Document:

Exhibit
10.4

 

NOTE PURCHASE
AGREEMENT made as of August 6,
2010, by and among the FEDERAL FINANCING BANK
(“FFB”), a body corporate and instrumentality of the United
States of America, STEPHENTOWN REGULATION
SERVICES, LLC (the “Borrower”), a limited liability company
organized and existing under the laws of the State of Delaware, and the SECRETARY OF ENERGY, acting through the Department of
Energy (the “Secretary”).

 

WHEREAS,  the Secretary
is authorized, pursuant to the Guarantee Act (as hereinafter defined), to
guarantee loans that meet the requirements of the Guarantee Act; and

 

WHEREAS,
FFB is authorized, under section 6(a) of the FFB Act (as hereinafter
defined), to make commitments to purchase, and to purchase on terms and
conditions determined by FFB, any obligation that is issued, sold, or
guaranteed by an agency of the United States of America; and

 

WHEREAS,
pursuant to the FFB Act, FFB has entered into the Program Financing Agreement
(as hereinafter defined) with the Secretary setting forth the commitment of FFB
to enter into agreements to purchase notes issued by entities designated by the
Secretary when those notes have been guaranteed by the Secretary, and the
commitment of the Secretary to guarantee those notes; and

 

WHEREAS,
pursuant to the Program Financing Agreement, the Secretary has delivered to FFB
and the Borrower a Designation Notice (as hereinafter defined) designating the
Borrower to be a “Borrower” for purposes of the Program Financing Agreement;
and

 

WHEREAS,
FFB is entering into this Note Purchase Agreement, as authorized by section 6(a) of
the FFB Act and in fulfillment of its commitment under the Program Financing
Agreement, setting out, among other things, FFB’s agreement to purchase,
pursuant to the FFB Act, the Note (as hereinafter defined) to be issued by the
Borrower, when the terms and conditions specified herein have been satisfied,
as hereinafter provided.

 

NOW,
THEREFORE, for and in consideration of the mutual agreements herein contained
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, FFB, the Secretary, and the Borrower agree as
follows:

 

ARTICLE 1

 

DEFINITIONS AND RULES OF INTERPRETATION

 

Section 1.1                                      Definitions.

 

As
used in this Agreement, the following terms shall have the respective meanings
specified in this section 1.1, unless the context clearly requires otherwise.

 

1

 

“Advance”
shall mean an advance of funds made by FFB under the Note in accordance with
the provisions of article 7 of this Agreement.

 

“Advance
Identifier” shall mean, for each Advance, the particular sequence of
letters and numbers constituting the Note Identifier plus the particular
sequence of additional numbers assigned by FFB to the respective Advance in the
interest rate confirmation notice relating to such Advance delivered by FFB in
accordance with section 7.7 of this Agreement.

 

“Advance Request” shall mean a letter from a
Borrower requesting an Advance under a Note, in the form of letter attached as Exhibit A
to this Agreement.

 

“Advance
Request Approval Notice” shall mean the written notice from the Department
located at the end of an Advance Request advising FFB that such Advance Request
has been approved on behalf of the Secretary.

 

“Borrower
Instruments” shall have the meaning specified in section 3.2.1 of this
Agreement.

 

“Borrower
State” shall have the meaning specified in Schedule I to this Agreement.

 

“Business
Day” shall mean any day on which FFB and the Federal Reserve Bank of New York
are both open for business.

 

“Certificate
Specifying Authorized Borrower Signatories” shall mean a certificate of the
Borrower specifying the names and titles of those individuals who are
authorized to execute and deliver from time to time Advance Requests on behalf
of the Borrower, and containing the original signature of each of those
individuals, substantially in the form of the Certificate Specifying Authorized
Borrower Signatories attached as Exhibit B to this Agreement.

 

“Certificate
Specifying Authorized Department Officials” shall mean a certificate
specifying the names and titles of those officials of the Department who are
authorized to execute and deliver Advance Request Approval Notices from time to
time on behalf of the Secretary and setting out the original signature of each
of those authorized officials, and specifying the name and title of those
officials of the Department who are authorized to confirm telephonically the
authenticity of the Advance Request Approval Notices from time to time on
behalf of the Secretary and setting out the telephone number of each of those
authorized officials, in the form of the Certificate Specifying Authorized
Department Officials attached as Annex 1 to the Program Financing
Agreement.

 

“Common
Agreement” shall have the meaning specified in Schedule I to this
Agreement.

 

“Department”
shall mean the Department of Energy.

 

“Designation
Notice” shall mean, generally, a notice from the Secretary to FFB and the
particular entity identified therein as the respective “Borrower,” designating
that entity to 

 

2

 

be
a “Borrower” for purposes of the Program Financing Agreement, in the form of
notice that is attached as Annex 2 to the Program Financing Agreement; and “the  Designation Notice” shall
mean the particular Designation Notice delivered by the Secretary to FFB and
the Borrower designating the Borrower to be a “Borrower” for purposes of the
Program Financing Agreement.

 

“FFB
Act” shall mean the Federal Financing Bank Act of 1973 (Pub.  L.  No. 
93-224, 87 Stat.  937, codified at 12
U.S.C. § 2281 et  seq.), as amended.

 

“Governmental
Approval” shall mean any approval, consent, authorization, license, permit,
order, certificate, qualification, waiver, exemption, or variance, or any other
action of a similar nature, of or by a Governmental Authority having
jurisdiction over the Borrower or any of its properties.

 

“Governmental
Authority” shall mean any federal, state, county, municipal, or regional
authority, or any other entity of a similar nature, exercising any executive,
legislative, judicial, regulatory, or administrative function of government.

 

“Governmental
Judgment” shall mean any judgment, order, decision, or decree, or any
action of a similar nature, of or by a Governmental Authority having
jurisdiction over the Borrower or any of its properties.

 

“Governmental
Registration” shall mean any registration, filing, declaration, or notice,
or any other action of a similar nature, with or to a Governmental Authority
having jurisdiction over the Borrower or any of its properties.

 

“Governmental
Rule” shall mean any statute, law, rule, regulation, code, or ordinance of
a Governmental Authority having jurisdiction over the Borrower or any of its
properties.

 

“Guarantee
Act” shall mean Title XVII of the Energy Policy Act of 2005 (Pub.  L.  No. 
109-58, 119 Stat. 594, 1117, codified at 42 U.S.C. § 16511 et  seq.),
as amended.

 

“Holder”
shall mean FFB, for so long as it shall be the holder of the Note, and any
successor or assignee of FFB, for so long as such successor or assignee shall
be the holder of the Note.

 

“Loan
Commitment Amount” shall have the meaning specified in Schedule I to this
Agreement.

 

“Loan
Servicer” shall mean the Department, acting through the Loan Guarantee Program
Office.

 

“Material
Adverse Effect on the Borrower” shall mean any material adverse effect on
the financial condition, operations, business or prospects of the Borrower or
the ability of the Borrower to perform its obligations under this Agreement or
any of the other Borrower Instruments.

 

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“Note”
shall mean a future advance promissory note payable to FFB, in the form of note
that is attached as Exhibit C to this Agreement, as such Note may
be amended, supplemented, and restated from time to time in accordance with its
terms.

 

“Note
Identifier” shall mean the particular sequence of letters and numbers
assigned by FFB to the Note in the Principal Instruments acceptance notice
relating to the Note delivered by FFB in accordance with section 5.1 of this
Agreement.

 

“Opinion
of Borrower’s Counsel re: Borrower Instruments” shall mean an opinion of
counsel from counsel to the Borrower, substantially in the form of opinion that
is attached as Exhibit D to this Agreement.

 

“Opinion
of Secretary’s Counsel re: Secretary’s Instruments” shall mean an opinion
of counsel from counsel to the Secretary, substantially in the form of opinion
that is attached as Exhibit E to this Agreement.

 

“Other
Debt Obligation” shall mean any note or Note, or any other evidence of an
obligation for borrowed money of a similar nature, made or issued by the
Borrower (other than the Note purchased by FFB under this Agreement), or any
mortgage, indenture, deed of trust or loan agreement with respect thereto to
which the Borrower is a party or by which the Borrower or any of its properties
is bound (other than this Agreement).

 

“Payment
Borrowing” shall have the meaning specified in paragraph 7(b) of the
Note purchased under this Agreement.

 

“Person”
shall mean any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, trust company, unincorporated
organization or Governmental Authority.

 

“Principal
Instruments” shall have the meaning specified in section 4.2 of this
Agreement.

 

“Program
Financing Commitment Amount” shall have the meaning specified in section
1.1 of the Program Financing Agreement.

 

“Program
Financing Agreement” shall mean the Program Financing Agreement dated as of
September 2, 2009, between FFB and the Secretary, as such agreement may be
amended, supplemented, and restated from time to time in accordance with its
terms.

 

“Project
State” shall have the meaning specified in Schedule I to this Agreement.

 

“Requested
Advance Amount” shall have the meaning specified in section 7.3.1(a)(2) of
this Agreement.

 

“Requested
Advance Date” shall have the meaning specified in section 7.3.1(a)(3) of
this Agreement.

 

4

 

“Secretary’s
Certificate” shall mean a certificate relating to the Secretary’s Guarantee
and other matters, in the form of certificate that is attached as Exhibit F
to this Agreement.

 

“Secretary’s
Guarantee” shall mean a guarantee of the Note issued by the Secretary, in
the form of guarantee that is attached as Exhibit G to this
Agreement.

 

“Secretary’s
Instruments” shall have the meaning specified in section 3.3.1 this
Agreement.

 

“Security
Instruments” shall have the meaning specified in Schedule I to this
Agreement.

 

“this
Agreement” shall mean this Note Purchase Agreement between FFB, the
Secretary, and the Borrower.

 

“Uncontrollable
Cause” shall mean an unforeseeable cause beyond the control and without the
fault of FFB, being: act of God, fire, flood, severe weather, epidemic,
quarantine restriction, explosion, sabotage, act of war, act of terrorism,
riot, civil commotion, lapse of the statutory authority of the United States
Department of the Treasury to raise cash through the issuance of Treasury debt
instruments, disruption or failure of the Treasury Financial Communications
System, closure of the Federal Government, or an unforeseen or unscheduled
closure or evacuation of the FFB offices.

 

Section 1.2                                      Rules of
Interpretation.

 

Unless
the context shall otherwise indicate, the terms defined in section 1.1 of this
Agreement shall include the plural as well as the singular and the singular as
well as the plural.  The words “herein,” “hereof,”
and “hereto,” and words of similar import, refer to this Agreement as a
whole.  All references to “the Secretary”
herein shall mean the Secretary in his or her official, and not individual,
capacity, and shall include designates thereof that may be duly authorized from
time to time.

 

ARTICLE 2

 

FFB COMMITMENT TO PURCHASE
THE NOTE

 

Subject
to the terms and conditions of this Agreement, FFB agrees to purchase the Note
that is offered by the Borrower to FFB for purchase under this Agreement.

 

ARTICLE 3

 

COMMITMENT CONDITIONS

 

FFB
shall be under no obligation to purchase the Note under this Agreement, and the
Secretary shall be under no obligation to issue the Secretary’s Guarantee
guaranteeing such Note, unless and until each of the conditions specified in
this article 3 has been satisfied.

 

5

 

Section 3.1                                      Commitment
Amount Limits.

 

3.1.1                        Loan Commitment
Amount.  The maximum principal amount
of the Note that is offered for purchase shall not exceed the Loan Commitment
Amount.

 

3.1.2                        Program
Financing Commitment Amount.  At the time that the Note is offered to FFB
for purchase under this Agreement, the maximum principal amount of the Note,
when added to the aggregate maximum principal amount of all other notes that
have been issued by entities that have been designated by the Secretary in
Designation Notices to be “Borrowers” for purposes of the Program Financing
Agreement and which notes have been guaranteed by the Secretary pursuant to the
Guarantee Act, shall not exceed the Program Financing Commitment Amount.

 

Section 3.2                                      Borrower
Instruments.

 

3.2.1                        Borrower Instruments.  FFB shall have received the following
instruments (such instruments being, collectively, the “Borrower Instruments”):

 

(a)                                  an original
counterpart of this Agreement, duly executed by the Borrower; and

 

(b)                                 the original
Note, with all of the blanks on page 1 of the Note filled in with
information consistent with the information set out in the Designation Notice,
and duly executed by the Borrower.

 

3.2.2                        Opinion of
Borrower’s Counsel re: Borrower Instruments.  FFB shall have received an Opinion of
Borrower’s Counsel re: Borrower Instruments.

 

3.2.3                        Certificate
Specifying Authorized Borrower Signatories.  FFB shall have received a completed and
signed Certificate Specifying Authorized Borrower Signatories.

 

Section 3.3                                      Secretary’s
Instruments.

 

3.3.1                        Secretary’s
Instruments.  FFB shall
have received the following instruments (such instruments being, collectively,
the “Secretary’s Instruments”):

 

(a)                                  an original
counterpart of this Agreement, duly executed by or on behalf of the Secretary;

 

(b)                                 the original
Secretary’s Guarantee relating to the Note, duly executed by or on behalf of
the Secretary; and

 

(c)                                  an original
Secretary’s Certificate relating to the Secretary’s Guarantee and other
matters, duly executed by or on behalf of the Secretary.

 

3.3.2                        Opinion of
Secretary’s Counsel re: Secretary’s Instruments.  FFB shall have received an Opinion of
Secretary’s Counsel re: Secretary’s Instruments.

 

6

 

Section 3.4                                      Conditions
Specified in Other Agreements.

 

Each
of the conditions specified in the Program Financing Agreement as being
conditions to purchasing the Note shall have been satisfied, or waived by FFB
or the Secretary, as the case may be.

 

ARTICLE 4

 

OFFER OF THE NOTE FOR
PURCHASE

 

The
Note that is to be offered to FFB for purchase under this Agreement shall be
offered in accordance with the procedures described in this article 4.

 

Section 4.1                                      Delivery of
Borrower Instruments to the Secretary.

 

The
Borrower shall deliver to the Secretary, for redelivery to FFB, the following:

 

(a)                                  all of the
Borrower Instruments, each duly executed by the Borrower;

 

(b)                                 an Opinion of
Borrower’s Counsel re: Borrower Instruments; and

 

(c)                                  a completed and
signed Certificate Specifying Authorized Borrower Signatories.

 

Section 4.2                                      Delivery of
Principal Instruments by the Secretary to FFB.

 

The
Secretary shall deliver to FFB all of the following instruments (collectively
being the “Principal Instruments”:

 

(a)                                  all of the
instruments described in section 4.1;

 

(b)                                 all of the Secretary’s
Instruments, each duly executed by the Secretary; and

 

(c)                                  an Opinion of
Secretary’s Counsel re: Secretary’s Instruments.

 

ARTICLE 5

 

PURCHASE OF THE NOTE BY
FFB

 

Section 5.1                                      Acceptance or
Rejection of Principal Instruments.

 

Within
5 Business Days after delivery to FFB of the Principal Instruments relating to
the Note that is offered for purchase under this Agreement, FFB shall deliver
by facsimile transmission (fax) to the Department one of the following:

 

7

 

(a)                                  an acceptance
notice, which notice shall:

 

(1)                                  state that the
Principal Instruments meet the terms and conditions detailed in article 3 of
this Agreement, or are otherwise acceptable to FFB; and

 

(2)                                  assign a Note
Identifier to such Note for use by the Borrower and the Department in all
communications to FFB making reference to such Note; or

 

(b)                                 a rejection
notice, which notice shall state that one or more of the Principal Instruments
does not meet the terms and conditions of this Agreement and specify how such
instrument or instruments does not meet the terms and conditions of this
Agreement.

 

Section 5.2                                      Purchase.

 

FFB
shall not be deemed to have accepted the Note offered for purchase under this
Agreement until such time as FFB shall have delivered an acceptance notice
accepting the Principal Instruments relating to the Note; provided, however,
that in the event that FFB shall make an Advance under the Note, then FFB shall
be deemed to have accepted the Note offered for purchase.

 

Section 5.3                                      Return of Note
and Secretary’s Guarantee Under Certain Circumstances.

 

In
the event that all of the following shall have occurred:

 

(a)                                  the Borrower
shall have issued the Note to FFB;

 

(b)                                 the Secretary
shall have issued to FFB the Secretary’s Guarantee relating to the Note;

 

(c)                                  FFB shall have
purchased the Note from the Borrower under this Agreement;

 

(d)                                 there have been
no Advances made by FFB to the Borrower under the Note;

 

(e)                                  on or before September 30,
2011, the Secretary shall have delivered written notice to FFB that the
Secretary has not received a written certification from a responsible officer
of the Borrower stating, to the best of such officer’s knowledge after due
inquiry, that “Commencement of Construction” (as that term is defined in the
Common Agreement) has occurred, and that the Secretary will not be approving
Advances under the Note,

 

then
FFB will return the Note to the Borrower and the Secretary’s Guarantee to the
Secretary and FFB’s obligations and commitments under this Agreement will
terminate.

 

8

 

ARTICLE 6

 

CUSTODY OF NOTE; LOSS OF
NOTE, ETC.

 

Section 6.1                                      Custody.

 

FFB
shall have custody of the Note purchased under this Agreement until all amounts
owed under the Note have been paid in full.

 

Section 6.2                                      Lost, Stolen,
Destroyed, or Mutilated Note.

 

In
the event that the Note purchased under this Agreement shall become lost,
stolen, destroyed, or mutilated, the Borrower shall, upon a written request
made by FFB to the Borrower, with a copy to the Secretary, execute and deliver
to FFB, in replacement thereof, a new Note of like tenor, dated and bearing
interest from the date to which interest has been paid on such lost, stolen,
destroyed, or mutilated Note or, if no interest has been paid thereon, dated
the same date as such lost, stolen, destroyed, or mutilated Note.  Upon delivery of such replacement Note to
FFB, the Borrower shall be released and discharged from any further liability
on account of the lost, stolen, or destroyed Note.  If the Note being replaced has been
mutilated, such mutilated Note shall be surrendered to the Borrower for
cancellation.  The Secretary shall
deliver to FFB a confirmation that the Secretary’s Guarantee related to the
lost, stolen, destroyed, or mutilated Note remains in full force and effect
with respect to the replacement Note.

 

ARTICLE 7

 

ADVANCES

 

Section 7.1                                      Commitment.

 

Subject
to the terms and conditions of this Agreement, FFB agrees to make Advances
under the Note for the account of the Borrower.

 

Section 7.2                                      Treasury
Policies Applicable to Advances.

 

Each
of the Borrower and the Secretary understands and consents to the following
Treasury financial management policies generally applicable to all advances of
funds:

 

(a)                                  each Advance
will be requested by the Borrower, and each Advance Request will be approved by
the Secretary, only at such time and in such amount as shall be necessary to
meet the immediate payment or disbursing need of the Borrower;

 

(b)                                 except for
Advances to reimburse the Borrower for expenditures that it has made from its
own working capital, generally each Advance will be requested to be disbursed
directly to the Person(s) to whom the Borrower is obligated to make
payments;

 

9

 

(c)                                  Advances for
investment purposes will not be requested by the Borrower or approved by the
Secretary; and

 

(d)                                 all interest
earned on any lawful and permitted investment of Advances in excess of the
interest accrued on such Advances will be remitted to FFB.

 

Section 7.3                                      Conditions to
Making Advances.

 

FFB
shall be under no obligation to make any Advance under the Note unless and
until each of the conditions specified in this section 7.3 is satisfied.

 

7.3.1                        Advance
Requests.  For each
Advance, the Borrower shall have delivered to the Secretary, for review and
approval before being forwarded to FFB, an Advance Request, which Advance
Request:

 

(a)                                  shall specify,
among other things:

 

(1)                                  the particular “Note
Identifier” that FFB assigned to this Note (as provided in section 5.1 of this
Agreement;

 

(2)                                  the particular
amount of funds that the Borrower requests to be advanced (such amount being
the “Requested Advance Amount” for the respective Advance);

 

(3)                                  the particular
calendar date that the Borrower requests to be the date on which the respective
Advance is to be made (such date being the “Requested Advance Date” for
such Advance), which date:

 

(A)                              must be a
Business Day; and

 

(B)                                shall not be
earlier than the third Business Day to occur after the date on which FFB shall
have received the respective Advance Request;

 

(4)                                  the particular
bank account or accounts to which the Borrower requests that the respective
Advance be made; and

 

(b)                                 shall have been
duly executed by an individual whose name and signature appear on the
Certificate Specifying Authorized Borrower Signatories delivered by the
Borrower to FFB pursuant to section 3.2.3 of this Agreement; and

 

(c)                                  shall have been
received by FFB not later than the third Business Day before the Requested
Advance Date specified in such Advance Request.

 

7.3.2                        Advance Request
Approval Notice.  For each
Advance, the Secretary shall have delivered to FFB the Borrower’s executed
Advance Request, together with the 

 

10

 

Department’s executed
Advance Request Approval Notice, which Advance Request Approval Notice:

 

(a)                                  shall have been
duly executed on behalf of the Secretary by an official of the Department whose
name and signature appear on the Certificate Specifying Authorized Department
Officials delivered to FFB pursuant to section 3.1.3 or section 6.1 of the
Program Financing Agreement; and

 

(b)                                 shall have been
received by FFB not later than the third Business Day before the Requested
Advance Date specified in such Advance Request.

 

7.3.3                        Telephonic
Confirmation of Authenticity of  Advance
Request Approval Notices.  For
each Advance, FFB shall have obtained telephonic confirmation of the
authenticity of the related Advance Request Approval Notice from an official of
the Department (a) whose name, title, and telephone number appear on the
Certificate Specifying Authorized Department Officials that has been delivered
by the Secretary to FFB pursuant to section 3.1.3 or section 6.1 of the Program
Financing Agreement; and (b) who is not the same official of the
Department who executed the Advance Request Approval Notice on behalf of the
Secretary.

 

7.3.4                        Note Maximum
Principal Amount Limit.  At
the time of making any Advance under the Note, the amount of such Advance, when
added to the aggregate amount of all Advances previously made under the Note,
shall not exceed the maximum principal amount of the Note.

 

7.3.5                        Conditions
Specified in Other Agreements.  Each of the conditions specified in the
Program Financing Agreement as being conditions to making Advances under the
Note, shall have been satisfied, or waived by FFB or the Secretary, as the case
may be.

 

Section 7.4                                      Amount and
Timing of Advances.

 

FFB
shall make each Advance in the Requested Advance Amount specified in the respective
Advance Request and on the Requested Advance Date specified in the respective
Advance Request, subject to satisfaction of the conditions specified in section
7.3 of this Agreement and subject to the following additional limitations:

 

(a)                                  in the event
that the Requested Advance Date specified in the respective Advance Request is
not a Business Day, FFB shall make the respective Advance on the first day
thereafter that is a Business Day;

 

(b)                                 in the event
that FFB receives the respective Advance Request and the related Advance
Request Approval Notice later than the third Business Day before the Requested
Advance Date specified in such Advance Request, FFB shall make the respective
Advance as soon as practicable thereafter, but in any event not later than the
third Business Day after FFB receives such Advance Request, unless the Borrower

 

11

 

delivers to FFB and the
Secretary a written cancellation of such Advance Request or a replacement
Advance Request specifying a later Requested Advance Date;

 

(c)                                  in the event
that an Uncontrollable Cause prevents FFB from making the respective Advance on
the Requested Advance Date specified in the respective Advance Request, FFB
shall make such Advance as soon as such Uncontrollable Cause ceases to prevent
FFB from making such Advance, unless the Borrower delivers to FFB and the
Secretary a written cancellation of such Advance Request or a replacement
Advance Request specifying a later Requested Advance Date; and

 

(d)                                 in the event
that FFB receives, not later than 3:30 p.m.  (Washington, DC, time) on the Business Day
immediately before the Requested Advance Date specified in an Advance Request,
a written notice delivered by facsimile transmission of withdrawal or cancellation
of the Advance Request Approval Notice, and telephonic confirmation of the
withdrawal or cancellation, from an official of the Department whose name,
title, and telephone number appear on the Certificate Specifying Authorized
Department Officials that has been delivered by the Secretary to FFB pursuant
to section 3.1.3 or section 6.1 of the Program Financing Agreement, FFB shall
not make the respective Advance.

 

Section 7.5                                      Type of Funds
and Means of Advance.

 

7.5.1                        General.  Except as provided in section 7.5.2 of this
Agreement, each Advance shall be made in immediately available funds by
electronic funds transfer to such bank account(s) as shall have been
specified in the respective Advance Request.

 

7.5.2                        Payment
Borrowings.  An Advance
for purposes of a Payment Borrowing under the Note shall be made by internal
transfer of funds on the books of the United States Department of the Treasury
in accordance with the terms of the Note.

 

Section 7.6                                      Interest Rate
Applicable to Advances.

 

The
rate of interest applicable to each Advance made under the Note shall be
established as provided in paragraph 6 of the Note.

 

Section 7.7                                      Interest Rate
Confirmation Notices.

 

After
making each Advance, FFB shall deliver, by facsimile transmission, to the
Borrower, the Department, and the Loan Servicer written confirmation of the
making of the respective Advance, which confirmation shall:

 

(a)                                  state the date
on which such Advance was made;

 

(b)                                 state the
interest rate applicable to such Advance; and

 

(c)                                  assign an Advance
Identifier to such Advance for use by the Borrower, the Department, and Loan
Servicer in all communications to FFB making reference to such Advance.

 

12

 

ARTICLE 8

 

REPRESENTATIONS AND
WARRANTIES BY THE BORROWER

 

The
Borrower makes the representations and warranties provided in this article 8 to
FFB.

 

Section 8.1                                      Organization.

 

The
Borrower is a limited liability company duly organized, validly existing and in
good standing under the laws of the Borrower State and is qualified to do
business in the Project State.

 

Section 8.2                                      Authority.

 

The
Borrower has all requisite limited liability company power and authority to
carry on its business as presently conducted, to execute and deliver this
Agreement and each of the other Borrower Instruments, to consummate the
transactions contemplated hereby and thereby, and to perform its obligations
hereunder and thereunder.

 

Section 8.3                                      Due Authorization.

 

The
execution and delivery by the Borrower of this Agreement and each of the other
Borrower Instruments, the consummation by the Borrower of the transactions
contemplated hereby and thereby, and the performance by the Borrower of its
obligations hereunder and thereunder have been duly authorized by all necessary
limited liability company action.

 

Section 8.4                                      Due Execution.

 

This
Agreement has been, and each of the other Borrower Instruments will have been
at the respective time of delivery of each thereof, duly executed and delivered
by individuals who are duly authorized to execute and deliver such documents on
behalf of the Borrower.

 

Section 8.5                                      Validity and Enforceability.

 

This
Agreement constitutes, and each of the other Borrower Instruments will
constitute at the respective time of delivery of each thereof, the legal,
valid, and binding agreement of the Borrower, enforceable against the Borrower
in accordance with their respective terms.

 

Section 8.6                                      No Governmental Actions Required.

 

No
Governmental Approvals or Governmental Registrations are now, or under existing
Governmental Rules will in the future be, required to be obtained or made,
as the case may be, by the Borrower to authorize the execution and delivery by
the Borrower of this Agreement or any of the other Borrower Instruments, the
consummation by the Borrower of the transactions contemplated hereby or
thereby, or the performance by the Borrower of its obligations hereunder or
thereunder.

 

13

 

Section 8.7                                      No Conflicts or Violations.

 

The
execution and delivery by the Borrower of this Agreement or any of the other
Borrower Instruments, the consummation by the Borrower of the transactions
contemplated hereby or thereby, and the performance by the Borrower of its
obligations hereunder or thereunder do not and will not conflict with or
violate, result in a breach of, or constitute a default under (a) any term
or provision of the certificate of formation or operating agreement of the
Borrower; (b) any of the covenants, conditions or agreements contained in
any Other Debt Obligation of the Borrower; (c) any Governmental Approval
or Governmental Registration obtained or made, as the case may be, by the
Borrower; or (d) any Governmental Judgment or Governmental Rule currently
applicable to the Borrower.

 

Section 8.8                                      All Necessary
Governmental Actions.

 

The
Borrower has not failed to obtain any material Governmental Approval or make
any material Governmental Registration required or necessary to carry on the
business of the Borrower as presently conducted, and the Borrower reasonably
believes that it will not be prevented by any Governmental Authority having
jurisdiction over the Borrower from so carrying on its business as presently
conducted.

 

Section 8.9                                      No Material
Litigation.

 

There
are no lawsuits or judicial or administrative actions, proceedings or
investigations pending or, to the best knowledge of the Borrower, threatened
against the Borrower which, in the reasonable opinion of the Borrower, is
likely to have a Material Adverse Effect on the Borrower.

 

ARTICLE 9

 

BILLING BY FFB

 

Section 9.1                                      Billing
Statements to the Borrower, the Department, and the Loan Servicer.

 

FFB
shall prepare a billing statement for the amounts owed to FFB on each Advance
that is made under the Note purchased under this Agreement, and shall deliver
each such billing statement to the Borrower, the Department, and the Loan
Servicer.

 

Section 9.2                                      Failure to
Deliver or Receive Billing Statements No Release.

 

Failure
on the part of FFB to deliver any billing statement or failure on the part of
the Borrower to receive any billing statement shall not, however, relieve the
Borrower of any of its payment obligations under the Note or this Agreement.

 

Section 9.3                                      FFB Billing
Determinations Conclusive.

 

9.3.1                        Acknowledgment
and Consent.  The
Borrower acknowledges that FFB has described to it:

 

14

 

(a)                                  the rounding
methodology employed by FFB in calculating the amount of accrued interest owed
at any time on the Note; and

 

(b)                                 the methodology
employed by FFB in calculating the equal principal installment payment schedule
for amounts due and payable on the Note;

 

and the Borrower consents to these methodologies.

 

9.3.2                        Agreement.  The Borrower agrees that any and all
determinations made by FFB shall be conclusive and binding upon the Borrower
with respect to:

 

(a)                                  the amount of
accrued interest owed on the Note determined using this rounding methodology;
and

 

(b)                                 the amount of
any equal principal installment payment due and payable on the Note determined
using this methodology.

 

ARTICLE 10

 

PAYMENTS TO FFB

 

Each
amount that becomes due and owing on the Note purchased under this Agreement
shall be paid when and as due, as provided in the Note.

 

ARTICLE 11

 

RIGHTS AND AGREEMENTS OF
THE SECRETARY AND FFB

 

Section 11.1                                Rights and
Agreements related to Enforcement.

 

11.1.1                  Secretary’s Authority.  In consideration of the Secretary’s Guarantee
relating to the Note that has been purchased by FFB under this Agreement, the
Secretary shall have the sole authority (vis-a-vis FFB), in the case of a
default by the Borrower under such Note or the occurrence of an Event of
Default under the Security Instruments, in respect of acceleration of such
Note, the exercise of other available remedies, and the disposition of sums or
property recovered.

 

11.1.2                  Acknowledgment of Security
Interest.  FFB
acknowledges that the Borrower has, through the execution of the Security
Instruments, pledged and granted a security interest to the “Collateral Agent,”
for the benefit of the “Secured Parties”(as those terms are defined in the
Common Agreement) in certain property of the Borrower to secure the payment and
performance of certain obligations owed to the Secretary under,
inter alia, the Security Instruments.

 

11.1.3                  FFB Cooperation.  FFB shall cooperate with the Secretary to
enable the Secretary to exercise and enforce the Secretary’s rights and
remedies under this Agreement, the Program Financing Agreement, the Note, and
the Security Instruments, 

 

15

 

including, when reasonably
requested by the Secretary, executing and delivering to the Secretary
instruments, agreements, and other documents prepared by or for the Department
for FFB’s execution.

 

Section 11.2                                Secretary’s
Right to Purchase Advances or the Note.

 

Notwithstanding
the provisions of the Note, the Borrower acknowledges that, under the terms of
the Program Financing Agreement, the Secretary may purchase from FFB all or any
portion of any Advance that has been made under the Note, or may purchase from
FFB the Note in its entirety, in the same manner, at the same price, and
subject to the same limitations as shall be applicable, under the terms of the
Note, to a prepayment by the Borrower of all or any portion of any Advance made
under the Note, or a prepayment by the Borrower of the Note in its entirety, as
the case may be.

 

Section 11.3                                Secretary’s
Confirmation Relating to the Secretary’s Guarantee.

 

The
Secretary confirms to FFB that the obligation of the United States of America
to pay amounts due and payable under the Secretary’s Guarantee when such
amounts become due and payable in accordance with its terms, constitutes the
absolute obligation of the United States of America, against which no offset
may be made by the United States of America in discharge of its obligation to
make these payments and for which, in accordance with section 1702(j) of
the Guarantee Act, the full faith and credit of the United States of America
are pledged, provided, however, that the United States will be
entitled to offset payments under the Secretary’s Guarantee against any
financial asset or obligation of any Holder of the Secretary’s Guarantee other
than FFB.

 

ARTICLE 12

 

EFFECTIVE DATE, TERM,
SURVIVAL

 

Section 12.1                                Effective Date.

 

This
Agreement shall be effective as of the date first above written.

 

Section 12.2                                Term of
Commitment to Make Advances.

 

The
obligation of FFB under this Agreement to make Advances under the Note issued
by the Borrower shall expire on the “Last Day for an Advance” specified in the
Note.

 

Section 12.3                                Survival.

 

12.3.1                  Representations, Warranties,
and Certifications.  All
representations, warranties, and certifications made by the Borrower in this
Agreement, or in any agreement, instrument, or certificate delivered pursuant
hereto, shall survive the execution and delivery of this Agreement, the
purchasing of the Note hereunder, and the making of Advances thereunder.

 

16

 

12.3.2                  Remainder of Agreement.  Notwithstanding the occurrence and passage of
the Last Day for an Advance, the remainder of this Agreement shall remain in
full force and effect until all amounts owed under this Agreement and the Note
purchased by FFB under this Agreement have been paid in full.

 

ARTICLE 13

 

MISCELLANEOUS

 

Section 13.1                                Notices.

 

13.1.1                  Addresses of the Parties.  All notices and other communications
hereunder and under the Note to be made to any party shall be in writing and
shall be addressed as follows:

 

To
FFB:

 

Federal
Financing Bank

Main
Treasury Building

1500
Pennsylvania Avenue, NW

Washington,
DC 20220

 

Attention:
Chief Financial Officer

 

Telephone
No. (202) 622-2470

Facsimile
No.   (202) 622-0707

 

To
the Borrower:

 

Stephentown
Regulation Services LLC

c/o
Beacon Power Corporation

65
Middlesex Road

Tyngsboro,
Massachusetts 01879

 

Attention:
James M.  Spiezio

 

Telephone
No.  (978) 694-9121

Facsimile
No.  (978) 694-9127

Email
Address  spiezio@beaconpower.com

 

With a copy (which copy shall not be required to
effect notice) to:

 

Stephentown
Regulation Services LLC

c/o
Beacon Power Corporation

65
Middlesex Road

Tyngsboro,
Massachusetts 01879

 

17

 

Attention:         Judith Judson

 

Telephone No. (978) 694-9121

Facsimile No.   (978) 694-9127

Email
Address  judson@beaconpower.com

 

To
the Secretary (or the Department):

 

United
States Department of Energy Loan Guarantee Program

1000
Independence Avenue, SW

Washington,
DC 20585

 

Attention:
Portfolio Manager

 

Telephone
No.  (202) 287-6738

Facsimile
No.  (202) 287-5816

Email
Address  lpo.portfolio@hq.doe.gov

 

With a copy (which copy shall not be required to
effect notice) to:

 

Nixon
Peabody LLP

437
Madison Avenue

New
York, NY 10022

 

Attention:
Scott Singer

 

Telephone No. (212) 940-3182

Facsimile No.  (866) 947-2466

Email
Address  ssinger@nixonpeabody.com

 

To
the Loan Servicer:

 

United
States Department of Energy Loan Guarantee Program

1000
Independence Avenue, SW

Washington,
DC 20585

 

Telephone
No.  (202) 287-6738

Facsimile
No.  (202) 287-5816

Attention:
Portfolio Manager

 

Email
Address  lpo.portfolio@hq.doe.gov

 

With a copy (which copy shall not be required to
effect notice) to:

 

Nixon
Peabody LLP

437
Madison Avenue

New
York, NY 10022

 

18

 

Attention:
Scott Singer

 

Telephone No.  (212) 940-3182

Facsimile No.    (866) 947-2466

Email
Address  ssinger@nixonpeabody.com

 

The
address, telephone number, or facsimile number for any party or the Loan
Servicer may be changed at any time and from time to time upon written notice
given by such changing party to the each other party hereto.

 

13.1.2                  Permitted Means of Delivery.  Advance Requests, notices, and other
communications to FFB under this Agreement may be delivered by facsimile (fax)
transmission of the executed instrument.

 

13.1.3                  Effective Date of Delivery.  A properly addressed notice or other
communication shall be deemed to have been “delivered” for purposes of this
Agreement:

 

(a)                                  if made by
personal delivery, on the date of such personal delivery;

 

(b)                                 if mailed by
first class mail, registered or certified mail, express mail, or by any
commercial overnight courier service, on the date that such mailing is
received;

 

(c)                                  if sent by
facsimile (fax) transmission:

 

(1)                                  if the
transmission is received and receipt confirmed before 4:00 p.m.
(Washington, DC, time) on any Business Day, on the date of such transmission;
and

 

(2)                                  if the
transmission is received and receipt confirmed after 4:00 p.m.
(Washington, DC, time) on any Business Day or any day that is not a Business
Day, on the next Business Day.

 

13.1.4                  Notices to FFB to Contain
FFB Identification References.  All notices to FFB making any reference to
either the Note or any Advance made thereunder shall identify the Note or such
Advance by the Note Identifier or the respective Advance Identifier, as the
case may be, assigned by FFB to the Note or such Advance.

 

Section 13.2                                Amendments.

 

No
provision of this Agreement may be amended, modified, supplemented, waived,
discharged, or terminated orally but only by an instrument in writing duly
executed by each of the parties hereto and consented to in writing by the
Secretary.

 

19

 

Section 13.3                                Successors and
Assigns.

 

This
Agreement shall be binding upon and inure to the benefit of each of FFB, the
Borrower, and the Secretary, and each of their respective successors and
assigns.

 

Section 13.4                                Sale or
Assignment of Note.

 

13.4.1                  Sale or Assignment Permitted.  Subject to the requirements of 10 C.F.R.
§ 609.10(g)(1) and Office of Management and Budget Circular A-129
revised (November 2000), FFB may sell, assign, or otherwise transfer all
or any part of the Note or any participation share thereof.

 

13.4.2                  Notice of Sale, Etc.  FFB will deliver to the Borrower, the
Department, and the Loan Servicer written notice of any sale, assignment, or
other transfer of any Note promptly after any such sale, assignment, or other
transfer.

 

13.4.3                  Manner of Payment after Sale.  Any sale, assignment, or other transfer of
all or any part of any Note may provide that, following such sale, assignment,
or other transfer, payments on such Note shall be made in the manner specified
by the respective purchaser, assignee, or transferee, as the case may be.

 

13.4.4                  Replacement Notes.  The Borrower agrees:

 

(a)                                  to issue a
replacement Note or Notes with the same aggregate principal amount, interest
rate, maturity, and other terms as each respective Note or Notes sold,
assigned, or transferred pursuant to subsection 13.4.1 of this Agreement; provided,
however, that, when requested by the respective purchaser, assignee, or
transferee, such replacement Note or Notes shall provide that payments
thereunder shall be made in the manner specified by such purchaser, assignee,
or transferee; and

 

(b)                                 to effect the
change in ownership on its records and on the face of each such replacement
Note issued, upon receipt of each Note or Notes so sold, assigned, or
transferred.

 

Section 13.5                                Forbearance Not
a Waiver.

 

Any
forbearance on the part of FFB from enforcing any term or condition of this
Agreement shall not be construed to be a waiver of such term or condition or
acquiescence by FFB in any failure on the part of Borrower to comply with or
satisfy such term or condition.

 

Section 13.6                                Rights Confined
to Parties.

 

Nothing
expressed or implied herein is intended or shall be construed to confer upon,
or to give to, any Person other than FFB, the Borrower, and the Secretary, and
their respective successors and permitted assigns, any right, remedy or claim
under or by reason of this Agreement or of any term, covenant or condition
hereof, and all of the terms, covenants, conditions, promises, and agreements
contained herein shall be for the sole and exclusive benefit of FFB, the
Borrower, and the Secretary, and their respective successors and permitted
assigns.

 

20

 

Section 13.7                                Governing Law.

 

This
Agreement and the rights and obligations of the parties hereunder shall be
governed by, and construed and interpreted in accordance with, Federal law and
not the law of any state or locality.  To
the extent that a court looks to the laws of any state to determine or define
the Federal law, it is the intention of the parties hereto that such court
shall look only to the laws of the State of New York without regard to the rules of
conflicts of laws.

 

Section 13.8                                Severability.

 

Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not of itself invalidate or render unenforceable such
provision in any other jurisdiction.

 

Section 13.9                                Headings.

 

The
descriptive headings of the various articles, sections, and subsections of this
Agreement were formulated and inserted for convenience only and shall not be
deemed to affect the meaning or construction of the provisions hereof.

 

Section 13.10                          Counterparts.

 

This
Agreement may be executed in separate counterparts, each of which when so
executed and delivered shall be an original, but all of which together shall
constitute but one and the same instrument.

 

[The remainder of this page is intentionally left blank.]

 

21

 

IN WITNESS WHEREOF, FFB, the Borrower, and the
Secretary have each caused this Agreement to be executed as of the day and year
first above mentioned.

 

	
   

  	
  FEDERAL
  FINANCING BANK

  
	
   

  	
  (“FFB”)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature:
  

  	
  /s/
  Mary J. Miller

  
	
   

  	
  Name:

  	
  Mary
  J. Miller

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  STEPHENTOWN
  REGULATION SERVICES LLC

  
	
   

  	
  (the
  “Borrower”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature:
  

  	
  /s/
  James M. Spiezio

  
	
   

  	
  Name:

  	
  James
  M. Spiezio

  
	
   

  	
  Title:

  	
  Treasurer
  and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE
  SECRETARY OF ENERGY

  
	
   

  	
  (the
  “Secretary”)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature:
  

  	
  /s/
  David G. Frantz

  
	
   

  	
  Name:

  	
  David
  G. Frantz

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
  Loan
  Guarantee Program

  
	
   

  	
   

  	
  Office
  of Loan Programs

  

 

22

 

SCHEDULE I

to

NOTE PURCHASE AGREEMENT

by and among

the Federal Financing Bank,

Stephentown Regulation Services LLC,

and the Secretary of Energy

 

1.                                       “Borrower
State” means the State of Delaware.

 

2.                                       “Common
Agreement” means the Common Agreement dated as of August 6,
2010, among Stephentown Regulation Services LLC, as Borrower, the U.S.  Department of Energy, as Credit Party and
Loan Servicer, and Midland Loan Services, Inc., as Administrative Agent in
its capacity as Collateral Agent, as such agreement may be amended,
supplemented, and restated from time to time in accordance with its terms.

 

3.                                       “Loan
Commitment Amount” means $43,137,019.

 

4.                                       “Project
State” means the State of New York.

 

5.                                       “Security
Instruments” means, collectively, (i) the Common Agreement,
and (ii) the “Security Documents” (as that term is defined in the Common
Agreement), as such agreements and documents may be amended, supplemented, and
restated from time to time in accordance with their respective terms.

 

23Exhibit 10.5

 

	
  DOE (Title XVII)

  	
  STEPHENTOWN REGULATION SERVICES

  
	
   

  	
   

  
	
  FOR FFB USE ONLY

  	
  Note

  	
   

  
	
   

  	
  Date

  	
  August 6,
  2010

  
	
  Note Identifier:

  	
   

  	
   

  
	
   

  	
  Place

  	
   

  
	
   

  	
  of
  Issue

  	
  Tyngsboro,
  MA

  
	
  Purchase Date:

  	
   

  	
   

  
	
   

  	
  Last
  Day

  	
   

  
	
   

  	
   

  	
  for
  an

  	
   

  
	
   

  	
  Advance
  (¶3)

  	
  May 30,
  2012

  
	
   

  	
   

  	
   

  
	
   

  	
  Maximum

  	
   

  
	
   

  	
  Principal

  	
   

  
	
   

  	
  Amount
  (¶4)

  	
  $43,137,019

  
	
  Maturity 

  	
   

  	
   

  	
   

  
	
  Date (¶5)

  	
  June 15, 2030

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Payment

  Dates (¶7)

  	
  March 15, June 15,

  September 15 &

  December 15

  of each year

  	
  First

  Principal

  Payment

  Date (¶8)

  	
  September 15,
  2012

  
	
   

  	
   

  	
   

  	
   

  
	
  Common

  Agreement

  (¶22)

  	
  Common
  Agreement dated as of August 6, 2010, among Stephentown Regulation
  Services LLC, as Borrower, the U.S. Department of Energy, as Credit Party
  and  Loan Servicer, and Midland Loan
  Services, Inc. as  Administrative
  Agent in its capacity as Collateral 
  Agent.

  
					

 

FUTURE
ADVANCE PROMISSORY NOTE

 

1.                                      Promise
to Pay.

 

FOR VALUE RECEIVED, STEPHENTOWN REGULATION SERVICES LLC, a Delaware
limited liability company (the “Borrower”, which term includes any
successors or assigns), promises to pay the FEDERAL
FINANCING BANK (“FFB”), a body corporate and instrumentality
of the United States of America (FFB, for so long as it shall be the holder of
this Note, and any successor or assignee of FFB, for so long as such successor
or assignee shall be the holder of this Note, being the “Holder”), at
the times, in the manner, and with interest at the rates to be established as
hereinafter provided, such amounts as may be advanced from time to time by FFB
to or for the account of the Borrower under this Note (each such amount being
an “Advance” and more than one such amounts being “Advances”).

 

 

2.                                      Reference
to Certain Agreements.

 

(a)           Program Financing Agreement.  This Note is one of the “Notes” referred to
in, and entitled to the benefits of, the Program Financing Agreement dated as
of September 2, 2009, made by and between FFB and the Secretary of Energy,
acting through the Department of Energy (the “Secretary”) (such
agreement, as it may be amended, supplemented, and restated from time to time
in accordance with its terms, being the “Program Financing Agreement”).

 

(b)           Note Purchase Agreement.  This Note is the “Note” referred to in, and
entitled to the benefits of, the Note Purchase Agreement dated as of even date
herewith, made by and among FFB, the Borrower, and the Secretary (such agreement,
as it may be amended, supplemented, and restated from time to time in
accordance with its terms, being the “Note Purchase Agreement”).

 

3.                                      Advances;
Advance Requests; Last Day for Advances.

 

(a)           Subject to the terms and conditions of the Note Purchase
Agreement, FFB shall make Advances under this Note in the amounts, at the
times, and to the accounts requested by the Borrower from time to time, in each
case upon delivery to FFB of a written request by the Borrower for an Advance
under this Note, in the form of request attached to the Note Purchase Agreement
as Exhibit A thereto (each such request being an “Advance Request”),
completed as prescribed in the Note Purchase Agreement.

 

(b)           To be effective, an Advance Request must first be
delivered to the Secretary for approval and be approved by or on behalf of the
Secretary in writing, and such Advance Request, together with written
notification of the Secretary’s approval thereof, must be received by FFB on or
before the third Business Day before the particular calendar date specified in
such Advance Request that the Borrower requests to be the date on which the
respective Advance is to be made.

 

(c)           The Borrower hereby agrees that FFB, for its purposes, may
consider any Advance Request approved by or on behalf of the Secretary and
delivered to FFB in accordance with the terms of the Note Purchase Agreement to
be an accurate representation of the Borrower’s request for an Advance under
this Note and the Secretary’s approval of that Advance Request.

 

4.                                      Principal
Amount of Advances; Maximum Principal Amount.

 

The
principal amount of each Advance shall be the amount specified in the
respective Advance Request; provided, however, that the aggregate
principal amount of all Advances made under this Note may not exceed the
particular amount specified on page 1 of this Note as the “Maximum
Principal Amount.”

 

5.                                      Maturity
Date.

 

This
Note, and each Advance made hereunder, shall mature on the particular date
specified on page 1 of this Note as the “Maturity Date” (such date being
the “Maturity Date”).

 

 

6.                                      Computation
of Interest on Each Advance.

 

(a)           Subject to paragraphs 12 and 15 of this Note, interest on
the outstanding principal of each Advance shall accrue from the date on which
the respective Advance is made to the date on which such principal is due.

 

(b)           Interest on each Advance shall be computed on the basis of
(1) actual days elapsed from (but not including) the date on which the
respective Advance is made (for the first payment of interest due under this Note
for the respective Advance) or the date on which the payment of interest was
last due (for all other payments of interest due under this Note for the
respective Advance), to (and including) the date on which payment is next due,
and (2) a year of 365 days.

 

(c)           The interest rate applicable to each Advance shall be
established by FFB at the time that the respective Advance is made on the basis
of the determination made by the Secretary of the Treasury pursuant to
section 6(b) (12 U.S.C. § 2285(b)) of the Federal Financing Bank Act
of 1973 (Pub. L. No. 93-224, 87 Stat. 937, codified at 12 U.S.C. § 2281 et
seq.), as amended (the “FFB Act”); provided, however, that
the shortest maturity used as the basis for any interest rate determination
shall be the remaining maturity of the most recently auctioned United States
Treasury bills having the shortest maturity of all United States Treasury bills
then being regularly auctioned.

 

7.                                      Payment
of Interest; Payment Dates; Payment Borrowings Permitted to Pay Accrued Interest
before the First Principal  Payment Date.

 

(a)           Interest accrued on the outstanding principal balance of
each Advance shall be due and payable on each of the particular dates specified
on page 1 of this Note as “Payment Dates” (each such date being a “Payment
Date”), beginning on the first Payment Date to occur after the date on
which such Advance is made, up through and including the Maturity Date.

 

(b)           On any Payment Date to occur before the “First Principal
Payment Date” (as that term is defined in paragraph 8 of this Note), the
Borrower shall be permitted to borrow all or a portion of the amount of accrued
interest due and payable on such Payment Date for each Advance made before the
First Principal Payment Date (each such borrowing being a “Payment Borrowing”),
by causing to be delivered to FFB an Advance Request, together with written
notification of the Secretary’s approval thereof, not later than the third
Business Day before the date specified in such Advance Request as the date for
such Advance for a Payment Borrowing, specifying the principal amount to be
borrowed, in which event FFB shall, subject to the terms and conditions of the
Note Purchase Agreement, make an Advance, by an internal transfer of funds on
the books of the United States Department of the Treasury, for the account of
the Borrower in the amount specified in the respective Advance Request, and
shall apply such amount to the payment of the accrued interest.  In the case of each Payment Borrowing, FFB
shall establish an interest rate for the respective Payment Borrowing in
accordance with the principles of paragraph 6(c) of this Note, which rate
shall apply from the date on which the Advance is made.

 

 

8.                                      Payment
of Principal.

 

(a)           The principal amount of each Advance shall be payable in
installments, which payments shall be due beginning on the particular date
specified as the “First Principal Payment Date” on page 1 of this Note
(such date being the “First Principal 
Payment Date”), and shall be due on each Payment Date to occur
thereafter until the principal of the respective Advance is repaid in full on
or before the Maturity Date.

 

(b)           With respect to each Advance, the amount of principal due
on the First Principal Payment Date, on each Payment Date to occur thereafter,
and on the Maturity Date shall be, in each case, substantially equal to the
amount of every other quarterly installment of principal and shall be
sufficient, when added to all other such quarterly installments of equal
principal to repay the principal amount of the respective Advance in full on
the Maturity Date.

 

9.                                      Fee.

 

A
fee to cover expenses and contingencies, assessed by FFB pursuant to
section 6(c) of the FFB Act, shall accrue on the outstanding
principal amount of each Advance from the date on which the respective Advance
is made to the date on which the principal amount of such Advance is due.  The fee on each Advance shall be equal to
three-eighths of one percent (0.375%) per annum of the unpaid principal balance
of such Advance.  The fee on each Advance
shall be computed in the same manner as accrued interest is computed under
paragraph 6(b) of this Note, and shall be due and payable at the same
times as accrued interest is due and payable under paragraph 7 of this
Note (adjusted as provided in paragraph 10 of this Note if a Payment Date is
not a Business Day).  The fee on each
Advance shall be credited to the Secretary as required by section 505(c) of
the Federal Credit Reform Act of 1990, as amended (codified at 2 U.S.C. §
661d(c)).

 

10.                               Business
Days.

 

(a)           Whenever any Payment Date or the Maturity Date shall fall
on a day on which either FFB or the Federal Reserve Bank of New York is not
open for business, the payment which would otherwise be due on such Payment
Date or the Maturity Date shall be due on the first day thereafter on which FFB
and the Federal Reserve Bank of New York are both open for business (any such
day being a “Business Day”).

 

(b)           In the case of a Payment Date falling on a day other than
a Business Day, the extension of time for making the payment that would
otherwise be due on such Payment Date shall (1) be taken into account in
establishing the interest rate for each Advance, and (2) be included in
computing interest due in connection with such payment and excluded in
computing interest due in connection with the next payment.

 

(c)           In the case of the Maturity Date falling on a day other
than a Business Day, the extension of time for making the payment that would
otherwise be due on the Maturity Date shall (1) be taken into account in
establishing the interest rate for each Advance, and (2) be included in
computing interest due in connection with such payment.

 

 

11.                               Manner
of Making Payments.

 

(a)           For so long as FFB is the Holder of this Note, each
payment under this Note shall be paid in immediately available funds by
electronic funds transfer to the account of the United States Treasury (for
credit to the subaccount of the Secretary) maintained at the Federal Reserve
Bank of New York in the manner described below:

 

U.S. Treasury Department

ABA No. 0210-3000-4

TREAS NYC/CTR/BNF=89000001

OBI=LGPO   Beacon/Stephentown # 1002

 

provided, however,
that a payment made in the manner described above shall not discharge any
portion of a payment obligation under this Note, or be applied as provided in
paragraph 14 of this Note, until the payment has been received and
credited to the subaccount of FFB (within the account of the United States
Treasury maintained at the Federal Reserve Bank of New York) specified by FFB
in a written notice to the Secretary, or to such other account as may be
specified from time to time by FFB in a written notice to the Secretary.

 

(b)           In the event that FFB is not
the Holder of this Note, then each payment under this Note shall be
made in immediately available funds by electronic funds transfer to such
account as shall be specified by the Holder in a written notice to the
Borrower.

 

12.                               Late
Payments.

 

(a)           In the event that any payment of any amount owing under
this Note is not made when and as due (any such amount being then an “Overdue
Amount”), then the amount payable shall be such Overdue Amount plus
interest thereon (such interest being the “Late Charge”) computed in
accordance with this subparagraph (a):

 

(1)           The Late Charge shall accrue from the scheduled date of
payment for the Overdue Amount (taking into account paragraph 10 of this Note)
to the date on which payment is made.

 

(2)           The Late Charge shall be computed on the basis of (A) actual
days elapsed from (but not including) the scheduled date of payment for such
Overdue Amount (taking into account paragraph 10 of this Note) to (and
including) the date on which payment is made, and (B) a year of 365 days.

 

(3)           The Late Charge shall accrue at a rate (the “Late  Charge Rate”) equal to one and one-half
times the rate to be determined by the Secretary of the Treasury taking into
consideration the prevailing market yield on the remaining maturity of the most
recently auctioned 13-week United States Treasury bills.

 

(4)           The initial Late Charge Rate shall be in effect until the
earlier to occur of either (A) the date on which payment of the Overdue
Amount and the amount of the accrued Late Charge is made, or (B) the first
Payment Date to occur after the scheduled date of payment for such Overdue
Amount.  In the event that the Overdue
Amount and the amount of the accrued Late Charge are not paid on or before the
such Payment Date, then the amount payable shall be the sum of the Overdue
Amount and the amount of the 

 

 

accrued Late Charge, plus a
Late Charge on such sum accruing at a new Late Charge Rate to be then
determined in accordance with the principles of clause (3) of this
subparagraph (a).  For so long as any
Overdue Amount remains unpaid, the Late Charge Rate shall be redetermined in
accordance with the principles of clause (3) of this subparagraph (a) on
each Payment Date to occur thereafter, and shall be applied to the Overdue
Amount and all amounts of the accrued Late Charge to the date on which payment
of the Overdue Amount and all amounts of the accrued Late Charge is made.

 

(b)           Nothing in subparagraph (a) of this
paragraph 12 shall be construed as permitting or implying that the
Borrower may, without the written consent of the Holder, modify, extend, alter
or affect in any manner whatsoever (except as explicitly provided herein) the
right of the Holder to receive any and all payments on account of this Note on
the dates specified in this Note.

 

13.                               Final
Due Date.

 

Notwithstanding
anything in this Note to the contrary, all amounts outstanding under this Note
remaining unpaid as of the Maturity Date shall be due and payable on the
Maturity Date.

 

14.                               Application
of Payments.

 

Each
payment made on this Note shall be applied first to the payment of Late Charges
(if any) payable under paragraphs 12 and 16 of this Note, then to the
payment of premiums (if any) payable under paragraphs 15 of this Note,
then to the payment of accrued interest, then on account of outstanding
principal, and then to the payment of the fee payable under paragraph 9 of this
Note.

 

15.                               Prepayments.

 

(a)           The Borrower may elect to prepay all or any portion of the
outstanding principal amount of any Advance made under this Note, or to prepay
this Note in its entirety, in the manner, at the price, and subject to the
limitations specified in this paragraph 15 (each such election being a “Prepayment
Election”).

 

(b)           The Borrower shall deliver to FFB (and if FFB is not the
Holder, then also to the Holder) and to the Secretary written notification of
each Prepayment Election (each such notification being a “Prepayment
Election Notice”), specifying:

 

(1)           the Advance Identifier that FFB assigned to the respective
Advance (as provided in the Note Purchase Agreement);

 

(2)           the particular date on which the Borrower intends to
prepay the respective Advance (such date being the “Intended Prepayment Date”
for the respective Advance), which date must be a Business Day; and

 

(3)           the amount of principal of the respective Advance that the
Borrower intends to prepay, which amount may be either:

 

 

(A)          the total outstanding principal amount of such Advance; or

 

(B)           an amount less than the total outstanding principal amount
of such Advance (any such amount being a “Portion”).

 

(c)           To be effective, a Prepayment Election Notice must be
received by FFB (and if FFB is not the Holder, then also by the Holder) on or
before the fifth Business Day before the date specified therein as the Intended
Prepayment Date for the respective Advance or Portion.

 

(d)           The Borrower shall pay to the Holder a price for the
prepayment of any Advance or Portion (such price being the “Prepayment Price”
for such Advance or Portion) determined as follows:

 

(1)           in the event that the Borrower elects to prepay the entire
outstanding principal amount of any Advance, then the Borrower shall pay to the
Holder a Prepayment Price for such Advance equal to the sum of:

 

(A)          the price for such Advance that would, if such Advance
(including all unpaid interest accrued thereon through the Intended Prepayment
Date) were purchased by a third party and held to the Maturity Date, produce a
yield to the third-party purchaser for the period from the date of purchase to
the Maturity Date substantially equal to the interest rate that would be set on
a loan from the Secretary of the Treasury to FFB to purchase an obligation
having a payment schedule identical to the payment schedule of such Advance for
the period from the Intended Prepayment Date to the Maturity Date; and

 

(B)           all unpaid Late Charges (if any) accrued on such Advance
through the Intended Prepayment Date;

 

(2)           in the event that the Borrower elects to prepay a Portion
of any Advance, then the Borrower shall pay to the Holder a Prepayment Price
for such Portion that would equal such Portion’s pro rata share of the
Prepayment Price that would be required for a prepayment of the entire
principal amount of such Advance (determined in accordance with the principles
of clause (1) of this subparagraph (d)); and

 

(3)           in the event that the Borrower elects to prepay this Note
in its entirety, then the Borrower shall pay to the Holder an amount equal to
the sum of the Prepayment Prices for all outstanding Advances (determined in
accordance with the principles of clause (1) of this subparagraph (d)).

 

(e)           Payment of the Prepayment Price for any Advance or any
Portion shall be due to the Holder before 3:00 p.m. (Washington, DC, time)
on the Intended Prepayment Date for such Advance or Portion.

 

(f)            Each prepayment of a Portion shall, as to the principal
amount of such Portion, be subject to a minimum amount equal to $100,000.00 of
principal; except that the minimum principal amount limitation shall not apply
to a prepayment of a Portion if:

 

 

(1)           the prepayment is made to satisfy the Borrower’s
obligation to make a mandatory prepayment under the “Security Instruments” (as
that term is defined in paragraph 21 of this Note); and

 

(2)           the Borrower has certified to that fact in the respective
Prepayment Election Notice.

 

(g)           In the event that the Borrower makes a Prepayment Election
with respect to any Portion of an Advance, then the Prepayment Price paid for
such Portion will be applied as provided in paragraph 14 of this Note,
and, with respect to application to outstanding principal, such Prepayment
Price shall be applied to principal installments in the inverse order of maturity.

 

(h)           In the event that the Borrower makes a Prepayment Election
with respect to any Portion of an Advance, then the outstanding principal
amount of such Advance, from and after such partial prepayment, shall be due
and payable in accordance with this subparagraph (h).

 

(1)           The amount of the quarterly principal installments that
will be due after such partial prepayment shall be equal to the quarterly
installments of equal principal that were due in accordance with the principal
repayment schedule that applied to such Advance immediately before such partial
prepayment.

 

(2)           The equal payments of principal shall be due beginning on
the first Payment Date to occur after such partial prepayment, and shall be due
on each Payment Date to occur thereafter up through and including the date on
which the entire principal amount of such Advance, and all unpaid interest (and
Late Charges, if any) accrued thereon, are paid.

 

16.                               Rescission
of Prepayment Elections; Late Charges for Late Payments of Prepayment Prices.

 

(a)           The Borrower may rescind any Prepayment Election made in
accordance with paragraph 15 of this Note, but only in accordance with
this paragraph 16.

 

(b)           The Borrower shall deliver to FFB, with a copy to the
Secretary, written notification of each rescission of a Prepayment Election
(each such notification being an “Election 
Rescission Notice”) specifying the particular Advance for which the
Borrower wishes to rescind such Prepayment Election, which specification must
make reference to the particular “Advance Identifier” (as that term is defined
in the Note Purchase Agreement) that FFB assigned to such Advance (as provided
in the Note Purchase Agreement).  The
Election Rescission Notice may be delivered by facsimile transmission to FFB at
(202) 622-0707 or at such other facsimile number or numbers as FFB may from
time to time communicate to the Borrower.

 

(c)           To be effective, an Election Rescission Notice must be
received by FFB not later than 3:30 p.m. (Washington, DC, time) on the
second Business Day before the Intended Prepayment Date.

 

(d)           In the event that the Borrower (1) makes a Prepayment
Election in accordance with paragraph 15 of this Note, (2) does not
rescind such Prepayment Election in accordance 

 

 

with this paragraph 16, and (3) does not,
before 3:00 p.m. (Washington, DC, time) on the Intended Prepayment Date,
pay to FFB the Prepayment Price described in paragraph 15(d) of this
Note, then a Late Charge shall accrue on any such unpaid amount from the
Intended Prepayment Date to the date on which payment is made, computed in
accordance with the principles of paragraph 12 of this Note.

 

17.                               Amendments
to Note.

 

To
the extent not inconsistent with applicable law, this Note shall be subject to
modification by such amendments, extensions, and renewals as may be agreed upon
from time to time by the Holder and the Borrower, with the approval of the
Secretary.

 

18.                               Certain
Waivers.

 

The
Borrower hereby waives any requirement for presentment, protest, or other
demand or notice with respect to this Note.

 

19.                               Effective
Until Paid.

 

Subject
to section 6.2 of the Note Purchase Agreement, this Note shall continue in
full force and effect until all amounts due and payable hereunder have been
paid in full.

 

20.                               Secretary’s
Guarantee of Note.

 

Upon
execution of the guarantee set forth at the end of this Note (the “Guarantee”),
the payment by the Borrower of all amounts due and payable under this Note,
when and as due, shall be guaranteed by the United States of America, acting
through the Secretary, pursuant to Title XVII of the Energy Policy Act of 2005,
as amended (42 U.S.C. § 16511 et  seq.).  In consideration of the Guarantee, the
Borrower promises to the Secretary to make all payments due under this Note
when and as due.

 

21.                               Security
Instruments.

 

This
Note is one of several notes permitted to be executed and delivered by, and is
entitled to the benefits and security of, the “Security Instruments” (as
defined in the Note Purchase Agreement), whereby the Borrower pledged and
granted a security interest in certain property of the Borrower, described
therein, to secure the payment of and performance of certain obligations owed
to the Secretary, as set forth in the Security Instruments.  For purposes of the Security Instruments, in
consideration of the undertakings by the Secretary set forth in the Program
Financing Agreement, the Note Purchase Agreement, and the Guarantee, the
Secretary shall be considered to be, and shall have the rights, powers,
privileges, and remedies of, the Holder of this Note.

 

22.                               Guarantee
Payments; Reimbursement.

 

If
the Secretary makes any payment, pursuant to the Guarantee, of any amount due
and payable under this Note, each and every such payment so made shall be
deemed to be a payment hereunder; provided, however, that no
payment by the Secretary pursuant to the Guarantee shall 

 

 

be
considered a payment for purposes of determining the existence of a failure by
the Borrower to perform its obligation to the Secretary to make all payments
under this Note when and as due.  The
Secretary shall have any rights by way of subrogation, agreement or otherwise
which arise as a result of such payment pursuant to the Guarantee and as
provided in the particular agreement specified on page 1 of this Note as
the “Common Agreement” between the Borrower and the United States of America,
acting through the Secretary, to evidence the Borrower’s obligation to
reimburse the Secretary for payment made by the Secretary pursuant to the
Guarantee.

 

23.                               Default
and Enforcement.

 

(a)           In case of a default by the Borrower under this Note or
the occurrence of an “Event of Default” (as defined in the Security
Instruments), then, in consideration of the obligation of the Secretary under
the Guarantee, the Secretary, in the name of the Secretary or the United States
of America, shall have all rights, powers, privileges, and remedies of the
Holder of this Note, in accordance with the terms of this Note and the Security
Instruments, including, without limitation, the right to (i) enforce or
collect all or any part of the obligation of the Borrower under this Note or
arising as a result of the Guarantee; (ii) accelerate (as provided in
paragraph 24); (iii) compromise or otherwise negotiate with the Borrower
(but not affecting amounts due and payable to the Holder under this Note and
the Guarantee); (iv) bring suit against or foreclose upon any or all of
the security interests granted by the Borrower; and (v) to file proofs of
claim or any other document in any bankruptcy, insolvency, or other judicial
proceeding, and to vote such proofs of claim.

 

(b)           The Borrower acknowledges that FFB has agreed in the Note
Purchase Agreement that, in consideration of the Guarantee, the Secretary shall
have the sole authority (vis-à-vis FFB), in the case of a default by the
Borrower under this Note or the occurrence of an Event of Default under the
Security Instruments, in respect of acceleration (as provided in paragraph 24),
the exercise of other remedies available hereunder or under the Note Purchase
Agreement, and the disposition of sums or property recovered.

 

24.                               Acceleration.

 

Upon
the occurrence and continuation of a default by the Borrower under this Note or
an Event of Default under the Security Instruments, the Secretary, pursuant to
the Security Instruments, may declare the entire unpaid principal amount of
this Note, all interest thereon, and all other amounts payable under this Note,
and upon such declaration such amounts shall become, due and payable to the
Secretary, under the circumstances described, and in the manner and with the
effect provided, in the Security Instruments.

 

25.                               Governing
Law.

 

This
Note shall be governed by, and construed and interpreted in accordance with,
the Federal law and not the law of any state or locality.  To the extent that a court looks to the laws
of any state to determine or define the Federal law, it is the intention of the
parties hereto that such court shall look only to the laws of the State of New
York without regard to the rules of conflicts of laws.

 

 

IN WITNESS WHEREOF, the Borrower has caused this
Note to be signed in its limited liability company name, all as of the day and
year first above written.

 

	
   

  	
  STEPHENTOWN REGULATION SERVICES LLC

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature: 

  	
  /s/ James M. Spiezio

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  James M. Spiezio

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Treasurer and Secretary

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