Document:

Exhibit 10.1 Material Definitive Agreement

Exhibit 10.1

EAGLEVILLLE PROPERTY

EXPLORATION AND MINING LEASE AND OPTION TO PURCHASE AGREEMENT

This Exploration and Mining Lease and Option to Purchase Agreement (the “Agreement”) is made and entered into this 13th day of December, 2011 (the “Effective Date”) by and between Mountain Gold Exploration, Inc., (“MGEINC”) a Nevada Corporation with an undivided interest of 34% and Lane A. Griffin and Associates with an undivided interest of 66%, collectively herein referred to as (the “Owner”) and Rarus Minerals Inc., a Nevada Corporation (the “Lessee”).

RECITALS

A.

Owner owns or controls the mineral rights and other certain interests to the Eagleville Property which consists of 57 unpatented lode-mining claims located on United States Bureau of Land Management ("BLM") lands in the Eagleville Mining District, Mineral County, Nevada. The Eagleville Property claims are described in greater detail in Exhibit A attached hereto. Collectively, the Eagleville Property, including but not limited to the claims, shall be referred to as (the “Property”.)

B. 

Owner desires to lease the Property to Lessee and to grant to Lessee the option to purchase the Property on the terms and conditions of this Agreement.

NOW THEREFORE, in consideration of their mutual promises, the parties agree as follows:

1. 

Definitions. The following defined terms, wherever used in this Agreement, shall have the meanings described below:

1.1

“Applicable Environmental Laws” means any applicable federal, state, or local government law (including common law), statute, rule, regulation, ordinance, permit, license, requirement, agreement or approval, or any applicable determination, judgment, injunction, directive, prohibition or order of any governmental authority with jurisdiction at any level of federal, state, or local government, relating to pollution or protection of the environment, ecology, natural resources, or public health or safety.

1.2

“Area of Interest” (the “AOI”) means the geographic area and legal description exterior to the boundary of the claims and effective as of the Property as it exists on the Effective Date. The AOI shall be defined as: T 14N, R33E sections 32, 33, 34 and 35 and T 13N, R 33E sections 2, 3, 4, 5, 8, 9, 10 and 11.

1.3

“Closing” means the delivery and exchange of documents and payments described in Section 5.

1.4

“Closing Date” means the date on which Lessee’s purchase of the Property is closed in accordance with Section 5.

1.5 

“Commercial Production” means the mining, extraction, processing and recovery for sale of Minerals from the Property, excluding the taking of Minerals from the Property for the purpose of bulk sampling or determining the amenability of the Minerals to beneficiation processes or mining;

1.6

“Data” means any and all factual and interpretative, original and copies of all written, hard copy and digital geological, geochemical, metallurgical and geophysical data, including but not limited to reports, documents, correspondences, maps, drill logs, drill chips trays, core, coarse rejects, pulps, core tests, hand samples, surveys, assays, analyses, production reports, operations, technical, accounting and financial records, and all other information present, acquired, generated, delivered to or in Lessee’s possession pertaining to the Property and Owner’s interest herein. 

1.7

“Deed” means the conveyance, included as Exhibit C, which Owner is obligated to execute and deliver to Lessee on Lessee’s exercise and closing of the Option in accordance with Section 5.5. 

1.8 

“Effective Date” means December 13, 2011, regardless of the signatures execution dates.

1.9

“Governmental Regulations” means all directives, laws, orders, ordinances, regulations and statutes of any federal, state, provincial or local agency, securities commission, court or office.

1.10 

“Hazardous Materials” means any material, waste, chemical, mixture or byproduct which: (i) is or is subsequently defined, listed, or designated under Applicable Environmental Laws as a pollutant, or as a contaminant, or as toxic or hazardous; or (ii) is harmful to or threatens to harm public health, safety, ecology, or the environment and which is or hereafter becomes subject to regulation by any federal, state or local governmental authority or agency.

1.11

“Interest Rate” means LIBOR plus two percent (2%) per annum.

1.12

“Lease Year” means each one (1) year period following the Effective Date during the Term. 

1.13

“Lessee” means Rarus Minerals Inc., a Nevada Corporation, and its successors and assigns.

1.14

“Minerals” means all minerals and mineral materials, including gold, silver, platinum and platinum group metals, base metals, antimony, chromium, cobalt, copper, lead, manganese, mercury, nickel, molybdenum, titanium, tungsten, zinc, and other metals and mineral materials that are on, in or under the Property. 

1.15

“Payments” means the Advanced Royalty Payments, Production Royalty Payments, and Common Share Issuance payable by Lessee in US Dollars and in the methods in accordance with Sections 4, 4.1, 4.2, 4.3, 4.4 and 4.5.

1.16

“Net Smelter Returns (the “NSR”) means the net smelter returns from the production of Minerals from the Property as calculated and determined in accordance with Section 4 and 4.2, and Exhibit B attached to the Deed. 

1.17

“Option” means the option to purchase the Property granted by Owner to Lessee in accordance with Section 4, 4.3, 4.4 and Section 5.

1.18

“Owner” means collectively Mountain Gold Exploration, Inc. (“MGEINC”) a Nevada Corporation and its successors and assigns; and Lane A. Griffin and Associates and its successors and assigns.

1.19

“Property” means the 57 unpatented mining claims situated in Mineral County, Nevada and more particularly described in Exhibit A attached hereto, plus any additional unpatented mining claims located within the Area of Interest by Owner or Lessee, which shall be made subject to this Agreement in accordance with its terms. If Lessee, its successors or assigns amends, relocates or patents any of the unpatented mining claims described in Exhibit A, or if Lessee converts any of such claims into leases or other types of property rights or interests pursuant to any amendment of the United States Mining Law of 1872, such claims, rights and interests shall be deemed to be included within the Property.

1.20

“Purchase Price” means the purchase price for the Property described In Section 5.

1.21

“Royalty” means the production royalty payable in cash or in-kind by Lessee to Owner in accordance with Section 4, 4.2 and 4.3.

 

2.

Lease and Grant of Rights. Owner hereby leases (the “Lease”) the Property to Lessee and grants Lessee the rights and privileges to use the Property pursuant to the terms of this Agreement.

2.1

Lease. Owner leases the Property to Lessee for the purpose of exploration for Minerals. Lessee shall have the right to conduct all customary mineral exploration activities including, but not limited to geological mapping, soil sampling, rock chip sampling, geophysical surveys, trenching, drilling, and excavation of test pits for bulk samples, all subject to appropriate state and federal permitting. Lessee shall further have the right to develop and mine such Minerals in accordance with all Federal and State laws and regulations.

2.2

Water Rights. Subject to the regulations of the State of Nevada concerning the appropriation and taking of water, Lessee shall have the right to appropriate and use water, to drill wells for the water on the Property and to lay and maintain all necessary water lines as may be required by Lessee in its operations on the Property. If lessee acquires or files any application for appropriation or a permit, it shall cause each such application and permit to be taken jointly in the names of Owner and Lessee. On termination of this Agreement, except on Lessee’s exercise and closing of the Option, Lessee shall assign and convey to Owner all permits and water rights appurtenant to the Property, which are acquired by Lessee during the term of the Agreement. If Lessee exercises and closes on the Option, Owner shall assign and convey to Lessee all permits and water rights appurtenant to the Property.

2.3 

Cross Mining. Lessee may use the Premises for any shafts, openings, pits, and stockpile-grounds sunk or made for the mining, removal, and/or stockpiling of any Mineral Substances from any adjoining or nearby property. Mineral Substances taken from the Premises shall at all times be kept entirely separate and distinct from any other ore or concentrated product, until the same are measured and sampled so that the rights of Owner shall be at all times preserved and protected.

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2.4

Commingling. Lessee shall have the right to commingle ore and minerals from the Premises with ore from other lands and properties; provided, however, that Lessee shall calculate from representative samples the average grade of the ore and shall weigh (or calculate by volume) the ore before commingling. If concentrates, dore, or any other processed, beneficiated, or refined mineral products (“Concentrates”) are produced from the commingled ores by Lessee, Lessee shall also calculate from representative samples the average recovery percentage for all such concentrates produced during the calendar quarter and shall allocate a percentage of concentrate production to Owner according to such calculations. In obtaining representative samples and calculating the average grade of the ore and average recovery percentages, Lessee may use any procedures accepted in the mining and metallurgical industry which it believes suitable for the type of mining and processing activity being conducted and, in the absence of fraud, its choice of such procedures shall be final and binding on Owner. In addition, comparable procedures may be used by Lessee to apportion among the commingled ores penalty charges, if any, imposed by the purchases or such ore or concentrates.

3.

Term. Subject to prior termination, the term (the “Term”) of this Agreement shall be for a period of fifty (50) years commencing on the Effective Date. 

4.

Consideration for the Granting of the Lease. Lessee shall make the following Payments to Owner:

4.1

Advanced Royalty Payments. In consideration of the granting of the Lease to the Lessee, on the dates described below, Lessee shall pay to Owner their respective percentage: 

			
	Date

	 
	Payment Amount

	On Execution of this Agreement (“Effective Date”)

	$

	15,000.00*

	First anniversary of the Effective Date

	$

	15,000.00

	Second anniversary of the Effective Date

	$

	20,000.00

	Third anniversary of the Effective Date

	$

	30,000.00

	Fourth anniversary of the Effective Date

	$

	40,000.00

	Fifth thru tenth anniversary of the Effective Date

	$

	50,000.00

	Eleventh anniversary of the Effective Date and thereafter

	$

	100,000.00

*(With the payment split as: $5,100 (34%) to Mountain Gold Holdings LLC Series C; and $9,900 (66%) to Lane A. Griffin and Associates; and all   future payments being based on the same split of 34% to Mountain Gold Holdings LLC Series C; and 66% to Lane A. Griffin and Associates). 

The Advanced Royalty Payments shall be nonrefundable and Owner shall have sole discretion on which payment to accept on the First anniversary. The Advanced Royalty Payments shall be credited against the Royalty, but not the Purchase Price. The Advanced Royalty Payment which is due within 15 days of the Effective Date shall be delivered and received by Owners or this Agreement shall be null and void and Lessee shall have no rights, title or interest to this Agreement, unless modified and agreed upon in writing by both parties.

4.2

Production Royalty Payment. Lessee shall pay to Owner a production royalty equal to three percent (3%) of the Net Smelter Returns (“NSR”) from the production or sale of Minerals from the Property. Lessee shall pay to Owner a production royalty equal to one percent (1%) of the Net Smelter Returns (“NSR”) from the production or sale of Minerals from all third party properties within the Area of Interest (“AOI”). Lessee shall calculate and pay the Royalty in accordance with Exhibit B attached to the Deed, included as Exhibit C. Lessee shall pay the Royalty within one (1) month after the last day of each calendar month during which Lessee sells or ships any Minerals or products of Minerals produced from the Property. The production royalty for barite shall be ten percent (10%) of gross production receipts from the sale of barite.

4.3

Royalty Purchase Option. Lessee shall have the option to purchase a portion of the 3% Royalty from the “Property” representing one percent (1%) of the NSR for one million dollars ($1,000,000 million), in accordance with the terms of the Deed. Lessee shall have the option to purchase an additional one percent (1%) of the NSR for three million dollars ($3,000,000 million), in accordance with the terms of the Deed. Lessee may exercise the option to purchase the Royalty at any time within one hundred and eighty (180) days after Lessee completes a positive, bankable, feasibility study and commits the development of the Property as a mine. The one percent (1%) Royalties from third parties within the AOI shall not be available for purchase. 

4.3

Method of Payment. All payments by Lessee to Owner shall be paid by check, wire or delivery of “In-Kind” at Owner’s sole discretion, and delivered to Owner at its address for notice purposes or by wire transfer to an account designated by each Owner. At Owner discretion and election, the payment of Precious Metals NSR Royalty may be paid in Cash or In-kind as defined in Exhibit B. All payments shall be accompanied by a statement explaining the manner in which the payment was calculated. Payments shall be delivered to Owner in the amounts of 100%. All cash payments and sums referred to in this Agreement shall be in United States currency or In-Kind.

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4.4 

Common Shares Issuance. Owner shall receive the following shares of Lessee common stock, which shall be distributed as follows:

a)

500,000 shares of Lessee common stock to Mountain Gold Holdings, LLC Series S within thirty (30) days of the Effective Date or this Agreement shall be null and void and Lessee shall have no rights, title or interest to this Agreement, unless modified and agreed upon in writing by Owner and Lessee; and

b)

1,000,000 shares of Lessee common stock to Lane Griffin and Associates within thirty (30) days of the Effective Date or this Agreement shall be null and void and Lessee shall have no rights, title or interest to this Agreement, unless modified and agreed upon in writing by Owner and Lessee,

The shares of Lessee common stock shall be deemed fully paid and non-assessable, and issued in compliance with all applicable federal and state securities laws. The Owner will have the same privileges and rights as all other holders of Lessee common stock. The stock shall be issued and delivered to the Owner based on their appropriate interest in the Property. Owner acknowledges that the stock evidencing the shares shall bear a legend indicating that the shares have not been registered under the Securities Act of 1933, as amended, and are restricted securities for purposes of U.S. federal securities laws. The shares of Lessee common stock being issued to Owner may not be sold, transferred or assigned in the absence of an effective registration statement for the securities under said Act, or an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, that registration is not required under said Act and that there is an applicable exemption under the Act. Lessee shall not unreasonably delay, interfere with or hinder Owners’ request to remove any restrictive legend associated with the shares so long as such request is in compliance with U.S. federal securities laws. 

4.5

Late Charge and Interest. Lessee acknowledges that late payment by Lessee to Owner of Advanced Royalty Payments, Royalty or other payment or sums due from Lessee will cause Owner to incur costs not contemplated by this Agreement, the exact amount of which will be extremely difficult to ascertain. Accordingly, if any Advanced Royalty Payment, Royalty or any other amount due and payable by Lessee is not received by Owner within thirty (30) days after such amount is due, then Lessee shall pay to Owner a late fee equal to five percent (5%) of such overdue amount. The parties agree that such late fee represents a fair and reasonable estimate of the costs Owner will incur by reason of any late payment by Lessee. Owner acceptance of such late charge shall not constitute a waiver of Lessee’s default with respect to such overdue amount, nor prevent Owner from exercising any of Owners other rights and remedies granted under this Agreement. If any Advanced Royalty Payment, Royalty or other amount payable by Lessee remains delinquent for a period in excess of one hundred and twenty (120) days, Lessee shall pay to Owner, in addition to the late payment, interest from and after the due date based on the Interest Rate. Lessee’s payment of such interest shall not excuse or cure any default by Lessee. If any Advanced Royalty Payments, Royalty or other stock issuances or amount payable by Lessee remains delinquent for a period in excess of one hundred and twenty (120) days, then this Agreement shall be null and void and Lessee shall have no rights, titles or interests to this Agreement or the Property. 

4.6

Reimbursement of Annual Fee. Based on the standard BLM property maintenance anniversary of September 1st of each year, Lessee agrees to reimburse Owner for BLM and Mineral County Annual Maintenance and Notice to Hold Payments, such reimbursements to begin at the September 1, 2012 BLM property maintenance anniversary date; and, in respect of the County fees, the first Mineral County annual maintenance anniversary date starting in 2012. 

4.7 

Work Commitment. In consideration of the granting of the Lease to the Lessee, Lessee shall be obligated to expend the amounts (the “Work Commitment Expenditures”) list below on exploration activities by the end of each Lease year as set forth below. Federal and County Mining Claim Maintenance Fees and staking and filing fees are not expenses that Lessee may expense towards the Work Commitment.

			
	Lease Year

	 
	Amount

	First Lease Year

	$

	10,000.00

	Second Lease Year

	$

	25,000.00

	Third Lease Year

	$

	50,000.00

	Fourth Lease Year

	$

	75,000.00

	Fifth Lease Year and thereafter

	$

	100,000.00

4

All work expenditures made by Lessee during any Lease Year in excess of the work commitment expenditures required for such Lease Year shall be credited, as far as they will go, against work commitment requirements for any subsequent Lease Year. For any work commitment expenditure not fulfilled with the above work commitment time frames, the difference between the actual expenditure and the minimum work commitment expenditures shall be paid to Owner at a rate of 50% of the remaining expenditure in US dollars as the fulfillment of Lessee’s obligation and Lessee shall be entitled to keep (and not expend) 50% of such remaining expenditure up to and including the Fourth Lease Year; and in the Fifth Year and, henceforth thereafter, Lessee shall pay 100% each year to Owner for the amount of the difference between actual expenditure and the minimum required work commitment expenditure, for that applicable year.

5.

Option to Purchase. Owner grants to Lessee the exclusive right to purchase the Property, subject to the Royalty reserved by Owner, and subject to Lessee’s obligations under the conveyance executed and delivered by Owner on the closing of the Option. The Purchase Price for the Property shall be Four Hundred Thousand Dollars ($400,000.00). The Advanced Royalty Payments payable by Lessee to Owner in accordance with Section 4.1 shall not be credited against the Purchase Price. Lessee’s payment of the Purchase Price shall not be credited against the Royalty. 

5.1 

Notice of Election. If Lessee elects to exercise the Option, Lessee shall deliver written notice to Owner during the Term of this Agreement. Following Owner’ receipt of Lessee’s notice to exercise the Option, the parties shall make diligent efforts to close the conveyance of the Property within thirty (30) days thereafter.

5.2

Real Property Transfer Taxes. Lessee shall pay the real property transfer taxes, if any, the costs of escrow and all recording costs incurred in closing of the Option.

5.3 

Proration of Taxes. Payment of any and all state and local real property and personal property taxes levied on the Property and not otherwise provided for in this Agreement shall be the responsibility of the Owner.

5.4 

Payment on Closing. On closing of the Option, Lessee shall pay the Purchase Price to Owner.

5.5 

Conveyance on Closing. If Lessee exercises and closes the Option, Owner shall execute and deliver to Lessee the Deed. The parties shall complete the Deed by inserting the description of the Property and the schedule of the Advanced Royalty Payments. Owner and Lessee shall execute and deliver such other written assurances and instruments as are reasonably necessary for the purpose of closing the purchase of the Property.

5.6 

Effect of Closing. On closing of the Option, Lessee shall own the Property, subject to the Royalty reserved by Owner and Lessee’s obligations stated in the Deed.

6.

Compliance with the Laws. During the Term, Lessee agrees it shall at Lessee’s sole cost: (1) apply for all necessary permits, licenses and approvals; (2) promptly comply with all Governmental applicable Laws and Regulations relating to the condition, use or occupancy of the Property by Lessee, including but not limited to all exploration and development work performed by Lessee; (3) notify promptly Owner of any allegations of substantial violation thereof; and (4) prepare and file all reports or notices required by Lessee. Lessee shall not be in breach of this provision if a violation has occurred in spite of the Lessee’s good faith efforts to comply, and Lessee has timely cured or disposed of such violation through performance, or payment of fines and penalties. For greater certainty, in respect of Section 8 during the Term, Lessee shall be responsible for title, property and permitting issues. Lessee shall, at its sole cost, promptly comply with all applicable Governmental Regulations regarding reclamation of the Property and Lessee shall defend, indemnify and hold harmless Owner from any and all actions, assessment, mining claims, costs, fines, liability and penalties arising from or related to Lessee’s failure to comply with any applicable Governmental Regulations. Lessee shall perform or cause to be performed during the Term all work necessary to comply with agreements, concessions or other instruments constituting and governing the Property and associated mining claims and shall take measures necessary to maintain same in full force and effect. Lessee agrees to fence off all dangerous openings on the property and shall complete all necessary closure activities and repairs within one hundred and twenty (120) days of the Effective Date.

 

7. 

Lessee’s Work Practices and Reporting.

7.1

Work Practices. During the Term, Lessee shall work the Property in a miner-like manner.

7.2

Inspection of Property and Data. During the Term, Owner shall have the right to examine and make copies of all Data regarding the Property in Lessee’s possession during reasonable business hours and upon prior notice, provided, however, that the rights of the Owner to examine such Data shall be exercised in a manner that does not interfere with the operations of the Lessee. During the Term, Owner shall be permitted to enter the Property and Lessee’s workings at all reasonable times for the purpose of inspection, but Owner shall enter on the Property at their own risk and in such a manner which does not unreasonably hinder, delay or interfere with Lessee’s operations. 

5

7.3 

Reports and Release of Data. Within sixty (60) days of the end of each Lease Year, Lessee shall, at Lessee’s sole costs, deliver to Owner address as set forth in the Notice provision in Section 22 herein, a copy of all Data, as well as deliver to Owner a report of all of Lessee’s activities conducted on the Property for such Lease Year, including itemized information concerning Work Commitment Expenditures incurred during the Lease Year. Within sixty (60) days of the completion of all third party services which results in the production of Data (including but not limited to geochemical laboratories, geophysical surveys, remote sensing surveys), Lessee shall obtain from such service provider an assignment of all intellectual property rights in the Data to the Owner and provide a copy of the same to the Owner. Lessee shall as well as forward release letters from third parties of specific surveys and data generated to Owner such that Owner owns the data and has full access to the Data. 

8.

Location of Additional Unpatented Mining Claims. During the Term, all unpatented mining claims acquired by either Owner or Lessee which are partially or wholly in the Area of Interest shall be recorded in Owner’s name and shall be part of and subject to this Agreement. If either Lessee or Owner acquires any unpatented mining claims in the Area of Interest, such party shall promptly notify the other party. Either party may execute and deliver an amendment of this Agreement, in recordable form, which provides that the newly acquired unpatented mining claims are part of the Property and are subject to this Agreement. The amendment may be recorded by either party.

8.1

Owner Acquired Rights. If at any time while this Agreement is in effect, Owner stakes or otherwise acquires, directly or indirectly, any right to or interest in any mining claims, license, lease, grant, concession, permit, patent, or other minerals, property or surface rights or water rights (collectively, the “Acquired Rights”) located wholly or partly within the Area of Interest, the Owner shall forthwith give notice to Lessee of that staking or acquisition, the cost thereof and all details in possession of the Owner with respect to the nature of the Acquired Rights and the known mineralization. Lessee may, within sixty (60) days of receipt of this notice, elect to include within the Option the Acquired Rights by reimbursing the Owner for any and all acquisition costs. If Lessee elects not to include the Acquired Rights as part of the mining claims subject to this Agreement the Owner shall hold such Acquired Rights separate from this Agreement and Firestone shall have no rights or obligations thereto.

8.2

Lessee Acquired Rights. If at any time while this Agreement is in effect, Lessee or otherwise acquires Acquired Rights located wholly or partly within the Area of Interest, then those Acquired Rights shall: (a) be included under this Agreement; (b) the cost of acquisition shall be deemed to be Exploration Expenditures; and (c) be transferred to the Owner should this Agreement expire or terminate. 

8.3

Existing Third Party Rights. Existing third party Rights wholly or partly located in the Area of Interest at the Effective Date are not subject to this Agreement; however, if third party Rights expire while this Agreement is in effect, then both the Owner and the Lessee have the right to stake or otherwise acquire any Rights subject to 8.1 and 8.2.

9.

Liens and Notices of Non-Responsibility. Lessee agrees to keep the Property at all times free and clear of all liens, charges and encumbrances of any and every nature and description done made or caused by Lessee, and to pay, and defend, indemnify and hold harmless Owner from and against, all indebtedness and liabilities incurred by or for Lessee which may or might become a lien, charge or encumbrance; except that Lessee need not discharge or release any such lien, charge or encumbrance so long as Lessee disputes or contests the lien, charge or encumbrance and posts a bond sufficient to discharge lien acceptable to Owner. Subject to Lessee’s right to post a bond in accordance with the foregoing, if Lessee does not within sixty (60) days following the imposition of any such lien, charge or encumbrance, cause the same to be released of record, Owner shall have, in addition to Owner’s contractual and legal remedies, the right, but not the obligation, to cause the lien to be released by such manner as Owner deems proper, including payment of the claim giving rise to such lien, charge or encumbrance. All sums paid by Owner for and all expenses incurred by it in connection with such purpose, including court costs and attorney’s fees, shall be payable by Lessee to Owner on demand at the Interest Rate. Owner shall, at Owner’s sole cost, file a Notice of Non-Responsibility in Owner name with the local County within sixty (60) days of execution of this Agreement and herein attached as Exhibit C and by this reference incorporated in this Agreement. 

10.

Taxes.

10.1

Real Property Taxes. Owner shall pay any and all taxes assessed and due against the Property before execution of this Agreement, if required. Lessee shall pay promptly before delinquency all taxes and assessments, general, special, ordinary and extraordinary, that may be levied or assessed during the Term upon the Property. All such taxes for the year in which this Agreement is executed and for the year in which this Agreement terminates shall be prorated between Owner and Lessee, except that neither Owner nor Lessee shall be responsible for the payment of any taxes which are based upon income, net proceeds, production or revenues or any other activities from the Property assessed solely to the other party. The parties acknowledge that there are presently no real property taxes assessed against unpatented mining claims, including the unpatented mining claims which constitute the Property. 

6

10.2

Personal Property Taxes. Each party shall promptly when due pay all taxes assessed against such party’s personal property, improvements or structures placed or used on the Property.

10.3

Income Taxes. Neither the Owner nor the Lessee shall be liable for any taxes levied on or measured by income or net proceeds, or other taxes applicable to the other, based upon payments under this Agreement. 

10.4

Delivery of Tax Notices. If Owner receives tax bills or claims that are Lessee’s responsibility, Owner shall promptly forward them to Lessee for payment.

11.

Insurance and Indemnity. 

11.1

Lessee’s Liability Insurance. Lessee shall, at Lessee’s sole cost, keep in force during the Term a policy of commercial general liability insurance covering property damage and liability for personal injury occurring on or about the Property, with limits in the amount of at least Two Million Dollars ($2,000,000) per occurrence for injuries to or death of person, One Million Dollars ($1,000,000) per occurrence for property damage, and with a contractual liability endorsement insuring Lessee’s performance of Lessee’s indemnity obligations of this Agreement.

11.2 

Form and Certificates. The policy of insurance required to be carried by Lessee pursuant to this Section shall have a Best’s Insurance Rating of at least A-IX. Such policy shall name Owner as an additional insured and contain a cross-liability and severability endorsement. Lessee’s insurance policy shall also be primary insurance without right of contribution from any policy carried by Owner. A certificate of insurance and a copy of Lessee’s insurance policy shall be provided to Owner before any entry by Lessee or its agents or employees on the Property and shall provide that such policy is not subject to cancellation, expiration or change, except upon thirty (30) days prior written notice to Owner. 

11.3 

Waiver of Subrogation. Lessee and Owner each waives any and all rights of recovery against the other, and against the partners, members, officers, employees, agents and representatives of the other, for loss of or damage to the Property or injury to person to the extent such damage or injury is covered by proceeds received under any insurance policy carried by Owner or Lessee and in force at the time of such loss or damage.

11.4 

Waiver and Indemnification. Except to the extent caused by the negligent or intentionacts or omissions of the Owner, the Owner shall not be liable to Lessee and Lessee waives all claims against Owner for any injury to or death of any person or damage to or destruction of any personal property or equipment or theft of property occurring on or about the Property or arising from or relating to Lessee’s business conducted on the Property. Lessee shall defend, indemnify and hold harmless Owner and its members, officers, directors, agents and employees from and against any and all claims, judgments, damage, demands, losses, expenses, costs or liability arising in connection with injury to person or property from any activity, work, or things done, permitted or suffered by Lessee or Lessee’s agents, partners, servants, employees, invitees or contractors on or about the Property, or from any breach or default by Lessee in the performance of any obligation on the part of Lessee to be performed under the terms of this Agreement (all of the foregoing collectively referred to as “General Indemnity Claims”). Lessee agrees to defend all General Indemnity Claims on behalf of Owner, with counsel acceptable to Owner, acting reasonably. The obligations of Lessee contained in this Section shall survive the expiration or termination of this Agreement. 

12.

Environmental.

12.1

Environmental. Hazardous Materials means any material, waste, chemical, mixture or byproduct which: (a) is or is subsequently defined, listed, or designated under Applicable Environmental Laws (defined below) as a pollutant, or as a contaminant, or as toxic or hazardous; or (b) is harmful to or threatens to harm public health, safety, ecology, or the environment and which is or hereafter becomes subject to regulation by any federal, state or local governmental authority or agency. Applicable Environmental Laws means any applicable Federal, state, or local government law (including common law), statute, rule, regulation, ordinance, permit, license, requirement, agreement or approval, or any applicable determination, judgment, injunction, directive, prohibition or order of any governmental authority with jurisdiction at any level of Federal, state, or local government, relating to pollution or protection of the environment, ecology, natural resources, or public health or safety.

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12.2

Lessee Hazardous Material Activities. Lessee shall limit any use, generation, storage, treatment, transportation, and handling of Hazardous Materials in connection with Lessee’s use of the Property (collectively “Lessee Hazardous Materials Activities”) to those Hazardous Materials, and to quantities of them, that are necessary to perform activities permitted under this Agreement. Lessee Hazardous Materials Activities may include, without limitation, all such activities on or about the Property by Lessee’s employees, partners, agents, invitees, contractors and their subcontractors. Lessee shall not cause or permit any Hazardous Materials to be disposed or abandoned at the Property. Lessee shall cause all Lessee Hazardous Materials Activities to be performed in strict conformance to Applicable Environmental Laws. Lessee shall promptly notify Owner and any applicable governmental agencies of any actual or claimed violation of Applicable Environmental Laws in connection with Lessee Hazardous Materials Activities, and Lessee shall promptly and thoroughly cure any violation of Applicable Environmental Laws in connection with Lessee Hazardous Materials Activities. If any governmental approval, consent, license or permit is required under Applicable Environmental Laws for Lessee to perform any portion of its work at the Property, including without limitation any air emission permits, before commencing any such work, Lessee shall be solely responsible, at Lessee’s expense, for obtaining and maintaining, and providing copies of, each approval, consent, license or permit. Qualified personnel who have received proper training with respect to Hazardous Materials, including compliance with applicable OSHA laws and regulations, shall perform all Lessee Hazardous Materials Activities. Lessee shall cause all Hazardous Materials present at the Property in connection with Lessee Hazardous Materials Activities to be safely and securely stored. Lessee agrees to conduct all of its activities on the Property in accordance with all Applicable Environmental Laws.

12.3

Spills of Hazardous Materials. Lessee shall promptly notify Owner and each governmental regulatory entity with jurisdiction of any spills, releases, or leaks of Hazardous Materials that occur in connection with Lessee Hazardous Materials Activities or Lessee’s use of the Property, including but not limited to any resulting contamination of the environment (collectively “Lessee Contamination”). Further, Lessee shall promptly notify Owner and any applicable governmental agencies of any claims of which Lessee becomes aware regarding any actual or alleged Lessee Contamination. Lessee shall be solely responsible at its expense for promptly, diligently and thoroughly investigating, monitoring, reporting on, responding to, and cleaning up to completion any and all such Lessee Contamination, in full conformance to Applicable Environmental Laws (collectively the “Lessee Environmental Response Work”). All Lessee Environmental Response Work shall be reported to each governmental regulatory entity with jurisdiction on an ongoing basis (as required by Applicable Environmental Laws), and Lessee shall diligently attempt to obtain written concurrence from such each such regulatory entity that all Lessee Environmental Response Work has been satisfactorily performed and completed. Lessee at its expense shall keep Owner timely informed of Lessee’s progress in responding to any Lessee Contamination, including but not limited to providing Owner with copies, at Lessee’s expense, of all reports, work plans, and communications with governmental regulatory entities.

12.4

Removal of Stored Hazardous Materials. Before the expiration or termination of this Agreement, and notwithstanding any other provision of this Agreement, and in full conformance to Applicable Environmental Laws, Lessee shall: (a) cause to be properly removed from the Property all Hazardous Materials stored at the Property in connection with Lessee’s use of the Property or in connection with Lessee Hazardous Materials Activities; and (b) cause to be properly dismantled, closed and removed from the Property all devices, drums, equipment and containments used for handling, storing or treating Hazardous Materials Activities. As part of the closure and removal activities described in the preceding sentence, Lessee shall cause to be performed representative environmental sampling of areas of the Property where such handling, storing or treating of Hazardous Materials occurred, to confirm that no contamination of the environment has resulted from any Lessee Hazardous Materials Activities. A qualified environmental consultant shall perform such sampling, and such consultant shall promptly issue a written report, which describes the consultant’s data, findings, and conclusions, a copy of which shall be provided to Owner at Lessee’s expense. If any Lessee Contamination is discovered, Lessee shall immediately initiate Lessee Environmental Response Work as prescribed in this Agreement.

12.5

Environmental Indemnity. Lessee shall promptly reimburse, defend, indemnify (with legal counsel acceptable to Owner, acting reasonably) and hold harmless Owner, its employees, assigns, successors-in-interest, agents and representatives from any and all claims, liabilities, obligations, losses, causes of action, demands, governmental proceedings or directives, fines, penalties, expenses, costs (including but not limited to reasonable attorney’s fees, consultant’s fees and other expert’s fees and costs), and damages, which arise from or relate to: (a) Lessee Hazardous Materials Activities; (b) Lessee Contamination; (c) any non-compliance with Applicable Environmental Laws in connection with Lessee’s use of the Property; or (d) a breach of any obligation of Lessee under this Section.

12.6

Survival. The provisions of this Section shall survive expiration and termination of this Agreement.

8

13. 

Property Maintenance and Work Commitment.

 

13.1 

Annual Assessment Work. To the extent required by law, beginning with the annual assessment work period of September 1, 2012 to September 1, 2013, and for each subsequent annual assessment work year commencing during the Term and not less than thirty (30) days before the applicable deadline, Lessee shall perform, for the benefit of the Property, work of a type customarily deemed applicable as assessment work and of sufficient value to satisfy the annual assessment work requirements of all applicable federal, state and local laws, regulations and ordinances, if any, and shall prepare evidence of the same in form proper for recordation and filing, and shall timely record and/or file such evidence in the appropriate federal, state and local office as required by applicable Federal, State, County and local laws, regulations and ordinances. Lessee shall deliver to Owner proof of Lessee’s compliance with this Section not less than fifteens (15) days before the applicable deadline. If Lessee elects to terminate this Agreement more than three (3) months before the deadline for performance of annual assessment work for the succeeding annual assessment year, Lessee shall have no obligations to either perform annual assessment work or to prepare, record and /or file evidence of the same for the following annual assessment year. The parties acknowledge that there are presently no annual assessment work requirements for the unpatented mining claims which constitute the Property. 

13.2

Federal, State and County Mining Claim Maintenance Fees. If under applicable federal laws and regulations federal annual mining claim maintenance fees are required to be paid for the unpatented mining claims which constitute all or part of the Property, beginning with the annual assessment work period of September 1, 2012 to September 1, 2013 and not less than thirty (30) days before the applicable deadline, Lessee shall timely and properly pay the federal annual Mining Claim Maintenance fees, and county annual Affidavit and Notice of Intent to Hold fees, and shall execute and record or file, as applicable, proof of payment of the federal annual mining claim maintenance fees and of Owner’s intention to hold the unpatented mining claims which constitute the Property. Lessee shall deliver to Owner proof of Lessee’s compliance with this Section not less than fifteen (30) days before the applicable deadline. If Lessee elects to terminate this Agreement more than ninety (90) days before the deadline for payment of the federal annual Mining Claim Maintenance fees for the succeeding annual assessment year, Lessee shall have no obligation to pay the federal annual Mining Claim Maintenance fees for the Property for the succeeding assessment year. Lessee shall timely and properly pay and record an Affidavit and Notice of Intent to Hold in the County the Property is located in, by not less than thirty (30) days before the applicable deadline. Lessee shall deliver to Owner proof of Lessee’s compliance of the federal and county annual filings with this Section not less than thirty (30) days before the applicable deadlines.

13.3

Amendment of Mining Laws. The parties acknowledge that legislation for the amendment or repeal of the mining laws of the United States applicable to the Property has been, and in the future may be, considered by the United States Congress. The parties desire to insure that any and all interests of the parties in the lands subject to the unpatented mining claims which comprise all or part of the Property, including any rights or interests acquired in such lands under the mining laws as amended, repealed or superseded, shall be part of the Property and shall be subject to the Agreement. If the mining laws applicable to the unpatented mining claims subject to this Agreement are amended, repealed or superseded, the conversion or termination of Owner’s interest in the Property pursuant to such amendment, repeal or supersession of the mining laws shall not be considered a deficiency or defect in Owner title in the Property, and Lessee shall have no right or claim against Owner resulting from the conversion, diminution, or loss of Owner’s interest in and to the Property, except as expressly provided in this Agreement. 

If pursuant to any amendment or supersession of the mining laws, Owner is granted the right to convert its interest in the unpatented mining claims comprising the Property to a permit, license, lease, or other right or interest, all converted interests or rights shall be deemed to be part of the Property subject to this Agreement. Upon the grant or issuance of such converted interests or rights, the parties shall execute and deliver an addendum to this Agreement, in recordable form, by which such converted interests or rights are made subject to this Agreement. 

14. 

Relationship of the Parties.

14.1

No Partnership. This Agreement shall not be deemed to constitute any party, in its capacity as such, the partner, agent or legal representative of any other party, or to create any joint venture, partnership, mining partnership or other partnership relationship between the parties.

14.2

Competition. Except as expressly provided in this Agreement, each party shall have the free and unrestricted right independently to engage in and receive the full benefits of any and all business endeavors of any sort outside the Property or outside the scope of this Agreement, whether or not competitive with the endeavors contemplated under this Agreement, without consultation with or participation of the other party. In particular, without limiting the foregoing, neither party to this Agreement shall have any obligation to the other as to any opportunity to acquire any interest, property or right offered to it outside the scope of this Agreement.

9

15. 

Inspection. Owner or Owner’s duly authorized representatives shall be permitted to enter on the Property at all reasonable times for the purpose of inspection, but they shall enter on the Property at their own risk and in such a manner which does not unreasonably hinder, delay or interfere with Lessee’s operations.

16. 

Title. Owner represents to Lessee to the best of their knowledge and belief as follows: (a) the mining claims which were located by Owner and which are part of the Property were properly located in accordance with applicable federal and state laws and regulations; (b) all assessment work requirements for the claims have been performed and all filings and recordings of proof of performance have been made properly and the federal annual mining claim maintenance and rental fees have been paid properly; (c) the claims are in good standing; (d) subject to the paramount title of the United States, Owner has good right and full power to lease and to convey the interests described in this Agreement; (e) the claims are free and clear of all liens, claims and encumbrances created by, through or under Owner. Owner represents the occurrence of mineral discovery on the property only to minimally satisfy the terms of location for unpatented mining claims; and (f) Owner disclaims any representation or warranty concerning the existence or proof of a discovery of locatable Minerals on or under the Property. No other statement of mineral value is expressed or implied.

17. 

Covenants, Warranties and Representations. Each of the parties covenants, warrants and represents for itself as follows:

17.1

Compliance with Laws. That the parties have complied with all applicable laws and regulations of any governmental body, federal, state or local, regarding the terms of and performance of its obligations under this Agreement.

17.2

No Pending Proceedings. Both parties acknowledge that there are no lawsuits or proceedings pending or threatened which affect its ability to perform the terms of this Agreement.

17.3

Costs. That the parties have shall pay their own costs and expenses incurred or to be incurred by it in negotiating and preparing this Agreement and in closing and carrying out the transactions contemplated by this Agreement.

17.4

Brokers. That the parties have had no dealings with any agent, broker or finder in connection with this Agreement, and shall indemnify, defend and hold the other party harmless from and against any claims that may be asserted through such party that any agent’s broker’s or finder’s fee is due in connection with this Agreement.

17.5

Patriot Act. That the parties are not on the Specially Designated National & Blocked Persons List of the Office of Foreign Assets Control of the United States Treasury Department and are not otherwise blocked or banned by any foreign assets office rule or any other law or regulation, including the USA Patriot Act or Executive Order 13224.

17.6 

Lessee Representation and Warrants. Lessee represents and warrants to Owner that: 

a)

it is qualified to acquire and dispose of interests in, and to explore, develop and exploit, mining properties in the State of Nevada;

b)

it has full power, capacity and authority to carry on its business and to enter into and perform its obligations under this Agreement and any agreement or instrument referred to or contemplated by this Agreement;

c)

all necessary corporate and shareholder or partnership approvals have been obtained and are in effect with respect to the transactions contemplated hereby, and no further action on the part of the directors or shareholders is necessary or desirable to make this Agreement valid and binding on it;

d)

neither the execution and delivery of this Agreement nor any of the agreements referred to herein or contemplated hereby, nor the consummation of the transactions hereby contemplated conflict with, result in the breach of or accelerate the performance required by its constating documents or any agreement to which it is a party;

e)

it is familiar with the laws and regulations that relate to the Property (including without limitation, the laws and regulations of the Nevada State Land Department); and,

f)

there is no finders’ fee or other obligations imposed upon the Lessee related to the execution of the Option, and the Lessee shall indemnify and hold harmless the Owner from any such claim.

17.7

Owner Representation and Warrants. Owner hereby represents and warrants to Lessee that:

a)

it has full power, capacity and authority to enter into and perform its obligations under this Agreement and any agreement or instrument referred to or contemplated herein;

b)

neither the execution and delivery of this Agreement nor any of the agreements referred to herein or contemplated hereby, nor the consummation of the transactions hereby contemplated conflict with, result in the breach of or accelerate the performance required by, any agreement to which Owner is a party;

10

c)

each of the unpatented mining claims included in and comprising the Property have been duly issued by the State of Nevada and are in good standing and Owner hold an undivided, sole and exclusive 100% interest in and to each of the permits comprising the Property, free and clear of all liens, charges, royalties and encumbrances;

d)

there are no pending or threatened actions, suits, claims or proceedings regarding the Property or any portion thereof of which Owner is aware;

e)

it does not warrant the accuracy of any data or technical information furnished to Lessee either before or subsequent to the execution of this Agreement; and 

f)

it has the exclusive right to enter into this Agreement, have not made any sale, lease or agreement affecting the rights granted herein, and have all necessary powers and authority to dispose of any and all rights, titles and interests in and to the Property in accordance with the terms of this Agreement.

17.8

Representations and Warranties Survival. The representations and warranties set forth herein are conditions on which the parties have relied in entering into this Agreement and will survive the acquisition of any interest in the Property by Lessee and each of the parties will indemnify and save the other harmless from all loss, damage, costs, actions and suits arising out of or in connection with any breach of any representation, warranty, covenant, agreement or condition made by it and contained in this Agreement.

18.

Termination by Expiration, Default or Agreement. This Agreement shall terminate as expressly provided herein, unless earlier terminated by mutual written agreement.

18.1

Termination by Owner. Any material failure by Lessee to perform any of its covenants, liabilities, obligations or responsibilities under this Agreement shall be a default. Owner may give Lessee written notice of a default. If the default is not remedied within one hundred and twenty (120) days after receipt of the notice, provided the default can reasonably be cured within that time, or, if not, if Lessee has not within that time commenced action to cure the same or does not after such commencement diligently prosecute such action to completion, Owner may terminate this Agreement by delivering notice to Lessee of Owner termination of this Agreement. In the case of Lessee’s failure to pay the Payments, Owner shall be entitled to give Lessee written notice of the default, and if such default is not remedied within one hundred and twenty (120) days after the receipt of the notice, then Owner may terminate this Agreement by delivering notice to Lessee of Owner termination of this Agreement. On termination of this Agreement based on Lessee’s default, within ten (10) days after termination Lessee shall execute and deliver to Owner a release and termination of this Agreement in form acceptable for recording. 

18.2

Termination by Lessee and Quitclaim Deed. Lessee may at any time terminate this Agreement by giving thirty (30) days advanced notice to Owner. If Lessee terminates this Agreement, Lessee shall perform all obligations and pay all payments which accrue or become due before the termination date. On Lessee’s termination of this Agreement, within ten (10) days after termination, Lessee shall execute and deliver to Owner a Release and Termination of this Agreement in form acceptable for recording or upon Owner request, at the signing of this Agreement, Lessee shall execute a Quitclaim Deed and Assignment in form acceptable by Owner and for recording that will be held in escrow at Lessee’s sole expense, which shall transfer any and all Lessee’s right, title and interest in the Property to Owner. Within ten (10) days after termination of this Agreement by Lessee, the parties agree that the Quitclaim Deed and Assignment shall be released to Owner. 

18.3

Continuing Obligations and Environmental Liabilities. During the Term of this Agreement and after termination or expiration under this Section 18, Lessee shall remain liable for liabilities to Owner and/or third parties arising out of or related to Lessee's use of and/or activities on the Property, including environmental liabilities and related bonding requirement. Lessee's liabilities and obligations shall include environmental damage and liabilities, which are caused by or as a result of work done on the Property as described in Section 6 of this Agreement. This provision shall survive expiration or termination of this Agreement.

18.4

Surrender of the Property and Disposition of Assets on Termination. On expiration or termination of this Agreement, Lessee shall surrender the Property promptly to Owner and at Lessee’s sole cost shall remove from the Property all of Lessee’s buildings, equipment and structures free and clear of all encumbrances. All costs and expenses incurred in connection with the removal or disposal of any and/or all of the personal property, including all buildings, equipment and structures and Data on the Property and the termination of this Agreement and any business related to this Section shall be expenses chargeable to Lessee and reimbursed to Owner or its Affiliates. This provision shall survive expiration or termination of this Agreement. Lessee shall reclaim the Property in accordance with all applicable Governmental Regulations. Lessee shall diligently perform reclamation and restoration of the Property such that Lessee’s reclamation and restoration shall be completed no later than the date required under any Governmental Regulations or no later than one hundred eighty (180) days of the expiration or termination of this Agreement. .

11

18.5

Right to Data after Termination. Within thirty (30) days following termination or expiration of this Agreement, Lessee shall deliver to Owner at its sole costs all Data, as defined in Section 1 Definitions and in this Agreement regarding the Property in Lessee’s possession at the time of termination which before termination have not been furnished to Owner and, at Owner request, Lessee shall deliver, at its sole costs, to Owner at Owner elected and directed location all drilling core, samples and sample splits taken from the Property. 

18.6

Non-Compete Covenants. Should Lessee terminate this agreement, Lessee shall not directly or indirectly acquire any rights, titles or interests to any portion of the Property or within the Area of Interest (AOI), for a period of two (2) year from the date of termination. If Lessee breaches this Section, Lessee shall be obligated and shall within fifteen (15) days of the breach, convey to Owner, without cost, any and all such Property or any and all other rights, titles and interests so acquired by Lessee. Such conveyance shall be made in writing and can be accepted by Owner at any time within ninety (90) days after the offer is delivered and received by Owner. Failure of Lessee to comply with this Section shall be a breach by Lessee of this Agreement, and Owner shall have any and all legal recourse to recoup its losses and damages at Lessee’s sole expense, including but not limited to attorney and legal fees.

 

 

18.7.

Continued Authority. On termination of the Agreement, Lessee shall complete any transaction and satisfy any obligation, unfinished or unsatisfied, at the time of such termination or withdrawal, if the transaction or obligation arises out of operations prior to such termination or withdrawal. Owner shall have the power and authority to grant or receive extensions of time or change the method of payment of an already existing liability or obligation, prosecute and defend actions on behalf of both parties and the Property, and take any other reasonable action.

19. Confidentiality. The Data and information, including the terms of this Agreement, coming into Lessee’s possession by virtue of this Agreement shall be deemed confidential and shall not be disclosed to outside third parties except as may be required to publicly record or protect title to the Property or to publicly announce and disclose information under Governmental Regulations or under the rules and regulations of any stock exchange on which the stock of any party, or the parent or affiliates of any party, is listed. If a party negotiates for a transfer of all or any portion of its interest in the Property or under this Agreement or negotiates to procure financing or loans relating to the Property, in order to facilitate any such negotiations such party shall have the right to furnish information to third parties, provided that each third party to whom the information is disclosed agrees to maintain its confidentiality in the manner provided in this Section.

20. Assignment.

20.1 

Assignments and Transfers. This Agreement and the terms and the conditions hereof shall be freely assignable and shall be binding upon and extend to the successors, heirs, and assigns of the parties; provided, however, that: (a) no transfer, assignment, royalty or other monies payable or the rights hereunder, however accomplished, shall operate to enlarge the obligations or diminish the rights of the parties; and (b) no assignment or transfer by Owner or Lessee shall be effective until Lessee or Owner has received written notice of such assignment or transfer. Upon an assignment or transfer, the assigning party and its assignee shall give written notice of such assignment to the non-assigning party, specifying therein the name(s) and address(s) (for notices and payments) of the assignee and the rights, titles and interests assigned. Following an assignment or transfer by Owner or Lessee, the assignee or transferee shall be deemed to be included in the term “Owner” or “Lessee” for all purposes of this Agreement.

20.2

Lessee’s Assignment. Lessee shall not assign, convey, encumber, sublease, grant any concession, or 

license or otherwise transfer (each a “Transfer”) all or any part of its interest in this Agreement or the Property, without, in each case, Owner’ prior written consent, which shall not be withheld unreasonably. Owner shall have thirty (30) days from date of notice that such Transfer is planned to object. If no objection has been received within thirty (30) days, Lessee is free to proceed with the Transfer. Any Transfer which is prohibited under this Section shall be deemed void and shall constitute a material default under the terms of this Agreement. 

 

20.3

Owner’s Assignment. Owner shall have the right to transfer assign, convey, encumber, sublease, 

grant any concession, or license or otherwise transfer all or any part of its interest in this Agreement or the Property. No change in Ownership in the Property shall affect Lessee's obligations under this Agreement unless and until Owner delivers and Lessee receives copies of the documents which demonstrate the change in Ownership of Owner's interest. Until Lessee receives Owner's notice and the documents required to be delivered under this Section, Lessee shall continue to make all payments under this Agreement as if the transfer of Owner's interest had not occurred. No division of Owner's interest as to all or any part of the Property shall enlarge Lessee's obligations or diminish Lessee's rights under this Agreement.

21. Memorandum Agreement. Concurrent with execution of this Agreement, the parties shall execute and deliver a Memorandum of Agreement (the “Memorandum”) set forth in Exhibit D attached hereto. The execution of the Memorandum shall not limit, increase or in any manner affect any of the terms of this Agreement or any rights, interests or obligations of the parties.

12

22. Notices. Any notices required or authorized to be given by this Agreement shall be in writing and shall be sent either by commercial courier, facsimile, or by certified U.S. mail, postage prepaid and return receipt requested, addressed to the proper party at the address stated below or such address as the party shall have designated to the other parties in accordance with this Section. Such notice shall be effective on the date of receipt by the addressee party, except that any facsimiles received after 5:00 p.m. of the addressee’s local time shall be deemed delivered the next day.

If to Owner:

Mountain Gold Exploration, Inc.

PO Box 21146

Reno, NV 89515

775-849-1985 (phone/fax)

And

Lane A. Griffin and Associates

321 Spokane Street

Richland, Washington, 99354

Delivery of all Data to:

Mountain Gold Exploration, Inc.

760 Brenda Way

Washoe Valley, Nevada 89704

If to Lessee:

Rarus Minerals Inc.

2850 W. Horizon Ridge Parkway

Suite 200

Henderson, NV 89052

Phone: (702) 430-4610

Fax: (702) 430-4501

23.

Binding Effect of Obligations. This Agreement shall be binding upon and inure to the benefit of the respective parties and their successors or assigns.

24.

Entire Agreement. The parties agree that the entire agreement between them is written in this Agreement. There are no terms or conditions, express or implied, other than expressly stated in this Agreement. This Agreement may be amended or modified only by a written instrument signed by the parties with the same formality as this Agreement.

25.

Governing Law and Forum Selection. This Agreement shall be construed and enforced in accordance with the laws of the State of Nevada. Any action or proceeding concerning the construction, or interpretation of the terms of this Agreement or any claim or dispute between the parties shall be commenced and heard in the Second Judicial District Court of the State of Nevada, in and for the County of Washoe, Reno, Nevada.

26.

Multiple Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which shall constitute the same Agreement.

27.

Severability. If any part, term or provision of this Agreement is held by a court of competent jurisdiction to be illegal or in conflict with any Governmental Regulations, the validity of the remaining portions or provisions shall not be affected, and the rights and obligations of the parties shall be construed and enforced as if the Agreement did not contain the particular part, term or provision held to be invalid.

28.

Time of Essence. Time is of the essence in the performance of the parties’ obligations under this Agreement.

13

LEASEE: 

RARUS MINERALS INC.

/s/ Manfred Ruf                            

Date: October 13, 2011

By: Manfred Ruf, President

OWNER:

MOUNTAIN GOLD EXPLORATION, INC.

/s/ Thomas Callicrate                  

Date: October 13, 2011

By: Thomas Callicrate, President

LANE A. GRIFFIN

/s/ Lane Griffin                             

Date: October 13, 2011

Lane A. Griffin and Associates

14

EXHIBIT A

To

Eagleville Property

Exploration and Mining Lease and Option to Purchase Agreement

_________________________________________________________________________

DESCRIPTION OF PROPERTY, INCLUDING THE AREA OF INTEREST

A.

Property: The following 57 unpatented lode mining claims located in the Eagleville Mining District, Township 13 and 14 North, Range 33, Mineral County, Nevada.

B.

Claims

					
	Claim Name

	 
	Document Number

	 
	BLM NMC#

	 
	 
	 
	 
	 

	Eagle Gold #1

	 
	183985

	 
	813143

	Eagle Gold#2

	 
	183986

	 
	813144

	Molly

	 
	153225

	 
	683538

	Mitchell

	 
	153224

	 
	683539

	Sleeper

	 
	152974

	 
	840466

	Dragon stone

	 
	150299

	 
	840467

	Eagle 8

	 
	128129

	 
	846896

	Eagle 9

	 
	128130

	 
	846867

	Eagle 10

	 
	128131

	 
	846898

	Eagle 11

	 
	128132

	 
	846899

	Eagle 12

	 
	179294

	 
	800373

	Eagle 13

	 
	128133

	 
	848900

	Eagle 14

	 
	179295

	 
	800374

	Eagle 15

	 
	128134

	 
	846901

	Eagle 16

	 
	128135

	 
	846902

	Eagle 17

	 
	128136

	 
	846903

	Eagle 18

	 
	128137

	 
	846904

	Eagle 27

	 
	128146

	 
	846913

	Eagle 28

	 
	128147

	 
	846914

	Eagle 29

	 
	128148

	 
	846915

	Eagle 30

	 
	128149

	 
	846916

	Eagle 31

	 
	128150

	 
	846917

	Eagle 32

	 
	128151

	 
	846918

	Eagle 33

	 
	179296

	 
	800375

	Eagle 35

	 
	179297

	 
	800376

	Eagle 37

	 
	128152

	 
	846919

	Eagle 39

	 
	128153

	 
	846920

	Eagle 40

	 
	128154

	 
	846921

	Eagle 41

	 
	128155

	 
	846922

	Eagle 42

	 
	128156

	 
	846923

	Eagle 44

	 
	128158

	 
	846925

	Eagle 46

	 
	128160

	 
	846927

	Eagle 51

	 
	128165

	 
	846932

	Eagle 52

	 
	128166

	 
	846951

	Eagle 53

	 
	128167

	 
	846952

	Eagle 54

	 
	128168

	 
	846953

	Eagle 55

	 
	128169

	 
	846954

	Eagle 56

	 
	128170

	 
	846955

	Eagle 57 

	 
	128171

	 
	846956

	Eagle 58

	 
	128172

	 
	846957

	Eagle 59

	 
	128173

	 
	846958

	Eagle 60

	 
	128174

	 
	846959

	Eagle 61

	 
	128175

	 
	846960

	Eagle 62

	 
	128176

	 
	846961

	Eagle 63

	 
	128177

	 
	846962

	Eagle 64

	 
	128178

	 
	846963

15

					
	Eagle 65

	 
	128179

	 
	846964

	Eagle 66

	 
	128180

	 
	846965

	Eagle 67

	 
	128181

	 
	846966

	Eagle 68

	 
	128182

	 
	846967

	Eagle 69

	 
	128183

	 
	846968

	Eagle 70

	 
	128184

	 
	846969

	Eagle 91

	 
	128199

	 
	846946

	Eagle 92

	 
	128200

	 
	846947

	Eagle 93

	 
	128201

	 
	846948

	Eagle 94

	 
	128202

	 
	846949

	Eagle 102

	 
	128203

	 
	846950

	Eagle 103

	 
	128204

	 
	846971

______________________________________________________________________________________

C. 

Area of Interest: There shall be an Area of Interest (AOI) exterior to the boundary of the claims as described: T14N, R33E, sections 32, 33, 34 and 35, and T13N, R33E, sections 2, 3, 4, 5, 8, 9, 10, and 11.

16

EXHIBIT B

To

Eagleville Property

Exploration and Mining Lease and Option to Purchase Agreement

_________________________________________________________________________________________

DESCRIPTION OF ROYALTY – NET SMELTER RETURNS

Lessee:

Rarus Minerals Inc.

Owner:

Mountain Gold Exploration, Inc. and Lane A. Griffin and Associates 

1.

Definitions. The terms defined in the instrument to which this Exhibit is attached and made a part of shall have the same meanings in this Exhibit. The following definitions shall apply to this Exhibit.

1.1

“Gold Production” means the quantity of refined gold outturned to Lessee’s account by an independent third party refinery for gold produced from the Property during a calendar month on either a provisional or final settlement basis.

1.2

 “Gross Value” shall be determined on a calendar month basis and have the following meanings with respect to the following Minerals:

1.2.1

Gold

a)

If Lessee sells unprocessed gold ores or gold concentrates or gold dore produced from Minerals, then Gross Value shall be the value of the gold contained in the gold concentrates, dore and ore determined by utilizing (1) the mine weights and assays for such gold concentrates, dore, and ore; (2) a reasonable recovery rate for the refined gold recoverable from such gold concentrates, dore and ore (which shall be adjusted annually to reflect the actual recovery rate of refined metal from such gold concentrates, dore and ore); and (3) the Monthly Average Gold Price for the month in which the gold concentrates, dore, and ore were sold.

b)

If Lessee produces refined gold (meeting the specifications of the London Bullion Market Association, and if the London Bullion Market Association no longer prescribes specifications, the specifications of such other association generally accepted and recognized in the mining industry) from Minerals, and if Section 1.2.1 (a) above is not applicable, then for purposes of determining Gross Value, the refined gold shall be deemed to have been sold at the Monthly Average Gold Price for the month in which it was refined. The Gross Value shall be determined by multiplying Gold Production during the month by the Monthly Average Gold Price.

1.2.2

Silver

a)

If Lessee sells unprocessed gold ores or gold concentrates or gold dore produced from Minerals, then Gross Value shall be the value of the silver contained in the silver concentrates, dore, or ore determined by utilizing: (1) the mine weights and assays for such silver concentrates, dore or ore; (2) a reasonable recovery rate for the refined silver recoverable from such silver concentrates, dore and ore (which shall be adjusted annually to reflect the actual recovery rate of refined metal from such silver concentrates, dore and ore); and (3) the Monthly Average Silver Price for the month in which the silver concentrates, dore or ore were sold.

b)

If Lessee produces refined silver (meeting the specifications for refined silver subject to the New York Silver Price published by Handy & Harmon, and if Handy & Harmon no longer publishes such specifications, the specifications of such other association or entity generally accepted and recognized in the mining industry) from Minerals, and if Section 1.2.2 (a) above is not applicable, the refined silver shall be deemed to have been sold at the Monthly Average Silver Price for the month in which it was refined. The Gross Value shall be determined my multiplying Silver Production during the month by the Monthly Average Silver Price.

17

1.2.3

All Other Minerals

a)

If Lessee sells any concentrates, fore or ore of Minerals other than gold or silver, then Gross Value shall be the value of such Minerals determined by utilizing: (1) the mine weights and assays for such Minerals: (2) a reasonable recovery rate for the Minerals (which shall be adjusted annually to reflect the actual recovery rate of recovered or refined metal or product from such Minerals); and (3) the monthly average price for the Minerals or product of the Minerals for the month in which the concentrates, dore or ore was sold. The monthly average price shall be determined by reference to the market for such Minerals or product which is recognized in the mining industry as authoritative and reflective of the market for such Minerals or product.

b)

If Lessee produces refined or processed metals from Minerals other than refined gold or refined silver, and if Section 1.2.3 (a) above is not applicable, then Gross Value shall be equal to the amount of the proceeds received by Leases during the month from the sale of such refined or processed metals. Lessee shall have the right to sell such refined or processed metals to an affiliated party, provided that such sales shall be considered, solely for purposes of determining Gross Value, to have been sold at process and on terms no less favorable than those that would be obtained from an unaffiliated third party in similar quantities and under similar circumstances.

1.2.3. 1 Barite If Lessee sells any barite products from the Property, Lessee shall pay a royalty to Owner equal to ten percent (10%) of the gross proceeds from the sale of barite or barium products.

1.3

“Minerals” means gold, silver, platinum, antimony, mercury, copper, lead, zinc, and all other mineral elements, and mineral compounds and geothermal resources which are contemplated to exist on the Property or which are after the Effective Date discovered on the Property and which can be extracted, mined, or processed by any method presently known or developed or invented after the Effective Date.

1.4

“In Cash” means Net Smelter Return Royalty paid in full and delivered in US dollars to Owner.

1.5

“In-Kind” means Net Smelter Return Royalty paid in full and delivered in physical, refined bullion to Owner.

1.6

“Monthly Average Gold Price” means the average London Bullion Market Association Afternoon Gold Fix, calculated by dividing the sum of all such process reported for the month by the number of days for which such process were reported during that month. If the London Bullion Market Association Afternoon Gold Fix ceases to be published, all such references shall be replaced with references to prices of gold for immediate sale in another established market selected by Lessee, as such prices are published in Metals Week magazine and if Metals Week magazine no longer publishes such prices, the prices of such other association or entity generally accepted and recognized in the mining industry.

1.7

“Monthly Average Silver Price” means the average New York Silver Price as published daily by Handy & Harmon, calculated by dividing the sum of all such prices reported for the month by the number of days in such month for which such prices were reported. If the Handy & Harmon quotations cease to be published, all such references shall be replaced with references to prices of silver for immediate sale in another established market selected by Lessee as published in Metals Week magazine, and if Metals Week magazine no longer publishes such prices, the prices of such other association or entity generally accepted and recognized in the mining industry.

1.8

“Net Smelter Returns” means the Gross Value of all Precious Metals and Other Minerals, less costs, charges and expenses paid or incurred by Lessee with respect to the refining and smelting of such Minerals, without limitation: 

1.8.1

Charges for smelting and refining (including sampling, assaying and penalty charges); and 

1.8.2

Actual costs of transportation (including freight, insurance, security, transaction taxes, handling, port, demurrage, delay and forwarding expenses incurred by reason of or in the course of such transportation) of product from the Property to the smelter refinery, but in no event shall charges or costs of transportation of Minerals from any mine on the Property to autoclave, concentrator, crusher, mill or plant which is not a smelter or refinery.

1.9

“Other Minerals” means all other metals and Minerals and rock and stone materials except for Precious Metals.

1.10

 “Precious Metals” means gold, silver and all platinum group metals.

18

1.11

 “Silver Production” means the quantity of refined silver outturned to Lessee's account by an independent third-party refinery for silver produced from the Property during the calendar month on either a provisional or final settlement basis.

2

Payment Procedures.

Payment of Net Smelter Returns Royalty may be made in Cash or In-Kind at the election of the Owner as follows:

2.1

Accrual of Obligation. Lessee's obligation to pay the Net Smelter Returns Royalty shall accrue upon the sale of unrefined metals, dore, concentrates, ores or other Minerals products or, if refined metals are produced, upon the outturn of refined metals meeting the requirements of the specified published price to Lessee's account.

2.2

Futures or Forward Sales. Except as provided in Sections 1.2.1(a), 1.2.2(a) and 1.2.3 above (with respect to sales of unprocessed gold and silver and sales of Minerals other than gold and silver), Gross Value shall be determined irrespective of any actual arrangements for the sale or other disposition of Minerals by Lessee, specifically including but not limited to forward sales, futures trading or commodities options trading, and any other price hedging, price protection, and speculative arrangements that may involve the possible delivery of gold, silver or other metals produced from Minerals.

2.3

Sampling and Commingling. All Minerals for which a Net Smelter Returns Royalty is payable shall be measured, sampled and analyzed in accordance with the commingling plan approved in accordance with the Agreement to which this Exhibit is attached. 

2.4

Monthly Calculations and Payments. Net Smelter Returns Royalties shall be determined on a calendar month basis. Net Smelter Returns Royalties shall be paid on or before the last business day of the calendar month immediately following the last day of the calendar month in which same accrued, but in any event Owner shall be paid no less frequently than when Lessee is paid. Precious Metals and Other Minerals will be deemed to have been sold or otherwise disposed of at the time refined production from the Property is delivered, made available, or credited to Lessee by a mint or refiner. The price used for calculating the Net Smelter Royalty on Precious Metals and Other Minerals shall be determined in accordance with Standard Practices and in accordance with this Agreement and Exhibit B. 

2.4.1

Payment of Royalty in Cash. 

Unless the Owner elects to receive Net Smelter Return Royalties In Kind, it shall be deemed to have elected to receive all Net Smelter Returns Royalties In Cash and all Net Smelter Returns Royalty payments shall be made by check payable to Owner and delivered to the address listed in this Agreement, or to such other address as Owner may direct in writing or by direct bank deposit to Owner account as Owner shall designate in writing. 

2.4.2

Payment of Royalty In-Kind. 

Owner may elect to receive its Net Smelter Returns Royalties, either in whole or in part, In-Kind. The elections may be exercised once per year on a calendar year basis during the life of production from the Property. Notice of election to receive the following year's Net Smelter Returns Royalty for In Kind payment shall be made in writing by Owner and delivered to Lessee on or before December 41 of each year. As of the Effective Date of this Agreement, Owner elects to receive its Net Smelter Returns Royalty on gold In Kind. Net Smelter Returns Royalties on Precious Metals other than gold and all Other Minerals shall be payable In Cash.

If Owner elects to receive its Net Smelter Returns Royalty In Kind, Owner shall open a bullion storage account at each refinery or mint designated by Lessee as a possible recipient of refined bullion in which Owner owns an interest. Owner shall be solely responsible for all costs and liabilities associated with maintenance of such account or accounts, and Lessee shall not be required to bear any additional expense with respect to such In-Kind payments. 

2.5

Net Smelter Returns Royalties In-Kind Payment. Net Smelter Returns Royalties will be paid by the deposit of refined bullion into Owner’s account. On or before the 25th day of each calendar month following a calendar month during which production and sale or other disposition occurred, Lessee shall deliver written instructions to the mint or refinery, with a copy to Owner, directing the mint or refinery to deliver refined bullion due to Owner in respect of the Net Smelter Returns Royalty, by crediting to Owner's account the number of ounces of refined bullion for which Net Smelter Returns Royalty is due; provided, however, that the words “other disposition” as used in this Agreement shall not include processing, milling, beneficiation. The number of ounces of refined bullion to be credited will be based upon Owner’s share of the previous month's production and sale or other disposition as calculated pursuant to the commingling provisions. 

19

(a)

Net Smelter Returns Royalties payable In Kind on silver or platinum group metals shall be converted to the gold equivalent of such silver or platinum group metals by using the average monthly spot prices for silver and platinum group metals. 

(b)

Title to refined bullion delivered to Owner under this Agreement shall pass to Owner at the time such bullion is credited to Owner at the mint or refinery. Owner agrees to hold harmless Lessee from any liability imposed as a result of the election of Owner to receive Net Smelter Returns Royalties In Kind and from any losses incurred as a result of Owner trading and hedging activities. Owner assumes all responsibility for any shortages which occur as a result of Owner anticipation of credits to its account in advance of an actual deposit or credit to its account by a refiner or mint.

(c)

When Net Smelter Returns Royalties are paid In Kind, they will not reflect the costs deductible in calculating Net Smelter Returns under this Agreement. Within thirty (30) days of the receipt of a statement showing charges incurred by Lessee for transportation, smelting or other deductible costs, Owner shall remit to Lessee full payment for such charges. If Owner does not pay such charges when due, Lessee shall have the right, at its election, provided Owner does not dispute such charges, to deduct the gold equivalent of such charges from the ounces of gold bullion to be credited to Owner in the following month. 

2.6

Statements. At the time of payment of the Net Smelter Returns Royalty, Lessee shall provide with such payment a statement showing in reasonable detail the quantities and grades of refined gold, silver or other metals or dore, concentrates or ores produced and sold or deemed sold by Lessee in the preceding calendar month; the Monthly Average Gold Price and Monthly Average Silver Price, as applicable; costs and other deductions, and other pertinent information in reasonable detail to explain the calculation of the Net Smelter Returns Royalty payment with respect to such calendar month.

2.7

Inventories and Stockpiles. Lessee shall include in all monthly statements a description of the quantity and quality of any gold or silver dore that has been retained as inventory for more than ninety (90) days. Owner shall have thirty (30) calendar days after receipt of the statement to either: (a) elect that the dore be deemed sold, with Gross Value to be determined as provided in Sections 1.2.1(b), with respect to gold, and 1.2.2(b) Error! Reference source not found., with respect to silver, as of such thirtieth (30th) day utilizing the mine weights and assays for such dore and utilizing a reasonable recovery rate for refined metal and reasonable deemed charges for all deductions specified in Section 1.81.71.8 above, or (b) elect to wait until such time as Royalties otherwise would become payable pursuant to sections 1.2.1(b) and 1.2.2 9b). The failure of Owner to respond within such time shall be deemed to be an election to use the methods described in Sections 1.2.1(b) and 1.2.2(b). No Net Smelter Returns Royalty shall be due with respect to stockpiles of ores or concentrates unless and until such ores or concentrates are actually sold.

2.8

Final Settlement. All Net Smelter Returns Royalty payments shall be considered final and in full satisfaction of Lessee's obligations with respect thereto, unless Owner gives Lessee written notice describing a specific objection to the calculation thereof within one year after receipt by Owner of the monthly statement provided for in Section 0. If Owner objects to a particular monthly statement, it shall have the right, for a period of thirty (30) days after Lessee's receipt of such objection, upon reasonable notice and at a reasonable time, to have Lessee's accounts and records relating to the calculation of the Net Smelter Returns Royalty payment with respect to the calendar month in question audited by an independent certified public accountant. If such audit determines that there has been a deficiency or an excess in the payment made to Owner, such deficiency or excess shall be resolved by adjusting the next monthly Net Smelter Returns Royalty payment due Owner. Owner shall pay all costs of such audit unless a deficiency of five percent (5%) or more of the Net Smelter Returns Royalty due for the calendar month in question is determined to exist. Lessee shall pay the costs of such audit if a deficiency of five percent (5%) or more of the amount due for the calendar month in question is determined to exist. All books and records used by Lessee to calculate the Net Smelter Returns Royalties due hereunder shall be kept in accordance with generally accepted accounting principles.

2.9

Transfer or Encumbrance of Net Smelter Royalty. Subject to Section 22 of the Agreement to which this Exhibit B is attached, Owner may transfer or encumber all or any part of its right, title and interest in and to the Net Smelter Returns Royalty.

20

3.0

Royalty for Other Minerals

3.0.1

 Royalties for Other Minerals. In the case of Other Minerals other than Precious Metals and the beneficiated products thereof ("Other Minerals"), shall be determined by multiplying (a) the gross amount of the particular Other Mineral contained in the Monthly Production delivered to the Lessee during the preceding calendar month by (b) the average of the New York Commodities Exchange final daily spot prices reported for the preceding calendar month of the appropriate Other Mineral, and subtracting from the product of Subsections 1(a) and 1(b) only the following if actually incurred: (i) charges imposed by the Lessee for smelting, refining or processing Other Minerals contained in such production, but excluding any and all charges and costs related to Lessee's mills or other processing plants constructed for the purpose of milling or processing Other Minerals, in whole or in part; (ii) penalty substance, assaying, and sampling charges imposed by the Lessee for smelting, refining, or processing Other Minerals contained in such production, but excluding any and all charges and costs of or related to Lessee's mills or other processing plants constructed for the purpose of milling or processing Other Minerals, in whole or in part; and (iii) charges and costs, if any, for transportation and insurance of Other Minerals and the beneficiated products thereof from Lessee's final mill or other final processing plant to places where such Other Minerals are smelted, refined and/or sold or otherwise disposed of. If for any reason the New York Commodities Exchange does not report spot pricing for a particular Other Mineral, then the Parties shall mutually agree upon an appropriate pricing entity or mechanism that accurately reflects the market value of any such Other Mineral.

3.0.2.

 In the event smelting, refining, or processing of Other Minerals are carried out in custom toll facilities owned or controlled, in whole or in part, by Lessee, which facilities were not constructed solely for the purpose of milling or processing Other Minerals from the Property, then charges, costs and penalties for such smelting, refining or processing shall mean the amount Lessee would have incurred if such smelting, refining or processing were carried out at facilities not owned or controlled by Lessee then offering comparable services for comparable products on prevailing terms, but in no event greater than actual costs incurred by Lessee with respect to such smelting and refining. In the event Lessee receives insurance proceeds for loss of production of Other Minerals, Lessee shall pay to Owner the Royalty percentage of any such insurance proceeds which are received by Lessee for such loss of production.

3.1

Audit. Upon reasonable notice and at a reasonable time, the Owner shall have the right to audit and examine the Lessee’s accounts and records relating to the calculation of the Net Smelter Returns royalty payments. If such audit determines that there has been a deficiency or an excess in the payment made to Owner, such deficiency or excess shall be resolved by adjusting the next monthly royalty payment due Owner. Owner shall pay all costs of such audit unless a deficiency of three percent (3%) or more of the royalty payment due for the calendar month in question is determined to exist. All books and records used by Lessee to calculate the royalty payments shall be kept in accordance with generally accepted accounting principles applicable to the mining industry.

21

EXHIBIT C

To

Eagleville Property

Exploration and Mining Lease and Option to Purchase Agreement

_________________________________________________________________________________________

QUITCLAIM DEED WITH RESERVATION OF ROYALTY

This Quitclaim Deed with Reservation of Royalty (the “Deed”) is made by and among Mountain Gold Exploration, Inc. a Nevada Corporation and Lane A. Griffin and Associates, (the “Owner”) and Rarus Minerals, Inc., a Nevada Corporation (“Lessee”)

RECITALS

A.

Owner and Lessee are parties to the Mining Lease and Option to Purchase Agreement effective as of December 13, 2011 (the “Agreement”), concerning the Eagleville Property and other unpatented mining claims situated in Mineral County, Nevada, more particularly described in Exhibit A attached hereto and by this reference incorporated in this Deed (collectively the “Royalty Property”), in accordance with which Owner agreed to sell to Lessee all of Owner’s right, title, and interest in and to the Royalty Property, subject to Owner’s reservation to Owner of the production royalty (the “Royalty”) described in this Deed.

B.

Owner and Lessee have closed the purchase and sale of the Royalty Property in accordance with the Agreement.

In consideration of the parties’ rights and obligations under the Agreement, the parties agree as follows:

1.

Quitclaim. Owner quitclaims to Lessee, and its assigns and successors forever, all of Owner’s right, title and interest in the Royalty Property, except and subject to Owner’s reserved Royalty and the parties’ rights and obligations under this Deed.

2.

Royalty Owner grants, reserves and retains to itself, and Owner’s assigns and successors forever, and Lessee agrees and covenants to pay to Owner, and Owner’s assigns and successors, a production royalty equal to two percent (3%) of the Net Smelter Returns (“NSR”), as calculated and determined in accordance with Exhibit B attached to and by this reference incorporated in this Deed. Lessee shall have the option to purchase a portion of the three (3%) percent Royalty from the “Property” representing one percent (1%) of the NSR for one million dollars ($1,000,000 million), in accordance with the terms of the Deed. Lessee shall have the option to purchase an additional one percent (1%) of the remaining two percent (2%) NSR for three million dollars ($3,000,000 million), in accordance with the terms of the Deed. Lessee may exercise the option to purchase the Royalty at any time within six (6) months after Lessee completes a positive, bankable, feasibility study and commits the development of the Property as a mine. 

2.1

Burden on Royalty Property. The Royalty shall burden and run with the Royalty Property, including any amendments, conversions to a lease or other form of tenure, relocations or patent of all or any of the unpatented mining claims which comprise all or part of the Royalty Property. On amendment, conversion to a lease or other form of tenure, relocation or patenting or any of the unpatented mining claims which comprise all or part of the Royalty Property, Lessee agrees and covenants to execute, deliver and record in the office of the recorder in which all or any part of the Royalty Property is situated an instrument by which Lessee grants to Owner the Royalty and subjects the amended, converted or relocated unpatented mining claims and the patented claims, as applicable, to all of the burdens, conditions, obligations and terms of this Deed.

2.2

Payment of the Royalty. Lessee shall calculate and pay the Royalty monthly in accordance with the provisions of Exhibit B. If Lessee does not timely pay the Royalty, Owner may give written notice to Lessee that Lessee is in default of its obligations under this Deed, and unless within five (5) business days of receipt by Lessee of such notice, Owner receives the delinquent Royalty payment, then Lessee shall pay interest on the delinquent payment at the statutory rate determined in accordance with the law of Nevada which shall accrue from the date the delinquent Royalty payment was due to the date of payment of the Royalty and accrued interest.

2.3

Production Records. Lessee shall keep true and accurate accounts, books and records of all of its activities, operations and production of Minerals on the Royalty Property.

2.4

Advanced Royalty Payments. On the dates described below, Lessee shall pay to the Owner the sums (“Advanced Royalty Payments”) described below:

22

			
	On Execution of this Agreement (“Effective Date”)

	$

	15,000.00*

	First anniversary of the Effective Date

	$

	15,000.00

	Second anniversary of the Effective Date 

	$

	20,000.00

	Third anniversary of the Effective Date

	$

	30,000.00

	Fourth anniversary of the Effective Date 

	$

	40,000.00

	Fifth thru tenth anniversary of the Effective Date 

	$

	50,000.00

	Eleventh anniversary of the Effective Date and thereafter 

	$

	100.000.00

*(With the payment split as: $5,100 (34%) to Mountain Gold Holdings LLC Series C; and $9,900 (66%) to Lane A. Griffin and Associates; and all future payments being based on the same split of 34% to Mountain Gold Holdings LLC Series C; and 66% to Lane A. Griffin and Associates). 

The Advanced Royalty Payments paid by Lessee to Owner under the Agreement or this Deed shall constitute advance royalty payment obligations. Lessee’s Advanced Royalty Payment obligation shall terminate on Lessee’s abandonment of the Royalty Property or the cessation of the mining of or exploration for Minerals from the Property and the Area of Interest and Lessee’s delivery of formal notice to regulatory agencies having jurisdiction of Lessee’s operations on the Property and in the Area of Interest that Lessee has ceased operations and commenced reclamation of the mine on the Property or in the Area of Interest.

3. 

Commingling Lessee shall have the right to commingle Minerals from the Royalty Property with Minerals mined from other properties. Not less than sixty (60) days before commencement of commingling, Lessee shall notify Owner and shall deliver to Owner Lessee’s proposed commingling plan for Owner’s review. Before Lessee commingles any Minerals produced from the Royalty Property with Minerals from other properties, the Minerals produced from the Royalty Property and other properties shall be measured and sampled in accordance with sound mining and metallurgical practices for metal, commercial Minerals and other appropriate content. Lesser shall keep detailed accounts and records which show measures, assays of metal, commercial Minerals, and other appropriate content and penalty substances, and gross metal content of the Minerals. From this information, Lessee shall determine the amount of the Royalty due and payable to Owner for Minerals produced from the Royalty Property commingled with Minerals from other properties.

4. 

Reports Not later than March 1 of each year, Lessee shall deliver to Owner a summary report of all exploration, development and mining activities and operations conducted by Lessee on or relating to the Property during the preceding calendar year. Such report shall include estimates of proposed expenditures upon, anticipated production from and estimated remaining ore reserves on the Royalty Property for the succeeding year. Lessee shall provide Owner reasonable access to all data and information generated regarding the Royalty Property.

5. 

Inspections Owner, or its authorized agents or representatives, may enter upon all surface and subsurface portions of the Royalty Property for the purpose of inspecting the Royalty Property and all improvements and operations on the Royalty Property, as well as inspecting and copying all accounts and records, including without limitation such accounts and records which are maintained electronically, pertaining to all activities and operations on or relating to the Royalty Property, the improvements or operations.

6. 

Compliance with Laws, Reclamation, Environmental Obligations and Indemnities

6.1

Compliance with Laws. Lessee shall at all times comply with all applicable federal, state and local laws, regulations and ordinances relating to Lessee’s activities and operations on or relating to the Royalty Property.

6.2

Reclamation, Environmental Obligations and Indemnities. Lessee shall perform all reclamation required under Federal, state, and local laws, regulations and ordinances relating to Lessee’s activities or operations on or relating to the Royalty Property and only those past activities for which Lessee has specifically agreed to accept liability and responsibility for Lessee shall defend, indemnify and hold harmless Owner from and against any and all actions, claims, costs, damages, expenses (including attorney’s fees and legal costs), liabilities and responsibilities arising from or relating to Lessee’s activities or operations on or relating to the Royalty Property, including those under laws, regulations and ordinances intended to protect or preserve the environment or to reclaim the Royalty Property. Lessee’s obligations under this Section shall survive the abandonment, surrender or transfer of the Royalty Property.

23

7. 

Tailings and Residues. All tailings, residues, waste rock, spoiled leach materials and other materials (collectively “Materials”) resulting from Lessee’s operations and activities on the Royalty Property shall be Lessee’s sole property, but shall remain subject to the Royalty if they are processed or reprocessed and Lessee receives revenues from such processing or reprocessing. If materials are processed or reprocessed, the Royalty payable shall be determined by using the best engineering, metallurgical, and technical practices and standards then available.

8. 

Title Maintenance. 

 

8.1 

Title Maintenance and Taxes. Lessee shall maintain title to the Royalty Property, including without limitation, paying when due all taxes on or with respect to the Royalty Property and doing all things and making all payment necessary or appropriate to maintain the right, title and interest of Lessee and Owner, respectively, in the Royalty Property and under this Deed.

8.2 

Assessment Work and Mining Claim Maintenance Fees. Lessee shall perform all required assessment work on, pay all claim maintenance fees and make such filings and recordings as are necessary to maintain title to the Royalty Property in accordance with applicable federal and state laws and regulations. Lessee shall perform the annual assessment work, pay the mining claim maintenance fees and file and record proof of performance and payment and notice of intent to hold the mining claims which constitute the Property.

8.3 

Abandonment. If Lessee intends to abandon or surrender any of the Royalty Property (the “Abandonment Property”), Lessee shall first give written notice of such intention to Owner first right of refusal” with at least sixty (60) days in advance of the proposed date of abandonment or surrender. At any time before the date of Lessee’s proposed abandonment or surrender of the Royalty Property Owner may deliver written notice to Lessee that Owner desires Lessee to convey the Abandonment Property to Owner. In such case, Lessee shall convey the Abandonment Property to Owner free and clear of any claims, encumbrances or liens created by, through or under Lessee. If Owner does not timely request reconveyance of the Abandonment Property, Owner’s right to do so shall be irrevocably terminated.

 

9. 

General Provisions. 

 

9.1

Conflict. If a conflict arises between the provisions of this Deed and the provisions of the Agreement, the provisions of the Agreement will prevail.

9.2

Entire agreement. This Deed and Agreement constitute the entire agreement between the parties.

9.3

Additional documents. The parties shall from time to time execute all such further instruments and documents and do all such further actions as may be necessary to effectuate the purposes of this Deed.

9.4

Binding Effect. All of the covenants, conditions, and terms of this Deed shall bind and inure to the benefit of the parties and their successors and assigns.

9.5

No Partnership. Nothing in this Deed shall be construed to create expressly or by implication, a joint venture, mining partnership or other partnership relationship between the parties.

9.6

Governing Law. This Deed is to be governed by and construed under the laws of the State of Nevada, County of Washoe County.

9.7

Time of Essence. Time is of the essence in this Deed.

9.8

Notices. Any notices required or authorized to be given by this Deed shall be in writing and shall be sent either by commercial courier, facsimile, or by certified U.S. mail, postage prepaid and return receipt requested, addressed to the proper party at the address stated below or such address as the party shall have designated to the other parties in accordance with this Section. Such notice shall be effective on the date of receipt by the addressee party, except that any facsimiles received after 5:00 p.m. of the addressee’s local time shall be deemed delivered the next day.

24

If to Owner:

Mountain Gold Exploration, Inc.

PO Box 21146

Reno, NV 89515

775-849-1985

 

Delivery of all Data to:

Mountain Gold Exploration, Inc.

760 Brenda Way

Washoe Valley, Nevada 89704

And

Lane A. Griffin and Associates

321 Spokane Street

Richland, Washington, 99354

If to Lessee:

Rarus Minerals Inc.

2850 W. Horizon Ridge Parkway

Suite 200

Henderson, NV 89052

Phone: (702) 430-4610

Fax: (702) 430-4501

This Deed is effective December 13, 2011, regardless of the date on which the parties execute this Deed.

 

Mountain Gold Exploration, Inc. 

Lane A. Griffin and Associates

By /s/Thomas Callicrate       

By: /s/ Lane Griffin           

Thomas Callicrate, President

Lane A. Griffin

Rarus Minerals Inc.

By: /s/ Manfred Ruf         

Manfred Ruf, President

25

EXHIBIT D

To

Eagleville Property

Exploration and Mining Lease and Option to Purchase Agreement

_________________________________________________________________________________________

MEMORANDUM OF EXPLORATION AND MINING LEASE AND OPTION TO PURCHASE AGREEMENT

Notice is given that Mountain Gold Exploration, Inc., a Nevada Corporation and Lane A Griffin and Associates collectively (the “Owner”) and Rarus Minerals Inc., a Nevada Corporation (“Lessee”), have entered into the Exploration and Mining Lease and Option to Purchase Agreement concerning the unpatented mining claims situated in Mineral County, Nevada, more particularly described in Exhibit A attached to and by this reference incorporated in this Agreement (the “Property”). 

Owner has leased the Property to Lessee and has granted to Lessee the option to purchase and acquire title to the Property. Lessee may assign its rights under the Agreement provided that Owner has first consented to the assignment which shall not be withheld unreasonably.

For purposes of the Agreement and this Memorandum, the addresses of the parties are:

If to Owner:

Mountain Gold Exploration, Inc.

PO Box 21146

Reno, NV 89515

775-849-1985

Delivery of all Data to:

Mountain Gold Exploration, Inc.

760 Brenda Way

Washoe Valley, Nevada 89704

And

Lane A. Griffin and Associates

321 Spokane Street

Richland, Washington, 99354

If to Lessee:

Rarus Minerals Inc.

2850 W. Horizon Ridge Parkway

Suite 200

Henderson, NV 89052

Phone: (702) 430-4610

Fax: (702) 430-4501

Dated: December 13, 2011.

26

LEASEE: 

Rarus Minerals Inc.

/s/ Manfred Ruf                  

By: Manfred Ruf, President

OWNER:

Mountain Gold Exploration, Inc.

/s/Thomas Callicrate           

By: Thomas Callicrate, President

And

Lane A. Griffin and Associates

/s/Lane Griffin                    

By: Lane Griffin, Individual

STATE OF NEVADA,

)

ss.

COUNTY OF WASHOE

)

This Memorandum of Exploration and Mining Lease and Option to Purchase Agreement was executed before me on ___________________________, 2011, by Thomas E. Callicrate. 

____________________________________________

Notary Public

STATE OF NEVADA,

)

ss.

COUNTY OF WASHOE

)

This Memorandum of Exploration and Mining Lease and Option to Purchase Agreement was executed before me on ___________________________, 2011, by Lane A. Griffin 

____________________________________________

Notary Public

This Memorandum of Exploration and Mining Lease and Option to Purchase Agreement was executed before me on ___________________________, 2011, by Manfred Ruf.. 

____________________________________________

Notary Public

27

EXHIBIT E

To

Eagleville Property

Exploration and Mining Lease and Option to Purchase Agreement

NOTICE OF NON-RESPONSIBILITY 

When recorded return to:

Mountain Gold Exploration, Inc.

Attn: Thomas E. Callicrate

PO Box 21146 

Reno, Nevada 89515

NOTICE OF NON-RESPONSIBILITY 

Pursuant to NRS 108.234, Mountain Gold Exploration, Inc. a Nevada Corporation and Lane A. Griffin hereby give notice that this Notice of Non-Responsibility (the “Notice”) is made on behalf of the Owner, Owner will not be responsible for materials furnished to or labor performed on the Eagleville Property unpatented lode mining claims listed in Exhibit A, as well as any future unpatented lode mining claims located and recorded within the Area of Interest as described in Exhibit A attached which are located in Mineral County, Nevada, the county recording and BLM filing information for which is more particularly described in Exhibit A attached to and by reference incorporated in this Notice.

1.

The owner of the Property is Mountain Gold Exploration, Inc. and Lane A. Griffin.

2.

The Owner has granted certain rights in the Property to Rarus Minerals Inc.

3.

The Owner will not be responsible for any buildings or other improvement constructed on the 

Property by the Lessee or its assigns, successors or sub-lessees. 

4.

For purpose of this Notice the addresses of the Owner and the lessee are: 

This notice pertains to any work performed by or at the request of Rarus Minerals Inc., a Nevada corporation or any of its employees, contractors, subcontractors, parents or subsidiary corporations, assignees, or other providers of services and materials to the unpatented lode mining claims. 

Dated this 13th day of December, 2011

If to Owner:

Mountain Gold Exploration, Inc.

PO Box 21146

Reno, NV 89515

775-849-1985

Delivery of all Data to:

Mountain Gold Exploration, Inc.

760 Brenda Way

Washoe Valley, Nevada 89704

and

Lane A. Griffin and Associates

321 Spokane Street

Richland, Washington, 99354

If to Lessee:

Rarus Minerals Inc.

2850 W. Horizon Ridge Parkway

Suite 200

Henderson, NV 89052

Phone: (702) 430-4610

Fax: (702) 430-4501

28

MOUNTAIN GOLD EXPLORATION, INC

A Nevada Corporation 

By: /s/ Thomas Callicrate           

Thomas E. Callicrate, President

LANE A. GRIFFIN

Individual 

By: /s/ Lane Griffin                    

Lane A. Griffin

STATE OF NEVADA

)

) SS

COUNTY OF MINERAL

)

On this _________ day of ________________________, 2011 personally appeared before me, a Notary Public, Thomas E. Callicrate, President of Mountain Exploration, Inc., a Nevada Corporation, who acknowledged that he executed the within Notice of Non-Responsibility. 

IN WITNESS THEREOF I have hereunto set my hand and official seal.

My Commission Expires:

________________________________

NOTARY PUBLIC

STATE OF NEVADA

)

) SS

COUNTY OF MINERAL

)

On this _________ day of ________________________, 2011 personally appeared before me, a Notary Public, Lane A. Griffin, an Individual, who acknowledged that he executed the within Notice of Non-Responsibility. 

IN WITNESS THEREOF I have hereunto set my hand and official seal.

My Commission Expires:

________________________________

NOTARY PUBLIC

29CNL - Exhibit 10.1

EXHIBIT 10.1

Execution Version 

	
					
	 
	 
	 
	 
	 

Cleco Power LLC

$100,000,000

5.12% Senior Notes due December 16, 2041

______________

Note Purchase Agreement

______________

Dated December 16, 2011

	
					
	 
	 
	 
	 
	 

Table of Contents
	
				
	SECTION
	HEADING
	PAGE

	 
	 
	 

	SECTION 1.
	AUTHORIZATION OF NOTES
	1
	

	 
	 
	 

	SECTION 2.
	SALE AND PURCHASE OF NOTES
	1
	

	 
	 
	 

	SECTION 3.
	CLOSING
	1
	

	 
	 
	 

	SECTION 4.
	CONDITIONS TO CLOSING
	2
	

	 
	 
	 

	SECTION 4.1.Representations and Warranties
	2
	

	SECTION 4.2.Performance; No Default
	2
	

	SECTION 4.3.Compliance Certificates
	2
	

	SECTION 4.4.Opinions of Counsel
	2
	

	SECTION 4.5.Purchase Permitted By Applicable Law, Etc
	3
	

	SECTION 4.6.Sale of Other Notes
	3
	

	SECTION 4.7.Payment of Special Counsel Fees
	3
	

	SECTIO 4.8.Private Placement Number
	3
	

	SECTION 4.9.Changes in Corporate Structure
	3
	

	SECTION 4.10.Funding Instructions
	3
	

	SECTION 4.11.Regulatory Order
	4
	

	SECTION 4.12.Proceedings and Documents
	4
	

	 
	 
	 

	SECTION 5.
	REPRESENTATIONS AND WARRANTIES OF THE COMPANY
	4
	

	 
	 
	 

	SECTION 5.1.Organization; Power and Authority
	4
	

	SECTION 5.2.Authorization, Etc
	4
	

	SECTION 5.3.Disclosure
	4
	

	SECTION 5.4.Organization and Ownership of Shares of Subsidiaries; Affiliates
	5
	

	SECTION 5.5.Financial Statements; Material Liabilities
	6
	

	SECTION 5.6.Compliance with Laws, Other Instruments, Etc
	6
	

	SECTION 5.7.Governmental Authorizations, Etc
	6
	

	SECTION 5.8.Litigation; Observance of Agreements, Statutes and Orders
	6
	

	SECTION 5.9.Taxes
	7
	

	SECTION 5.10.Title to Property; Leases
	7
	

	SECTION 5.11.Licenses, Permits, Etc
	7
	

	SECTION 5.12.Compliance with ERISA
	7
	

	SECTION 5.13.Private Offering by the Company
	8
	

	SECTION 5.14.Use of Proceeds; Margin Regulations
	8
	

	SECTION 5.15.Existing Indebtedness; Future Liens
	9
	

	SECTION 5.16.Foreign Assets Control Regulations, Etc
	9
	

	SECTION 5.17.Status under Certain Statutes
	10
	

	SECTION 5.18.Environmental Matters
	10
	

	
				
	SECTION 6.
	REPRESENTATIONS OF THE PURCHASERS
	11
	

	 
	 

	SECTION 6.1.Purchase for Investment
	11
	

	SECTION 6.2.Source of Funds
	11
	

	 
	 
	 

	SECTION 7.
	INFORMATION AS TO COMPANY
	13
	

	 
	 
	 

	SECTION 7.1.Financial and Business Information
	13
	

	SECTION 7.2.Officer's Certificate
	15
	

	SECTION 7.3.Visitation
	16
	

	 
	 
	 

	SECTION 8.
	PAYMENT AND PREPAYMENT OF THE NOTES
	17
	

	 
	 
	 

	SECTION 8.1.Maturity
	17
	

	SECTION 8.2.Optional Prepayments with Make-Whole Amount
	17
	

	SECTION 8.3.Allocation of Partial Prepayments
	17
	

	SECTION 8.4.Maturity; Surrender, Etc
	17
	

	SECTION 8.5.Purchase of Notes
	17
	

	SECTION 8.6.Make-Whole Amount
	18
	

	 
	 
	 

	SECTION 9.
	AFFIRMATIVE COVENANTS
	19
	

	 
	 
	 

	SECTION 9.1.Compliance with Law
	19
	

	SECTION 9.2.Insurance
	20
	

	SECTION 9.3.Maintenance of Properties
	20
	

	SECTION 9.4.Payment of Taxes and Claims
	20
	

	SECTION 9.5.Corporate Existence, Etc
	20
	

	SECTION 9.6.Books and Records
	20
	

	 
	 
	 

	SECTION 10.
	NEGATIVE COVENANTS
	21
	

	 
	 
	 

	SECTION 10.1.Transactions with Affiliates
	21
	

	SECTION 10.2.Merger, Consolidation, Etc
	21
	

	SECTION 10.3.Line of Business
	22
	

	SECTION 10.4.Terrorism Sanctions Regulations
	22
	

	SECTION 10.5.Liens
	22
	

	SECTION 10.6.Subsidiary Indebtedness
	24
	

	SECTION 10.7.Leverage Ratio
	25
	

	 
	 
	 

	SECTION 11.
	EVENTS OF DEFAULT
	25
	

	 
	 
	 

	SECTION 12.
	REMEDIES ON DEFAULT, ETC
	27
	

	 
	 
	 

	SECTION 12.1.Acceleration
	27
	

	SECTION 12.2.Other Remedies
	28
	

	SECTION 12.3.Rescission
	28
	

	SECTION 12.4.No Waivers or Election of Remedies, Expenses, Etc
	29
	

	 
	 
	 

	SECTION 13.
	REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
	29
	

- ii -

	
				
	SECTION 13.1.Registration of Notes
	29
	

	SECTION 13.2.Transfer and Exchange of Notes
	29
	

	SECTION 13.3.Replacement of Notes
	30
	

	 
	 

	SECTION 14.
	PAYMENTS ON NOTES
	30
	

	 
	 
	 

	SECTION 14.1.Place of Payment
	30
	

	SECTION 14.2.Home Office Payment
	30
	

	 
	 

	SECTION 15.
	EXPENSES, ETC
	31
	

	 
	 
	 

	SECTION 15.1.Transaction Expenses
	31
	

	SECTION 15.2.Survival
	31
	

	 
	 
	 

	SECTION 16.
	SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT
	31
	

	 
	 
	 

	SECTION 17.
	AMENDMENT AND WAIVER
	32
	

	 
	 
	 

	SECTION 17.1.Requirements
	32
	

	SECTION 17.2.Solicitation of Holders of Notes
	32
	

	SECTION 17.3.Binding Effect, etc
	33
	

	SECTION 17.4.Notes Held by Company, etc
	33
	

	 
	 
	 

	SECTION 18.
	NOTICES
	33
	

	 
	 
	 

	SECTION 19.
	REPRODUCTION OF DOCUMENTS
	33
	

	 
	 
	 

	SECTION 20.
	CONFIDENTIAL INFORMATION
	34
	

	 
	 
	 

	SECTION 21.
	SUBSTITUTION OF PURCHASER
	35
	

	 
	 
	 

	SECTION 22.
	MISCELLANEOUS
	35
	

	 
	 
	 

	SECTION 22.1.Successors and Assigns
	35
	

	SECTION22.2.Payments Due on Non-Business Days
	35
	

	SECTION 22.3.Accounting Terms
	35
	

	SECTION 22.4.Severability
	36
	

	SECTION 22.5.Construction, etc
	36
	

	SECTION 22.6.Counterparts
	36
	

	SECTION 22.7.Governing Law
	36
	

	SECTION 22.8.Jurisdiction and Process; Waiver of Jury Trial
	36
	

	 
	 
	 

	SIGNATURE
	 
	1
	

- iii -

Cleco Power LLC
2030 Donahue Ferry Road
Pineville, Louisiana 71360 5226

5.12% Senior Notes due December 16, 2041

December 16, 2011

TO EACH OF THE PURCHASERS LISTED IN
SCHEDULE A HERETO:
Ladies and Gentlemen:
Cleco Power LLC, a Louisiana limited liability company (the “Company”), agrees with each of the purchasers whose names appear at the end hereof (each, a “Purchaser” and, collectively, the “Purchasers”) as follows:
		
	Section 1.
	AUTHORIZATION OF NOTES.

The Company will authorize the issue and sale of $100,000,000 aggregate principal amount of its 5.12% Senior Notes due December 16, 2041 (the “Notes”, such term to include any such notes issued in substitution therefor pursuant to Section 13).  The Notes shall be substantially in the form set out in Exhibit 1.  Certain capitalized and other terms used in this Agreement are defined in Schedule B; and references to a “Schedule” or an “Exhibit” are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement.
		
	Section 2.
	SALE AND PURCHASE OF NOTES.

Subject to the terms and conditions of this Agreement, the Company will issue and sell to each Purchaser and each Purchaser will purchase from the Company, at the Closing provided for in Section 3, Notes in the principal amount specified opposite such Purchaser's name in Schedule A at the purchase price of 100% of the principal amount thereof.  The Purchasers' obligations hereunder are several and not joint obligations and no Purchaser shall have any liability to any Person for the performance or non-performance of any obligation by any other Purchaser hereunder.
		
	Section 3.
	CLOSING.

The sale and purchase of the Notes to be purchased by each Purchaser shall occur at the offices of Chapman and Cutler LLP, 111 West Monroe Street, Chicago, Illinois 60603 at 10:00 a.m. Central time, at a closing (the “Closing”) on December 16, 2011 or on such other Business 

	
			
	Cleco Power LLC
	 
	Note Purchase Agreement

Day thereafter on or prior to December 20, 2011 as may be agreed upon by the Company and the Purchasers.  At the Closing the Company will deliver to each Purchaser the Notes to be purchased by such Purchaser in the form of a single Note (or such greater number of Notes in denominations of at least $100,000 as such Purchaser may request) dated the date of the Closing and registered in such Purchaser's name (or in the name of its nominee), against delivery by such Purchaser to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company to account number 5737400 at JPMorgan Chase Bank, N.A., 1 Chase Manhattan Plaza, New York, NY 10005-1401, ABA number 021000021.  If at the Closing the Company shall fail to tender such Notes to any Purchaser as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to such Purchaser's satisfaction, such Purchaser shall, at its election, be relieved of all further obligations under this Agreement, without thereby waiving any rights such Purchaser may have by reason of such failure or such nonfulfillment.
		
	Section 4.
	CONDITIONS TO CLOSING.

Each Purchaser's obligation to purchase and pay for the Notes to be sold to such Purchaser at the Closing is subject to the fulfillment to such Purchaser's satisfaction, prior to or at the Closing, of the following conditions:
Section 4.1.    Representations and Warranties.  The representations and warranties of the Company in this Agreement shall be correct when made at the time of the Closing.
Section 4.2.    Performance; No Default.  The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Section 5.14) no Default or Event of Default shall have occurred and be continuing.  Neither the Company nor any Subsidiary shall have entered into any transaction since the date of the Memorandum that would have been prohibited by Sections 10.1 through 10.3, inclusive, Section 10.5 and Section 10.6 had such Sections applied since such date.
Section 4.3.    Compliance Certificates.
(a)    Officer's Certificate.  The Company shall have delivered to such Purchaser an Officer's Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.
(b)    Secretary's Certificate.  The Company shall have delivered to such Purchaser a certificate of its Secretary or Assistant Secretary, dated the date of Closing, certifying as to the resolutions attached thereto and other limited liability company proceedings relating to the authorization, execution and delivery of the Notes and this Agreement.
Section 4.4.    Opinions of Counsel.  Such Purchaser shall have received opinions in form and substance satisfactory to such Purchaser, dated the date of the Closing (a) from (i) 

-2-

	
			
	Cleco Power LLC
	 
	Note Purchase Agreement

Baker Botts L.L.P., New York special counsel for the Company and (ii) Phelps Dunbar, L.L.P., Louisiana special counsel for the Company, covering the matters set forth in Exhibit 4.4(a) and covering such other matters incident to the transactions contemplated hereby as such Purchaser or its counsel may reasonably request (and the Company hereby instructs each such counsel to deliver its opinion to the Purchasers) and (b) from Chapman and Cutler, the Purchasers' special counsel in connection with such transactions, substantially in the form set forth in Exhibit 4.4(b) and covering such other matters incident to such transactions as such Purchaser may reasonably request.
Section 4.5.    Purchase Permitted By Applicable Law, Etc.  On the date of the Closing such Purchaser's purchase of Notes shall (a) be permitted by the laws and regulations of each jurisdiction to which such Purchaser is subject, without recourse to provisions (such as section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (b) not violate any applicable law or regulation (including, without limitation, Regulation T, U or X of the Board of Governors of the Federal Reserve System) and (c) not subject such Purchaser to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof.  If requested by such Purchaser, such Purchaser shall have received an Officer's Certificate certifying as to such matters of fact as such Purchaser may reasonably specify to enable such Purchaser to determine whether such purchase is so permitted.
Section 4.6.    Sale of Other Notes.  Contemporaneously with the Closing the Company shall sell to each other Purchaser and each other Purchaser shall purchase the Notes to be purchased by it at the Closing as specified in Schedule A.
Section 4.7.    Payment of Special Counsel Fees.  Without limiting the provisions of Section 15.1, the Company shall have paid on or before the Closing the fees, charges and disbursements of the Purchasers' special counsel referred to in Section 4.4 to the extent reflected in a statement of such counsel rendered to the Company at least one Business Day prior to the Closing.
Section 4.8.    Private Placement Number.  A Private Placement Number issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the SVO) shall have been obtained for the Notes.
Section 4.9.    Changes in Limited Liability Company Structure.  The Company shall not have changed its jurisdiction of organization or been a party to any merger or consolidation or succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5.  
Section 4.10.    Funding Instructions.  At least three Business Days prior to the date of the Closing, each Purchaser shall have received written instructions signed by a Responsible Officer on letterhead of the Company confirming the information specified in Section 3 including (i) the name and address of the transferee bank, (ii) such transferee bank's ABA number and (iii) the account name and number into which the purchase price for the Notes is to be deposited.

-3-

	
			
	Cleco Power LLC
	 
	Note Purchase Agreement

Section 4.11.    Regulatory Order.  A no-opposition letter from the Louisiana Public Service Commission (the “LPSC Order”) relating to the issuance of the Notes shall have been received by the Company and copies thereof shall have been furnished to the Purchasers.
Section 4.12.    Proceedings and Documents.  All limited liability company and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory to such Purchaser and its special counsel, and such Purchaser and its special counsel shall have received all such counterpart originals or certified or other copies of such documents as such Purchaser or such special counsel may reasonably request.
		
	Section 5.
	REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to each Purchaser that:
Section 5.1.    Organization; Power and Authority.  The Company is a limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign limited liability company and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  The Company has the limited liability company power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and the Notes and to perform the provisions hereof and thereof.
Section 5.2.    Authorization, Etc.  This Agreement and the Notes have been duly au-thorized by all necessary limited liability company action on the part of the Company, and this Agreement constitutes, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
Section 5.3.    Disclosure.  The Company, through its agents, Crédit Agricole Securities (USA) Inc., JPMorgan Securities Inc. and KeyBanc Capital Markets Inc., has delivered to each Purchaser a copy of a Confidential Private Placement Memorandum, dated November 30, 2011 (together with all exhibits thereto and all other documents incorporated therein by reference (copies of which have been delivered to the Purchasers), the “Memorandum”), relating to the transactions contemplated hereby.  The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Company and its Subsidiaries.  This Agreement, the Memorandum and the documents, certificates or other writings delivered to the Purchasers by or on behalf of the Company in connection with the transactions contemplated hereby and identified in Schedule 5.3, and the financial statements listed in Schedule 5.5 (this Agreement, the Memorandum and such documents, certificates or other writings and such 

-4-

	
			
	Cleco Power LLC
	 
	Note Purchase Agreement

financial statements delivered to each Purchaser prior to December 2, 2011 being referred to, collectively, as the “Disclosure Documents”), taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made, provided that, to the extent any such reports, financial statements, certificates or other information was based upon or constitutes a forecast or a projection (including statements concerning future financial performance, ongoing business strategies or prospects or possible future actions, and other forward-looking statements), the Company represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.  Except as disclosed in the Disclosure Documents, since December 31, 2010, there has been no change in the financial condition, operations, business, properties or prospects of the Company or any Subsidiary except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect.  There is no fact known to the Company that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Disclosure Documents.
Section 5.4.    Organization and Ownership of Shares of Subsidiaries; Affiliates.  (a) Schedule 5.4 contains (except as noted therein) complete and correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary, (ii) of the Company's Affiliates, other than Subsidiaries, and (iii) of the Company's directors and senior officers.
(b)    All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 5.4).
(c)    Each Subsidiary identified in Schedule 5.4 is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact.
(d)    Other than Cleco Katrina/Rita Hurricane Recovery Funding LLC, no Subsidiary is a party to, or otherwise subject to any legal, regulatory, contractual or other restriction (other than this Agreement, the agreements listed on Schedule 5.4 and customary limitations imposed by corporate law or similar statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary.

-5-

	
			
	Cleco Power LLC
	 
	Note Purchase Agreement

Section 5.5.    Financial Statements; Material Liabilities.  The Company has delivered to each Purchaser copies of the financial statements of the Company and its Subsidiaries listed on Schedule 5.5.  All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments).   The Company and its Subsidiaries do not have any Material liabilities that are not disclosed on such financial statements or otherwise disclosed in the Disclosure Documents.
Section 5.6.    Compliance with Laws, Other Instruments, Etc.  The execution, delivery and performance by the Company of this Agreement and the Notes will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate or limited liability company charter, by-laws or limited liability company agreement, or any other agreement or instrument to which the Company or any Subsidiary is bound or by which the Company or any Subsidiary or any of their respective properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Subsidiary (assuming the accuracy of the Purchasers' representations set forth in Section 6) or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Subsidiary. 
Section 5.7.    Governmental Authorizations, Etc.  Other than the LSPC Order, no consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required to be obtained or made by the Company or any Subsidiary thereof in connection with the execution, delivery or performance by the Company of this Agreement or the Notes, other than routine filings with the LPSC and the SEC.  The LPSC Order is in full force and effect and is final, and all periods for appeal and rehearing by third parties have expired and all conditions contained in the LSPC Order which are required to be fulfilled on or prior to the issuance of the Notes have been fulfilled.  
Section 5.8.    Litigation; Observance of Agreements, Statutes and Orders.  (a) There are no actions, suits, investigations or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
(b)    Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws 

-6-

	
			
	Cleco Power LLC
	 
	Note Purchase Agreement

or the USA Patriot Act) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
Section 5.9.    Taxes.  The Company and its Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (i) the amount of which is not individually or in the aggregate Material or (ii) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP.  The Company knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect.  The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate.  The Federal income tax liabilities of the Company and its Subsidiaries have been finally determined (whether by reason of completed audits or the statute of limitations having run) for all fiscal years up to and including the fiscal year ended December 31, 2000.
Section 5.10.    Title to Property; Leases.  The Company and its Subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement.  All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects. 
Section 5.11.    Licenses, Permits, Etc.  (a) The Company and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, proprietary software, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material, without known conflict with the rights of others.
(b)    To the best knowledge of the Company, no product of the Company or any of its Subsidiaries infringes in any material respect any license, permit, franchise, authorization, patent, copyright, proprietary software, service mark, trademark, trade name or other right owned by any other Person.
(c)    To the best knowledge of the Company, there is no Material violation by any Person of any right of the Company or any of its Subsidiaries with respect to any patent, copyright, proprietary software, service mark, trademark, trade name or other right owned or used by the Company or any of its Subsidiaries.
Section 5.12.    Compliance with ERISA.  (a)  The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncom-pliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect.  Neither the Company nor any ERISA Affiliate has incurred 

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any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to section 401(a)(29) or 412 of the Code or section 4068 of ERISA, other than such liabilities or Liens as would not be individually or in the aggregate Material.
(b)    The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan's most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities by a Material amount.  The term “benefit liabilities” has the meaning specified in section 4001 of ERISA and the terms “current value” and “present value” have the meaning specified in section 3 of ERISA.
(c)    The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material.
(d)    The expected postretirement benefit obligation (determined as of the last day of the Company's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Subsidiaries is not Material.
(e)    The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code.  The representation by the Company to each Purchaser in the first sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy of such Purchaser's representation in Section 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by such Purchaser.
Section 5.13.    Private Offering by the Company.  Neither the Company nor anyone acting on its behalf has offered the Notes or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any person other than the Purchasers and not more than 15 other Institutional Investors, each of which has been offered the Notes at a private sale for investment.  Neither the Company nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of Section 5 of the Securities Act or to the registration requirements of any securities or blue sky laws of any applicable jurisdiction.
Section 5.14.    Use of Proceeds; Margin Regulations.  The Company will apply the proceeds of the sale of the Notes as set forth in  “The Offering and Use of Proceeds” of the Memorandum.  No part of the proceeds from the sale of the Notes hereunder will be used, 

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directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220).  Margin stock does not constitute more than 5% of the value of the consolidated assets of the Company and its Subsidiaries and the Company does not have any present intention that margin stock will constitute more than 5% of the value of such assets.  As used in this Section, the terms “margin stock” and “purpose of buying or carrying” shall have the meanings assigned to them in said Regulation U.
Section 5.15.    Existing Indebtedness; Future Liens.  (a) Except as described therein, Schedule 5.15 sets forth a complete and correct list of all outstanding Indebtedness of the Company and its Subsidiaries as of November 30, 2011 (including a description of the obligors and obligees, principal amount outstanding and collateral therefor, if any, and Guaranty thereof, if any), since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness of the Company or its Subsidiaries.  Neither the Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Indebtedness of the Company or such Subsidiary and no event or condition exists with respect to any Indebtedness of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment.
(b)    Except as disclosed in Schedule 5.15, neither the Company nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 10.5.
(c)    Neither the Company nor any Subsidiary is a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness of the Company or such Subsidiary, any agreement relating thereto or any other agreement (including, but not limited to, its charter or other organizational document) which limits the amount of, or otherwise imposes restrictions on the incurring of, Indebtedness of the Company, except as specifically indicated in Schedule 5.15.
Section 5.16.    Foreign Assets Control Regulations, Etc.  (a) Neither the Company nor any Controlled Entity (i) is a Person whose name appears on the list of Specially Designated Nationals and Blocked Persons published by the Office of Foreign Assets Control, U.S. Department of Treasury (“OFAC”) (an “OFAC Listed Person”) or is a Person that is otherwise subject to an OFAC Sanctions Program, (ii) is a department, agency or instrumentality of, or is otherwise controlled by or acting on behalf of, directly or indirectly, (x) any OFAC Listed Person or (y) any Person, entity, organization, foreign country or regime that is subject to any OFAC Sanctions Program (each OFAC Listed Person and each other Person, entity, organization and government of a country described in clause (ii), a “Blocked Person”) or (iii) has any investments in, or engages in any dealings or transactions with, any Blocked Person.

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(b)    No part of the proceeds from the sale of the Notes hereunder constitutes or will constitute funds obtained on behalf of any Blocked Person or will otherwise be used, directly by the Company or indirectly through any Controlled Entity, in connection with any investment in, or any transactions or dealings with, any Blocked Person.
(c)    To the Company's knowledge after making due inquiry, neither the Company nor any Controlled Entity (i) is under investigation by any Governmental Authority for, or has been charged with, or convicted of, money laundering, drug trafficking, terrorist‐related activities or other money laundering predicate crimes under any applicable law (collectively, “Anti‐Money Laundering Laws”), (ii) has been assessed civil penalties under any Anti‐Money Laundering Laws or (iii) has had any of its funds seized or forfeited in an action under any Anti‐Money Laundering Laws.  The Company has taken reasonable measures appropriate to the circumstances (in any event as required by applicable law) to ensure that the Company and each Affiliated Entity is and will continue to be in compliance with all applicable current and future Anti‐Money Laundering Laws.
(d)    No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for any improper payments to any governmental official or employee, political party, official of a political party, candidate for political office, official of any public international organization or any one else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage.  The Company has taken reasonable measures appropriate to the circumstances (in any event as required by applicable law) to ensure that the Company and each Controlled Entity is and will continue to be in compliance with all applicable current and future anti‐corruption laws and regulations.
Section 5.17.    Status under Certain Statutes.  Neither the Company nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 2005, as amended, the ICC Termination Act of 1995, as amended, or the Federal Power Act, as amended.
Section 5.18.    Environmental Matters.  Except as disclosed in the following Company filings with the SEC (i) Annual Report on Form 10-K for the fiscal year ended December 31, 2010 (see Part 1, Item 1, “Business - Regulatory Matters, Industry Developments, and Franchises - Environmental Matters”); (ii) Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011 (see Part 1, Item 2, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Regulatory Matters -  Environmental Matters”); (iii) Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011 (see Part 1, Item 2, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Regulatory Matters - Environmental Matters”); and (iv) Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011 (see Part 1, Item 2, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Regulatory Matters -Environmental Matters”):
(a)    Neither the Company nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against 

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the Company or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect; 
(b)    Neither the Company nor any Subsidiary has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect;
(c)    Neither the Company nor any Subsidiary has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them and has not disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and
(d)    All buildings on all real properties now owned, leased or operated by the Company or any Subsidiary are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect.
		
	Section 6.
	REPRESENTATIONS OF THE PURCHASERS.

Section 6.1.    Purchase for Investment.  Each Purchaser severally represents that it is purchasing the Notes for its own account or for one or more separate accounts maintained by such Purchaser or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of such Purchaser's or their property shall at all times be within such Purchaser's or their control.  Each Purchaser understands that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes.
Section 6.2.    Source of Funds.  Each Purchaser severally represents that at least one of the following statements is an accurate representation as to each source of funds (a “Source”) to be used by such Purchaser to pay the purchase price of the Notes to be purchased by such Purchaser hereunder:
(a)    the Source is an “insurance company general account” (as the term is defined in the United States Department of Labor's Prohibited Transaction Exemption (“PTE”) 95-60) in respect of which the reserves and liabilities (as defined by the annual statement for life insurance companies approved by the National Association of Insurance Commissioners (the “NAIC Annual Statement”)) for the general account contract(s) held by or on behalf of any employee benefit plan together with the amount of the reserves and liabilities for the general account contract(s) held by or on behalf of any other employee benefit plans maintained by the same employer (or affiliate thereof as defined in PTE 95-60) or by the same employee organization in the general account do 

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not exceed 10% of the total reserves and liabilities of the general account (exclusive of separate account liabilities) plus surplus as set forth in the NAIC Annual Statement filed with such Purchaser's state of domicile; or
(b)    the Source is a separate account that is maintained solely in connection with such Purchaser's fixed contractual obligations under which the amounts payable, or credited, to any employee benefit plan (or its related trust) that has any interest in such separate account (or to any participant or beneficiary of such plan (including any annuitant)) are not affected in any manner by the investment performance of the separate account; or
(c)    the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 and, except as disclosed by such Purchaser to the Company in writing pursuant to this clause (c), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or
(d)    the Source constitutes assets of an “investment fund” (within the meaning of Part V of PTE 84-14 (the “QPAM Exemption”)) managed by a “qualified professional asset manager” or “QPAM” (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(a), (c) and (g) of the QPAM Exemption are satisfied, the QPAM does not own a 10% or more interest in the Company and any person controlling or controlled by the QPAM (applying the definition of “control” in Section V(e) of the QPAM Exemption) does not own a 20% or more interest in the Company or the Parent Guarantor and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this clause (d); or
(e)    the Source constitutes assets of a “plan(s)” (within the meaning of Section IV of PTE 96-23 (the “INHAM Exemption”)) managed by an “in-house asset manager” or “INHAM” (within the meaning of Part IV of the INHAM Exemption), the conditions of Part I(a), (g) and (h) of the INHAM Exemption are satisfied, neither the INHAM nor a person controlling or controlled by the INHAM (applying the definition of “control” in Section IV(d) of the INHAM Exemption) owns a 5% or more interest in the Company and (i) the identity of such INHAM and (ii) the name(s) of the employee benefit plan(s) whose assets constitute the Source have been disclosed to the Company in writing pursuant to this clause (e); or
(f)    the Source is a governmental plan; or

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(g)    the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this clause (g); or
(h)    the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms “employee benefit plan,” “governmental plan,” and “separate account” shall have the respective meanings assigned to such terms in section 3 of ERISA.
		
	Section 7.
	INFORMATION AS TO COMPANY.

Section 7.1.    Financial and Business Information.  The Company shall deliver to each holder of Notes that is an Institutional Investor:
(a)    Quarterly Statements - within 60 days (or such shorter period as is 15 days greater than the period applicable to the filing of the Company's Quarterly Report on Form 10‐Q (the “Form 10‐Q”) with the SEC regardless of whether the Company is subject to the filing requirements thereof) after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of,
(i)    a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter, and
(ii)    consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments, provided that delivery within the time period specified above of copies of the Company's Form 10‐Q prepared in compliance with the requirements therefor and filed with the SEC shall be deemed to satisfy the requirements of this Section 7.1(a), provided, further, that the Company shall be deemed to have made such delivery of such Form 10‐Q if it shall have timely made such Form 10‐Q available on “EDGAR” and on its home page on the worldwide web (at the date of this Agreement located at:  http//www.cleco.com) and shall have given each Purchaser prior notice of such availability on EDGAR and on its home page in connection with each delivery (such availability and notice thereof being referred to as “Electronic Delivery”);

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(b)    Annual Statements - within 120 days (or such shorter period as is 15 days greater than the period applicable to the filing of the Company's Annual Report on Form 10‐K (the “Form 10‐K”) with the SEC regardless of whether the Company is subject to the filing requirements thereof) after the end of each fiscal year of the Company, duplicate copies of
(i)    a consolidated balance sheet of the Company and its Subsidiaries as at the end of such year, and
(ii)    consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries for such year,
setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by an opinion thereon of independent public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, provided that the delivery within the time period specified above of the Company's Form 10‐K for such fiscal year (together with the Company's annual report to shareholders, if any, prepared pursuant to Rule 14a‐3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the SEC shall be deemed to satisfy the requirements of this Section 7.1(b), provided, further, that the Company shall be deemed to have made such delivery of such Form 10‐K if it shall have timely made Electronic Delivery thereof;
(c)    SEC and Other Reports - promptly upon their becoming available, one copy of (i) each financial statement, report, notice or proxy statement sent by the Company or any Subsidiary to its securities holders generally, and (ii) each regular or periodic report, each registration statement (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company or any Subsidiary with the SEC and of all press releases and other statements made available generally by the Company or any Subsidiary to the public concerning developments that are Material; 
(d)    Notice of Default or Event of Default - promptly, and in any event  within five Business Days after a Responsible Officer becoming aware of the existence of a Default or Event or Default of the type referred to in Sections 11(a), (b), (h) and (i) and within fifteen days after a Responsible Officer becoming aware of the existence of any other Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 11(g), a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto; 

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(e)    ERISA Matters - promptly, and in any event within five days after a Responsible Officer becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto:
(i)    with respect to any Plan, any reportable event, as defined in section 4043(c) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; or
(ii)    the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multi-employer Plan that such action has been taken by the PBGC with respect to such Multi-employer Plan; or
(iii)    any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affili-ate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect; 
(f)    Notices from Governmental Authority - promptly, and in any event within 30 days of receipt thereof, copies of any notice to the Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; and
(g)    Requested Information - with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of its Subsidiaries (including, but without limitation, actual copies of the Company's Form 10‐Q and Form 10‐K) or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such holder of Notes.
Section 7.2.    Officer's Certificate.  Each set of financial statements delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) shall be accompanied by a certificate of a Senior Financial Officer setting forth (which, in the case of Electronic Delivery of any such financial statements, shall be by separate concurrent delivery of such certificate to each holder of Notes):

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(a)    Covenant Compliance - the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Sections 10.5 through 10.7, inclusive, during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and
(b)    Event of Default - a statement that such Senior Financial Officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and its Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of the Company or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto.
Section 7.3.    Visitation.  The Company shall permit the representatives of each holder of Notes that is an Institutional Investor:
(a)    No Default - if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company's officers, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Subsidiary, in each case no more than once per calendar year and at such reasonable times as may be requested in writing; and
(b)    Default - if a Default or Event of Default then exists, at the expense of the Company to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested; provided that no holder of Notes shall be entitled to examine or make copies or abstracts of, or otherwise obtain information with respect to, the Company's records relating to pending or threatened litigation if any such disclosure by the Company would reasonably be expected (i) to give rise to a waiver of any attorney/client privilege of the Company or any of its Subsidiaries relating to such information or (ii) to be otherwise materially disadvantageous to the Company or any of its Subsidiaries in the defense of such litigation; and provided, further, that in the case of 

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any discussion with the accountants, only if the Company has been given the opportunity to participate in the discussion.
		
	Section 8.
	PAYMENT AND PREPAYMENT OF THE NOTES.

Section 8.1.    Maturity.  As provided therein, the entire unpaid principal balance of the Notes shall be due and payable on the stated maturity date thereof.
Section 8.2.    Optional Prepayments with Make-Whole Amount.  The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes, in an amount not less than 5% of the aggregate principal amount of the Notes then outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid, and the Make-Whole Amount determined for the prepayment date with respect to such principal amount.  The Company will give each holder of Notes written notice of each optional prepayment under this Section 8.2 not less than 30 days and not more than 60 days prior to the date fixed for such prepayment.  Each such notice shall specify such date (which shall be a Business Day), the aggregate principal amount of the Notes to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.3), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation.  Two Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date.
Section 8.3.    Allocation of Partial Prepayments.  In the case of each partial prepayment of the Notes, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment.
Section 8.4.    Maturity; Surrender, Etc      In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment (which shall be a Business Day), together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any.  From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue.  Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note.
Section 8.5.    Purchase of Notes.  The Company will not and will not permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except (a) upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes or (b) pursuant to an offer to purchase made by the Company or an Affiliate pro rata to the holders of all Notes at the time outstanding upon the 

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same terms and conditions.  Any such offer shall provide each holder with sufficient information to enable it to make an informed decision with respect to such offer, and shall remain open for at least 30 Business Days.  If the holders of more than 30% of the principal amount of the Notes then outstanding accept such offer, the Company shall promptly notify the remaining holders of such fact and the expiration date for the acceptance by holders of Notes of such offer shall be extended by the number of days necessary to give each such remaining holder at least 10 Business Days from its receipt of such notice to accept such offer.  The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes.
Section 8.6.    Make-Whole Amount.
“Make-Whole Amount” means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero.  For the purposes of determining the Make-Whole Amount, the following terms have the following meanings:
“Called Principal” means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.
“Discounted Value” means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal.
“Reinvestment Yield” means, with respect to the Called Principal of any Note, .50% over the yield to maturity implied by (i) the yields reported as of 10:00 a.m. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as “Page PX1” (or such other display as may replace Page PX1) on Bloomberg Financial Markets for the most recently issued actively traded on the run U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable (including by way of interpolation), the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (or any comparable successor publication) for on the run U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date.  
In the case of each determination under clause (i) or clause (ii), as the case may be, of the preceding paragraph, such implied yield will be determined, if necessary, by (a) converting U.S. 

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Treasury bill quotations to bond equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the applicable on the run U.S. Treasury security with the maturity closest to and greater than such Remaining Average Life and (2) the applicable on the run U.S. Treasury security with the maturity closest to and less than such Remaining Average Life.  The Reinvestment Yield shall be rounded to the number of decimal places as appears in the interest rate of the applicable Note.
“Remaining Average Life” means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment.
“Remaining Scheduled Payments” means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 or Section 12.1.
“Settlement Date” means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.
		
	Section 9.
	AFFIRMATIVE COVENANTS.

The Company covenants that so long as any of the Notes are outstanding:
Section 9.1.    Compliance with Law.  Without limiting Section 10.4, the Company will, and will cause each of its Subsidiaries to, comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, ERISA, the USA Patriot Act and Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, except such thereof as shall be contested in good faith and, if applicable, by appropriate proceedings diligently conducted by it.

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Section 9.2.    Insurance.  The Company will, and will cause each of its Subsidiaries to, maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated.
Section 9.3.    Maintenance of Properties.  The Company will, and will cause each of its Subsidiaries to, maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent the Company or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 9.4.    Payment of Taxes and Claims.  The Company will, and will cause each of its Subsidiaries to, file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent the same have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax, assessment, charge, levy or claim if (i) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (ii) the nonpayment of all such taxes, assessments, charges, levies and claims in the aggregate could not reasonably be expected to have a Material Adverse Effect. 
Section 9.5.    Limited Liability Company Existence, Etc.  Subject to Section 10.2, the Company will at all times preserve and keep in full force and effect its limited liability company  existence.  Subject to Sections 10.2, the Company will at all times preserve and keep in full force and effect the corporate or other legal entity existence of each of its Subsidiaries (unless merged into the Company or another Subsidiary (other than an Excluded Subsidiary)) and all rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect. 
Section 9.6.    Books and Records.  The Company will, and will cause each of its Subsidiaries to, maintain proper books of record and account in conformity with GAAP and all applicable requirements of any Governmental Authority having legal or regulatory jurisdiction over the Company or such Subsidiary, as the case may be.

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	Section 10.
	NEGATIVE COVENANTS.

The Company covenants that so long as any of the Notes are out-standing:
Section 10.1.    Transactions with Affiliates.  The Company will not and will not permit any Subsidiary to enter into directly or indirectly any transaction or group of related transactions (including without limitation the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the Company or another Subsidiary (other than an Excluded Subsidiary)), except (i) in the ordinary course and pursuant to the reasonable requirements of the Company's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would be obtainable in a comparable arm's-length transaction with a Person not an Affiliate, (ii) for any transaction that is in compliance with the applicable laws and regulations of the Federal Energy Regulatory Commission and the LPSC (or successor regulatory agencies thereto) pertaining to affiliate transactions or (iii) any Receivables Securitization permitted by this Agreement.
Section 10.2.    Merger, Consolidation, Etc.  The Company will not, and will not permit any Subsidiary to, consolidate with or merge with any other Person or convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions to any Person (except that any Subsidiary may merge with or into, or convey, transfer or lease all or substantially all of its assets to, the Company or another Subsidiary (other than an Excluded Subsidiary) if (1) in any such merger or consolidation involving the Company, the Company is the survivor and (2) immediately before and immediately after giving effect to any such merger, consolidation or conveyance, transfer or lease, no Default or Event of Default would exist), unless:
(a)    in the case of the Company, the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer or lease all or substantially all of the assets of the Company as an entirety, as the case may be, shall be a solvent limited liability company or corporation organized and existing under the laws of the United States or any State thereof (including the District of Columbia), and, if the Company is not such surviving limited liability company or corporation, (i) such limited liability company  or corporation shall have executed and delivered to each holder of any Notes its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement and the Notes and (ii) shall have caused to be delivered to each holder of any Notes an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof; and 
(b)    immediately before and immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing (it being agreed that, for purposes of determining compliance with Section 10.7, such transaction shall be treated on a pro forma basis for the relevant period as having been consummated as of the last day of the immediately preceding fiscal quarter).

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No such conveyance, transfer or lease of all or substantially all of the assets of the Company shall have the effect of releasing the Company or any successor limited liability company or corporation that shall theretofore have become such in the manner prescribed in this Section 10.2 from its liability under this Agreement or the Notes.
Section 10.3.    Line of Business.  The Company will not and will not permit any Subsidiary to engage in any business if, as a result, the general nature of the business in which the Company and its Subsidiaries, taken as a whole, would then be engaged would be substantially changed from the general nature of the business in which the Company and its Subsidiaries, taken as a whole, are engaged on the date of this Agreement as described in the Memorandum.
Section 10.4.    Terrorism Sanctions Regulations.  The Company will not and will not permit any Controlled Entity to (a) become a Blocked Person or (b) have any investments in or engage in any dealings or transactions with any Blocked Person.
Section 10.5.    Liens.   The Company shall not, and shall not permit any Subsidiary to, create, incur, assume or suffer to exist any Lien upon any of its property, whether now owned or hereafter acquired by it, except:

(a)    Permitted Encumbrances;

(b)    any Lien existing on any property or asset prior to the acquisition thereof by the Company or any of its Subsidiaries, or existing on any property of any Person that becomes a Subsidiary after the date of Closing prior to the time such Person becomes a Subsidiary or that is merged with or into or consolidated with the Company or any Subsidiary prior to such merger or consolidation, provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary or such merger, as the case may be, (ii) such Lien shall not apply to any other property or asset of the Company or any of the Subsidiaries, and (iii) such Lien shall secure only those obligations and liabilities that it secures on the date of such acquisition or the date such Person becomes a Subsidiary of the Company or such merger, as the case may be;

(c)    Liens (including precautionary Liens in connection with Capital Lease Obligations) on fixed or capital assets and other property related thereto (including any natural gas, oil or other mineral assets, pollution control facilities, electrical generating plants, equipment and machinery, and related accounts, financial assets, contracts and general intangibles) acquired, constructed, explored, drilled, developed or improved by the Company, provided that (i) such security interests and the obligations and liabilities secured thereby are incurred prior to or within 270 days after the acquisition of the relevant asset or the completion of the relevant construction, exploration, drilling, development or improvement, or within 270 days after the extension, renewal, refinancing or replacement of the obligations and liabilities secured thereby, as the case may be, (ii) the obligations and liabilities secured thereby do not exceed the cost of acquiring, constructing, exploring, drilling, developing, or improving the relevant assets, 

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and (iii) such security interests shall not apply to any other property beyond the relevant property set forth in this subsection (c) (and in the case of construction or improvement, any theretofore unimproved real property on which the property so constructed or the improvement is located);

(d)    Liens on any Equity Interest of any Person owned or otherwise held by or on behalf of the Company created in connection with any project financing at such Person; provided that (x) such Person's sole purpose and activity is and continues to be the acquisition, development or operation of assets relating to a specific project (and where the lender in respect of such project financing is materially reliant on such project for repayment) and (y) any such Liens do not include a recourse covenant to pay with respect to the Company or any Subsidiary (other than such Person);

(e)    Liens securing the payment of Indebtedness of the Company to a state of the United States or any political subdivision thereof issued in a transaction in which such state or political subdivision issued industrial revenue bonds or other obligations, the interest on which is excludable from gross income by the holders thereof pursuant to the provisions of the Internal Revenue Code, as in effect at the time of the issuance of such obligations, for the purposes of financing or refinancing, in whole or in part, the acquisition or construction of property used or to be used by the Company to the extent such lien covers only such acquired or constructed property, and Indebtedness to the issuer of a letter of credit, bond insurance or guaranty to support any such obligations to the extent the Company is required to reimburse such issuer for drawings under such letter of credit, bond insurance or guaranty with respect to the principal of or interest on such obligations;

(f)    Liens created to secure Indebtedness of any Subsidiary to the Company or to any of the Company's other Subsidiaries (other than an Excluded Subsidiary);

(g)    Liens created by any Receivables SPC in connection with a Receivables Securitization and Liens created to secure other sales or factoring of accounts receivables and other receivables, provided that the aggregate amount of all of the foregoing shall not exceed $50,000,000 at any time;

(h)    [intentionally omitted;]

(i)    Liens to secure obligations of the Company in respect of Hedge Agreements with counterparties in the ordinary course of business and not for speculation, provided that the aggregate amount secured under this clause (i) shall not exceed $100,000,000 at any time (or such lesser or greater amount as from time to time permitted by the Bank Credit Agreement);

(j)    Liens created for the sole purpose of extending, renewing or replacing in whole or in part Indebtedness secured by any lien, mortgage or security interest referred to in the foregoing clauses (a) through (i), provided, however, that the principal amount of Indebtedness secured thereby shall not exceed the principal amount of Indebtedness so 

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secured at the time of such extension, renewal or replacement and that such extension, renewal or replacement, as the case may be, shall be limited to all or a part of the property or indebtedness that secured the lien or mortgage so extended, renewed or replaced (and any improvements on such property);

(k)    Liens created by any Finsub for any Securitization Financing pursuant to any Securitization Financing Order;

(l)    Liens on cash or invested funds used to make a defeasance, covenant defeasance or in substance defeasance of any Indebtedness pursuant to an express contractual provision in the agreements governing such Indebtedness or GAAP, provided that immediately before and immediately after giving effect to the making of such defeasance, no Default or Event of Default shall exist; and

(m)    the Lien evidenced by the Utility Mortgage securing any Indebtedness; provided that (i) such Lien shall not extend to or over any property of a character not subject on the date of Closing to the Lien granted under the Utility Mortgage, (ii) at the time of incurrence of such Indebtedness and immediately after giving effect thereto, no Default or Event of Default exists and (iii) if at any time the aggregate amount of outstanding Indebtedness secured by such Lien exceeds 15% of Total Assets then the Company shall promptly provide the holders with equal and ratable security for the Notes with all other Indebtedness secured by the Utility Mortgage pursuant to documentation reasonably satisfactory to the Required Holders (or issue first mortgage bonds under and secured by the Utility Mortgage in exchange for the Notes); and provided, further, that  Priority Debt does not at any time exceed 20% of Total Assets.

The Company agrees that neither it nor any of its Subsidiaries shall use any capability under subparagraph (m) of this Section 10.5 to secure any amounts owed or outstanding under the Bank Credit Agreement or the Indenture unless the Notes and this Agreement are also concurrently equally and ratably secured pursuant to documentation reasonably satisfactory to the Required Holders (or first mortgage bonds have been issued under and secured by the Utility Mortgage in exchange for the Notes).
Section 10.6.    Subsidiary Indebtedness.  The Company will not permit any Subsidiary to create, incur, assume, guarantee or otherwise become liable with respect to any Indebtedness other than:
(a)    Indebtedness outstanding on the date hereof as specified in Schedule 5.15 and any extension, renewal, refinancing or replacement thereof in whole or in part, provided that the principal amount thereof immediately prior to such extension, renewal, refinancing or replacement is not increased (except for increases in an amount not to exceed accrued interest, premium, fees and expenses in connection therewith);
(b)    Indebtedness owed by any Subsidiary to the Company or any other Subsidiary (other than an Excluded Subsidiary);

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(c)    Indebtedness of a Subsidiary existing at the time such Subsidiary becomes a Subsidiary (and not incurred in anticipation thereof) and any extension, renewal, refinancing or replacement thereof in whole or in part, provided that the principal amount thereof immediately prior to such extension, renewal, refinancing or replacement is not increased (except for increases in an amount not to exceed accrued interest, premium, fees and expenses in connection therewith);
(d)    Indebtedness secured by any Lien permitted by Section 10.5; and
(e)     Indebtedness not otherwise permitted by subparagraphs (a) through (d) above, provided that (i) immediately after giving effect to the creation, incurrence or assumption thereof, no Default or Event of Default exists and (ii) Priority Debt does not at any time exceed 20% of Total Assets.
Section 10.7.    Leverage Ratio.   The Company will not permit its Total Indebtedness to be greater than 65% of Total Capitalization as of the end of any fiscal quarter or fiscal year end of the Company.
		
	Section 11.
	EVENTS OF DEFAULT.

An “Event of Default” shall exist if any of the following conditions or events shall occur and be continuing: 
(a)    the Company defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or
(b)    the Company defaults in the payment of any interest on any Note for more than five Business Days after the same becomes due and payable; or
(c)    the Company defaults in the performance of or compliance with any term contained in Section 7.1(d); or
(d)    the Company defaults in the performance of or compliance with any term contained in Section 10 and such default is not remedied within 15 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder of a Note (any such written notice to be identified as a “notice of default” and to refer specifically to this Section 11(d)); or
(e)    the Company defaults in the performance of or compliance with any term contained herein (other than those referred to in Sections 11(a), (b), (c) and (d)) and such default is not remedied within 30 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder of a Note (any such written notice to be identified as a “notice of default” and to refer specifically to this Section 11(e)); or

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(f)    any representation or warranty made in writing by or on behalf of the Company or by any officer of the Company in this Agreement or in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made; or
(g)    (i) the Company or any Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Indebtedness that is outstanding in an aggregate principal amount of at least $50,000,000 beyond any period of grace provided with respect thereto, provided that this clause (g)(i) shall not apply to any Indebtedness of a Finsub or a Receivables SPC so long as there is no recourse with respect to such Indebtedness to the Company or any of its Subsidiaries; or (ii) the Company or any Subsidiary is in default in the performance of or compliance with any term of any evidence of any Indebtedness in an aggregate outstanding principal amount of at least $50,000,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been declared, due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Indebtedness to convert such Indebtedness into equity interests), the Company or any Subsidiary has become obligated to purchase or repay Indebtedness before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $50,000,000, provided that clause (g)(ii) and (iii) shall not apply to (A) Indebtedness that becomes due as a result of a notice of voluntary prepayment or redemption delivered by the Company or a Subsidiary, (B) secured Indebtedness that becomes due solely as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness, (C) intercompany indebtedness, (D) the exercise of any contractual right to cause the prepayment of any Indebtedness relating to tax exempt bonds or securities (other than (1) the exercise of a remedy for an event of default under the applicable contract or agreement or (2) the right to cause such prepayment as a result of the occurrence or continuation of any event or condition relating to the Company or any Subsidiary, which event or condition is expressly provided for under the applicable contract or agreement as giving rise to such prepayment right), or (E) any Indebtedness of a Finsub or a Receivables SPC so long as there is no recourse with respect to such Indebtedness to the Company or any of its Subsidiaries; or
(h)    the Company or any Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or

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(i)    a court or Governmental Authority of competent jurisdiction enters an order appointing, without consent by the Company or any of its Subsidiaries, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any of its Subsidiaries, or any such petition shall be filed against the Company or any of its Subsidiaries and such petition shall not be dismissed within 60 days; or
(j)    a final judgment or judgments for the payment of money aggregating in excess of $50,000,000 (unless fully covered by insurance after taking into account any applicable deductibles, as confirmed in writing by a reputable insurer) are rendered against one or more of the Company and its Subsidiaries and which judgments are not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay; or
(k)    if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) there is any “amount of unfunded benefit liabilities” (within the meaning of section 4001(a)(18) of ERISA) under one or more Plans, determined in accordance with Title IV of ERISA, (iv) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company or any Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect. 
As used in Section 11(k), the terms “employee benefit plan” and “employee welfare benefit plan” shall have the respective meanings assigned to such terms in section 3 of ERISA.
		
	Section 12.
	REMEDIES ON DEFAULT, ETC.

Section 12.1.    Acceleration.  (a)  If an Event of Default with respect to the Company described in Section 11(h) or (i) (other than an Event of Default described in clause (i) of Section 11(h) or described in clause (vi) of Section 11(h) by virtue of the fact that such clause 

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encompasses clause (i) of Section 11(h)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable.
(b)    If any other Event of Default has occurred and is continuing, any holder or holders of more than 50% in principal amount of the Notes at the time outstanding may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable.
(c)    If any Event of Default described in Section 11(a) or (b) has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon (including, but not limited to, interest accrued thereon at the Default Rate) and (y) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived.  The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances.
Section 12.2.    Other Remedies.  If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise.
Section 12.3.    Rescission.  At any time after any Notes have been declared due and payable pursuant to Section 12.1(b) or (c), the holders of not less than 51% in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) neither the Company nor any other Person shall have paid any amounts which have become due solely by reason of such declaration, (c) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (d) no judgment or decree has been entered for the payment of any monies due 

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pursuant hereto or to the Notes.  No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon.
Section 12.4.    No Waivers or Election of Remedies, Expenses, Etc.  No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies.  No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise.  Without limiting the obligations of the Company under Section 15, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys' fees, expenses and disbursements.
		
	Section 13.
	REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

Section 13.1.    Registration of Notes.  The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes.  The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register.  Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary.  The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes.
Section 13.2.    Transfer and Exchange of Notes.  Upon surrender of any Note to the Company at the address and to the attention of the designated officer (all as specified in Section 18(iii)), for registration of transfer or exchange (and in the case of a surrender for registration of transfer accompanied by a written instrument of transfer duly executed by the registered holder of such Note or such holder's attorney duly authorized in writing and accompanied by the relevant name, address and other information for notices of each transferee of such Note or part thereof), within ten Business Days thereafter, the Company shall execute and deliver, at the Company's expense (except as provided below), one or more new Notes (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note.  Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit 1.  Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon.  The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes.  Notes shall not be transferred in denominations of less than $100,000, provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than $100,000.  Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in Section 6.2.

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	Note Purchase Agreement

Section 13.3.    Replacement of Notes.  Upon receipt by the Company at the address and to the attention of the designated officer (all as specified in Section 18(iii)) of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and
(a)    in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original Purchaser or another holder of a Note with a minimum net worth of at least $50,000,000 or a Qualified Institutional Buyer, such Person's own unsecured agreement of indemnity shall be deemed to be satisfactory), or
(b)    in the case of mutilation, upon surrender and cancellation thereof,
within ten Business Days thereafter, the Company at its own expense shall execute and deliver, in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon.
		
	Section 14.
	PAYMENTS ON NOTES.

Section 14.1.    Place of Payment.  Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made in New York City, New York at the principal office of JPMorgan Chase Bank, N.A. in such jurisdiction.  The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction.
Section 14.2.    Home Office Payment.  So long as any Purchaser or its nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose below such Purchaser's name in Schedule A, or by such other method or at such other address as such Purchaser shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, such Purchaser shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1.  Prior to any sale or other disposition of any Note held by a Purchaser or its nominee, such Purchaser will, at its election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to Section 13.2.  The Company will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect 

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	Note Purchase Agreement

transferee of any Note purchased by a Purchaser under this Agreement and that has made the same agreement relating to such Note as the Purchasers have made in this Section 14.2.
		
	Section 15.
	EXPENSES, ETC.

Section 15.1.    Transaction Expenses.  Whether or not the transactions contemplated hereby are consummated, the Company will pay all costs and expenses (including reasonable attorneys' fees of a special counsel and, if reasonably required by the Required Holders, local or other counsel) incurred by the Purchasers and each other holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement or the Notes (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement or the Notes or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement or the Notes, or by reason of being a holder of any Note, (b) the costs and expenses, including financial advisors' fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes and (c) the costs and expenses incurred in connection with the initial filing of this Agreement and all related documents and financial information with the SVO provided, that such costs and expenses under this clause (c) shall not exceed $3,500.  The Company will pay, and will save each Purchaser and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses, if any, of brokers and finders (other than those, if any, retained by a Purchaser or other holder in connection with its purchase of the Notes).
Section 15.2.    Survival.  The obligations of the Company under this Section 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or the Notes, and the termination of this Agreement.
		
	Section 16.
	SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or transfer by any Purchaser of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of such Purchaser or any other holder of a Note.  All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement  shall be deemed representations and warranties of the Company under this Agreement.  Subject to the preceding sentence, this Agreement and the Notes embody the entire agreement and understanding between each Purchaser and the Company and supersede all prior agreements and understandings relating to the subject matter hereof.

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	Cleco Power LLC
	 
	Note Purchase Agreement

		
	Section 17.
	AMENDMENT AND WAIVER.  

Section 17.1.    Requirements.  This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Required Holders, except that (a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it is used therein), will be effective as to any Purchaser unless consented to by such Purchaser in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20.
Section 17.2.    Solicitation of Holders of Notes.
(a)    Solicitation.  The Company will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes.  The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 17 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes.
(b)    Payment.  The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security or provide other credit support, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes of any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted or other credit support concurrently provided, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment.
(c)    Consent in Contemplation of Transfer.  Any consent made pursuant to this Section 17 by a holder of Notes that has transferred or has agreed to transfer its Notes to the Company, any Subsidiary or any Affiliate of the Company and has provided or has agreed to provide such written consent as a condition to such transfer shall be void and of no force or effect except solely as to such holder, and any amendments effected or waivers granted or to be effected or granted that would not have been or would not be so effected or granted but for such consent (and the consents of all other holders of Notes that were acquired under the same or similar conditions) shall be void and of no force or effect except solely as to such holder.

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	Note Purchase Agreement

Section 17.3.    Binding Effect, etc.  Any amendment or waiver consented to as provided in this Section 17 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver.  No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon.  No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note.  As used herein, the term "this Agreement" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented.
Section 17.4.    Notes Held by Company, etc.  Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding.
		
	Section 18.
	NOTICES.

All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid).  Any such notice must be sent:
(i)    if to any Purchaser or its nominee, to such Purchaser or nominee at the address specified for such communications in Schedule A, or at such other address as such Purchaser or nominee shall have specified to the Company in writing,
(ii)    if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, or
(iii)    if to the Company, to the Company at its address set forth at the beginning hereof to the attention of the Treasurer, or at such other address as the Company shall have specified to the holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
		
	Section 19.
	REPRODUCTION OF DOCUMENTS.

This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by any Purchaser at the Closing (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to any Purchaser, may be 

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	Cleco Power LLC
	 
	Note Purchase Agreement

reproduced by such Purchaser by any photographic, photostatic, electronic, digital, or other similar process and such Purchaser may destroy any original document so reproduced.  The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by such Purchaser in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.  This Section 19 shall not prohibit the Company or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction.
		
	Section 20.
	CONFIDENTIAL INFORMATION.

For the purposes of this Section 20, “Confidential Information” means information delivered to any Purchaser by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by such Purchaser as being confidential information of the Company or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to such Purchaser prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by such Purchaser or any person acting on such Purchaser's behalf, (c) otherwise becomes known to such Purchaser other than through disclosure by the Company or any Subsidiary or (d) constitutes financial statements delivered to such Purchaser under Section 7.1 that are otherwise publicly available.  Each Purchaser will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by such Purchaser in good faith to protect confidential information of third parties delivered to such Purchaser, provided that such Purchaser may deliver or disclose Confidential Information to (i) its directors, officers, employees, agents, attorneys, trustees and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by its Notes), (ii) its financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor to which it sells or offers to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (v) any Person from which it offers to purchase any security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (vi) any federal or state regulatory authority having jurisdiction over such Purchaser, (vii) the NAIC or the SVO or, in each case, any similar organization, or any nationally recognized rating agency that requires access to information about such Purchaser's investment portfolio, or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to such Purchaser, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which such Purchaser is a party or (z) if an Event of Default has occurred and is continuing, to the extent such Purchaser may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under such Purchaser's Notes and this Agreement.  Each holder of a Note, 

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	Cleco Power LLC
	 
	Note Purchase Agreement

by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement.  On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying the provisions of this Section 20.
		
	Section 21.
	SUBSTITUTION OF PURCHASER.

Each Purchaser shall have the right to substitute any one of its Affiliates as the purchaser of the Notes that it has agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both such Purchaser and such Affiliate, shall contain such Affiliate's agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6.  Upon receipt of such notice, any reference to such Purchaser in this Agreement (other than in this Section 21), shall be deemed to refer to such Affiliate in lieu of such original Purchaser.  In the event that such Affiliate is so substituted as a Purchaser hereunder and such Affiliate thereafter transfers to such original Purchaser all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, any reference to such Affiliate as a “Purchaser” in this Agreement (other than in this Section 21), shall no longer be deemed to refer to such Affiliate, but shall refer to such original Purchaser, and such original Purchaser shall again have all the rights of an original holder of the Notes under this Agreement.
		
	Section 22.
	MISCELLANEOUS.

Section 22.1.    Successors and Assigns.  All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not.
Section 22.2.    Payments Due on Non-Business Days.  Anything in this Agreement or the Notes to the contrary notwithstanding (but without limiting the requirement in Section 8.4 that the notice of any optional prepayment specify a Business Day as the date fixed for such prepayment), any payment of principal of or Make-Whole Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day; provided that if the maturity date of any Note is a date other than a Business Day, the payment otherwise due on such maturity date shall be made on the next succeeding Business Day and shall include the additional days elapsed in the computation of interest payable on such next succeeding Business Day.
Section 22.3.    Accounting Terms.  All accounting terms used herein which are not expressly defined in this Agreement have the meanings respectively given to them in accordance with GAAP.  Except as otherwise specifically provided herein, (i) all computations made pursuant to this Agreement shall be made in accordance with GAAP, and (ii) all financial statements shall be prepared in accordance with GAAP.

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	Note Purchase Agreement

For purposes of determining compliance with the covenants contained in this Agreement, any election by the Company to measure an item of Indebtedness using fair value (as permitted by Accounting Standard Codification Topic No. 825-10-25 - Fair Value Option or any similar accounting standard) shall be disregarded and such determination shall be made as if such election had not been made.
Section 22.4.    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 (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction.
Section 22.5.    Construction, etc.  Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant.  Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person.
For the avoidance of doubt, all Schedules and Exhibits attached to this Agreement shall be deemed to be a part hereof.
Section 22.6.    Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument.  Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto.
Section 22.7.    Governing Law.  This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice‐of‐law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.
Section 22.8.    Jurisdiction and Process; Waiver of Jury Trial.  (a) The Company irrevocably submits to the non-exclusive jurisdiction of any New York State or federal court sitting in the Borough of Manhattan, The City of New York, over any suit, action or proceeding arising out of or relating to this Agreement or the Notes.  To the fullest extent permitted by applicable law, the Company irrevocably waives and agrees not to assert, by way of motion, as a defense or otherwise, any claim that it is not subject to the jurisdiction of any such court, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
(b)    The Company consents to process being served by or on behalf of any holder of Notes in any suit, action or proceeding of the nature referred to in Section 22.8(a) by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage 

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	Cleco Power LLC
	 
	Note Purchase Agreement

prepaid, return receipt requested, to it at its address specified in Section 18 or at such other address of which such holder shall then have been notified pursuant to said Section.  The Company agrees that such service upon receipt (i) shall be deemed in every respect effective service of process upon it in any such suit, action or proceeding and (ii) shall, to the fullest extent permitted by applicable law, be taken and held to be valid personal service upon and personal delivery to it.  Notices hereunder shall be conclusively presumed received as evidenced by a delivery receipt furnished by the United States Postal Service or any reputable commercial delivery service.
(c)    Nothing in this Section 22.8 shall affect the right of any holder of a Note to serve process in any manner permitted by law, or limit any right that the holders of any of the Notes may have to bring proceedings against the Company in the courts of any appropriate jurisdiction or to enforce in any lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.
(d)    THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH OR THEREWITH.

*    *    *    *    *

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If you are in agreement with the foregoing, please sign the form of agreement on a counterpart of this Agreement and return it to the Company, whereupon this Agreement shall become a binding agreement between you and the Company.

Very truly yours,

Cleco Power LLC

By   /s/ Darren J. Olagues
Darren J. Olagues
Senior Vice President, CFO & Treasurer

	
			
	Cleco Power LLC
	 
	Note Purchase Agreement

The foregoing is hereby
accepted and agreed to as 
of the date thereof.
John Hancock Life Insurance Company (U.S.A.)

		
	By
	   /s/ Gavin R. Danaher

Name:  Gavin R. Danaher
Title:  Managing Director

	
			
	Cleco Power LLC
	 
	Note Purchase Agreement

The foregoing is hereby
accepted and agreed to as 
of the date thereof.
Thrivent Financial for Lutherans

By   /s/ Alan D. Onstad
Name:  Alan D. Onstad
Title:  Senior Director

	
			
	Cleco Power LLC
	 
	Note Purchase Agreement

The foregoing is hereby
accepted and agreed to as 
of the date thereof.
Pacific Life Insurance Company

By   /s/ Darcy L. Lewis
Name:  Darcy L. Lewis
Title:  Assistant Vice President

By   /s/ Bernard J. Dougherty
Name:  Bernard J. Dougherty
Title:  Assistant Secretary

	
			
	Cleco Power LLC
	 
	Note Purchase Agreement

The foregoing is hereby
accepted and agreed to as 
of the date thereof.
ING Life Insurance and Annuity Company
ING USA Annuity and Life Insurance Company
ReliaStar Life Insurance Company
ReliaStar Life Insurance Company of New York

By:  ING Investment Management LLC, as Agent

By   /s/ Fitzhugh L. Wickham
Name:  Fitzhugh L. Wickham
Title:  Vice President

	
			
	Cleco Power LLC
	 
	Note Purchase Agreement

The foregoing is hereby
accepted and agreed to as 
of the date thereof.
Connecticut General Life Insurance Company

By:  CIGNA Investments, Inc. (authorized agent)

By   /s/ Robert W. Eccles
Name:  Robert W. Eccles
Title:  Senior Managing Director

Defined Terms
As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term:
“Affiliate” means, at any time, and with respect to any Person, any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and, with respect to the Company, shall include any Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests of the Company or any Subsidiary or any corporation of which the Company and its Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of any class of voting or equity interests.  As used in this definition, “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an “Affiliate” is a reference to an Affiliate of the Company.
“Anti-Terrorism Order” means Executive Order No. 13224 of September 24, 2001, Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit or Support Terrorism, 66 U.S. Fed. Reg. 49, 079 (2001), as amended.
“Anti‐Money Laundering Laws” is defined in Section 5.16(c).
“Bank Credit Agreement” means the $300,000,000 Credit Agreement dated as of November 23, 2010, among Cleco Power LLC, as borrower, the lenders thereto, JPMorgan Chase Bank, N.A., as administrative agent, Credit Agricole Corporate and Investment Bank and Keybank National Association, as syndication agents, JPMorgan Securities LLC, Credit Agricole Corporate and Investment Bank and Keybank National Association, as co-lead arrangers and book runner, and Deutsche Bank AG New York Branch and U.S. Bank National Association, as documentation agents, as such agreement may be amended, supplemented, modified, renewed, replaced, refunded or refinanced from time to time and any successor bank credit facility which constitutes the primary bank credit facility of the Company. 
“Blocked Person” is defined in Section 5.16(a).
“Business Day” means (a) for the purposes of Section 8.6 only, any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed, and (b) for the purposes of any other provision of this Agreement, any day other than a Saturday, a Sunday or a day on which commercial banks in New York, New York or New Orleans, Louisiana are required or authorized to be closed.
“Capital Lease Obligations” means with respect to any Person, obligations of such Person to pay rent or other amounts under any lease (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and 

SCHEDULE B
(to Note Purchase Agreement)

the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP, provided, however, no power purchase agreement with an independent power producer or a power producer which is not an Affiliate of the Company shall constitute a Capital Lease Obligation.
“Closing” is defined in Section 3.
“Code” means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time.
“Company” means Cleco Power LLC, a Louisiana limited liability company or any successor that becomes such in the manner prescribed in Section 10.2.
“Confidential Information” is defined in Section 20.
“Controlled Entity” means any of the Subsidiaries of the Company and any of their or the Company's respective Controlled Affiliates.  As used in this definition, “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“Default” means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default.
“Default Rate” means that rate of interest that is the greater of (i) 2.0% per annum above the rate of interest stated in clause (a) of the first paragraph of the Notes or (ii) 2.0% over the rate of interest publicly announced by JPMorgan Chase Bank, N.A. in New York, New York as its “base” or “prime” rate.
“Disqualified Stock” means any Equity Interest that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event, matures (excluding any maturity as a result of an optional redemption by the issuer thereof to the extent not prohibited by this Agreement) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the unconditional sole option of the holder thereof (other than solely for Equity Interests which do not constitute Disqualified Stock), in whole or in part, on or prior to December 16, 2042. The term “Disqualified Stock” shall also include any options, warrants or other rights that are convertible into Disqualified Stock or that are redeemable at the option of the holder, or required to be redeemed, prior to June 16, 2042.
“Electronic Delivery” is defined in Section 7.1(a).
“Environmental Laws” means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the 

B-2

protection of the environment or the release of any materials into the environment, including but not limited to those related to Hazardous Materials.
“Equity Interest” means (i) shares of corporate stock, partnership interests, limited
liability company membership interests, and any other interest that confers on a Person the right to receive a share of the profits and losses of, or distribution of assets of, the issuing Person, and (ii) all warrants, options or other rights to acquire any Equity Interest set forth in clause (i) of this defined term.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect. 
“ERISA Affiliate” means any trade or business  (whether or not incorporated) that is treated as a single employer together with the Company under section 414 of the Code.
“Event of Default” is defined in Section 11.
“Excluded Subsidiary” means any Finsub or any Receivable SPC.
“Financial Statements” means the financial statements described on Schedule 5.5.  
“Finsub” means each special purpose bankruptcy-remote Person that is a wholly-owned (directly or indirectly) Subsidiary organized solely for the purpose of engaging in a Securitization Financing authorized by a Securitization Statute and a Securitization Financing Order and activities related thereto.
“Form 10‐K” is defined in Section 7.1(b).
“Form 10‐Q” is defined in Section 7.1(a).
“GAAP” means generally accepted accounting principles as in effect from time to time in the United States of America.
“Governmental Authority” means
(a)    the government of
(i)    the United States of America or any State or other political subdivision thereof, or
(ii)    any other jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company or any Subsidiary, or

B-3

(b)    any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government.
“Guaranty” means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person:
(a)    to purchase such indebtedness or obligation or any property constituting security therefor;
(b)    to advance or supply funds (i) for the purchase or payment of such indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation;
(c)    to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of any other Person to make payment of the indebtedness or obligation; or
(d)    otherwise to assure the owner of such indebtedness or obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under any Guaranty, the indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor.
“Hazardous Material” means any and all pollutants, toxic or hazardous wastes or other substances that might pose a hazard to health and safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage or filtration of which is or shall be restricted, prohibited or penalized by any applicable law including, but not limited to, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum, petroleum products, lead based paint, radon gas or similar restricted, prohibited or penalized substances.
“Hedge Agreement” means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest rate, currency exchange rate or commodity price hedge, future, forward, swap, option, cap, floor, collar or similar agreement or arrangement (including both physical and financial settlement transactions).
“holder” means, with respect to any Note the Person in whose name such Note is registered in the register maintained by the Company pursuant to Section 13.1.

B-4

“Indebtedness” means as to any Person, at a particular time, all items which constitute, without duplication, (i) indebtedness for borrowed money or the deferred purchase price of property (excluding trade payables incurred in the ordinary course of business and excluding any such obligations payable solely through the Company's issuance of Equity Interests (other than the Disqualified Stock and Equity Interests convertible into Disqualified Stock)), (ii) indebtedness evidenced by notes, bonds, debentures or similar instruments, (iii) obligations with respect to any conditional sale or title retention agreement, (iv) indebtedness arising under acceptance facilities and the amount available to be drawn under all letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder to the extent such Person shall not have reimbursed the issuer in respect of the issuer's payment of such drafts, (v) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof (other than statutory Liens and Liens described in clauses (n), (o), (s) and (t) of the definition “Permitted Encumbrances”), provided that the amount of such liabilities included for purposes of this definition will be the amount equal to the lesser of the fair market value of such property and the amount of the liabilities so secured, (vi) indebtedness in respect of Disqualified Stock valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued dividends, (vii) liabilities in respect of any obligation (contingent or otherwise) to purchase, redeem, retire, acquire or make any other payment in respect of any shares of equity securities or any option, warrant or other right to acquire any shares of equity securities, (viii) obligations under Capital Lease Obligations, and (ix) Guaranties of such Person in respect of Indebtedness of others.  Regardless of whether or not any bonds or other obligations of the Company or any Subsidiary (including any Finsub or Receivables SPC) in respect of any Securitization Financing or Receivables Financing constitutes Indebtedness under GAAP, the Indebtedness and other liabilities of such Finsub or Receivables SPC in respect of such bonds or other obligations and any credit enhancement with respect thereto shall be taken into account in calculating Indebtedness.
“Indenture” means the Indenture, dated as of October 1, 1988, as the same may be amended, restated, supplemented or otherwise modified from time to time, between the Company and The Bank of New York Mellon Trust Company, NA (f/k/a The Bank of New York Trust Company, NA), as trustee.
“Institutional Investor” means (a) any Purchaser of a Note, (b) any holder of a Note holding (together with one or more of its affiliates) more than 10% of the aggregate principal amount of the Notes then outstanding, (c) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form, and (d) any Related Fund of any holder of any Note.
“Intellectual Property” means all copyrights, trademarks, servicemarks, patents, trade names and service names.
“Lien” means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or 

B-5

Capital Lease, upon or with respect to any property or asset of such Person (including in the case of stock, stockholder agreements, voting trust agreements and all similar arrangements).
“LPSC” means Louisiana Public Service Commission.
“LPSC Order” is defined in Section 4.11.
“Make-Whole Amount” is defined in Section 8.6.
“Material” means material in relation to the business, operations, affairs, financial condition, assets, properties, or prospects of the Company and its Subsidiaries taken as a whole.
“Material Adverse Effect” means a material adverse effect on (a) the business, operations, affairs, financial condition, assets or properties of the Company and its Subsidiaries taken as a whole, or (b) the ability of the Company to perform its obligations under this Agreement and the Notes, or (c) the validity or enforceability of this Agreement or the Notes.
“Memorandum” is defined in Section 5.3.
“Multiemployer Plan” means any Plan that is a “multiemployer plan” (as such term is defined in section 4001(a)(3) of ERISA).
“NAIC” means the National Association of Insurance Commissioners or any successor thereto.
“Notes” is defined in Section 1.
“OFAC” is defined in Section 5.16(a).
“OFAC Listed Person” is defined in Section 5.16(a).
“OFAC Sanctions Program” means any economic or trade sanction that OFAC is responsible for administering and enforcing.  A list of OFAC Sanctions Programs may be found at http://www.ustreas.gov/offices/enforcement/ofac/programs/.
“Officer's Certificate” means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate.
“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto.
“Permitted Encumbrances” means:

(a)    Liens imposed by law for taxes, assessments or similar charges incurred in the ordinary course of business that are not yet due or are being contested in compliance with Section 9.4, provided that enforcement of such Liens is stayed pending such contest;

B-6

(b)    landlords', vendors', carriers', warehousemen's, mechanics', materialmen's, contractors', repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations which are not delinquent or are being contested, provided that enforcement of such Liens is stayed pending such contest;

(c)    pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations (but not ERISA);

(d)    pledges and deposits to secure the performance of bids, trade contracts, leases, purchase agreements, government contracts, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business, and other than promissory notes and contracts for the repayment of borrowed money;

(e)    Liens (including contractual security interests) in favor of a financial institution (including securities firms) encumbering deposit accounts or checks or instruments for collection, commodity accounts or securities accounts (including the right of set-off) at or held by such financial institution in the ordinary course of its commercial business and which secure only liabilities owed to such financial institution arising out of or resulting from its maintenance of such account or otherwise are within the general parameters customary in the financial industry;

(f)    maritime Liens arising by operation of law in the ordinary course of business and securing obligations which are not delinquent or are being contested, provided that enforcement of such Liens is stayed pending such contest;

(g)    Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties in connection with the importation of goods;

(h)    judgment liens in respect of judgments that do not constitute an Event of Default under Section 11(j);

(i)    any interest of a lessor or licensor in property under an operating lease under which the Company or any Subsidiary is lessee or licensee, and any restriction or encumbrance to which the interest of such lessor or licensor is subject;

(j)    Liens arising from filed UCC-1 financing statements relating solely to leases not prohibited by this Agreement;

(k)    leases or subleases granted to others that do not materially interfere with the ordinary conduct of business of the Company and its Subsidiaries;

(l)    licenses of Intellectual Property granted by the Company or any Subsidiary in the ordinary course of business and not materially interfering with the 

B-7

ordinary conduct of the business of the Company and its Subsidiaries;

(m)    easements, servitudes (contractual and legal), zoning restrictions, rights of way, encroachments, minor defects and irregularities in title and other similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not render title to such property unmarketable or materially interfere with the ability of the Company and its Subsidiaries, as the case may be, to utilize their respective properties for their intended purposes;

(n)    Liens securing obligations, neither assumed by the Company or any Subsidiary nor on account of which the Company or any Subsidiary customarily pays interest, upon real estate on which the Company or any Subsidiary has a right-of-way, easement, franchise or other servitude or of which the Company or any Subsidiary is the lessee, for the purpose of locating transmission and distribution lines and related support structures, pipe lines, substations, measuring stations, tanks, pumping or delivery equipment or similar equipment, or service buildings incidental to any of the foregoing;

(o)    with respect to properties involved in the production of oil, gas and other minerals, unitization and pooling agreements and orders, operating agreements, royalties,
reversionary interests, preferential purchase rights, farmout agreements, gas balancing agreements and other agreements, in each case that are customary in the oil, gas and mineral production business in the general area of such property and that are entered into in the ordinary course of business;

(p)    Liens in favor of Governmental Authorities encumbering assets acquired in connection with a government grant program, and the right reserved to, or vested in, any Governmental Authority by the terms of any right, power, franchise, grant, license, or permit, or by any provision of law, to purchase, condemn, recapture or designate a purchaser of any property;

(q)    Liens on any cash collateral for letters of credit issued under the Bank Credit Agreement to the extent required thereunder (i) as a result of any such letters of credit remaining outstanding after the termination of the Bank Credit Agreement (other than for reasons related to any default or event of default or similar event occurring under the Bank Credit Agreement) or (ii) in respect of a defaulting lender's contractual participation interest in any such letters of credit; provided that the aggregate amount of all cash collateral posted pursuant to this subparagraph (q) shall not exceed 50% of the total lending commitment in effect from time to time under the Bank Credit Agreement; and provided, further, that Priority Debt does not at any time exceed 20% of Total Assets;

(r)    customary Liens for the fees and expenses of trustees and escrow agents pursuant to any indenture, escrow agreement or similar agreement establishing a trust or escrow arrangement, and Liens on monies held by trustees in payment or construction accounts under indentures;
    

B-8

(s)    agreements for and obligations (other than repayment of borrowed money) relating to the joint or common ownership, operation, and use of property, including Liens under joint venture or similar agreements securing obligations incurred in the conduct of operations or consisting of a purchase option, call or right of first refusal with respect to the Equity Interests in such jointly owned Person; and

(t)    Liens granted on cash or invested funds constituting proceeds of any sale or disposition of property deposited into escrow accounts to secure indemnification, adjustment of purchase price or similar obligations incurred in connection with such sale or disposition, in an amount not to exceed the amount of gross proceeds received from such sale or disposition.
“Person” means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, business entity or Governmental Authority.
“Plan” means an “employee benefit plan” (as defined in section 3(3) of ERISA) subject to Title I of ERISA that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability.
“Priority Debt” means the sum of (i) all cash collateral posted pursuant to subparagraph  (q) of the definition of “Permitted Encumbrances” plus (ii) outstanding Indebtedness secured by Liens pursuant to Section 10.5(m) plus (iii) outstanding Indebtedness pursuant to Section 10.6(e); provided, however, that with respect to the determination of Indebtedness secured by Liens pursuant to Section 10.5(m), if the Notes have been equally and ratably secured as provided in Section 10.5(m), then Indebtedness secured by Liens pursuant to Section 10.5(m) shall be excluded from the calculation of Priority Debt.      
“property” or “properties” means, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate.
“PTE” is defined in Section 6.2(a).
“Purchaser” is defined in the first paragraph of this Agreement.
“Qualified Institutional Buyer” means any Person who is a “qualified institutional buyer” within the meaning of such term as set forth in Rule 144A(a)(1) under the Securities Act.
“Receivables” means accounts receivables, payment intangibles, notes receivable, rights to receive future payments and related rights of the Company or any of its Subsidiaries, and any supporting obligations and other financial assets related thereto (including all collateral securing such accounts receivables or other assets, contracts and contract rights, all guarantees with respect thereto, and all proceeds thereof) which are transferred, or in respect of which security interests are granted, in one or more transactions that are customary for asset securitizations of such Receivables. 

B-9

“Receivables Securitization” means any sale, grant or contribution, or series of related sales, grants or contributions, by the Company or any of its Subsidiaries of Receivables or interests therein (or purported sale, grant or contribution) to a limited liability company, business trust or other entity, where (a) the purchase of such Receivables or interests therein is funded in whole or in part by the incurrence or issuance by the purchaser, grantee or any successor entity of Indebtedness or securities that are to receive payments from, or that represent interests in, the cash flow derived primarily from such Receivables or interests therein (provided, however, that “Indebtedness” as used in this clause (a) shall not include Indebtedness incurred by a Receivables SPC owed to the Company or any of its Subsidiaries, as applicable, which Indebtedness represents all or a portion of the purchase price or other consideration paid by the Receivables SPC for such Receivables or interests therein), (b) any representation, warranty, covenant, recourse, repurchase, hold harmless, indemnity or similar obligations of the Company or any of its Subsidiaries, as applicable (other than the Receivables SPC that is a party to such transaction), in respect of Receivables or interests therein sold, granted or contributed, or payments made in respect thereof, are customary for transactions of this type, and do not prevent the characterization of the transaction as a true sale under applicable laws (including debtor relief laws), and (c) any representation, warranty, covenant, recourse, repurchase, hold harmless, indemnity or similar obligations of a Receivables SPC in respect of Receivables or interests therein sold, granted or contributed, or payments made in respect thereof, are customary for transactions of this type.
“Receivables SPC” means a special purpose, bankruptcy-remote Person formed for the sole and exclusive purpose of engaging in activities in connection with the purchase, sale and financing of Receivables in connection with and pursuant to a Receivables Securitization.
“Related Fund” means, with respect to any holder of any Note, any fund or entity that (i) invests in Securities or bank loans, and (ii) is advised or managed by such holder, the same investment advisor as such holder or by an affiliate of such holder or such investment advisor.
“Required Holders” means, at any time, the holders of more than 50% in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its Affiliates).
“Responsible Officer” means any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of this Agreement.
“SEC” shall mean the Securities and Exchange Commission of the United States, or any successor thereto.
“Securities” or “Security” shall have the meaning specified in Section 2(1) of the Securities Act. 
“Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect.

B-10

“Securitization Financing” means an issuance of any bonds, other evidence of indebtedness or certificates of participation or beneficial interests that is (i) issued by a Finsub and (ii) secured by the intangible property right to collect charges for the recovery of specified costs and such other assets, if any, of a Finsub.
“Securitization Financing Order” means an order of the applicable regulatory Governmental Authority (such as the Louisiana Public Service Commission) which allows for a securitization financing by the Company and/or a Finsub authorized by a Securitization Statute.
“Securitization Statute” means any legislation, including, but not limited to, the Louisiana Electric Utility Storm Recovery Securitization Act and the Louisiana Electric Utility Investment Recovery Securitization Act, and/or any order or regulation of the Louisiana Public Service Commission, that (i) is enacted to facilitate the recovery of certain specified costs incurred by the Company; (ii) authorizes the Company to apply for, and authorizes the applicable regulatory Governmental Authority to issue, a financing order determining the amount of specified costs the Company will be allowed to recover; (iii) provides that pursuant to the financing order, the Company acquires an intangible property right to charge, collect, and receive amounts necessary to provide for the full recovery of the specified costs determined to be recoverable; (iv) guarantees that the applicable regulatory Governmental Authority will not rescind or amend the financing order, revise the amount of specified costs, or in any way reduce or impair the value of the intangible property right, except as may be contemplated by periodic adjustments authorized by such legislation, order or regulation; (v) provides procedures assuring that the sale of the intangible property right from the Company to a Finsub will be perfected under applicable law as an absolute transfer of the Company's right, title, and interest in such property, and (vi) authorizes the securitization of the intangible property right to recover the fixed amount of specified costs through the issuance of bonds, other evidences of indebtedness, or certificates of participation or beneficial interest that are issued pursuant to an indenture, contract or other agreement of the Company or a Finsub.
“Senior Financial Officer” means the chief financial officer, principal accounting officer, treasurer or comptroller of the Company.
“Subsidiary” means, as to any Person, any other Person in which such first Person or one or more of its Subsidiaries or such first Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such second Person, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such first Person or one or more of its Subsidiaries or such first Person and one or more of its Subsidiaries (unless such partnership or joint venture can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries).  Unless the context otherwise clearly requires, any reference to a “Subsidiary” is a reference to a Subsidiary of the Company.
“SVO” means the Securities Valuation Office of the NAIC or any successor to such Office.

B-11

“Total Assets” means, at any time, the aggregate amount of assets of the Company and its Subsidiaries at such time, as determined on a consolidated basis in accordance with GAAP.
“Total Capitalization” means, at any time, the difference between (i) the sum of each of the following at such time with respect to the Company and the Subsidiaries determined on a consolidated basis in accordance with GAAP: (a) preferred Equity Interests, plus (b) common Equity Interests and any premium on Equity Interests thereon (as such term is used in the Financial Statements), excluding accumulated other comprehensive income or loss, plus (c) retained earnings, plus (d) Total Indebtedness, and (ii) stock of the Company acquired by the Company and stock of a Subsidiary acquired by such Subsidiary, in each case at such time, as applicable, determined on a consolidated basis in accordance with GAAP.
“Total Indebtedness” means at any time, all Indebtedness (net of unamortized premium and discount (as such term is used in the Financial Statements)) at such time of the Company and the Subsidiaries, determined on a consolidated basis in accordance with GAAP.  Regardless of whether or not any bonds issued in connection with a Securitization Financing, Receivables Securitization or other obligations of the Company or any Subsidiary (including any Finsub and Receivables SPC) in respect of a Securitization Financing or Receivables Securitization constitutes Indebtedness under GAAP, the Indebtedness and other liabilities of such Finsub or Receivables SPC in respect of such bonds and any credit enhancement with respect thereto shall be taken into account in calculating Total Indebtedness.
“USA Patriot Act” means United States Public Law 107-56, Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect.
“Utility Mortgage” means the Indenture of Mortgage, dated as of July 1, 1950, made by the Company to Bank One Trust Company, NA, as Trustee, as amended and supplemented from time to time.
“Wholly-Owned Subsidiary” means, at any time, any Subsidiary one hundred percent of all of the equity interests (except directors' qualifying shares) and voting interests of which are owned by any one or more of the Company and the Company's other Wholly-Owned Subsidiaries at such time.

B-12

[FORM OF NOTE]
Cleco Power LLC
5.12% SENIOR NOTE DUE DECEMBER 16, 2041

	
					
	No. [_____]
	 
	 
	 
	[Date]

	$[_______]
	 
	 
	 
	PPN 185508 A*9

For Value Received, the undersigned, Cleco Power LLC (herein called the “Company”), a limited liability company organized and existing under the laws of the State of Louisiana, hereby promises to pay to [____________], or registered assigns, the principal sum of [_____________________] Dollars (or so much thereof as shall not have been prepaid) on December 16, 2041, with interest (computed on the basis of a 360-day year of twelve 30‐day months) (a) on the unpaid balance hereof at the rate of 5.12% per annum from the date hereof, payable semiannually, on the 16th day of June and December in each year, commencing with the June or December next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law, on any overdue payment of interest and, during the continuance of an Event of Default, on such unpaid balance and on any overdue payment of any Make‐Whole Amount, at a rate per annum from time to time equal to the greater of (i) 7.12% or (ii) 2.0% over the rate of interest publicly announced by JPMorgan Chase Bank, N.A. from time to time in New York, New York as its “base” or “prime” rate, payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand).
Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at such place as the holder of this Note shall have designated as provided in the Note Purchase Agreement referred to below.
This Note is one of a series of Senior Notes (herein called the “Notes”) issued pursuant to the Note Purchase Agreement, dated as of December 16, 2011 (as from time to time amended, the “Note Purchase Agreement”), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof.  Each holder of this Note will be deemed, by its acceptance hereof, to have (i) agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) made the representation set forth in Section 6.2 of the Note Purchase Agreement.  Unless otherwise indicated, capitalized terms used in this Note shall have the respective meanings ascribed to such terms in the Note Purchase Agreement.
This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee.  Prior to due presentment for registration of transfer, the Company may treat the 

person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary.
This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise.
If an Event of Default occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement.
This Note shall be construed and enforced in accordance with, and the rights of the Company and the holder of this Note shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.

Cleco Power LLC

	
		
	By
	 

[Title]

B-2

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