exv10w7






Exhibit 10.7




EXECUTION COPY




AGREEMENT TO LEASE

WITH OPTION TO PURCHASE




between



INDUSTRIAL DEVELOPMENT BOARD NO.1 OF

THE PARISH OF EVANGELINE, STATE OF LOUISIANA, INC.



and



PINE PRAIRIE ENERGY CENTER, LLC



Dated as of May 1, 2006



In Connection With



$50,000,000



INDUSTRIAL DEVELOPMENT BOARD NO. 1

OF THE PARISH OF EVANGELINE, STATE OF LOUISIANA, INC.

TAXABLE INDUSTRIAL DEVELOPMENT REVENUE BONDS

(PINE PRAIRIE ENERGY CENTER, LLC PROJECT)



Series 2006



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TABLE OF CONTENTS




	 	 	 	 	 
	ARTICLE I
	 	 	4	 
	 
	 	 	 	 
	DEFINITIONS AND USE OF PHRASES
	 	 	4	 
	Section 1.1 Definitions
	 	 	4	 
	Section 1.2 Definitions Contained in the Indenture
	 	 	8	 
	Section 1.3 Use of Phrases
	 	 	8	 
	 
	 	 	 	 
	ARTICLE II
	 	 	8	 
	 
	 	 	 	 
	REPRESENTATIONS AND WARRANTIES
	 	 	8	 
	Section 2.1 Representations by the Issuer
	 	 	8	 
	Section 2.2 Representations and Warranties by the Lessee
	 	 	9	 
	 
	 	 	 	 
	ARTICLE III
	 	 	10	 
	 
	 	 	 	 
	DEMISING CLAUSES
	 	 	10	 
	Section 3.1 Demising Clauses
	 	 	10	 
	Section 3.2 Use
	 	 	10	 
	 
	 	 	 	 
	ARTICLE IV
	 	 	10	 
	 
	 	 	 	 
	ISSUANCE OF THE BONDS
	 	 	10	 
	Section 4.1 Appointments
	 	 	10	 
	Section 4.2 Agreement to issue Bonds and Security Therefor and to Acquire Project
	 	 	11	 
	Section 4.3 Certification of In Service Date
	 	 	11	 
	Section 4.4 Additional Facilities
	 	 	12	 
	Section 4.5 Additional Real Property
	 	 	12	 
	Section 4.6 Equipment
	 	 	13	 
	Section 4.7 Lease Addendum
	 	 	13	 
	Section 4.8 No Warranty of Suitability by the Issuer
	 	 	13	 
	 
	 	 	 	 
	ARTICLE V
	 	 	13	 
	 
	 	 	 	 
	AD VALOREM PROPERTY TAX RELIEF/PILOT PAYMENTS
	 	 	13	 
	Section 5.1 Ad Valorem Property Tax Relief
	 	 	13	 
	Section 5.2 PILOT Payments
	 	 	14	 
	Section 5.3 Obligation to Defense/Repay School Bonds
	 	 	15	 
	Section 5.4 Sales and Use Taxes
	 	 	15	 
	 
	 	 	 	 
	ARTICLE VI
	 	 	16	 
	 
	 	 	 	 
	DURATION OF TERM AND RENTAL PROVISIONS
	 	 	16	 
	Section 6.1 Duration of Term
	 	 	16	 
	Section 6.2 Rental Provisions
	 	 	16	 
	Section 6.3 Additional Rental
	 	 	16	 
	Section 6.4 Obligation of Lessee Unconditional
	 	 	16	 
	 
	 	 	 	 
	ARTICLE VII
	 	 	17	 
	 
	 	 	 	 
	PROVISIONS CONCERNING TAXES, UTILITIES AND INSURANCE
	 	 	17	 
	Section 7.1 Taxes, Other Governmental Charges and Utility Charges
	 	 	17	 
	Section 7.2 Insurance
	 	 	18	 
	Section 7.3 Effect of Mortgage
	 	 	19	 
	 
	 	 	 	 
	ARTICLE VIII
	 	 	19	 
	 
	 	 	 	 
	PROVISIONS RESPECTING DAMAGE, DESTRUCTION AND CONDEMNATION
	 	 	19	 
	Section 8.1 Damage and Destruction Provisions
	 	 	19	 
	Section 8.2 Condemnation Provisions
	 	 	19	 
	Section 8.3 Condemnation of Lessee-Owned Property
	 	 	20	 






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	Section 8.4 Cooperation of the Issuer in the Conduct of Condemnation Proceeds
	 	 	20	 
	 
	 	 	 	 
	ARTICLE IX
	 	 	20	 
	 
	 	 	 	 
	PARTICULAR COVENANTS OF THE LESSEE
	 	 	20	 
	Section 9.1 Release and Indemnification Covenants
	 	 	20	 
	Section 9.2 Inspection of Project
	 	 	21	 
	Section 9.3 Agreement to Maintain Existence
	 	 	21	 
	Section 9.4 Qualification in Louisiana
	 	 	22	 
	Section 9.5 Covenant to Operate
	 	 	22	 
	 
	 	 	 	 
	ARTICLE X
	 	 	22	 
	 
	 	 	 	 
	CERTAIN PROVISIONS RELATING TO ASSIGNMENT, SUBLEASING AND MORTGAGING AND TO THE BONDS
	 	 	22	 
	Section 10.1 Provisions Relating to Assignment and Subleasing by Lessee
	 	 	22	 
	Section 10.2 Provisions Relating to Issuer’s Issuance of Additional Bonds/Transfer of Project
	 	 	22	 
	Section 10.3 References to Bonds Ineffective after Indebtedness Paid
	 	 	23	 
	 
	 	 	 	 
	ARTICLE XI
	 	 	23	 
	 
	 	 	 	 
	EVENTS OF DEFAULT AND REMEDIES
	 	 	23	 
	Section 11.1 Events of Default Defined
	 	 	23	 
	Section 11.2 Remedies on Default
	 	 	24	 
	Section 11.3 No Remedy Exclusive
	 	 	24	 
	Section 11.4 Agreement to Pay Attorneys’ Fees
	 	 	24	 
	Section 11.5 No Additional Waiver Implied by One Waiver
	 	 	24	 
	 
	 	 	 	 
	ARTICLE XII
	 	 	24	 
	 
	 	 	 	 
	OPTIONS
	 	 	24	 
	Section 12.1 Options to Terminate the Lease during Primary Term
	 	 	24	 
	Section 12.2 Option to Purchase
	 	 	25	 
	Section 12.3 Options -In General
	 	 	25	 
	 
	 	 	 	 
	ARTICLE XIII
	 	 	25	 
	 
	 	 	 	 
	MISCELLANEOUS
	 	 	25	 
	Section 13.1 Covenant of Quiet Enjoyment, Surrender
	 	 	25	 
	Section 13.2 The Lease to be a Net Lease
	 	 	26	 
	Section 13.3 Statement of Intention Regarding Certain Tax Matters
	 	 	26	 
	Section 13.4 Notice
	 	 	26	 
	Section 13.5 Certain Prior and Contemporaneous Agreements Canceled
	 	 	27	 
	Section 13.6 Limited Liability of Issuer
	 	 	27	 
	Section 13.7 Binding Effect
	 	 	27	 
	Section 13.8 Severability
	 	 	28	 
	Section 13.9 Article and Section Captions
	 	 	28	 
	Section 13.10 Governing Law
	 	 	28	 
	Section 13.11 Counterparts
	 	 	28	 
	Section 13.12 Assignment to Trustee
	 	 	28	 






EXHIBIT A — PROJECT DESCRIPTION


EXHIBIT B — PROJECT SITE


EXHIBIT C — RIGHTS OF WAY


EXHIBIT D — FORM OF CONVEYANCE AGREEMENT


EXHIBIT E — FORM OF LEASE ADDENDUM


EXHIBIT F — FORM OF CONSENT AND AGREEMENT





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     This AGREEMENT TO LEASE WITH OPTION TO PURCHASE, dated as of May 1,
2006, and effective as of the time of execution and delivery hereof, between INDUSTRIAL
DEVELOPMENT BOARD NO. 1 OF THE PARISH OF EVANGELINE, STATE OF
LOUISIANA, INC., a public corporation organized and existing under the laws of the State of
Louisiana (herein called the “Issuer” or “Lessor”), and PINE PRAIRIE ENERGY CENTER,
LLC, a limited liability company organized and existing under the laws of the State of
Delaware
(the “Lessee”),



W I T N E S S E T H 




     That in consideration of the respective representations and agreements hereinafter
contained, the Issuer and the Lessee agree as follows (provided that in the performance of
the
agreements of the Issuer herein contained, any obligation it may thereby incur for the
payment of
money shall not be a general debt on its part but shall be payable by it solely out of the
rents,
revenues and receipts derived from this Lease, the proceeds of the sale of the Bonds referred
to
in Section 4.2 and any other rents, revenues and receipts arising out of or in
connection with its
ownership of the Project as hereinafter defined):



ARTICLE I




DEFINITIONS AND USE OF PHRASES



     Section 1.1 Definitions. The following words and phrases and others evidently
intended as the equivalent thereof shall, in the absence of clear implication herein
otherwise, be
given the following respective interpretations in this Lease:



     “Act” means Chapter 7 of Title 51 of the Louisiana Revised Statutes of 1950 (La. R.S. 1150, et. seq.), as amended and supplemented and at the time in force and effect.



     “Additional Rental” means the amounts payable under Section 6.3 hereof.



     “Affiliate” means any person, firm, corporation, limited liability company or other entity
controlling, controlled by or under common control with the Lessee.



     “Annual Operation Deficiency” has the meaning set forth in Section 5.2 hereof.



     “Authorized Issuer Representative” means the person or persons at the time designated
as such by written certificate furnished to the Lessee and the Trustee, containing the
specimen
signature or signatures of such person or persons and signed on behalf of the Issuer by the
President or the Vice President of its Board of Directors.



     “Authorized Lessee Representative” means the person or persons at the time designated
as such by written certificate furnished to the Issuer and the Trustee, containing the
specimen
signature or signatures of such person or persons and signed on behalf of the Lessee.



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     “Base Rental” means a payment equal to the sum of (a) the annual interest payment to be
made by the Issuer on the Bonds as provided in the Indenture, which shall be payable on the
date
such interest payment must be made by the Issuer under the Indenture; and (b) the amount (if
any) required for any outstanding Indebtedness to be paid in full, which shall be payable at
the
end of the Lease Term.



     “Bond Resolution” means the Resolution of the Issuer authorizing the issuance of the. Bonds and the execution and delivery of the Financing Documents.



     “Bonds” means the Issuer’s Taxable Industrial Development Revenue Bonds (Pine
Prairie Energy Center, LLC Project) Series 2006, issued under the Indenture.



     “Code” means the Internal Revenue Code of 1986, as amended and at the time in force
and effect.



     “Commencement Month” means the second February 1 after the In Service Date.



     “Consent Agreement” means the Consent and Agreement, the form of which is attached
as Exhibit F hereto.



     “Conveyance Agreement” means the Cash Sale between the Lessee and the Issuer,
substantially in the form of Exhibit D.



     “Counsel” means any attorney duly admitted to practice before the highest court of any
state of the United States of America or of the District of Columbia (including any officer
or full-
time employee of the Issuer, the Lessee or an Affiliate who is so admitted to practice), it
being
understood that “Counsel” may also mean a firm of attorneys any of whose members is so
admitted to practice.



     “Credit Agreement” shall mean that certain Credit Agreement dated as of May 9, 2006
among the Credit Providers set forth therein and the Lessee, including any amendments or
supplements to such instrument from time to time entered into pursuant to the applicable
provisions thereof, and any additional or replacement credit agreement, note purchase
agreement,
loan agreement or similar agreement or agreements pursuant to which the Lessee or any
Affiliate
of the Lessee obtains financing secured by the Lessee’s interest in the Project.



     “Credit Provider” means any lender or agent that is a party to a Credit Agreement in
effect at such time.



     “Eminent Domain”, when used herein with reference to any taking of property, means
the power (actual or claimed) of any governmental authority or any person, firm or
corporation
acting under governmental authority (actual or claimed) to take such property, and for
purposes
of this Lease, a taking of property under the exercise of the power of Eminent Domain shall
include a conveyance made, or a use granted or taken, under either the threat or the fact of
the
exercise of governmental authority.



     “Employment Deficit Factor” has the meaning set forth in Section 5.2 hereof.



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     “Event of Default” means an “Event of Default” as specified in Section 11.1
hereof.



     “Facilities” means any buildings or other constructions permanently attached to the
Project Site, the Rights of Way, or other real property subject to the demise of this Lease,
including but not limited to storage facilities, pipelines, tanks, compressor stations,
metering
stations and all other component parts (such term having the meaning set forth in Louisiana
Civil
Code Articles 463 through 469) of any buildings or other constructions located on the Project
Site, the Rights of Way, or other real property subject to the demise of this Lease, whether
conveyed by the Lessee to the Issuer through the Conveyance Agreement or hereafter
constructed by the Lessee on the Project Site or Rights of Way, or such other real property
subject to the demise of this Lease, as such facilities may at any time exist.



     “Force Majeure” means the following circumstances or events outside the reasonable
control of the Lessee: strikes, work stoppages, lockouts or picketing (legal or illegal);
the
passage or enactment of, or the interpretation or application of, any law or governmental
requirement (whether or not formally stated), and the orders (whether or not formally
stated) of
any governmental authority; any approval process of any governmental authority, acts of
God,
including without limitation, tornadoes, hurricanes, floods, sinkholes, landslides,
earthquakes,
epidemics, quarantine and pestilence, adverse weather conditions, fire and other
casualties;
governmental action; condemnation or other exercise of the power of eminent domain; acts of
a
public enemy, acts of war, terrorism, effects of nuclear radiation, blockades,
insurrections, riots,
civil disturbances, civil unrest or state, local, national or international calamities; and
unavailability of, or unusual delay in the delivery of fuel, power, supplies or materials;
any of the
foregoing events affecting any pipelines, pipeline interconnects, electricity supplies,
water
supplies and any other utility necessary or advisable to operate the Project in a safe
manner; and
any act or failure to act or omission by the Issuer or its agents, employees or other
representatives.



     “Fully Paid”, “payment in full”, “paid in full”, or any similar expression with respect to
the Indebtedness, means that such Indebtedness has been paid in full, extinguished
(including by
surrender of the Bonds) or otherwise forgiven in full by the Owner or duly provided for
pursuant
to the applicable provisions of the Indenture, and that the lien of such Indenture has
been
canceled, satisfied and discharged in accordance with the applicable provisions thereof.



     “In Service Date” means the date that the Project has received the necessary state and
federal regulatory approval to begin accepting third party natural gas for injection into
its first
cavern for storage as certified to the Trustee and the Issuer in accordance with the
provisions of
Section 4.3.



     “Indebtedness” means all indebtedness of the Issuer at the time with respect to the
Bonds secured by the Indenture, including, without limitation, (i) all principal of or
interest on
the Bonds; and (ii) all reasonable and proper fees, charges and disbursements of the
Trustee for
services performed under the Indenture.



     “Indenture” means the Trust Indenture between the Issuer and U.S. Bank National
Association (or any successor trustee as provided therein), as Trustee, dated as of May 1,
2006,
under which the Bonds are authorized to be issued, as said Trust Indenture now exists and
as it
may hereafter be supplemented and amended.



6









 






     “Issuer” means (i) Industrial Development Board No. 1 of the Parish of Evangeline,
State of Louisiana, Inc. and its successors and assigns, and (ii) any public corporation
resulting
from or surviving any consolidation or merger to which it or its successors may be a party.



     “Issuer Indemnity Rights” has the meaning set forth in Section 13.12 hereof.



     “Lease” means this Agreement to Lease With Option to Purchase as it now exists and as
it may from time to time be modified, supplemented or amended as permitted by Article XIV of
the Indenture, including through any Lease Addendum as permitted under Section 4.5.



     “Lease Addendum” has the meaning set forth in Section 4.7 hereof.



     “Lease Term” has the meaning set forth in Section 6.1 hereof.



     “Lessee” means Pine Prairie Energy Center, LLC, a Delaware limited liability company.



     “Mortgage” has the meaning set forth in Section 7.3 hereof.



     “Owner” shall mean the owner or owners of the Bonds.



     “Parish Direct Payments” mean all payments under this Lease that are to be paid
directly to the Issuer, the Sheriff or other Evangeline Parish officials, including without
limitation, (i) the PILOT payments (if any); (ii) the fee to Issuer under Section
6.3(i) hereof; (iii)
and reimbursements or other amounts due the Issuer under Section 6.3(v) and
(vi) hereof.



     “PILOT” means payments in lieu of the ad valorem property taxes on the Project that
would otherwise be levied against the Project during the Lease Term but for Lessee’s
utilization
of financing for the Project under the Act.



     “Pipeline Corridors” means the pipeline corridors to be used in connection with the
Project Business, as generally described on Exhibit A to this Lease.



     “Project” means the assets subject to (or intended to be subject to) the demise of this
Lease, including the Project Site, the Rights of Way and all Facilities as they may at any
time
exist, as well as any other assets used in connection with the Project Business that are
subject to
ad valorem property taxes under applicable law.



     “Project Business” means the development, design, acquisition, transportation,
assembly, installation, construction, drilling, operation, maintenance, repair and
improvement of
the salt cavern gas storage development project (including related pipelines and assets)
generally
described on Exhibit A of this Lease, as such term may be modified in accordance with
Section 4.5(a).



     “Project Expansion” has the meaning set forth in Section 4.5 hereof.



7









 





     “Project Site” means the parcels of land specifically described in Exhibit B of this
Lease, and any other parcels of land that hereafter are conveyed to the Issuer and become part
of
the demise of this Lease through a Lease Addendum permitted under Section 4.5.



     “Rental” means Base Rental and Additional Rental.



     “Right of Way” means any of the rights of way, leases and easements conveyed by the
Lessee to the Issuer pursuant to the Conveyance Agreement, described on Exhibit C of this
Lease, and any other right of way that hereafter is assigned to the Issuer and becomes part
of the
demise of this Lease through a Lease Addendum permitted under Section 4.5.



     “School Bonds” has the meaning set forth in Section 5.3 hereof.



     “Sheriff” has the meaning set forth in Section 5.2 hereof.



     “Three Year Average” has the meaning set forth in Section 5.2 hereof.



     “Trustee” means the Trustee at the time serving as such under the Indenture.



     “United States Corporation” means a corporation, limited liability company,
partnership (including limited partnership or limited liability partnership) or other
business entity
organized under the laws of the United States of America, one of the states thereof or the
District
of Columbia.



     Section 1.2 Definitions Contained in the Indenture. Unless the context clearly
indicates a different meaning, other words, terms or phrases which are not defined in this
Lease
but which are defined in the Indenture shall have the meanings respectively given them in the
Indenture.



     Section 1.3 Use of Phrases. “Herein,” “hereby,” “hereunder,” “hereof”,
“hereinbefore,” “hereinafter” and other equivalent words refer to this Lease as an entirety
and
not solely to the particular portion in which any such word is used. The definitions set
forth in
Section 1.1 hereof include both singular and plural. Whenever used herein, any
pronoun shall be
deemed to include both singular and plural and to cover all genders.



ARTICLE II




REPRESENTATIONS AND WARRANTIES



     Section 2.1 Representations by the Issuer. The Issuer makes the following
representations as the basis for the undertakings on its part herein contained:



     (a) The Issuer is duly incorporated under the provisions of the Act, as now existing,
by Articles of Incorporation duly filed for record with the Louisiana Secretary of State and
the
Clerk of Court for Evangeline Parish, Louisiana, the said Articles of Incorporation have not
been
revoked and are in full force and effect; and the Issuer is not in default under any of the
provisions contained in said Articles of Incorporation or in its Bylaws or in the laws of the
State
of Louisiana.



8









 





     (b) The Project Site and the Rights of Way are located wholly within the
unincorporated portion of Evangeline Parish, Louisiana.



     (c) The Issuer was induced to enter this undertaking by the promise of the Lessee to
acquire, construct and install the Project in Evangeline Parish, Louisiana. The Project
constitutes
a “project” within the meaning of the Act.



     (d) The Issuer has found and hereby declares that the issuance of the Bonds and the
use of the proceeds to acquire the portion of the Project conveyed to the Issuer pursuant to
the
Conveyance Agreement, and the leasing of the Project to the Lessee and the sale of the
Project to
the Lessee at the expiration or sooner termination of the Lease Term is in furtherance of the
public purposes for which the Issuer was created.



     (e) The Issuer is not subject to any charter, by-law or contractual limitation or
provision of any nature whatsoever which in any way limits, restricts or prevents the Issuer
from
entering into this Lease or performing any of its obligations hereunder.



     (f) Notwithstanding anything contained herein to the contrary, the Bonds shall be
limited obligations of the Issuer payable by it solely out of the payments of Rental and
other
payments to be received by the Issuer under this Lease and shall not be deemed to constitute
a
debt, liability or obligation of or pledge of the faith and credit of the Parish of
Evangeline, the
State of Louisiana or any political subdivision thereof and neither the faith and credit of
the
Parish of Evangeline or the State of Louisiana or any political subdivision thereof is
pledged to
the payment of the principal of or the interest on the Bonds.



     (g) To accomplish the foregoing, the Issuer proposes to issue its Bonds in the
principal amount of $50,000,000 as provided in the Bond Resolution and the Indenture,
following the execution and delivery of this Lease. The date, denominations, interest rate or
rates, maturity dates, redemption provisions and other pertinent provisions with respect to
the
Bonds are set forth in the Bond Resolution and the Indenture and by this reference thereto
they
are incorporated herein.



     (h) By resolutions duly adopted on July 14, 2005 and March 21, 2006, the Issuer took
official action providing for the acquisition and leasing of the Project and the financing of
the
acquisition of a portion of the Project through the issuance of the Bonds, and said
resolution is in
full force and effect.



     (i) The Bonds are to be issued under and secured by the Indenture.



     Section 2.2 Representations and Warranties by the Lessee. The Lessee makes the
following representations and warranties:



          (a) The Lessee has power to enter into, and to perform and observe the
agreements and covenants on its part contained in, this Lease.



          (b) Neither the execution and delivery of this Lease, the consummation of the
transactions contemplated hereby, nor the fulfillment of or compliance with the terms and
conditions hereof, conflicts or will conflict with, or results or will result in a breach of,
any of the



9









 





terms, conditions or provisions of any agreement, instrument or court or other governmental
order to which the Lessee is now a party or by which it is bound, or constitutes or will constitute
a default under any of the foregoing.




          (c) The Project Site and the Rights of Way are located wholly within the
unincorporated portion of Evangeline Parish, Louisiana.



ARTICLE III




DEMISING CLAUSES




     Section 3.1 Demising Clauses. For and during the Lease Term, the Issuer hereby
demises and leases to the Lessee, and the Lessee hereby rents from the Issuer, the Project
Site,
the Rights of Way and all of the Facilities, and all fixtures and component parts now or
hereafter
owned by the Issuer and installed in the Facilities or in any of such other buildings,
structures
and improvements now or hereafter located on the Project Site or within the Rights of Way, it
being the intention hereof that all property, rights and privileges hereafter acquired for
use as a
part of or in connection with or as an improvement or component part to the Project Site, the
Rights of Way or the Facilities shall be as fully covered hereby as if such property, rights
and
privileges were now owned by the Issuer and were specifically described herein.



     Section 3.2 Use.



          (a) The Lessee shall have the sole and exclusive rights to use and enjoy the
Project, including the rights of possession and quiet enjoyment of the Project and the right
to
receive and retain all revenues derived from operating the Project, all in accordance with
the
terms hereof.



          (b) The Lessee shall have the sole and exclusive right, subject to all of the
terms and provisions hereof, to cause or permit the conduct upon the Project Site, the Rights
of
Way and the Facilities of any and all activities relating to the Project Business by or
through an
independent contractor, sublessee, or other third parties, provided that the Lessee shall not
thereby be relieved of any of its obligations thereunder.



          (c) The Lessee shall have the sole and exclusive right, subject to all of the
terms and provisions hereof, to design, acquire, transport, assemble, and install (or cause
to be
installed) the Facilities (and any equipment and other personal property not constituting
Facilities) on the Project Site and the Rights of Way and assemble, operate, maintain,
repair, and
improve the Facilities (and such equipment and other personal property) during the Lease
Term.



ARTICLE IV




ISSUANCE OF THE BONDS



     Section 4.1 Appointments. The Issuer and the Lessee shall each appoint by written
instrument an agent or agents authorized to act for each respectively in any or all matters
arising
under this Lease or the Indenture which, by the specific terms of this Lease or the
Indenture,
require action by such agents. Each agent so appointed to act for the Issuer shall be
designated an
Authorized Issuer Representative, and each agent so appointed to act for the Lessee shall be
designated an Authorized Lessee Representative. Either the Issuer or the Lessee may from time



10









 




to time, by written notice to the other party hereto and to the Trustee, revoke, amend or
otherwise
limit the authorization of any agent appointed by it to act on its behalf or designate another
agent
or agents to act on its behalf, provided that with reference to all the foregoing matters there
shall
be at all times at least one Authorized Issuer Representative authorized to act on behalf of the
Issuer and at least one Authorized Lessee Representative authorized to act on behalf of the
Lessee.




     Section 4.2 Agreement to Issue Bonds and Security Therefor, Payment of Counsel
and Other Fees and to Acquire Project.



     Simultaneously with the delivery hereof:



          (a) The Issuer shall issue and sell the Bonds and, as security therefor, execute
and deliver the Indenture. All the terms and conditions of the Indenture (including, without
limitation, those relating to the amounts and maturity date or dates of the principal of or
interest
on the Bonds) are hereby approved by the Lessee, and to the extent that any provision of the
Indenture is relevant to the calculation of any Rental or other amount payable by the Lessee
hereunder or to the determination of any other Bond Resolution and obligation of the Lessee
hereunder, the Lessee hereby agrees that such provision of the Indenture shall be deemed a
part
hereof as fully and completely as if set out herein.



          (b) The Lessee shall make a one time payment in the aggregate amount of
$200,000 to Issuer representing the anticipated reasonable legal fees of counsel to the
Issuer,
bond counsel fees, and other attorney fees in connection with the formation of the Issuer,
drafting and negotiating the original Memorandum of Understanding between the Issuer and
Lessee, affirmation thereof, and other local work with respect to this Lease and the Project
(including costs and expenses of such counsel) and the other reasonable costs (other than
legal
fees) of the Issuer in connection with the proposed financing of the Project and performance
of
its obligations under this Lease. Lessee agrees that any amounts representing such $200,000
payment that are in excess of the amounts required for the purposes set forth above may be
retained by the Issuer as additional compensation for Issuer’s entering into the Lease, and
Issuer
agrees that Lessee shall not be responsible for any amounts in excess of such $200,000 payment
that may be required for the purposes set forth above. Notwithstanding the foregoing, at the
direction of the Issuer, Lessee shall make the portion of the above payment representing bond
counsel fees (including costs and expenses of such counsel) directly to the Trustee for
distribution in accordance with the Indenture.



          (c) The Issuer and the Lessee shall execute and deliver the Conveyance
Agreement.



     Section 4.3 Accomplishment and Certification of In Service Date.



          (a) Lessee shall proceed with reasonable diligence to acquire, construct and
install the Project and to accomplish as promptly as practicable (but in any event by January
1,
2008), the In Service Date.



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          (b) The In Service Date shall be evidenced to the Trustee and the Issuer by a
certificate signed by an Authorized Lessee Representative stating that the Project has
received
the necessary state and federal regulatory approval to begin accepting third party natural
gas into
its first cavern for storage.



          (c) The Lessee hereby agrees, to the extent not in contravention of existing
contracts by which the Lessee is bound, to give preference to manufacturers, suppliers,
contractors, and subcontractors that reside in Evangeline Parish (each a “Parish Provider”)
in
connection with the acquisition, construction, installation, equipping and continued
operations of
the Project. For this purpose, “preference” means that the Lessee will award business to a
Parish
Provider if such Parish Provider (i) offers goods or services of the same or better quality as
all
out-of-Parish competitors, (ii) offers goods or services at a price that is the same as or lower
than
all out-of-Parish competitors; (iii) has meaningful experience in providing the goods and
services
offered; (iv) has the demonstrable ability to provide the scope of goods and services within the
timeframe required by the Lessee; and (v) has the demonstrable financial ability (in the
reasonable judgment of the Lessee) to satisfy any warranties or similar contingent obligations
associated with the goods and services provided. In the event a Parish Provider fails to meet
its
obligations, the Lessee may terminate any such arrangement in its sole discretion, consistent
with
practices employed by the Lessee with respect to non-Parish Providers.



     Section 4.4 Additional Facilities. The Lessee shall have the right from time to
time
during the Lease Term, at its own expense, to construct any Facilities on the Project Site,
within
the Rights of Way or along a Pipeline Corridor (to the extent reasonably necessary for the
construction, operation and maintenance of a pipeline), or to modify or reconstruct any
existing
Facilities, and title to all such Facilities, modifications and reconstructions shall vest
in the Issuer
and shall become subject to this Lease upon incorporation thereof on the Project Site or
within
the Rights of Way or upon completion of construction. The Lessee may evidence the addition
of
any such Facilities, modifications and reconstructions through the execution of a Lease
Addendum, and provided such Facilities are located on the Project Site or within the Rights
of
Way, such Lease Addendum shall not require execution by the Issuer.



     Section 4.5 Additional Real Property



          (a) From time to time during the Lease Term, with the written agreement of
the Issuer, the Lessee may (i) modify the definition of the “Project Business” to include
additional facilities beyond those described on Exhibit A of this Lease (each a “Project
Expansion”) and (ii) in connection with such Project Expansion, add parcels of land and
rights of
way within Evangeline Parish, Louisiana to the Project Site and the Rights of Way, as
applicable,
through the execution by the Lessee and the Issuer of a Lease Addendum, all for no
additional
consideration from the Issuer.



          (b) From time to time during the Lease Term, without the consent of the
Issuer, the Lessee shall have the right (at its own expense) to add to the Project Site or
Rights of
Way parcels of land that are within the “Descriptions of Project Elements” set forth on
Exhibit
A of this Lease, through the execution by the Lessee of a Lease Addendum, all for no
additional
consideration from the Issuer.



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          (c) Upon the addition of any facilities, parcels of land or rights of way
pursuant to Section 4.5(b), the Issuer shall provide written notice to the Board and
the
Evangeline Parish Tax Assessor of such additions, together with copies of the Lease Addendum
evidencing such addition.



          (d) Upon (i) execution of a Lease Addendum as provided in Section 4.5 and
Section 4.5(b) hereof; and (ii) providing any notice required under Section
4.5(c) hereof, the
terms “Project Business” and “Project” shall be deemed to be modified to include such parcels
of
land and rights of way and any Facilities located or to be located thereon.



     Section 4.6 Equipment. At any time and from time to time, the Lessee may, at its
own cost and expense, install at the Facilities or elsewhere on the Project Site or the
Rights of
Way any equipment or other personal property. Title to all such equipment and other personal
property that does not constitute Facilities shall remain in the Lessee. Any such equipment
or
personal property owned (or leased pursuant to any lease contract other than this Lease) by
the
Lessee may be removed by the Lessee at any time and from time to time without responsibility
or accountability to the Issuer and the Trustee.



     Section 4.7 Lease Addendum. If the Lessee from time to time desires to (a) evidence
the addition of Facilities or any modifications or reconstructions of existing Facilities to
the
demise of this Lease as provided in Section 4.4; or (b) add any parcel of land to the
Project Site
or any right of way to the Rights of Way as provided in Section 4.5, it shall prepare
a
conveyance and lease addendum substantially in the form of Exhibit E (a “Lease Addendum”).
Upon execution of such Lease Addendum as provided in Section 4.4 and 4.5 hereof, this
Lease
shall be deemed amended by such Lease Addendum and the assets or property described therein
shall thereafter be subject to the demise of this Lease.



     Section 4.8 No Warranty of Suitability by the Issuer. The Lessee recognizes that
the Project has been or is to be designed, planned, constructed and carried out under
Lessee’s
control and in accordance with its requirements; therefore, the Issuer cannot, and makes no
warranty, either express or implied, or offers any assurances that the Project Site or the
Project
will be suitable for the Lessee’s purpose or needs or that the proceeds derived from the sale
of
the Bonds, together with the income (if any) earned from the investment of such proceeds,
will
be sufficient to fund any portion of the Project. It is acknowledged and agreed that the
Issuer
will have no obligation (either moral or legal) to fund any portion of the Project.



ARTICLE V




AD VALOREM PROPERTY TAX RELIEF/PILOT PAYMENTS



     Section 5.1 Ad Valorem Property Tax Relief. As a result of the issuance of the
Bonds and acquisition of title to the Project by the Issuer, pursuant thereto, under the Act,
such
property acquired by the Issuer comprising the Project shall not be subject to ad valorem
property taxes during the Lease Term. As used herein “ad valorem property taxes” does not
include or relate to the ad valorem tax on inventory, and there are no current exemptions or
reductions available or offered with respect to the ad valorem tax on inventory pursuant to
this
Lease.



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     Section 5.2 PILOT Payments



          (a) Beginning with the calendar year following the year in which the In
Service Date has occurred, and for each calendar year thereafter during the Lease Term, the
Lessee shall make a PILOT payment of $500,000, but if and only if the average of the annual ad
valorem inventory tax revenues applicable to natural gas in the Project caverns for the prior
three
consecutive calendar years (the “Three Year Average”) is less than $500,000, in which case the
PILOT payment applicable for such calendar year shall be the difference between $500,000 and
the Three Year Average (it being understood that the Three Year Average for the first calendar
year shall be $500,000, and that the “Three Year Average” for the second such calendar year
shall be the average of the actual ad valorem inventory tax for such year and the prior
calendar
year). For the avoidance of doubt, if the Three Year Average for any calendar year is $500,000
or more, the Lessee shall not be required to make any PILOT payment for such calendar year
pursuant to this paragraph.



          (b) In the event that this PILOT payment is payable by the Lessee, it shall be
paid to the Sheriff and Ex-Officio Tax Collector of the Parish of Evangeline, State of
Louisiana
(the “Sheriff) on the July 1 occurring after deadline date for the calculation of the annual
ad
valorem inventory tax revenues for such calendar year. Such PILOT payments shall be allocated
and distributed by the Sheriff in accordance with Parish requirements.



          (c) In addition to the foregoing, the Lessee shall make a PILOT payment with
respect to the pipeline commonly referred to as the “LA Chalk Pipeline” which generally
constitutes the pipeline segment of approximately 33 miles of 24-inch diameter buried
pipeline,
beginning at a point on the Louisiana Chalk Gathering System commonly referred to as
“Tennessee Junction” in Rapides Parish, Louisiana (Section 34-T1S-R2W) and extending
southward, through the Parish to an existing point of interconnection with the facilities of
El
Paso Field Services Company’s Eunice Gas Processing Plant in Acadia Parish, Louisiana
(Section 12-T75-R2W). The PILOT payment shall be only with respect to that portion of the LA
Chalk Pipeline that is situated in the Parish, shall be payable commencing with respect to
the
calendar year after the year which such pipeline is acquired by the Issuer, shall be in an
amount
not to exceed $45,000 per annum (payable in arrears) and shall be payable to the Sheriff on
or
prior to December 31 of each year;



          (d) Notwithstanding the foregoing, if after the calendar year commencing
after the Commencement Month, or any calendar year thereafter that the Project is not subject
to
ad valorem property tax, the Lessee discontinues operation of the Project for a period of one
hundred eighty (180) days or more (excluding any day that the Project is not in operation by
reason of fire or other casualty or any event of force majeure affecting the Project or the
Lessee)
(an “Annual Operation Deficiency”), the Lessee shall make a PILOT payment in the full amount
of ad valorem property taxes that would have been payable for such calendar year if the
Project
were subject to ad valorem property taxes during such period of discontinued operation.
Additionally, commencing the calendar year after the Commencement Month and each calendar
year thereafter that the Project is not subject to ad valorem property tax, the Lessee must
certify
annually with reasonably verifiable data, the average monthly employment at the Project. In
the
event that during any such calendar year (other than a calendar year in which the Lessee is
required to make a payment as a result of an Annual Operation Deficiency), such certification
shows that the monthly average number of jobs at the Project was less than ten (10) with an
average annualized income of at least Thirty Thousand Dollars ($30,000), except to the extent



14









 




that any such deficit is caused by fire or other casualty, or any event of force majeure affecting
the Project or the Lessee, the Lessee shall make a PILOT payment for such calendar year (and
for such calendar year only) in an amount equal to the result obtained by multiplying (a) the full
amount of ad valorem property taxes during such period by (b) the Employment Deficit Factor.
For purposes of this Lease, the “Employment Deficit Factor” shall be determined by subtracting
from the number one, the number obtained by dividing the monthly average number of full times
jobs at the Project of the calendar year with an average annualized income of at least Thirty
Thousand ($30,000) by ten. “Commencement Month” means the second February 1 after the In-
Service Date. All ad valorem calculations hereunder and under this Lease shall be determined
by the Evangeline Parish Tax Assessor.




          (e) In the event that any property interest of the Lessee associated with the
Project Business and located in Evangeline Parish, Louisiana becomes subject to ad valorem
property tax prior to the exercise by the Lessee of its rights under Section 12.2,
the amounts to be
paid under this Lease as PILOT payments shall be reduced (but not below zero) by the actual
amount paid as such taxes.



          (f) PILOT payments, if any, shall prime the payment of the Bonds and be
superior to any Mortgage or other interest in the property on which the Project is located
(including, without limitation, any property added by Lease Addendum), in the same manner
that
ad valorem property taxes would have prior lien over mortgages and other security devices.
The
Lessee shall require all lenders with respect to the Project to subordinate their interests
to the
rights of the Parish and other political subdivisions to the PILOT payments made to the
Issuer.



     Section 5.3 Obligation to Defease/Repay School Bonds. In addition to the PILOT
payments set forth herein, the Lessee agrees to make, on the date which is the earlier of (i)
13
months following the In Service Date; or (ii) March 1, 2008, a payment in lieu of a PILOT
payment, which shall be made to the Paying Agent for the Pine Prairie School District No. 4
General Obligation Bonds, which bonds were issued on March 1, 2001 in the original principal
amount of $3,750,000 (the “School Bonds”). Such payment shall be in an amount sufficient to
defease or otherwise pay the principal and interest on the School Bonds (at their then
outstanding
balance based on the existing amortization schedules) in full or to provide for their payment
in
full at the next available redemption date; provided that the issuer thereof (x) may not
agree to an
increase in the principal amount of such School Bonds or an increase in the interest rate or
other
amounts which would be due the owners of the School Bonds; and (y) may not agree to an
amendment to the amortization schedule which has the effect of postponing the payment of any
principal or interest or other amount; and (z) must continue to be current with respect to
payments of principal and interest thereon.



     Section 5.4 Sales and Use Taxes. Lessee hereby acknowledges and agrees that there
shall be no exemptions or reductions available to the Lessee with respect to local sales and
use
taxes due and payable on the Project. All equipment and materials delivered to the Project
Site
shall be subject to all local sales and use taxes, notwithstanding any federal and/or state
tax
exemption to which Lessee may be entitled, and Lessee shall make no application for exemption
of such local sales and use taxes.




15












 





ARTICLE
VI

DURATION OF TERM AND RENTAL PROVISIONS




     Section 6.1 Duration of Term. The term of this Lease shall commence on the date of the
issuance of the Bonds and shall end on the date that is the fifteenth (15th) anniversary of the In
Service Date (the “Lease Term”).



     Section 6.2 Rental Provisions. The Lessee shall pay, for the account of the Issuer,
the Base Rental. For so long as the Bonds remain outstanding, such payment shall be made to the
Trustee for deposit in the Bond Fund created by the Indenture.



     Section 6.3 Additional Rental. The Lessee shall also pay the following amounts
hereunder (items without a specified due date shall become due and payable as set forth in the
Indenture or upon demand by Payee):




     (i) the amount of $15,000 annually, payable on March 1 (or, if such date is
not a business date, the next succeeding business date) of each year during the
Lease Term, which payment shall be made directly to the Issuer as an
administrative fee;




     (ii) annual fee of the Trustee for the ordinary services of the Trustee
rendered and its ordinary expenses incurred under the Indenture;




     (iii) the reasonable fees and charges of the Trustee as registrar, transfer
agent and paying agent with respect to the Bonds, as well as the fees and charges
of any other paying agent with respect to the Bonds who shall act as such agent in
accordance with the provisions of the Indenture;




     (iv) the reasonable fees, charges and expenses of the Trustee for or in
connection with necessary extraordinary services rendered by it and extraordinary
expenses incurred by it under the Indenture;




     (v) any reimbursement amounts payable pursuant to Sections 7.2 and
11.4 hereof or pursuant to any other provision hereof; and




     (vi) litigation expenses, attorneys’ fees, etc., incurred by Issuer in
enforcing or pursuing its rights under this Lease, whether in the Issuer’s own
interest or on behalf of Lessee as permitted herein.


All such fees, charges and expenses of Trustee in items (ii), (iii) and (iv) hereof shall be paid
directly to the Trustee for its account upon presentation of its statements therefor.




     Section 6.4 Obligation of Lessee Unconditional. The obligation of the Lessee to pay
Rental, to make all other payments provided for herein and to perform and observe the other
agreements and covenants on its part herein contained shall be absolute and unconditional,
irrespective of any rights of set-off, recoupment or counterclaim it might otherwise have against
the Issuer. The Lessee shall not suspend, discontinue, reduce or defer any such payment or fail to
perform and observe any of its other agreements and covenants contained herein or (except as



16









 




expressly authorized herein) terminate this Lease for any cause, including, without limiting the
generality of the foregoing, any acts or circumstances that may deprive the Lessee of the use and
enjoyment of the Project, failure of consideration or commercial frustration of purpose, or any
damage to or destruction of the Project or any part thereof, or the taking by eminent domain of
title to or the right to temporary use of all or any part of the Project, or any change in the tax
or other laws of the United States of America, the State of Louisiana or any political or taxing
subdivision of either thereof, or any change in the cost or availability of raw materials or energy
adversely affecting the profitable operation of the Project by the Lessee, or any failure of the
Issuer to perform and observe any agreement or covenant, whether express or implied, or any duty,
liability or obligation arising out of or connected with this Lease.




     The provisions of the first paragraph of this Section 6.4  shall remain in effect only
so long as any of the Indebtedness remains outstanding and unpaid. Nothing contained in this
Section 6.4 shall be construed to prevent the Lessee, at its own cost and expense and in
its own name or in the name of the Issuer, from prosecuting or defending any action or proceeding
or taking any other action involving third persons which the Lessee deems reasonably necessary in
order to secure or protect its rights hereunder. Further, nothing contained in this Section
6.4 shall be construed to release the Issuer from the performance of any of the agreements on
its part herein contained or to preclude the Lessee from instituting such action against the
Issuer as the Lessee may deem necessary to compel such performance, it being understood and
agreed, however, that no such action on the part of the Lessee shall in any way affect the
agreements on the part of the Lessee contained in the first paragraph of this Section 6.4
or in any way relieve the Lessee from performing any such agreements.



ARTICLE VII




PROVISIONS CONCERNING TAXES, UTILITIES AND INSURANCE



     Section 7.1 Taxes, Other Governmental Charges and Utility Charges. With the exception
that the Lessee shall be entitled to ad valorem property tax abatements during the Lease Term as
anticipated under Section 5.1 hereof with respect to the Project, the Lessee shall pay to the
extent no abatement applies under applicable Louisiana law or the provisions of this Lease
(including Section 5.4 hereof), as the same respectively become due,




     (i) all taxes and governmental charges of any kind including all penalties,
interest and statutory assessments whatsoever that may lawfully be assessed or
levied against or with respect to the Project, including, without limiting the
generality of the foregoing, all inventory taxes, sales and use taxes and any
taxes levied upon or with respect to any part of the receipts, income or profits
of the Issuer from the Project and any other taxes levied upon or with respect to
the Project which, if not paid, would become a lien on the Project or a charge on
the revenues and receipts therefrom prior to or on a parity with the charge
thereon and pledge and assignment thereof to be created and made in the Indenture;
and



17









 






     (ii) all assessments and charges lawfully made by any governmental body for
public improvements that may be secured by a lien on the Project; provided that
with respect to special assessments or other governmental charges that may lawfully
be paid in installments over a period of years, the Lessee shall be obligated to
pay only such installments as are required to be paid during any period which this
Lease shall be in effect.



     The Issuer shall promptly forward to the Lessee any bills, statements, assessments, notices
or other instruments asserting or otherwise relating to any such taxes, assessments or charges.
Lessee shall report all assets and inventory subject to such taxes and cooperate in any audit to
determine taxes, as required by applicable law.



     The Lessee may, at its own expense and in its own name and behalf or in the name and behalf
of the Issuer, in good faith contest any such taxes, assessments and utility and other charges
and, in the event of any such contest, may permit the taxes, assessments or other charges so
contested to remain unpaid during the period of such contest and any appeal therefrom. The Issuer
shall cooperate with the Lessee in any such contest.



     The Lessee shall also pay, as the same respectively become due, all utility and other similar
charges incurred in the operation, maintenance, use and upkeep of the Project, including, without
limitation, all charges for gas, water, sewer, electricity, light, heat, power, steam, air-
conditioning, telephone or other communication service or other utility or service used, rendered
or supplied to, upon or in connection with the Project Site or the buildings and improvements on
or above or below the Project Site throughout the Lease Term and shall indemnify Issuer and save
it harmless against any liability or damages on such account.



     Section 7.2 Insurance. With respect to the Project, the Lessee shall, not later than
the date of delivery of this Lease, take out and thereafter continuously maintain in effect or
cause to be taken out and thereafter continuously maintained in effect, without lapse, insurance
with respect to the Project against such risks as are customarily insured against by businesses of
like size and type as the Lessee, and shall include environmental indemnity sureties or policies
of insurance and public liability insurance providing coverage in an amount not less than $10
million for personal injury, death, or property damage with respect to the Project. Such insurance
may be determined by the Lessee in accordance with the foregoing sentence, paying as the same
become due all premiums with respect thereto.



     All such insurance policies shall name as insureds (in addition to any other persons or
entities as determined by the Lessee) the Issuer, the Trustee, and the Lessee (as their respective
interests shall appear); provided that all losses (including those in excess of $500,000) may be
adjusted by the Lessee. All such policies shall provide that they shall not be canceled or amended
without at least thirty (30) days notice to each of the Issuer, and the Trustee. The Lessee shall
evidence the existence of such insurance as shall from time to time be in effect with respect to
the Project by furnishing to the Issuer and the Trustee a certificate or certificates of the
respective insurers providing such insurance. The Lessee shall provide, not later than 30 days
prior to any policy expiration, evidence of renewal or replacement coverage.



18









 





     If Lessee fails to provide notices of evidence of renewal or replacement coverage as required
by this Lease, the Issuer may (but in no way shall be obligated to) procure insurance for such
risk covering Issuer’s interests as required by this Lease, and Lessee shall pay all premiums
thereon promptly upon demand by Issuer (to the extent such amounts are not paid from monies held
under the Indenture), and, until such payment is made by Lessee, the amount of such premium shall
be secured by this Lease.



     Lessee shall provide written documentation from a guarantor, surety or other responsible party
(other than Lessee) reasonably acceptable to Issuer pursuant to which such guarantor, surety or
other responsible party agrees, in the event of dissolution, insolvency or bankruptcy of Lessee, to
pay all insurance premiums or other amounts necessary to maintain the coverage required by this
Lease for no less than one year after such event of dissolution, insolvency or bankruptcy, to the
extent such amounts are not paid by any Credit Provider.



     Section 7.3 Effect of Mortgage. The provisions and requirements of this Article VII
and of Article VIII shall be in addition to the provisions and requirements of any mortgage
security interest(s) on the Project Site, Rights of Way, or Facilities previously granted by the
Lessee to Sun Trust Bank as “Collateral Agent” under the Consent Agreement to secure existing or
future indebtedness (the “Mortgage”), and not in substitution therefor. So long as the Mortgage
shall remain in force and effect, and subject to the subordination requirements in Section
5.2(f) hereof, the requirements of the Mortgage shall govern the obligations of the parties
with respect to the Project to the extent the same are inconsistent with the provisions of
Articles VI and VII. The Issuer acknowledges that except as provided in Section 5.2(f)
with respect to the PILOT payments, the lien of the Mortgage is and shall be superior to the
rights of the Issuer in and to the Project.



ARTICLE VIII




PROVISIONS RESPECTING DAMAGE, DESTRUCTION, CONDEMNATION AND ABANDONMENT



     Section 8.1 Damage and Destruction Provisions. If the Project is destroyed, in whole
or in part, or is damaged, by fire or other casualty, the total insurance proceeds recovered on
account of such destruction or damage, less all expenses (including attorneys’ fees) incurred in
collection of such proceeds, shall be paid to the Lessee.



     All Facilities acquired in connection with any repair, replacement or restoration of any part
of the Project shall be and become part of the Project subject to the demise hereof and the lien
of the Indenture and shall be held by the Lessee on the same terms and conditions as the property
originally constituting the Project.



     Section 8.2 Condemnation Provisions. If title to the Project or any part thereof is
taken under the exercise of the power of Eminent Domain, the entire condemnation award in respect
of such taking, “including, without limitation, (i) all amounts received as the result of any
settlement of compensation claims negotiated with the condemning authority and (ii) any amount
awarded as compensation for the interest of the Lessee in the part of the Project taken and as
damages to the interest of the Lessee in any part thereof not taken, shall be paid to the Lessee.



19









 





     Section 8.3 Condemnation of Lessee-Owned Property. The Lessee shall be entitled to
any condemnation award (including all amounts received as the result of any settlement of
compensation claims negotiated with the condemning authority) or portion thereof made for
damages to or the taking of its own property not included in the Project, including damages for
goodwill or loss of business.



     Section 8.4 Cooperation of the Issuer in the Conduct of Condemnation Proceeds.
The Issuer shall cooperate with the Lessee in the handling and conduct of any prospective or
pending condemnation proceeding initiated by a third party against the Project or any part
thereof and will follow all reasonable directions given to it by the Lessee in connection with
such proceeding. In no event will the Issuer settle, or consent to the settlement of, any
prospective or pending condemnation proceeding against the Project or any part thereof without the
prior written consent of the Lessee. Notwithstanding the foregoing, nothing in this paragraph
shall obligate or require the Issuer to initiate or assist with any condemnation or expropriation
proceedings on behalf of Lessee for the purpose of acquiring property or property rights for the
benefit of the Project.



     Section 8.5 Abandonment. If, after the In Service Date, Lessee abandons the
Project, then Lessee shall be required to ensure that all Indebtedness is Paid in Full and to
purchase the Project for the purchase price and terms set forth in Section 12.2 hereof
within 60 days of the Issuer sending written notice to the Lessee. The Issuer shall be entitled
to specific performance with respect to such purchase.



     For purposes of this Section 8.5, the Project shall be deemed abandoned upon (i)
written certification by the Parish Engineer supported by the opinion of a qualified engineer
independent of and without prior relation to the Parish that the Project has ceased operation
for a period of 360 consecutive days, and that within such time period no material effort has
been made by Lessee to replace or repair Facilities or to restore, rehabilitate or restart the
Project (as applicable); or (ii) the Issuer shall have received notice by Lessee of its
intention to abandon the Project.



ARTICLE IX




PARTICULAR COVENANTS OF THE LESSEE



     Section 9.1 Release and Indemnification Covenants. The Lessee releases the Issuer
(and each board member, director, officer, employee, attorney, consultant and agent thereof) and
the Trustee from, and shall indemnify and hold the Issuer (and each director, officer, employee,
attorney, consultant and agent thereof) and the Trustee harmless against, any and all claims and
liabilities of any character or nature whatsoever, regardless of by whom asserted or imposed,
and losses of every conceivable kind, character and nature whatsoever claimed by or on behalf of
any person, firm, corporation or governmental authority, arising out of, resulting from, or in
any way connected with the Project, and in the case of the Trustee, the Indenture, including,
without limiting the generality of the foregoing, (i) liability for loss or damage to property
or any injury to or death of any and all persons that may be occasioned by any cause whatsoever
pertaining to the Project, and in the case of the Trustee, the Indenture, or arising by reason
of or in connection with the occupation or the use thereof or the presence on, in or about the
premises of the Project; and (ii) liability arising from or expense incurred by the Issuer’s
acquisition, owning, leasing or



20









 




financing of the Project, and in the case of the Trustee, the Indenture, including without limiting
the generality of the foregoing all causes of action and attorneys’ fees and any other expenses
incurred in defending any suits or actions which may arise as a result of any of the foregoing; and
(iii) costs and expenses of the Issuer or the Trustee or the individual board members thereof
incurred as a result of carrying out its obligations under this Lease, the Bond Resolution and the Indenture; provided
however, that the Lessee shall not be obligated to indemnify any director, officer, employee,
attorney, consultant or agent of the Issuer or the Trustee against any claim, liability or loss in
any way connected with the Project, and in the case of the Trustee, the Indenture, if such claim,
liability or loss arises out of or results from other than official action taken in the name and
behalf of the Issuer or the Trustee, as the case may be, by such director, officer, employee,
attorney, consultant or agent which shall constitute gross negligence or willful misconduct on its
part. The provision of this Section 9.1 as they related to the Trustee shall not be amended
or compromised in any way except with the express written consent of the Trustee, and shall exist
for the sole benefit of the Trustee, which, so long as the Bonds remain outstanding, shall be a
third party beneficiary of this Lease. This Section 9.1 shall survive the expiration or
termination of this Lease or the Indenture.




     Section 9.2 Inspection of Project. The Parish Engineer shall, upon three (3) business
days’ notice, be permitted to access the Project Site during normal business hours during the
construction phase and thereafter during the term of the Lease. It is understood that the Parish
Engineer shall not interfere or otherwise have any input with respect to construction or operation
of the Project, but may report any alleged violations of Parish Ordinances or this Lease to the
Issuer. The Parish Engineer shall be authorized to execute a waiver of liability prior to any such
inspection and shall comply with all Lessee safety regulations and policies while on the Project
Site.



     Section 9.3 Agreement to Maintain Existence. The Lessee shall maintain its existence,
shall not dissolve or otherwise dispose of all or substantially all of its assets (either in a
single transaction or in a series of related transactions) and shall not consolidate with or merge
into another corporation or permit one or more corporations to consolidate with or merge into it;
provided that the Lessee may, without violating the agreements contained in this section, do or
perform any of the following:



          (a) it may consolidate with or merge into another United States Corporation, or permit one or
more United States Corporations to consolidate with or merge into it if the corporation surviving
such merger or resulting from such consolidation, if it shall be one other than the Lessee,
expressly assumes in writing all the obligations of the Lessee contained in this Lease and the
Indenture;




          (b) it may transfer to another United States Corporation all or substantially all its assets
as an entirety, and (if it so elects) thereafter dissolve, if the corporation to which such
transfers shall be made expressly assumes in writing all the obligations of the Lessee contained
in this Lease and the Indenture.





21









 








     The Lessee shall, promptly following any merger, consolidation or transfer permitted under the
provisions of this Section 9.3, furnish to the Issuer and the Trustee fully executed or
appropriately certified copies of the writing by which the Lessee’s successor or transferring
corporation expressly assumes the obligations of the Lessee contained in this Lease and the
Indenture.



     If, after a transfer by the Lessee of all or substantially of its assets to another United
States Corporation under the circumstances described in the preceding clause (b) of this section,
the Lessee does not thereafter dissolve, it shall not have any further rights or obligations
hereunder.



     Section 9.4 Qualification in Louisiana. The Lessee warrants and represents that it is
now duly qualified to do business in Louisiana and covenants that it, or any successor corporation
permitted under Section 9.3 hereof, shall remain qualified to do business in Louisiana during the
term of this Lease.



     Section 9.5 Covenant to Operate. The Lessee covenants to continuously operate the
Project as a natural gas storage facility or other “project” within the meaning of the Act, so
long as any Indebtedness remains outstanding.



ARTICLE X




CERTAIN PROVISIONS RELATING TO ASSIGNMENT, SUBLEASING AND MORTGAGING AND TO THE BONDS



     Section 10.1 Provisions Relating to Assignment and Subleasing by Lessee. The

Lessee may assign this Lease and the leasehold interest created hereby, or sublease the Project or
any portion thereof upon giving at least 30 days written notice to the Issuer; provided, however,
that (i) the successor assumes all obligations under this Lease, including, without limitation,
the obligation to make the PILOT payments and all other payments hereunder; and (ii) the Issuer
consents to such assignment and/or sublease, which consent shall not be unreasonably withheld. No
such assignment or subleasing shall relieve the Lessee of any liability hereunder. The Lessee may
mortgage, pledge or grant security interests in this Lease and the leasehold interest created
hereby in favor of any Credit Provider, and in connection therewith, the Issuer shall execute a
consent and agreement substantially in the form attached as Exhibit F, with such changes thereto
as may reasonably be requested by such Credit Provider.



     Section 10.2 Provisions Relating to Issuer’s Issuance of Additional Bonds/Transfer of
Project. Without the prior express written request or consent of the Lessee, the Issuer shall
not hereafter issue any bonds or other securities (including refunding securities), other than the
Bonds, that are payable out of or secured by a pledge of the revenues and receipts derived by the
Issuer from the leasing or sale of the Project, nor, without such consent, shall the Issuer
hereafter place any mortgage or other encumbrance (other than the Indenture and supplemental
indentures contemplated thereby) on the Project or any part thereof or otherwise sell, transfer or
convey all or any part of the Project.



22









 





     Section 10.3 References to Bonds Ineffective after Indebtedness Paid. Upon full
payment of the Indebtedness and cancellation, satisfaction and discharge of the Indenture in
accordance with the provisions thereof, all references in this Lease to the Bonds and the Trustee
shall be ineffective and neither the Trustee nor the Owners of any of the Bonds shall thereafter
have any rights hereunder, saving and excepting any that shall have theretofore vested and except
that the provisions of Sections 9.2 and 9.3  shall survive. For purposes of this Lease, any
of the Bonds shall be deemed fully paid if there exist, with respect thereto, the applicable
conditions specified in Section 1002 of the Indenture.



     If the Indebtedness is fully paid prior to the end of the Lease Term, the Lessee shall be
entitled to use of the Project for the remainder of the Lease Term on all the same terms and
conditions hereof.



ARTICLE XI




EVENTS OF DEFAULT AND REMEDIES



     Section 11.1 Events of Default Defined. The following shall be “Events of Default”
hereunder, and the term “Event of Default” shall mean, whenever it is used in this Lease, any one
or more of the following conditions or events:



          (a) failure by the Lessee to make any PILOT payment or to provide for the
repayment/defeasance of the School Bonds under Section 5.3 hereof, which failure
shall have continued for a period of 10 days after written notice of such failure shall have been
given to the Lessee;




          (b) failure by the Lessee to pay any installment of Base Rental or to make any other payment
(including, without limitation, Additional Rental) required under the terms hereof (other than any
payment referred to in clause (c) of this section) which failure shall have continued for a period
of 10 days after written notice of such failure shall have been given to the Lessee;




          (c) failure by the Lessee to perform or observe any agreement or covenant on its part
contained in this Lease (other than the covenants and agreements referred to in the preceding
clause (a) and (b) of this section), which failure shall have continued for a period of 90 days
after written notice, specifying, in reasonable detail, the nature of such failure and requiring
the Lessee to perform or observe the agreement or covenant with respect to which it is delinquent,
shall have been given to the Lessee by the Issuer or the Trustee, unless (i) the Owner and the
Issuer (such waiver not to be unreasonably withheld or delayed) shall have waived in writing such
failure or shall agree in writing to an extension of such period prior to its expiration, (ii) the
failure of Lessee is by reason of Force Majeure at the time prevented from performing or observing
the agreement or covenant with respect to which it is delinquent, or (iii) the Lessee commences
the cure within the 90 day period and diligently pursues corrective action until completion
thereof.




          (d) there shall occur and shall be continuing any event of default, as therein defined, under
the Indenture and the expiration of the applicable grace period, if any, specified therein, unless
such event of default has been waived by the Owner.




23









 








     Section 11.2 Remedies on Default. Whenever any Event of Default shall have happened
and be continuing, the Issuer may take any one or more of the following remedial actions:



          (a) terminate this Lease, subject to the Lessee’s rights under Section
12.2; and




          (b) take whatever legal proceedings may appear necessary or desirable to collect the Rental
and/or PILOT payments then due, whether by declaration or otherwise, or to enforce any obligation,
covenant or agreement of the Lessee under this Lease or any obligation of the Lessee imposed by
any applicable law.




     Section 11.3 No Remedy Exclusive. No right, power or remedy herein conferred upon or
reserved to the Issuer or the Trustee is intended to be exclusive of any other available right,
power or remedy, but each and every such right, power or remedy shall be cumulative and shall be
in addition to every other right, power or remedy given under this Lease as now or hereafter
existing at law or in equity or by statute. No delay or omission to exercise any right, power or
remedy accruing upon any Event of Default shall impair any such right, power or remedy or shall be
construed to be a waiver thereof but any such right, power or remedy may be exercised from time to
time and as often as may be deemed expedient.



     Section 11.4 Agreement to Pay Attorneys’ Fees. In the event that, as a result of an
Event of Default or a threatened Event of Default by the Lessee, the Issuer or the Trustee should
employ attorneys at law or incur other expenses in or about the collection of Rental or the
enforcement of any other obligation, covenant, agreement, term or condition of this Lease, the
Lessee shall pay to the Issuer or the Trustee or one or more of them, as the case may be,
reasonable attorneys’ fees and other reasonable expenses so incurred.



     Section 11.5 No Additional Waiver Implied by One Waiver. In the event any agreement
contained herein should be breached by either party and thereafter waived by the other party, such
waiver shall be limited to the particular breach so waived and shall not be deemed to waive any
other breach hereunder. Further, neither the receipt nor the acceptance of any Rental hereunder by
the Issuer or by the Trustee on its behalf, shall be deemed to be a waiver of any breach of any
covenant, condition or obligation herein contained or a waiver of any Event of Default even though
at the time of such receipt or acceptance there has been a breach of one or more covenants,
conditions or obligations on the part of the Lessee herein contained or an Event of Default (or
both) and the Issuer or the Trustee have knowledge thereof.



ARTICLE XII




OPTIONS



     Section 12.1 Options to Terminate the Lease during Primary Term. The Lessee shall
have the right, exercisable at its option, to cancel or terminate this Lease during this Lease
Term upon compliance with the conditions specified in the succeeding provisions of this
Section 12.1:



          (a) The Lessee may cancel or terminate this Lease by (i) giving the Issuer and the Trustee
written notice of such termination and specifying in such notice the date on which such
termination is to be effective; and (ii) causing the Indebtedness to be paid in full.





24









 








          (b) upon payment of the entire Indebtedness in full this Lease shall terminate.




     Any cancellation or termination of this Lease as aforesaid notwithstanding, (i) the option
to purchase set forth in Section 12.2 hereof; and (ii) any obligations or liabilities of
the Lessee hereunder, actual or contingent, which have arisen on or before the effective date of
such cancellation or termination, shall remain in full force and effect.



     Section 12.2 Option to Purchase. If the Lessee pays all Rental and other amounts due
hereunder, it shall have the right and option, hereby granted by the Issuer, to purchase the
Project (including any and all mineral rights in the Project Site that may have reverted to the
Issuer) from the Issuer at any time during the Lease Term or within one hundred eighty (180) days
after the expiration or earlier termination thereof, for the sum of Five Thousand Dollars
($5,000), provided that the Indebtedness shall have been paid in full. On such purchase date, the
Lessee shall pay the aforesaid purchase price to the Issuer in cash or bankable funds, whereupon
the Issuer shall, by deed or other instrument complying with the provisions of Section
12.3 hereof, transfer and convey any and all rights held by the Issuer in the Project (in its
then condition, whatever that may be) to the Lessee. Nothing herein contained shall be construed
to give the Lessee any right to any rebate to or refund of any Rental or other amounts paid by it
hereunder prior to the exercise by it of the purchase option hereinabove granted, even though such
Rental or other amounts may have been wholly or partially prepaid. In addition to the foregoing,
if at any time during the Lease Term any mineral interest in the Project Site shall have reverted
to the Issuer, and if any person or entity shall propose to enter into a mineral lease with the
Issuer in respect thereof, the Issuer shall promptly notify the Lessee. The Lessee shall have the
right of first refusal, which may be exercised by notice to the Issuer, to enter into such mineral
lease with the Issuer on the same terms and conditions as proposed by such person or entity. Such
right shall be in addition to the Lessee’s right to purchase the Project as specified herein. Any
mineral lease entered into in contravention of the Lessee’s rights hereunder shall be null and
void.



     Section 12.3 Options — In General. In the event of the exercise by the Lessee of
any of the options to purchase the Project, the Issuer shall convey to the Lessee, after
compliance by the Lessee with the conditions to purchase specified in the respectively
applicable sections hereof, the property with respect to which such option was exercised by
statutory warranty deed, bill of sale (in the case of personal property) or other appropriate
instrument, subject only to such liens, encumbrances and exceptions to which title to such
property was subject when such property was acquired by the Issuer, those to the creation or
suffering of which the Lessee consented and those resulting from the failure of the Lessee to
perform or observe any of the agreements or covenants on its part contained in this Lease.



ARTICLE XIII




MISCELLANEOUS



     Section 13.1 Covenant of Quiet Enjoyment, Surrender. The Lessee shall peaceably and
quietly have, hold and enjoy the Project during the Lease Term subject to all the terms and
provisions hereof. At the end of the Lease Term, or upon any prior termination of this Lease,
the Lessee shall surrender to the Issuer possession of all property then subject to the demise
of this Lease (unless it is simultaneously purchasing such property from the Issuer) in its then
condition, whatever that may be.



25









 





     Section 13.2 The Lease to be a Net Lease. The Lessee recognizes and understands that
it is the intention hereof that this Lease shall be a “triple net lease”. This Lease shall be
construed to effectuate such intent.



     Section 13.3 Statement of Intention Regarding Certain Tax Matters. The Issuer and the
Lessee acknowledge and agree that it is their mutual intention that the Lessee, for federal and
state income tax purposes, shall be entitled to all deductions and credits with respect to the
Project (including, but not limited to, depreciation and investment credits) and that for such
purposes this Lease shall be deemed to be a financing of any part of the Project acquired with the
proceeds of the Bonds.



     Section 13.4 Notice. All notices, demands, requests and other communications
hereunder shall be deemed sufficient and properly given if in writing and delivered, or sent by
registered mail, postage prepaid, to the following addresses:




	 	(a)	 	If to the Issuer:






Industrial Development Board No. 1 of the 

Parish of Evangeline, State of Louisiana, Inc. 

c/o Evangeline Parish District Attorney 

202 Courthouse, 200 Court Street 

Ville Platte, Louisiana 70586




	 	(b)	 	If to the Lessee:






Pine Prairie Energy Center, LLC 

333 Clay Street, Suite 1600 

Houston, Texas 77002 

Attention: Al P. Swanson 

Vice President-Finance and Chief Financial Officer 






with a copy to:








Pine Prairie Energy Center, LLC 

333 Clay Street, Suite 1600 

Houston, Texas 77002 

Attention: Tim Moore 

Vice President, General Counsel and Secretary




	 	(c)	 	If to the Trustee:






U.S. Bank National Association 

5847 San Felipe, Suite 1050 

Houston, TX 77057 

Attention: Corporate Trust Department 





26












 





     Any of the above mentioned parties may, by like notice, designate any further or
different addresses to which subsequent notices shall be sent. A copy of any notice given to the
Issuer, the Lessee or the Trustee pursuant to the provisions of this Lease shall also be given to the
other parties to whom notice is not herein required to be given, but the failure to give a copy of
such notice to either such other party shall not invalidate such notice or render it ineffective
unless notice to such other party is otherwise herein expressly required. Any notice hereunder
signed on behalf of the notifying party by a duly authorized attorney at law shall be valid and
effective to the same extent as if signed on behalf of such party by a duly authorized officer or
employee.



     Whenever, under the provisions hereof, any request, consent or approval of the Issuer or the Lessee is required or authorized, such request, consent or approval shall (unless
otherwise expressly provided herein) be signed on behalf of the Issuer by an Authorized Issuer Representative and, on behalf of the Lessee by an Authorized Lessee Representative; and each
of the parties and the Trustee are authorized to act and rely upon any such requests, consents or approvals so signed.



     Section 13.5 Certain Prior and Contemporaneous Agreements Canceled. This Lease shall completely and fully supersede all other prior or contemporaneous agreements,
both written and oral, between the Issuer (or any body representing Evangeline Parish, including the Police Jury) and the Lessee relating to the Project and the leasing of the Project, including
but not limited to the Memorandum of Understanding between the Issuer and the Lessee executed by the Issuer on July 7, 2005 and the Affirmation and Agreement between the Police Jury of the
Parish of Evangeline, State of Louisiana, and the Lessee dated January 9, 2006, all to the end that the Issuer and the Lessee shall look to this Lease for ultimate definition and determination
of their respective rights, liabilities and responsibilities respecting the Project and the Bonds.



     Section 13.6 Limited Liability of Issuer. The Issuer is entering into this Lease pursuant to the authority conferred upon it by the Act. No provision hereof shall be
construed to impose a charge against the general credit of the Issuer or any personal or pecuniary
liability upon the Issuer except with respect to the proper application of the proceeds to be derived
from the sale of the Bonds, moneys made available by the Lessee or the Issuer pursuant to the
provisions hereof, and the revenues and receipts to be derived from any leasing or sale of
the Project, including insurance proceeds and condemnation awards. Further, none of the
directors, officers, employees or agents of the Issuer shall have any personal or pecuniary liability
whatever hereunder or any liability for the breach by the Issuer of any of the agreements on
its part herein contained. Nothing contained in this section, however, shall relieve the Issuer
from the observance and performance of the several covenants and agreements on its part herein contained or relieve any director, officer, employee or agent of the Issuer from performing
all duties of their respective offices that may be necessary to enable the Issuer to perform the covenants and agreements on its part herein contained.



     Section 13.7 Binding Effect. This Lease shall inure to the benefit of, and shall be binding upon, the Issuer, the Lessee and their respective successors and assigns. To the
extent provided herein and in the Indenture, the Trustee, and the Owner of the Bonds shall be deemed to be a third party beneficiary hereof, but nothing herein contained shall be deemed to
create any right in, or to be for the benefit of, any other person who is not a party hereto.



27









 





     Section 13.8 Severability. In the event any provision of this Lease shall be held
invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or
render unenforceable any other provision hereof.



     Section 13.9 Article and Section Captions. The article and section headings and
captions contained herein are included for convenience only and shall not be considered a
part hereof or affect in any manner the construction or interpretation hereof.



     Section 13.10 Governing Law. This Lease shall in all respects be governed by and construed in accordance with the laws of the State of Louisiana.



     Section 13.11 Counterparts. This Lease may be executed in any number of counterparts, each of which shall be deemed an original.



     Section 13.12 Assignment to Trustee. The Issuer hereby notifies the Lessee and the Lessee acknowledges that, except for rights with respect to the Parish Direct Payments and
the Issuer’s right to indemnity under Section 9.1 hereof (“Issuer Indemnity Rights”), the
Issuer’s rights in this Agreement shall be immediately and automatically assigned to the Trustee upon
the issuance of the Bonds to provide a source of payment of all interest and principal owing by
the Issuer to the Owners pursuant to the terms of the Indenture. The Lessee hereby consents to
such assignment and (subject to the provisions of item (iii) of the following paragraph) agrees
that the Trustee, as assignee of the Issuer, shall have the right to enforce all of the covenants,
agreements, obligations and duties of the Lessee contained herein. Except for the Parish Direct Payments,
the Issuer Indemnity Rights and the payments with respect to repayment/defeasing of School Bonds
under Section 5.03 hereof, each of which shall be paid as set forth in this Lease,
the Issuer hereby directs the Lessee to make all payments due hereunder after the issuance of the Bonds
to the Trustee instead of to the Issuer, and the Lessee hereby agrees to do so. All such
payments shall be made in lawful money of the United States of America directly to the Trustee, as
assignee of the Issuer, at the location specified by the Trustee and shall be applied in
accordance with the provisions of the Indenture.



     Notwithstanding any assignment to Trustee under this Section 13.12, the Issuer shall
be entitled to (i) all notifications to Issuer under this Lease; (ii) the rights of inspection
under Section 9.2 hereof; (iii) to consent to any assignment under Section 10.1
hereof; (iii) enforce all covenants, agreements, obligations and duties of Lessee with respect to the Parish District
Payments, Issuer Indemnity Rights and repayment of the School Bonds.



28









 






     IN WITNESS WHEREOF, the Issuer and the Lessee have caused this Lease to be executed in their respective names and their respective corporate seals to be hereunto
affixed, and have caused this Lease to be attested, in six counterparts, each of which shall be deemed
an original, and have caused this Lease to be dated as of the date set forth above.



	 	 	 	 	 
	 	

INDUSTRIAL DEVELOPMENT BOARD NO. 1

OF THE PARISH OF EVANGELINE, STATE

OF LOUISIANA, INC.

	(SEAL)	 	 	 
	 	By:  	/s/ William “Tojo” Ward 	 
	 	 	William “Tojo” Ward, President 	 
	 	 	 	 	 
	 
	Attest:	 	 	 	 
	 	 	 	 	 
	/s/ Doug Deville	 	 
	Doug Deville, Secretary-Treasurer 	 	 	 
	 	 	 	 
	 
	 	PINE PRAIRIE ENERGY CENTER, LLC

 	 
	 	By:  	/s/ Tim Moore	 
	 	 	Tim Moore, Vice President and Secretary 	 
	 	 	 	 



29









 







STATE OF LOUISIANA




PARISH OF EAST BATON ROUGE





     We, the undersigned Notary Public and two witnesses, in and for said Parish in said State,
do hereby certify that William “Tojo” Ward, whose name as President of the Board of Directors
of Industrial Development Board No. 1 of the Parish of Evangeline, State of Louisiana, Inc.,
is signed to the foregoing instrument, and who is known to us and known to be such officer,
acknowledged before us on this day that, being informed of the contents of said instrument,
he, in his capacity as such officer and with full authority, executed and delivered the same
voluntarily and as the act of said Issuer.




	 	 	Given under my hand and seal of office this 9th day of May, 2006.





	 	 	 
	WITNESSES:
	 	/s/ WESLEY S. SHAFTO
	/s/
[ILLEGIBLE]

	 	NOTARY PUBLIC WESLEY S. SHAFTO
	/s/ [ILLEGIBLE]

	 	NOTARY PUBLIC
	 

	 	State of Louisiana
	STATE OF LOUISIANA

	 	 My Commission Is Issued For life
	 

	 	#19788
	PARISH OF EAST BATON ROUGE

	 	






     We, the undersigned Notary Public and two witnesses, in and for said Parish in said State,
do hereby certify that Tim Moore, whose name as Vice President and Secretary of Pine Prairie
Energy Center, LLC is signed to the foregoing instrument, and who is known to us and known to
be such officer, acknowledged before us on this day that, being informed of the contents of
said instrument, he, in his capacity as such officer and with full authority, executed and
delivered the same voluntarily and as the act of said Lessee.



     Given under my hand and seal of office this 9th day of May, 2006.



	 	 	 	 	 	 	 
	WITNESSES:
	 	 	 	 	 	/s/ WESLEY S. SHAFTO
	/s/ [ILLEGIBLE]

	 	NOTARY PUBLIC
	 	WESLEY S. SHAFTO
	/s/ [ILLEGIBLE]

	 	 
	 	NOTARY PUBLIC 
	 

	 	 	  	 	 	State of Louisiana
	 

	 	 		 	 	My Commission Is Issued For Life
	 

	 	 	 	 	 	#19788






30









 






EXHIBIT A



PROJECT DESCRIPTION



Project Description For Pine Prairie Energy Center




Summary




     The Pine Prairie Energy Center, LLC (“PPEC”) natural gas storage project (the
“Project”) is designed to be an underground natural gas storage facility. Natural gas shall be
stored in caverns. The main part of the Project, consisting of gas storage caverns leached
from the subsurface Pine Prairie salt dome, is located in Evangeline Parish, south-southwest of the
community of Pine Prairie. This part of the Project also includes gas handling facilities and
(during construction and in connection with the leaching process) brine disposal and raw water
withdrawal facilities. The Project shall also include metering and regulator sites and
pipelines connecting to natural gas transmission lines. Most of the Project pipelines are or shall be in
Evangeline Parish; however, some portion shall extend into Acadia Parish to the south and
Rapides Parish to the North. Only those assets and facilities located in Evangeline Parish are
considered part of the Project for purposes of the Lease.



Location




     This Project is located in the southern portion of Louisiana. The Project pipelines and
facilities are or shall be located in the northern part of Acadia Parish, and extend
northward through Evangeline Parish into the southern portion of Rapides Parish. The Gas Storage Site
currently consists of approximately 80 acres, of which about 8 acres shall be used for the
Gas Handling Facility Site and the remainder temporarily used as a buffer zone or construction
storage site or the surface location for a storage cavern. The Brine Disposal and Raw Water
Withdrawal Facility Site is located on an approximately 35-acre site. The Metering and
Regulator Sites (M&R Sites) shall be located in various positions along the Project route. In
addition, temporary construction yards and roads shall be constructed at various locations
along the Project route. The descriptions below are intended to give a sense of the scope of the
Project. The Project shall be developed in phases, and changes shall be made to effect operational
efficiencies and address construction and development challenges.



Descriptions of Project Elements




     (1) Gas Storage and Handling Facilities Site. The Gas Storage and Handling
Facilities Site is currently concentrated on 80.76 acres spanning Ambrose Road in Section 36,
Township 3 South, Range 1 West. This area shall contain the gas handling facility and the
first gas storage wells, as well as temporary construction facilities.



     (2) Brine Disposal and Raw Water Withdrawal Facility Site. The Brine Disposal and
Raw Water Withdrawal Facility is located in a recent cutover adjacent to both sides of
Ambrose Road in Section 3 and 4, Township 4 South, Range 1 West. The site consists of approximately



A-1









 




35 acres and shall be the location of saltwater disposal wells, raw water withdrawal wells and
Pipeline Right-of-Way.




     (3) Pipeline Corridors. PPEC has acquired and shall be acquiring parcels of real
property (including rights of way) along the following described corridors to the extent
reasonably necessary for the construction, operation and maintenance of pipelines in such
Pipeline Corridors:



          (a) North Pipeline Corridor. The North Pipeline Corridor shall link the Mid-
Pipeline Corridor with existing interstate gas transmission pipelines at an M&R Site and
interconnections located north of the Gas Storage Site. It shall consist of an existing
24-inch bi-directional natural gas pipeline with an existing, permanent, 30-feet wide right-of-way,
extending 17.80 miles from the Mid-Pipeline Corridor connection to the Tennessee Gas Pipeline (TGP)
M&R Site. This existing pipeline is a portion of the former Louisiana Chalk Gathering System.
Although located primarily in Evangeline Parish, the North Pipeline Corridor extends a short
distance into Rapides Parish. Because this portion of the project shall not require
excavation or construction of new pipelines, there shall be no impacts from the project North Pipeline
Corridor except for expansion of the Tennessee Gas Pipeline M&R Site.




          (b) Mid-Pipeline Corridor. The Mid-Pipeline Corridor connects the Gas
Handling Facility with the North Pipeline Corridor and the South Pipeline Corridor near LA
Hwy 10. The corridor is 6.36 miles long. In this corridor there are 26 Tracts of land, with
numerous landowners. The Right-of-Way has been acquired in the 7 Tracts that traverse from
the Gas Storage and Handling Facility to the Brine Disposal and Raw Water Withdrawal Site.




          (c) South Pipeline Corridor. The South Pipeline Corridor is an existing
pipeline corridor that was created by the construction of the Louisiana Chalk Gathering
System in Evangeline and northern Acadia parishes. It shall link the Mid-Pipeline Corridor with gas
transmission pipelines to the south and southeast of the Gas Storage Site. The South Pipeline
Corridor shall be composed of the existing 16.49-mile long, 24-inch Chalk Pipeline, and a new
11.24-mile loop, consisting of one 24-inch bi-directional pipeline. The new 24-inch bi-
directional pipeline shall loop 11.2 miles of the existing 16.49-mile long, 24-inch Chalk
Pipeline.




          (d) Miller’s Lake Lateral Corridor. A pipeline corridor approximately 14
miles is proposed to be constructed from the Gas Handling Facility east to Columbia Gulf
Pipeline, located in Section 47, Township 3 South, Range 2 East in Evangeline Parish, LA.
Within the Corridor the there shall be 1.5 miles of dual 24-inch pipelines to the Texas Gas
M&R Site and 12.5 miles of single 24-inch pipeline to the Columbia Gulf M&R Site. In this
corridor there are 70 Tracts of land, with numerous landowners.



      (4) Proposed M&R Sites. Seven or eight M&R stations are currently proposed to be
constructed as part of this project. Proceeding from the farthest southeast M&R Station to
the west and north, following is a list of proposed metering sites (which may be relocated):



          (a) FGT M&R Station. At the present time, this station is located at the
eastern terminus of the proposed East Lateral Pipeline Corridor in Section 8, Township 7
South,



A-2









 







Range 1 West. Alternatively, this station may be relocated to a site adjacent to the ANR SE
M&R Station.




          (b) ANR SE M&R Station. This station is located along the East Lateral
Pipeline Corridor at its intersection with the ANR Pipeline Corridor in Section 12, Township
7 South, Range 2 West.



          (c) TETCO M&R Station. The TETCO M&R Station is located in Section
13, Township 6 South, Range 2 West at the intersection of the TETCO Pipeline Corridor and the
Louisiana Chalk Line.



          (d) TRANSCO M&R Station. These stations are located at the intersection of
the TRANSCO Pipeline Corridor and the Louisiana Chalk Line in Section 6, Township 6 South,
Range 1 West.



          (e) ANR ML2 M&R Station. The ANT ML2 M&R Station is located in
Section 4, Township 4 South, Range 1 West at the intersection of a new pipeline from the
Brine Disposal and Raw Water Withdrawal Site to the ANR Pipeline Corridor.



          (f) TGT M&R Station. The TGT M&R Station is located in Section 1,
Township 4 South, Range 1 East in Evangeline Parish, LA.



          (g) Columbia Gulf M&R Station. The Columbia Gulf M&R Station is located
in Section 47, Township 3 South, Range 2 East in Evangeline Parish, LA.




A-3











 









	B PROJECT SITE
The following interests, which represent the properties for which recordation has been completed as of April 30, 2006:
I. EVANGELINE PARISH
A, FEE PROPERTY
EXHIBIT





 









 





EXHIBIT D




FORM OF CONVEYANCE AGREEMENT






















 









 








ACT OF CONVEYANCE




     Before the respective undersigned Notaries Public and in the presence of the respective
undersigned witnesses personally came and appeared:




PINE PRAIRIE ENERGY CENTER, LLC (TIN 20-0521747), a Delaware limited
liability company authorized to transact business in the State of Louisiana,represented
Herein by ,___________________________ its______________, whose
mailing address is declared to be 333 Clay St., Suite 1600, Houston, Tx. 77002
(“Vendor”),


and





INDUSTRIAL DEVELOPMENT BOARD NO. 1 OF THE PARISH OF
EVANGELINE, STATE OF LOUISIANA, INC. (TIN XX-XXX____), a public
corporation and instrumentality of the Parish of Evangeline, State of Louisiana,
represented herein by                                                             , its                                                              ,
whose permanent mailing address is c/o Evangeline Parish Police Jury -
Secretary/Treasurer, 200 Court Street, Suite 207, Ville Platte, Louisiana 70580
(“Vendee”),


each of whom made the following declarations:




     Vendor does by these presents transfer and convey to Vendee, without any warranties of any
nature whatsoever, but with full substitution and subrogation in and to all rights and
actions of warranty
which Vendor has or may have against all preceding owners and vendors, the property described on
Exhibit A-1 and Exhibit A-2 attached hereto and made a part hereof (the “Property”), the
delivery and possession of which Vendee acknowledges.



     Vendor hereby reserves unto itself, its heirs, successors and assigns, all of the oil, gas,
sulphur and other minerals, ores and hydrocarbons of every kind and character that may now or
hereafter be found, located, contained in, developed or taken from the Property, as well as all
mineral and royalty rights which appertain to the Property, for the maximum time permitted by
law (such reservation, the “Mineral Servitude”) and to the extent applicable, the Mineral
Servitude is reserved and granted under and pursuant to La. R.S. §31:149, et seq. The mineral
servitude herein created may be maintained by unit operations and it is specifically provided that
such unit operations will interrupt prescription as to the entirety of the mineral servitude herein
created regardless of the location of the well and regardless of whether all or only part of the land
is included in the unit. Notwithstanding the foregoing Vendor does hereby waive any right to
use the surface for the development of the Mineral Servitude, such use being in the sole
discretion of Vendee.



     This act of conveyance is made for and in consideration of Vendee issuing its Taxable
Industrial Development Revenue Bonds (Pine Prairie Energy Center LLC Project) Series 2006 (the “Bonds”)
for the purpose of financing the acquisition, construction and installation of all facilities
necessary and



1









 




appropriate in connection with the establishment of natural gas storage, pipelines and related
handling and storage facilities within the Parish of Evangeline, State of Louisiana (the “Facility”) to be
located on the Property, which Facility and Property will be owned by Vendee and leased to Vendor for a rental
that is sufficient in amount to pay the principal of, interest and premium on the Bonds when they become
due pursuant to a Lease Agreement dated of even date herewith by and between Vendee, as lessor, and
Vendor, as lessee.




     All agreements and stipulations herein, and all the obligations herein assumed shall inure to
the benefit of and be binding upon the successors and assigns of the respective parties, and
Vendee, its successors and assigns shall have and hold the described property in full ownership forever.



     This act may be executed in one or more counterparts, each of which shall be deemed an
original agreement, but all of which together shall constitute one and the same instrument.



{The remainder of this page intentionally left blank}




2









 








     This act has been signed by Vendor on
                                                             , 2006, in                                         ,                                         , in the presence of the undersigned notary
public and witnesses.



	 	 	 	 	 	 	 	 	 
	Witnesses:

	 	
	 	 	 	Pine Prairie Energy Center, LLC
	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 
	 	 	 	 	 	 
	Printed Name:

	 	 	 	 	 	 	Name:	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 	Title:	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	Printed Name:

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 





 






                                        , Notary Public

Parish / County of                                         ,

State of                                         

Notary ID #                                         

My commission expires                                         

{seal}




{Signatures continued on following page}


3









 






     This
act has been signed by Vendee on____, 2006, in Ville Platte,
Louisiana, in the presence of the undersigned notary public and witnesses.



	 	 	 	 	 	 	 	 	 
	Witnesses:	 	 	 	Industrial Development Board No. 1 of the 

Parish of Evangeline, State of Louisiana, Inc.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 
	 	 	 	 	 	 
	Printed Name:

	 	 	 	 	 	 	Name:	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 	Title:	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	Printed Name:

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 





 






                                                , Notary Public

Parish of                                         , State of Louisiana

Notary ID #                                        

My commission is for life





4











 





EXHIBIT E




FORM OF LEASE ADDENDUM



 









 





     This
CONVEYANCE AND LEASE ADDENDUM NO. ___, dated as of                     , 20___ (this “Lease Addendum”), between INDUSTRIAL DEVELOPMENT
BOARD NO. 1 OF THE PARISH OF EVANGELINE, STATE OF LOUISIANA, INC., a public
corporation organized and existing under the laws of the State of Louisiana (herein called the
“Lessor”), and PINE PRAIRIE ENERGY CENTER, LLC, a limited liability company organized
and existing under the laws of the State of Delaware (the “Lessee”).



W I T N E S S E T H



A. The Lessor and the Lessee have heretofore entered into the Agreement to Lease with
Option to Purchase dated as of May 1, 2006 (the “Lease”) to which this Lease Addendum is an
addendum.



B. The Lease provides for the execution and delivery of a Lease Addendum for the purposes
and upon the terms and conditions set forth in Section 4.7 thereof.




     In consideration of the foregoing and the mutual agreements set forth herein and in the
Lease, the Lessor and the Lessee agree as follows:



     1. Capitalized terms used but not defined in this Lease Addendum shall have the
meanings specified in the Lease.



     2. The Lessee does by these presents transfer and convey to the Lessor, without any
warranties of any nature whatsoever, but with full substitution and subrogation in and to all
rights and actions of warranty which the Lessee has or may have against all preceding owners
and vendors, the property described on Attachment 1 attached hereto and made a part hereof
(the
“Additional Property”), the delivery and possession of which the Lessor acknowledges. The
Lessee hereby reserves unto itself, its heirs, successors and assigns, all of the oil, gas,
sulphur
and other minerals, ores and hydrocarbons of every kind and character that may now or
hereafter
be found, located, contained in, developed or taken from the Additional Property, as well as
all
mineral and royalty rights which appertain to the Additional Property, for the maximum time
permitted by law (such reservation, the “Mineral Servitude”) and to the extent applicable,
the
Mineral Servitude is reserved and granted under and pursuant to La. R.S. § 31:149, et seq.
The
mineral servitude herein created may be maintained by unit operations and it is specifically
provided that such unit operations will interrupt prescription as to the entirety of the
mineral
servitude herein created regardless of the location of the well and regardless of whether all
or
only part of the land is included in the unit. Notwithstanding the foregoing, the Lessee does
hereby waive any right to use the surface for the development of the Mineral Servitude, such
use
being in the sole discretion of the Lessor. As provided in the Lease, the conveyance
described in
this paragraph 2 shall be for the consideration specified in the Lease and shall be without
any
additional consideration from the Lessor.



     3. All agreements and stipulations herein, and all the obligations herein assumed
shall inure to the benefit of and be binding upon the successors and assigns of the
respective
parties, and the Lessor, its successors and assigns shall have and hold the described
property in
full ownership forever.



 









 





     4. The Lessor does hereby demise and lease to the Lessee, and the Lessee does
hereby rent from the Lessor, the Additional Property and all of the Facilities, and all
fixtures and
components now or hereafter owned by the Lessor and installed in the Facilities or in any of
such
other buildings, structures and improvements now or hereafter located on the Additional
Property, all pursuant to and in accordance with the terms of the Lease, and such Additional
Property hereafter shall constitute a part of the Project and subject to the Lease.



     5. This Lease Addendum may be executed in any number of counterparts, each of
which shall be deemed an original.



     6. This Lease Addendum shall in all respects be governed by and construed in
accordance with the laws of the State of Louisiana.



     7. This Lease Addendum constitutes and addendum to, and a part of, the Lease, and
the Lease, as hereby supplemented, remains in full force and effect.



     IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease Addendum
to be executed as of the date set forth above.



	 	 	 	 	 
	 	INDUSTRIAL DEVELOPMENT

BOARD NO. 1 OF THE PARISH OF

EVANGELINE, STATE OF LOUISIANA, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	PINE PRAIRIE ENERGY CENTER, LLC

 	 
	 	By:  	 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 




 









 





[TO BE COMPLETED IF ADDITIONAL REAL PROPERTY IS BEING ADDED]


STATE OF LOUISIANA



PARISH OF EVANGELINE




     I, the undersigned, a Notary Public in and for said Parish in said State, do hereby certify
that
                    , whose name as                                          of                
                         , is signed
to the foregoing instrument, and who is known to me and known to be such officer,
acknowledged before me on this day that, being informed of the contents of said instrument, he,
in his capacity as such officer and with full authority, executed the same voluntarily and as
the act of said Issuer.



     Given under my hand and seal of office this                      day of                                        
 , 20___.



	 	 	 
	 

	 	 
 
	 

	 	NOTARY PUBLIC





STATE OF LOUISIANA



PARISH OF EVANGELINE




     I, the undersigned, a Notary Public in and for said Parish in said State, do hereby certify
that
                                        , whose name as                      of Pine Prairie Energy Center,
LLC is signed to the foregoing instrument, and who is known to me and known to be such
officer, acknowledged before me on this day that, being informed of the contents of said
instrument, he, in his capacity as such officer and with full authority, executed the same
voluntarily and as the act of said Lessee.



     Given
under my hand and seal of office this                      day of                                      
    , 20___.



 









 





EXHIBIT F




FORM OF CONSENT AND AGREEMENT




 











 





EXHIBIT F




FORM OF

CONSENT AND AGREEMENT




          THIS CONSENT AND AGREEMENT (this “Consent”), dated as of May 8,
2006, among INDUSTRIAL DEVELOPMENT BOARD NO. 1 OF THE PARISH OF
EVANGELINE, STATE OF LOUISIANA, INC., a public corporation organized and existing
under the laws of the State of Louisiana (the “Consenting Party”), PINE PRAIRIE
ENERGY
CENTER, LLC, a Delaware limited liability company (the “Borrower”), and SUNTRUST
BANK, INC., as collateral agent (in such capacity, together with its successors in such
capacity,
the “Collateral Agent”) for the Secured Parties (as defined in the Credit Agreement as
hereinafter
defined).




RECITALS




          WHEREAS, the Borrower proposes to finance, develop, construct, lease and/or
own and operate an underground natural gas storage facility, together with all related
facilities,
located near the village of Pine Prairie in Evangeline Parish and in Acadia Parish and
Rapides
Parish, Louisiana (the “Project”);




          WHEREAS, the Borrower and the Consenting Party have entered into that
certain Agreement to Lease with Option to Purchase (as amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms thereof, the
“Lease”);




          WHEREAS, pursuant to the Lease, the Borrower has agreed to lease the Project
(as defined in the Lease) from the Consenting Party in exchange for the payment of rent and
other payments;




          WHEREAS, pursuant to that certain Credit Agreement, dated as of May 9, 2006
(as amended, restated, supplemented or otherwise modified from time to time in accordance
with
the terms thereof, the “Credit Agreement”), among the Borrower, SunTrust Bank, Inc.
(“SunTrust”), as Initial Lender and LC Issuer (the “Initial Lender”), the
banks and other financial
institutions or entities from time to time party thereto (together with the Initial Lender,
the
“Lenders”), SunTrust, as administrative agent and collateral agent for the Lenders,
SunTrust
Robinson Humphrey, a division of SunTrust Capital Markets, Inc., as lead arranger and
bookrunner, ING Capital LLC, as syndication agent, and Bank of America, N.A., and Cobank,
ACB, as co-documentation agents, the Lenders have agreed to make loans to the Borrower to
finance the construction, development and operation of the Project, including related debt
service
and pad gas costs;




          WHEREAS, as security for its obligations to the Lenders under the Credit
Agreement (the “Obligations”), the Borrower, among other things, has collaterally
assigned all
of its right, title and interest in, to and under, and granted a security interest in, the
Lease to the
Collateral Agent for the benefit of the Secured Parties pursuant to the Leasehold Mortgage,
Security Agreement, Financing Statement, Fixture Filing and Assignment of Leases, Rents and
Security Deposits dated as of May 9, 2006 (as amended, restated, supplemented or otherwise




 









 







modified from time to time in accordance with the terms thereof, the “Leasehold Mortgage”)
by
the Borrower in favor of the Collateral Agent for the benefit of the Secured Parties; and




          WHEREAS, it is a condition precedent to the Secured Parties extending credit to
the Borrower pursuant to the Credit Agreement and entering into certain other agreements
relating to the Credit Agreement, including the Leasehold Mortgage (collectively, the “Loan
Documents”) that the Consenting Party execute and deliver this Consent.




          NOW, THEREFORE, as an inducement to the Secured Parties to extend credit
to the Borrower pursuant to the Credit Agreement and the Loan Documents, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, the Consenting Party hereby agrees as follows:




          SECTION 1. CONSENT TO ASSIGNMENT, ETC.




          1.1 Consent to Assignment. The Consenting Party (a) acknowledges that the
Collateral Agent and the Secured Parties are entering into the Credit Agreement and the Loan
Documents and extending credit in reliance upon the execution and delivery by the Consenting
Party of the Lease and this Consent, (b) consents in all respects to the pledge and
collateral
assignment to the Collateral Agent of all of the Borrower’s right, title and interest in, to
and
under the Lease pursuant to the Leasehold Mortgage; and (c) acknowledges the right, but not
the
obligation, of the Collateral Agent, in the exercise of the Collateral Agent’s rights and
remedies
under the Leasehold Mortgage, to make all demands, give all notices, cure all defaults, take
all
actions and exercise all rights of the Borrower all in accordance with the Lease, and agrees
that,
in such event, the Consenting Party shall perform for the benefit of the Secured Parties its
obligations in accordance with the Lease.




          1.2 Rights under the Lease. Nothing herein shall require the Collateral Agent
to cure any default of the Borrower under the Lease or to perform under the Lease, but shall
only
give the Collateral Agent the option to do so.




          1.3 Substitute Owner. The Consenting Party agrees that, if the Collateral
Agent shall notify the Consenting Party that an event of default under the Credit Agreement
has
occurred and is continuing and that the Collateral Agent has exercised its rights (a) to have
itself
or its designee substituted for the Borrower under the Lease (including pursuant to paragraph
1.6
below) or (b) to sell, assign, transfer or otherwise dispose of the Lease to any person,
including,
without limitation, any purchaser or grantee at a foreclosure or by a conveyance by the
Borrower
in lieu of foreclosure, then the Collateral Agent, the Collateral Agent’s designee or such
person
(each, a “Substitute Owner”) shall be substituted for the Borrower under the Lease and
that, in
such event, the Consenting Party will accept the performance by the Substitute Owner of the
obligations of the Borrower under the Lease; provided that if such Substitute Owner is any
person or entity other than the Collateral Agent, the Consenting Party consents to such sale,
assignment, transfer or other disposition, which consent shall not be unreasonably withheld.
Upon any sale, assignment, transfer or disposition pursuant to clause (b) above to a
Substitute
Owner that has assumed in writing for the benefit of the Consenting Party the obligation to
perform all of the Borrower’s obligations under the Lease, each of the Collateral Agent, its





-2-









 







designees and the Secured Parties (other than a Substitute Owner) shall be relieved of any and
all
obligations arising under the Lease.




          1.4 Right to Cure. The Consenting Party agrees that in the event of a failure,
breach or default by the Borrower in the performance of any of its obligations under the
Lease,
or upon the occurrence or non-occurrence of any event or condition under the Lease, which
would immediately or with the passage of any applicable grace period or the giving of
notice, or
both, enable the Consenting Party to terminate or suspend its obligations or exercise any
other
right or remedy under the Lease or under applicable law (hereinafter
a “default”), the Consenting
Party will continue to perform its obligations under the Lease and will not exercise any such
right or remedy until it first gives prompt written notice of such default to the Collateral Agent
and affords the Collateral Agent a period of at least thirty (30) days (or if such default is a non-
monetary default, such longer period not to exceed sixty (60) days as is required so long as any
such party has commenced and is diligently pursuing appropriate action to cure such default)
from the later of (i) the expiry of the Borrower’s cure rights with respect to such default under
the Lease and (ii) the Collateral Agent’s receipt of written notice from the Consenting Party of
such default;provided,however, that if the Collateral Agent is prohibited from curing any such
default by any process, stay or injunction issued pursuant to any bankruptcy or insolvency
proceeding involving the Borrower, then the time periods specified in this Section 1.4 for curing
a default shall be extended for the period of such prohibition.




          1.5 No Termination, Assignments or Material Amendments. The Consenting
Party will not, without the prior written consent of the Collateral Agent, which consent
shall not
be unreasonably withheld, conditioned or delayed, except as specified herein or as
permitted by
the Loan Documents, (a) enter into any consensual cancellation or termination of the
Lease, (b)
except as permitted under the Lease (but subject to the cure rights set forth in
paragraph 1.4
above), suspend its performance of any obligations under the Lease (except as permitted
under
paragraph 1.4 above), (c) except as permitted under the Lease sell, assign or otherwise
transfer
any of its right, title and interest in the Lease to any other Person (a
“Transferee”) or (d) consent
to any such sale, assignment or transfer by the Borrower.




          1.6 Replacement Agreement. In the event that the Lease is rejected or
terminated as a result of any bankruptcy or insolvency proceeding affecting the Borrower,
the
Consenting Party will, at the option of the Collateral Agent, enter into a new agreement
with the
Collateral Agent (or its transferee or other nominee that owns or leases the Project) for
the
remaining term of the Lease and having other terms that are substantially the same as the
terms
of the Lease.




          1.7 No Liability. The Consenting Party acknowledges and agrees that neither
the Collateral Agent, the Collateral Agent’s designee nor the Secured Parties shall have
any
liability or obligation under the Lease as a result of this Consent, the Leasehold
Mortgage or
otherwise, nor shall the Collateral Agent, the Collateral Agent’s designee or the Secured
Parties
be obligated or required to (a) perform any of the Borrower’s obligations under the Lease
(including any replacement Lease entered into pursuant to paragraph 1.6 above), except,
in the
case of the Collateral Agent, during any period in which the Collateral Agent has entered
into a
replacement agreement pursuant to Section 1.6 or, in the case of the Collateral Agent or
the
Collateral Agent’s designee, during any period in which the Collateral Agent or the
Collateral




-3-









 







Agent’s designee is a Substitute Owner pursuant to Section 1.3, in which case the Collateral
Agent or such Substitute Owner, as applicable, shall have all of the obligations and liabilities of
the Borrower under the Lease or (b) take any action to collect or enforce any claim for payment
assigned under the Leasehold Mortgage.




          1.8 Delivery of Notices. The Consenting Party shall deliver to the Collateral
Agent, concurrently with the delivery thereof to the Borrower, a copy of each notice of
default,
violation or breach, given by the Consenting Party under or pursuant to the Lease.




          SECTION 2. PAYMENTS UNDER THE ASSIGNED LEASE




          2.1 Payments. So long as the Obligations are outstanding, the Consenting
Party will pay all amounts payable by it to the Borrower under the Lease, if any, in the
manner
required by the Lease directly into the account specified on Exhibit A hereto, or to
such other
person or account as shall be specified from time to time by the Collateral Agent to the
Consenting Party in writing.




          SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE
CONSENTING PARTY




          In order to induce the Collateral Agent and the Secured Parties to enter into the
Credit Agreement and the other Loan Documents and to induce the Secured Parties to extend
credit pursuant to the Credit Agreement and the other Loan Documents, the Consenting Party
makes the following representations and warranties as of the date hereof.




          3.1 Organization; Power and Authority. The Consenting Party is duly
incorporated under the provisions of the Act (as defined in the Lease), as now existing, by
Articles of Incorporation duly filed for record with the Louisiana Secretary of State and the
Clerk
of Court of Evangeline Parish, Louisiana, and said Articles of Incorporation have not been
revoked and are in full force and effect and the Consenting Party is not in default under any
of
the provisions contained in such Articles of Incorporation or in its Bylaws or in the laws of
the
State of Louisiana.




          3. 2 Authorization. The execution, delivery and performance by the
Consenting Party of this Consent and the Lease have been duly authorized by all necessary
action on the part of the Consenting Party, and do not and will not require any approval or
consent of any other person or entity, except approvals or consents which have previously
been
obtained.




          3.3 Execution and Delivery; Binding Agreements. Each of this Consent and
the Lease is in full force and effect, has been duly authorized and duly executed and
delivered on
behalf of the Consenting Party by the appropriate officers of the Consenting Party, and
constitutes the legal, valid and binding obligation of the Consenting Party, enforceable
against
the Consenting Party in accordance with its terms except as the enforceability thereof may be
limited by (a) bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors’ rights generally and (b) general equitable principles (whether
considered in a proceeding in equity or at law).




-4-









 








          3.4 Compliance. The Consenting Party is not subject to any charter, by-law or
contractual limitation or provision of any nature whatsoever which in any way limits,
restricts or
prevents the Consenting Party from entering into the Lease and this Consent or
performing its
obligations thereunder or hereunder.




          3.5 No Default or Amendment. Neither the Consenting Party nor, to the
Consenting Party’s knowledge, any other party to the Lease is in default of any of its
obligations
thereunder. The Consenting Party has no existing counterclaims, offsets or defenses
against the
Borrower. The Consenting Party and, to the Consenting Party’s knowledge, each other
party to
the Lease have complied with all conditions precedent to the respective obligations of such party
to perform under the Lease. To the Consenting Party’s knowledge, no event or condition exists,
which would either immediately or with the passage of any applicable grace period or giving of
notice, or both, enable either the Consenting Party or the Borrower to terminate or suspend its
obligations under the Lease. The Lease has not been amended, modified or supplemented in any
manner.




          3.6 No Previous Assignments. Other than in respect of the assignment
contemplated by Section 13.12 of the Lease, the Consenting Party has no notice of, and
has not
consented to, any previous assignment of all or any part of its rights under the Lease,
which has
not been terminated as of the date of this Consent.




          SECTION 4. MISCELLANEOUS




          4.1 Notices. All notices and other communications hereunder shall be in
writing, shall be deemed given upon receipt thereof by the party or parties to whom
such notice
is addressed, shall refer on their face to the Lease (although failure to so refer
shall not render
any such notice or communication ineffective), shall be sent by first class mail, by
personal
delivery or by a nationally recognized courier service, and shall be directed as
follows:




	 	 	 	 	 
	 

	 	If to the Consenting Party:
	 	INDUSTRIAL DEVELOPMENT BOARD NO.l
	 

	 	 	 	OF THE PARISH OF EVANGELINE, STATE OF
	 

	 	 	 	LOUISIANA, INC.
	 

	 	 	 	c/o Evangeline Parish District Attorney
	 

	 	 	 	202 Courthouse, 200 Court Street
	 

	 	 	 	Ville Platte, Louisiana 70586
	 
	 	 	 	 
	 

	 	If to the Borrower:
	 	PINE PRAIRIE ENERGY CENTER, LLC
	 

	 	 	 	333 Clay Street, Suite 1600
	 

	 	 	 	Houston, Texas 77002
	 

	 	 	 	Attention: Mr. Al Swanson
	 

	 	 	 	Telephone: (713)646-4455
	 

	 	 	 	Fax: (713) 646-4564
	 
	 	 	 	 
	 

	 	If to the Collateral Agent:
	 	SUNTRUST BANK, INC.
	 

	 	 	 	303 Peachtree Street, N.E.
	 

	 	 	 	Atlanta, Georgia 30303
	 

	 	 	 	Attention: Mr. Jim Warren






-5-









 






	 	 	 	 	 
	 

	 	 	 	Telephone: (404)588-7824
	 

	 	 	 	Fax:  (404)827-6270






          The above parties may, by notice given hereunder, designate any further or
different addresses to which subsequent notices or other communications shall be sent.




          4.2 Governing Law; Submission to Jurisdiction. THIS CONSENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED
IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF
LOUISIANA.




          4.3 Counterparts. This Consent may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each of which
when so
executed and delivered shall be an original, but all of which shall together constitute one
and the
same instrument.




          4.4 Headings Descriptive. The headings of the several sections and
subsections of this Consent are inserted for convenience only and shall not in any way
affect the
meaning or construction of any provision of this Consent.




          4.5 Severability. In case any provision in or obligation under this Consent
shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and
enforceability of the remaining provisions or obligations, or of such provision or
obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.




          4.6 Amendment, Waiver. Neither this Consent nor any of the terms hereof
may be terminated, amended, supplemented, waived or modified except by an instrument in
writing signed by the Consenting Party, the Borrower and the Collateral Agent.




          4.7 Termination, (a) Except as specified herein, the Consenting Party has no
right, and shall have no right, to terminate this Consent or to be released, relieved or
discharged
from any obligation or liability hereunder until the earlier of (i) termination or
expiration of the
Lease and (ii) the date when all Obligations have been satisfied in full, notice of
which shall be
provided by the Collateral Agent when all such Obligations have been so satisfied (the
“Termination Notice”).




     (b) In the event that the Collateral Agent delivers the Termination Notice to the
Consenting Party pursuant to this Section 4.7, this Consent shall terminate for all
purposes as to
the Collateral Agent and the Credit Agreement and the other Loan Documents, and the
Collateral
Agent and the Secured Parties shall have no further rights or obligations under this
Consent;
provided, however, that the Consenting Party agrees that this Consent
shall continue to apply for
the benefit of the Borrower and the providers of new credit facilities to the Borrower
or any of its
Affiliates to replace the Credit Agreement (such provider or providers of new credit
facilities to
be referred to as “New Lender” or “New Lenders”), provided,
further, that (i) within fifteen (15)
days following delivery by the Collateral Agent to the Consenting Party , with a copy to
the
Borrower, of the Termination Notice pursuant to this Section 4.7, the New Lender or New
Lenders or an agent, trustee or other representative of the New Lender or New Lenders,
shall
have notified the Consenting Party that it assumes the rights and the prospective
obligations of



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the “Collateral Agent” under this Consent, and shall have supplied substitute notice address
information for Section 4.1 and new payment instructions (countersigned on behalf of the
Borrower) for Exhibit A, and (ii) thereafter, (A) the term loans under this Consent shall be
deemed to refer to the new credit facilities, (B) the term “Collateral Agent” or “Secured Parties”
shall be deemed to refer to the New Lender or New Lenders or any agent or trustee for the New
Lender or New Lenders, (C) the term “Credit Agreement” shall be deemed to refer to the credit
agreement, indenture or other instrument providing for the new credit facilities and (D) the term
“Leasehold Mortgage” shall be deemed to refer to the security agreement under which the Lease
is assigned as collateral to secure performance of the obligations of the Borrower under the new
credit facilities.




          4.8 Successors and Assigns. This Consent shall be binding upon the parties
hereto and their respective successors and permitted assigns and shall inure to the benefit
of the
parties, their designees and their respective successors and permitted assigns.




          4.9 Further Assurances. The Consenting Party agrees to execute such
acknowledgments or such other instruments and take such other actions as the Borrower or the
Collateral Agent shall reasonably request in connection with the transactions provided for in
this
Consent.




          4.10 Survival. All agreements, statements, representations and warranties
made by the Consenting Party herein shall be considered to have been relied upon by the
Collateral Agent and the Secured Parties and shall survive the execution and delivery of this
Consent.




          4.11 No Waiver; Remedies Cumulative. No failure or delay on the part of the
Collateral Agent in exercising any right, power or privilege hereunder and no course of
dealing
between the Consenting Party and the Collateral Agent shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder preclude any
other
exercise, or the further exercise, of any other right, power or privilege hereunder. The
rights and
remedies herein expressly provided are cumulative and not exclusive of any rights or remedies
that the Collateral Agent would otherwise have.




          4.12 Entire Agreement. This Consent embodies the complete agreement
among the parties hereto with respect to the matters specified herein and supersedes all
other oral
or written understandings or agreements.




[Signatures on Following Page]





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          IN WITNESS WHEREOF, the Consenting Party, the Borrower and the
Collateral Agent have caused this Consent to be duly executed and delivered by their
respective
officers thereunto duly authorized as of the date first above written.




	 	 	 	 	 
	 	INDUSTRIAL DEVELOPMENT BOARD NO.1

OF THE PARISH OF EVANGELINE, STATE

OF LOUISIANA, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	PINE PRAIRIE ENERGY CENTER, LLC,

a Delaware limited liability company

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	SUNTRUST BANK, INC.,

as Collateral Agent

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




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