return” shall mean a
Tax Return that is not prepared on a basis consistent with the Fixed Tax
Assumptions and other provisions in this Agreement because there is not at least
“substantial authority” (within the meaning of Regulation Section
1.6662-4(d)(2)) for filing a Tax Return on a basis consistent with the Fixed Tax
Assumptions and other provisions in this Agreement as the result of (A) a final
determination in any federal income tax audit or administrative or judicial
proceeding involving such Tax Return or a Tax Return for a prior period making
an adjustment to any item affected by the Fixed Tax Assumptions or (B) a Change
in Tax Law or any other enactment, promulgation or issuance, as applicable,
subsequent to the Effective Date of any of the types of authorities described in
Treasury Regulation Section 1.6662-4(d)(3), (C) the breach of any
representations, warranties, or covenants by a Class A Member, the Managing
Member (as long as it is, or is an Affiliate of, a Class A Member) or the Tax
Matters Partner (or Partnership Representative, as applicable) (as long as it
is, or is an Affiliate of, a Class A Member) under this Agreement or the
Contribution Agreement, or (D) the result of the breach of the representations,
warranties or covenants of a Class B Member in Sections 3.11 or 12.3 of this
Agreement or of Section 2.3 or Section 4.8 of the Contribution Agreement. A Tax
Return that is neither a Consistent Return nor an Excepted Non-Conforming Return
shall be a “Non-Conforming Return”). The Tax Matters Partner shall prepare the
Tax Returns substantially in accordance with the Base Case Model except to the
extent that any position taken in such Tax Returns (x) is one that the
Accounting Firm will not report without disclosure under Code Section
6694(a)(2)(B) or (y) is one that is inconsistent with the other provisions of
this Agreement. A Tax Return that is not filed substantially in accordance with
the Base Case Model will be treated as a Non-Conforming Return.

 

(c)     Furnishing Returns. The Tax Matters Partner shall use commercially
reasonable efforts to furnish to the Members:

 

(i)     by no later than March 15th of each year, a copy of the Company’s Tax
Return in the form proposed to be filed for the immediately preceding Tax Year,

 

(ii)     by no later than March 15th of each year, written notification if the
Tax Matters Partner anticipates furnishing to the Members a Tax Return that is a
Non-Conforming Return for the immediately preceding Tax Year, and

 

(iii)     within twenty (20) days after filing such federal and state income Tax
Returns and information returns, a copy of the Company’s federal and state
income Tax Returns and information returns as filed for each Tax Year, together
with any additional tax-related information in the possession of the Company
that such Member may reasonably and timely request in order to properly prepare
its own income Tax Returns.

 

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(d)     Consistent Return. Any proposed Tax Return delivered to the Members
pursuant to Section 7.6(c)(i) as to which the Tax Matters Partner has given
notice as described in Section 7.6(c)(ii) will be deemed to constitute a Tax
Return that is a Non-Conforming Return for purposes of this Agreement. Any other
proposed Tax Return delivered to the Members pursuant to Section 7.6(c)(i) will
be deemed to constitute a Consistent Return or an Excepted Non-Conforming Return
for purposes of this Agreement unless, within thirty (30) days of receipt of the
proposed Tax Return pursuant to Section 7.6(c)(i), a Class B Member provides
written notice to the Tax Matters Partner and the Managing Member that it
disagrees that the proposed Tax Return is a Consistent Return or Excepted
Non-Conforming Return, in which event, such dispute will be resolved in
accordance with Section 13.11. If the Independent Accounting Firm determines
pursuant to Section 13.11 that the proposed Tax Return does constitute either a
Consistent Return or an Excepted Non-Conforming Return, then such Tax Return
shall be deemed to constitute a Consistent Return or Excepted Non-Conforming
Return for purposes of this Agreement. If the Independent Accounting Firm
determines pursuant to Section 13.11 that the proposed Tax Return does not
constitute either a Consistent Return or an Excepted Non-Conforming Return, then
such proposed Tax Return shall be deemed as a Non-Conforming Return for purposes
of this Agreement; provided, however, that, if the Tax Return actually filed by
the Tax Matters Partner and the Accounting Firm (or any replacement Accounting
Firm) constitutes a Consistent Return or an Excepted Non-Conforming Return in
accordance with the Independent Accounting Firm’s determination pursuant to
Section 13.11, then such Tax Return as so filed shall be deemed a Consistent
Return or an Excepted Non-Conforming Return for purposes of this Agreement.

 

(e)     Costs of Preparation. The Company shall bear the costs of the
preparation and filing of its returns, including the fees of Accounting Firm.

 

Section 7.7     Tax Audits.

 

(a)     OrLeaf is hereby designated as the “tax matters partner,” as that term
is defined in Section 6231(a)(7) of the Code (the “Tax Matters Partner”), of the
Company, with all of the rights, duties and powers provided for in Sections 6221
through 6234 of the Code, inclusive. The Tax Matters Partner is hereby directed
and authorized to take whatever steps the Tax Matters Partner, in its reasonable
discretion, deems necessary or desirable to perfect such designation, including
filing any forms or documents with the IRS, taking such other action as may from
time to time be required under the Treasury Regulations and directing the
Managing Member to take any of the foregoing actions. The Tax Matters Partner
shall remain as the Tax Matters Partner so long as it retains any ownership
interests in the Company unless the Tax Matters Partner requests that it not
serve as Tax Matters Partner and such request is approved by a Super-Majority
Vote of the Members.

 

(b)     The Tax Matters Partner, in Consultation with the other Members, shall
direct, or cause the Managing Member to direct, the defense of any claims made
by the IRS to the extent that such claims relate to the adjustment of Company
items at the Company level and, in connection therewith, shall cause the Company
to retain and to pay the fees and expenses of counsel and other advisors chosen
by the Tax Matters Partner in Consultation with the other Members. The Tax
Matters Partner shall promptly deliver, or shall cause the Managing Member to
promptly deliver, to each Member a copy of all notices, communications, reports
and writings received from the IRS relating to or potentially resulting in an
adjustment of Company items, shall promptly advise, or cause the Managing Member
to promptly advise, each Member of the substance of any conversations with the
IRS in connection therewith and shall keep, or cause the Managing Member to
keep, the Members advised of all developments with respect to any proposed
adjustments which come to its or the Managing Member’s, as the case may be,
attention. In addition, the Tax Matters Partner shall or shall cause the
Managing Member to (i) provide each Member with a draft copy of any
correspondence or filing to be submitted by the Company in connection with any
administrative or judicial proceedings relating to the determination of Company
items at the Company level reasonably in advance of such submission,
(ii) incorporate all reasonable changes or comments to such correspondence or
filing requested by any Member and (iii) provide each Member with a final copy
of correspondence or filing. The Tax Matters Partner will provide, or cause the
Managing Member to provide, each Member with notice reasonably in advance of any
meetings or conferences with respect to any administrative or judicial
proceedings relating to the determination of Company items at the Company level
(including any meetings or conferences with counsel or advisors to the Company
with respect to such proceedings) and each Member shall have the right to
participate, at its sole cost and expense, in any such meetings or conferences.

 

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(c)     For any issue or matter relating to the period prior to the Flip Date
without the approval of Members collectively holding at least eighty percent
(80%) of the Class B Membership Interests, the Tax Matters Partner shall not
(i) commence a judicial action (including filing a petition as contemplated in
Section 6226(a) or Section 6228 of the Code) with respect to a federal income
tax matter or appeal any adverse determination of a judicial tribunal;
(ii) enter into a settlement agreement with the IRS which purports to bind the
Members; (iii) intervene in any action as contemplated by Section 6226(b) of the
Code; (iv) file any request contemplated in Section 6227(b) of the Code; or
(v) enter into an agreement extending the period of limitations as contemplated
in Section 6229(b)(1)(B) of Code. Any cost or expense incurred by the Tax
Matters Partner in connection with its duties as Tax Matters Partner shall be
paid by the Company.

 

(d)     If for any reason the IRS disregards the election made by the Company
pursuant to Section 7.5(c) and commences any audit or proceeding in which it
makes a claim, or proposes to make a claim, against any Member that could
reasonably be expected to result in the disallowance or adjustment of any items
of income, gain, loss, deduction or credit (including PTCs) allocated to such
Member by the Company, then such Member shall promptly advise the other Members
of the same, and such Member, in Consultation with the other Members, shall use
commercially reasonable efforts to convert the portion of such audit or
proceeding that relates to such items into a Company level proceeding consistent
with the Company’s election pursuant to Section 7.5(c).

 

(e)     If any Member intends to file, pursuant to Section 6227 of the Code, a
request for an administrative adjustment of any such partnership item of the
Company, or to file a petition under Sections 6226, 6228 or other Sections of
the Code with respect to any such partnership item or any other tax matter
involving the Company, such Member shall, at least 30 days prior to any such
filing, notify the other Members of such intent, which notification must include
a reasonable description of the contemplated action and the reasons for such
action; provided, however, that this Section 7.7(e) shall not relieve such
Member’s obligation to use all commercially reasonable efforts to convert a
Member level proceeding into a Company level proceeding as provided in
Section 7.7(d).

 

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(f)     Notwithstanding anything in this Agreement to the contrary, the Members
agree to work together, reasonably and in good faith, to amend this Agreement
for Tax Years for which the partnership audit provisions of Title XI are
effective on or before the effective date of such provisions to the extent
reasonably possible, to preserve and maintain (including through relevant
elections and credit support) the relative and analogous rights, duties,
responsibilities, indemnities, obligations and risks of the Members, including
with respect to the payment of tax liabilities to those provided under this
Agreement. In the event that subsequent to such amendment, there are further
statutory amendments, Treasury Regulations, notices, revenue procedures, revenue
rulings or other administrative guidance, interpreting or applying Title XI, the
Members shall further amend this Agreement consistent with this Section 7.7(f).
Notwithstanding the foregoing, in the event the Members have not amended this
Agreement to the reasonable satisfaction of each Member on or before the
effective date of Title XI (or any further guidance) then (i) OrLeaf, so long as
it continues to retain an ownership interest in the Company, shall be designated
the Partnership Representative, subject to removal and replacement rights
analogous to those set forth in Section 7.7(a), (ii) for any notice of final
partnership adjustment with respect to which an “imputed underpayment” within
the meaning of Section 6225(b) of Title XI may be determined, the Company shall
elect application of Section 6226 of Title XI and timely furnish to each Member
of the Company for the reviewed year and to the U.S. Department of the Treasury
a statement of each Member’s share of any adjustment to income, gain, loss,
deduction, or credit, which shares will be calculated in a manner that takes
into account the allocation of tax risk between the Members reflected in this
Agreement; provided, such election shall not be made if, under subsequent
guidance from the IRS, such election would transfer the audit or contest to the
partner-level; provided, further, if, under subsequent guidance, the parties
cannot make such election without transferring the audit or contest to the
partner-level, then the Members agree to negotiate in good faith to amend this
Agreement to retain the audit or contest at the Company level, while preserving
the relative rights, burdens and economics of the Members, including each
Member’s obligation to pay its respective share of the “imputed underpayment”,
and (iii) the Partnership Representative shall not take any action that the Tax
Matters Partner was not permitted to take without the consent of the Class B
Member under Section 7.7(b) without the consent of the Class B Member. In the
event a Section 6226 election cannot be made under the circumstances described
in (ii) because of subsequent guidance from the IRS that would transfer the
audit or contest to the partner level, each Member will be required to make a
Capital Contribution to the Company as described in Section 4.5 within ten (10)
Business Days of notice from the IRS that payment of the imputed underpayment is
due and payable by the Company and such payment is not subject to appeal by the
Company that would allow further deferral of such payment.

 

Section 7.8     Cooperation. Subject to the provisions of this Article VIII,
each Member shall provide the other Members with such assistance as may
reasonably be requested by such other Members in connection with the preparation
of any Tax Return, any audit or other examination by any taxing authority, or
any judicial or administrative proceedings relating to the liability for any
Taxes with respect to the operations of the Company and the Subject Companies or
the allowance or disallowance of any PTCs arising from the sale by the Subject
Companies of electricity produced in their respective Projects.

 

Section 7.9     Fiscal Year. The Fiscal Year of the Company for financial
reporting purposes will be a 12-month year ending December 31.

 

Section 7.10     Tax Year. The Tax Year of the Company will be a 12-month year
ending December 31 unless the Company is required by Section 706 of the Code to
use a different Tax Year.

 

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Section 7.11     Target Internal Rate of Return Determination.

 

(a)     Annual Determinations. Prior to the Flip Date, the Managing Member will
(i) calculate (or will cause to be calculated) using the Tracking Model at least
annually whether the Class B Member has reached the Target Internal Rate of
Return and (ii) send the Class B Member, within 45 days after the end of each
year in which the Target Internal Rate of Return was not achieved, a report in
the form of the Target IRR Report showing where it believes the Class B Member
is in relation to the Target Internal Rate of Return. The Managing Member will
make its advisers available to answer any questions regarding the calculations
contained in any such Target IRR Report.

 

(b)     Occurrence of Flip Date. If the Managing Member determines, in the
manner provided in this Section 7.11, that the Flip Date has occurred, the
Managing Member will notify the Class B Member in writing at least ten days
before the Distribution Date following the month in which it believes the
Class B Member achieved the Target Internal Rate of Return or at least 30 days
before making any liquidating distributions, in connection with a liquidation of
the Company pursuant to Section 10.2, if it believes the Class B Member will
achieve the Target Internal Rate of Return as a consequence of the liquidating
distributions. The notice will include the Target IRR Report showing the
Managing Member’s calculations and, in the case of a notice delivered in
connection with a liquidation, the allocations and distributions that the
Managing Member proposes to make to the Class B Member under Section 10.2 in
light of the calculations. The Managing Member will make its advisers available
to answer any questions about the calculations contained in any such Target IRR
Report.

 

(c)     Calculation Rules and Conventions. The Managing Member will employ the
following calculation rules and conventions in determining whether the Class B
Member has reached the Target Internal Rate of Return:

 

(i)     Continuity of Ownership. The Managing Member will treat ownership of the
Class B Membership Interests as being continuous from the Closing Date to the
relevant testing date as of which the calculation is being made without regard
to any change in ownership of the Class B Membership Interests during such
period.

 

(ii)     Cash Flows. The “Cash Flows” taken into account in determining the
Internal Rate of Return will consist solely of (A) the Capital Contributions
made by the Class B Member for the Class B Membership Interests on the Closing
Date and the Deferred Contributions made pursuant to Section 4.3 (which for the
avoidance of doubt includes any Deferred Contributions attributable to Excess
Production prior to the Flip Date but payable after the Flip Date),
(B) out-of-pocket costs and expenses paid or incurred by the Class B Member in
connection with any event that is the subject of a Direct Claim that the Class A
Member is required to pay, including amounts relating to the enforcement of such
Direct Claim or the defense of any Third Party Claim against the Class B Member,
(C) distributions to the Class B Member made on any (1) Distribution Date
pursuant to Section 6.1, Section 4.3(c), or Section 4.7 or (2) date of
distribution of liquidation proceeds pursuant to Section 10.2(b)(v) (or to be
made on the Distribution Date or date of distribution of liquidation proceeds as
of which the Internal Rate of Return is being determined), (D) subject to the
proviso contained in the last sentence hereof, indemnity payments and cost and
expense reimbursements received by a Class B Member from the Company or the
Class A Member to compensate for the loss of amounts described in clauses (C)
and (E) of this Section 7.11(c)(ii), but excluding any indemnity payments
treated as cash distributions, and (E) the Grossed-Up PTC Amount based on the
PTCs received by the Class B Member determined in accordance with
subsection (iii) of this Section 7.11(c) to be received on any Estimated Tax
Payment Date. Any amount received by the Class B Member which is in the nature
of a recovery or replacement of, or indemnity or compensation for, and is the
substantial economic equivalent of an item which would otherwise be taken into
account in the foregoing clauses (A) through (E) will be deemed received for
purposes of the calculation of the Internal Rate of Return on the date so
received by such Class B Member; provided, however, that, any payments received
pursuant to Article XI for lost depreciation deductions, other deductions and
losses and credits other than PTCs shall not be taken into account for purposes
of calculating the Internal Rate of Return in accordance with this
Section 7.11(c)(ii).

 

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(iii)     PTCs.

 

(A)     PTC Amounts that are not consistent with the Fixed Tax Assumptions shall
be recalculated for purposes of the Internal Rate of Return in a manner
consistent with the Fixed Tax Assumptions, except to the extent that such
inconsistency with the Fixed Tax Assumptions is the result of (1) the relevant
Tax Return filed with the IRS by or for the Company being a Non-Conforming
Return (as provided in Section 7.6(c)), (2) a change in the Code or Treasury
Regulations promulgated thereunder that affect Fixed Tax Assumptions, or (3) the
breach of any representations, warranties, or covenants by a Class A Member, the
Managing Member, the Tax Matters Partner, or the Partnership Representative (in
each case, as long as it is, or is an Affiliate of, a Class A Member) under this
Agreement or the Contribution Agreement. PTC Amounts shall also be recalculated
to include any credit that would have been realized by the Class B Member, but
which is not so recognized as the result of the breach of the representations,
warranties or covenants of a Class B Member in Sections 3.11 or 12.3(a) – (c) of
this Agreement or of Sections 2.3 or 4.8 of the Contribution Agreement. For
purposes of calculating and determining PTC Amounts, each Class B Member shall
be treated as able to use immediately, subject to the same timing described in
Section 7.11(c), and fully any PTC Amounts without regard to (X) whether the
Class B Member has any income, gains, or tax liability against which it is
permitted to offset such credits, (Y) any provision of Law limiting,
restricting, deferring or disallowing such credit that is applicable to any
Class B Member (as opposed to the Company), or (Z) a Company-level limitation,
restriction, deferral or disallowance of such loss, deduction or credits that
results from the breach of any representation, warranty or covenant of a Class B
Member in this Agreement or the Contribution Agreement.

 

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(B)     For the avoidance of doubt, in all respects outside those described in
Section 7.7(c)(iii) the Internal Rate of Return and the amount of Deferred
Contributions shall be based upon the PTC Amounts or gross income allocation, as
applicable, without any adjustment or recalculation, in accordance with the
federal income tax accounting methods and tax elections actually used with
respect to such period by the Company in the preparation of its Tax Returns, and
as subsequently adjusted as a result of any amended Tax Return or a final
determination in any federal income tax audit or subsequent administrative or
judicial proceeding.

 

(C)     Estimated Tax Payment Dates. The distributive share of PTCs as
determined for federal income tax purposes allocated by the Company to the Class
B Member, shall be treated as recognized ratably during the Tax Year, with the
result that the PTCs allocated to the Class B Members shall be treated as having
been received in four equal installments on April 30, June 30, September 30, and
December 31 during the Tax Year (the “Estimated Tax Payment Dates”), except that
in the Tax Year in which the Flip Date occurs, such items allocated to the Class
B Members for the period prior to the Flip Date will be treated as allocated
ratably to each of the Estimated Tax Payment Dates during the Tax Year, and the
present value, discounted at the Target Internal Rate of Return of items
allocated to Estimated Tax Payment Dates after the Flip Date shall be taken into
account for purposes of determining the Flip Date.

 

(d)     Method of Determining the Flip Date; Pro Ration of Distributions.

 

(i)     If, as of any Distribution Date after the Target Flip Date, the Managing
Member calculates that the Flip Date has occurred during the calendar month in
which such Distribution Date occurs (taking account of the distribution of the
Distributable Cash on such Distribution Date and any Deferred Contributions due
based on production prior to the Distribution Date but payable thereafter
discounted to the Flip Date at the Target Internal Rate of Return) the Managing
Member will calculate the lowest percentage (the “Trigger Percentage”) which,
when applied to such Distributable Cash, will result in a Class B Unit receiving
an amount of Distributable Cash (such amount of cash calculated using such
Trigger Percentage, the “Cash Trigger Amount”) which will cause the Flip Date to
occur. The Cash Trigger Amount shall be deemed to precede the Flip Date and
shall be distributed to the Class B Members (notwithstanding anything to the
contrary contained in Section 4.7 or Section 6.1(a)) and the remainder of such
Distributable Cash shall be distributed to the Holders of Class A Units and
Class B Units under Section 6.1(a)(iii).

 

(ii)     If, prior to a distribution of liquidation proceeds, the Managing
Member calculates that the Class B Member will achieve the Target Internal Rate
of Return as a consequence of the liquidating distributions (taking into account
the expected distribution of liquidation proceeds), the Managing Member will
calculate, using an iterative process, the percentage of the liquidation
proceeds which, if distributed in accordance with Section 10.2(b)(v), will cause
the cash distributions to be made pursuant to Section 10.2(b)(v) on the date of
distribution of liquidation proceeds, to the extent such distributions are
attributable to pro rata allocations pursuant to Section 10.2(b)(iv)(A), to
cause the Flip Date to occur. Such calculation shall be taken into account in
making the allocations under Section 10.2(b)(iv) in such manner as to ensure
that, to the greatest extent feasible, the balances in the Capital Accounts of
the Members are expected to result in distributions pursuant to
Section 10.2(b)(v) in accordance with the target liquidation distributions
contemplated in Section 10.2(b)(iv)(A) and Section 10.2(b)(iv)(B).

 

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(e)     End-of-Year True Up.

 

(i)     If the Class B Member achieves the Target Internal Rate of Return after
the Target Flip Date, then prior to filing the Tax Return for the Tax Year which
includes the Flip Date, the Managing Member shall compare the PTC Amounts for
the portion of the Tax Year through the calendar month in which such Flip Date
was determined to have occurred, as taken into account in the calculation of
such Flip Date, with the PTC Amounts for such period as determined using the
amounts reflected in the Tax Return as proposed to be filed, other than to the
extent of any difference in such calculation of the Flip Date and such amounts
reflected in the Tax Returns as the result of the application of the provisions
of Section 7.11(c) or the calculation assumptions and conventions in this
Section 7.11. In the event of any difference (disregarding de minimis amounts)
the Managing Member shall apply such adjustments ratably to the Estimated Tax
Payment Dates for such Tax Year and shall re-calculate the Trigger Percentage
based upon the amounts reflected in such return and shall (A) adjust the Flip
Date accordingly (including by advancing or retarding the Flip Date to a prior
or subsequent calendar month), and (B) determine the difference (the “Cash
Difference”) between the actual cash distribution to the Class B Members on the
Distribution Date occurring in the month in which such Flip Date was originally
determined to have occurred (and any subsequent Distribution Dates, if relevant)
and the cash distribution which would have been made on such Distribution
Date(s) based on the recalculated Trigger Percentage (it being acknowledged that
any difference between the PTC Amounts assumed to be allocable to the Class B
Interests at the time such Flip Date was first determined and the amounts of
such PTC Amounts reflected in the allocations pursuant to the Tax Return
actually filed has been reflected in the final determination of such Flip Date
under this paragraph (i)).

 

(ii)     Provisions similar to those provided in Section 7.11 shall apply for
purposes of advance notification to the Class B Members of the adjusted Flip
Date and Cash Difference calculations referred to in paragraph (i), above, and
the right of the Class B Members to challenge.

 

(iii)     Upon becoming final pursuant to this Section 7.11(e), the Managing
Member shall apply the adjusted Flip Date for all purposes of this Agreement. On
the Distribution Date immediately following the calculation becoming final, the
sharing percentages set forth in Section 5.1(c) and Section 6.1(a)(iii) shall be
adjusted to the maximum extent necessary (subject to the limit that the
aggregate sharing percentages for the Class B Members shall not be less than
five percent (5%) and the aggregate sharing percentages for the Class A Members
shall not be less than one percent (1%)) so as to correct the Cash Difference on
a present value basis calculated at the Target Internal Rate of Return, which
adjusted sharing percentages shall remain in effect until elimination of the
Cash Difference.

 

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(f)     Curative Flip Allocations. If, after filing the Tax Return for the Tax
Year in which the Flip Date was determined to have occurred, there is change in
the distributive share of Company items reported for the period through such
Flip Date for reasons other than as the result of the application of the
provisions of Section 7.11(c) or the calculation assumptions and conventions in
this Section 7.11, and the Company has not yet made liquidating distributions
under Section 10.2, then the following curative allocations, distributions and
payments will apply and be effected by the Parties (the “Curative Flip
Allocation”). The Managing Member will promptly determine the shortfall between
the Internal Rate of Return actually achieved through the last Distribution Date
that the Company distributed Distributable Cash under Section 6.1(a)(i) or (ii),
as applicable, and the Target Internal Rate of Return. The sharing percentages
in Section 5.1(c) and Section 6.1(a)(iii) then will be adjusted for allocations
and distributions to be made subsequent to those relating to such last
Distribution Date to the maximum extent and for so long as is necessary to
eliminate such shortfall between the Internal Rate of Return actually achieved
through the last Distribution Date that the Company distributed Distributable
Cash under Section 6.1(a)(i) or (ii), as applicable, and the Target Internal
Rate of Return (subject to the limit that the aggregate sharing percentages for
the Class B Members shall not be less than five percent (5%) and the aggregate
sharing percentages for the Class A Members shall not be less than one percent
(1%)). If an event occurs that would have triggered a Curative Flip Allocation
but for the fact that a Class A Member has already purchased the Class B
Interests pursuant to Section 9.6 or Section 9.7, then such Class A Member will
pay in cash, within twenty (20) Business Days following the occurrence of such
event, the economic equivalent of the Curative Flip Allocation as additional
purchase price for the Class B Interests.

 

(g)     Disputes. Any dispute by the Class B Member of any item or procedure or
calculation of, or which affects, the Target Internal Rate of Return contained
in any notice or report delivered to the Class B Member will be disputed in
accordance with the dispute resolution mechanism set forth in Section 13.11.

 

ARTICLE VIII
MANAGEMENT

 

Section 8.1     Managing Member.

 

(a)     The Managing Member shall be the Member designated to act as such
hereunder from time to time in accordance with the provisions of this
Section 8.1 (the “Managing Member”). The initial Managing Member shall be
OrLeaf. Except (i) for Major Decisions and Fundamental Decisions, which shall be
determined as set forth in Section 3.2, and (ii) as otherwise required by
applicable Legal Requirements or as otherwise expressly provided in this
Agreement (including Other Consent Matters), the Managing Member shall perform
the services set forth in Schedule 8.1(a) and conduct, direct and exercise
control over all activities of the Company, and shall have full power and
authority on behalf of the Company to manage and administer the business and
affairs of the Company and to do or cause to be done any and all acts reasonably
considered by the Managing Member to be necessary or appropriate to conduct the
business of the Company (including, without limitation, all necessary actions to
cause each of the Subject Companies to perform its obligations and enforce its
rights under the Material Contracts to which it is a party and to otherwise
carry out its respective purposes) without the need for approval by or any other
consent from any Member, including, but not limited to, the authority to bind
the Company in making contracts and incurring obligations in the Company’s name
in the course of the Company’s business.

 

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(b)     In carrying out its duties and obligations under this Agreement, the
Managing Member shall be required to perform such duties and obligations in
accordance with the material requirements of the Transaction Documents, Material
Contracts and of the Licenses and Permits (as defined in the Contribution
Agreement), applicable laws, the purposes set forth in Section 2.3 and in good
faith and in a manner reasonably believed to be in the best interest of the
Subject Companies and the Projects, in each case taking into account, for so
long as PTCs are available to any PTC Eligible Projects, the requirements to
maintain and generate PTCs.

 

(c)     The Managing Member may, at any time, upon not less than 60 Business
Days’ notice to the other Members resign as Managing Member and will in good
faith assist the Members with finding a replacement Managing Member and
providing them with reasonable assistance in transitioning to the new Managing
Member. The Class B Members holding eighty percent (80%) of the Class B
Membership Interests may, at any time and from time to time, remove the Managing
Member for Cause and fill any vacancy resulting therefrom. In addition, the
Managing Member shall be removed automatically without further vote, action or
notice by any Member in the event of a Bankruptcy of the Managing Member, the
Tax Matters Partner or the Class A Member, unless those Members who are not
Affiliates of the Managing Member elect otherwise upon written notice.

 

Section 8.2     Major Decisions.

 

(a)     In addition to any other approval required by applicable Legal
Requirements or this Agreement, Major Decisions are reserved to the Members, and
subject to Section 3.2, none of the Company, the Managing Member, or any
officer, employee or agent thereof shall do or take or make or approve any Major
Decisions prior to the later of (i) the Flip Date and (ii) the date upon which
the Class B Member’s restoration obligations pursuant to Section 10.3(b) have
been reduced to zero dollars ($0) without a Super-Majority Vote of Members.

 

(b)     The decision of each Member as to whether or not to consent to any Major
Decision shall be in the sole discretion of such Member. A request for consent
shall be sent by the Managing Member to each Member as provided in Section 13.1.
A Member will be deemed to have consented if no written response is received
from that Member within fourteen (14) Business Days of the confirmed delivery
date of a request for consent sent to such Member. The Managing Member shall
make reasonable efforts to confirm the actual delivery date to the Class B
Member by seeking an email acknowledgement that such consent request was
received and is under review; provided, however, that such fourteen (14)
Business Days shall be extended for a reasonable period to the extent requested
by the Class B Member, it being understood that reasonable requests for
additional information by such Member shall be treated as a valid extension
request extending through such time as the supplementary information is
provided, and such Member is actively reviewing it and has had a reasonable
amount of time to evaluate such information in light of the consent being
requested.

 

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Section 8.3     Fundamental Decisions.

 

(a)     In addition to any other approval required by applicable Legal
Requirements or this Agreement, Fundamental Decisions are reserved to the
Members, and none of the Company, the Managing Member, or any officer, employee
or agent thereof shall do or take or make or approve any Fundamental Decision
without a Super-majority Vote.

 

(b)     The decision of each Member as to whether or not to consent to any
Fundamental Decision shall be in the sole discretion of such Member. A request
for consent shall be sent by the Managing Member to each Member as provided in
Section 13.1. A Member will be deemed to have consented if no written response
is received from that Member within fourteen (14) Business Days of the confirmed
delivery date of a request for consent sent to such Member. The Managing Member
shall make reasonable efforts to confirm the actual delivery date to the Class B
Member by obtaining an email acknowledgement that such consent request was
received and is under review; provided, however, that such fourteen (14)
Business Days shall be extended for a reasonable period to the extent requested
by the Class B Member, it being understood that reasonable requests for
additional information by such Member shall be treated as a valid extension
request extending through such time as the supplementary information is
provided, and such Member is actively reviewing it and has had a reasonable
amount of time to evaluate such information in light of the consent being
requested.

 

Section 8.4     Insurance. The Managing Member shall cause the Company and its
Subsidiaries to acquire and maintain (including making changes to coverage and
carriers) the casualty, general liability (including product liability),
property damage and/or other types of insurance set forth in Schedule 8.4;
provided that, if any such insurance is not available on commercially reasonable
terms (which shall be to the reasonable satisfaction of the Class B Member,
provided that if the Class B Member does not provide a written response
manifesting an unambiguous agreement or disagreement within ten Business Days of
notification of such determination the Class B Member shall be deemed to be in
agreement), the Managing Member shall cause the Company to establish reasonably
satisfactory self-insurance reserves and replacement third party insurance shall
be procured as soon as commercially reasonable terms are available. The Members
shall be added to such insurance as named insured and loss payee as their
interests may appear (except for any workers’ compensation policy), with a
waiver of subrogation permitted in their favor (where legally permitted or
insurance market practice permits). Unless the insurance required to be carried
pursuant to Schedule 8.4 requires the insurer to provide the Members with at
least 30 days written notice of cancellation (ten days for non-payment of
premium), the Managing Member hereby covenants and agrees to give the Class B
Members at least 30 days written notice of cancellation (ten days for
non-payment of premium) to the extent that it receives such notice from the
insurer.

 

Section 8.5     Notice of Material Breach. The Managing Member shall notify the
Class B Members within five Business Days of obtaining actual knowledge of any
(a) written notice of default delivered by a party to a Material Contract to a
Subject Company or the Managing Member or (b) default by a party to a Material
Contract (other than a Subject Company or any Affiliate thereof) under such
Material Contract, in the case of either (a) or (b), which default, would be
reasonably likely to result in a Material Adverse Effect; provided, however,
that in the case of any notice of default in connection with the Senior Notes,
the Managing Member shall be required to notify, and provide such notice to, the
Class B Members immediately and in all cases not later than the following
Business Day.

 

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Section 8.6     Anti-Corruption Laws and Sanctions. The Managing Member shall
(a) cause the Company to maintain in effect and enforce policies and procedures
designed to ensure compliance by the Company, and their respective directors,
officers, employees and agents, with Anti-Corruption Laws and applicable
Sanctions and otherwise to prevent interactions with Prohibited Persons and
(b) require that third party counterparties implement and maintain similar
procedures designed to ensure compliance by such counterparties with
Anti-Corruption Laws and applicable Sanctions and otherwise to prevent
interactions with Prohibited Persons. The Managing Member shall cause the
Company, and its directors, officers, employees and agents (x) not to make, or
take any action in furtherance of, any offer, payment, promise to pay, or
authorization of the payment or giving of money, or anything else of value, to
any Person in violation of any Anti-Corruption Laws and (y) not to use the
Company funds (i) for the purpose of funding, financing or facilitating any
activities, business or transaction of or with any Sanctioned Person or in any
Sanctioned Country or (ii) in any manner that would result in the violation of
any Sanctions.

 

ARTICLE IX
TRANSFERS

 

Section 9.1     Prohibited Transfers.

 

Except for Permitted Transfers, no Member shall sell, transfer, assign, convey,
pledge, mortgage, encumber, hypothecate or otherwise dispose of all or any part
of its Membership Interests or any interest, rights or obligations with respect
thereto, directly or indirectly (including through a change of control or merger
of such Member) (any such action, a “Transfer”), except as provided in this
Article IX. Any attempted Transfer that does not comply with this Article IX
shall be null and void and of no force or effect whatsoever.

 

Section 9.2     Conditions Applicable to All Transfers.

 

(a)     Except as otherwise provided in this Section 9.2, all Transfers of
Membership Interests must satisfy the following conditions:

 

(i)     The transferring Member must give notice of the proposed Transfer to
each of the other Members not less than ten (10) days prior to the effective
date of the proposed Transfer.

 

(ii)     The transferring Member and the prospective transferee each execute,
acknowledge and deliver to the Company such instruments of transfer and
assignment with respect to such Transfer and such other instruments as are
reasonably satisfactory in form and substance to the other Members to effect
such Transfer and to confirm the transferor’s intention that the transferee
become a Member in its place, and the prospective transferee makes the
representations and warranties set forth in Section 3.11 as of the date of such
Transfer.

 

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(iii)     The transferee executes, adopts and acknowledges this Agreement, and
executes such other agreements as the Managing Member may reasonably deem
necessary or appropriate to confirm the undertaking of the transferee to be
bound by the terms of this Agreement and to assume the obligations of the
transferor under this Agreement and the Contribution Agreement (to the extent
the transferor is to be released from such obligations).

 

(iv)     The Transfer will not violate (x) any securities laws or any other
applicable federal or state laws or the order of any court having jurisdiction
over the Company or any of its Assets or (y) any material contract, lease,
security, indenture or agreement binding on any Subject Company or its Assets.

 

(v)     In the case of a Transfer by the Class B Member, such Transfer will not
result in a termination of the Company or any Subject Company under
Section 708(b)(1)(B) of the Code unless the transferor has indemnified the other
Members for any adverse tax consequences incurred as a result of such
termination in an amount determined on a present value basis using the Target
Internal Rate of Return as the discount rate and using the Tracking Model
results to the date of such Transfer, but otherwise not changing any of the
inputs and assumptions from the Base Case Model. In the case of a Transfer by
the Class A Member, such Transfer will not result in a termination of the
Company or any Subject Company under Section 708(b)(1)(B) of the Code unless the
transferor has indemnified the other Members for any adverse tax consequences
incurred as a result of such termination in an amount determined on a present
value basis using the Tracking Model results to the date of such Transfer, but
otherwise not changing any of the inputs and assumptions from the Base Case
Model.

 

(vi)     The Transfer will not cause the Company to be classified as a publicly
traded partnership treated as a corporation for federal income tax purposes or
result in any of the Projects becoming tax-exempt use property, in whole or in
part, within the meaning of Section 168(h) of the Code during any applicable
recovery period.

 

(vii)     All consents, approvals and filings required to be obtained or made in
connection with the Transfer will have been obtained or made and will be in full
force and effect.

 

(viii)     The Transferee is an Unrelated Person.

 

(ix)     The Transferee is a “United States person” within the meaning of
Section 7701(a)(30) of the Code.

 

(b)     If the Transfer involves Class A Membership Interests (including, for
the avoidance of doubt, a Transfer upon foreclosure (or in lieu of such
foreclosure) under an Encumbrance relating to such Class A Membership Interest),
(i) through and including the Flip Date, the Transfer must be approved by a
Super-Majority Vote of Members and (ii) the Transferee shall have provided such
“Know Your Customer” information as shall be required by the policies and
procedures of the Class B Member.

 

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Section 9.3     Conditions Applicable to All Transfers of Class B Membership
Interests. Except as otherwise provided in this Section 9.3, all Transfers of
Class B Membership Interests must satisfy the following conditions (in addition
to those in Section 9.2):

 

(i)     An agreement (or agreements), in form and substance satisfactory to the
Class A Member, shall be in full force and effect with respect to the transferee
in which the transferee agrees to be bound by all the provisions of (x) this
Agreement, including Sections 9.5 and 9.6 of this Agreement, and (y) the
Contribution Agreement insofar as it relates to the Class B Membership Interests
transferred, including Article VI thereof.

 

(ii)     Such Transfer will not result in any Person that is not an Approved
Transferee holding a Class B Membership Interest.

 

Section 9.4     Certain Permitted Transfers.

 

(a)     Notwithstanding the foregoing provisions of this Article IX, except as
otherwise provided in this Section 9.4, the following Transfers (the “Permitted
Transfers”) may be made at any time and from time to time, without restriction
and without notice to, approval of, filing with, consent by, or other action of
or by, any Member or other Person:

 

(i)     The issuance of Membership Interests pursuant to the Contribution
Agreement.

 

(ii)     The grant of any security interest in any Membership Interest pursuant
to any security agreement any Member may enter into with lenders.

 

(iii)     A Transfer to a Class A Approved Transferee in connection with any
foreclosure or other exercise of remedies in respect of any Class A Membership
Interest subject to a security interest referred to in Section 9.4(a)(ii).

 

(iv)     Any Transfer of all or a portion of the stock, membership interests or
Assets (including any change of control or merger) of OrLeaf or any upstream
Affiliate of OrLeaf (other than the Assets of any such Affiliate that are
Membership Interests); provided, that, prior to the Flip Date, in connection
with such transfer Ormat Technologies Inc. will retain direct or indirect
control of over fifty percent (50%) of the voting interest in Ormat and Ormat
will remain the managing member of OrLeaf.

 

(v)     Any Transfer of Class B Membership Interests by any Class B Member or
any Affiliate of such Class B Member to any other Class B Member or any
Affiliate of such Class B Member.

 

(vi)     Any Transfer of Class B Membership Interests by any Class B Member or
any Affiliate of such Class B Member in connection with Section 9.11.

 

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(vii)     Any Transfer of all or a portion of the stock, membership interests or
Assets (including any change of control or merger) of the Class B Members or any
Affiliates of the Class B Members (other than (x) the Assets of any such
Affiliate that are Membership Interests and (y) the stock or membership
interests of any such Affiliate the Assets of which consist primarily of
Membership Interests, directly or indirectly, and such Transfer would result in
either (1) any event referred to in Section 9.2(a)(v), (vi) or (ix) or
(2) Membership Interests being held, directly or indirectly, by a Person that is
a Competitor).

 

(viii)     Any Transfer made in accordance with Sections 9.5 or 9.6.

 

(b)     The conditions set forth in Section 9.2(a)(ii) through (vii) shall apply
to the Permitted Transfers referred to in Section 9.4(a)(iii).

 

Section 9.5     Right of First Offer.

 

(a)     If at any time any Class B Member desires to Transfer any of its Class B
Membership Interests to any third Person, other than an Affiliate of such
Class B Member, prior to offering the Class B Membership Interests to any such
third Person, such Class B Member shall first give notice to the Class A Member
(the “Offer Notice”).

 

(b)     The Class A Member shall have the right, for a period of 30 calendar
days after receipt of an Offer Notice, to inform the Class B Member in writing
of its offer to purchase the subject Class B Membership Interests, including the
price and other terms of such offer (such offer, the “ROFO Offer”). Any ROFO
Offer, if given, shall be irrevocable.

 

(c)     If the Class B Member chooses, in its sole discretion, to accept the
ROFO Offer the closing of the Transfer of the Class B Membership Interests
covered by any ROFO Offer shall occur no later than 45 days after the ROFO Offer
is given or such later date as may be required to obtain any applicable
governmental consents or approvals, or to satisfy any reporting or waiting
period under any applicable Legal Requirements, or at such other time as the
parties agree.

 

(d)     If the ROFO Offer is exercised, at the closing of the Transfer, (1) the
Class A Member shall pay (by wire transfer of immediately available United
States Dollars to such United States bank accounts as the Class B Member may
designate in a written notice to the Company and Class A Member no later than
five Business Days prior to the closing date for the Transfer pursuant to the
ROFO Offer) an amount equal to the product of (i) the cash price of the Class B
Membership Interests set forth in the Offer Notice, multiplied by (ii) the
Class B Membership Interests subject to the ROFO Offer Notice and (2) the
Class B Member shall take the following actions: (i) the Class B Member shall
Transfer to the Class A Member all right, title and interest in and to the
Class B Membership Interests, free and clear of all Encumbrances other than
Permitted Encumbrances; (ii) the Class B Member shall be deemed to have made the
representations set forth on Schedule 9 attached hereto to the Class A Member
and the Company; and (iii) the Class B Member shall take all such further
actions and execute, acknowledge and deliver all such further documents that are
necessary to effectuate the Transfer of the Class B Membership Interests
contemplated by this Section. Upon the closing of such Transfer, (1) all of the
Class B Member’s obligations and liabilities associated with the Class B
Membership Interests which are the subject of such Transfer will terminate
except those obligations and liabilities accrued through the date of such
closing, (2) the Class B Member shall have no further rights as a Member in
respect of the Class B Membership Interests which are the subject of such
Transfer, and (3) all the rights, obligations and liabilities associated with
the Class B Membership Interests which are the subject of such Transfer shall
become the rights, obligations and liabilities of the Class A Member.

 

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(e)     If the Class B Member chooses not to accept the ROFO Offer the Class B
Member may Transfer the Class B Membership Interests to any third Person,
subject to the other restrictions contained herein.

 

(f)     A proposed Transfer between one Class B Member to another Class B
Member, or between respective Affiliates of such Class B Members, shall not be
subject to the right of first offer as set forth in this Section 9.5.

 

Section 9.6     Flip Purchase Option.

 

(a)     The Class A Member (or any Affiliate of the Class A Member designated by
it) shall have the right to acquire all (but not less than all) of the Class B
Membership Interests on either of (i) the Target Flip Date or (ii) the date that
is 9.0 years after the Closing Date (the “Flip Purchase Option”), in either case
upon providing written notice no later than 90 days prior to such date to the
Company and the Class B Member of its election to exercise the Flip Purchase
Option (the “Flip Exercise Notice”). Any Flip Exercise Notice, if given, shall
be irrevocable; provided that, if the Class A Member defaults on its obligation
to purchase the Class B Membership Interest pursuant hereto, the Flip Purchase
Option shall expire.

 

(b)     The consideration for the Transfer of the Class B Membership Interests
to the Class A Member pursuant to the Flip Purchase Option shall be an amount
(payable in United States dollars) equal to the greater of (i) the Fair Market
Value of the Class B Membership Interests as of the date of the purchase of the
Class B Membership Interests pursuant to this Section 9.6, increased to account
for any minimum gain chargeback after taking into account any suspended losses
under Section 704(d) of the Code the Class B Member recognizes due to the
exercise of the Flip Purchase Option assuming a tax rate equal to the Highest
Marginal Rate, and (ii) $3,000,000; provided, that if the Class B Member has not
yet achieved the Target Internal Rate of Return, the consideration for the
Transfer of the Class B Membership Interests shall first consist of the amount
necessary to cause the Class B Member to achieve its Target Internal Rate of
Return and then the applicable amount set forth in subclause (i) or (ii) of this
Section 9.6(b) (the “Flip Purchase Price”). The Fair Market Value of the Class B
Membership Interests shall be determined by agreement between the Class A Member
and the Class B Member. If they fail to agree upon such value within thirty (30)
days after the date of the Buyout Notice, the Members shall, promptly
thereafter, initiate the Appraisal Method for purposes of establishing such Fair
Market Value.

 

(c)     If the Flip Purchase Option is exercised, the closing of such Transfer
shall occur on the Business Day that is (i) 60 days after the applicable Flip
Exercise Notice is given or (ii) such later date as may be required to obtain
any applicable consents or approvals or satisfy any reporting or waiting period
under any applicable Legal Requirements.

 

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(d)     If the Flip Purchase Option is exercised, at the closing of the
Transfer, (1) the Class A Member shall pay (by wire transfer of immediately
available United States Dollars to such United States bank accounts as the
Class B Members may designate in a written notice to the Company and the Class A
Member no later than five Business Days prior to the closing date for the
Transfer pursuant to the Flip Purchase Option) an amount equal to the Flip
Purchase Price (determined in accordance with Section 9.6(b)) and (2) the
Class B Members shall take the following actions: (i) such Class B Member shall
Transfer to the Class A Member, all right, title and interest in and to the
Class B Membership Interests, free and clear of all Encumbrances other than
Permitted Encumbrances; (ii) such Class B Member shall be deemed to have made
the representations set forth on Schedule 9 attached hereto to each such Class A
Member and the Company; and (iii) such Class B Member shall take all such
further actions and execute, acknowledge and deliver all such further documents
that are necessary to effectuate the Transfer of the Class B Membership
Interests contemplated by this Section. Upon the closing of such Transfer,
(x) all of such Class B Member’s obligations and liabilities associated with the
Class B Membership Interests which are the subject of such Transfer will
terminate except those obligations and liabilities accrued through the date of
such closing, (y) such Class B Member shall cease to be a Member, and (z) all
the rights, obligations and liabilities associated with the Class B Membership
Interests which are the subject of such Transfer shall become the rights,
obligations and liabilities of each Person acquiring such Class B Membership
Interests.

 

Section 9.7     Buy-Out Event.

 

(a)     Following the occurrence of a Material Adverse Change in Tax Law for
which the Distributable Cash ratios may be modified as provided in the proviso
in Section 6.1(a), the Class A Member shall have the option to acquire all, but
not less than all, of the Class B Membership Interest of the Class B Member in
accordance with the requirements provided in Section 9.2. Such option may be
exercised by the Class A Member by giving to the Class B Member written notice
to such effect no later than sixty (60) Business Days after the occurrence of
such Material Adverse Change in Tax Law (the “Buyout Notice”).

 

(b)     The purchase price for the Class B Membership Interests being purchased
pursuant to this Section 9.7 shall be the greater of (i) the amount necessary to
cause the Class B Member to achieve the 20-Year IRR Rate and (ii) the Fair
Market Value of the Class B Membership Interests as of the date of such
purchase.

 

(c)     Within twenty (20) days after the date of the Buyout Notice, the Members
will meet to discuss and negotiate in good faith to determine and agree upon the
Fair Market Value of the Class B Membership Interests. If they agree upon such
Fair Market Value, such value will be deemed to be the Fair Market Value for
purposes hereof. If they fail to agree upon such value within thirty (30) days
after the date of the Buyout Notice, the Members shall, promptly thereafter,
initiate the Appraisal Method for purposes of establishing such Fair Market
Value.

 

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(d)     The closing of any such purchase shall occur on the later of the
thirtieth (30th) Business Day following the date of the Buyout Notice, the
twentieth (20th) Business Day following the determination of the Fair Market
Value of the Class B Membership Interests, and the fifth (5th) Business Day
after the receipt of all applicable necessary approvals from any Governmental
Body. At the closing, the Class B Member shall convey the Class B Membership
Interests to the Class A Member on an “as is, where is” basis without
representations or warranties, expressed or implied, other than that the Class B
Member has good and marketable title to the Class B Membership Interests and
that no encumbrance against the Class B Membership Interests then exists other
than those created pursuant to this Agreement. At the closing, (1) the Class A
Member shall expressly assume any and all obligations and liabilities of the
Class B Member under this Agreement (except those obligations or liabilities
accrued through the date of such closing), (2) the Class A Member shall amend
this Agreement to reflect the withdrawal of the Class B Member and the
redemption or transfer of the Class B Membership Interests effective as of the
date of such closing, and (3) the Class A Member shall pay the purchase price to
the Class B Member by wire transfer of immediately available funds.

 

Section 9.8     Regulatory and Other Authorizations and Consents. In connection
with any Transfer pursuant to Sections 9.5, 9.6 or 9.7 (a “Designated
Transfer”), each Member involved shall use all commercially reasonable efforts
to obtain all authorizations, consents, orders and approvals of, give all
notices to and make all filings with, all Governmental Bodies and third parties
that may be or become necessary for the Designated Transfer, its execution and
delivery of, and the performance of its obligations under, this Agreement or
other Transaction Documents in connection with any such Designated Transfer and
will cooperate fully with the other Members in promptly seeking to obtain all
such authorizations, consents, orders and approvals, giving such notices and
making such filings, including the provision to such third parties and
Governmental Bodies of such financial statements and other publicly available
financial information with respect to such Member, as such third parties or
Governmental Bodies may reasonably request; provided, however, that no Member
involved shall have any obligation to pay any consideration to obtain any such
consents. In addition, the Members involved shall keep each other reasonably
apprised of their efforts to obtain necessary consents and waivers from third
parties or Governmental Bodies and the responses of such third parties and
Governmental Bodies to requests to provide such consents and waivers.

 

Section 9.9     Admission. Any transferee of all or part of any Membership
Interests pursuant to a Transfer made in accordance with this Agreement shall be
admitted to the Company as a substitute Member upon its execution of a
counterpart to this Agreement.

 

Section 9.10     Security Interest Consent. If any Member grants a security
interest in any Membership Interest to a Class A Approved Transferee, upon
request by such Member, each other Member will execute and deliver to such
Class A Approved Transferee holding such security interest (for itself and/or
for the benefit of other lenders) such acknowledgments, consents or other
instruments as such Class A Approved Transferee may reasonably request to
confirm that such grant and any foreclosure or other exercise of remedies in
respect of such Membership constitutes a Permitted Transfer under this
Agreement.

 

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Section 9.11     Regulatory Compliance.

 

(a)     In the event that the Class B Member reasonably determines that it has a
Regulatory Problem, the Company and the Managing Member agree at the sole cost
and expense of the Class B Member to take all such actions as are reasonably
requested by such Class B Member in order (i) to effectuate and facilitate any
transfer by such Class B Member of any securities in the Company then held by
the Class B Member to any Person designated by such Class B Member; provided,
that Section 9.3 shall be complied with, (ii) to permit such Class B Member (or
any of its Affiliates) to exchange all or any portion of the voting securities
then held by such Person on a share-for-share basis for shares of a class of
non-voting securities of the Company, which non-voting securities shall be
identical in all respects to such voting securities, except that such new
securities shall be non-voting and shall be convertible on such terms as are
requested by such Class B Member into voting securities and reasonably
acceptable to the Company in light of regulatory considerations then prevailing,
and (iii) to continue and preserve the respective allocation of the voting
interests with respect to the Company arising out of such Class B Member’s
ownership of voting securities before the transfers and amendments referred to
above (including entering into such additional contracts as are reasonably
requested by such Class B Member to permit any Person(s) designated by such
Class B Member to exercise any voting power which is relinquished by such
Class B Member upon any exchange of voting securities for nonvoting securities
of the Company); and at the sole cost and expense of such Class B Member, the
Company shall enter into such additional contracts, adopt such amendments to
this Agreement and other relevant contracts and take such additional actions, in
each case as are reasonably requested by such Class B Member in order to
effectuate the intent of the foregoing; provided that any such additional
contracts, amendments to this Agreement or other relevant contracts, or other
actions shall not have an adverse impact on the Company or any other Member. If
such Class B Member is, or elects to transfer securities of the Company in order
to avoid a Regulatory Problem to, a Regulated Holder, the Company and each of
the Members agree at the request of such Class B Member that the provisions of
this Section 9.11 shall be applicable to such Regulated Holder in order to
assist such Regulated Holder in complying with applicable laws and regulations
to which it is subject. To the extent necessary to comply with such laws and
regulations, such agreements may include restrictions on the redemption,
repurchase or retirement of securities of the Company that would result or be
reasonably expected to result in such Regulated Holder holding more voting
securities or total securities (equity and debt) than it is permitted to hold
under such laws and regulations.

 

(b)     In the event such Class B Member has the right to acquire any of the
Company’s securities from the Company or any other Person (as the result of a
preemptive offer, pro rata offer or otherwise), and such Class B Member
reasonably determines that it has a Regulatory Problem, at such Class B Member’s
request, the Company, at the sole cost and expense of such Class B Member, will
offer to sell to such Class B Member non-voting securities (or, if the Company
is not the proposed seller, will arrange for the exchange of any voting
securities for non-voting securities immediately prior to or simultaneous with
such sale) on the same terms as would have existed had such Class B Member
acquired the securities so offered and immediately requested their exchange for
non-voting securities pursuant to subsection (a) above.

 

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ARTICLE X
DISSOLUTION AND WINDING-UP

 

Section 10.1     Events of Dissolution. The Company shall be dissolved and its
affairs shall be wound up upon the first to occur of any of the following:

 

(a)     the written consent of the Members representing a Super-Majority Vote to
dissolve and terminate the Company;

 

(b)     the entry of a decree of judicial dissolution under Section 18-802 of
the Act;

 

(c)     the occurrence of the Termination Date;

 

(d)     the disposition of all or substantially all of the Company’s business
and Assets;

 

(e)     the issuance of a final, nonappealable court order which makes it
unlawful for the business of the Company to be carried on; or

 

(f)     at any time there are no Members of the Company unless the business of
the Company is continued in accordance with the Act.

 

Section 10.2     Distribution of Assets.

 

(a)     The Members hereby appoint the Managing Member to act as the liquidator
upon the occurrence of one of the events in Section 10.1. Upon the occurrence of
such an event, the liquidator will proceed diligently to wind up the affairs of
the Company and make final distributions as provided herein and in the Act. The
costs of liquidation will be borne by the Company. The liquidator may sell, and
will use commercially reasonable efforts to obtain the best possible price for
the sale of any or all Company property, including to Members. In no event,
without the approval of Members by Super-Majority Vote of Members, will a sale
to a Member be for an amount that is less than fair market value (determined by
the Appraisal Method if the Members (by Super-Majority Vote) are unable to agree
on the fair market value).

 

(b)     The steps to be accomplished by the liquidator are as follows:

 

(i)     As promptly as reasonably practicable after dissolution and again after
final liquidation, the liquidator shall cause a proper accounting to be made by
the Accounting Firm of the Company’s Assets, liabilities, and operations through
the last day of the calendar month in which the dissolution occurs or the final
liquidation is completed, as applicable.

 

(ii)     The liquidator shall pay from Company funds all of the debts and
liabilities of the Company (including the Working Capital Loans) or otherwise
make adequate provision for them (including the establishment of a cash escrow
fund for contingent, conditional or unmatured liabilities in such amount and for
such term as the liquidator may reasonably determine).

 

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(iii)     With respect to the remaining Assets of the Company:

 

(A)     the liquidator shall use all commercially reasonable efforts to obtain
the best possible price and may sell any or all Company Assets (subject to any
and all restrictions to which the Project is subject), including to the Members
at such price, but in no event lower than the Fair Market Value thereof; and

 

(B)     with respect to all Company Assets that have not been sold, the Gross
Asset Values of such Assets shall be determined pursuant to subparagraph (b) of
the definition of Gross Asset Value.

 

(iv)     Any Company items of income and gain (including any such items
attributable to the disposition or deemed disposition of Assets pursuant to
Section 10.2(b)(iii) and PTCs) for the Tax Year during which the distribution of
liquidation proceeds occurs that have not been allocated pursuant to the
allocations set forth in Section 5.2(a) through (h) shall, subject to the
limitation contained in Section 10.2(b)(iv)(C) hereof, first be allocated to
each Member having a deficit balance in its Capital Account, in the proportion
that such deficit balance bears to the total deficit balances in the Capital
Accounts of all Members, until each Member has been allocated Company items of
income and gain equal to any such deficit balance in its Capital Account and
such deficit balance has thereby been eliminated provided, if the Company items
of income and gain are insufficient to eliminate the deficit Capital Account
balances of the Members, any Company items of income and gain (but not losses)
shall be allocated first to the Class B Members; provided further, that if any
Class B Member will have a deficit in its Capital Account as a result of the
allocation of five percent (5%) of any Company items of losses associated with
any PPA pursuant to Section 10.2(b)(iv)(C), then prior to such allocation,
Company items of income and gain shall be further allocated to such Class B
Member to the extent necessary to ensure such Class B Member will not have a
deficit in its Capital Account after taking into account the allocation of any
such losses. Any remaining Company items (including any items attributable to
the disposition or deemed disposition of Assets pursuant to Section 10.2(b)(iii)
and PTCs) for such Tax Year during which the distribution of liquidation
proceeds occurs shall be allocated among the Members in such manner as to ensure
that, to the greatest extent feasible, following these allocations, the balances
in the Capital Accounts of the Members are expected to result in distributions
pursuant to Section 10.2(b)(v) in accordance with the following target
liquidation distributions:

 

(A)     first, to the Class B Members, pro rata in accordance with their Class B
Units, until the Class B Member has achieved the Target Internal Rate of Return
(for the avoidance of doubt, using the calculation rules and conventions of
Section 7.11(a) through (d); and

 

(B)     thereafter, to the Class A Members and the Class B Members in accordance
with the sharing ratios set forth in Section 6.1(a)(iii) hereof as being
applicable after the Flip Date.

 

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(C)     Notwithstanding the foregoing, in the event that the allocations set
forth in this Section 10.2(b)(iv) result in either (i) the Class A Members
failing to be allocated at least one percent (1%) or (ii) the Class B Members
failing to be allocated at least five percent (5%), of each material Company
item for the Tax Year during which the distribution of liquidation proceeds
occurs, Company items shall be reallocated among the Class B Members and the
Class A Members, to the extent necessary, to cause (i) the Class A Members to be
allocated at least one percent (1%) and (ii) the Class B Members to be allocated
at least five percent (5%), of each material item of gross income, gain, loss,
deduction and credit for the Tax Year during which the distribution of
liquidation proceeds occurs.

 

(v)     After giving effect to all allocations (including those under
Section 5.2 and Section 10.2(b)(iv)), all prior distributions (including those
under Section 6.1) and all Capital Contributions (including those made on the
Effective Date) for all periods, all remaining cash and property (including any
Distributable Cash and liquidation proceeds) shall be distributed to the Members
in accordance with the positive balances in their Capital Accounts.

 

(vi)     Any distribution to the Members in respect of their Capital Accounts
pursuant to this Section 10.2 shall be made by the end of the Company taxable
year in which a the event described in Section 10.1 occurs (or if later, within
ninety (90) days after the date of such liquidating event).

 

(c)     The distribution of cash or property to a Member in accordance with the
provisions of this Section 10.2 constitutes a complete return to the Member of
its Capital Contributions and a complete distribution to the Member on account
of its Membership Interest and all the Company’s property and constitutes a
compromise to which all Members have consented pursuant to Section 18-502(b) of
the Act.

 

Section 10.3      Deficit Capital Accounts.

 

(a)     Except as expressly provided in this Section 10.3, no Member shall be
obligated to contribute cash to restore a deficit in its Capital Account
balance.

 

(b)     In the event the Class B Members’ interests in the Company are
“liquidated” within the meaning of Treasury Regulations
Section 1.704-1(b)(2)(ii)(g), if a Class B Member has a deficit Capital Account
balance in excess of the amount such Class B Member is deemed obligated to
restore pursuant to the penultimate sentences of Treasury Regulations Section
1.704-2(g)(1) and 1.704-2(i)(5) (an “Adjusted Deficit Capital Account Balance”),
calculated in each case in accordance with Section 10.2 and the other provisions
of this Agreement without regard to such Class B Member’s obligation pursuant to
this Section 10.3(b) (provided, that to the extent disregarding such obligation
in calculating such amount is inconsistent with Law, such Class B Member’s
obligation pursuant to this Section 10.3(b) shall be taken into account in such
calculation), then such Class B Member shall be obligated to pay to the Company
cash in an amount equal to Adjusted Deficit Capital Account Balance by the end
of the Company taxable year during which the liquidation of the Company occurs,
or if later, within ninety (90) days after the date of such liquidation;
provided, however, that the restoration obligation of such Class B Member shall
not be more than its DRO Amount. Each Class B Member shall have the right by
written notice to the Company (the “DRO Notice”), at any time and in its sole
discretion, to elect to increase its DRO Amount to the amount specified in such
DRO Notice. Notwithstanding the foregoing, after such point in time at which the
absolute value of a Class B Member’s Adjusted Deficit Capital Account Balance
declines over the prior Tax Year, such Class B Member’s DRO Amount shall be
adjusted downward (but not increased) at the end of each Tax Year to an amount
equal to the lesser of (i) the dollar amount set forth in the latest of any DRO
Notice given by such Class B Member, or (ii) the absolute value of such Class B
Member’s Adjusted Deficit Capital Account Balance at the end of such Tax Year.
Nothing contained in this Agreement shall obligate any Class B Member to issue a
DRO Notice. A DRO Notice given by a Class B Member pursuant hereto shall be
deemed to constitute a duly adopted amendment to this Agreement without any
further action by any party. If any Class B Member issues a DRO Notice, the Tax
Matters Partner shall prepare, or cause to be prepared by the Accounting Firm, a
Tax Return that is consistent with such DRO Notice.

 

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(c)     In the event the Class A Members’ interests in the Company are
“liquidated” within the meaning of Treasury Regulations
Section 1.704-1(b)(2)(ii)(g), if a Class A Member has a deficit Capital Account
balance in excess of the amount such Class A Member is deemed obligated to
restore pursuant to the penultimate sentences of Treasury Regulations Section
1.704-2(g)(1) and 1.704-2(i)(5) (a “Class A Adjusted Deficit Capital Account
Balance”), calculated in each case in accordance with Section 10.2 and the other
provisions of this Agreement without regard to such Class A Member’s obligation
pursuant to this Section 10.3(c) (provided, that to the extent disregarding such
obligation in calculating such amount is inconsistent with Law, such Class A
Member’s obligation pursuant to this Section 10.3(c) shall be taken into account
in such calculation), then such Class A Member shall be obligated to pay to the
Company cash in an amount equal to such Class A Adjusted Deficit Capital Account
Balance by the end of the Company taxable year during which the liquidation of
the Company occurs, or if later, within ninety (90) days after the date of such
liquidation; provided, however, that the restoration obligation of such Class A
Member shall initially not be more than $0; provided, further, that,
notwithstanding any provision herein to the contrary, each Class A Member’s DRO
Amount shall be not less than the amount of any deficit in such Class A Member’s
Capital Account that results from cash distributions made to the Class A Member
in a Tax Year that are not matched by an allocation of income or gain or an
adjustment made under Treasury Regulations Section 1.704-1(b)(2)(iv)(m) to such
Class A Member for such Tax Year (such deficit restoration obligation of a Class
A Member, the “Class A Member’s DRO Amount”). Notwithstanding the foregoing, if
the absolute value of the deficit in the Class A Member’s Capital Account
declines at the end of a subsequent taxable year, the Class A Member’s DRO
Amount shall be adjusted downward by a corresponding amount (subject to any DRO
Notice issued by the Class A Member).

 

Section 10.4     In-Kind Distributions. There shall be no distribution of Assets
of the Company in kind without the prior Super-Majority Vote of the Members.

 

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Section 10.5     Certificate of Cancellation.

 

(a)     When all debts, liabilities and obligations have been paid and
discharged or adequate provisions have been made therefor and all of the
remaining property and Assets have been distributed to the Members, a
certificate of cancellation of the Certificate of Formation (the “Certificate of
Cancellation”) shall be executed and filed by the liquidator with the Secretary
of State of the State of Delaware, which certificate shall set forth the
information required by Section 18-203 of the Act.

 

(b)     Upon the filing of the Certificate of Cancellation, the existence of the
Company shall cease.

 

(c)     All costs and expenses in fulfilling the obligations under this
Section 10.5 shall be borne by the Company.

 

ARTICLE XI
INDEMNIFICATION

 

Section 11.1     Indemnifications.

 

(a)     The Class A Member (the “Indemnifying Party”) agrees to indemnify,
defend and hold harmless Class B Member Indemnified Parties (the “Indemnified
Parties”) from and against any and all Class B Member Indemnified Costs.

 

(b)     No claim for indemnification may be made with respect to any breach
(other than failure to pay an amount due) unless and until the aggregate amount
of claims for which indemnification is (or previously has been) sought exceeds
three hundred thousand dollars ($300,000); provided that, once such threshold
amount of claims has been reached, the relevant Indemnified Party shall have the
right to be indemnified for all such claims, including amounts that were not
previously paid because such threshold amount had not been reached.

 

(c)     Notwithstanding anything to the contrary contained herein, the Class A
Members’ indemnification obligations shall survive the Transfer of any Class A
Membership Interests, to the extent that any claim for indemnification by a
Class B Member Indemnified Party relates to the period of time prior to such
Transfer.

 

Section 11.2     Direct Claims. In any case in which an Indemnified Party seeks
indemnification under Section 11.1 which is not subject to Section 11.3 because
no Third Party Claim is involved (a “Direct Claim”), the Indemnified Party shall
notify the Indemnifying Party in writing of any amounts which such Indemnified
Party claims are subject to indemnification under the terms of this Article XI.
The failure of the Indemnified Party to exercise promptness in such notification
shall not amount to a waiver of such claim, except to the extent the resulting
delay materially and adversely prejudices the position of the Indemnifying Party
with respect to such claim.

 

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Section 11.3     Third Party Claims.

 

(a)     An Indemnified Party shall give written notice to any Indemnifying Party
within 30 days after it has actual knowledge of commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a “Third
Party Claim”) in respect of which such Indemnified Party may seek
indemnification under Section 11.1. Such notice shall state the nature and basis
of such Third Party Claim and the events and the amounts thereof to the extent
known. Any failure so to notify an Indemnifying Party shall not relieve such
Indemnifying Party from any liability that it, he, or she may have to such
Indemnified Party under this Article XI, except to the extent the failure to
give such notice materially and adversely prejudices such Indemnifying Party. In
case any such action, proceeding or claim is brought against an Indemnified
Party, so long as it has acknowledged in writing to the Indemnified Party that
it is liable to the Indemnified Party for such Third Party Claim pursuant to
this Section, the Indemnifying Party shall be entitled to participate in and,
unless in the reasonable judgment of the Indemnified Party a conflict of
interests between it and the Indemnifying Party may exist in respect of such
Third Party Claim or such Third Party Claim entails a material risk of criminal
penalties or civil fines or non-monetary sanctions or equitable remedies being
imposed on the Indemnified Party (a “Third Party Penalty Claim”), to assume the
defense thereof, with counsel selected by the Indemnifying Party and reasonably
satisfactory to the Indemnified Party, and after notice from the Indemnifying
Party to the Indemnified Party of its election so to assume the defense thereof,
the Indemnifying Party shall not be liable to such Indemnified Party for any
legal or other expenses subsequently incurred by the latter in connection with
the defense thereof other than as expressly provided below in this Section 11.3;
provided nothing contained herein shall permit any Indemnifying Party to control
or participate in any Tax contest or dispute involving the Class B Member or any
Affiliate of the Class B Member, or permit the Class B Member to control or
participate in any Tax contest or dispute involving the Class A Member or any
Affiliate of the Class A Member other than the Company; and, provided, further,
the Parties agree that the handling of any tax contests involving the Company
will be governed by Section 7.7.

 

(b)     In the event that (i) the Indemnifying Party advises an Indemnified
Party that it will not contest a claim for indemnification hereunder, (ii) the
Indemnifying Party fails, within thirty (30) days of receipt of any
indemnification notice to notify, in writing, such Indemnified Party of its
election, to defend, settle or compromise, at its sole cost and expense, any
such Third Party Claim (or discontinues its defense at any time after it
commences such defense) or (iii) in the reasonable judgment of the Indemnified
Party, a conflict of interests between it and the Indemnifying Party exists in
respect of such Third Party Claim or the action or claim is a Third Party
Penalty Claim, then the Indemnified Party may, at its option, defend, settle or
otherwise compromise or pay such action or claim or Third Party Claim. In any
event, unless and until the Indemnifying Party elects in writing to assume and
does so assume the defense of any such claim, proceeding or action, the
Indemnifying Party shall be liable for the Indemnified Party’s reasonable costs
and expenses arising out of the defense, settlement or compromise of any such
action, claim or proceeding. The Indemnified Party shall cooperate fully with
the Indemnifying Party in connection with any negotiation or defense of any such
action or claim by the Indemnifying Party. The Indemnifying Party shall keep the
Indemnified Party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. If the Indemnifying Party
elects to defend any such action or claim, then the Indemnified Party shall be
entitled to participate in such defense with counsel of its choice at its sole
cost and expense; provided that any such participation of the Indemnified Party
shall be at the Indemnifying Party’s sole cost and expense to the extent such
participation relates to a Third Party Penalty Claim or if a conflict of
interest between the Indemnified Party and the Indemnifying Party exists in
respect of the Third Party Claim; and provided, further, that the Indemnifying
Party shall not be responsible for the costs and expenses of more than one
counsel for all Indemnified Parties. If the Indemnifying Party does not assume
such defense, the Indemnified Party shall keep the Indemnifying Party apprised
at all times as to the status of the defense; provided, however, that the
failure to keep the Indemnifying Party so informed shall not affect the
obligations of the Indemnifying Party hereunder.

 

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(c)     The Indemnifying Party shall not be liable for any settlement of any
action, claim or proceeding effected without its written consent; provided,
however, that the Indemnifying Party shall not unreasonably withhold, delay or
condition its consent.

 

(d)     Notwithstanding anything in this Section 11.3 to the contrary, the
Indemnifying Party shall not, without the Indemnified Party’s prior written
consent, settle or compromise any claim or consent to entry of judgment in
respect thereof which imposes any criminal liability or civil fine or sanction
or equitable remedy on the Indemnified Party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
Indemnified Party, a release from all liability in respect of such claim.

 

Section 11.4     Certain Obligation of the Class A Members. Following the
delivery of a notice of Claim pursuant to Section 11.2 or Section 11.3 hereof,
as applicable, and providing there is a reasonable basis for such Claim, and the
amount of the Claim is reasonable in light of the basis of the Claim, then
commencing with the first cash distribution under Section 6.1 hereof made by the
Company following (a) the date the Indemnifying Party receives notice of a
Direct Claim or (b) the expiration of the 30-day period referred to in
Section 11.3(b)(ii) hereof, and in either case until all payments owed by the
Class A Member to any Class B Member Indemnified Party pursuant to Section 11.2
or to any other Person pursuant to Section 11.3 hereof have been paid in full
(or such lesser amount as shall have been agreed in writing by the Class B
Member), any distributions as to which the Class A Member would otherwise be
entitled pursuant to Section 6.1 hereof shall not be paid to the Class A Member
until the Class B Member Indemnified Party or other Person, as the case may be,
shall have received all amounts owed to such Class B Member Indemnified Party or
other Person, as the case may be, and all Distributable Cash otherwise payable
to the Class A Member, shall (to the extent that such Claim is not subject to
any good faith dispute) be paid to the Class B Member Indemnified Party or to
such other Person; provided, that the Class A Member shall use its best efforts
to resolve any such good faith dispute within sixty (60) days.

 

Section 11.5     After-Tax Basis. For tax reporting purposes, to the maximum
extent permitted by the Code, each Party will treat all amounts paid under any
of the provisions of this Article XI as an adjustment to the Capital
Contribution for the Membership Interest (or otherwise as a non-taxable
reimbursement, contribution or return of capital, as the case may be). To the
extent any such indemnification payment is includable as income of the
Indemnified Party as determined by agreement of the Parties, or if there is no
agreement, by an opinion of a nationally recognized tax counsel selected jointly
by the Parties that such amount “should” be includable as income of the
recipient, the amount of the payment shall be increased by the amount of any
federal income tax required to be paid by the Indemnified Party or its
Affiliates on the receipt or accrual of the indemnification payment, including,
for this purpose, the amount of any such Tax required to be paid by the
Indemnified Party on the receipt or accrual of the additional amount required to
be added to such payment pursuant to this Section 11.5, assuming full
taxability, using an assumed tax rate equal to the Highest Marginal Rate. Both
Parties shall have the opportunity to comment on the opinion delivered in
accordance with the foregoing sentence. If an opinion is delivered in accordance
with this Section 11.5, the Indemnified Party shall report the relevant
indemnification payments as income consistent with such opinion and otherwise
act in a manner consistent with such opinion. Any payment made under this
Article XI shall be reduced by the present value (as determined on the basis of
a discount rate equal to the Target Internal Rate of Return and the same
assumptions about taxability and tax rates) of any federal income tax benefit to
be realized by the Indemnified Party or its Affiliates by reason of the facts
and circumstances giving rise to such indemnification.

 

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Section 11.6     No Duplication. Any liability for indemnification under this
Article XI shall be determined without duplication of recovery. Without limiting
the generality of the prior sentence, if a statement of facts, condition or
event constitutes a breach of more than one representation, warranty, covenant
or agreement which is subject to the indemnification obligation in Section 11.1,
only one recovery of Class B Member Indemnified Costs shall be allowed.

 

Section 11.7     Survival. All representations and warranties in this Agreement
shall survive until the final date for any assertion of claims as forth in
Section 11.8.

 

Section 11.8     Final Date for Assertion of Indemnity Claims. All claims by a
Class B Member Indemnified Party for indemnification pursuant to this Article XI
resulting from breaches of representations or warranties under the Contribution
Agreement shall be forever barred unless the Class A Member is notified on or
prior to the second anniversary of the Closing Date, except that (i) (w) the
representations and warranties made as a condition precedent to the Closing and
set forth in Sections 3.1 (Organization, Good Standing, Etc. of ONI and OrLeaf),
3.2 (Organization, Good Standing, Etc. of the Company and Subject Companies),
3.3 (Authority) and 3.6 (Ownership) of the Contribution Agreement shall survive
indefinitely, (x) the representations and warranties set forth in Section 3.9
(Tax Matters) of the Contribution Agreement shall survive for 60 days after the
applicable statute of limitations, (y) the representations and warranties set
forth in Section 3.30 (Background Materials) of the Contribution Agreement shall
survive for four years following the Closing Date, and (z) the representations
and warranties set forth in Section 3.13 (Environmental Matters) of the
Contribution Agreement shall survive for four years following the Closing Date;
provided, that, if written notice of a claim for indemnification has been given
by such Class B Member Indemnified Party on or prior to the applicable date
described above, then the obligation of the Class A Member to indemnify such
Class B Member Indemnified Party pursuant to this Article XI shall survive with
respect to such claim until such claim is finally resolved.

 

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Section 11.9     Mitigation and Limitations on Losses. Notwithstanding anything
to the contrary contained herein:

 

(a)     Reasonable Steps to Mitigate. The Indemnified Party will take, at the
Indemnifying Party’s cost and expense, all commercially reasonable steps
identified by the Indemnifying Party to mitigate all Class B Member Indemnified
Costs, which steps may include availing itself of any defenses, limitations,
rights of contribution, claims against third Persons and other rights at law or
equity. The Indemnified Party will provide such evidence and documentation of
the nature and extent of the Class B Member Indemnified Costs as may be
reasonably requested by the Indemnifying Party.

 

(b)     Net of Insurance Benefits. All Losses shall be limited to the amount of
actual out-of-pocket damages sustained by the Indemnified Party by reason of any
breach or nonperformance hereunder, net of insurance recoveries from insurance
policies of the Subject Companies (including under the existing title policies).

 

(c)     No Consequential Damages. Except as otherwise provided in the definition
of “Class B Member Indemnified Costs” relating to disallowed PTCs and other Tax
deductions, Class B Member Indemnified Costs shall not include, and the
Indemnifying Party shall have no obligation to indemnify any Indemnified Parties
for or in respect of any punitive, consequential, special, incidental or
exemplary damages of any nature (other than punitive, consequential, special,
incidental or exemplary damages recovered against an Indemnified Party by a
Person other than a Party and subject to indemnification hereunder).

 

Section 11.10     Sole Remedy. Without in any way limiting the Sponsor Guaranty,
the Parties agree that the remedies under this Article XI are the sole and
exclusive remedies under this Agreement and the Contribution Agreement for the
recovery of monetary damages with respect to any breach or failure to perform
any covenant or agreement set forth in this Agreement or the Contribution
Agreement or any breach of any representation or warranty set forth in this
Agreement or the Contribution Agreement other than fraud, gross negligence or
willful misconduct.

 

Section 11.11     Payment of Indemnification Claims. Subject to Section 11.4,
all claims for indemnification shall be paid by the Indemnifying Party in
immediately available funds in U.S. Dollars. Subject to Section 11.4, payments
for indemnification claims shall be made promptly after any final determination
of the amount of such claim is made by a court of competent jurisdiction (or by
agreement of the Parties involved).

 

ARTICLE XII
COVENANTS

 

Section 12.1     Geothermal Matters.

 

(a)     The Members hereby agree that each Project currently utilizes specific
geothermal resources set forth in the Independent Engineer’s report, located on
such land set forth in the surveys, each a “Known Project Geothermal Resource
Area.”

 

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(b)     (i) other than for the purpose of compliance with the Material
Contracts, the Class A Member shall allocate all geothermal fluid, brine or
other geothermal elements from any Known Project Geothermal Resource, at all
times in a manner so as to at least achieve the assumptions and projections in
the Base Case Model with respect to the PTC Eligible Projects, and (ii) except
as otherwise provided in paragraph (c) of this Section 12.1, and only until the
Flip Date, (A) the Class A Member shall not develop, construct, own or operate,
and shall ensure that none of its Affiliates develop, construct, own or operate,
a new geothermal power plant utilizing geothermal resources that form part of
any Known Project Geothermal Resource Area, and (B) other than for the purpose
of compliance with the Material Contracts, the Class A Member shall not, and
shall ensure that none of its Affiliates, direct, divert or provide to, or allow
to be used by, another Person or for another geothermal power plant, geothermal
fluid, brine or other geothermal elements from any Known Project Geothermal
Resource Area.

 

(c)     The restrictions contained in paragraph (b)(ii) of this Section 12.1
shall not apply if the Class A Member delivers to the Class B Member a
certificate from GeothermEx, Inc. (or other geothermal consultant acceptable to
the Class B Member), in form and substance reasonably acceptable to the Class B
Member, to the effect that the sustainable operation at the levels of production
and PTCs produced assumed in the Base Case Model of the existing Projects owned
by the Subject Companies will not be adversely affected by (i) the development,
construction and operation of the planned new geothermal power plant (in the
case of clause (ii)(A) of Section 12.1(b)) or (ii) such redirection, diversion
or provision of geothermal elements (in the case of clause (ii)(B) of
Section 12.1(b)).

 

Section 12.2     Compliance with Senior Notes and Certain Other Material
Contracts.

 

(a)     The Managing Member shall take such actions (or cause such actions to be
taken), acting in accordance with the Prudent Operator Standard, to (a) comply,
or to cause the Company and/or the Subject Companies, as applicable, to comply
in all material respects with the terms and conditions of the Senior Notes and
Loan Documents (as defined in the OFC2 Note Purchase Agreement), and (b) cause
the Subject Companies to perform and observe their respective covenants and
obligations under the Material Contracts to which they are party except where
the failure to do so could not reasonably be expected to result in a Material
Adverse Effect; provided, (i) that it shall not be a breach of the Managing
Member’s obligations under this Section 12.2(a) if any failure to comply with
any obligation under the Senior Notes and Loan Documents (as defined in the OFC2
Note Purchase Agreement) or the other Material Contracts, as the case may be, is
not reasonably susceptible to cure within the requisite time period (if any) by
the Managing Member, Company or relevant Subject Company, as the case may be, or
funds are not available from Distributable Cash (as determined prior to
subtracting the cash contemplated in subclause (b) of the definition of
Distributable Cash) as needed to effect such cure, (ii) the Managing Member
shall have no obligation to cause Company funds to be applied towards any
payments due and owing under the applicable Senior Notes or with respect to any
Project Company’s other obligations (in either such case only to the extent that
adequate funds are not available at such Project Company) other than from
Distributable Cash available in accordance with this Agreement, and (iii) for
the avoidance of doubt, the Managing Member shall have no obligation to use its
own funds to perform any obligation hereunder.

 

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(b)     Ormat (or an Affiliate) has posted certain credit support in connection
with the Senior Notes. In the event Ormat (or an Affiliate) incurs reimbursement
obligations or loans resulting from draws of such credit support, or otherwise
advances cash reserves, provides a guaranty, letter of credit, surety or posts
other collateral, such reimbursement obligations, loans, guaranties, letter of
credits, sureties or cash advances shall be deemed an obligation of Ormat,
individually, and shall not be considered a Working Capital Loan or subject to
any priority distribution or fee.

 

(c)     To the extent that under the terms of any of the Loan Documents (as
defined in the OFC2 Note Purchase Agreement) (i) any credit support previously
provided in connection with the Senior Notes has been released because it is no
longer required, or (ii) cash or cash equivalents deposited in any required
reserve account have been substituted with any letter of credit or other credit
support provided by the Class A Member or any Affiliate thereof (other than the
Company or any Subject Company), or (iii) any required reserve amount is reduced
or is no longer required to be maintained and is permitted to be distributed as
a Restricted Payment, then, in each such case, and notwithstanding any other
provision of this Agreement to the contrary, any such credit support, cash or
cash equivalents, or funds comprising amounts reduced from or released as a
reserve requirement shall be distributed by the Company in full to the Class A
Member only, but only to the extent such credit support, cash or cash
equivalents was in place as of the Effective Date.

 

Section 12.3     Certain Tax Matters.

 

(a)     Each Member hereby covenants to the Company and the other Member that it
will be a “United States person” as defined in Section 7701(a)(30) of the Code,
and will not be subject to withholding under Section 1446 of the Code.

 

(b)     Each Member hereby covenants to the Company and the other Member that it
will be an Unrelated Person.

 

(c)     Each Member hereby covenants to the Company and the other Member that it
will not take any action that would cause the Assets of the Company or any
Subject Company to constitute tax-exempt use property within the meaning of
Section 168(h) of the Code.

 

(d)     The Managing Member hereby covenants that each Project shall be located
in its entirety in the United States.

 

(e)     The Managing Member hereby covenants that, for purposes of
Section 45(b)(3) of the Code, there shall not be any (i) grant provided by the
United States, any state or any political subdivision of a state for use in
connection with any PTC Eligible Project, (ii) issue of state or local
government obligations used to provide financing for any PTC Eligible Project
the interest on which is exempt from federal income tax under Section 103 of the
Code, (iii) subsidized energy financing provided (directly or indirectly) under
a federal, state, or local program provided in connection with any PTC Eligible
Project or (iv) other credit with respect to any property that is part of a PTC
Eligible Project, in each case unless agreed to by a Major Decision or otherwise
consented to or claimed by the Class B Member, in each case, other than as a
result of an act or omission of the Class B Member.

 

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(f)     The Managing Member hereby covenants that to the extent each PTC
Eligible Project shall derive energy, it shall derive such energy from a
geothermal reservoir consisting of natural heat that is stored in rocks or in an
aqueous liquid or vapor.

 

(g)     The Managing Member hereby covenants that it will not make capital
improvements to any PTC Eligible Project prior to the Flip Date, without consent
of the Class B Member, to the extent that the total cost of capital expenditures
with respect to the PTC Eligible Project made after the relevant date set forth
on Schedule 3.9(f) of the Contribution Agreement would exceed four times the
value of the equipment that was part of the PTC Eligible Project on such date.

 

(h)     The Managing Member hereby covenants that it will sell to an Unrelated
Person all electricity generated by any PTC Eligible Project that is capable of
being sold and that no more of such electricity than is necessary will be used
to satisfy the load requirements of any Project.

 

(i)     The Managing Member hereby covenants that in each Tax Year the Company
shall continue to claim cost recovery deductions in accordance with Section 611
of the Code and the applicable Treasury Regulations for depletion of the Steam
Resource.

 

(j)     The Managing Member hereby covenants that to the extent the Company pays
or incurs any intangible drilling and development costs, the Managing Member
will provide notice to the Class B Member within sixty (60) days of the Company
incurring any such costs, which notice shall provide the amount of such
intangible drilling and development costs and describe the Class B Member’s
option to make an election with respect to such costs pursuant to Section 59(e)
of the Code.

 

(k)     The Managing Member hereby covenants that it will not cause the Company
or any Subject Company to (x) apply for a grant with respect to any PTC Eligible
Project from the U.S. Treasury Department under Section 1603 of the American
Recovery and Reinvestment Tax Act of 2009 or (y) claim an investment tax credit
under Section 48 of the Code with respect to any PTC Eligible Project or any
portion thereof.

 

ARTICLE XIII
MISCELLANEOUS

 

Section 13.1     Notices. Unless otherwise provided herein, any offer,
acceptance, election, approval, consent, certification, request, waiver, notice
or other communication required or permitted to be given hereunder (collectively
referred to as a “Notice”), shall be in writing and deemed given if delivered
personally, by a nationally recognized overnight courier, by facsimile, or
mailed by registered or certified mail (return receipt requested) directed to
the intended recipient at the address of such Member set forth on
Schedule 4.2(d) attached hereto (as applicable) or at such other address as any
Member hereafter may designate to the others in accordance with a Notice under
this Section 13.1. A Notice and other communications given in accordance
herewith shall be deemed given (i) on the date of delivery, if hand delivered,
(ii) on the date of receipt, if faxed (provided a hard copy of such transmission
is dispatched by first class mail within 48 hours), (iii) three Business Days
after the date of mailing, if mailed by registered or certified mail, return
receipt requested, and (iv) one Business Day after the date of sending, if sent
by a nationally recognized overnight courier; provided, that a notice given in
accordance with this Section but received on any day other than a Business Day
or after business hours in the place of receipt, will be deemed given on the
next Business Day in that place.

 

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Section 13.2     Amendment. Except for a Transfer of Membership Interests and
the admission of a new Member in accordance with the terms of this Agreement,
this Agreement may be changed, modified or amended only by an instrument in
writing duly executed by all of the Members.

 

Section 13.3     Partition. Each of the Members hereby irrevocably waives, to
the extent it may lawfully do so, any right that such Member may have to
maintain any action for partition with respect to the Company property.

 

Section 13.4     Waivers and Modifications. Any waiver or consent, express,
implied or deemed, to or of any breach or default by any Person in the
performance by that Person of its obligations with respect to the Company or any
action inconsistent with this Agreement is not a consent or waiver to or of any
other breach or default in the performance by that Person of the same or any
other obligations of that Person with respect to the Company or any other such
action. Failure on the part of a Person to insist in any one or more instances
upon strict performance of any provisions of this Agreement, to take advantage
of any of its rights hereunder, or to declare any Person in default with respect
to the Company, irrespective of how long that failure continues, does not
constitute a waiver by that Person of its rights with respect to that Person or
its rights with respect to that default until the applicable statute of
limitations period has lapsed. All waivers and consents hereunder shall be in
writing duly executed by Members representing a Super-Majority Vote of the
Members affected by such waiver or consent and shall be delivered to the other
Members in the manner set forth in Section 13.1.

 

Section 13.5     Severability. Except as otherwise provided in the succeeding
sentence, every term and provision of this Agreement is intended to be
severable, and if any term or provision of this Agreement is illegal or invalid
for any reason whatsoever, such illegality or invalidity shall not affect the
legality or validity of the remainder of this Agreement. The preceding sentence
shall be of no force or effect if the consequence of enforcing the remainder of
this Agreement without such illegal or invalid terms or provision would be to
cause any Party to lose the benefit of its economic bargain.

 

Section 13.6     Successors; No Third-Party Beneficiaries. This Agreement is
binding on and inures to the benefit of the Members and their respective heirs,
legal representatives, successors and permitted assigns. Nothing in this
Agreement shall provide any benefit to any third party or entitle any third
party to any claim, cause of action, remedy or right of any kind, it being the
intent of the Members that this Agreement shall not be construed as a
third-party beneficiary contract. To the fullest extent permitted by law, no
creditor or other third party having dealings with the Company shall have the
right to pursue any other right or remedy hereunder or at law or in equity, it
being understood and agreed that the provisions of this Agreement shall be
solely for the benefit of, and may be enforced solely by, the parties hereto and
their respective successors and permitted assigns. None of the rights of the
Members herein set forth to make Capital Contributions or loans to the Company
shall be deemed an Asset of the Company for any purpose by any creditor or other
third party, nor may such rights or obligations be sold, transferred or assigned
by the Company or pledged or encumbered by the Company to secure any debt or
other obligation of the Company or of any of the Members.

 

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Section 13.7     Entire Agreement. This Agreement, including the Schedules,
exhibits and annex attached hereto or incorporated herein by reference,
constitutes the entire agreement of the Members with respect to the matters
covered herein. This Agreement supersedes all prior agreements and oral
understandings among the parties hereto with respect to such matters.

 

Section 13.8     Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, excluding any
conflict of laws rule or principle that might refer the governance or
construction of this Agreement to the law of another jurisdiction.

 

Section 13.9     Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
reasonably required or useful to carry out the intent and purpose of this
Agreement and as are not inconsistent with the terms hereof.

 

Section 13.10     Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together will
constitute one instrument, binding upon all parties hereto, notwithstanding that
all of such parties may not have executed the same counterpart.

 

Section 13.11     Dispute Resolution.

 

(a)     Except as provided in Section 13.11(b), in the event a dispute,
controversy or claim arises hereunder, the aggrieved party will promptly provide
written notification of the dispute to the other party within ten days after
such dispute arises. A meeting will be held promptly between the parties,
attended by representatives of the parties with decision-making authority
regarding the dispute, to attempt in good faith to negotiate a resolution of the
dispute. If the dispute, controversy or claim involves approval of any Annual
Budget, the Independent Engineer (or if the Independent Engineer is unable or
unwilling to act for any reason, another recognized firm of independent
engineers experienced with geothermal power projects comparable to the Projects
selected by Super-Majority Vote) will be invited to participate in the meeting
and advise the representatives of the parties involved concerning the
Independent Engineer’s opinions concerning any such dispute, controversy or
claim involving the Annual Budget. If the parties are not successful in
resolving a dispute within 21 days, the parties will thereafter be entitled to
pursue all such remedies as may be available to them.

 

(b)     If the Class B Member disputes the Managing Member’s calculation of any
items in any Target Internal Rate of Return calculation, the Class B Member
shall notify the Managing Member and other Members not more than ten Business
Days after the Class B Member has received the applicable Target Internal Rate
of Return calculation notice from the Managing Member. If any Class B Member
shall disagree with the Tax Matters Partner that a proposed Tax Return
constitutes either a Consistent Return or an Excepted Non-Conforming Return as
provided in Section 7.6(c)(i), such Class B Member shall so notify the Managing
Member in accordance with Section 7.6(d).

 

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(i)     In such event, the Members and the Managing Member shall consider the
issues raised or in dispute and discuss such issues with each other and attempt
to reach a mutually satisfactory agreement. If notice of dispute is not given by
the Class B Member within such period, any calculation in the Target Internal
Rate of Return will be final and binding on the Members.

 

(ii)     If the dispute as to the Managing Member’s calculations is not promptly
resolved within ten Business Days of such notification of the dispute, the
Class B Member and the Managing Member shall each promptly present their
interpretations to an Independent Accounting Firm, and shall instruct the
Independent Accounting Firm to determine the correct amount of the calculations
in dispute and to resolve the dispute promptly, but in no event more than twenty
Business Days after having the dispute submitted to it. The Independent
Accounting Firm will make a determination as to each of the items in dispute,
which must be (A) in writing, (B) furnished to each Member and the Managing
Member and (C) made in accordance with this Agreement, and which determination,
absent manifest error, will be conclusive and binding on all Members. Each
Member shall use reasonable efforts to cause the Independent Accounting Firm to
render its decision as soon as reasonably practicable, including by promptly
complying with all reasonable requests by the Independent Accounting Firm for
information, books, records and similar items.

 

(iii)     In the event the Independent Accounting Firm determines that any of
the calculations in dispute was incorrect in any material respect, the fees and
expenses of the Independent Accounting Firm shall be borne by the Class A
Member. In all other cases the fees and expenses of the Independent Accounting
Firm shall be borne by the Class B Member disputing any of the calculations.

 

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Section 13.12     Confidentiality.

 

The Members shall, and shall cause their Affiliates and their respective
stockholders, members, Subsidiaries and Representatives to, hold confidential
and not use in any manner detrimental to the Company or any Member all
information they may have or obtain concerning Ormat, OrLeaf, the Company, JPM
(and its Affiliates) and their respective Assets, business, operations or
prospects or this Agreement (the “Confidential Information”); provided, however,
that Confidential Information shall not include information that (a) becomes
generally available to the public other than as a result of a disclosure by a
Member or any of its Representatives, (b) becomes available to a Member or any
of its Representatives on a nonconfidential basis prior to its disclosure by the
Company or its Representatives, (c) is required or requested to be disclosed by
a Member or any of its Affiliates or their respective stockholders, members,
Subsidiaries or Representatives as a result of any applicable Legal Requirement
or rule or regulation of any stock exchange, or (d) is required or requested by
the IRS in connection with the Projects or PTCs relating thereto, including in
connection with a request for any private letter ruling, any determination
letter or any audit. Additionally, the Parties may disclose to any and all
Persons, without limitations of any kind, the tax treatment and tax structure of
the transactions contemplated by this Agreement and all materials of any kind
(including opinions or other tax analyses) that are provided to it relating to
such tax treatment and tax structure; provided, however, that no party hereto
shall be permitted to disclose such tax treatment in violation of federal or
state securities laws. The preceding sentence is intended to cause the
transactions contemplated hereby to be treated as not having been offered under
conditions of confidentiality for purposes of Treasury Regulations
Section 1.6011-4(b)(3) (or any successor provision) promulgated under
Section 6011 of the Code, and shall be construed in a manner consistent with
such purpose. If such party becomes compelled by legal or administrative process
to disclose any Confidential Information, such party will provide the other
Members with prompt Notice so that the other Members may seek a protective order
or other appropriate remedy or waive compliance with the non-disclosure
provisions of this Section 13.12 with respect to the information required to be
disclosed. If such protective order or other remedy is not obtained, or such
other Members waive compliance with the non-disclosure provisions of this
Section 13.12 with respect to the information required to be disclosed, the
first party will furnish only that portion of such information that it is
advised, by opinion of counsel, is legally required to be furnished and will
exercise reasonable efforts, at the other Members’ expense, to obtain reliable
assurance that confidential treatment will be accorded such information,
including, in the case of disclosures to the IRS described in clause (d) above,
to obtain reliable assurance that, to the maximum extent permitted by applicable
Legal Requirements, such information will not be made available for public
inspection pursuant to Section 6110 of the Code. Nothing herein shall be
construed as prohibiting a party hereunder from using such Confidential
Information in connection with (i) any claim against another Member hereunder,
(ii) any exercise by a party hereunder of any of its rights hereunder and
(iii) a disposition by a Member of all or a portion of its Membership Interest
or a disposition of an equity interest in such Member or its Affiliates,
provided, that, such potential purchaser shall have entered into a
confidentiality agreement with respect to Confidential Information on customary
terms used in confidentiality agreements in connection with corporate
acquisitions before any such information may be disclosed. In addition, each
Member hereby acknowledges that (i) the financial statements of the Company
furnished to Members from time to time are confidential and may constitute
material, non-public information concerning Affiliates of the Company or their
securities under the United States federal securities laws; (ii) the United
States federal securities laws, among other things, prohibit certain persons in
possession of material, non-public information concerning companies or
securities from buying or selling securities issued by those companies or
disclosing that material, nonpublic information to others who buy or sell those
securities while in possession of that information (or disclose that information
to others who buy or sell); and (iii) each Member has a duty to comply with
applicable United States federal securities laws.

 

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(a)     The Members acknowledge that the Class B Member, together with its
associated companies, is a global financial services firm (the “Global Financial
Services Firm”) engaged in the securities, investment management and credit
services businesses. The Global Financial Services Firm’s securities business is
engaged in securities underwriting, trading, brokerage activities, foreign
exchange, commodities and derivatives trading, as well as providing investment
banking, financing and financial advisory services. In the ordinary course of
its trading, brokerage and financing activities, the Global Financial Services
Firm may at any time hold long or short positions, and may trade or otherwise
effect transactions, for its own account or the accounts of Affiliates of the
Company, in debt or equity securities or senior loans of Affiliates of the
Company or in any related derivative instrument. The Global Financial Services
Firm, its respective directors and officers may also at any time invest on a
principal basis or manage funds that invest on a principal basis, in debt or
equity securities of any company that may be an Affiliate of the Company, or in
any currency or commodity that may be involved in this transaction, or in any
related derivative instrument. Further, the Global Financial Services Firm may
at any time carry out ordinary course brokering activities for any company that
may be an Affiliate of the Company.

 

(b)     The Members also acknowledge that the Global Financial Services Firm,
its respective directors and officers, may from time to time perform various
investment banking, commercial banking and financial advisory services for
clients and customers who may have conflicting interests with respect to the
Company. Each Member hereby acknowledges and agrees that, by reason of law or
duties of confidentiality owed to other persons or the rules of any regulatory
authority, the Global Financial Services Firm may be prohibited from disclosing
information to Members (or such disclosure may be inappropriate), including
information as to the Global Financial Services Firm’s possible interests as
described in this paragraph and information received pursuant to client
relationships.

 

Section 13.13     Joint Efforts. To the fullest extent permitted by law, neither
this Agreement nor any ambiguity or uncertainty herein will be construed against
any of the parties hereto, whether under any rule of construction or otherwise.
On the contrary, this Agreement has been prepared by the joint efforts of the
respective attorneys for, and has been reviewed by, each of the parties hereto.

 

Section 13.14     Specific Performance. The Members agree that irreparable
damage may result if this Agreement is not performed in accordance with its
terms, and the Members agree that any damages available at law for a breach of
this Agreement may not be an adequate remedy. Therefore, to the extent that
damages available at law for a breach of this Agreement are an inadequate
remedy, to the fullest extent permitted by law, the provisions hereof and the
obligations of the Members hereunder may be enforceable in a court of equity, or
other tribunal with jurisdiction, by a decree of specific performance, and
appropriate injunctive relief may be applied for and granted in connection
therewith. Such remedies and all other remedies provided for in this Agreement
shall, however, be cumulative and not exclusive and shall be in addition to any
other remedies that a Member may have under this Agreement, at law or in equity.

 

Section 13.15     Survival. All indemnities and reimbursement obligations made
pursuant to this Agreement shall survive dissolution and liquidation of the
Company until expiration of the longest applicable statute of limitations
(including extensions and waivers) with respect to the matter for which a Person
would be entitled to be indemnified or reimbursed, as the case may be.

 

Section 13.16     Letter of Credit Reimbursement Obligations.

 

(a)     In the event that Ormat or an Affiliate incurs reimbursement obligations
or loans resulting from draws on any credit support (other than the Sponsor
Guaranty) provided on behalf of any Subject Company, or otherwise advances cash
reserves or posts other collateral, in each case, other than for purposes of
complying with credit support or reserve requirements under the Loan Documents
(as such term is defined in the OFC2 Note Purchase Agreement), such
reimbursement obligations, loans or cash advances shall be deemed an unsecured
loan to the Company or Project Company, as applicable, by Ormat or such
Affiliate, as applicable, to be repaid out of available cash flow of the Company
or such Project Company, as applicable before any distributions to the members
of such entity. In any case where Ormat or an Affiliate incurs such loan, such
loan shall bear interest and shall otherwise have terms and conditions
applicable to Working Capital Loans, excluding any limitations on the aggregate
principal amount outstanding on Working Capital Loans. In any case where any
Person other than Ormat or an Affiliate incurs such loan resulting from draws on
any such Credit Support provided on behalf of the Subject Companies, such loan
shall bear interest and shall otherwise have terms and conditions applicable to
the credit or other facility made available by such Person to Ormat or an
Affiliate.

 

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(b)     In the event that Ormat or an Affiliate provides on behalf of any
Subject Company any guaranty, letter of credit or surety bond (other than the
Sponsor Guaranty), in each case other than for purposes of complying with credit
support or reserve requirements under the Loan Documents (as such term is
defined in the OFC2 Note Purchase Agreement), the entity providing such
guaranty, letter of credit or surety bond, if not a Class B Member, shall
provide to the Class B Members within ten Business Days an executed copy of such
guaranty, letter of credit or surety bond and Ormat or such Affiliate will be
entitled to (i) receive a fee (the “Guaranty Fee”) which fee shall be comparable
to a fee chargeable for providing such guaranty, letter of credit or surety bond
to a project company rated below investment grade (or not rated), on a
non-recourse basis, that may be arranged in an arm’s length transaction by a
guarantor which would be deemed to have a credit rating of at least BBB+ and
taking into account the amount of the underlying obligation being guaranteed and
the length of time the guarantee will be outstanding, and (ii) compensation for
the costs and expenses (including reasonable legal fees) incurred in connection
with effecting, maintaining and renewing such guaranty, letter of credit or
surety bond.

 

(c)     To the extent any such credit support, guaranty, letter of credit, or
reserve requirement described in clause (a) above is subsequently released to
any Subject Company, such credit support, guaranty, letter of credit or funds
comprising a released reserve shall be distributed, notwithstanding any other
provision in this Agreement to the contrary, in full to the Class A Member.

 

Section 13.17     Recourse Only to Member. Subject to the Sponsor Guaranty, the
sole recourse of the Company for performance of the obligations of any Member
hereunder shall be against such Member and its Assets and not against any Assets
or property of any present or future stockholder, partner, member, officer,
employee, servant, executive, director, agent, authorized representative or
Affiliate of such Member.

 

 

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IN WITNESS WHEREOF, the parties, each a Member, have caused this Amended and
Restated Limited Liability Company Agreement to be signed by their respective
duly authorized officers as of the date first above written.

 

 

ORLEAF LLC

 

 

By:     /s/ Connie Stechman                                          

Name:   Connie Stechman

Title:     Secretary

 

 

JPM CAPITAL CORPORATION

 

 

 

By:     /s/ Anand Dandapani                                          

Name:     Anand Dandapani

Title:       Executive Director

 

 

 

 

[Signature Page to LLC Agreement of Opal Geo LLC]

 

 

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Annex I

 

Definitions

 

“20-Year IRR Rate” means an after-tax internal rate of return of eleven and
ninety-nine hundredths percent (11.99%) through the twentieth (20th) anniversary
of the Closing Date calculated using the “XIRR” function on Microsoft Office
Excel 2010 (or the same function in any subsequent version of Microsoft Office
Excel).

 

“Accounting Firm” means the Company’s primary independent accounting firm, which
shall be any of Deloitte Touche Tohmatsu, Ernst & Young, KPMG International,
Pricewaterhouse Coopers or any nationally-recognized Affiliate thereof, at the
Managing Member’s election, or such other firm of certified public accountants
approved by Members representing a Super-Majority Vote.

 

“Act” means the Delaware Limited Liability Company Act, Delaware Code Ann. 6,
Sections 18-101, et seq. and any successor statute, as the same may be amended
from time to time.

 

“Adjusted Capital Account” means the Capital Account of a Member (a) increased
by the amount of potential deficit that the Member is deemed obligated to
restore, calculated as described in the last sentence of Treasury Regulation
Section 1.704-2(g)(1) and the last sentence of Treasury Regulation
Section 1.704-2(i)(5), (b) increased by the amount of any deficit restoration
obligation to which the Member has agreed under Section 10.3(b), and (c)
decreased by the items described in Treasury Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

 

“Adjusted Deficit Capital Account Balance” has the meaning set forth in
Section 10.3(b).

 

“Affiliate” of a specified Person means any Person that directly or indirectly
through one or more intermediaries controls, is controlled by, or is under
common control with, such specified Person. As used in this definition of
Affiliate, the term “control” of a specified Person including, with correlative
meanings, the terms, “controlled by” and “under common control with,” means
(a) the ownership, directly or indirectly, of fifty percent (50%) or more of the
equity interest in a Person or (b) the power to direct or cause the direction of
the management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise; provided, however, that notwithstanding
the foregoing, for purposes of this Agreement, the Company will be deemed not to
be an Affiliate of any Member; provided, further, that for purposes of Section
9.4(a)(iv) of this Agreement (and for no other purpose), any direct or indirect
owner of an equity interest in OrLeaf shall be considered an Affiliate of
OrLeaf.

 

“Agreement” means this Amended and Restated Limited Liability Company Agreement
(and all schedules, annexes and exhibits hereto), as the same may be amended,
supplemented or replaced from time to time.

 

“Annual Budget” has the meaning set forth in Section 7.1(b).

 

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“Anti-Corruption Laws” has the meaning given to such term in the Contribution
Agreement.

 

“Appraisal Method” shall mean one appraiser shall be appointed by the Class A
Member and one appraiser shall be appointed by the Class B Members, in each
case, within 15 days of a party invoking the procedure described in this
definition, which appraisers shall attempt to agree upon the fair market value
of the Class B Membership Interests. If either the Class A Member or the Class B
Members do not appoint their respective appraiser within five days after the end
of the 15-day period referenced in the immediately preceding sentence, the
determination of the appraiser appointed by the other Person (if so appointed
within such period) shall be conclusive and binding on the Members. If the
appraisers appointed by the Class A Member and the Class B Members are unable to
agree upon the fair market value of the Class B Membership Interests within
30 days after the appointment of the second of such appraisers, the two
appraisers shall appoint a third appraiser. In such case, the average of the
determinations of the three appraisers shall be conclusive and binding on the
Members, unless the determination of one independent appraiser is disparate from
the middle determination by more than twice the amount by which the third
determination is disparate from the middle determination, in which case the
determination of the most disparate appraiser shall be excluded, and the average
of the remaining two determinations shall be conclusive and binding on the
Members.

 

“Approved Transferee” means any Person that (a) is an Affiliate of any Class B
Member, or (b) (i) (x) satisfies the requirements hereunder applicable to all
Transfers of Class B Membership Interests and (y) is not a Competitor, or
(ii) is a Person approved by OrLeaf (such approval not to be unreasonably
withheld or delayed).

 

“Assets” means all right, title and interest of a Person in land, properties,
buildings, improvements, fixtures, foundations, assets and rights of any kind,
whether tangible or intangible, real, personal or mixed, including contracts,
leases, easements, equipment, systems, books, data, reports, studies and
records, proprietary rights, intellectual property, licenses, permits, rights
under or pursuant to all warranties, representations and guarantees, cash,
accounts receivable, deposits and prepaid expenses.

 

“Bankruptcy” of a Person means the occurrence of any of the following events:
(i) the filing by such Person of a voluntary case or the seeking of relief under
any chapter of Title 11 of the United States Bankruptcy Code, as now constituted
or hereafter amended (the “Bankruptcy Code”), (ii) the making by such Person of
a general assignment for the benefit of its creditors, (iii) the admission in
writing by such Person of its inability to pay its debts as they mature,
(iv) the filing by such Person of an application for, or consent to, the
appointment of any receiver or a permanent or interim trustee of such Person or
of all or any portion of its property, including the appointment or
authorization of a trustee, receiver or agent under applicable law or under a
contract to take charge of its property for the purposes of enforcing a lien
against such property or for the purpose of general administration of such
property for the benefit of its creditors, (v) the filing by such Person of a
petition seeking a reorganization of its financial affairs or to take advantage
of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution
or liquidation law or statute, or an answer admitting the material allegations
of a petition filed against it in any proceeding under any such law or statute,
(vi) an involuntary case is commenced against such Person by the filing of a
petition under any chapter of Title 11 of the Bankruptcy Code and within 60 days
after the filing thereof either the petition is not dismissed or the order for
relief is not stayed or dismissed, (vii) an order, judgment or decree is entered
appointing a receiver or a permanent or interim trustee of such Person or of all
or any portion of its property, including the entry of an order, judgment or
decree appointing or authorizing a trustee, receiver or agent to take charge of
the property of such Person for the purpose of enforcing a lien against such
property or for the purpose of general administration of such property for the
benefit of the creditors of such Person, and such order, judgment or decree
shall continue unstayed and in effect for a period of 60 days, or (viii) an
order, judgment or decree is entered, without the approval or consent of such
Person, approving or authorizing the reorganization, insolvency, readjustment of
debt, dissolution or liquidation of such Person under any such law or statute,
and such order, judgment or decree shall continue unstayed and in effect for a
period of 60 days. The foregoing definition of “Bankruptcy” is intended to
replace and shall supersede the definition of “Bankruptcy” set forth in
Sections 18-101(1) and 18-304 of the Act.

 

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“Base Case Model” means a financial model agreed to by the Members and
separately identified as the file named “EXT Opal Geo LLC P50 FINAL
12.16.2016.xlsb”, as attached to the email transmitted by Dave Stoppel to
Nachman Isaac and Nir Yahav on December 16, 2016.

 

“Business Day” means any day other than Saturday, Sunday and any day that is a
legal holiday or a day on which banking institutions in New York, New York are
authorized by law or governmental action to close.

 

“Buyout Notice” has the meaning given to such term in Section 9.7(a).

 

“Capex Contribution” has the meaning given to such term in Section 4.4.

 

“Capital Account” has the meaning set forth in Section 4.2(a) and as the amounts
are adjusted from time to time.

 

“Capital Contribution” means, with respect to any Member, any amount of money
and the initial Gross Asset Value of any property contributed to the Company
with respect to the Membership Interests in the Company held or purchased by
such Member.

 

“Capital Interest” means, with respect to any Member, at any time, as the
context may require, (i) the balance of such Member’s Capital Account,
determined in accordance with Section 4.2 of this Agreement, at such time and
(ii) the amount, expressed as a percentage, equal to the fraction the numerator
of which is the balance referred to in clause (i) at such time and the
denominator of which is the aggregate Capital Account balances of all Members at
such time.

 

“Cash Difference” shall have the meaning set forth in Section 7.11(e)(i).

 

“Cash Trigger Amount” shall have the meaning set forth in Section 7.11(d)(i).

 

“Cause” means (A) fraud, willful misappropriation of funds, gross negligence,
willful misconduct or a willful violation of a material provision of this
Agreement applicable to the Managing Member or Tax Matters Partner, or any
Affiliate of any of them, which violation applicable to the Managing Member or
Tax Matters Partner, or any Affiliate of any of them, (x) continues unremedied
for 30 days after Notice of such violation is given to the Managing Member or
Tax Matters Partner, as applicable, and (y) has a material adverse effect on
(1) the business, Assets, liabilities, financial condition or results of
operations of the Company and its Subsidiaries, taken as a whole or (2) the
rights, remedies or economic benefits of the Class B Members under this
Agreement, and (z) is not the result of mere negligence, oversight,
misunderstanding or misinterpretation of this Agreement (or any applicable law
referred to in this Agreement) on the part of the Managing Member or Tax Matters
Partner, or (B) breach or default by the Sponsor under the terms of the Sponsor
Guaranty with respect to the obligations of the Managing Member or Tax Matters
Partner, or any Affiliate of any of them, guaranteed thereunder and the
expiration of any applicable cure period thereunder.

 

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“Certificate of Formation” has the meaning set forth in the preliminary
statements of this Agreement.

 

“Change in Tax Law” means (a) any change in or amendment to the Code or another
applicable federal income tax statute, (b) any change in, or issuance of, or
promulgation of any temporary or final Treasury Regulations promulgated
thereunder that results in any change to the interpretation of the Code or
existing Treasury Regulations, (c) any IRS guidance published or to be published
in the Internal Revenue Bulletin and / or Cumulative Bulletin, notice,
announcement, revenue ruling, revenue procedure, technical advice memorandum,
examination directive or similar authority issued by the IRS Large Business and
International division, including any revision or amendment to any published IRS
guidance, and any published advice, advisory, or legal memorandum issued by IRS
Chief Counsel, that applies, advances or articulates a new or different
interpretation or analysis of any provision of the Code, any other applicable
federal tax statute, any temporary or final Treasury Regulations promulgated
thereunder, or any proposed Treasury Regulation promulgated thereunder if the
interpretation or analysis of such proposed Treasury Regulation would apply
prior to the issuance of the related final Treasury Regulation; or (d) any
change in the interpretation of any of the Code or Treasury Regulations by a
decision of the U.S. Tax Court, the U.S. Court of Federal Claims, a U.S.
District Court, a U.S. Court of Appeals or the U.S. Supreme Court, that applies,
advances or articulates a new or different interpretation or analysis of federal
income tax law, in each case which is enacted, promulgated or issued, as
applicable, subsequent to the Effective Date, that affects negatively in a
material manner the federal income tax consequences, including the ability to
use any federal income tax benefits, as set forth in the Base Case Model.

 

“Claim” means any Direct Claim, Third Party Claim or Third Party Penalty Claim.

 

“Class A Adjusted Deficit Capital Account Balance” has the meaning set forth in
Section 10.3(c).

 

“Class A Approved Transferee” means a Person (or a direct or indirect subsidiary
of such Person) that (i) has a tangible net worth of at least five hundred
million dollars ($500,000,000) and (ii) either (x) owns and manages or
(y) operates (in each case before giving effect to any Transfer hereunder) not
less than 250 MW of geothermal projects in the United States, and such Person
must have done so for a period of at least five years prior to any Transfer
hereunder.

 

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“Class A Member” means a Member holding one or more Class A Membership
Interests.

 

“Class A Member’s DRO Amount” has the meaning set forth in Section 10.3(c).

 

“Class A Membership Interests” has the meaning set forth in Section 3.1 of this
Agreement.

 

“Class B Member Loan” has the meaning set forth in Section 4.7(a).

 

“Class B Contribution Default” has the meaning set forth in Section 4.3(c).

 

“Class B Member” means a Member holding one or more Class B Membership
Interests.

 

“Class B Member Indemnified Costs” means, subject to Article IX of this
Agreement, any and all damages, losses, claims, liabilities, demands, charges,
suits, Taxes, penalties, interest, costs, and reasonable expenses (including
court costs and reasonable attorneys’ fees and expenses), incurred by any of the
Class B Member Indemnified Parties resulting from or relating to (A) any breach
or default by the Class A Member of any representation, warranty, covenant,
indemnity or agreement under this Agreement or any other Transaction Document,
including (i) in its capacity as the Managing Member under this Agreement and
(ii) in its capacity as Tax Matters Partner under this Agreement or (B) any
claim for fraud, gross negligence, or willful misconduct relating to this
Agreement or any Transaction Document.

 

“Class B Member Indemnified Parties” means the Class B Member and its respective
Affiliates and each of their respective shareholders, members, officers,
directors, employees, agents, and other representatives, and their respective
successors and assigns.

 

“Class B Membership Interests” has the meaning set forth in Section 3.1 of this
Agreement.

 

“Closing Date Appraisal” has the meaning set forth in the Contribution
Agreement.

 

“Closing Date” has the meaning set forth in the Contribution Agreement.

 

“Code” means the United States Internal Revenue Code of 1986, as amended from
time to time.

 

“Company” has the meaning set forth in the introductory paragraph hereof.

 

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“Company Minimum Gain” means the amount of minimum gain there is in connection
with nonrecourse liabilities of the Company, calculated in the manner described
in Treasury Regulation Sections 1.704-2(b)(2) and 1.704-2(d).

 

“Competitor” means any Person which, directly or indirectly, through one or more
Subsidiaries, Affiliates or joint ventures, operates, manages, or develops or
manufactures equipment for use in geothermal power generating facilities or
recovered energy (waste heat) based power generating facilities; provided, that
any institution that has a passive interest in a geothermal power generating
facility similar to that owned by the holders of Class B Membership Interests
hereunder shall not be considered a Competitor solely as a result thereof.

 

“Confidential Information” has the meaning set forth in Section 13.12.

 

“Consistent Return” has the meaning set forth in Section 7.6(b).

 

“Consultation” means to confer with, and reasonably consider and take into
account the reasonable suggestions, comments or opinions of another Person.

 

“Contribution Agreement” has the meaning set forth in the preliminary statements
of this Agreement.

 

“Curative Flip Allocation” shall have the meaning set forth in Section 7.11(f).

 

“Deferred Contribution” means a Capital Contribution made by a Class B Member
pursuant to Section 4.3(a).

 

“Deferred Contribution Cap” means $30,000,000.

 

“Deferred Contribution Date” means, for each Deferred Contribution Period,
January 31 of the following calendar year; provided, however, that if the
Class B Member cannot make a determination of the amount of the Capital
Contribution it is required to make on the Deferred Contribution Date because
the Production Report has not been delivered to the Class B Member pursuant to
Section 7.1(f) or a good faith dispute pursuant to Section 7.1(g) or 13.11(b) is
ongoing, then such Deferred Contribution Date shall be the date the Class B
Member actually makes its Capital Contribution.

 

“Deferred Contribution Payment Rate” means, for a given Deferred Contribution
Period, the payment rate of twenty-three dollars ($23) for each MWh of Excess
Production as adjusted annually for inflation consistent with the adjustment to
PTCs under Section 45(b)(2) of the Code for each Deferred Contribution Period
after 2016 and otherwise subject to the terms of Section 4.3(a), provided,
however, that in the event of either (i) a phase out of PTCs under
Section 45(b)(1) of the Code, or (ii) a PTC Change in Tax Law, the Deferred
Contribution Payment Rate shall be adjusted to the maximum extent necessary to
preserve the expected Flip Date under the most recent Tracking Model prior to
such phase out or PTC Change in Tax Law, and provided, further, however, in the
event any Project is not a qualified facility within the meaning of Section
45(d)(1) of the Code, including without limitation as a result of a PTC Change
in Tax Law or a final determination by the IRS or a court (after final
adjudication of any contest or appeal), the Deferred Contribution Payment Rate
shall be zero with respect to all energy produced by such Project.

 

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“Deferred Contribution Period” means the period beginning on January 1, 2017 and
ending on December 31, 2017, and each calendar year thereafter through December
31, 2022.

 

“Depreciation” means for each Tax Year or part thereof, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable for
United States federal income tax purposes with respect to an Asset for such Tax
Year or part thereof, except that if the Gross Asset Value of an Asset differs
from its adjusted basis for United States federal income tax purposes at the
beginning of such Tax Year, the depreciation, amortization, or other cost
recovery deduction for such Tax Year or part thereof shall be an amount which
bears the same ratio to such Gross Asset Value as the United States federal
income tax depreciation, amortization, or other cost recovery deduction for such
Tax Year or part thereof bears to such adjusted tax basis. If such Asset has a
zero adjusted tax basis, the depreciation, amortization, or other cost recovery
deduction for each Tax Year shall be determined under a method reasonably
selected by the Managing Member and agreed to by Members representing a
Super-Majority Vote.

 

“Designated Transfer” has the meaning set forth in Section 9.8.

 

“Direct Claim” has the meaning set forth in Section 11.2.

 

“Distributable Cash” means, as of any date, all cash, cash equivalents and
liquid investments held by the Company as of such date less all reserves that,
in the reasonable judgment of the Managing Member, are necessary or appropriate
for the operation of the Company, the Subject Companies or the Projects
consistently with the Prudent Operator Standard. Reasonable reserves shall
consist of (a) any combination of the following reserves as reasonably
determined by the Managing Member: (i) necessary for payment of expenses
included in the annual budget, (ii) necessary to prevent or mitigate an
emergency situation, (iii) established with the prior written consent of the
Members (by Super-Majority Vote), (iv) necessary to allow the Company and the
Subject Companies to meet expenses that are clearly identified and expected with
reasonable certainty to become due, but that are not included in the budget,
(v) necessary to ensure sufficient spare parts or the payment of operational and
maintenance costs for each of the Projects, (vi) necessary to service any
Existing Indebtedness or other indebtedness (the incurrence of which constituted
a Major Decision) incurred by the Subject Companies, (vii) necessary for well
drillings or well maintenance or (viii) one or more additional reserves not
referred to in the preceding clauses of this definition of “Distributable Cash”
that do not in the aggregate exceed five hundred thousand dollars ($500,000) and
(b) unless the Class B Member is entitled to one hundred percent (100%) of the
Distributable Cash pursuant to clause (ii) of, or the proviso at the end of,
Section 6.1(a), in the event that any reserve amount or letter of credit or
other security has been drawn upon under any Loan Document (as defined in the
OFC2 Note Purchase Agreement) and, as a result, is required to be replenished,
an amount equal to such replenishment amount.

 

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“Distribution Date” means, each Deferred Contribution Date and the last Business
Day of each month.

 

“DRO Amount” equals zero dollars ($0).

 

“DRO Notice” has the meaning set forth in Section 10.3(b).

 

“ECA” means the Equity Contribution Agreement dated as of December 16, 2016
among the Class A Member, the Class B Member and Ormat.

 

“Effective Date” has the meaning set forth in the introductory paragraph hereof.

 

“Encumbrance” means any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, mortgage, security interest, right of
first refusal or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income or exercise of any other attribute of
ownership.

 

“Estimated Tax Payment Date” shall have the meaning set forth in
Section 7.11(c)(iii)(C).

 

“Estimated Tax Payment Period” shall mean the periods, within a taxable year,
between the Estimated Tax Payment Dates.

 

“Excepted Non-Conforming Return” has the meaning set forth in Section 7.6(b).

 

“Excess Production” means, with respect to any Deferred Contribution Period, the
excess of the Production eligible for PTCs generated by the PTC Eligible
Projects for which the related item of gross income is actually allocated to the
Class B Member (without regard to the Fixed Tax Assumptions) through the
expiration of the Deferred Contribution Period over the Production Threshold
through the expiration of the Deferred Contribution Period as set forth in
Schedule 4.3(b).

 

“Existing Indebtedness” means the aggregate existing indebtedness outstanding
under the Senior Notes.

 

“Fair Market Value” means, with respect to any Asset, the price at which the
Asset would change hands between a willing buyer and a willing seller, neither
being under any compulsion to buy or to sell, and both having reasonable
knowledge of the relevant facts.

 

“Fiscal Year” has the meaning set forth in Section 7.9.

 

“Fixed Tax Assumptions” means the following assumptions: (i) the Company is a
partnership and each of the Subject Companies is a disregarded entity for
federal income tax purposes; (ii) the Class A Member and the Class B Member are
the sole partners in the Company for federal income tax purposes; (iii) the
Company is the owner for federal income tax purposes of the Projects; ; and
(iv) the allocations of tax items (i.e., income gain, loss and deduction, but
for the avoidance of doubt, not including depletion) by the Company to the
Members, in each case, will be respected by the IRS either because they have
“substantial economic effect” or are otherwise consistent with the Members’
interests in the Company within the meaning of Section 704(b) of the Code;
provided, this assumption shall not apply to (A) the calculation of items of
income, gain, loss, deduction, and credit, and (B) the timing that such items
arise and occur.

 

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“Flip Date” means the later of (i) the Target Flip Date and (ii) the last day of
the month in which the Class B Member has achieved an Internal Rate of Return
equal to or greater than the Target Internal Rate of Return.

 

“Flip Exercise Notice,” “Flip Purchase Option” and “Flip Purchase Price” have
the meanings set forth in Section 9.6.

 

“Fundamental Decisions” means the decisions pursuant to clauses (a), (b), (d),
(f), (g), (h), (k), (l), (m), (n), (p), (q), (r), (t), (u) and (v) of the
definition of Major Decisions.

 

“GAAP” means United States generally accepted accounting principles as in effect
from time to time, consistently applied throughout the specified period.

 

“Global Financial Services Firm” has the meaning set forth in Section 13.12(a).

 

“Governmental Body” means the federal government of the United States, any state
of the United States or political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any other governmental entity, instrumentality,
agency, authority, commission or self-regulatory organization.

 

“Gross Asset Value” means, with respect to any Asset, the Asset’s adjusted tax
basis for federal income tax purposes, except as follows:

 

(a)     the initial Gross Asset Value of any Asset contributed by a Member to
the Company shall be the Gross Fair Market Value of such Asset as of the date of
contribution; provided, that the initial Gross Asset Values of the Assets
contributed to the Company pursuant to Section 4.2(d) shall be as set forth in
Schedule 4.2(d);

 

(b)     the Gross Asset Values of all Company Assets shall be adjusted to equal
their respective fair market values as of the following times: (i) the
acquisition of additional Membership Interests in the Company by any new or
existing Member in exchange for more than a de minimis Capital Contribution;
(ii) the distribution by the Company to a Member of more than a de minimis
amount of money or Company property as consideration for Membership Interests in
the Company; and (iii) the liquidation of the Company within the meaning of
Treasury Regulation Section 1.704-1(b)(2)(ii)(g); provided, however, that
adjustments pursuant to clauses (i) and (ii) shall be made only if the Managing
Member reasonably determines, after Consultation with the Members, that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Members in the Company;

 

(c)     the Gross Asset Value of any item of Company Assets distributed to any
Member shall be adjusted to equal the Gross Fair Market Value of such Asset on
the date of distribution;

 

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(d)     the Gross Asset Values of all Company Assets shall be adjusted to
reflect any adjustments to the adjusted basis of such Assets pursuant to
Sections 734(b) or 743(b) of the Code, but only to the extent that such
adjustments are required to be taken into account in determining Capital
Accounts pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m); provided,
however, that Gross Asset Values shall not be adjusted pursuant to this
subsection (d) to the extent that the Managing Member determines that an
adjustment pursuant to subsection (b) is necessary or appropriate in connection
with a transaction that would otherwise result in an adjustment pursuant to this
subsection (d); and

 

(e)     if the Gross Asset Value of an Asset has been determined or adjusted
pursuant to subsection (a), (b) or (d) above, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such Asset.

 

“Gross Fair Market Value” means, with respect to any Asset, the fair market
value of the Asset as reasonably determined by the Managing Member and agreed to
by Members representing a Super-Majority Vote.

 

“Grossed-Up PTC Amount” means an amount equal to the PTC Amount divided by 1
minus the Highest Marginal Rate.

 

“Guaranty Fee” has the meaning set forth in Section 13.16(b).

 

“Highest Marginal Rate” means, with respect to the Class B Member, the then
highest marginal federal income tax rate generally applicable to entities having
the same classification for U.S. income tax purposes as the Class B Member (and
not the effective rate of any particular taxpayer), as in effect from time to
time; provided, that the Class B Membership Interests shall be treated as
continuously held by the original Class B Member in respect of such Class B
Membership Interests for purposes of determining the highest marginal federal
income tax rate generally applicable to any holder of such Class B Membership
Interests.

 

“Indemnified Parties” has the meaning set forth in Section 11.1.

 

“Indemnifying Party” has the meaning set forth in Section 11.1.

 

“Independent Accounting Firm” means PricewaterhouseCoopers, or an accounting
firm which is otherwise mutually acceptable to the Class A Member and the
Class B Member.

 

“Independent Engineer” has the meaning set forth in the Contribution Agreement.

 

“Insurance Consultant” has the meaning set forth in the Contribution Agreement.

 

“Intermediate Company” has the meaning set forth in the preliminary statements
of this Agreement.

 

“Internal Rate of Return” means the annual effective discount rate computed in a
manner consistent with the rules and conventions described in Section 7.11
(including by taking into account the Cash Flows set forth in
Section 7.11(c)(ii)) and calculated using the “XIRR” function on Microsoft
Office Excel 2010 (or the same function in any subsequent version of Microsoft
Office Excel).

 

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“IRS” means the Internal Revenue Service or any successor agency thereto.

 

“JPM” has the meaning set forth in the introductory paragraph hereof.

 

“Known Project Geothermal Resource Area” has the meaning set forth in
Section 12.1(a).

 

“Legal Requirement” means, as to any Person (as defined in the Contribution
Agreement), any requirement under any law, statute, act, decree, ordinance,
rule, directive, permit, order, treaty, code or regulation (including any of the
foregoing relating to health or safety matters or any Environmental Law (as such
term is defined in the Contribution Agreement)), as enacted, issued or
promulgated by any Governmental Body, including all amendments, modifications,
extensions, replacements or re-enactments thereof, to the extent that any of the
foregoing has the force of law.

 

“Major Decisions” means any of the following:

 

(a)     Any sale, lease or other voluntary disposition of any limited liability
company interest in the Company or any Subject Company;

 

(b)     Any sale, lease or other voluntary disposition of all or substantially
all of the Assets of any Subject Company;

 

(c)     Any sale, lease or other voluntary disposition of any Assets of any
Subject Company with an aggregate fair market value in excess of five million
dollars ($5,000,000) during any 12 month period, other than in the Ordinary
Course of Business;

 

(d)     Any Encumbrance or grant of any Encumbrance on the Assets or rights of
the Company or the Assets and rights of any Subject Company other than Permitted
Liens;

 

(e)     The Company, or any Subject Company (1) cancel, suspend, renew or
terminate any Material Contract (2) assign, release or relinquish the rights or
obligations of any party to, or amend, any Material Contract if any of the
foregoing items in this clause (2) would have a Material Adverse Effect on the
Company or any such Subject Company, or (3) renew any Material Contract except
to the extent such renewal is on substantially the same terms as the original
Material Contract, provided that none of such actions will be considered a Major
Decision if the actions are required by or resulting from any requirement of any
Governmental Body.

 

(f)     The Company or any Subject Company takes or files any action or
institute any proceedings in Bankruptcy;

 

(g)     Any merger or consolidation of the Company or any Subject Company, other
than any merger of one Subject Company with another Subject Company;

 

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(h)     Any incurrence or guarantee of indebtedness for borrowed money or
capitalized lease obligations in excess of (x) four million dollars
($4,000,000), in the aggregate, for the Company, and (y) three million dollars
($3,000,000), for any Subject Company, other than Working Capital Loans;

 

(i)     Any issuance or redemption by the Company of any Membership Interests or
other equity interest of any kind in the Company;

 

(j)     Approval of any transactions (other than Working Capital Loans and other
transactions contemplated by any of the Transaction Documents, including under
clause (q) of this definition) between the Company or any Subject Company, as
the case may be, and any member thereof or any Affiliates thereof;

 

(k)     Any settlement of claims, litigation or arbitration if, as a result of
such settlement, (x) the Company would be obligated to pay more than $4 million,
in the aggregate, (y) the Intermediate Company would be obligated to pay more
than $3 million, in the aggregate or (z) any individual Project Owner would be
obligated to pay more than $2 million, in the aggregate;

 

(l)     Any action that would cause the Company or any Subject Company to engage
in any business or activity that is not within the purpose of such entity, as
set forth in such entity’s Organizational Documents, or to change such purpose,
or to the extent that there would be an elective change to any Subject Company’s
status as a Qualifying Facility or any action that would be inconsistent with
the status of a Subject Company’s status as a Qualifying Facility (other than as
a result of a change in law providing for a successor status for similar
projects) if, in each case, such action or change would result in the Class B
Member no longer being eligible for an exemption under PUHCA.

 

(m)     Any amendment or cancellation of (i) the certificate of formation of the
Company or any Project Company or (ii) of any Transaction Document; provided,
however, solely with respect to any O&M Agreement, only material amendments of
such O&M Agreement shall be considered a Major Decision;

 

(n)     The admission of any additional member in the Company, other than
pursuant to terms of this Agreement or in connection with the exercise of rights
by any lenders to OrLeaf to which OrLeaf has pledged its Membership Interests to
secure a borrowing by OrLeaf; provided such lenders are an Approved Transferee;

 

(o)     Any consent, approval or waiver that would allow the expenditure by any
Subject Company under an operation and maintenance agreement for a Project,
which spending is either (x) not contemplated in an Annual Budget or (y) exceeds
by more than the greater of (A) one million dollars ($1,000,000) and (B) ten
percent (10%) of the amounts contemplated in an Annual Budget; provided that
none of such actions will be considered a Major Decision if the actions relate
to expenditures in connection with any expansion capital expenditures for any
Project, unless (1) the Class B Members elect to, and the Members agree on, the
Class B Members’ funding contributions for such capital expenditure or (2) such
expansion has a material adverse effect on the Class B Member, the Company or
any Subject Company;

 

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(p)     Entering into any contract under which (x) the Company would be
obligated to pay more than four million dollars ($4,000,000), in the aggregate,
in any Fiscal Year, (y) any Subject Company would be obligated to pay more than
three million dollars ($3,000,000), in the aggregate, in any Fiscal Year, in
each case other than (1) Working Capital Loans or (2) as contemplated in an
Annual Budget;

 

(q)     Entering into any contract with any Affiliate of a Member that would
require payments by the Company or any Subject Company of more than four million
dollars ($4,000,000), in the aggregate, in any Fiscal Year, other than
(a) contracts providing for Working Capital Loans, (b) the Transaction Documents
or (c) an extension or replacement of an agreement described in the foregoing
(a) or (b) with the same or another Affiliate of such Member;

 

(r)     The Company or any Subject Company hire any employees;

 

(s)     Approval of renegotiations of the operations and maintenance fee under
the relevant O&M Agreement to the extent taking place every five years as
provided under such O&M Agreement, unless the increase is solely to adjust for
inflation;

 

(t)     Electing that the Company be treated other than as a partnership for
United States federal income tax purposes, or causing the Company to receive (or
permit to be received) any grants, tax-exempt bonds, subsidized energy
financing, or other federal tax credits, each within the meaning of
Section 45(b)(3) of the Code;

 

(u)     Prior to the end of the applicable statute of limitations for the year
in which the Flip Date occurs, (i) commencing of a judicial action (including
filing a petition as contemplated in Section 6226(a) or Section 6228 of the
Code) with respect to a federal income tax matter or appeal any adverse
determination of a judicial tribunal; (ii) entering into a settlement agreement
with the IRS which purports to bind the Members; (iii) intervening in any action
as contemplated by Section 6226(b) of the Code; (iv) filing any request
contemplated in Section 6227(b) of the Code; or (v) entering into an agreement
extending the period of limitations as contemplated in Section 6229(b)(1)(B) of
Code; and

 

(v)     Any amendment to modify the amortization schedule of the Senior Notes.

 

“Managing Member” has the meaning set forth in Section 8.1. The Managing Member
is the “manager” of the Company within the meaning of the Act.

 

“Material Adverse Change in Tax Law” means any Change in Tax Law that
(x) becomes effective after the Effective Date, (y) directly affects the
availability or the rate of PTCs and (z) that would cause the Flip Date
projected in the Tracking Model immediately prior to such Change in Tax Law to
be delayed by two years or more after taking such Change in Tax Law into effect.

 

“Material Adverse Effect” has the meaning set forth in the Contribution
Agreement.

 

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“Material Contract” means (1) a contract for the sale of electric energy or
transmission services of a Project; (2) a contract for the sale, use or
allocation of geothermal fluid, brine or other geothermal elements; (3) a
contract, lease, indenture or security under which the Company or any Subject
Company (a) has created, incurred, assumed or guaranteed any indebtedness for
borrowed money or obligations under any lease that, in accordance with GAAP,
should be capitalized, (b) has created a mortgage, security interest or other
consensual encumbrance on any property with a fair market value in excess of
five million dollars ($5,000,000) (other than any Permitted Liens), or (c) has a
reimbursement obligation in respect of any letter of credit, guaranty, bond, or
other credit or collateral support arrangement required to be maintained by any
Subject Company under the terms of any contract referred to in clause (1) above;
(4) a contract for management, operation or maintenance of a Project; (5) a
product warranty or repair contract by or with a manufacturer or vendor of
equipment owned or leased by a Subject Company with a fair market value in
excess of five million dollars ($5,000,000); and (6) any other contract that
could require payments of more than five million dollars ($5,000,000), in the
aggregate for any Subject Company during any Fiscal Year.

 

“Member” means any Person executing this Agreement as of the date of this
Agreement as a member of the Company or any Person admitted to the Company as a
member as provided in this Agreement (each in the capacity as a member of the
Company), but does not include any Person who has ceased to be a member of the
Company.

 

“Member Nonrecourse Debt” means “partner nonrecourse debt” as defined in
Treasury Regulation Section 1.704-2(b)(4). An example is where a Member or a
person related to the Member makes a loan on a nonrecourse basis to the Company.

 

“Member Nonrecourse Deductions” has the meaning given to the term “partner
nonrecourse deductions” in Treasury Regulation Sections 1.704-2(i)(1) and
1.704-2(i)(2).

 

“Membership Interest” means the limited liability company interest of a Member
in the Company, including rights to distributions (liquidating or otherwise),
allocations, and to vote, consent or approve, if any.

 

“Minimum Gain Attributable to Member Nonrecourse Debt” means the amount of
minimum gain there is in connection with a Member Nonrecourse Debt, calculated
in the manner described in Treasury Regulation Section 1.704(i)(3).

 

“MW” means megawatt.

 

“MWh” means megawatt hour.

 

“Non-Conforming Return” has the meaning set forth in Section 7.6(b).

 

“Nonrecourse Deductions” has the meaning given to such term in Treasury
Regulation Sections 1.704-2(b)(1) and 1.704-2(c).

 

“Nonrecourse Liability” has the meaning given to such term in Treasury
Regulation Section 1.704-2(b)(3).

 

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“Notice” has the meaning set forth in Section 13.1.

 

“O&M Agreements” mean, collectively, each of the operation and maintenance
agreements between the Operator and a Subject Company, as each such agreement
may be amended, supplemented or replaced from time to time.

 

“OFAC Blocked List” means the list of Specially Designated Nationals and Blocked
Persons maintained by the Office of Foreign Assets Control, or any replacement
list intended to be a successor to such list.

 

“OFC2 Distribution Block” means the occurrence of any event contemplated in
Section 10.5 of the OFC2 Note Purchase Agreement that would result in any Issuer
(as defined in the OFC2 Note Purchase Agreement) being prohibited from (i) the
making or payment of any distribution or dividend on any membership interest or
on any rights with respect to membership interests or (ii) the application of
any funds, property or assets to the purchase, redemption, sinking fund or other
retirement of, or agreement to purchase or redeem, any membership interest.

 

“OFC2 Foreclosure” means any exercise of remedies by the Trustee (as defined in
the OFC2 Note Purchase Agreement) or Senior Creditors (as defined in the OFC2
Note Purchase Agreement) under the OFC2 Note Purchase Agreement, OFC2 Indenture
or any other Loan Document (as defined in the OFC2 Note Purchase Agreement), the
result of which is that the Company no longer owns (i) one hundred percent
(100%) of the membership interests in the Intermediate Company, (ii) one hundred
percent (100%) (directly or indirectly) of the Project Companies owned by the
Intermediate Company or (iii) one hundred percent (100%) (directly or
indirectly) of the Projects owned (directly or indirectly) by the Intermediate
Company.

 

“OFC2 Indenture” means that certain Indenture of Trust and Security Agreement
dated as of September 23, 2011 (as amended, amended and restated, modified
and/or supplemented from time to time) among OFC 2 LLC, ORNI 15 LLC, ORNI 39
LLC, ORNI 42 LLC, and HSS II, LLC, and Wilmington Trust Company, as Trustee and
as Depository.

 

“OFC2 Note Purchase Agreement” means that certain Note Purchase Agreement dated
as of September 23, 2011 (as amended, amended and restated, modified and/or
supplemented from time to time) among OFC 2 LLC, ORNI 15 LLC, ORNI 39 LLC, ORNI
42 LLC, and HSS II, LLC, as the Issuers, OFC 2 Noteholder Trust, as Purchaser,
the U.S. Department of Energy, as Guarantor, and John Hancock Life Insurance
Company (U.S.A.), as Administrative Agent.

 

“Offer Notice” has the meaning set forth in Section 9.5(a) of this Agreement.

 

“Operations Report” has the meaning set forth in Section 7.1 of this Agreement.

 

“Operator” means Ormat, or any successor thereto, each in its capacity as the
operator pursuant to each O&M Agreement.

 

“Ordinary Course of Business” means the ordinary conduct of business consistent
with past custom and practice (including with respect to quantity and
frequency).

 

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“Organizational Documents” means articles of incorporation, certificate of
incorporation, charter, bylaws, articles of organization, formation or
association, regulations, operating agreement, certificate of limited
partnership, partnership agreement, and all other similar documents, instruments
or certificates executed, adopted, or filed in connection with the creation,
formation or organization of a Person, including any amendments thereto.

 

“Ormat” means Ormat Nevada, Inc., a Delaware corporation.

 

“ORNI 37” has the meaning set forth in the Contribution Agreement

 

“Other Consent Matters” means each of the matters requiring consent, approval,
authorization or vote of or by the Class B Member, in each case as and to the
extent so required, pursuant to Sections 3.5, 4.7(a), 6.1(d), 6.5, 7.1(b),
7.5(b), 7.7(a), 7.7(c), 9.2(b), 10.1(a), 10.2(a), 10.4, 12.3(e), 12.3(g), and
13.11(a), and the definitions of Accounting Firm, Depreciation, Distributable
Cash (clause (iii) only) and Gross Fair Market Value.

 

“Overpayment” has the meaning set forth in Section 7.1(g)(vi).

 

“Partnership Representative” means the “partnership representative” as that term
is defined in Code Section 6223 of Title XI.

 

“Permitted Encumbrance” means Encumbrances provided for under the Transaction
Documents, liens for Taxes not yet due and payable and restrictions on transfer
of the Membership Interests under any applicable federal, state or foreign
securities law.

 

“Permitted Investments” means any of the following having a maturity of not
greater than one year from the date of issuance thereof: (a) readily marketable
direct obligations of the government of the United States of America or any
agency or instrumentality thereof or obligations unconditionally guaranteed by
the full faith and credit of the government of the United States of America,
(b) insured certificates of deposit of or time deposits with any commercial bank
that is a member of the Federal Reserve System, issues (or the parent of which
issues) commercial paper rated at least “Prime 1” (or the then equivalent grade)
by Moody’s Investors Service, Inc. or “A 1” (or the then equivalent grade) by
Standard & Poor’s Corporation, is organized under the laws of the United States
or any State thereof and has combined capital and surplus of at least one
billion dollars ($1,000,000,000) or (c) money market funds rated “AAA “ or
“Aaa2” or better by Standard & Poor’s Corporation or Moody’s Investors Service,
Inc.

 

“Permitted Liens” means (a) liens for taxes not yet due or that are being
contested in good faith by appropriate proceedings, (b) carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s, employees’,
contractors’, operators’ or other similar liens or charges securing the payment
of expenses not yet due and payable that were incurred in the Ordinary Course of
Business of each Subject Company, (c) trade contracts or other obligations of a
like nature incurred in the Ordinary Course of Business of each Subject Company,
(d) obligations or duties to any Governmental Body arising in the Ordinary
Course of Business (including under licenses and permits held by the Subject
Companies and under all Applicable Legal Requirements), (e) obligations or
duties under easements, leases or other property rights, (f) Existing
Indebtedness and (g) all other encumbrances and exceptions that are incurred in
the Ordinary Course of Business of each Project, are not incurred for borrowed
money and do not have a material adverse effect on either the use of any Assets
of the Subject Companies as currently used or the value of any such Assets.

 

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“Permitted Transfers” has the meaning set forth in Section 9.4.

 

“Person” has the meaning set forth in Section 18-101(12) of the Act.

 

“PPA” has the meaning set forth in the Contribution Agreement.

 

“Production” means electricity (measured in MWh) actually generated by a Project
and sold to a Person that is an Unrelated Party by the applicable Subject
Company.

 

“Production Report” has the meaning set forth in Section 7.1(f).

 

“Production Threshold” means, for each Deferred Contribution Period, MWhs as set
forth in Schedule 4.3(b) under the heading “Production Threshold”, provided,
however, that in the event of either (i) a phase out of PTCs under
Section 45(b)(1) of the Code, or (ii) a PTC Change in Tax Law, the Production
Threshold shall be adjusted to the maximum extent necessary to preserve the
expected Flip Date under the most recent Tracking Model prior to such phase out
(for the avoidance of doubt, after taking into account any corresponding
adjustment to the Deferred Contribution Payment Rate as a result of such
change). For the avoidance of doubt, in the event that the PTC rate as provided
by any guidance or publication issued by the IRS pursuant to Code
Section 45(e)(2)(A) is different from the PTC rate assumed in the Base Case
Model in any year, the applicable Production Threshold for such year shall be
equal to the product of the Production Threshold as set forth in Schedule 4.3(b)
applicable to such year multiplied by a factor, the numerator of which is the
PTC rate assumed in the Base Case Model and the denominator of which is the PTC
rate as provided by the guidance or publication issued by the IRS pursuant to
Code Section 45(e)(2)(A). For the avoidance of doubt, after the Flip Date
occurs, the Production Threshold will be zero.

 

“Prohibited Person” means any Person that is (a) listed on, or owned or
controlled by a Person listed on, or acting on behalf of a Person listed on, the
OFAC Blocked List, (b) a Sanctioned Person, (c) otherwise a target of Sanctions
(“target of Sanctions” signifying a Person with whom a Person or other national
of a Governmental Authority that administers Sanctions would be prohibited or
restricted by law from engaging in trade, business or other activities), or
(d) any party that to the best knowledge and reasonable belief of the Class A
Member is known to directly or indirectly (i) make or to have made any illicit
bribes or otherwise engaged in corrupt behavior in violation of Anti-Corruption
Laws or (ii) to have acted in connection with the illegal laundering of the
proceeds of any criminal activity.

 

“Projects” has the meaning set forth in the preliminary statements of this
Agreement.

 

“Project Companies” has the meaning set forth in the preliminary statements of
this Agreement.

 

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“Prudent Operator Standard” means that a Person will (a) perform its duties in
good faith and as a reasonably prudent operator, (b) perform its duties in
compliance with (or to cause the applicable Subject Companies to comply in all
materials respects with) the requirements of the Material Contracts,
(c) exercise such care, skill and diligence as a reasonably prudent business
company of established reputation engaged in the geothermal energy business
would exercise in the conduct of its business and for the advancement or
protection of its own interests, (d) perform the duties in accordance with
applicable geothermal energy industry standards, taking into account, prior to
the Flip Date, the requirements to maintain qualification for PTCs, (e) use
sufficient and properly trained and skilled personnel, and (f) use parts and
supplies that meet the specifications set forth in the Material Contracts, in
all cases with respect to (a) through (f) herein, taking into account all of the
costs, expenses and benefits of operation of each Project.

 

“PTCs” means the tax credits pursuant to Section 45 of the Code (or any
successor to such Code section) for the sale of electricity produced from
certain renewable resources.

 

“PTC Amount” means the PTCs actually generated and allocated to the Class B
Member.

 

“PTC Change in Tax Law” means any Change in Tax Law that limits, restricts,
defers or disallows the ability of the Company to claim PTCs.

 

“PTC Eligible Projects” has the meaning set forth in the Contribution Agreement.

 

“PUHCA” means the Public Utility Holding Company Act of 2005 and FERC’s
regulations promulgated thereunder.

 

“Qualifying Facility” means a qualifying small power production facility
pursuant to the Public Utility Regulatory Policies Act of 1978, as amended, and
FERC’s regulations thereunder at 18 C.F.R. § 292.203.

 

“Quarter” means, with respect to the Fiscal Year of the Company, each of the
three month periods from January 1 through March 31, from April 1 through
June 30, from July 1 through September 30 and from October 1 through December 31
of any calendar year.

 

“Recapture Gain” has the meaning set forth in Section 5.3(c).

 

“Regulated Holder” means any holder of the Company’s securities that is (or that
is a subsidiary of a bank holding company that is) subject to the various
provisions of Regulation Y of the Board of Governors of the Federal Reserve
Systems, 12 C.F.R. Part 225 (or any successor to Regulation Y).

 

“Regulatory Problem” means, with respect to the Class B Member, (a) any set of
facts or circumstances wherein it has been asserted by any Governmental
Authority (or such Class B Member reasonably believes based on advice of its
counsel or regulators that there is a material risk of such assertion) that such
Class B Member (or any bank holding company or other regulated bank entity that
controls such Class B Member) is not entitled to hold, or exercise any material
right with respect to, all or any portion of the Membership Interest which such
Person holds or (b) any set of facts or circumstances where such Person and its
Affiliates does or would own, control or have power (including voting rights)
over a greater quantity of the Membership Interests than is permitted under any
law applicable to such Person or to which such Person is subject

 

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“Representatives” means, with respect to any Person, the managing member(s), the
officers, directors, employees, representatives or agents (including investment
bankers, financial advisors, attorneys, accountants, brokers and other advisors)
of such Person, to the extent that such officer, director, employee,
representative or agent of such Person is acting in his or her capacity as an
officer, director, employee, representative or agent of such Person.

 

“Revenue Procedures” means statements of procedure from the IRS designated as
such and issued to the general public, affecting the rights or duties of
taxpayers or other members of the public under the Code.

 

“ROFO Offer” has the meaning set forth in Section 9.5(b) of this Agreement.

 

“Sanctioned Country” has the meaning given to such term in the Contribution
Agreement.

 

“Sanctioned Person” has the meaning given to such term in the Contribution
Agreement.

 

“Sanctions” has the meaning given to such term in the Contribution Agreement.

 

“Senior Notes” means the senior notes issued under the OFC2 Note Purchase
Agreement.

 

“Sponsor” means Ormat Technologies, Inc., a Delaware corporation.

 

“Sponsor Guaranty” means the Guaranty Agreement made by the Sponsor for the
benefit of JPM.

 

“Steam Resource” has the meaning set forth in the Contribution Agreement.

 

“Subject Companies” has the meaning set forth in the preliminary statements of
this Agreement.

 

“Subsidiary” means, with respect to any Person, any corporation, partnership,
limited liability company, joint venture or other entity of which such Person
(either alone or through or together with any other Person pursuant to any
agreement, arrangement, contract or other commitment) owns, directly or
indirectly, fifty percent (50%) or more of the stock or other equity interests
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other legal
entity.

 

“Super-Majority Vote” has the meaning set forth in Section 3.2.

 

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“Target Flip Date” means December 31, 2022.

 

“Target Internal Rate of Return” means an Internal Rate of Return of twenty
percent (20%).

 

“Target IRR Notice” has the meaning set forth in Section 7.1(e).

 

“Target IRR Report” has the meaning set forth in Section 7.1(d).

 

“Tax” (and, with correlative meaning, “Taxes” and “Taxable”) means:

 

(i)     any taxes, customs, duties, charges, fees, levies, penalties or other
assessments imposed by any federal, state, local or foreign taxing authority,
including, but not limited to, income, gross receipts, windfall profit,
severance, property, production, sales, use, license, excise, franchise, net
worth, employment, occupation, payroll, withholding, social security,
alternative or add-on minimum, ad valorem, transfer, stamp, or environmental
tax, or any other tax, custom, duty, fee, levy or other like assessment or
charge of any kind whatsoever, together with any interest, penalty, addition to
tax, or additional amount attributable thereto; and

 

(ii)     any liability for the payment of amounts with respect to payment of a
type described in clause (i), including as a result of being a member of an
affiliated, consolidated, combined or unitary group, as a result of succeeding
to such liability as a result of merger, conversion or Asset transfer or as a
result of any obligation under any tax sharing arrangement or tax indemnity
agreement.

 

“Tax Matters Partner” has the meaning set forth in Section 7.7(a).

 

“Tax Return” has the meaning set forth in Section 7.6(b).

 

“Tax Year” has the meaning set forth in Section 7.10.

 

“Termination Date” has the meaning set forth in Section 2.4.

 

“Third Party Claim” has the meaning set forth in Section 11.3.

 

“Third Party Penalty Claim” has the meaning set forth in Section 11.3.

 

“Title XI” has the meaning set forth in Section 7.7(f).

 

“Tracking Model” means the Base Case Model, as adjusted from time to time to
account for actual performance except as provided in Section 7.11.

 

“Transaction Documents” means this Agreement, the Contribution Agreement, the
Sponsor Guaranty, the O&M Agreements and each of the other documents required to
be delivered on the Closing Date, individually and collectively.

 

“Transfer” has the meaning set forth in Section 9.1.

 

“Treasury Regulations” means the regulations promulgated under the Code, as such
regulations are in effect on the date hereof or as otherwise contemplated by
Section 5.2.

 

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“Trigger Percentage” shall have the meaning set forth in Section 7.11(d)(i).

 

“UCC” means the Uniform Commercial Code of any applicable jurisdiction.

 

“Underpayment” has the meaning set forth in Section 7.1(g)(v).

 

“Unrelated Persons” means a Person that is not “related”, within the meaning of
Section 45(e)(4) of Code, to any Person to whom any of the Subject Companies
sells electricity during the period the Company is entitled to PTCs on such
electricity.

 

“Working Capital Loan” has the meaning given to such term in Section 4.5.

 

 

 

 

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