Document:

ex10_1.htm

Exhibit 10.1

 

REDACTED

EXECUTION VERSION

CONFIDENTIAL TREATMENT REQUESTED:

INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED 

AND MARKED WITH “*******” OR OTHERWISE CLEARLY INDICATED.  AN UNREDACTED VERSION 

OF THIS DOCUMENT HAS ALSO BEEN PROVIDED TO THE SECURITIES AND EXCHANGE COMMISSION.

 

	 

 

 

POWER PURCHASE AND SALE AGREEMENT

 

 

among

 

H.Q. ENERGY SERVICES (U.S.) INC.,

as Seller

 

and

 

CENTRAL VERMONT PUBLIC SERVICE CORPORATION;

GREEN MOUNTAIN POWER CORPORATION;

VERMONT ELECTRIC COOPERATIVE, INC.;

VERMONT PUBLIC POWER SUPPLY AUTHORITY;

VERMONT MARBLE POWER DIVISION OF OMYA INC.; 

CITY OF BURLINGTON, VERMONT ELECTRIC 

DEPARTMENT; AND

THE TOWN OF STOWE ELECTRIC DEPARTMENT,

as Buyers

 

Dated as of

August 12, 2010

 

	 

 

 

 

 

 

 

TABLE OF CONTENTS

 

	ARTICLE ONE GENERAL DEFINITIONS	
1

	 	 	 	 
	ARTICLE TWO REQUIRED APPROVALS	
12

	 	 	 	 
	 	2.1 	
Required Approvals

	
12

	 	2.2	
Cooperation to Obtain Required Approvals

	
14

	 	2.3	
Buyers' Option to Assume Removed Buyer's Share

	
15

	 	 	 	 
	ARTICLE THREE PARTIES' OBLIGATIONS WITH RESPECT TO THE PRODUCTS	
16

	 	 	 	 
	 	3.1 	
Term; General Description of Obligations

	
16

	 	3.2  	
Energy Product

	
16

	 	3.3 	
Environmental Attributes Product

	
21

	 	3.4  	
Force Majeure

	
24

	 	 	 	 
	ARTICLE FOUR AMOUNT DUE IN EVENT OF CERTAIN FAILURES	
25

	 	 	 	 
	 	4.1  	
Failure to Schedule Energy Product

	
25

	 	4.2  	
Failure to Transfer Environmental Attributes Product

	
25

	 	 	 	 
	ARTICLE FIVE EVENTS OF DEFAULT; REMEDIES	
26

	 	 	 	 
	 	5.1 	
Events of Default

	
26

	 	5.2  	
Remedies

	
29

	 	5.3	
Calculation of Termination Payment

	
30

	 	5.4  	
Notice of Payment of Termination Payment

	
30

	 	5.5  	
Closeout Setoffs                               

	
30

	 	 	 	 
	ARTICLE SIX PAYMENT AND NETTING	
31

	 	 	 	 
	 	6.1 	
Billing Period

	
31

	 	6.2 	
Timeliness of Payment

	
31

	 	6.3	
Disputes and Adjustments of Invoices

	
31

	 	6.4 	
Netting of Payments

	
31

	 	6.5  	
Security

	
32

	 	 	 	 
	ARTICLE SEVEN LIMITATIONS	
32

	 	 	 	 
	 	7.1 	
Limitation of Remedies, Liability and Damages

	
32

	 	 	 	 
	ARTICLE EIGHT CREDIT AND COLLATERAL REQUIREMENTS	
32

	 	 	 	 
	 	8.1	
Financial Information

	
32

	 	8.2 	
Collateral Agreements

	
33

	 	8.3  	
Guaranties

	
34

	 	 	 	 
	ARTICLE NINE GOVERNMENTAL CHARGES	
34

	 	 	 	 
	 	9.1	
Cooperation

	
34

	 	9.2	
Governmental Charges

	
34

	 	 	 	 
	ARTICLE TEN OPERATING COMMITTEE	
35

 

  

i

  

 

	 	10.1	
Operating Committee

	
35

	 	10.2 	
Duties of the Operating Committee

	
35

	 	10.3   	
Confirmation of Operating Committee Actions

	
36

	 	10.4 	
Expenses

	
36

	 	 	 	 
	ARTICLE ELEVEN MISCELLANEOUS	
37

	 	 	 	 
	 	11.1  	
Survival

	
37

	 	11.2  	
Representations and Warranties

	
37

	 	11.3   	
Duty to Mitigate

	
38

	 	11.4  	
Indemnity

	
38

	 	11.5   	
Assignment

	
39

	 	11.6      	
Governing Law; Venue

	
40

	 	11.7  	
Notices

	
40

	 	11.8  	
Several Rights and Obligations of Buyers

	
40

	 	11.9 	
Interpretation

	
40

	 	11.10	
General

	
42

	 	11.11 	
Regulatory Event

	
43

	 	11.12 	
Audit

	
44

	 	11.13  	
FERC Standard of Review; Mobile-Sierra Waiver

	
44

	 	11.14 	
Bankruptcy Issues

	
45

	 	11.15 	
Confidentiality

	
45

 

 

TABLE OF APPENDICES

	
APPENDIX A

	
Certain Provisions Pertaining to Buyers That Are Governmental Entities

	
APPENDIX 3.2(c)(i)

	
Buyers' Shares of the Energy Quantity at 218 MW

	
APPENDIX 3.2(c)(ii)

	
Buyers' Shares of the Energy Quantity at 225 MW

	
APPENDIX 3.2(e)

	
Sample Price Calculations (For Illustrative Purposes Only)

	
APPENDIX 3.3(b)(i)

	
Buyers' Shares of the Environmental Attributes Quantity at 218 MW

	
APPENDIX 3.3(b)(ii)

	
Buyers' Shares of the Environmental Attributes Quantity at 225 MW

	
APPENDIX 3.3(f)

	
Form of Attestation

	
APPENDIX 11.7

	
Notice Information

 

ii

 

 

POWER PURCHASE AND SALE AGREEMENT

 

 

This Power Purchase and Sale Agreement ("Agreement") is made as of the 12th day of August, 2010 (the "Effective Date") among H.Q. Energy Services (U.S.) Inc. ("HQUS" or "Seller"), Central Vermont Public Service Corporation ("CVPS"), Green Mountain Power Corporation ("GMP"), Vermont Electric Cooperative, Inc. ("VEC"), Vermont Public Power Supply Authority, a body politic and corporate and a public instrumentality of the State of Vermont exercising public and essential governmental functions ("VPPSA"), Vermont Marble Power Division of Omya Inc. ("Vermont Marble"), City of Burlington, Vermont Electric Department ("BED"), and the Town of Stowe Electric Department ("Stowe").  Each of CVPS, GMP, VEC, VPPSA, Vermont Marble, BED and Stowe are also referred to herein as a "Buyer," and collectively, the "Buyers".  Seller and each Buyer are also referred to herein as a "Party," and collectively, the "Parties."

 

NOW THEREFORE, for good and valuable consideration, receipt of which is acknowledged by each signatory, the signatories to this Agreement hereby agree and covenant as follows:

 

ARTICLE ONE

 

GENERAL DEFINITIONS

 

 

1.1           "Affiliate" means (i) in relation to a Buyer, any other Person (other than an individual) that, directly or indirectly, including through one or more intermediaries, controls, or is controlled by, or is under common control with, such Buyer, and (ii) in relation to Seller, Hydro-Québec and any other Person that, directly or indirectly, including through one or more intermediaries, Hydro-Québec controls.  For this purpose, "control" means the direct or indirect ownership of fifty percent (50%) or more of the outstanding capital stock or other equity interests having ordinary voting power.

 

 

1.2           "Agreement" means this Power Purchase and Sale Agreement among the Parties as the same may be amended and restated from time to time.

 

 

1.3           "Annual Governor" means the ******* limit on the positive or negative year-over-year variation to the Contract Price as set forth in Section 3.2(e)(i) of this Agreement.

 

 

1.4           "Appointing Entity" has the meaning set forth in Section 10.1.

 

 

1.5           "Bankrupt" means the financial status with respect to any Person which (i) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy, insolvency, reorganization or similar law, or has any such petition filed or commenced against it, (ii) makes an assignment or any general arrangement for the benefit of creditors, (iii) otherwise becomes bankrupt or insolvent (however evidenced), (iv) has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets, or (v) is generally unable to pay its debts as they fall due.

 

 

1

 

 

1.6           "Bankruptcy Code" has the meaning set forth in Section 11.14.

 

 

1.7           "BED" has the meaning set forth in the preamble to this Agreement.

 

 

1.8           "Business Day" means any day except a Saturday, Sunday, or a Federal Reserve Bank holiday.  A Business Day shall open at 8:00 a.m. and close at 5:00 p.m. eastern prevailing time.

 

 

1.9           "Buyer" means each of the Buyers identified in the preamble to this Agreement.

 

 

1.10          "Claiming Party" has the meaning set forth in Section 3.4.

 

 

1.11          "Claims" means all third party claims or actions, threatened or filed and, whether groundless, false, fraudulent or otherwise, that directly or indirectly relate to the subject matter of an indemnity, and the resulting losses, damages, expenses, attorneys' fees and court costs, whether incurred by settlement or otherwise, and whether such claims or actions are threatened or filed prior to or after the termination of this Agreement.

 

 

1.12          "Collateral Agreement" has the meaning set forth in Section 8.2.

 

 

1.13          "Contract Price" means the price per MWh, calculated in accordance with Section 3.2(e), to be paid to Seller by each Buyer for the purchase of the Energy Product.

 

 

1.14          "Contract Year" means the annual 365 day period (366 days for leap years) commencing on November 1st and continuing through October 31st.

 

 

1.15          "Costs" means, with respect to the Non-Defaulting Party, brokerage fees, commissions and other similar third party transaction costs and expenses reasonably incurred by such Party in entering into new arrangements to replace or resell the Energy Quantity in the event of an Early Termination under Section 5.2; and all reasonable attorneys' fees and expenses incurred by the Non-Defaulting Party in connection with such Early Termination.

 

 

2

 

 

1.16          “Credit Rating” means, with respect to any Person, on any date of determination, the respective ratings then assigned to such Person’s unsecured, senior long-term debt or deposit obligations (not supported by third-party credit enhancement except that the standing guaranty of the Province of Québec in favor of the Seller Guarantor shall not be considered to constitute “third party credit enhancement” for purposes of this definition) by S&P, Moody’s or other specified rating agency or agencies or if such Person does not have a rating for its unsecured, senior long-term debt or deposit obligations (including, for the avoidance of doubt, debt incurred pursuant to municipal revenue bonds), then the rating assigned to such Person as an "issuer" and/or its “corporate credit rating” by S&P or Moody's.

 

 

1.17          “Cross Default Entity” has the meaning set forth in Section 5.1(k).

 

 

1.18          "CVPS" has the meaning set forth in the preamble to this Agreement.

 

 

1.19          "Day-Ahead Adjusted Load Obligation" has the meaning set forth in the ISO-NE Tariff.

 

 

1.20          "Day-Ahead Energy Market" has the meaning set forth in the ISO-NE Tariff.

 

 

1.21           "Daily Settlement Published Prices" means the "Daily Settlement" values under the product name ******* published by NYMEX and found on the NYMEX website at ******* provided, that if such Price Source ceases to exist or becomes unavailable, then as provided in Section 10.2(d), the Parties may agree upon a replacement Price Source.  The Daily Settlement Published Prices is the Price Source for the Mass Hub Forward Price, as set forth in Section 3.2(e)(vi).

 

 

1.22          "Daily Values" has the meaning set forth in Section 3.2(e)(vi).

 

 

1.23          "Defaulting Party" has the meaning set forth in Section 5.1.

 

 

1.24          "Early Termination" has the meaning set forth in Section 5.2(a).

 

 

1.25          "Early Termination Date" has the meaning set forth in Section 5.2(b).

 

 

1.26          "Effective Date" has the meaning set forth in the preamble to this Agreement.

 

 

1.27          "Energy" is power produced in the form of electrical energy, measured in megawatthours (MWh).

 

 

3

 

 

1.28           *******

 

 

1.29           *******

 

 

1.30           "Energy Product" has the meaning set forth in Section 3.2(a).

 

 

1.31           "Energy Profile" has the meaning set forth in Section 3.2(b).

 

 

1.32           "Energy Profile Price Adjustment" or "EPPAy" has the meaning set forth in Section 3.2(e)(vii).

 

 

1.33           "Energy Quantity" means the volume of the Energy Product that Seller and each Buyer agree to Schedule as set forth in Appendix 3.2(c)(i) or Appendix 3.2(c)(ii), as applicable.

 

 

1.34           "Environmental Attributes" means all environmental characteristics, claims, credits, benefits, emissions reductions, offsets, allowances, allocations, howsoever characterized, denominated, measured or entitled, corresponding to Energy from the HQP System Mix.

 

 

1.35           "Environmental Attributes Product" has the meaning set forth in Section 3.3(a).

 

 

1.36           "Environmental Attributes Quantity" means the volume of the Environmental Attributes Product that Seller agrees to transfer and each Buyer agrees to receive as set forth in Appendix 3.3(b)(i) or Appendix 3.3(b)(ii), as applicable.

 

 

1.37           "Environmental Attributes Revenues" means revenues received by Seller or any Buyer from the sale for resale of any Environmental Attributes as provided for in Section 3.3(g) or Section 3.3(h).

 

 

1.38           "Equitable Defenses" means any bankruptcy, insolvency, reorganization and other laws affecting creditors' rights generally, and with regard to equitable remedies, the discretion of the court before which proceedings to obtain same may be pending.

 

 

1.39           "Escalation Factor" has the meaning set forth in Section 3.2(e)(iii).

 

 

1.40           "Evaluation Date" means the annually occurring date on the second Friday of the month of October when the Contract Price for the upcoming Contract Year is calculated in accordance with Section 3.2(e).

 

 

4

 

 

1.41           "Event of Default" has the meaning set forth in Section 5.1.

 

 

1.42           "Event of Force Majeure" means an occurrence or circumstance constituting a Force Majeure or, solely with respect to Seller's obligation to transfer the Environmental Attributes Product, an HQP Force Majeure.

 

 

1.43           "FERC" means the Federal Energy Regulatory Commission.

 

 

1.44           “Final Order” means a decision that has been granted as to which (a) no request for rehearing or reconsideration is pending, (b) no request for a stay is pending and no stay is in effect, and (c) no appeal is pending after the expiration of the applicable appeal period; provided, however, that if such decision is subject to an appeal, the pendency of such appeal shall be waived if the Party required to obtain such decision provides written notice of waiver to the other Parties within thirty (30) days after the filing of the appeal, whereupon such decision shall be deemed to be a "Final Order."

 

 

1.45           "Firm (LD)" means that Seller or Buyers, as applicable, shall be relieved of their respective obligations hereunder applicable to the Energy Product, without liability only to the extent that, and for the period during which, such performance is prevented by an Event of Force Majeure.

 

 

1.46           “Fixed Threshold Amount” means (a) as regards VPPSA, ******* (b) as regards BED, *******; (c) as regards the Town of Stowe, *******; and (d) as regards Seller, *******.

 

 

1.47           "Force Majeure" means an event or circumstance which prevents a Party from performing its obligations under this Agreement, including its Scheduling obligations, which event or circumstance was not anticipated as of the Effective Date, which is not within the reasonable control of, or the result of the negligence of, the Claiming Party, and which, by the exercise of due diligence, the Claiming Party is unable to overcome or avoid or cause to be avoided.  Force Majeure shall not be based on (i) the loss of Buyers' markets for any Product provided hereunder; (ii) a Buyer's inability economically to use or resell any of the Product provided hereunder; (iii) subject, for the avoidance of doubt, to Seller’s right to claim any HQP Force Majeure with respect to Seller's obligation to transfer the Environmental Attributes Product, the loss or failure of Seller's supply of any of the Product provided hereunder; (iv) Seller's ability to sell any of the Product provided hereunder at a greater price than the price paid for such Product hereunder; or (v) subject, for the avoidance of doubt, to Seller’s right to claim any HQP Force Majeure with respect to Seller's obligation to transfer the Environmental Attributes Product, unavailability in whole or in part due to curtailment or unavailability of transmission facilities.

 

 

5

 

 

1.48           "Gains" means, with respect to any Party, an amount equal to the present value of the economic benefit to it, if any (exclusive of Costs), resulting from Early Termination, determined in a commercially reasonable manner.

 

 

1.49           "GMP" has the meaning set forth in the preamble to this Agreement.

 

 

1.50           "GNP IPD" means the implicit price deflator or its successor representing changes in the United States gross national product price index.  As of the Effective Date, the GNP IPD is published by Bureau of Economic Analysis for the United States Department of Commerce.

 

 

1.51           "Governmental Authority" means any international, national, federal, provincial, state, municipal, county, regional or local government, administrative, judicial or regulatory Person operating under any applicable laws and includes any department, commission, bureau, board, administrative agency or regulatory body of any government and, for the avoidance of doubt, the ISO-NE.

 

 

1.52           "Governmental Charges" has the meaning set forth in Section 9.2.

 

 

1.53           "HE" means hour ending.

 

 

1.54           "Highgate" means the transmission facilities from the Bedford Substation in Québec to and including the high voltage direct current converter terminal at Highgate, Vermont together with any upgrades associated with increasing the capacity or performance of these facilities, up to 225 MW.

 

 

1.55           "HQP Force Majeure" means an event or circumstance that prevents Seller from receiving from Hydro-Québec Production or delivering into the New England Markets Energy from HQP System Mix (including Environmental Attributes) for purposes of allowing Seller to perform its obligations under this Agreement to transfer the total Environmental Attributes Quantity for a given calendar year, which event or circumstance (i) was not anticipated as of the Effective Date, (ii) is not within the reasonable control of, or the result of the negligence of Seller or any of its Affiliates (as applicable), and (iii) which, by the exercise of due diligence, Seller or any of its Affiliates (as applicable) is unable to overcome or avoid or cause to be avoided.  Provided that the conditions set forth in clauses (i), (ii) and (iii) of the prior sentence apply, HQP Force Majeure includes the following: fires; storms; ice storms; earthquakes; floods; lightning; landslides; volcanic eruptions; hurricanes; tidal waves; epidemics; explosions; cyclones; tornadoes; acts of God; tempests; other natural disasters; strikes; work stoppages; walkouts; lockouts; civil disturbances; sabotage; vandalism; labor shortages; acts of terrorism; acts of military authorities; war (declared or not); riot; invasion; armed conflict; blockage; embargo; revolution; national emergency; public disorder; quarantine; insurrections; shortage of materials; and breakage of equipment caused by an event which otherwise constitutes a force majeure event specified in this Section.  HQP Force Majeure shall not be based on (x) the loss of HQP's markets or (y) HQP's ability to sell any product purchased by Seller from HQP at a price greater than the price paid by Seller to HQP.  Seller may not raise a claim of HQP Force Majeure based in whole or in part on curtailment by a transmission provider unless (a) HQP or Seller, as applicable, has contracted for firm transmission with such transmission provider and (b) such curtailment is due to "force majeure" or "uncontrollable force" or a similar term as defined under such transmission provider's tariff.

 

 

6

 

 

1.56           "HQP System Mix" means, with respect to any given calendar year during the Term, the Hydro-Québec Production system generation mix in the province of Québec, the actual content of which for such calendar year shall be confirmed by Seller in the annual attestation provided by Seller in accordance with Section 3.3(f), which generation mix shall be comprised of not less than ninety percent (90%) hydroelectricity.  For avoidance of doubt, each MWh in the HQP System Mix shall be comprised of not less than ninety percent (90%) hydroelectricity.

 

 

1.57           "HQUS" has the meaning set forth in the preamble to this Agreement.

 

 

1.58           "Hydro-Québec" means Hydro-Québec, a body politic and corporate, duly incorporated and regulated by the Hydro-Québec Act (R.S.Q., Chapter H-5), having its head office and principal place of business at 75 René-Lévesque boulevard West, Montréal, Québec, Canada, H2Z 1A4.  As of the Effective Date, Hydro-Québec is the indirect parent of HQUS.

 

 

1.59           "Hydro-Québec Guaranty" has the meaning set forth in Section 8.3.

 

 

1.60           "Hydro-Québec Production" or "HQP" means Hydro-Québec Production, a division of Hydro-Québec.

 

 

1.61           "Indemnification Request Notice" has the meaning set forth in Section 11.4(b).

 

 

1.62           "Interest Rate" means, for any date, the lesser of (a) the per annum rate of interest equal to the prime lending rate as may from time to time be published in The Wall Street Journal under "Money Rates" or such other source as the Operating Committee shall designate, on such day (or if not published on such day on the most recent preceding day on which published), plus two percent (2%) and (b) the maximum rate permitted by applicable law.

 

 

1.63           "Internal Bilateral Transaction" or "IBT" means an internal bilateral transaction for Energy which applies in the Day-Ahead Energy Market and Real-Time Energy Market under which each Buyer receives a reduction in Day-Ahead Adjusted Load Obligation and Real-Time Adjusted Load Obligation and Seller receives a corresponding increase in Day-Ahead Adjusted Load Obligation and Real-Time Adjusted Load Obligation in the amount of the sale, in MW per hour.  For the avoidance of doubt, each transaction involving an IBT shall be treated as a Firm (LD) transaction.

 

 

7

 

 

1.64           "ISO-NE" means ISO New England Inc.

 

 

1.65           "ISO-NE Protocols" means the protocols, manuals, user guides, operating guides, procedures and standards developed and utilized by ISO-NE for the scheduling, settlement and other provisions pertinent to the daily operation of the New England Markets, as amended or modified from time to time, including but not limited to the ISO-NE Tariff, as the same may be amended or modified from time to time.  For the purposes of determining responsibilities and rights at a given time, the ISO-NE Protocols in effect at the time of the performance or non-performance of an action shall govern with respect to that action.

 

 

1.66           "ISO-NE Tariff" means the ISO New England Inc. Transmission, Markets and Services Tariff, FERC Electric Tariff No. 3, as filed with the FERC, as amended, supplemented or restated from time to time.

 

 

1.67           "LMP" means Locational Marginal Price, as set forth in the ISO-NE Tariff.

 

 

1.68           "Losses" means, with respect to any Party, an amount equal to the present value of the economic loss to it, if any (exclusive of Costs), resulting from Early Termination, determined in a commercially reasonable manner.

 

 

1.69           "Market Participant" means a participant in the New England Markets that has executed a Market Participant Service Agreement, or on whose behalf an unexecuted Market Participant Service Agreement has been filed with and approved by FERC.

 

 

1.70           "Market Participant Service Agreement" means an Agreement between ISO-NE and a Market Participant in the form specified in Attachment A to the ISO-NE Tariff.

 

 

1.71           "Mass Hub" means the ISO-NE trading hub (ISO-NE Node #4000) created within the New England Control Area as specified in the ISO-NE Protocols.

 

 

1.72           "Mass Hub Forward Price" has the meaning set forth in Section 3.2(e)(vi).

 

 

1.73           "Monthly Values" has the meaning set forth in Section 3.2(e)(vi).

 

 

8

 

 

1.74           "NEPOOL GIS" means the New England Power Pool Generation Information System.

 

 

1.75           "NERC" means the North American Electric Reliability Corporation.

 

 

1.76           "NERC Holidays" means the "NERC Additional Off-Peak Holidays", as approved and published by the NERC Resources Subcommittee or any successor thereto.

 

 

1.77           "New England Control Area" has the meaning specified in the ISO-NE Tariff.

 

 

1.78           "New England Markets" means the markets for the purchase and sale of Energy, capacity and other products and that are administered by ISO-NE.

 

 

1.79           "Node" means a point on the New England transmission system designated by ISO-NE at which LMPs are calculated.

 

 

1.80           "Non-Defaulting Party" has the meaning set forth in Section 5.2(a).

 

 

1.81           "Notice of Termination" has the meaning set forth in Section 5.2(b).

 

 

1.82           "Off-Peak Highgate Environmental Attributes" has the meaning set forth in Section 3.3(h).

 

 

1.83           "Omya Guaranty" has the meaning set forth in Section 8.3.

 

 

1.84           "On-Peak Hours" means hours from HE 08:00 through HE 23:00 (eastern prevailing time) Monday through Friday, excluding NERC Holidays.

 

 

1.85           "Operating Committee" has the meaning set forth in Section 10.1.

 

 

1.86           "Party" has the meaning set forth in the preamble to this Agreement.

 

 

1.87           "Performance Assurance" has the meaning set forth in the Collateral Agreement between Seller and the applicable Buyer.

 

 

9

 

 

1.88           "Person" means an association, a corporation, an individual, a partnership, a limited liability company, an unlimited liability company, a trust, or any other natural person, entity or organization, including a Governmental Authority.

 

 

1.89           "Price Source" means a publication or such other origin of reference, including ISO-NE or an exchange, containing or reporting or making generally available to Market Participants (including by electronic means) a price, or prices or information from which the price of the Energy Product is determined under this Agreement.

 

 

1.90           "Product" means the Energy Product and the Environmental Attributes Product, as applicable.

 

 

1.91           "Programs" has the meaning set forth in Section 3.3(d).

 

 

1.92           "Québec System Mix" means with respect to any given calendar year during the Term the generation mix associated with deliveries originating from the province of Québec, as may be designated by the NEPOOL GIS.

 

 

1.93           "Real-Time Adjusted Load Obligation" has the meaning set forth in the ISO-NE Tariff.

 

 

1.94           "Real-Time Energy Market" has the meaning set forth in the ISO-NE Tariff.

 

 

1.95           "Reference Price" has the meaning set forth in Section 3.2(e)(ii).

 

 

1.96           "Regulatory Event" has the meaning specified in Section 11.11(a).

 

 

1.97           "Remaining Buyers" has the meaning set forth in Section 2.3(a).

 

 

1.98           "Removed Buyer" has the meaning set forth in Section 2.3(a).

 

 

1.99           "Required Approval(s)" has the meaning set forth in Section 2.1(b).

 

 

1.100         "Required Approvals of Buyers" has the meaning set forth in Section 2.1(b).

 

 

1.101         "Required Approvals of Seller" has the meaning set forth in Section 2.1(a).

 

 

10

 

 

1.102           "Sales Point" means the Highgate External Node (ISO-NE Node #4013, labeled "I.HQHIGATE120 2" by ISO-NE).

 

 

1.103           "Sales Point Price Adjustment" or "SPPAy" has the meaning set forth in Section 3.2(e)(vii).

 

 

1.104           "Schedule" or "Scheduling" means the actions of Seller, Buyers and/or their designated representatives as further defined in Section 3.2(d).

 

 

1.105           "Scheduling Deadline" means the Day-Ahead Internal Bilateral Transaction Trading Deadline as defined in the ISO-NE Protocols.

 

 

1.106           *******

 

 

1.107           "Seller" means the Seller identified in the preamble to this Agreement.

 

 

1.108           "Seller Guarantor" means Hydro-Québec.

 

 

1.109           "Share" means, with respect to each Buyer, the amount of the Energy Quantity and the amount of the Environmental Attributes Quantity allocated to each Buyer in Section 3.2(c) and Section 3.3(b), respectively.

 

 

1.110           “Specified Indebtedness” means any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money.

 

 

1.111           “Specified Transaction” means any transaction or agreement (other than this Agreement) now existing or hereafter entered into between or among a Party and, in the case such Party is Seller, one or more Buyers, and, in the case such Party is a Buyer, Seller (among others as applicable).

 

 

1.112           "Stowe" has the meaning set forth in the preamble to this Agreement.

 

 

1.113           "Sub-Purchaser" means any Person that enters into a concurrent power sales agreement with VPPSA to take a portion of VPPSA's Share of Energy Quantity and Environmental Attributes Quantity.

 

 

11

 

 

1.114           "Term" has the meaning set forth in Section 3.1(a).

 

 

1.115           "Termination Payment" means the Losses or Gains, and Costs, which the Non-Defaulting Party incurs pursuant to Article Five of this Agreement in the event of an Early Termination.

 

 

1.116           “Threshold Amount” means, (a) as regards any Cross Default Entity other than Seller, VPPSA, BED and the Town of Stowe, ******* of the shareholders' equity of such Cross Default Entity, (b) as regards each of VPPSA, BED and the Town of Stowe, the greater of (i) ******* of its net assets and (ii) the Fixed Threshold Amount applicable to it and (c) as regards Seller, the Fixed Threshold Amount applicable to it.

 

 

1.117           "Trading Day" means a day for which Daily Settlement Published Prices are collected for the purpose of calculating a Daily Value.

 

 

1.118           "VEC" has the meaning set forth in the preamble to this Agreement.

 

 

1.119           "Vermont Joint Owners Power Purchase Agreement" has the meaning set forth in Section 5.1(l).

 

 

1.120           "Vermont Marble" has the meaning set forth in the preamble to this Agreement.

 

 

1.121           "Vermont Marble Guarantor" means Omya Industries Inc.

 

 

1.122           "VPPSA" has the meaning set forth in the preamble to this Agreement.

 

 

ARTICLE TWO

 

REQUIRED APPROVALS

 

2.1           Required Approvals.

 

 

(a)           Required Approvals of Seller.  The obligations of Seller under this Agreement are contingent upon and subject to the receipt of the following governmental approvals before February 1, 2012, upon terms satisfactory to Seller ("Required Approvals of Seller"):

 

 

12

 

 

(i)                      Export permit obtained by Hydro-Québec in a Final Order from the National Energy Board of Canada; and

 

 

(ii)                     A determination by the Vermont Public Service Board that no Required Approvals of Seller are required to be obtained by Seller from the Vermont Public Service Board to undertake the transactions contemplated under this Agreement.

 

 

(b)           Required Approvals of Buyer.  The obligations of each Buyer under this Agreement are contingent upon and subject to the receipt of the following governmental approvals before May 1, 2012, upon terms satisfactory to each Buyer as to whom such approvals apply as set forth below ("Required Approvals of Buyers" and, together with Required Approvals of Seller, "Required Approvals"):

 

 

(i)                      As to each Buyer, one or more Final Orders by the Vermont Public Service Board approving this Agreement in accordance with the terms hereof and issuing a Certificate of Public Good under 30 V.S.A. § 248 to that effect;

 

 

(ii)                     As to each Buyer, one or more Final Orders by the Vermont Public Service Board approving the issuance of debt or other securities and the mortgaging or pledging of corporate property, as necessary for the performance of this Agreement, pursuant to 30 V.S.A. § 108;

 

 

(iii)                    As to each of Stowe and BED, final, uncontested authorizing votes from their respective municipal citizen voting bodies following the issuance as to each of a Certificate of Public Good under 30 V.S.A. § 248;

 

 

(iv)                    As to VPPSA, one or more Final Orders by the Vermont Public Service Board approving, for Sub-Purchasers, concurrent power sales agreements between VPPSA and Sub-Purchasers and issuing to the Sub-Purchasers a Certificate of Public Good under 30 V.S.A. § 248 to that effect, and approval by Sub-Purchasers' respective municipal voters or, in the case of a cooperative, the cooperative's members, of the concurrent power sales agreements, and in the case of Washington Electric Cooperative, Inc. as a Sub-Purchaser, approval by the U.S. Department of Agriculture's Rural Utility Service.  Subject to Section 2.1(c) and Section 2.3, in the event that any Sub-Purchasers do not obtain such Required Approvals of Buyers for the concurrent power sales agreements, VPPSA's Share of Energy Quantity shall be reduced to equal the amount of Energy Quantity for which the Sub-Purchasers have received all applicable Required Approvals of Buyers.  Furthermore, VPPSA's Share of Environmental Attributes Quantity shall be reduced by an identical proportion.  VPPSA shall notify Seller and other Buyers of its revised Share of Energy Quantity and Environmental Attributes Quantity on or before March 15, 2012;

 

 

(v)                     As to VEC, authorizing votes from its members following the issuance as to VEC of a Certificate of Public Good under 30 V.S.A. § 248; and

 

  

13

  

 

(vi)                    A determination by the Vermont Public Service Board that no other Required Approvals of Buyers are required to be obtained by Buyers from the Vermont Public Service Board to undertake the transactions contemplated under this Agreement.

 

 

(c)           Termination Upon Failure to Obtain Required Approvals.

 

 

(i)                      Seller Failure.  If Seller does not obtain the Required Approvals of Seller by February 1, 2012, this Agreement shall automatically terminate unless the Parties mutually agree to waive such termination.

 

 

(ii)                     Buyer Failure.  If a Buyer does not obtain the Required Approvals of Buyer by May 1, 2012, this Agreement shall automatically terminate with respect to such Buyer (but only such Buyer) unless Seller and such Buyer mutually agree to waive such termination; provided, that notwithstanding Section 2.3(b), if Buyers with Shares comprising at least 75% of the aggregate Energy Quantity, based on the Energy Quantity as of November 1, 2015 in Appendix 3.2(c)(i) or Appendix 3.2(c)(ii), as applicable, do not obtain their Required Approvals of Buyers by May 1, 2012, then Seller shall have the right to terminate this entire Agreement upon thirty (30) days' notice to all Buyers, such notice to be given not later than May 31, 2012 or, if a notice has been given by such Buyer pursuant to Section 2.1(c)(iii), the date that is thirty (30) days after such notice is provided in accordance with Section 11.7.

 

 

(iii)                    Notice of Unsatisfactory Approvals.  Upon receipt of any governmental approval listed in Section 2.1(a) or 2.1(b), the Party required to obtain such approval shall promptly (and in no event later than ten (10) Business Days after receipt thereof) provide written notice and a copy of such governmental approval to the other Parties.  Such approval shall be deemed not to be satisfactory if the Party required to obtain such approval gives to the other Parties within thirty (30) days after the receipt of such approval written notice that such approval is not satisfactory.

 

 

(iv)                    Absence of Liability.  Notwithstanding any provision to the contrary in this Agreement, no Party with respect to which this Agreement is terminated pursuant to this Section 2.1(c) shall have any further financial or other obligation to any other Party with respect to this Agreement.  Upon any such termination with respect to a Party, the terminated Party shall be entitled to the return of any and all of its Performance Assurance that was posted in respect of this Agreement and, when Vermont Marble is the terminated Party, the Omya Guaranty and, when Seller is the terminated Party, the Hydro-Québec Guaranty, in each case in its full, undrawn amount that was posted to any other Party in respect of this Agreement.  If a Buyer is a terminated Party, such Buyer shall release Seller Guarantor from its obligations under the Hydro-Québec Guaranty with respect to such Buyer, and if Seller is a terminated Party, Seller shall release the Vermont Marble Guarantor from its obligations under the Omya Guaranty.

 

2.2           Cooperation to Obtain Required Approvals.  Each Party shall use commercially reasonable efforts (a) to initiate, as and if applicable, proceedings as promptly as possible after the Effective Date to obtain its respective Required Approvals, and (b) to obtain its respective Required Approvals by the applicable deadline set forth in Section 2.1(a) or Section 2.1(b).  Each Party hereto will cooperate with other Parties in the furnishing of technical information, data, or other matters which may be reasonably required for the Required Approvals.

 

  

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2.3           Buyers' Option to Assume Removed Buyer's Share.

 

 

(a)           Continuing Effect.  In the event that this Agreement is terminated with respect to any Buyer pursuant to Section 2.1(c)(ii) or, with respect to VPPSA, in the event that its Share of the Energy Quantity and Environmental Attributes Quantity is reduced under Section 2.1(b)(iv) (any such Buyer, a "Removed Buyer"), such event shall have no effect upon the remaining Buyers ("Remaining Buyers") or the terms and conditions of this Agreement, which shall remain in full force and effect as to Seller and the Remaining Buyers subject to Section 2.1(c)(ii).

 

 

(b)           Option; Exercise.  Subject to the consent of Seller with respect to credit and collateral requirements under the applicable Collateral Agreements (such consent not to be unreasonably withheld or delayed), each Remaining Buyer shall have an option, exercisable upon providing written notice to Seller and each other Remaining Buyer within forty-five (45) days following termination with respect to a Removed Buyer pursuant to Section 2.1(c)(ii), to assume additional shares of any Removed Buyer's Share of the Energy Quantity and Environmental Attributes Quantity with the allocation of such additional shares as determined by the Remaining Buyers and afterward confirmed by Seller in writing to the Remaining Buyers; provided, that such assumption shall not be effective with respect to any Remaining Buyer having exercised its option hereunder unless such Remaining Buyer has obtained by October 31, 2012 any additional governmental and internal organizational approvals required by such exercise; provided further, that for the avoidance of doubt, in the case VPPSA is a Removed Buyer with respect to only a portion of its Share of the Energy Quantity and Environmental Attributes Quantity, a Remaining Buyer shall have the option to purchase only such portion of VPPSA's Share of the Energy Quantity and Environmental Attributes.  For the avoidance of doubt, any Remaining Buyer assuming all or a portion of a Removed Buyer's Share of the Energy Quantity and Environmental Attributes Quantity shall assume equal proportions of such Removed Buyer's Share of the Energy Quantity and Share of the Environmental Attributes Quantity.

 

 

(c)           Adjustments.  The respective (i) Share of the Energy Quantity and Environmental Attributes Quantity and (ii) credit and collateral requirements under the respective Collateral Agreement of each Buyer that exercises its option under Section 2.3(b) shall, in each case, be adjusted by Seller and each such Buyer to reflect the exercise of the option and resulting increased Share of the Energy Quantity and Environmental Attributes Quantity.

 

  

15

  

 

ARTICLE THREE

 

PARTIES' OBLIGATIONS WITH RESPECT TO THE PRODUCTS

 

3.1           Term; General Description of Obligations.

 

 

(a)           Term.  The term shall start on November 1, 2012 and shall be continuing through October 31, 2038 (the "Term").

 

 

(b)           Energy Product.  Commencing on November 1, 2012 and continuing through the end of the Term, Seller shall perform its obligations to Schedule and sell, and each Buyer shall perform its obligations to Schedule and purchase, the Energy Product, in each case (i) in an amount set forth for the Energy Quantity with respect to each Buyer in Section 3.2(c), (ii) in accordance with the Scheduling procedures set forth in Section 3.2(d), and (iii) at a Contract Price to be paid by each Buyer to Seller established in accordance with Section 3.2(e).

 

 

(c)           Environmental Attributes Product.  Commencing on November 1, 2012 and continuing through the Term (i) Seller shall transfer to each Buyer, and each such Buyer shall accept the transfer of, the Environmental Attributes Product in an amount set forth for the Environmental Attributes Quantity with respect to each Buyer in Section 3.3(b), and (ii) Seller and each Buyer shall share Environmental Attributes Revenues from (x) the subsequent sale, if any, by any Buyer of any amount of the Environmental Attributes Quantity received by such Buyer under this Agreement and (y) the sale, if any, by Seller of any Off-Peak Highgate Environmental Attributes, in each case in accordance with the revenue sharing provisions of Sections 3.3(g) and 3.3(h).

 

3.2           Energy Product.

 

 

(a)           Energy Product Definition.  The energy product under this Agreement shall consist of Energy transacted through an Internal Bilateral Transaction, or IBT, at the Sales Point in conformance with the Energy Profile (the "Energy Product").  For the avoidance of doubt, the Energy Product shall not include any capacity.

 

 

(b)           Energy Profile.  Subject to Scheduling obligations of Section 3.2(d), the Energy Quantity shall be Scheduled daily each hour starting from HE 08:00 through HE 23:00 eastern prevailing time, Monday through Sunday, including NERC Holidays (the "Energy Profile").

 

 

(c)           Energy Quantity.  Each Buyer's Share of Energy Quantity shall be the quantities for each period set forth in Appendix 3.2(c)(i) or Appendix 3.2(c)(ii), as applicable, which reflect that the initial aggregate amount of the Energy Quantity shall be as specified for the applicable period as set forth in Appendix 3.2(c)(i) and as provided below shall increase to the amounts set forth in Appendix 3.2(c)(ii) upon an increase in the firm transfer capability of Highgate to 225 MW during the Term; provided, that, subject to Seller's right to require changes in CVPS's credit and collateral requirement under the CVPS Collateral Agreement to reflect the re-allocation of additional Energy Quantity to CVPS, Vermont Marble shall have the right to assign its allocation to CVPS in the event that the Vermont Public Service Board approves the sale of Vermont Marble assets to CVPS and the assignment occurs on or before May 1, 2012.  Each Buyer's Share of Energy Quantity shall be as set forth in Appendix 3.2(c)(i) unless and until such time as the Operating Committee may increase each Buyer's Share of Energy Quantity to the quantities for each period set forth in Appendix 3.2(c)(ii) upon the increase in the rated transfer capability of Highgate to 225 MW at a level of reliability satisfactory to the Operating Committee.

 

  

16

  

 

(d)           Scheduling Energy.  By the Scheduling Deadline, Seller shall submit an IBT, in accordance with the Energy Profile, for each Buyer's Share of the Energy Quantity for settlement in the Day-Ahead Energy Market at the Sales Point.  By the Scheduling Deadline each Buyer shall confirm its IBT submitted by Seller.  Each of Buyer and Seller shall perform its respective submission and confirmation obligations in accordance with the ISO-NE Protocols and any procedures that may be specified by the Operating Committee.  Such actions by Seller and Buyer, as applicable, constitute "Schedule" or "Scheduling" obligations.

 

 

(e)           Contract Price.  Each Buyer shall pay to Seller the Contract Price calculated as follows:

 

 

(i)            *******.

 

(A)           *******

 

 

*******

 

 

*******:

 

*******

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(B)           *******:

 

*******:

 

*******

 

*******

 

  

17

  

 

*******:

 

*******

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*******

*******

 

(ii)           *******.

 

 

(A)           *******

 

 

*******

 

*******

 

*******

 

*******

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(B)           *******

 

 

*******

 

 

*******

 

*******

*******

*******

 

(iii)           *******:

 

 

*******

 

 

*******:

 

*******

*******

*******

 

(iv)           *******:

 

  

18

  

 

*******

 

 

*******:

 

*******

*******

*******

 

(v)           *******:

 

 

*******

 

 

*******

 

*******

*******

*******

*******

*******

 

(vi)           *******.

 

 

(A)           *******

 

 

(B)           *******

 

 

(C)           *******

 

 

(D)           *******

 

 

(I)           *******

 

*******;

*******;

*******; and

*******.

 

 

(II)           *******:

 

*******;

 

  

19

  

 

*******;

*******

*******.

 

 

(vii)           *******.

 

(A)           *******

 *******

 *******

 *******

 *******

*******

*******

*******

*******

*******

*******.

 

 

(B)           *******

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*******

*******

*******

*******

*******.

 

(C)           *******

 *******

 *******.

 

 

(viii)                      Time of Calculation.  The Parties shall calculate such adjustment to the Contract Price annually on the Evaluation Date, such adjustment being effective as of the first day of the following Contract Year.

 

  

20

  

 

(ix)                      Sample Calculation.  Sample calculations illustrating calculation of the Contract Price and the Mass Hub Forward Price are set forth in Appendix 3.2(e).

 

3.3           Environmental Attributes Product.

 

 

(a)           Environmental Attributes Product Definition.  For each calendar year during the Term, Seller shall transfer, and each Buyer shall accept the transfer of, Environmental Attributes, in the Shares specified for such year for such Buyer in Appendix 3.3(b)(i) or Appendix 3.3(b)(ii), as applicable, that are associated with Energy that is delivered during such calendar year by Seller into the New England Markets over any transmission facilities existing as of the Effective Date or replacement transmission facilities of such transmission facilities (such Environmental Attributes, the “Environmental Attributes Product”).

 

 

(b)           Environmental Attributes Quantity.  Each Buyer's Share of the Environmental Attributes Quantity shall be equal to that set forth with respect to such Buyer in Appendix 3.3(b)(i) (when the Energy Quantity is determined by Appendix 3.2(c)(i)) or in Appendix 3.3(b)(ii) (when the Energy Quantity is determined by Appendix 3.2(c)(ii)).  For any calendar year in which both Appendix 3.3(b)(i) and Appendix 3.3(b)(ii) apply, the Operating Committee shall appropriately pro-rate the Environmental Attributes Quantities that Seller shall transfer to Buyers in such year to reflect the relative time periods in such year during which both Appendix 3.3(b)(i) and Appendix 3.3(b)(ii) applied.

 

 

(c)           Transfer.  Subject to the acknowledgements of Section 3.3(d) and the representations of Section 3.3(e):

 

 

(i)                      For each calendar year during the Term and occurring no later than fifteen (15) Business Days before the last trading day of the NEPOOL GIS (or successor mechanism or tracking system) for such calendar year, Seller shall transfer, through the NEPOOL GIS (or successor mechanism or tracking system) using one or more transfers, to each Buyer, certificates representing such Buyer's Share of the Environmental Attributes Quantity specified in Section 3.3(b), and each such transfer shall be accepted by such Buyer by the applicable prevailing deadline provided for by NEPOOL GIS (or successor mechanism or tracking system); and

 

 

(ii)                      As of the Effective Date, the Parties acknowledge that Energy transfers from Québec into the New England Markets are recorded in the NEPOOL GIS as Québec System Mix.  The Parties further acknowledge and agree that until such time as the NEPOOL GIS (or successor mechanism or tracking system) accurately represents the HQP System Mix, as the case may be, Seller shall, to the extent that Seller has delivered into the New England Markets HQP System Mix in accordance with the provisions of Section 3.3(a), transfer to each Buyer certificates issued by the NEPOOL GIS in respect of the Québec System Mix (or, for the avoidance of doubt, of any successor designation other than HQP System Mix) in an amount equal to the Environmental Attributes Quantity applicable to such Buyer.

 

  

21

  

 

(iii)          As of the Effective Date, the Parties acknowledge that the NEPOOL GIS permits the transfer of Québec System Mix certificates by Seller to each Buyer as contemplated by this Agreement.  The Parties further acknowledge and agree that Seller shall not be obligated to transfer:

 

 

(A)           certificates representing the Environmental Attributes Product if, during the Term, the NEPOOL GIS (or successor mechanism or tracking system) no longer permits the transfer of Québec System Mix certificates or, if applicable, HQP System Mix certificates or any other similar certificates, and there is no other Program facilitating the transfer of certificates representing the Environmental Attributes Product, but such failure to transfer shall not affect Seller’s obligations to make the representations and warranties under Section 3.3(e); and

 

 

(B)           certificates representing the Environmental Attributes Product if, during the Term, a Governmental Authority or NEPOOL GIS (or successor mechanism or tracking system) subsequently requires that certificates representing the Environmental Attributes Product be transferred to Persons other than Buyers, but such failure to transfer shall not affect Seller’s obligations to make the representations and warranties under Section 3.3(e) except to the extent such change in requirements prevents Seller from making the representations and warranties in Section 3.3(e) that concern Seller’s obligations to represent and warrant that Seller has not transferred the Environmental Attributes associated with the Environmental Attributes Quantity to any other Person.

 

 

(d)           Acknowledgements.  The Parties hereby expressly acknowledge and agree that:

 

 

(i)                      as of the Effective Date there is no renewable Energy, emissions reduction or any product reporting rights program, scheme or organization, or other similar program with respect to which exists a market, registry or reporting for the Environmental Attributes adopted by a Governmental Authority or the NEPOOL GIS (or successor mechanism or tracking system) (the “Programs”), but the absence of such Programs shall not limit Buyers’ right to pursue their remedies for non-performance of Seller’s obligation to transfer the Environmental Attributes Quantity in accordance with Section 4.2 or Section 5.2, as applicable;

 

  

22

  

 

(ii)                     Seller makes no representation as to the content of the sources of generation constituting the Québec System Mix;

 

 

(iii)                    Seller’s obligation to transfer, and Buyer's obligation to accept such transfer of, the Environmental Attributes Quantity, is an essential part of the consideration for this Agreement; and

 

 

(iv)                   subject to Seller's obligations to transfer the Environmental Attributes Quantity pursuant to this Section 3.3, nothing in this Agreement shall be interpreted as restricting the rights of Seller or any of its Affiliates to sell to any third parties any environmental attributes relating to Hydro-Québec Production's generation.

 

 

(e)           Representations and Warranties.  Subject to Section 3.3(d), Seller hereby represents and warrants to Buyers that, at the time of each transfer by Seller of a quantity of the Environmental Attributes Product:

 

 

(i)                    the Environmental Attributes Quantity:

 

 

(A)           will have originated from the HQP System Mix and have been delivered into the New England Markets in accordance with Section 3.3(a), and

 

 

(B)           will be solely and exclusively owned by Seller;

 

 

(ii)                      Seller will not have transferred the Environmental Attributes associated with the Environmental Attributes Quantity to any other Person, will not have made any representations in respect of such Environmental Attributes to any other Person, will not otherwise have sold, claimed or represented such Environmental Attributes as part of Energy sold elsewhere, will not have otherwise retired such Environmental Attributes, and will not have used such Environmental Attributes to satisfy any other Person's obligations in any Program; and

 

 

(iii)                      to the fullest extent allowed under applicable law, all of Seller's right, title and interest in the Environmental Attributes associated with the Environmental Attributes Quantity will be transferred to Buyers and will be free and clear of any liens, taxes, claims, security interests or other encumbrances except for any right or interest by any Person claiming through Buyers.

 

 

(f)           Attestation.  On or before the later of (a) July 1 following any given calendar year of the Term or (b) fifteen (15) days after the last trading day of the NEPOOL GIS (or successor mechanism or tracking system) for any such applicable calendar year, Seller shall provide to each Buyer an attestation in the form of Appendix 3.3(f) (as may be subsequently amended by the mutual written agreement of the Parties) documenting the representations set forth in Section 3.3(e) with respect to such Buyer's Share of the Environmental Attributes Quantity for such previous calendar year of the Term and documenting the actual content of the HQP System Mix for such previous calendar year.

 

  

23

  

 

(g)           Revenue Sharing.  Any Environmental Attributes Revenues accrued by a Buyer from any sale for resale of all or part of the Environmental Attributes Product transferred to such Buyer hereunder shall be shared equally between such Buyer and Seller.  Buyer shall notify Seller of any such sale for resale within a commercially reasonable time after such sale for resale is made and becomes legally binding (and in no event later than three (3) months thereafter).

 

 

(h)           Additional Revenue Sharing.  Provided that Vermont has designated hydroelectric power, including hydroelectric power generated as part of the HQP System Mix, as renewable under Vermont law, and as long as such designation remains in effect, Seller agrees to share all Environmental Attributes Revenues realized by it from the sale of Environmental Attributes associated with Energy that Seller, in its sole discretion, physically delivers during the Term over Highgate into the New England Markets during the hours other than from HE 08:00 through HE 23:00 eastern prevailing time, Monday through Sunday, including NERC Holidays hours (the “Off-Peak Highgate Environmental Attributes”).  Any Environmental Attributes Revenues accrued by Seller of Off-Peak Highgate Environmental Attributes shall be shared 50% by Buyers and 50% by Seller.  Seller shall notify Buyers of any such sale for resale within a commercially reasonable time after such sale for resale is made and becomes legally binding (and in no event later than three (3) months thereafter).

 

3.4           Force Majeure.

 

 

(a)           To the extent any Party is prevented by an Event of Force Majeure from carrying out, in whole or part, its obligations under this Agreement and such Party (the "Claiming Party") gives notice and details of the Event of Force Majeure to the other Parties as soon as practicable, then the Claiming Party shall be excused from the performance of those obligations prevented by such Event of Force Majeure (other than the obligation to make payments then due or becoming due with respect to performance prior to the Event of Force Majeure) during the duration of such Event of Force Majeure.  The Claiming Party shall remedy the Event of Force Majeure with all reasonable dispatch.  If the Claiming Party is Seller, Buyers shall not be required to perform or resume performance of their respective obligations to Seller corresponding to the obligations of Seller excused by the Event of Force Majeure. If the Claiming Party is a Buyer, Seller shall not be required to perform or resume performance of its obligations corresponding to the obligations of the Claiming Party only.

 

 

(b)           If a Claiming Party is prevented, due to one or more Events of Force Majeure lasting collectively for twelve (12) consecutive months, from performing its obligations under Article Three, then any Buyer (in the case the Claiming Party is Seller) or Seller (in the case the Claiming Party is any Buyer), so long as it has met its obligations under this Section and is not otherwise in breach of this Agreement, may terminate this Agreement, as regards only the rights and obligations of such Party with the Claiming Party, upon thirty (30) days' notice.

 

  

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ARTICLE FOUR

 

AMOUNT DUE IN EVENT OF CERTAIN FAILURES

 

4.1           Failure to Schedule Energy Product.  If Seller or any Buyer fails to perform its Scheduling obligations with respect to the Energy Product pursuant to Section 3.2, and such failure is not excused by an Event of Force Majeure, then a financial adjustment to the monthly invoice for the month in which such failure occurred shall be made by Seller as follows:  (i) each affected Buyer will be excused from paying the Contract Price for each MWh or fraction thereof of its Share of the Energy Product that was not Scheduled for a given hour during the Energy Profile and (ii) Seller shall credit or charge each Buyer for such MWh or fraction thereof that was not Scheduled the positive or negative amount, as the case may be, equal to the LMP at the Sales Point in the Day-Ahead Energy Market for that hour minus the Contract Price.  To the extent any charges or fees are imposed by the ISO-NE as a result of a Party's failure to perform its Scheduling obligations hereunder, such Party only shall be responsible for the payment of such charges imposed and the other Party shall not be responsible for the payment of any such charges or fees imposed.

 

4.2           Failure to Transfer Environmental Attributes Product.  For any calendar year during the Term, if Seller fails to transfer, in whole or in part, to any Buyer its full Share of the Environmental Attributes Quantity for such calendar year pursuant to Section 3.1 and Section 3.3 and such failure is not excused by an Event of Force Majeure or due to Buyer’s failure to accept such transfer, then Seller shall be required to transfer to such Buyer within 12 months after the end of the trading period applicable for such calendar year an amount of Environmental Attributes Product for such calendar year equal to the quantity of such Buyer's Share of the Environmental Attributes Quantity that was not transferred to such Buyer; provided, however, that in the event:

 

 

(a)           a Program exists in which a monetary value for the Environmental Attributes Product exists, and

 

 

(b)           such Seller’s failure to transfer the Environmental Attributes Quantity in accordance with Section 3.1 and Section 3.3 will result in a penalty or non-compliance fee for Buyer that would not otherwise have been incurred had Seller transferred the required Environmental Attributes Quantity in such calendar year,

 

  

25

  

 

then such Buyer shall no later than five (5) Business Days after Seller’s failure, inform Seller of the estimated cost of such penalties or non-compliance fees and, if applicable, of the costs related to obtaining in a commercially reasonable manner a replacement product that qualifies under the Program.  Upon receipt of such notice Seller shall have five (5) Business Days to provide Buyer with an alternative replacement product that qualifies and has the same compliance effect for Buyer under the Program.  If Seller is able to provide such replacement within such time, then Buyer shall accept such replacement, and Seller shall not otherwise have to compensate any costs to Buyer, including for the avoidance of doubt any additional penalties or non-compliance fees if assessed under the Program.  If Seller is not able to provide such replacement within such time, then Buyer shall make a direct purchase in a commercially reasonable manner, and Seller shall reimburse Buyer for the actual cost of such replacement purchase and any out-of-pocket charges or costs reasonably incurred by Buyer directly linked to making such replacement purchase.  In the event that either the Buyer is not able to make such a direct purchase or the costs of such a direct purchase is higher than the applicable penalty or non-compliance fee, Seller shall reimburse to Buyer the cost of the penalty or non-compliance fee that are directly attributable to Seller’s failure at the time such penalty or non-compliance fee costs are actually required under the Program to be incurred by Buyer.  For the avoidance of doubt, for the purposes of this Section 4.2 “commercially reasonable manner” shall mean the purchase of the replacement for the Environmental Attributes Product, with the lowest cost for Seller and with the same compliance effect for the Buyer under the Program and as determined from three (3) competitive quotes, or less if three (3) quotes are not available.

 

 

ARTICLE FIVE

 

EVENTS OF DEFAULT; REMEDIES

 

5.1           Events of Default.  An "Event of Default" shall mean, with respect to a Party (a "Defaulting Party"), the occurrence of any of the following:

 

 

(a)           the failure to make, when due, any payment required under this Agreement if such failure is not remedied within five (5) Business Days after written notice from the Party to which such payment is due;

 

 

(b)           any representation or warranty made by such Party herein is false or misleading in any material respect when made or when deemed made or repeated and such breach has a material adverse effect upon the Party to whom such representation or warranty was made;

 

 

(c)           the failure to perform any material covenant or obligation set forth in this Agreement (except to the extent constituting a separate Event of Default, and except for such Party's obligations to Schedule the applicable Energy Quantity, the exclusive remedy for which is, subject to Sections 5.1(i) and (j), provided in Article Four) if such failure is not remedied within five (5) Business Days after written notice;

 

 

(d)           such Party becomes Bankrupt;

 

  

26

  

 

(e)           the failure of such Party to satisfy the creditworthiness or collateral requirements agreed to pursuant to a Collateral Agreement to which it is a Party if such failure is not remedied within five (5) Business Days after written notice, or the repudiation or termination by such Party of such Collateral Agreement;

 

 

(f)           such Party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all of its assets to, another Person and, at the time of such consolidation, amalgamation, merger or transfer, the resulting, surviving or transferee Person fails to assume all the covenants and obligations of such Party under this Agreement by operation of law or pursuant to an agreement reasonably satisfactory to the other Party;

 

 

(g)           with respect to Seller:

 

 

(i)                      any representation or warranty made by Seller Guarantor in connection with this Agreement is false or misleading in any material respect when made or when deemed made or repeated and such breach has a material adverse effect upon the Party to whom such representation or warranty was made;

 

 

(ii)                      the failure of Seller Guarantor to make any payment required or to perform any other material covenant or obligation in the Hydro-Québec Guaranty made in connection with this Agreement and such failure is not remedied within five (5) Business Days after written notice from the Party to which such payment is due or in favor of which such covenant or obligation was contracted;

 

 

(iii)                     Seller Guarantor becomes Bankrupt;

 

 

(iv)                    the failure of the Hydro-Québec Guaranty to be in full force and effect for purposes of this Agreement (other than in accordance with its terms) prior to the satisfaction of all obligations of Seller under this Agreement to which the Hydro-Québec Guaranty shall relate without the written consent of the Party being the beneficiary of the Hydro-Québec Guaranty; or

 

 

(v)                     Seller Guarantor repudiates, disaffirms, disclaims, or rejects, in whole or in part, or challenges the validity of, the Hydro-Québec Guaranty;

 

 

(h)           with respect to Vermont Marble:

 

 

(i)                      any representation or warranty made by the Vermont Marble Guarantor in connection with this Agreement is false or misleading in any material respect when made or when deemed made or repeated and such breach has a material adverse effect upon Seller;

 

  

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(ii)                      the failure of the Vermont Marble Guarantor to make any payment required or to perform any other material covenant or obligation in the Omya Guaranty made in connection with this Agreement and such failure is not remedied within five (5) Business Days after written notice from Seller;

 

 

(iii)                      the Vermont Marble Guarantor becomes Bankrupt;

 

 

(iv)                      the failure of the Omya Guaranty to be in full force and effect for purposes of this Agreement (other than in accordance with its terms) prior to the satisfaction of all obligations of Vermont Marble under this Agreement to which the Omya Guaranty shall relate without the written consent of Seller; or

 

 

(v)                      the Vermont Marble Guarantor repudiates, disaffirms, disclaims, or rejects, in whole or in part, or challenges the validity of, the Omya Guaranty;

 

 

(i)           with respect to Seller, if Seller fails to Schedule all or part of a Buyer's Share of the Energy Quantity in accordance with Section 3.2, such failure is not excused by such Buyer's failure to perform its obligations under Section 3.2 or by an Event of Force Majeure, and such failure occurs on forty-five (45) or more calendar days within a two (2) year period during the Term;

 

 

(j)           with respect to a Buyer, if such Buyer fails to Schedule all or part of its Share of the Energy Quantity in accordance with Section 3.2, such failure is not excused by Seller's failure to perform its obligations under Section 3.2 or by an Event of Force Majeure, and such failure occurs on forty-five (45) or more calendar days within a two (2) year period during the Term;

 

 

(k)           the occurrence or existence of (i) a default, event of default or other similar condition or event (however described) in respect of (A) Seller or the Seller Guarantor (in the case of Seller) or (B) (x) a Buyer, (y) in the case of Stowe, the Town of Stowe or (z) in the case of Vermont Marble, Vermont Marble or the Vermont Marble Guarantor (each of Seller, the Seller Guarantor, any such Buyer and, as applicable, the Town of Stowe and the Vermont Marble Guarantor, a “Cross Default Entity”), under one or more agreements or instruments relating to Specified Indebtedness where the aggregate principal amount of such one or more agreements or instruments, either alone or together with the amount, if any, referred to in clause (ii) below, is not less than the applicable Threshold Amount and which has resulted in the future payments under such Specified Indebtedness having been accelerated and having become immediately due and payable; or (ii) a default by a Cross Default Entity in making one or more payments under such agreements or instruments on the due date for payment (after giving effect to any applicable notice requirement or grace period) in an aggregate amount, either alone or together with the amount, if any, referred to in clause (i) above, of not less than the applicable Threshold Amount; provided, however, that an Event of Default shall not occur under either clause (i) or (ii) above if the default, event of default or other similar event or condition referred to in clause (i) or the failure to pay referred to in clause (ii) is a failure caused by an error or omission of an administrative or operational nature and funds were available to such Cross Default Entity to enable it to make the relevant payment when due and such payment is in fact made within the applicable cure period;

 

  

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(l)           such Party (i) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, which default results in a liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction, (ii) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment or delivery due on the last payment date or delivery date of a Specified Transaction; or (iii) disaffirms, disclaims or repudiates any Specified Transaction; provided, for the avoidance of doubt, that payments due with respect to that certain Firm Power and Energy Contract dated December 4, 1987 by and among Allied Power and Light Company, the City of Burlington, Vermont Electric Department, Central Vermont Public Service Corporation, Franklin Electric Light Company, Inc., Green Mountain Power Corporation, Village of Johnson Electric Light Department, Rochester Electric Light & Power Company, Vermont Electric Generation & Transmission Cooperative Inc., Vermont Public Power Supply Authority and Hydro-Québec (the “Vermont Joint Owners Power Purchase Agreement”) shall not be subject to, and amounts with respect thereto, if applicable, shall not be aggregated with other defaults in payment in determining a Party’s compliance with, this Section 5.1(l); or

 

 

(m)           with respect to Seller, if Seller fails to transfer all or part of a Buyer's Share of the Environmental Attributes Quantity in accordance with Section 3.1(c) and Section 3.3(c), such failure is not excused by such Buyer's failure to perform its obligations under Section 3.1(c) and Section 3.3(c) or by an Event of Force Majeure, and such failure is not remedied by Seller pursuant to Section 4.2.

 

5.2           Remedies.

 

 

(a)           If an Event of Default shall have occurred and be continuing, Seller in the event a Buyer is the Defaulting Party or any affected Buyer in the event Seller is the Defaulting Party (the "Non-Defaulting Party") shall have the right (i) to seek specific performance of the Defaulting Party's obligations under this Agreement (including the Defaulting Party's obligations to make payments under Article Four), (ii) to accelerate all amounts owing between the Non-Defaulting Party and the Defaulting Party calculated in accordance with Section 5.3 and to liquidate and terminate its obligations under this Agreement as to such Defaulting Party ("Early Termination"), (iii) suspend performance with respect to such Defaulting Party, and (iv) except as expressly provided or limited in this Agreement (including with respect to Article Four) and only with respect to such Defaulting Party, to any other remedy available at law or in equity, in each case subject to and in accordance with the provisions of this Article Five; provided, however, that, for the avoidance of doubt, (x) if the Non-Defaulting Party is a Buyer, its Early Termination rights under this Section 5.2 shall apply solely with respect to such Buyer and shall not act to terminate this Agreement or Seller's obligations hereunder with respect to any other Buyer, and (y) if the Non-Defaulting Party is Seller, its Early Termination rights under this Section 5.2 shall apply solely with respect to Buyer that is the Defaulting Party and shall not act to terminate this Agreement or Seller's obligations hereunder with respect to any other Buyer.

 

  

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(b)           To the extent the Non-Defaulting Party wishes to exercise its Early Termination rights under this Section 5.2, the Non-Defaulting Party shall provide written notice to the Defaulting Party (the "Notice of Termination") and shall include in the Notice of Termination a date of Early Termination, which shall be a date (the "Early Termination Date") (i) in the case of an Event of Default other than under Section 5.1(i) or Section 5.1(j), no earlier than thirty (30) days and no later than sixty (60) days, or (ii) in the case of an Event of Default under Section 5.1(i) or Section 5.1(j), no later than sixty (60) days, in each case after such Notice of Termination is delivered.  If the occurrence resulting in the Event of Default is not eliminated by the Early Termination Date, the Defaulting Party and the Non-Defaulting Party shall, at the sole discretion of the Non-Defaulting Party having given Notice of Termination, proceed to liquidate and terminate this Agreement, but only as between the Non-Defaulting Party and the Defaulting Party.

 

5.3           Calculation of Termination Payment.  In the event that the Non-Defaulting Party elects to terminate this Agreement, the Non-Defaulting Party shall calculate, in a commercially reasonable manner, a Termination Payment for the Early Termination that shall be liquidated and due to, or due from, the Non-Defaulting Party as appropriate.  Performance Assurance held by a Party may be netted against any Termination Payment due to such Party.

 

5.4           Notice of Payment of Termination Payment.  As soon as practicable after the Early Termination Date, written notice shall be given by the Non-Defaulting Party to the Defaulting Party of the amount of the Termination Payment and whether the Termination Payment is due to, or due from, the Non-Defaulting Party.  The notice shall include a written statement explaining in reasonable detail the calculation of such amount and shall otherwise be provided in accordance with the notice provisions of Section 11.7.  The Termination Payment shall be made by the Party that owes it within two (2) Business Days after such notice is effective under the provisions of Section 11.7.  For the avoidance of doubt, payment of the Termination Payment shall not relieve the Defaulting Party from any of its accrued payment obligations hereunder, which shall be due and payable as otherwise provided in this Agreement.

 

5.5           Closeout Setoffs.  After calculation of a Termination Payment in accordance with Section 5.3, if the Defaulting Party would be owed the Termination Payment, the Non-Defaulting Party shall be entitled, at its option and in its discretion, to set off against such Termination Payment any amounts due and owing by the Defaulting Party to the Non-Defaulting Party under any other agreements, instruments or undertakings between the Defaulting Party and the Non-Defaulting Party.  The remedy provided for in this Section shall be without prejudice and in addition to any right of setoff, combination of accounts, lien or other right to which any Party is at any time otherwise entitled (whether by operation of law, contract or otherwise).

 

  

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ARTICLE SIX

 

PAYMENT AND NETTING

 

6.1           Billing Period.  The calendar month shall be the standard period for all payments under this Agreement.  As soon as practicable after the end of each month starting November 1, 2012, Seller shall render to each Buyer an invoice specifying the payment and revenue sharing obligations, if any, incurred hereunder during the preceding month.

 

6.2           Timeliness of Payment.  All invoices under this Agreement shall be due and payable in accordance with each invoice's instructions on or before the later of the tenth (10th) day of each month, or fifth (5th) day after receipt of the invoice or, if such day is not a Business Day, then on the next Business Day.  Payments shall be made by electronic funds transfer, or by other method(s) agreeable between Seller and any Buyer, to the account designated by the Party to which payment is due.  Any amounts not paid by the due date shall be deemed delinquent and shall accrue interest at the Interest Rate, such interest to be calculated from and including the due date to but excluding the date the delinquent amount is paid in full.

 

6.3           Disputes and Adjustments of Invoices.  A Buyer may, in good faith, dispute the correctness of any invoice or any adjustment to an invoice, rendered to such Buyer under this Agreement within ninety (90) days after the date the invoice, or adjustment to an invoice, was rendered, and Seller may adjust any invoice or adjustment thereto for any arithmetic or computational error within eighteen (18) months after the date the invoice, or adjustment to an invoice, was rendered.  In the event an invoice or portion thereof, or any other claim or adjustment arising hereunder, is disputed, payment of the undisputed portion of the invoice shall be required to be made when due, with notice of the objection given to Seller.  Any invoice dispute or invoice adjustment shall be in writing and shall state the basis for the dispute or adjustment.  Without limiting any Party's remedies at law or equity, payment of the disputed amount shall not be required until the dispute is resolved.  Upon resolution of the dispute, any required payment shall be made within two (2) Business Days of such resolution along with interest accrued at the Interest Rate from and including the due date to but excluding the date paid.  Inadvertent overpayments shall be returned upon request or deducted from subsequent payments, with interest accrued at the Interest Rate from and including the date of such overpayment to but excluding the date repaid or deducted.  Any dispute with respect to an invoice is waived unless Seller is notified in accordance with the time periods set forth in this Section 6.3.  If an invoice is not rendered within eighteen (18) months after the close of the month during which performance to which the invoice relates occurred, the right to payment for such performance is waived.

 

6.4           Netting of Payments.  The Parties hereby agree that they shall discharge mutual debts and payment obligations due and owing to each other under this Agreement on the same date through netting, in which case all amounts owed by any Party to another Party under this Agreement during the monthly billing period under this Agreement, including any payments or damages calculated pursuant to Article Four or a Collateral Agreement, interest, and payments or credits, shall be netted so that only the excess amount remaining due shall be paid by the Party owing it.

  

  

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6.5           Security.  Unless the Party benefiting from a Performance Assurance or a guaranty notifies in writing the Party having transferred such Performance Assurance or the obligations of which are guaranteed by such guaranty, as the case may be, and except in connection with a liquidation and termination in accordance with Article Five, all amounts netted pursuant to this Article Six shall not take into account or include any Performance Assurance or guaranty which may be in effect to secure a Party's performance under this Agreement.

 

 

ARTICLE SEVEN

 

LIMITATIONS

 

7.1           Limitation of Remedies, Liability and Damages. EXCEPT AS SET FORTH HEREIN, THERE IS NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND ANY AND ALL IMPLIED WARRANTIES ARE DISCLAIMED.  THE PARTIES CONFIRM THAT THE EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF.  FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED AS THE SOLE REMEDY OR MEASURE OF DAMAGES, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, THE OBLIGOR'S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED.  IF NO MEASURE OF DAMAGES IS EXPRESSLY PROVIDED HEREIN, THE OBLIGOR'S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES.  UNLESS EXPRESSLY HEREIN PROVIDED, NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE, EXCEPT THAT A PARTY SHALL BE ENTITLED TO RECOVER ITS COSTS (AS DEFINED HEREIN) UPON A FINAL JUDGMENT IN ITS FAVOR.  IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE.  TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS.

 

 

ARTICLE EIGHT

 

CREDIT AND COLLATERAL REQUIREMENTS

 

8.1           Financial Information.

 

  

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(a)            From Buyers.  Each Buyer agrees that, so long as it has or may have any obligation under this Agreement, it will make available to Seller (i) within one hundred twenty (120) days following the end of each fiscal year, the audited consolidated year-end financial statements of such Buyer or, in the case of Stowe or Vermont Marble, the Town of Stowe or the Vermont Marble Guarantor, respectively, prepared in accordance with U.S. generally accepted accounting principles, consistently applied, (ii) to the extent such Buyer or, in the case of Stowe or Vermont Marble, the Town of Stowe or the Vermont Marble Guarantor, respectively, prepares quarterly or semi-annual financial statements, within forty-five (45) days following the end of each fiscal quarter or semi-annual period, the unaudited consolidated financial statements of such Buyer or, in the case of Stowe or Vermont Marble, the Town of Stowe or the Vermont Marble Guarantor, respectively, for such quarter or semi-annual period prepared in accordance with U.S. generally accepted accounting principles, consistently applied, and (iii) from time to time any other reasonable, pertinent and publicly disclosable information about the financial position of such Buyer or, in the case of Stowe or Vermont Marble, the Town of Stowe or the Vermont Marble Guarantor, respectively, requested by Seller.

 

 

(b)           From Seller Guarantor.  Seller agrees that, so long as it has or may have any obligation under this Agreement, it will make available to Buyers (i) within one hundred twenty (120) days following the end of each fiscal year, audited consolidated year-end financial statements of Seller Guarantor prepared in accordance with Canadian generally accepted accounting principles, consistently applied, (ii) to the extent Seller Guarantor prepares quarterly or semi-annual financial statements, within one hundred twenty (120) days following the end of each fiscal quarter or semi-annual period, its unaudited consolidated financial statements for such quarter or semi-annual period prepared in accordance with Canadian generally accepted accounting principles, consistently applied, and (iii) from time to time any other reasonable, pertinent and publicly disclosable information about Seller Guarantor's financial position requested by Buyers.

 

8.2           Collateral Agreements.

 

 

(a)           The obligations of each Buyer as to Seller, and Seller as to each Buyer, under this Agreement shall be secured in accordance with the provisions of a separate collateral agreement of even date herewith between each Buyer and Seller (each such collateral agreement, as may be amended, supplemented, updated and restated from time to time, a "Collateral Agreement").  Each Collateral Agreement is made a part hereof as though fully set forth in this Agreement;

 

 

(b)           Each Collateral Agreement shall apply to (i) transactions undertaken under this Agreement and (ii) any transactions undertaken pursuant to any future agreements entered into between the respective Buyer and Seller for the purchase and sale of power and power-related products, including without limitation, financially settled transactions and transactions involving Environmental Attributes, to the extent that Seller and such Buyer affirmatively state in the definitive agreement for such future transactions that such transactions are subject to the Collateral Agreement; and

 

  

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(c)           Each Collateral Agreement shall set forth with respect to this Agreement and, as the case may be, any future agreements and transactions, the exclusive conditions under which each Buyer and Seller will be required to provide credit and collateral support and Performance Assurance in the form of cash, a letter of credit or other property as agreed to by such Parties, as well as the exclusive conditions under which such Parties will release such Performance Assurance.

 

8.3           Guaranties.  Concurrently with the execution of this Agreement, (a) Seller shall cause Seller Guarantor to deliver to Buyers a single Guaranty Agreement in an amount equal to ******* and in a form mutually agreeable to Seller and Buyers (the "Hydro-Québec Guaranty"), and (b) Vermont Marble shall cause the Vermont Marble Guarantor to deliver to Seller a Guaranty Agreement in an amount and form mutually agreeable to Seller and Vermont Marble (the "Omya Guaranty").  Each Buyer expressly acknowledges and agrees that none of Seller, Seller Guarantor or any of their Affiliates shall incur any liability in connection with or be involved in any disputes or claims among any Buyers regarding Buyers' allocation of any amounts paid or made available to Buyers under the Hydro-Québec Guaranty.

 

 

ARTICLE NINE

 

GOVERNMENTAL CHARGES

 

9.1           Cooperation.  Each Party shall use reasonable efforts to implement the provisions of, and to administer, this Agreement in accordance with the intent of the Parties to minimize all taxes, including delivery to Seller by each Buyer of sales tax exemption or resale certificates, so long as neither Party is materially adversely affected by such efforts.

 

9.2           Governmental Charges.  Seller shall pay or cause to be paid all taxes and charges imposed by any Governmental Authority ("Governmental Charges") on or with respect to the Energy Quantity arising prior to the Sales Point.  Each Buyer shall pay or cause to be paid all Governmental Charges on or with respect to the Energy Quantity at and from the Sales Point (other than ad valorem, franchise or income taxes which are related to the sale of the Energy Quantity and are, therefore, the responsibility of Seller).  For the avoidance of doubt, ISO-NE charges imposed on sellers in an IBT transaction will be the responsibility of Seller, and ISO-NE charges imposed on buyers in an IBT transaction will be the responsibility of Buyers.  In the event Seller is required by law or regulation to remit or pay Governmental Charges which are any Buyer's responsibility hereunder, such Buyer shall promptly reimburse Seller for such Governmental Charges.  If a Buyer is required by law or regulation to remit or pay Governmental Charges which are Seller's responsibility hereunder, such Buyer may deduct the amount of any such Governmental Charges from the sums due to Seller under Article 6 of this Agreement.  Nothing shall obligate or cause a Party to pay or be liable to pay any Governmental Charges for which it is exempt under the law.

 

  

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ARTICLE TEN

 

OPERATING COMMITTEE

 

10.1          Operating Committee.  The Parties shall maintain an operating committee (the "Operating Committee"), consisting of four (4) members, two (2) appointed by Seller and one (1) appointed by each of the two (2) Buyers with the largest Shares of Energy Quantity as aggregated over the remaining Term (for the purposes of this Article 10, each of Seller and such two (2) Buyers may also be referred to as an "Appointing Entity"), and four (4) alternate members, two (2) appointed by Seller and one (1) appointed by each of the two (2) Buyers with the largest Shares of Energy Quantity as aggregated over the remaining Term.  Should a member appointed by an Appointing Entity be unable to attend a meeting, he shall be represented at the meeting by an alternate member appointed by such Appointing Entity or by a Person named either by such member or such alternate, or by the Person to whom such member reports administratively.  Prompt notice in writing shall be given by each Appointing Entity for all appointments, removals and replacements of its members.  Each member of the Operating Committee is authorized to represent and bind its Appointing Entity and, in the case of the members of the Operating Committee appointed by the Appointing Entities for Buyers, Buyers, respecting all matters covered in Section 10.2 of this Agreement, as the same may be amended from time to time by the Parties; provided, however, that the Operating Committee shall not have authority to modify or amend this Agreement, such authority remaining at all times with the Parties.  All decisions of the Operating Committee shall be unanimous.  The Operating Committee shall have access at all reasonable times to the pertinent and relevant records of the Parties required to substantiate any fact pertaining to this Agreement.

 

10.2          Duties of the Operating Committee.  Subject to Section 10.1, the Operating Committee is authorized on behalf of the Parties to do all things necessary to give effect to the original intention of the Parties as reflected in this Agreement in the ongoing administration of this Agreement.  Specifically, the duties of the Operating Committee include:

 

 

(a)           Monitor and revise the source of the Interest Rate as necessary and appropriate, consistent with the original intention of the Parties;

 

 

(b)           Monitor and adjust the Energy Quantities and Environmental Attributes Quantities as necessary and appropriate as provided in Section 2.3(b), Section 3.2(c) and Section 3.3(b);

 

 

(c)           Monitor and revise as necessary and appropriate, consistent with the original intention of the Parties as reflected in this Agreement, the Scheduling procedures under Section 3.2(d) submittal, confirmation and/or notification procedure to facilitate the operational activities for the Parties consistent with ISO-NE Protocols and the original intention of the Parties as reflected in this Agreement;

 

  

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(d)           Make the appropriate adjustments to the Contract Price annually in accordance with Section 3.2(e), and monitor and revise as necessary and appropriate, consistent with the original intention of the Parties as reflected in this Agreement, availability of the Price Source and any market indices or published data to be utilized in connection with the Contract Price;

 

 

(e)           Monitor and revise as necessary and appropriate, consistent with the original intention of the Parties as reflected in this Agreement for the accurate reporting of the Environmental Attributes Product, protocols for confirming the conformance of the Environmental Attributes Product with the requirements of Section 3.3 in each case in conformance with applicable reporting requirements of a legally authorized Person or Program for tracking Environmental Attributes;

 

 

(f)           Monitor and revise as necessary and appropriate, consistent with the original intention of the Parties as reflected in this Agreement, protocols for ensuring that the revenue sharing of the Environmental Attributes occurs consistent with Section 3.3;

 

 

(g)           Monitor and adjust the Environmental Attributes Quantities through pro-ration as necessary and appropriate in accordance with Section 3.3(b);

 

 

(h)           Monitor and update as necessary the notice information for the Parties set forth in Appendix 11.7; and

 

 

(i)           The consideration of such other matters as may arise in carrying out the objectives of this Agreement or as may be referred to it in order to administer this Agreement.

 

10.3           Confirmation of Operating Committee Actions.  Any agreement of the Operating Committee made pursuant to this Agreement shall be confirmed in writing and signed by all members of the said Operating Committee, and provided to Seller and all Buyers.  The Operating Committee shall keep written minutes showing matters discussed and actions taken at its meetings.

 

10.4           Expenses.  Each Appointing Entity shall pay the expenses of the member or members it has appointed on the Operating Committee.  Any expenses incurred by the Operating Committee for activities pertaining to this Agreement shall be allocated fifty percent (50%) to Seller and fifty percent (50%) to the Appointing Entities for Buyers or in such other proportion between Seller and Appointing Entities for Buyers as may be agreed upon in writing by the Operating Committee.

 

  

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ARTICLE ELEVEN

 

MISCELLANEOUS

 

11.1           Survival.  In the event that this Agreement is terminated prior to the expiration of the Term in accordance with Section 2.1(c), Article Five, Section 3.4 or Section 11.11, or upon the expiration of the Term, such termination or expiration (as applicable) shall not relieve any Party of its accrued and unpaid liabilities, if any, hereunder.  Section 11.15 shall survive the termination or expiration of this Agreement (as applicable); the indemnity provisions of this Agreement shall survive the termination or expiration of this Agreement (as applicable) for the period of the applicable statute of limitations; and the audit provisions of this Agreement shall survive the termination or expiration of this Agreement (as applicable) for a period of twelve (12) months.

 

11.2           Representations and Warranties.  As of each of the Effective Date and November 1, 2012, each Party represents and warrants to the other Parties that, subject to any Required Approval applicable to such Party:

 

 

(a)           it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation;

 

 

(b)           it has all regulatory authorizations necessary for it to legally perform its obligations under this Agreement;

 

 

(c)           the execution, delivery and performance of this Agreement is within its powers, has been duly authorized by all necessary action, does not require the consent of any party to any agreement with such Party, and does not violate any of the terms and conditions in its governing documents, any contracts to which it is a party or any law, rule, regulation, order or the like applicable to it;

 

 

(d)           this Agreement, and each other document executed and delivered in accordance with this Agreement constitutes its legally valid and binding obligation enforceable against it in accordance with its terms, subject to any Equitable Defenses.

 

 

(e)           it is not Bankrupt and there are no proceedings pending or being contemplated by it or, to its knowledge, threatened against it which would result in it being or becoming Bankrupt;

 

 

(f)           there is not pending or, to its knowledge, threatened against it or any of its Affiliates any legal proceedings that could materially adversely affect its ability to perform its obligations under this Agreement;

 

  

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(g)           no Event of Default with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement;

 

 

(h)           it is acting for its own account, has made its own independent decision to enter into this Agreement and as to whether this Agreement is appropriate or proper for it based upon its own judgment, is not relying upon the advice or recommendations of any other Party in so doing, and is capable of assessing the merits of and understanding, and understands and accepts, the terms, conditions and risks of this Agreement;

 

 

(i)           except with respect to each of VEC, VPPSA, BED and Stowe, it is a "forward contract merchant" within the meaning of the Bankruptcy Code;

 

 

(j)           it has entered into this Agreement in connection with the conduct of its business and it has the capacity or ability to undertake and perform the obligations hereunder;

 

 

(k)           it is, or in the case of VPPSA acting on behalf of, a producer, processor, commercial user or merchant handling the Energy Quantity, and it is entering into this Agreement for purposes related to its business as such;

 

 

(l)           as to Seller, it has and shall continue to take all necessary actions to maintain throughout the Term, FERC market-based rate authority; and

 

 

(m)           as to each Buyer, it is a Market Participant and has the power and authority to perform its Scheduling obligations hereunder.

 

11.3           Duty to Mitigate.  Each Party agrees that it has a duty to mitigate damages under applicable law and covenants that it will use commercially reasonable efforts, to the extent required under applicable law, to minimize any damages it may incur as a result of another Party's default or non-performance of this Agreement.

 

11.4           Indemnity.

 

 

(a)           Subject to any limitations set forth in Article Seven, (i) Seller shall indemnify, defend and hold harmless each Buyer and its Affiliates, directors, employees and agents and (ii) each Buyer shall indemnify, defend and hold harmless Seller and its Affiliates, directors, employees and agents, from and against any Claims arising in connection with or resulting from the indemnifying Party's (x) breach of any representations or warranties made in connection with this Agreement, (y) failure to perform any of its obligations under this Agreement, and (z) any Governmental Charges for which such indemnifying Party is responsible under Article Nine.

 

  

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(b)           The potential indemnified Party shall, with reasonable promptness after obtaining knowledge thereof, provide the potential indemnifying Party with written notice (the "Indemnification Request Notice") of the Claims that may be subject to indemnification, which notice shall include a statement of the basis of the potential indemnified Party's claim for indemnification hereunder, including a summary of the facts or circumstances that form the basis for the potential indemnified Party's claim for indemnification hereunder and copies of any pleadings or demands from the third party; provided, that no delay on the part of the potential indemnified Party in giving any such Indemnification Request Notice shall relieve the potential indemnifying Party of any indemnification obligation hereunder except to the extent that the potential indemnifying Party is actually and materially prejudiced by such delay.  A potential indemnifying Party shall have thirty (30) days after its receipt of the Indemnification Request Notice to notify the potential indemnified Party in writing whether or not the potential indemnifying Party agrees that the Claim is subject to indemnification hereunder and, if so, whether the potential indemnifying Party elects to undertake, conduct and control, through counsel of its choosing and at its sole risk and expense, the settlement or defense of the Claim.  If, within thirty (30) days after its receipt of the Indemnification Request Notice, the potential indemnifying Party notifies the potential indemnified Party that it elects to undertake the settlement or defense of the Claim, the potential indemnified Party shall cooperate in a commercially reasonable manner with the potential indemnifying Party in connection therewith including, without limitation, by making available to the potential indemnifying Party, to the extent commercially reasonable, all relevant information and the testimony of employees and agents material to the defense of the Claim.  So long as the potential indemnifying Party is contesting the Claim in good faith and with diligence, the potential indemnified Party waives any right to settle the Claim without the consent of the potential indemnifying Party.  If the potential indemnifying Party does not provide a responsive written notice within (30) days after the Indemnification Request Notice, the potential indemnified Party shall thereafter have the right to contest, settle or compromise the Claim at its exclusive discretion, and the potential indemnifying Party will thereby waive any claim, defense or argument that the potential indemnified Party's settlement or defense of such Claim is in any respect inadequate or unreasonable; provided, however, that such waiver by the potential indemnifying Party shall not limit any rights of the potential indemnifying Party under this Agreement.

 

11.5           Assignment.  No Party shall transfer or assign this Agreement or its rights hereunder without the prior written consent of the Seller (in the case of an assignment by any Buyer) or all Buyers (in the case of an assignment by the Seller), which consent may be withheld in the exercise of each affected Party's sole discretion; provided, however, that any Party may, without the consent of the other Parties (and without relieving itself from liability hereunder unless consented to in writing by such other Parties), (i) transfer, sell, pledge, encumber or assign this Agreement or the accounts, revenues or proceeds hereof to a Person whose Credit Rating is equal to or higher than that of such Party or, with respect to a transfer or assignment by Seller or Vermont Marble, of the Seller Guarantor or Vermont Marble Guarantor, respectively, in connection with any financing or other financial arrangements, (ii) transfer or assign this Agreement to an Affiliate of such Party so long as (x) such Affiliate's Credit Rating is equal to or higher than that of such Party or, with respect to a transfer or assignment by Seller or Vermont Marble, of the Seller Guarantor or Vermont Marble Guarantor, respectively, or (y) the obligations of such Affiliate are guaranteed by such Party or, with respect to a transfer or assignment by Seller or Vermont Marble, the Seller Guarantor or Vermont Marble Guarantor, respectively, in accordance with a guaranty agreement in form and substance satisfactory to the other Party, or (iii) transfer or assign this Agreement to any Person succeeding to all or substantially all of the assets of such Party whose Credit Rating is equal to or higher than that of such Party or, with respect to a transfer or assignment by Seller or Vermont Marble, of the Guarantor or Vermont Marble, respectively; provided, however, that in each such case, any such assignee shall agree in writing to be bound by the terms and conditions hereof and so long as the transferring Party delivers such tax and enforceability assurance as each non-transferring Party may reasonably request.

 

  

39

  

 

11.6           Governing Law; Venue .  THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED AND PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAWS.  EACH PARTY WAIVES ITS RESPECTIVE RIGHT TO ANY JURY TRIAL WITH RESPECT TO ANY LITIGATION ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT.  ALL ACTIONS AND PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE HEARD AND DETERMINED EXCLUSIVELY IN A COURT LOCATED IN NEW YORK, NEW YORK.

 

11.7           Notices.  All notices hereunder shall be made to each Party as specified below.  Notices shall, unless otherwise specified herein, be in writing and may be delivered by hand delivery, overnight mail, overnight courier service or facsimile.  Notice by facsimile or hand delivery shall be effective at the close of business on the day actually received, if received during business hours on a Business Day, and otherwise shall be effective at the close of business on the next Business Day.  Notice by overnight mail or courier shall be effective on the next Business Day after it was sent.  A Party may change its addresses by providing notice of same in accordance herewith.  All notices hereunder shall be sent to the applicable Parties and their representatives at the addresses set forth in Appendix 11.7 to this Agreement.

 

11.8           Several Rights and Obligations of Buyers.  The rights and obligations of Buyers under this Agreement shall be several, and not joint or joint and several.

 

11.9           Interpretation.  In this Agreement, unless otherwise indicated or otherwise required by the context, the following rules of interpretation shall apply:

 

 

(a)           words denoting the singular include the plural and vice versa;

 

 

(b)           words denoting a gender include all genders;

 

 

(c)           references to a particular part, clause, section, paragraph, article, exhibit, schedule, appendix or other attachment shall be a reference to a part, clause, section, paragraph, or article of, or an exhibit, schedule, appendix or other attachment to, this Agreement;

 

  

40

  

 

(d)           the exhibits, schedules and appendices attached hereto are incorporated herein by reference and shall be construed as an integral part of this Agreement to the same extent as if they were set forth verbatim herein;

 

 

(e)           a reference to any statute, regulation, proclamation, ordinance or law includes all statutes, regulations, proclamations, amendments, ordinances or laws varying, consolidating or replacing the same from time to time, and a reference to a statute includes all regulations, policies, protocols, codes, proclamations and ordinances issued or otherwise applicable under that statute unless, in any such case, otherwise expressly provided in any such statute or in this Agreement;

 

 

(f)           a reference to a particular section, paragraph or other part of a particular statute shall be deemed to be a reference to any other section, paragraph or other part substituted therefor from time to time;

 

 

(g)           a definition of or reference to any document, instrument or agreement includes any amendment or supplement to, or restatement, replacement, modification or novation of, any such document, instrument or agreement unless otherwise specified in such definition or in the context in which such reference is used;

 

 

(h)           a reference to any Person includes such Person's successors and permitted assigns in that designated capacity;

 

 

(i)           any reference to "days" shall mean calendar days unless "Business Days" are expressly specified;

 

 

(j)           if the date as of which any right or election is exercisable, or the date upon which any amount is due and payable, is stated to be on a date or day that is not a Business Day, such right or election may be exercised, and such amount shall be deemed due and payable, on the next succeeding Business Day with the same effect as if the same was exercised or made on such date or day (without, in the case of any such payment, the payment or accrual of any interest or other late payment or charge, provided such payment is made on such next succeeding Business Day);

 

 

(k)           words such as "hereunder," "hereto," "hereof" and "herein" and other words of similar import shall, unless the context requires otherwise, refer to this Agreement as a whole and not to any particular article, section, subsection, paragraph or clause hereof; and a reference to "include" or "including" means including without limiting the generality of any description preceding such term and shall be by way of example only and shall not be considered in any way to be in limitation;

 

  

41

  

 

(l)             all payments made hereunder and prices set forth herein shall be in United States dollars; and

 

 

(m)           unless otherwise expressly specified, United States dollars shall be rounded to the second decimal place, e.g., $0.97, and all other values shall be rounded to the third decimal place, e.g., 0.973.

 

11.10           General.

 

 

(a)           Entire Agreement.  This Agreement and each Collateral Agreement (but solely with respect to Seller and the respective Buyer) constitutes the entire agreement among the Parties relating to its subject matter; provided, however, for the avoidance of doubt, that nothing in this Agreement is intended, or does, amend or supersede Vermont Joint Owners Power Purchase Agreement.  For the avoidance of doubt, this Agreement, and in particular Section 11.15 hereof, supersedes as of the Effective Date the Confidentiality Agreement dated as of June 5, 2008 among the Parties.

 

 

(b)           Joint Preparation and Good Faith.  This Agreement shall be considered for all purposes as prepared through the joint efforts of the Parties and shall not be construed against one Party or the other as a result of the preparation, substitution, submission or other event of negotiation, drafting or execution hereof.  Each Party has prepared, negotiated and drafted, and is executing, this Agreement in good faith.

 

 

(c)           Amendment Procedures.  Except to the extent herein provided for, no amendment or modification to this Agreement shall be enforceable unless reduced to writing and executed by all Parties.

 

 

(d)           Wholesale Power Sales Tariffs.  Each Party agrees that if it seeks to amend any of its applicable wholesale power sales tariffs, such amendment will not in any way affect outstanding obligations under this Agreement without the prior written consent of Seller, in the case of such an amendment by a Buyer, and affected Buyers, in the case of such an amendment by Seller.  Subject to the provisions of Section 11.11, each Party further agrees that it will not assert, or defend itself, on the basis that any of its applicable tariffs is inconsistent with this Agreement.

 

 

(e)           No Third-Party Beneficiaries.  This Agreement shall not impart any rights enforceable by any third party (other than a permitted successor or assignee bound to this Agreement).

 

 

(f)            Waiver.  Waiver by a Party of any default by another Party shall not be construed as a waiver of any other default.

 

  

42

  

 

(g)            Headings.  The headings used herein are for convenience and reference purposes only.

 

 

(h)            Successors and Assigns.  This Agreement shall be binding on each Party's successors and permitted assigns.

 

 

(i)             Further Assurances.  Each Party agrees to provide such information, execute and deliver any instruments and documents and to take such other actions as may be necessary or reasonably requested by another Party which are not inconsistent with the provisions of this Agreement and which do not involve the assumption of obligations other than those provided for in this Agreement, in order to give full effect to this Agreement and to carry out the intent of the Parties.

 

 

(j)             Counterparts.  This Agreement may be executed in any number of counterparts (including by means of facsimile or pdf), each of which when executed, shall be deemed to be an original and all of which together will be deemed to be one and the same instrument binding upon all of the Parties notwithstanding the fact that all Parties are not signatory to the original or the same counterpart.  Delivery of an executed counterpart of a signature page to this Agreement electronically or by facsimile shall be effective as delivery of a manually executed counterpart of this Agreement.

 

11.11       Regulatory Event.

 

 

(a)            Defined.  As used in this Agreement, the term "Regulatory Event" means a statutory or regulatory change or issuance of an order by a Governmental Authority, including changes relating to the ISO-NE Tariff, ISO-NE Protocols and the NEPOOL GIS, that causes (i) a material change in the meaning of a term defined herein or incorporated herein by reference or (ii) a material change in the manner in which a Party is required to perform its obligations under this Agreement (including changes relating to ISO-NE's ability to support or settle the Energy Product) to no longer reflect the intent of the Parties as reflected in this Agreement, which, in the case of any such change identified in clauses (i) and (ii) of this Section 11.11(a), causes the performance of any material term of this Agreement to be deemed unlawful, impossible or impracticable.

 

 

(b)           Upon Occurrence of a Regulatory Event.  Upon the occurrence of a Regulatory Event, the Parties shall endeavor, in good faith and using commercially reasonable efforts, to agree to reform this Agreement in order to give effect to the original intention of the Parties as reflected in this Agreement.  It is the intent of the Parties to agree to reform the Agreement if a Regulatory Event occurs rather than for the Regulatory Event to discharge a Party's duty to perform its obligations under this Agreement; provided, however, that if a Regulatory Event renders performance of a material term unlawful, impossible or impracticable and the Parties are unable following good faith efforts to mitigate such Regulatory Event or reform this Agreement to render performance lawful, possible or practicable while preserving the intent of the Parties, then (i) any Event of Default solely due to a failure by a Party to continue to perform such unlawful, impossible or impracticable material term shall not give rise to damages to the extent that such Party performs as much of such term as is lawful, possible or practicable, and (ii) a Party materially adversely affected by another Party's inability to perform a material term of the Agreement due to a Regulatory Event that renders such performance unlawful, impossible or impracticable may terminate this Agreement as between such Parties.

 

  

43

  

 

(c)           Exclusions.  Notwithstanding the foregoing, (i) the enactment or promulgation of any law, rule or regulation in Vermont affecting the recognition of the hydroelectric component of the HQP System Mix as a renewable resource shall be deemed not to be a Regulatory Event, and (ii) a Party's performance of its obligations hereunder shall not be deemed to be "impossible" or "impracticable," as used in Section 11.11(a), solely due to an increase in the cost of such performance.

 

11.12           Audit.  Each Party has the right, at its sole expense and during normal working hours, to examine the records of the other Party to the extent reasonably necessary to verify the accuracy of any statement, charge or computation made pursuant to this Agreement.  If any such examination reveals any inaccuracy in any statement, the necessary adjustments in such statement and the payments thereof will be made promptly and shall bear interest calculated at the Interest Rate from the date the overpayment or underpayment was made until paid; provided, however, that no adjustment for any statement or payment will be made unless objection to the accuracy thereof was made prior to the lapse of twelve (12) months from the rendition thereof, and thereafter any objection shall be deemed waived.

 

11.13           FERC Standard of Review; Mobile-Sierra Waiver.

 

 

(a)           The rates for service specified herein shall remain in effect for the Term and shall not be subject to change through application to the Federal Energy Regulatory Commission pursuant to the provisions of Section 205 of the Federal Power Act absent the agreement of all Parties hereto.  Any subsequent review of the rates, terms, or conditions set forth in this Agreement is subject to the Mobile-Sierra standard of review as explained by the United States Supreme Court in Morgan Stanley Capital Group, Inc. v. Public Utility District No. 1 of Snohomish County, 128 S.Ct. 2733 (2008), and NRG Power Marketing, LLC v. Maine Public Utilities Commission, 130 S.Ct. 693 (2010).

 

 

(b)           In addition, and notwithstanding the foregoing subsection (a), to the fullest extent permitted by applicable law, each Party, for itself and its successors and assigns, hereby expressly and irrevocably waives any rights it can or may have, now or in the future, whether under §§ 205 and/or 206 of the Federal Power Act or otherwise, to seek to obtain from FERC by any means, directly or indirectly (through complaint, investigation or otherwise), and each hereby covenants and agrees not at any time to seek to so obtain, an order from FERC changing any section of this Agreement specifying the rate, charge, classification, or other term or condition agreed to by the Parties, it being the express intent of the Parties that, to the fullest extent permitted by applicable law, neither Party shall unilaterally seek to obtain from FERC any relief changing the rate, charge, classification, or other term or condition of this Agreement, notwithstanding any subsequent changes in applicable law or market conditions that may occur.  In the event it were to be determined that applicable law precludes the Parties from waiving their rights to seek changes from FERC to their market-based power sales contracts (including entering into covenants not to do so) then this subsection (b) shall not apply, provided that, consistent with the foregoing subsection (a), neither Party shall seek any such changes except solely under the "public interest" application of the "just and reasonable" standard of review and otherwise as set forth in the foregoing subsection (a).

 

  

44

  

 

11.14           Bankruptcy Issues.  The Parties intend that (i) they are each a “forward contract merchant” within the meaning of the United States Bankruptcy Code (the "Bankruptcy Code") and all transactions under this Agreement constitute a "forward contract" within the meaning of Bankruptcy Code or a "swap agreement" within the meaning of the Bankruptcy Code; (ii) all payments made or to be made by one Party to another Party pursuant to this Agreement constitute "settlement payments" within the meaning of the Bankruptcy Code; (iii) all transfers of Performance Assurance by one Party to another Party under this Agreement constitute "margin payments" within the meaning of the Bankruptcy Code; and (iv) this Agreement constitutes a "master netting agreement" within the meaning of the Bankruptcy Code.  Each Party hereby waives its rights to argue in any proceeding that any of the statements in clauses (i) through (iv) above are not true or enforceable.

 

11.15           Confidentiality.  No Party shall disclose the terms and conditions of this Agreement, or information or other documents (including any financial information or guaranties) exchanged between the Parties in connection with this Agreement, in each case to any third party (other than the Party's employees, lenders, counsel, accountants or advisors who have a need to know such information and have agreed to keep such terms confidential), except a Party may, after written notice to the other Parties, disclose terms and conditions of this Agreement or information exchanged between the Parties in connection with this Agreement (i) in order to comply with any applicable law (including Vermont's Open Meeting and Access to Public Records Laws, 1 V.S.A. ch. 5, if ordered by a court of competent jurisdiction), regulation, or any exchange, control area or independent system operator rule or in connection with any court or regulatory proceeding; provided, however, that each Party shall, to the extent practicable, use commercially reasonable efforts to prevent or limit the disclosure, including utilization of a protective agreement and protective order limiting access to and use of confidential information and (ii) without limiting the generality of the foregoing, as required under applicable law or regulation in connection with obtaining a Required Approval, it being understood that in respect of any such disclosure as part of the process of obtaining a Required Approval, each Party shall use commercially reasonable efforts, in accordance with applicable laws and regulations, so that the Contract Price terms of this Agreement as set forth in Section 3.2(e) (including Appendix 3.2(e)) not be disclosed and to limit such disclosure to (x) the initial Reference Price and (y) a general description of the approach used for annual market and inflation adjustments to the Contract Price.  The Parties shall be entitled to all remedies available at law or in equity to enforce, or seek relief in connection with, the confidentiality obligations of this Section 

 

  

45

  

 

11.15.  Each Governmental Entity acknowledges that this Agreement contains information, and provides for the exchange of information, that is business-sensitive and confidential, and agrees in each case to treat such information as information that is exempt from disclosure and public inspection pursuant to 1 V.S.A. § 317(c)(9); provided, that in each case such information shall not be considered business sensitive and confidential to the extent that at or after the time of such exchange it becomes generally available to the public other than through any act or omission on the receiving Party’s part.

 

 

[Remainder of Page Intentionally Left Blank]

 

 

 

 

 

 

 

  

46

  

 

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first above written.

 

	SELLER, H.Q. Energy Services (U.S.) Inc.	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:  	
/s/ Christian G. Brosseau

	 	 	
 

	 
	 	
Name: Christian G. Brosseau  

	 	 	
 

	 
	 	
Title: President

	 	 	
 

	 

 

 

	BUYER, Central Vermont Public Service Corporation	 	BUYER, Green Mountain Power Corporation	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:  	
/s/ Robert H. Young

	 	By:  	
/s/ Mary G. Powell 

	 
	 	
Name:  Robert H. Young

	 	 	
Name:  Mary G. Powell

	 
	 	
Title: President and Chief Executive Officer

	 	 	

Title:  President and Chief Executive Officer

	 

 

 

	BUYER, Vermont Electric Cooperative, Inc.	 	BUYER, Vermont Public Power Supply Authority	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:  	
/s/ David Hallquist

	 	By:  	
/s/ David John Mullet

	 
	 	
Name:  David Hallquist

	 	 	
Name:  David John Mullet

	 
	 	
Title:  CEO

	 	 	

Title:  General Manager

	 

 

 

	BUYER, Vermont Marble Power Division of Omya Inc.	 	BUYER, the Town of Stowe Electric Department	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:  	
/s/ Anthony Colak

	 	By:  	
/s/ Ellen L. Burt

	 
	 	
Name:  Anthony Colak

	 	 	
Name:  Ellen L. Burt

	 
	 	
Title:  CEO

	 	 	

Title:  General Manager

	 

 

 

	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:  	
/s/ Michael Phillips 

	 	 	
 

	 
	 	
Name:  Michael Phillips

	 	 	
 

	 
	 	
Title:  CFO

	 	 	

 

	 

 

  

  

  

 

	BUYER, City of Burlington, Vermont Electric Department	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:  	
/s/ Barbara L. Grimes

	 	 	
 

	 
	 	
Name:  Barbara L. Grimes

	 	 	
 

	 
	 	
Title:  General Manager

	 

 

 

 

 

 

 

 

 

  

  

  

 

 

APPENDIX A

CERTAIN PROVISIONS PERTAINING TO BUYERS

THAT ARE GOVERNMENTAL ENTITIES

 

A.        Definitions.  The Parties agree to add the following definitions in Article One.

 

“Acts” means 3 V.S.A. Chapter 5, Title 24 of the V.S.A., a Government Entity’s municipal charter set forth 24 V.S.A. Appendix, and 30 V.S.A. Chapters 3, 5, 84.

“Governmental Entity” means the Vermont Public Power Supply Authority, the City of Burlington, Vermont Electric Department, and the Town of Stowe Electric Department.

 

B.        Force Majeure.  The following sentence shall be added to the end of the definition of “Force Majeure” in Article One.

 

If the Claiming Party is a Governmental Entity, Force Majeure does not include any action taken by the Governmental Entity in its governmental capacity.

 

C.        Representations and Warranties.  The Parties agree to add to Section 11.2 the following representations and warranties made solely by the Governmental Entities, as of each of the Effective Date and November 1, 2012, to the other Parties to this Agreement.

 

(xiv)           with respect to a Party that is a Governmental Entity, such Governmental Entity represents and warrants to Seller as follows: (i) all acts necessary to the valid execution, delivery and performance of this Agreement and the Collateral Agreement have or will be taken and performed as required under the Acts and the Governmental Entity’s charters, ordinances, bylaws or other regulations, (ii) all persons making up the governing body of the Governmental Entity are the duly elected or appointed incumbents in their positions and hold such positions in good standing in accordance with the Act and other applicable law, (iii) entry into and performance of this Agreement by the Governmental Entity are for a proper public purpose, and (iv) obligations to make payments hereunder do not constitute any kind of indebtedness of the Governmental Entity or create any kind of lien on, or security interest in, any property or revenues of the Governmental Entity which, in either case, is proscribed by any provision of the Act or any other relevant constitutional, organic or other governing documents and applicable law, any order or judgment of any Governmental Authority applicable to it or its assets, or any contractual restriction binding on or affecting it or any of its assets.

 

D.       No Immunity Claim.  The Parties agree to add the following Section 11.16 to Article Eleven.

 

  

1

  

 

11.16           No Immunity Claim.  Each Governmental Entity warrants and covenants that with respect to its contractual obligations hereunder and performance thereof, it will not claim immunity on the grounds of sovereignty or similar grounds with respect to itself or its revenues or assets from (a) suit, (b) jurisdiction of court (including a court located outside the jurisdiction of its organization), (c) relief by way of injunction, order for specific performance or recovery of property, (d) attachment of assets, or (e) execution or enforcement of any judgment.

 

E.       Governmental Entity Security.  The Parties agree to add the following Section 8.4 to Article Eight.

 

8.4              Governmental Entity Security.  Each Governmental Entity shall, upon execution of this Agreement and for each subsequent fiscal year of Governmental Entity during the Term, have obtained all necessary budgetary approvals and certifications for payment of all of its obligations under this Agreement for such fiscal year.

 

F.        Governing Law.  The Parties agree to add the following sentence after the first sentence of Section 11.6.

 

SOLELY WITH RESPECT TO THE APPLICABILITY OF THE "ACTS" (FOR THE AVOIDANCE OF DOUBT AS DEFINED IN APPENDIX A) AS HEREIN PROVIDED, THE LAWS OF THE STATE OF VERMONT SHALL APPLY.

 

 

 

 

 

 

 

  

2

  

 

APPENDIX 3.2(c)(i)

BUYERS' SHARES OF THE ENERGY QUANTITY AT 218 MW

 

	  	
November 1, 

2012 to 

October 31, 

2015

	
November 1, 

2015 to 

October 31, 

2016

	
November 1, 

2016 to 

October 31, 

2020

	
November 1, 

2020 to 

October 31, 

2030

	
November 1, 

2030 to 

October 31, 

2035

	
November 1, 

2035 to 

October 31, 

2038

	  	
MW

	
MW

	
MW

	
MW

	
MW

	
MW

	
BED

	
0

	
5

	
5

	
9

	
9

	
4

	
CVPS

	
0

	
83.119

	
94.119

	
95.119

	
105.809

	
22.69

	
GMP

	
4.821

	
65.589

	
75.063

	
75.063

	
79.11

	
18.342

	
Stowe

	
1.032

	
2.884

	
2.984

	
2.984

	
2.251

	
0.399

	
VEC

	
15.236

	
15.236

	
15.236

	
16.236

	
4.004

	
4.004

	
VPPSA

	
0.911

	
11.172

	
15.598

	
15.598

	
16.267

	
6.006

	
Vermont Marble

	
3

	
4

	
4

	
4

	
1.559

	
0.559

	
Total

	
25

	
187

	
212

	
218

	
218

	
56

 

 

 

 

  

1

  

 

APPENDIX 3.2(c)(ii)

BUYERS' SHARES OF THE ENERGY QUANTITY AT 225 MW

	  	
November 1, 

2012 to 

October 31, 

2015

	
November 1, 

2015 to 

October 31, 

2016

	
November 1, 

2016 to 

October 31, 

2020

	
November 1, 

2020 to 

October 31,

 2030

	
November 1, 

2030 to 

October 31,

2035

	
November 1, 

2035 to 

October 31, 

2038

	  	
MW

	
MW

	
MW

	
MW

	
MW

	
MW

	
BED

	
0

	
5

	
5

	
9

	
9

	
4

	
CVPS

	
0

	
85.419

	
96.419

	
98.419

	
112.101

	
26.682

	
GMP

	
7.017

	
67.485

	
76.959

	
76.959

	
81.293

	
20.825

	
Stowe

	
1.238

	
2.89

	
2.99

	
2.99

	
2.135

	
0.483

	
VEC

	
17

	
17

	
17

	
17

	
3.845

	
3.845

	
VPPSA

	
1.745

	
11.206

	
15.632

	
15.632

	
15.91

	
6.449

	
Vermont Marble

	
5

	
5

	
5

	
5

	
0.716

	
0.716

	
Total

	
32

	
194

	
219

	
225

	
225

	
63

 

 

 

 

  

1

  

 

APPENDIX 3.2(e)

SAMPLE PRICE CALCULATIONS

(FOR ILLUSTRATIVE PURPOSES ONLY)

 

CONTRACT PRICE

The calculations set forth in this Appendix 3.2(e) are for illustrative purposes only.  In the event of any inconsistency or contradiction between this Appendix 3.2(e) and Section 3.2(e) of the Agreement, Section 3.2(e) shall govern and shall supersede this Appendix 3.2(e).  Principles for rounding decimals in dollars and other values are set forth in Section 11.9(m) of the Agreement.

	
1.

	
Calculation of the Contract Price for the first Contract Year (November 2012 through October 2013)

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*******

*******:

2.1           *******

*******

*******

******

2.2           *******

*******

*******

  

5

  

*******

*******

*******

*******:

*******

*******.

3.           *******

 

*******

 

 

*******

*******:

 

	
*******

	
*******

	
*******

*******

*******

*******

*******

*******

*******

*******

*******

*******

*******

*******

	
*******

*******

*******

*******

*******

*******

*******

*******

*******

*******

*******

*******

 

*******

*******.

 

  

6

  

 

 

	
*******

	
*******

	
*******

*******

*******

*******

*******

*******

*******

*******

*******

*******

*******

*******

	
*******

*******

*******

*******

*******

*******

*******

*******

*******

*******

*******

*******

 

*******:

 

*******

 

*******

 

 

*******

*******.

 

*******

 

*******

 

 

*******

*******

*******

 

  

7

  

APPENDIX 3.3(b)(i)

BUYERS' SHARES OF THE ENVIRONMENTAL ATTRIBUTES QUANTITY AT 218 MW

	  	
2012

	
2013-

2014

	
2015

	
2016

	
2017-

2019

	
2020

	
2021-

2023, 

2025-

2027, and 

2029

	
2024 and 

2028

	
2030

	
2031 and 

2033-

2034

	
2032

	
2035

	
2036

	
2037

	
2038

	  	
MWh / year

	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / year

	
MWh / year

	
BED

	
0

	
0

	
4,880

	
29,280

	
29,200

	
33,184

	
52,560

	
52,704

	
52,560

	
52,560

	
52,704

	
47,680

	
23,424

	
23,360

	
19,456

	
CVPS

	
0

	
0

	
81,124

	
497,481

	
549,655

	
552,138

	
555,495

	
557,018

	
565,928

	
617,924

	
619,617

	
536,800

	
132,872

	
132,509

	
110,365

	
GMP

	
4,705

	
28,155

	
87,464

	
393,336

	
438,368

	
439,569

	
438,368

	
439,569

	
442,318

	
462,002

	
463,268

	
402,693

	
107,411

	
107,117

	
89,215

	
Stowe Electric

	
1,007

	
6,027

	
7,834

	
16,986

	
17,427

	
17,474

	
17,427

	
17,474

	
16,711

	
13,146

	
13,182

	
11,338

	
2,337

	
2,330

	
1,941

	
VEC

	
14,871

	
88,978

	
88,979

	
89,222

	
88,978

	
90,198

	
94,818

	
95,078

	
82,880

	
23,383

	
23,447

	
23,383

	
23,447

	
23,383

	
19,475

	
VPPSA

	
889

	
5,320

	
15,335

	
69,743

	
91,092

	
91,341

	
91,092

	
91,341

	
91,745

	
95,000

	
95,260

	
84,985

	
35,171

	
35,076

	
29,213

	
Vermont Marble

	
2,928

	
17,520

	
18,496

	
23,424

	
23,360

	
23,424

	
23,360

	
23,424

	
20,978

	
9,105

	
9,130

	
8,129

	
3,274

	
3,265

	
2,719

	
Total

	
24,400

	
146,000

	
304,112

	
1,119,472

	
1,238,080

	
1,247,328

	
1,273,120

	
1,276,608

	
1,273,120

	
1,273,120

	
1,276,608

	
1,115,008

	
327,936

	
327,040

	
272,384

 

 

 

 

 

 

 

  

1

  

APPENDIX 3.3(b)(ii)

BUYERS' SHARES OF THE ENVIRONMENTAL ATTRIBUTES QUANTITY AT 225 MW

	  	
2012

	
2013-

2014

	
2015

	
2016

	
2017-

2019

	
2020

	
2021-

2023, 

2025-

2027, and 

2029

	
2024 and 

2028

	
2030

	
2031 and 

2033-

2034

	
2032

	
2035

	
2036

	
2037

	
2038

	  	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / 

year

	
MWh / year

	
MWh / year

	
BED

	
0

	
0

	
4,880

	
29,280

	
29,200

	
33,184

	
52,560

	
52,704

	
52,560

	
52,560

	
52,704

	
47,680

	
23,424

	
23,360

	
19,456

	
CVPS

	
0

	
0

	
83,369

	
510,950

	
563,086

	
566,582

	
574,766

	
576,342

	
588,120

	
654,671

	
656,463

	
571,302

	
156,250

	
155,823

	
129,781

	
GMP

	
6,849

	
40,979

	
99,996

	
404,439

	
449,441

	
450,672

	
449,441

	
450,672

	
453,671

	
474,751

	
476,052

	
415,734

	
121,951

	
121,618

	
101,293

	
Stowe Electric

	
1,208

	
7,230

	
8,842

	
17,021

	
17,462

	
17,509

	
17,462

	
17,509

	
16,627

	
12,468

	
12,503

	
10,856

	
2,828

	
2,821

	
2,349

	
VEC

	
16,592

	
99,280

	
99,280

	
99,552

	
99,280

	
99,552

	
99,280

	
99,552

	
86,441

	
22,455

	
22,516

	
22,455

	
22,516

	
22,455

	
18,702

	
VPPSA

	
1,703

	
10,191

	
19,425

	
69,942

	
91,291

	
91,541

	
91,291

	
91,541

	
91,562

	
92,914

	
93,169

	
83,680

	
37,766

	
37,662

	
31,368

	
Vermont Marble

	
4,880

	
29,200

	
29,200

	
29,280

	
29,200

	
29,280

	
29,200

	
29,280

	
25,019

	
4,181

	
4,193

	
4,181

	
4,193

	
4,181

	
3,483

	
Total

	
31,232

	
186,880

	
344,992

	
1,160,464

	
1,278,960

	
1,288,320

	
1,314,000

	
1,317,600

	
1,314,000

	
1,314,000

	
1,317,600

	
1,155,888

	
368,928

	
367,920

	
306,432

 

 

 

 

 

 

 

  

1

  

 

APPENDIX 3.3(f)

FORM OF ATTESTATION

 

Attestation of Transfer

 of

HQP System Mix Environmental Attributes

I, [Insert Name and Title of HQUS Attesting Officer], hereby declare and attest (the “Attestation”) that (defined terms used in this Attestation if not otherwise defined shall have the meaning set forth in the Agreement (as defined below)):

1.           Environmental Attributes corresponding to [Insert applicable Amount for each Buyer for the calendar year to which the attestation pertains] MWh of Energy (the “[Insert applicable calendar year] Environmental Attributes”) were transferred to [Insert Name of Applicable Buyer] (“Buyer”) pursuant to that certain Power Purchase and Sale Agreement (the “Agreement”), dated August 12, 2010, by and among H.Q. Energy Services (U.S.) Inc. (“HQUS” or “Seller”), Central Vermont Public Service Corporation (“CVPS”), Green Mountain Power Corporation (“GMP”), Vermont Electric Cooperative, Inc. (“VEC”), Vermont Public Power Supply Authority, a body politic and corporate and a public instrumentality of the State of Vermont exercising public and essential governmental functions (“VPPSA”), Vermont Marble Power Division of Omya Inc. (“Vermont Marble”), City of Burlington, Vermont Electric Department (“BED”), and the Town of Stowe Electric Department (“Stowe”).

2.           The content by generation source of the HQP System Mix for the [Insert applicable calendar year] Environmental Attributes is as follows:  [______% hydroelectricity; ______ % nuclear; _____ % natural gas; _____ % wind; etc.; and other generation sources (in each case as applicable and with “other generation sources” to be a catchall category for individual sources that in themselves represent less than 1% but when added together collectively may be more than 1%)].

3.           The [Insert applicable calendar year] Environmental Attributes Quantity:

(i)          originated from the HQP System Mix and were delivered into the New England Markets in accordance with Section 3.3(a) of the Agreement; and

(ii)         were, prior to transfer to [Insert Name of Applicable Buyer] in accordance with Section 3.3(a) of the Agreement, solely and exclusively owned by Seller;

4.           HQUS has not:

(i)           transferred the [Insert applicable calendar year] Environmental Attributes associated with the Environmental Attributes Quantity to any other Person;

 

  

1

  

 

(ii)          made any representations in respect of such [Insert applicable calendar year] Environmental Attributes Quantity to any other Person;

(iii)        otherwise sold, claimed, or represented as part of Energy sold elsewhere or used such [Insert applicable calendar year] Environmental Attributes Quantity;

 

(iv)        otherwise retired such [Insert applicable calendar year] Environmental Attributes Quantity; or

(v)         used such [Insert applicable calendar year] Environmental Attributes Quantity to satisfy any other Person's obligations in any Program.

5.           To the fullest extent allowed under applicable law, all of HQUS’ right, title and interest in the [Insert applicable calendar year] Environmental Attributes associated with the Environmental Attributes Quantity have been transferred to [Insert Name of Applicable Buyer] free and clear of any liens, taxes, claims, security interests or other encumbrances except for any right or interest by any Person claiming through [Insert Name of Applicable Buyer].

As an authorized agent of HQUS, I declare and attest that the above statements are true and correct.

______________________________                                                _________

[Insert Name and Title]                                                                           Date

[Insert Place of Execution of Attestation]

 

 

 

 

  

2

  

 

APPENDIX 11.7

NOTICE INFORMATION

 

 

	HQUS:	 	BED: 
	 	 	 	 	 
	Invoices:	 	Invoices:
	 	 	 	 	 
	 	
Attention:  Brigitte Benicy, 18th Floor

Phone:  514 289-6861

Email:  benicy.brigitte@hydro.qc.ca

Fax:  514 289-6867

	 	 	
Attention:  Accounts Payable

Email:  bedap@burlingtonelectric.com

Fax: (802) 865-7400

	 	 	 	 	 
	Credit:	 	Credit:
	 	 	 	 	 
	 	
Attention:  Credit Risk Advisor, 18th Floor

Phone:  514 289-6728

Email:  shooner.david@hydro.qc.ca

Fax:  514 289-6760

	 	 	
Attention:  Resource Planner

Email:  jgibbons@burlingtonelectric.com

Fax: (802) 865-7400

 

	Scheduling:	 	Scheduling:
	 	 	 	 	 
	 	Attention: ISNE Scheduler, 18th Floor 

Phone:  514 289-6795

Email:  hqscheduling@hydro.qc.ca

Fax:  514 289-6756

	 	 	
Attention:  Director of Resource Planning

Email:  knolan@burlingtonelectric.com

Fax: (802) 865-7400

 

	Other Notices:	 	Other Notices:
	 	 	 	 	 
	 	
H.Q. Energy Services (U.S.) Inc.

75, boul. René-Lévesque, Ouest

Montréal, Québec, H2Z 1A4

Attention:  Manager, Structured Transactions

Email:  racine.sylvie@hydro.qc.ca

Fax:  514 289-6723

	 	 	
Burlington Electric Department

585 Pine Street

Burlington, VT 05401

Attention:  General Manager

Email:  bgrimes@burlingtonelectric.com

Fax: (802) 865-7400

Customer Market Participant ID:  50085

	 	 	 	 	 
	 	      with a copy to	 	 	      with a copy to

 

	 	
H.Q. Energy Services (U.S.) Inc.

75, boul. René-Lévesque, Ouest

Montréal, Québec, H2Z 1A4

Attention: Vice-President, Regulatory Affairs

Email:  cellucci.sandro@hydro.qc.ca

Fax:  514 289-6217

	 	 	
Neil, Leddy & Sheahan

271 South Union Street

Burlington, VT  05401

Attention:  William F. Ellis, Esq.

Email:  wellis@mcneilvt.com

Fax:  (802) 863-1743

 

  

1

  

  

 

	CVPS:	 	GMP:
	 	 	 	 	 
	Invoices:	 	Invoices:
	 	 	 	 	 
	 	
Email only to:  powerbills@cvps.com

	 	 	

Finance Department

Attn:  Deb Anger

Phone: (802) 655-8458

anger@greenmountainpower.com

	 	 	 	 	 
	Credit:	 	Credit:
	 	 	 	 	 
	 	

Attn: Treasury

Phone: 802 747-5418

Facsimile: 802 747-2129

Email: margingroup@cvps.com

	 	 	

Vice President, Chief Financial Officer

Attn:  Dawn Bugbee

Phone: (802) 655-8768

Bugbee@greenmountainpower.com

 

	Scheduling:	 	Scheduling:
	 	 	 	 	 
	 	

Attn:  Power Supply

Phone: 802 747-5336

Email: pwrsale@cvps.com

	 	 	

Trading/Scheduling

Attn: Maria Fischer

Phone: (802) 655-8725

Gmp-trading@gmpvt.com

 

	Other Notices:	 	Other Notices:
	 	 	 	 	 
	 	

Central Vermont Public Service Corp.

77 Grove Street

Rutland, VT 05701

Attention:  Director, Power Supply & Strategic Analysis

Email:  pwrsale@cvps.com

Fax:  802 747-1902

Customer Market Participant ID:  50252

	 	 	

Mgr. Energy Resource Planning

Attn:  Douglas Smith

Green Mountain Power Corporation

163 Acorn Lane

Colchester, Vermont  05446

smith@greenmountainpower.com

(802) 655-8550 (fax)

(802) 655-8462 (voice)

ISO Customer ID # 50275

	 	 	 	 	 
	 	      with a copy to	 	 	      with a copy to

 

	 	

Central Vermont Public Service Corp.

77 Grove Street

Rutland, VT 05701

Attention:  Corporate Secretary

Email:  corpsecy@cvps.com

Fax:  802 770-3249

	 	 	

Vice President and General Counsel

Attn: Donald Rendall

Green Mountain Power Corporation

163 Acorn Lane

Colchester, Vermont 05446

802-655-8420 (voice)

rendall@greenmountainpower.com

  

  

2

  

 

	Stowe:	 	Other Notices:
	 	 	 	 	 
	Invoices:	 	 
	 	 	 	 	Town of Stowe Electric Department
	 	

Attention:  Lili Burgess

Email:  lili.burgess@yahoo.com

Phone:  802-253-7215

Fax:  802-253-4555

	 	 	

P.O. Box 190

Stowe, Vermont  05672

Attention:  Ellen Burt, General Manager

Email:  eburt@stoweaccess.com

Phone:  802-253-7215

Fax:  802-253-4555

ISO Customer ID:  50324-Town of Stowe Electric Department

	 	 	 	 	 
	 Credit:	 	              with a copy to
	 	 	 	 	 
	 	

Attention:  Pat Householder, Controller

Email:  phouseholder@stoweaccess.com

Phone:  802-253-7215

Fax:  802-253-4555

	 	 	

Stackpole & French Law Offices

P.O Box 819

Stowe, Vermont  05672

Attention:  Edward B. French, Jr., Esq.

Email:  efrench@stackpolefrench.com

Phone:  802-253-7339

Fax:  802-253-7330

 

	Scheduling:	 	 
	 	 	 	 	 
	 	

Attention:  Ellen Burt, General Manager

Email:  eburt@stoweaccess.com

Phone:  802-253-7215

Fax:  802-253-4555

	 	 	
 

 

	 	      with a copy to	 	 	      

 

	 	

Energy New England, LLC

100 Foxborough Blvd.

Suite 100

Foxborough, MA  02035

Attention:  Tim Hebert & Christina Beaudry

Email:  thebert@energynewengland.com / cbeaudry@energynewengland.com

Phone:  508-698-0000

Fax:  508-698-0222

	 	 	
 

 

  

3

  

 

	VEC:	 	Vermont Marble:
	 	 	 	 	 
	Invoices:	 	Invoices and Scheduling:
	 	 	 	 	 
	 	

Attention:  Chief Financial Office

email:  mbursell@vermontelectric.coop

(800) 832-2667 (phone)

(802) 635-7645 (fax)

	 	 	

Attention: Strategic Sourcing Manager -

 Energy and Engineering

Email:  todd.allard@omya.com

Phone: (513) 387-4344

Fax:  (513) 387-4311

	 	 	 	 	 
	Credit:	 	Credit:
	 	 	 	 	 
	 	

Attention:  Chief Financial Office

email:  mbursell@vermontelectric.coop

(800) 832-2667 (phone)

(802) 635-7645 (fax)

	 	 	

Attention:  Manager Financial Reporting and Consolidations

Phone: 513-387-4656

Fax: 513-387-4695

Email: thomas.mcclure@omya.com

 

	Scheduling:	 	Other Notices:
	 	 	 	 	 
	 	

Attention:  Senior Power Resources Planner

email:  ckieny@vermontelectric.coop

(800) 832-2667 (phone)

(802) 635-7645 (fax)

ISO Participant ID:  50326

	 	 	

Omya Inc.

9987 Carver Road, Suite 300

Cincinnati, OH 45242

Attention: Strategic Sourcing Manager - 

Energy and Engineering

Email:  todd.allard@omya.com

Phone: (513) 387-4344

Fax:  (513) 387-4311

Customer ID:  50288

 

	Other Notices:	 	                   with a copy to
	 	 	 	 	 
	 	

Vermont Electric Cooperative, Inc.

42 Wescom Road

Johnson, Vermont  05656

Attention:  Senior Power Resources Planner

email:  ckieny@vermontelectric.coop

(800) 832-2667 (phone)

(802) 635-7645 (fax)

ISO Participant ID:  50326

	 	 	

Edward V. Schwiebert, Esq.

Kenlan Schwiebert Facey & Goss, P.C.

P.O. Box 578

71 Allen Street

Rutland, VT  05702-0578

Email:  evs@kenlanlaw.com

Fax:  (802) 775-1581

	 	 	 	 	 
	 	  	 	 	      

 

  

4

  

 

  

 

	VPPSA:	 	 
	 	 	 	 	 
	Invoices:	 	 
	 	 	 	 	 
	 	

Attention:  Controller

Email:  controller@vppsa.com

Fax:  802-244-6889

Customer ID:  50289

	 	 	
 

	 	 	 	 	 
	Credit:	 	 
	 	 	 	 	 
	 	

Attention:  Director of Power Supply

Email:  directorpowersupply@vppsa.com

Fax:  802-244-6889

Customer ID:  50289

	 	 	
 

 

	Scheduling:	 	 
	 	 	 	 	 
	 	

Attention:  Director of Power Supply

Email:  directorpowersupply@vppsa.com

Fax:  802-244-6889

Customer ID:  50289

	 	 	
 

 

	Other Notices:	 	 
	 	 	 	 	 
	 	

Vermont Public Power Supply Authority

5195 Waterbury-Stowe Road

Waterbury Center, VT  05677

Attention:  General Manager

Email:  generalmanager@vppsa.com

Fax:  802-244-6889

Fax:  802-244-6889

Customer ID:  50289

	 	 	
 

	 	 	 	 	 
	 	      with a copy to	 	 	 

 

	 	

Primmer Piper Eggleston & Cramer PC

PO Box 159

421 Summer St.

St. Johnsbury, Vermont  05819

Attention: Elijah D. Emerson

Email:  eemerson@ppeclaw.com

Fax: 802-748-3976

	 	 	
 

 

5ex10_1.htm

Exhibit 10.1

 

 

 

 

NEULION, INC.

 

 

SUBSCRIPTION AGREEMENT

 

 

SALE OF ________________ CLASS 3 PREFERENCE SHARES

 

 

August 12, 2010

 

 

 

 

 

 

  

  

  

 

TERMS AND CONDITIONS OF SUBSCRIPTION

 

1.             Subscription.  The undersigned (the “Purchaser”) hereby tenders to NeuLion, Inc. (the “Corporation”) this subscription offer which, upon acceptance by the Corporation, will constitute an agreement (the “Subscription Agreement”) of the Purchaser with the Corporation to purchase from the Corporation and, on the part of the Corporation, to sell to the Purchaser, that number of the Corporation’s Class 3 Preference Shares (“Preferred Shares”) set out on the signature page below (the “Purchaser’s Shares”) at the price of Cdn $0.60 per Preferred Share and in the amount of the aggregate subscription price set forth on the signature page of this Subscription Agreement (the “Purchase Price”), all on the terms and subject to the conditions set forth in this Subscription Agreement (the “Offering”).

 

     The rights, terms and conditions of the Preferred Shares are set forth on Schedule C to this Subscription Agreement.

 

2.              (a)           Definitions.  In this Subscription Agreement, unless the context otherwise requires:

 

“Accredited Investor Questionnaire” means the accredited investor questionnaire, in the form of Schedule B attached hereto, required to be completed by the Purchaser as a resident of the United States.

 

“Accredited Investor Status Certificate” means the accredited investor status certificate, in the form of Schedule A attached hereto, required to be completed by the Purchaser.

 

“Articles” has the meaning ascribed to such term in Section 5(b)(v) hereof.

 

“Business Day” means a day which is not a Saturday, Sunday or statutory or civic holiday in Toronto, Ontario, Canada.

 

“Bylaws” has the meaning ascribed to such term in Section 6(i) hereof.

 

“Closing” means the completion of the issue and sale by the Corporation and the purchase by the Purchaser of the Preferred Shares pursuant to this Subscription Agreement.

 

“Closing Date” means September 29, 2010, or such other date as the Corporation and the Purchaser may agree, provided, however, that all requisite approvals of the shareholders of the Corporation and of the Stock Exchange have been obtained.

 

“Closing Time” means 10:00 a.m. (Toronto time) on the Closing Date or such other time as the Corporation and the Purchaser may agree.

 

“Common Shares” means common shares in the capital of the Corporation.

 

“Corporation” has the meaning ascribed to such term in Section 1 hereof.

 

“Domestication” has the meaning ascribed to such term in Section 8(e) hereof.

 

“Exchange Rate” means the Bank of Canada noon rate for the conversion of United States dollars to Canadian dollars on the day prior to the Closing Date.

 

“Personal Information” means any information about a Purchaser disclosed by the Purchaser in this Subscription Agreement.

 

“Preferred Shares” has the meaning ascribed to such term in Section 1 hereof.

 

“Private Placement Exemption” means an exemption from the prospectus and registration requirements under applicable Securities Laws.

 

“Purchase Price” has the meaning ascribed to such term in Section 1 hereof.

 

  

  

  

 

“Purchaser” has the meaning ascribed to such term in Section 1 hereof.

 

“Purchaser’s Shares” has the meaning ascribed to such term in Section 1 hereof.

 

“Securities Commission” means the Ontario Securities Commission.

 

“Securities Documents” has the meaning ascribed to such term in Section 6(j) hereof.

 

“Securities Laws” means the securities laws of Ontario and the United States and the regulations and rules made and forms prescribed thereunder together with all national and applicable multilateral instruments, blanket orders and  rulings of the Securities Commission and the United States Securities and Exchange Commission and together with all published policies, rules and regulations of the Stock Exchange.

 

“Stock Exchange” means the Toronto Stock Exchange.

 

“United States Securities Act” means the U.S. Securities Act of 1933, as amended.

 

(b)   Gender and Number.  Words importing the singular number only shall include the plural and vice versa, words importing the masculine gender shall include the feminine gender and words importing persons shall include firms and corporations and vice versa.

 

(c)   Currency.  Unless otherwise stated, all dollar amounts herein are expressed in United States dollars.

 

(d)   Headings.  The division of the Subscription Agreement into Sections and the use of headings are for convenience of reference only and shall not affect the interpretation of this Subscription Agreement.

 

(e)   Description of Schedules.  The following are the Schedules attached to and incorporated in this Subscription Agreement by reference and deemed to be a part hereof:

 

Schedule A                                Accredited Investor Status Certificate

Schedule B                                Accredited Investor Questionnaire (for U.S. Investors only)

Schedule C                                Rights, Terms and Conditions of Class 3 Preference Shares

3.             Delivery and Payment.  The Purchaser agrees that the following shall be delivered to the Corporation at the address and by the Closing Time, or such other time, date or place as the Corporation may advise:

 

	
  

	
(a)

	
a completed and duly signed copy of this Subscription Agreement;

 

	
  

	
(b)

	
a completed and duly signed copy of the Accredited Investor Status Certificate in the form annexed hereto as Schedule A, and, if applicable a completed and duly signed copy of the Accredited Investor Questionnaire (for U.S. Investors only) in the form attached hereto as Schedule B; and

 

	
  

	
(c)

	
a certified cheque or bank draft made payable on or before the Closing Date in same day immediately available US funds in Plainview, NY to the Corporation representing the aggregate Purchase Price payable by the Purchaser for the Purchaser’s Shares, or by bank-wire transfer of immediately available funds in accordance with the following:

 

  

2

  

 

	 	Bank:  	Capital One Bank
	 	ABA#:  	021407912
	 	Account Name:  	NeuLion, Inc.
	 	Account Number: 	3124-07095-8
	 	SWIFT Code:  	NFBKUS33
	 	Reference:   	JK&B Capital V Special Opportunity Fund, L.P.
	 	 	 
	 	 	 
	 	EACH PURCHASER MUST INSTRUCT ITS BANK TO MARK ALL WIRE TRANSFER CHARGES TO THE REMITTING BANK, SO THAT THE FULL AMOUNT OF EACH CONTRIBUTION IS RECEIVED BY THE CORPORATION PRIOR TO CLOSING.

 

, or such other method of payment of the same amount against delivery of the Purchaser’s Shares as the Corporation may accept.

 

The Purchaser consents to and hereby authorizes the filing of such certificates and other documents as may be required to be filed with the Stock Exchange or other securities regulatory authority in connection with the transactions contemplated hereby.

 

4.             Closing.  The Closing will be completed at the offices of Loeb & Loeb LLP, counsel to the Corporation, at the Closing Time.  Subject to satisfaction or waiver of the Closing conditions referred to herein, the Purchaser acknowledges that the Purchaser’s Shares will be available for delivery to it at the Closing against payment of the amount of the aggregate Purchase Price (in immediately available US funds) for the Purchaser’s Shares.

 

5.             Conditions of Closing.

 

(a)            The Purchaser’s obligation to purchase the Purchaser’s Shares at the Closing Time shall be conditional upon the fulfillment at or before the Closing Time of the following conditions:

 

	
  

	
(i)

	
the Purchaser shall have received evidence that all requisite approvals of the shareholders of the Corporation and conditional approval of the Stock Exchange (subject to the fulfillment of customary post-closing conditions) have been obtained by the Corporation in order to complete the Offering and the issuance of the Preferred Shares;

 

	
  

	
(ii)

	
the Corporation shall have received disinterested approval of its board of directors;

 

	
  

	
(iii)

	
this Subscription Agreement and the certificates representing the Preferred Shares shall have been executed and delivered by the parties thereto in form and substance satisfactory to the Purchaser, acting reasonably;

 

	
  

	
(iv)

	
the Purchaser shall have received a certificate, dated as of the Closing Date, signed by the Secretary of the Corporation, or such other officer of the Corporation as the Purchaser may agree, certifying for and on behalf of the Corporation, to the best of the knowledge, information and belief of the person so signing (without personal liability), that:

 

  

3

  

 

A.   the Corporation has complied with all the covenants and satisfied all the terms and conditions of this Subscription Agreement on its part to be complied with and satisfied at or prior to the Closing Time; and

 

B.    the representations and warranties of the Corporation contained herein are true and correct as at the Closing Time, with the same force and effect as if made on and as at the Closing Time after giving effect to the transactions contemplated hereby;

 

	
  

	
(v)

	
the Purchaser shall have received a customary opinion of counsel for the Corporation in a form mutually agreeable to the parties;

 

	
  

	
(vi)

	
the Corporation shall have waived all applicable anti-takeover measures under the Corporation’s charter documents and applicable law; and

 

	
  

	
(vii)

	
there shall have been no Material Adverse Effect.  Material Adverse Effect shall mean an event, change or occurrence that individually, or together with any other event, change or occurrence, has a material adverse impact on the Corporation’s financial position, business or results of operations; provided, however, that the term Material Adverse Effect shall not include the impact of (i) changes in laws of general applicability or interpretations thereof by courts or other governmental authorities, (ii) changes in generally accepted accounting principles, (iii) seasonal fluctuations in the Corporation’s performance due to general economic conditions that do not have a disproportionately adverse effect on the Corporation, (iv) the announcement of the transactions contemplated by this Term Sheet, (v) any action taken at Purchaser’s request, or (vi) a change in the market price of the Common Shares.

 

	
  

	
(b)

	
The Corporation’s obligation to issue the Purchaser’s Shares at the Closing Time shall be conditional upon the fulfillment at or before the Closing Time of the following conditions:

 

	
  

	
(i)

	
this Subscription Agreement and the certificates representing the Preferred Shares shall have been executed and delivered by the parties thereto in form and substance satisfactory to the Corporation, acting reasonably;

 

 

	
  

	
(ii)

	
the Corporation shall have received all requested approvals of the Shareholders of the Corporation and conditional approval of the Stock Exchange (subject to the fulfillment of customary post-closing conditions) have been obtained by the Corporation in order to complete the Offering and the issuance of the Preferred Shares;

 

	
  

	
(iii)

	
the Corporation shall receive the Purchase Price in immediately available funds;

 

	
  

	
(iv)

	
the holders of not more than 1% of the issued and outstanding Common Shares, in the aggregate, shall have exercised dissent rights in connection with the amendment to the Articles of Incorporation of the Corporation (the “Articles”) required to create the Preferred Shares.

 

  

4

  

 

6.             Representations, Warranties and Covenants of the Corporation.  The Corporation represents and warrants to the Purchaser as follows:

 

	
  

	
(a)

	
the Corporation and each of its Subsidiaries has been duly incorporated and is validly existing and in good standing under the laws of its jurisdiction of incorporation and the Corporation has, or will have as of the Closing Date, all requisite corporate power and capacity to enter into, and carry out its obligations under, this Subscription Agreement;

 

	
  

	
(b)

	
on or before the Closing Date, the Corporation will have taken all corporate steps necessary to approve the transactions contemplated hereby, including the execution and delivery of this Subscription Agreement and the certificates representing the Preferred Shares, each of which will constitute a legal and binding obligation of the Corporation enforceable in accordance with its terms;

 

	
  

	
(c)

	
the Corporation has complied with, or will comply with, all applicable corporate and Securities Laws and regulations in connection with the offer, sale and issuance of the Preferred Shares, including the filing of all required forms and reports under the Securities Laws within the time periods therein prescribed and payment of all required fees in connection therewith;

 

	
  

	
(d)

	
each of the creation, issuance and sale of the Preferred Shares by the Corporation does not and will not conflict with and does not and will not result in a breach of any of the terms, conditions or provisions of the Corporation’s constituent documents or any agreement or instrument to which the Corporation is a party;

 

	
  

	
(e)

	
at the Closing, every consent, approval, authorization or order that is required for the transactions herein contemplated to occur at the Closing will have been obtained and will be in effect;

 

	
  

	
(f)

	
the Corporation is a “reporting issuer” in each province of Canada (or its equivalent), within the meaning of such term under applicable Securities Laws (where such concept exists), and has been for the four (4) months preceding the Closing Date and is not included on the list of defaulting reporting issuers maintained by the Securities Commission;

 

	
  

	
(g)

	
no order ceasing or suspending trading in the securities of the Corporation nor prohibiting the sale of such securities or the Shares has been issued to the Corporation or its directors or officers and, to the knowledge of the Corporation’s Chief Executive Officer and Chief Financial Officer, no investigations or proceedings for such purposes are pending or threatened;

 

	
  

	
(h)

	
the Corporation has, or as of the Closing Date the Corporation will have, full corporate power and authority to undertake the Offering and, at the Closing Time, the Preferred Shares will be duly and validly created, authorized and issued and the Common Shares will have been duly allotted and reserved for issuance and, upon the conversion of the Preferred Shares, will be issued as fully paid and non-assessable Common Shares;

 

	
  

	
(i)

	
all of the issued and outstanding shares of the Corporation are validly issued, fully paid, and nonassessable.  Other than as set forth in the Company’s publicly available documents, there are no outstanding options, warrants, rights to subscribe to, or securities, rights or obligations convertible into or exchangeable or exercisable for, or giving any person any right to subscribe for or acquire, any capital shares of the Corporation or any options, warrants, rights or other instruments convertible into or exchangeable for, capital shares of the Corporation.  The Articles, as in effect on the date hereof, and the Corporation’s Bylaws (the “Bylaws”) as in effect on the date hereof, are available at www.sedar.com and www.sec.gov.  Other than as set forth in the Corporation’s publicly available documents, there are no stockholder agreements, voting agreements or other similar agreements with respect to the capital shares to which the Corporation is a party;

 

  

5

  

 

	
  

	
(j)

	
the Corporation has filed all reports (including all exhibits thereto) required to be filed by it under Securities Laws for the two years preceding the date hereof (the “Securities Documents”) on a timely basis or has received a valid extension of such time of filing and has filed any such Securities Document prior to the expiration of any such extension.  As of their respective dates, the Securities Documents complied in all material respects with the requirements of the Securities Laws, as the case may be, and the rules and regulations of the Securities Commission promulgated thereunder applicable to the Securities Documents, and none of the Securities Documents, at the time they were filed with the Securities Commission, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  There are no Securities Documents that are not available to the public.  As of their respective dates, the financial statements and the related notes complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Securities Commission with respect thereto.  The financial statements and the related notes have been prepared in accordance with accounting principles generally accepted in the U.S., consistently applied, during the periods involved (except (i) as may be otherwise indicated in the financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes, may be condensed or summary statements or may conform to the Securities Commission’s rules and instructions) and fairly present in all material respects the consolidated financial position of the Corporation as of the dates thereof and the consolidated results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).  No other written information provided by or on behalf of the Corporation to the Purchaser by the executive management of the Corporation which is not included in the Securities Documents, to the knowledge of the Corporation’s executive management, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading;

 

	
  

	
(k)

	
the Corporation and its Subsidiaries maintain a system of accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorization, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles as applied in the United States and to maintain accountability for assets, and (iii) access to assets is permitted only in accordance with management’s general or specific authorization;

 

	
  

	
(l)

	
no brokerage commissions, placement agent’s fees or similar payments are payable relating to this Subscription Agreement or the transactions contemplated hereby;

 

  

6

  

 

	
  

	
(m)

	
the Corporation has filed (or has obtained an extension of time within which to file) all necessary federal, provincial and foreign income and franchise tax returns and has paid all taxes shown as due on such tax returns, except where the failure to so file or the failure to so pay would not have a Material Adverse Effect.  The Corporation has complied in all material respects with all applicable legal requirements relating to the payment and withholding of taxes and, within the time and in the manner prescribed by law, has withheld from wages, fees and other payments and paid over to the proper governmental or regulatory authorities all amounts required;

 

	
  

	
(n)

	
the Corporation has not taken, nor will it take, directly or indirectly any action designed to stabilize or manipulate the price of the Common Shares or any security of the Corporation to facilitate the sale or resale of any of the Preferred Shares;

 

	
  

	
(o)

	
the books of account, minute books and other records of the Corporation are complete and correct in all material respects.  The minute books of the Corporation contain accurate and complete records of all meetings held of, and corporate action taken by, the shareholders, the Corporation’s Board of Directors and committees of the Corporation’s Board of Directors, and no meeting of any of such shareholders, the Corporation’s Board of Directors or such committees has been held for which minutes have not been prepared and are not contained in such minute books, except for the minutes of the May 2010 meeting of the Board of Directors and the Audit Committee, which will be prepared for review and approval at the next Board of Directors meeting;

 

	
  

	
(p)

	
the Corporation and its Subsidiaries are in compliance in all material respects with all currently applicable laws and regulations respecting employment, discrimination in employment, terms and conditions of employment, wages, hours and occupational safety and health and employment practices, and is not engaged in any unfair labor practice.  To the Corporation’s knowledge, no employees of the Corporation or the Subsidiaries are in violation of any term of any material employment contract, patent disclosure agreement, noncompetition agreement, or any restrictive covenant to a former employer relating to the right of any such employee to be employed by the Corporation or its Subsidiaries because of the nature of the business conducted or presently proposed to be conducted by the Corporation or to the use of trade secrets or proprietary information of others;

 

	
  

	
(q)

	
the Corporation and its Subsidiaries are not in violation of any applicable statute, law or regulation relating to the environment or occupational health and safety, violation of which would have a Material Adverse Effect.

 

7.            Purchaser’s Representations and Warranties.  The Purchaser represents and warrants to the Corporation that:

 

(a)  The Purchaser has all requisite authority to execute and deliver this Subscription Agreement and to observe and perform its covenants and obligations hereunder and, upon acceptance by the Corporation, this Subscription Agreement will constitute a legal, valid and binding agreement of the Purchaser enforceable against the Purchaser in accordance with its terms and will not result in a violation of or create a state of facts which, after notice, lapse of time or both, would constitute a default or breach of any agreement to which the Purchaser is a party or by which it is bound or any law applicable to the Purchaser or any judgment, law applicable to the Purchaser or any decree, order, statute, rule or regulation applicable to the Purchaser;

 

  

7

  

 

(b)    The Purchaser is a resident of the jurisdiction referred to under “Name and Address of Purchaser” set out on the signature page hereto and is not a resident of any other jurisdiction nor is it purchasing the Purchaser’s Shares for the account or benefit of a resident of any other jurisdiction;

 

(c)    The Purchaser has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Purchaser’s Shares and that he, she or it is able to bear the economic risk of such investment for an indefinite period of time.  The Purchaser is purchasing the Preferred Shares for the Purchaser’s own account, for investment purposes only and not with a view to any resale or distribution thereof and the Purchaser does not have any contracts, understandings, agreements or arrangements with any person or entity to sell, transfer or grant a participation interest with respect to any of the Preferred Shares;

 

(d)    The Purchaser is an “accredited investor” as such term is defined in National Instrument 45-106–Prospectus and Registration Exemptions and specifically represents and warrants that one or more of the categories set forth in the Accredited Investor Status Certificate correctly, and in all respects, describes the Purchaser, and will describe the Purchaser as at Closing, and the Purchaser has so indicated by marking the box next to the category which so describes it and executing and delivering a copy of the Accredited Investor Status Certificate;

 

(e)    The Purchaser, if a United States resident, is an “accredited investor” within the meaning of Regulation D under the United States Securities Act, and specifically represents and warrants that one or more of the categories set forth in the Accredited Investor Questionnaire attached hereto as Schedule B correctly, and in all respects, describes the Purchaser, and will describe the Purchaser as at Closing, and the Purchaser has so indicated by marking the box next to the category which so describes it and executing and delivering a copy of the Accredited Investor Questionnaire;

 

(f)    The Purchaser will execute and deliver within the applicable time periods all documentation as may be required by applicable Securities Laws to permit the purchase of the Preferred Shares on the terms herein set forth;

 

(g)   If required by applicable securities legislation, policy or order of a securities regulatory authority, stock exchange or other regulatory authority, the Purchaser will execute, deliver, file and otherwise assist the Corporation in filing such reports, undertakings and other documents with respect to the issuance of the Preferred Shares as may be required;

 

(h)   The Purchaser acknowledges that the investment in the securities of the Corporation may have tax consequences to the Purchaser under applicable law, which the Purchaser is solely responsible for determining.  The Purchaser acknowledges and agrees that the Purchaser is responsible for obtaining its own legal and tax advice;

 

(i)    None of the funds being used to purchase the Purchaser’s Shares are to the Purchaser’s knowledge proceeds obtained or derived directly or indirectly as a result of illegal activities.  The funds being used to purchase the Purchaser’s Shares which will be advanced by the Purchaser to the Corporation hereunder will not represent proceeds of crime for the purposes of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) (the “PCMLTFA”) and the Purchaser acknowledges that the Corporation may in the future be required by law to disclose the Purchaser’s name and other information relating to this Subscription Agreement and the Purchaser’s subscription hereunder, on a confidential basis, pursuant to the PCMLTFA.  To the best of its knowledge, none of the funds to be provided by the Purchaser or the beneficial purchaser are being tendered on behalf of a person or entity who has not been identified to the Purchaser.  The Purchaser covenants to promptly notify the Corporation if the Purchaser discovers that any of such representations ceases to be true, and to provide the Corporation with appropriate information in connection therewith;

 

  

8

  

(j)    The Purchaser does not have knowledge of a material fact or material change with respect to the Corporation that has not been generally disclosed; and

 

(k)    No person has made any written or oral representation to the Purchaser:

 

	
  

	
(i)

	
that any person will resell or repurchase the Preferred Shares;

 

	
  

	
(ii)

	
that any person will refund the purchase price of the Preferred Shares other than as provided in this Subscription Agreement; or

 

	
  

	
(iii)

	
relating to the future price or value of the Preferred Shares.

 

8.             Purchaser’s Acknowledgements.

 

(a)    Private Placement Exemptions.  The Purchaser hereby acknowledges and agrees that the Offering is being made pursuant to a Private Placement Exemption.  As a result of the Corporation’s reliance on the Private Placement Exemption, the Preferred Shares will be subject to restrictions on resale and transferability contained in applicable securities legislation, as well as any restrictions on resale and transferability imposed by the Stock Exchange.  The Preferred Shares may not be sold or otherwise transferred unless the sale or transfer is made in accordance with the provisions of all applicable Securities Laws and Stock Exchange requirements.

 

(b)    United States Securities Act of 1933.  The Purchaser acknowledges and agrees that the securities underlying the Preferred Shares subscribed for have not been and will not be registered under the United States Securities Act, or any applicable state securities laws; accordingly, the securities underlying the Preferred Shares will be “restricted securities” within the meaning of Rule 144(a)(3) of the Act and may not be offered and sold, directly or indirectly, in the United States or by or to U.S. Persons (as defined in Regulation S promulgated under the United States Securities Act) without registration under the United States Securities Act and any applicable state securities laws, unless an exemption from registration is available.

 

(c)    Reliance.  The Corporation will rely on the acknowledgments, representations and warranties made herein or otherwise provided by the Purchaser to the Corporation in completing the sale and issue of the Preferred Shares to the Purchaser.

 

(d)    Consent to Collection and Use of Personal Information.  The Purchaser hereby acknowledges, agrees and consents to:

 

	
  

	
(i)

	
the disclosure of Personal Information to each of the Corporation and the Stock Exchange;

 

	
  

	
(ii)

	
the collection, use and disclosure of Personal Information by the Stock Exchange for the purposes identified by the Stock Exchange, from time to time; and

 

	
  

	
(iii)

	
the collection, use and disclosure of Personal Information by the Corporation for corporate finance and shareholder communication purposes or such other purposes as are necessary to the Corporation’s or its subsidiaries’ business.

 

  

9

  

 

If the Purchaser is resident in or otherwise subject to the securities laws of the Province of Ontario, the Purchaser acknowledges and agrees that the Purchaser has been notified by the Corporation (i) of the delivery to the Securities Commission of Personal Information pertaining to the Purchaser, including, without limitation, the full name, residential address and telephone number of the Purchaser, the number and type of securities purchased and the aggregate Purchase Price paid in respect of the Purchaser’s Shares, (ii) that this information is being collected indirectly by the Securities Commission under the authority granted to it in securities legislation, (iii) that this information is being collected for the purposes of the administration and enforcement of the securities legislation of Ontario, (iv) that the title, business address and business telephone number of the public official in Ontario who can answer questions about the Securities Commission’s indirect collection of the information is the Administrative Assistant to the Director of Corporate Finance, the Ontario Securities Commission, Suite 1903, Box 5520 Queen Street West, Toronto, Ontario M5H 358, Telephone: (416) 593-8086, Facsimile: (416) 593-8252, and (v) has authorized the indirect collection of such information by the Securities Commission.

 

(e)  Domestication.  The Purchaser acknowledges that he, she or it is fully aware that (i) at the Annual and Special Meeting of the shareholders of the Corporation held on May 13, 2009: (x) the shareholders authorized the Corporation to apply, at any time from the date of such meeting until May 13, 2011, to the Director under the Canadian Business Corporations Act for a letter of satisfaction for the continuance of the Corporation out of the laws of Canada and, upon receipt of the letter of satisfaction, to file a certificate of domestication and certificate of incorporation with the Secretary of State of the State of Delaware (the “Domestication”); and (y) the shareholders adopted forms of the Certificate of Incorporation and the Bylaws that were intended to reflect Delaware law; and (ii) if the Corporation goes forward with the approved Domestication, the rights of the shareholders of the Corporation, including the Purchaser upon the consummation of the transactions contemplated by this Subscription Agreement, will be governed by the General Corporation Law of the State of Delaware.  The Purchaser further acknowledges that he, she or it has consulted his, her or its own professional advisors regarding all of the implications of the transactions contemplated by Domestication on such Purchaser’s rights as a shareholder of the Corporation and that the Corporation has not provided any legal advice relating to the effect of the Domestication on Purchaser’s rights as a shareholder therein.

 

(f)    Advisors.  The Purchaser acknowledges that he, she or it has been advised to consult with the Purchaser’s own attorney regarding legal matters concerning the Offering, to consult with the Purchaser’s tax advisor regarding the tax consequences of participating in the Offering and any other advisor with which the Purchaser regularly consults regarding investments of this type and nature.

 

9.             Purchaser’s Expenses.  At the Closing or promptly thereafter, the Corporation shall reimburse Purchaser for all reasonable fees and expenses associated with the negotiation and consummation of the Offering, including legal expenses, accounting expenses and out-of-pocket due diligence expenses.

 

10.           Resale Restrictions.  The Purchaser understands and acknowledges that the Purchaser’s Shares and any Common Shares issuable upon conversion of the Preferred Shares within four months and one day of the Closing Date will be subject to certain resale restrictions under applicable Securities Laws and the Purchaser agrees to comply with such restrictions.  The Purchaser also acknowledges that it has been advised to consult its own legal advisors with respect to applicable resale restrictions and that it is responsible for complying with such restrictions.

 

For purposes of complying with the Securities Laws and Multilateral Instrument 45-102–Resale of Securities, the Purchaser understands and acknowledges that upon the issuance of Preferred Shares, all the certificates representing the Preferred Shares, as well as all certificates issued in exchange for or in substitution of the foregoing securities, shall bear the following legend:

 

  

10

  

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE STATE OR FOREIGN SECURITIES LAWS, AND MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR THE AVAILABILITY OF AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [INSERT DATE THAT IS 4 MONTHS AND ONE DAY FROM CLOSING DATE].”

 

11.           Modification.  Subject to the terms hereof, neither this Subscription Agreement nor any provision hereof shall be modified, changed, discharged or terminated except by an instrument in writing signed by the party against whom any waiver, change, discharge or termination is sought.

 

12.           Assignment.  The terms and provisions of this Subscription Agreement shall be binding upon and inure to the benefit of the Purchaser and the Corporation and their respective successors and assigns; provided that this Subscription Agreement shall not be assignable by any party without the prior written consent of the other party.

 

13.           Counterparts.  This Subscription Agreement may be executed in any number of counterparts, each of which when delivered, either in original or facsimile form, shall be deemed to be an original and all of which together shall constitute one and the same document.

 

14.           Facsimile Subscriptions.  The Corporation shall be entitled to rely on delivery by facsimile machine of an executed copy of this Subscription Agreement, including the completed Schedules hereto, and acceptance by the Corporation of such facsimile copy shall be legally effective to create a valid and binding agreement between the Purchaser and the Corporation in accordance with the terms hereof.

 

15.           Entire Agreement.  This Subscription Agreement (including the Schedules hereto) contains the entire agreement of the parties hereto relating to the subject matter hereof and there are no representations, covenants or other agreements relating to the subject matter hereof.  This Subscription Agreement may be amended or modified in any respect by written instrument only.

 

16.           Governing Law.  This Subscription Agreement shall be governed by and construed in accordance with the laws of the State of New York and the federal laws of Canada applicable therein.  The Purchaser on its own behalf and, if applicable, on behalf of others for whom it is contracting hereunder, hereby irrevocably consents to the jurisdiction of the courts of the State of New York with respect to any matters arising out of this Subscription Agreement.

 

17.           Survival.  The Purchaser hereby agrees that this subscription, once accepted by the Corporation, is irrevocable and that the Subscription Agreement, including without limitation the representations, warranties and covenants of the Purchaser, shall survive the Closing, notwithstanding the completion of the purchase of the Purchaser’s Shares by the Purchaser pursuant hereto, the completion of the Offering and any subsequent disposition in accordance with the applicable Securities Law by the Purchaser of the Purchaser’s Shares.

 

  

11

  

 

18.           Time of Essence.  Time shall be of the essence with respect to all provisions of this Subscription Agreement.

 

19.           Effective Date.  This Subscription Agreement is intended to and shall take effect on the Closing Date, notwithstanding its actual date of execution or delivery by any of the parties.

 

[The remainder of this page has deliberately been left blank]

 

 

 

 

 

  

12

  

SIGNATURE PAGE

 

 

IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement and applicable Accredited Investor Questionnaire as of the 12 day of August, 2010.

 

 

Security: Class 3 Preference Shares

Price Per Share:  Cdn$0.60

Exchange Rate: the noon rate on the last Business Day prior to the Closing Date.

Number of Units Purchased:  ____________

Total Subscription Price:  US$4,274,200

Name and Address of Purchaser:

 

	INDIVIDUAL INVESTOR(S):*	 	PARTNERSHIP, CORPORATION, LIMITED 
	 	 	LIABILITY CORPORATION, TRUST, 
	 	 	CUSTODIAL ACCOUNT, OTHER INVESTOR:
	(Print Name)	 	 
	 	 	JK&B Capital V Special Opportunity Fund, L.P.
	 	 	By:	JK&B Management V, L.P., its General Partner
	(Signature)	 	By:  	JK&B Capital V, L.L.C., its General Partner
	 	 	 	 
	 	 	By: 	/s/ Marc Sokol	 
	
(Secondary Signature for Joint Accounts)

	 	 	Marc Sokol, its Managing Director
	 	 	 
	 	 	 
	Address: 	 	 	Address:	180 N. Stetson Pl.	 
	 	(Street Address)	 	 	(Street Address)	 
	 	 	 	 	 
	 	 	 	 	Chicago IL, 60601 USA	 
	 	(City, State/Province and Country)	 	 	(City, State/Province and Country)	 
	 	 	 	 	 
	 	 	 	 	 	 
	 	(Postal code)	 	 	 (Postal code)	 

*If Purchasers are jointly subscribing for Preferred Shares, each Purchaser must print and sign his, her or its name.

 

The Corporation hereby accepts the Purchaser’s subscription for the Preferred Shares set out above.

 

	NEULION, INC.
	 
	By: 	/s/ Roy E Reichbach	 
	 	(Signature)	 
	 	 	 
	 	Roy E Reichbach, Secretary	 
	 	
(Print Name and Title)

	 

 

  

  

  

 

SCHEDULE A

 

ACCREDITED INVESTOR STATUS CERTIFICATE

 

FOR ALL INVESTORS

 

NOTE: THE PURCHASER MUST INITIAL OR OTHERWISE MARK BESIDE THE APPLICABLE PORTION OF THE DEFINITION BELOW.

 

Accredited Investor - (defined in National Instrument 45 106) means:

 

	  	 	
(a)    a Canadian financial institution, or an authorized foreign bank named in Schedule III of the Bank Act (Canada); or

	 	 	 
	  	 	
(b)    the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada); or

	 	 	 
	  	 	
(c)    a subsidiary of any person referred to in paragraphs (a) or (b), if the person owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary; or

	 	 	 
	  	 	
(d)    a person registered under the securities legislation of a jurisdiction of Canada, as an adviser or dealer, other than a person registered solely as a limited market dealer under one or both of the Units (Ontario) or the Units (Newfoundland and Labrador); or

	 	 	 
	  	 	
(e)    an individual registered or formerly registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (d); or

	 	 	 
	  	 	
(f)     the Government of Canada or a jurisdiction of Canada, or any crown corporation, agency or wholly-owned entity of the Government of Canada or a jurisdiction of Canada; or

	 	 	 
	  	 	
(g)    a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l’île de Montréal or an intermunicipal management board in Québec; or

	 	 	 
	  	 	
(h)    any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government; or

	 	 	 
	  	 	
(i)     a pension fund that is regulated by the Office of the Superintendent of Financial Institutions (Canada), a pension commission or similar regulatory authority of a jurisdiction of Canada; or

	 	 	 
	  	 	
(j)     an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds $1,000,000; or

 

  

  

  

 

	  	 	
(k)    an individual whose net income before taxes exceeded $200,000 in each of the two most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the two most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year; or

	 	 	 
	  	 	
(l)     an individual who, either alone or with a spouse, has net assets of at least $5,000,000; or

	 	 	 
	  	 	
(Note: if individual accredited investors wish to purchase through wholly-owned holding companies or similar entities, such purchasing entities must qualify under paragraph (t) below, which must be initialed.)

	 	 	 
	  	 	
(m)   a person, other than an individual or investment fund, that has net assets of at least $5,000,000 as shown on its most recently prepared financial statements; or

	 	 	 
	 	 	
(n)    an investment fund that distributes or has distributed its securities only to:

	  	 	
 

(i)

 

(ii)  

 

(iii)  

	

 

a person that is or was an accredited investor at the time of the distribution, or

 

a person that acquires or acquired securities in the circumstances referred to in sections 2.10 or 2.19 of National Instrument 45-106, or

 

a person described in paragraph (i) or (ii) that acquires or acquired securities under section 2.18 of National Instrument 45-106; or

	 	 	 
	  	 	
(o)    an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Quebéc, the securities regulatory authority, has issued a receipt; or

	 	 	 
	  	 	
(p)    a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation, as the case may be; or

	 	 	 
	 	 	
(q)  a person acting on behalf of a fully managed account managed by that person, if that person

	  	 	
 

(i)

 

(ii)  

	

 

is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction, and

 

in Ontario, is purchasing a security that is not a security of an investment fund; or

	 	 	 
	  	 	
(r)     a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded; or

 

  

  

  

 

	  	 	
(s)    an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) to (d) or paragraph (i) in form and function; or

	 	 	 
	  	 	
(t)     a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors (as defined in National Instrument 45-106); or

	 	 	 
	  	 	
(Note: if you are purchasing as an individual accredited investors paragraph (k) above must be initialed rather than paragraph (t).)

	 	 	 
	X	 	
(u)    an investment fund that is advised by a person registered as an adviser or a person that is exempt from registration as an adviser; or

	 	 	 
	  	 	
(v)    a person that is recognized or designated by the securities regulatory authority or, except in Ontario and Quebéc, the regulator an accredited investor.

 

 

For the purposes hereof:

 

	
(a)

	
“Canadian financial institution” means

 

	
  

	
(i)

	
an association governed by the Cooperative Credit Associations Act (Canada) or a central cooperative credit society for which an order has been made under section 473(1) of that Act, or

 

	
  

	
(ii)

	
a bank, loan corporation, trust company, trust corporation, insurance company, treasury branch, credit union, caisse populaire, financial services cooperative, or league that, in each case, is authorized by an enactment of Canada or a jurisdiction of Canada to carry on business in Canada or a jurisdiction of Canada;

 

	
(b)

	
“control person” has the same meaning as in securities legislation;

 

	
(c)

	
“director” means:

 

	
  

	
(i)

	
a member of the board of directors of a company or an individual who performs similar functions for a company, and

 

	
  

	
(ii)

	
with respect to a person that is not a company, an individual who performs functions similar to those of a director of a company;

 

	
(d)

	
“eligibility adviser” means:

 

	
  

	
(i)

	
a person that is registered as an investment dealer and authorized to give advice with respect to the type of security being distributed, and

 

	
  

	
(ii)

	
in Saskatchewan or Manitoba, also means a lawyer who is a practicing member in good standing with a law society of a jurisdiction of Canada or a public accountant who is a member in good standing of an institute or association of chartered accountants, certified general accountants or certified management accountants in a jurisdiction of Canada provided that the lawyer or public accountant must not

 

  

  

  

 

	
  

	
(A)

	
have a professional, business or personal relationship with the issuer, or any of its directors, executive officers, founders, or control persons, and

 

	
  

	
(B)

	
have acted for or been retained personally or otherwise as an employee, executive officer, director, associate or partner of a person that has acted for or been retained by the issuer or any of its directors, executive officers, founders or control persons within the previous 12 months;

 

	
(e)

	
“executive officer” means, for an issuer, an individual who is

 

	
  

	
(i)

	
a chair, vice-chair or president,

 

	
  

	
(ii)

	
a vice-president in charge of a principal business unit, division or function including sales, finance or production, or

 

	
  

	
(iii)

	
performing a policy-making function in respect of the issuer;

 

	
(f)

	
“financial assets” means

 

	
  

	
(i)

	
cash,

 

	
  

	
(ii)

	
securities, or

 

	
  

	
(iii)

	
a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation;

 

	
(g)

	
“foreign jurisdiction” means a country other than Canada or a political subdivision of a country other than Canada;

 

	
(h)

	
“founder” means, in respect of an issuer, a person who,

 

	
  

	
(i)

	
acting alone, in conjunction, or in concert with one or more persons, directly or indirectly, takes the initiative in founding, organizing or substantially reorganizing the business of the issuer, and

 

	
  

	
(ii)

	
at the time of the distribution or trade is actively involved in the business of the issuer;

 

	
(i)

	
“fully managed account” means an account of a client for which a person makes the investment decisions if that person has full discretion to trade in securities for the account without requiring the client's express consent to a transaction;

 

	
(j)

	
“investment fund” has the same meaning as in National Instrument 81-106 Investment Fund Continuous Disclosure;

 

	
(k)

	
“jurisdiction” means a province or territory of Canada except when used in the term foreign jurisdiction;

 

	
(l)

	
“local jurisdiction” means the jurisdiction in which the Canadian securities regulatory authority is situate;

 

	
(m)

	
“non-redeemable investment fund” means an issuer,

 

  

  

  

 

	
  

	
(i)

	
whose primary purpose is to invest money provided by its security holders,

 

	
  

	
(ii)

	
that does not invest;

 

	
  

	
(A)

	
for the purpose of exercising or seeking to exercise control of an issuer, other than an issuer that is a mutual fund or a non-redeemable investment fund; or

 

	
  

	
(B)

	
for the purpose of being actively involved in the management of any issuer in which it invests, other than an issuer that is a mutual fund or a non-redeemable investment fund; and

 

	
  

	
(iii)

	
that is not a mutual fund;

 

	
(n)

	
“person” includes

 

	
  

	
(i)

	
an individual,

 

	
  

	
(ii)

	
a corporation,

 

	
  

	
(iii)

	
a partnership, trust, fund and an association, syndicate, organization or other organized group of persons, whether incorporated or not, and

 

	
  

	
(iv)

	
an individual or other person in that person's capacity as a trustee, executor, administrator or personal or other legal representative;

 

	
(o)

	
“regulator” means, for the local jurisdiction, the Executive Director as defined under securities legislation of the local jurisdiction;

 

	
(p)

	
“related liabilities” means

 

	
  

	
(i)

	
liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or

 

	
  

	
(ii)

	
liabilities that are secured by financial assets.

 

	
(q)

	
“Schedule III bank” means an authorized foreign bank named in Schedule III of the Bank Act (Canada);

 

	
(r)

	
“spouse” means, an individual who,

 

	
  

	
(i)

	
is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual,

 

	
  

	
(ii)

	
is living with another individual in a marriage-like relationship, including a marriage-like relationship between individuals of the same gender, or

 

	
  

	
(iii)

	
in Alberta, is an individual referred to in paragraph (i) or (ii) above, or is an adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta); and

 

  

  

  

 

	
(s)

	
“subsidiary” means an issuer that is controlled directly or indirectly by another issuer and includes a subsidiary of that subsidiary.

 

Affiliated Entities, Control and Subsidiaries

 

	
1.

	
A person or company is considered to be an affiliated entity of another person or company if one is a subsidiary entity of the other, or if both are subsidiary entities of the same person or company, or if each of them is controlled by the same person or company.

 

	
2.

	
A person or company is considered to be controlled by a person or company if

 

	
  

	
(a)

	
in the case of a person or company,

 

	
  

	
(i)

	
voting securities of the first mentioned person or company carrying more than 50% of the votes for the election of directors are held, otherwise than by way of security only, by or for the benefit of, the other person or company, and

 

	
  

	
(ii)

	
the votes carried by the securities are entitled, if exercise, to elect a majority of the directors of the first mentioned person or company.

 

	
  

	
(b)

	
in the case of a partnership that does not have directors, other than a limited partnership, the second mentioned person or company holds more than 50% of the interests in the partnership; or

 

	
  

	
(c)

	
in the case of a limited partnership, the general partner is the second mentioned person or company.

 

	
3.

	
A person or company is considered to be a subsidiary entity of another person or company if

 

	
  

	
(a)

	
it is controlled by,

 

	
  

	
(iii)

	
that other person or company; or

 

	
  

	
(iv)

	
that other and one or more persons or companies, each of which is controlled by that other; or

 

	
  

	
(v)

	
two or more persons or companies, each of which is controlled by that other; or

 

	
  

	
(vi)

	
it is a subsidiary entity of a person or company that is the other’s subsidiary entity.

 

	
  

	
All monetary references are in Canadian Dollars

 

  

  

  

 

SCHEDULE B

ACCREDITED INVESTOR QUESTIONNAIRE

(FOR U.S. INVESTORS ONLY)

 

1.           Applicable to Individuals ONLY.  Please answer the following questions concerning your financial condition as an “accredited investor” (within the meaning of Rule 501 of Regulation D of the Act.  If the Purchaser is more than one individual, each individual must initial an answer where the question indicates a “yes” or “no” response and must answer any other question fully, indicating to which individual such answer applies.  If the purchaser is purchasing jointly with his or her spouse, one answer may be indicated for the couple as a whole:

 

	
  

	
(a)

	
Does your net worth* (or joint net worth with your spouse) exceed $1,000,000?

 

_______                                  _______

Yes                                           No

 

	
  

	
(b)

	
Did you have an individual income** in excess of $200,000 or joint income together with your spouse in excess of $300,000 in each of the two most recent years (2008 and 2009) and do you reasonably expect to reach the same income level in the current year (2010)?

 

_______                                  _______

Yes                                           No

 

	
  

	
(c)

	
Are you an executive officer of NeuLion, Inc.?

 

_______                                 _______

Yes                                           No

* For purposes hereof, net worth shall be deemed to include ALL of your assets, liquid or illiquid (including such items as home, furnishings, automobile and restricted securities) MINUS any liabilities (including such items as home mortgages and other debts and liabilities).

 

** For purposes hereof, the term “income” is not limited to “adjusted gross income” as that term is defined for federal income tax purposes, but rather includes certain items of income which are deducted in computing “adjusted gross income”.  For purchasers who are salaried employees, the gross salary of such purchaser, minus any significant expenses personally incurred by such investor in connection with earning the salary, plus any income from any other source including unearned income, is a fair measure of “income” for purposes hereof.  For purchasers who are self employed, “income” is generally construed to mean total revenues received during the calendar year minus significant expenses incurred in connection with earning such revenues.

 

	
2.

	
Applicable to Corporations, Partnerships, Limited Liability Companies and other Entities ONLY:

 

The Purchaser is an accredited investor because the Purchaser falls within at least one of the following categories (Check all appropriate lines):

 

 

	
  

	
___

	
a bank as defined in Section 3(a)(2) of the Act or a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity;

 

  

  

  

 

	
  

	
___

	
a broker-dealer registered pursuant to Section 15 of the United States Securities Exchange Act of 1934, as amended;

 

	
  

	
___

	
an insurance Partnership as defined in Section 2(13) of the Act;

 

	
  

	
___

	
an investment Partnership registered under the Investment Partnership Act of 1940, as amended (the “Investment Act”) or a business development Partnership as defined in Section 2(a)(48) of the Investment Act;

 

	
  

	
___

	
a Small Business Investment Partnership licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958, as amended;

 

	
  

	
___

	
a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, where such plan has total assets in excess of $5,000,000;

 

	
  

	
___

	
an employee benefit plan within the meaning of Title 1 of the Employee Retirement Income Security Act of 1974, as amended (the “Employee Act”), where the investment decision is made by a plan fiduciary, as defined in Section 3(21) of the Employee Act, which is either a bank, savings and loan association, insurance Partnership, or registered investment adviser, or an employee benefit plan that has total assets in excess of $5,000,000, or a self-directed plan the investment decisions of which are made solely by persons that are accredited investors;

 

	
  

	
___

	
a private business development Partnership, as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended;

 

	
  

	
__X_

	
an organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, a Massachusetts or similar business trust, or a partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;

 

	
  

	
___

	
a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a “sophisticated” person, as described in Rule 506(b)(2)(ii) promulgated under the Act, who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment;

 

	
  

	
___

	
an entity in which all of the equity investors are persons or entities described above (“accredited investors”).

 

  

  

  

 

	
Dated:

	 	
Signed:  

	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	  	 	  
	
Witness (If Purchaser is an Individual)

	
Print the name of Purchaser

	  	 
	 	 
	 	 	 	 
	
Print Name of Witness

	
If Purchaser is a Corporation,

print name and title of Authorized Signing Officer

 

 

 

 

  

  

  

 

SCHEDULE C

RIGHTS, TERMS AND CONDITIONS OF CLASS 3 PREFERENCE SHARES

 

 

 

 

 

  

  

  

 

1.           COMMON SHARE PROVISIONS

 

The Corporation is authorized to issue an unlimited number of Common Shares.  The rights, privileges, restrictions and conditions attaching to the Common Shares are as follows:

 

(a)      DIVIDENDS

 

Dividends:  The holders of the Common Shares will be entitled to receive dividends if, as and when declared by the board of directors out of the assets of the Corporation properly applicable to the payment of dividends in such amounts and payable in such manner as the board of directors may from time to time determine.  Subject to the rights of the holders of Class 1 Preference Shares, Class 2 Preference Shares, Class 3 Preference Shares and any other class of shares of the Corporation entitled to receive dividends in priority to or concurrently with the holders of the Common Shares, the board of directors may in its sole discretion declare dividends on the Common Shares to the exclusion of any other class of shares of the Corporation.

 

            LIQUIDATION

 

Liquidation:  In the event of the liquidation, dissolution or winding up of the Corporation or other distribution of assets of the Corporation among its shareholders for the purpose of winding up its affairs, the holders of the Common Shares will, subject to the rights of the holders of Class 1 Preference Shares, Class 2 Preference Shares, Class 3 Preference Shares and any other class of shares of the Corporation entitled to receive assets of the Corporation upon such a distribution in priority to or concurrently with the holders of the Common Shares, be entitled to participate in the distribution.  Such distribution will be made in equal amounts per share on all the Common Shares at the time outstanding without preference or distinction.

 

            VOTING

 

Voting:  The holders of the Common Shares will be entitled to receive notice of and to attend all annual and special meetings of the shareholders of the Corporation and to one vote in respect of each Common Share held at all such meetings.

 

	
2.

	
CLASS 1 PREFERENCE SHARE PROVISIONS

 

The Corporation is authorized to issue an unlimited number of Class 1 Preference Shares. The rights, privileges, restrictions and conditions attaching to the Class 1 Preference Shares are as follows:

 

	 	
(a)

	
The Class 1 Preference Shares may at any time or from time to time be approved for issuance and be issued by the board of directors in one or more series.  Prior to the issue of the shares of any such series, the board of directors shall, subject to the limitations set out below, fix the number of shares authorized in, and determine the designation, rights, privileges, restrictions and conditions attaching to the shares of, such series including, without limitation:

 

  

  

  

 

	
  

	
(a)

	
the rate, amount or method of calculation of dividends, if any, and whether the same are subject to adjustments;

 

	
  

	
(b)

	
whether such dividends are cumulative, partly cumulative or non-cumulative;

 

	
  

	
(c)

	
the dates, manner and currency of payments of dividends and the dates from which dividends accrue or become payable;

 

	
  

	
(d)

	
if redeemable, retractable or purchasable, the redemption, retraction, or purchase prices and the terms and conditions of redemption, retraction or purchase, with or without provision for sinking or similar funds;

 

	
  

	
(e)

	
any conversion, exchange or reclassification rights; and

 

	
  

	
(f)

	
any other rights, privileges, restrictions and conditions not inconsistent with these provisions;

 

the whole being subject to the receipt by the Director under the Canada Business Corporations Act of articles of amendment designating and fixing the number of Class 1 Preference Shares in such series and setting forth the rights, privileges, restrictions and conditions attaching to such series of Class 1 Preference Shares and the issue by the Director of a certificate of amendment with respect to the articles of amendment so filed.

 

	 	
(b)

	
The Class 1 Preference Shares of each series shall, with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding-up its affairs, rank and be entitled to a preference over the Common Shares and the shares of any other class ranking junior to the Class 1 Preference Shares.

 

	 	
(c)

	
The holders of Class 1 Preference Shares shall not, as such, have any pre-emptive right to subscribe for, purchase or receive any part of any issue of securities of the Corporation now or hereafter authorized.

 

	
3.

	
CLASS 2 PREFERENCE SHARE PROVISIONS

 

The Corporation is authorized to issue an unlimited number of Class 2 Preference Shares. The rights, privileges, restrictions and conditions attaching to the Class 2 Preference Shares are as follows:

 

	 	
(a)

	
The Class 2 Preference Shares may at any time or from time to time be approved for issuance and be issued by the board of directors in one or more series.  Prior to the issue of the shares of any such series, the board of directors shall, subject to the limitations set out below, fix the number of shares authorized in, and determine the designation, rights, privileges, restrictions and conditions attaching to the shares of, such series including, without limitation:

 

  

  

  

 

	
  

	
(a)

	
the rate, amount or method of calculation of dividends, if any, and whether the same are subject to adjustments;

 

	
  

	
(b)

	
whether such dividends are cumulative, partly cumulative or non cumulative;

 

	
  

	
(c)

	
the dates, manner and currency of payments of dividends and the dates from which dividends accrue or become payable;

 

	
  

	
(d)

	
if redeemable, retractable or purchasable, the redemption, retraction, or purchase prices and the terms and conditions of redemption, retraction or purchase, with or without provision for sinking or similar funds;

 

	
  

	
(e)

	
any conversion, exchange or reclassification rights; and

 

	
  

	
(f)

	
any other rights, privileges, restrictions and conditions not inconsistent with these provisions;

 

	
  

	 	the whole being subject to the receipt by the Director under the Canada Business Corporations Act of articles of amendment designating and fixing the number of Class 2 Preference Shares in such series and setting forth the rights, privileges, restrictions and conditions attaching to such series of Class 2 Preference Shares and the issue by the Director of a certificate of amendment with respect to the articles of amendment so filed.

 

	 	
(b)

	
The Class 2 Preference Shares of each series shall, with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding-up its affairs, rank and be entitled to a preference over the Common Shares, the Class 1 Preference Shares, and the shares of any other class ranking junior to the Class 2 Preference Shares.

 

	 	
(c)

	
The holders of Class 2 Preference Shares shall not, as such, have any pre-emptive right to subscribe for, purchase or receive any part of any issue of securities of the Corporation now or hereafter authorized.

 

	
4.

	
CLASS 3 PREFERENCE SHARE PROVISIONS

 

The Corporation is authorized to issue a maximum number of ● Class 3 Preference Shares.[The bullet will be replaced by the amount equal to: (the Bank of Canada noon exchange rate for the Canadian dollar against the U.S. dollar on the business day immediately preceding the closing date) x (USD$10,000,000) / (CDN$0.60)] The rights, privileges, restrictions and conditions attaching to the Class 3 Preference Shares are as follows:

 

	 	
(a)

	
DIVIDENDS

 

	
  

	
(a)

	
Cumulative Dividends:  The holders of the Class 3 Preference Shares, in priority to the holders of Common Shares, Class 1 Preference Shares, Class 2 Preference Shares and all other shares ranking junior to the Class 3 Preference Shares, will be entitled to receive and the Corporation will pay thereon, as and when declared by the board of directors out of the assets of the Corporation properly applicable to the payment of dividends, fixed preferential cumulative dividends at the rate of 8% per annum on the Redemption Amount (as hereinafter defined) per share for a period of five years from the date of issuance.  Dividends will be prorated for stub periods.

 

  

  

  

 

	
  

	
(b)

	
Dividends Preferential:  Except with the consent in writing of the holders of a majority of the Class 3 Preference Shares outstanding, no dividend will at any time be declared and paid on or set apart for payment on the Common Shares, Class 1 Preference Shares, Class 2 Preference Shares or on any other shares ranking junior to the Class 3 Preference Shares in any financial year unless and until the cumulative dividends stated in clause 4.A(i) on all the Class 3 Preference Shares outstanding have been declared and paid or set apart for payment.

 

	
  

	
(c)

	
Equivalent Dividends on Common Shares:  In addition to clause 4.A(i) holders of Class 3 Preference Shares will also be entitled to receive pari passu dividends paid to the holders of Common Shares if, as and when declared by the board of directors out of the assets of the Corporation properly applicable to the payment of dividends.  A holder of a Class 3 Preference Share shall be entitled to receive a dividend on such share equal to the product of the Common Share Equivalent multiplied by the per share dividend declared on each Common Share.  The term “Common Share Equivalent”, at any particular time, refers to that number of Common Share(s) which would be received by a holder of a Class 3 Preference Share upon a conversion at that time of such share(s) into Common Shares.

 

	 	
(b)

	
LIQUIDATION, ETC.

 

	
  

	
(a)

	
Participation upon Liquidation, Dissolution or Winding Up:  In the event of the liquidation, dissolution or winding up of the Corporation or other distribution of assets of the Corporation among its shareholders for the purpose of winding up its affairs (a “Liquidation Event”), the holders of the Class 3 Preference Shares will be entitled to receive from the assets of the Corporation a sum equivalent to the aggregate Redemption Amount (as hereinafter defined) of all Class 3 Preference Shares held by them respectively before any amount is paid or any assets of the Corporation are distributed to the holders of any Common Shares, Class 1 Preference Shares, Class 2 Preference Shares or shares of any other class ranking junior to the Class 3 Preference Shares.  After payment to the holders of the Class 3 Preference Shares of the amount so payable to them as above provided such holders shall not be entitled to any further distribution from the Corporation.

 

	 	
(c)

	
VOTING

 

	
  

	
(a)

	
The holders of the Class 3 Preference Shares will be entitled to receive notice of and to attend all annual and special meetings of the shareholders of the Corporation and to one vote in respect of each Common Share Equivalent (determined for each Class 3 Preference Share held by such holder) at all such meetings.

 

  

  

  

 

	
  

	
(b)

	
Except for matters where holders of the Class 3 Preference Shares are by law required or permitted herein to vote as a class, holders of Class 3 Preference Shares shall vote together with the holders of Common Shares as a single class.

 

	 	
(d)

	
RETRACTION

 

	
  

	
(a)

	
Majority Holder Redemption:  Holders of the majority of the Class 3 Preference Shares will be entitled to require the Corporation to redeem, subject to the requirements of the Canada Business Corporations Act as now enacted or as the same may from time to time be amended, re-enacted or replaced, at any time all, but not less than all of the Class 3 Preference Shares held by all holders by tendering to the Corporation at its registered office the share certificates representing the Class 3 Preference Shares together with a request in writing (a “Majority Redemption Request”) specifying (i) that the holders desire to have all, but not less than all of the Class 3 Preference Shares represented by such certificates redeemed by the Corporation, (ii) the business day (herein referred to as the “Redemption Date”) on which the holders desire to have the Corporation redeem such Class 3 Preference Shares, and (iii) written authorization from holders holding not less than 50.1% of the Class 3 Preference Shares then outstanding supporting the Majority Redemption Request or minutes from a duly convened meeting of the holders of the Class 3 Preference Shares at which a majority of such holders passed a resolution to support the Majority Redemption Request.  The Redemption Date will be not less than 30 days (or such shorter period to which the Corporation may consent) after the day on which the Majority Redemption Request is given to the Corporation.  Upon receipt of the share certificates representing all of the Class 3 Preference Shares being redeemed by a holder, the Corporation will on the Redemption Date redeem such Class 3 Preference Shares by paying to such holder the Redemption Amount (as hereinafter defined) for each such Class 3 Preference Share being redeemed.  Such payment will be made by cheque or, with the consent of a majority of the holders, by any other means of immediately available funds.

 

	
  

	
(b)

	
Constraints:  Notwithstanding the foregoing:  (a) a Majority Redemption Request may only be issued after [•] [ Insert date of fifth anniversary following the date the Class 3 Preference Shares are issued] (the “Fifth Anniversary”) and (b) any payments to be made pursuant to this clause 4D shall be subject to clause 4J.

 

	 	
(e)

	
REDEMPTION

 

	
  

	
(a)

	
Redemption by Corporation:  The Corporation may, upon giving notice as hereinafter provided, redeem, subject to the requirements of the Canada Business Corporations Act at any time the whole or from time to time (subject to subsection (v) and the conversion provisions set forth in Section F below) any part of the then outstanding Class 3 Preference Shares from any one or more of the holders thereof as the board of directors may in its sole discretion determine on payment of CAD$0.60 for each share to be redeemed, plus all accrued and unpaid dividends thereon, the whole constituting and being herein referred to as the “Redemption Amount”.

 

  

  

  

 

	
  

	
(b)

	
Idem:  In the case of redemption of Class 3 Preference Shares under the provisions of clause 4E(i) hereof, the Corporation will at least 21 days (or, if a majority of the holders of the Class 3 Preference Shares to be redeemed consent, such shorter period to which they may consent) before the date specified for redemption mail (or, with the consent of any particular holder, otherwise deliver) a notice in writing of the intention of the Corporation to redeem such Class 3 Preference Shares to each person who at the record date for the determination of shareholders entitled to receive notice is a holder of Class 3 Preference Shares to be redeemed.  Such notice will (subject to the consent of any particular holder referred to above) be mailed by letter, postage prepaid, addressed to each such holder at the holder’s address as it appears on the records of the Corporation or in the event of the address of any such holder not so appearing then to the last known address of such holder; provided, however, that accidental failure to give any such notice to one or more of such holders will not affect the validity of such redemption.  Such notice will set out the Redemption Amount and the date on which redemption is to take place and if part only of the shares held by the person to whom it is addressed is to be redeemed the number thereof so to be redeemed.  On or after the date so specified for redemption, the Corporation will pay or cause to be paid to or to the order of the holders of the Class 3 Preference Shares to be redeemed the Redemption Amount thereof on presentation and surrender at the registered office of the Corporation or any other place designated in such notice of the certificates representing the Class 3 Preference Shares called for redemption.  Such payment will be made by cheque or, with the consent of any particular holder, by any other means of immediately available funds.  If a part only of the shares represented by any certificate are redeemed a new certificate for the balance will be issued at the expense of the Corporation.  From and after the date specified for redemption in any such notice the holders of the Class 3 Preference Shares called for redemption will cease to be entitled to dividends and will not be entitled to exercise any of the rights of holders of Class 3 Preference Shares in respect thereof unless payment of the Redemption Amount is not made upon presentation of certificates in accordance with the foregoing provisions, in which case the rights of the holders of the said Class 3 Preference Shares will remain unaffected.  The Corporation will have the right at any time after the mailing (or delivery, as the case may be) of notice of its intention to redeem any Class 3 Preference Shares to deposit the Redemption Amount of the shares so called for redemption or of such of the said shares represented by certificates as have not at the date of such deposit been surrendered by the holders thereof in connection with such redemption to a special account in any chartered bank or in any trust company in Canada or in the United States, named in such notice, to be paid without interest to or to the order of the respective holders of such Class 3 Preference Shares called for redemption upon presentation and surrender to such bank or trust company of the certificates representing the same, and upon such deposit being made or upon the date specified for redemption in such notice, whichever is the later, the Class 3 Preference Shares in respect whereof such deposit has been made will be redeemed and the rights of the holders thereof after such deposit or such redemption date, as the case may be, will be limited to receiving without interest their proportionate part of the total Redemption Amount so deposited against presentation and surrender of the said certificates held by them respectively and any interest allowed on such deposit will belong to the Corporation.

 

	
  

	
(c)

	
Change of Control Redemption:  In the event of a Change of Control (as hereinafter defined), then subject to the conversion provisions set forth in Section F below, the Corporation shall forthwith redeem at any time the whole of the then outstanding Class 3 Preference Shares from the holders thereof on payment of the Redemption Amount in respect of each such share.

 

  

  

  

 

	
  

	
(d)

	
For the purposes of these Articles, a “Change of Control” means any one of:

 

	
  

	
(i)

	
the consummation of a merger, amalgamation, plan of arrangement or other transaction or series of related transactions resulting in the combination of the Corporation with or into another entity, where the shareholders of the Corporation immediately prior to any such transaction(s) directly or indirectly do not continue to hold more than a 50% voting interest in the continuing or surviving entity immediately following such transaction or series of related transactions and no shareholder who held less than a 50% voting interest in the Corporation before such event holds directly or indirectly more than a 50% voting interest in the continuing or surviving entity immediately following such event,

 

	
  

	
(ii)

	
a sale or transfer of all or substantially all of the Corporation’s assets (other than a sale or transfer to a wholly-owned subsidiary of the Corporation), or

 

	
  

	
(iii)

	
an exclusive license of all or substantially all of the Corporation’s intellectual property (other than a license to a wholly-owned subsidiary of the Corporation);

 

provided, in each case, that the transaction is entered into at arm’s length with all shareholders of the Corporation and provided, however, that a transaction will not constitute a Change of  Control if:

 

	
  

	
A.

	
its sole purpose is to change the jurisdiction of the Corporation’s incorporation; or

 

	
  

	
B.

	
it will create a holding company that will be owned in substantially the same proportions by the persons who held the Corporation’s securities immediately prior to such transaction;

 

	
  

	
C.

	
the principal purpose of the transaction is a bona fide equity financing transaction and no one Person will hold a majority of the Corporation’s shares after completion of the transaction; or

 

	
  

	
D.

	
a majority of the holders of the Class 3 Preference Shares and a majority of each other class of shares of the Corporation (determined separately on a class by class basis) determine that such event should not be treated as a Change of Control for the purposes of this provision.

 

	
  

	
(e)

	
Constraints:  Notwithstanding the foregoing:  (x) the Corporation may only give notice to redeem Class 3 Preference Shares in accordance with clause 4E(ii) after the Fifth Anniversary and (y) any payments to be made pursuant to this clause 4E shall be subject to clause 4J.

 

  

  

  

 

	 	
(f)

	
CONVERSION

 

	
  

	
(a)

	
Conversion Privilege:  Each issued Class 3 Preference Share may at any time (including after a notice of redemption is received but prior to the redemption date) be converted, at the option of the holder, into one Common Share (subject to variation in accordance with clause 4G(i), the “Conversion Ratio”).  The conversion privilege herein provided for may be exercised by notice in writing given to the Corporation accompanied by a certificate or certificates representing the Class 3 Preference Shares in respect of which the holder thereof desires to exercise such right of conversion and such notice will be signed by the holder of the Class 3 Preference Shares in respect of which such right is being exercised and will specify the number of Class 3 Preference Shares which the holder desires to have converted.  Upon receipt of such notice the Corporation will issue certificates representing fully paid Common Shares upon the basis above prescribed and in accordance with the provisions hereof to the holder of the Class 3 Preference Shares represented by the certificate or certificates accompanying such notice.  In the event of conversion, all accrued but unpaid dividends on the Class 3 Preference Shares shall be paid in cash or as otherwise permitted by applicable law and shall not increase the Common Shares issuable upon such conversion.

 

	
  

	
(b)

	
Idem:  All Common Shares resulting from any conversion of Class 3 Preference Shares into Common Shares pursuant to clause 4.F(i) hereof will be deemed to be fully paid and non-assessable.

 

	
  

	
(c)

	
Automatic Conversion:  In the event of a Liquidation Event all of the issued and outstanding Class 3 Preference Shares shall automatically be converted into Common Shares at the Conversion Ratio where it is determined by the Corporation that the holder of a Class 3 Preference Share would receive greater consideration (based on the cash and or fair market value of publicly traded securities to be received) from the Corporation if such holder held the Common Share Equivalent in lieu of such Class 3 Preference Shares.  The Corporation shall, where this clause is operative, take such steps as may be required or are desirable to effect the conversion of the issued and outstanding Class 3 Preference Shares into Common Shares.

 

	
  

	
(d)

	
Majority Conversion:  Holders of a majority of the Class 3 Preference Shares will be entitled to require the holders of all Class 3 Preference Shares to convert their shares into Common Shares (at the Conversion Ratio) on a specified conversion date, by giving notice (“Mandatory Conversion Notice”) to the Corporation.  Upon receipt of a Mandatory Conversion Notice the Corporation shall take such steps as may be required or are desirable (including filing articles of amendment) to convert the issued and outstanding Class 3 Preference Shares into Common Shares.  Any Mandatory Conversion Notice delivered to the Corporation shall be accompanied by written authorization from holders holding not less than 50.1% of the Class 3 Preference Shares then outstanding supporting the Mandatory Conversion Notice or minutes from a duly convened meeting of the holders of the Class 3 Preference Shares at which a majority of such holders passed a resolution to support the Mandatory Conversion Notice.

 

	 	
(g)

	
ANTIDILUTION

 

  

  

  

 

	
  

	
(a)

	
If the Common Shares are subdivided, consolidated or if a stock dividend is paid or if such Common Shares are otherwise varied pursuant to a share capital reorganization, an equivalent change, as the board of directors may in its sole discretion determine, will be made to the Conversion Ratio or otherwise to the Class 3 Preference Shares or if a stock dividend is paid or if such Common Shares are otherwise varied pursuant to a share capital reorganization.

 

	 	
(h)

	
SPECIAL PROTECTION

 

	
  

	
(a)

	
Protective Provisions:  Subject to applicable law, the approval of holders of 662⁄3% of the Class 3 Preference Shares (voting alone) shall be required to:

 

	
  

	
(i)

	
change the rights or terms of the Class 3 Preference Shares or increase the authorized number thereof; or

 

	
  

	
(ii)

	
authorize, create or issue any security either preferential to or on parity with the Class 3 Preference Shares, including any Class 1 or Class 2 Preference Shares.

 

	
  

	
(b)

	
Declaration of Dividends:  The consent of holders of a majority of the Class 3 Preference Shares shall be required to pay any dividend to or redeem any preference shares (other than the Class 3 Preference Shares) or Common Shares (other than the payment of dividends on the Class 3 Preference Shares as contemplated above and other than purchases of Common Shares from employees or other service providers upon termination of service).

 

	 	
(i)

	
PRE-EMPTIVE RIGHTS

 

	
  

	
(a)

	
Subject to applicable laws and the requirements of any stock exchange on which the Corporation’s securities may be listed and posted for trading, if any additional Common Shares are to be issued by the Corporation, the Corporation will first offer (the “Offer”) such Common Shares to each of the holders of the Class 3 Preference Shares (individually, an “Investor” and collectively, the “Investors”) by providing such Investor with notice, sent to the last address of the Investor shown on the books and records of the Corporation, of the Corporation’s intention to issue additional Common Shares and the number and class thereof to be so issued, the purchase price for each Common Share and the date of issuance (to the extent such facts are known by the Corporation).

 

	
  

	
(b)

	
Each Investor will have the right to purchase that proportion of the Common Shares so offered that is equal to the proportion of Class 3 Preference Shares owned beneficially or of record by the Investor to the aggregate issued Common Shares, Class 1 Preference Shares and Class 2 Preference Shares then outstanding at the date notice is given of such Offer.  Such right will be exercisable by the Investor by giving notice to the Corporation within five days of receipt of the notice from the Corporation.

 

	
  

	
(c)

	
In the event the Investor accepts the Offer, the Investor will take up and pay for all or any of the Common Shares to which the Investor is entitled on the closing of the transaction.

 

  

  

  

 

	
  

	
(d)

	
The rights of the Investors in this clause 4I will not apply to issuances of:

 

	
  

	
(i)

	
Common Shares issued or issuable:

 

	
  

	
A.

	
upon the conversion of Convertible Securities (as defined below);

 

	
  

	
B.

	
upon the exercise of options granted pursuant to any stock option plan or other equity incentive plan, in either case approved by the board of directors;

 

	
  

	
C.

	
in conjunction with arm’s length debt financing (including, without limitation, commercial credit arrangements or equipment financing), acquisitions, joint ventures or strategic investments of the Corporation and its subsidiaries;

 

	
  

	
D.

	
as a dividend or distribution on any class of securities of the Corporation; or

 

	
  

	
(ii)

	
any Common Shares or Convertible Securities issued pursuant to a bona fide arm’s length business acquisition by the Corporation, whether by merger, consolidation, purchase of assets, the sale or exchange of shares or otherwise.

 

	
  

	
(e)

	
For the purposes of this clause 4I, “Convertible Securities” means any evidences of indebtedness, shares or other securities convertible into or exchangeable for Common Shares.

 

	 	
(j)

	
TAXES

 

	
  

	
(a)

	
Withholding Tax:  Notwithstanding any other provision of these Articles, the Corporation shall be entitled to deduct and withhold (and/or recover) from any amounts payable to holders of shares of the Corporation the amount of all Taxes which the Corporation may be required or permitted to deduct and withhold in accordance with applicable law.  All such withheld amounts shall be timely remitted to the relevant governmental authority and all such remitted amounts shall be treated as having been paid to the relevant holder.  For purposes hereof “Tax” means any local, domestic or foreign tax of any kind or nature whatsoever, any levy, impost, duty or other charge of a similar nature, and includes any sales tax, value-added tax, goods and services tax, transfer tax or withholding tax (including any penalty, interest, or addition to tax).

 

	
  

	
(b)

	
Shareholder Certification:  Each holder of shares of the Corporation shall provide such tax representations, information, or other documentation to the Corporation which may reasonably be considered by the Corporation to be required or advantageous in the context of the payment of a dividend, a transaction deemed to be a dividend for tax purposes, the conversion of any shares or in the event of a Liquidation Event.

 

	
  

	
(c)

	
Preferred Share Tax:  Notwithstanding any other provision of these Articles:

 

  

  

  

 

	
  

	
a.

	
The amount of any dividend otherwise payable (“Dividend Entitlement”) on the Class 3 Preference Shares shall be reduced to ensure that the sum of the dividend paid on such shares together with any Part VI.1 Tax (as defined below) imposed on the Corporation in respect of the dividend does not exceed the Dividend Entitlement.

 

	
  

	
b.

	
The Corporation shall be entitled to reduce the amount otherwise payable (“Repurchase Entitlement”) to a holder of Class 3 Preference Shares on a redemption, retraction, or repurchase of such shares by the amount that ensures that the sum of the amount paid by the Corporation to the holder in such a transaction together with any Part VI.1 Tax (as defined below) imposed on the Corporation in respect of the redemption, retraction, or repurchase transaction does not exceed the Repurchase Entitlement.

 

	
  

	
c.

	
The term “Part VI.1 Tax” refers to the Part VI.1 tax imposed on the Corporation in respect of a dividend or a deemed dividend pursuant to the Income Tax Act (Canada) (“Tax Act”).  The applicable Part VI.1. tax shall be calculated by the Corporation, acting reasonably, and by: (I) applying the maximum “dividend allowance” (within the meaning of subsection 191.1(2) of the Tax Act) to which the Corporation is entitled; and (II) net of the maximum credit for such tax to which the Corporation is entitled pursuant to the mechanism in paragraph 110(1)(k) of the Tax Act.

 

	
  

	
d.

	
The maximum dividend allowance in paragraph C(I) shall be calculated on the basis that (I) the Corporation is not associated (within the meaning of the Tax Act) with any other corporation; and (II) no dividends or deemed dividends have been paid by the Corporation on any other class of shares of the Corporation.

 

	
  

	
e.

	
The Part VI.1 tax will be allocated, for purposes of this Section J(iii), to the holders of Class 3 Preference Shares pro rata for each fiscal year of the Corporation.  A holder's pro rata share is determined by dividing the total amount of dividends (including deemed dividends) the holder of Class 3 Preference Shares was entitled to receive in respect of those shares in the applicable fiscal year of the Corporation but for this Section J(iii), by the total amount of dividends (including deemed dividends) all holders of Class 3 Preference Shares were entitled to receive in respect of those shares in that fiscal year but for this Section J(iii).

 

	
  

	
f.

	
Notwithstanding any other provision of these share conditions, the amount by which any payment to a holder of Class 3 Preference Shares is reduced pursuant to this Section J(iii) will not be considered part of the amount paid or payable to such holder on account of a dividend on such shares or proceeds in respect of the redemption, retraction or repurchase of such shares, as applicable, and the amount of the dividend or proceeds, as the case may be, will be the reduced amount calculated in accordance with this section.

 

	
  

	
g.

	
At least 10 business days prior to any payment being made by the Corporation that would involve a reduction in accordance with this Section J(iii), the Corporation will provide to each affected holder of Class 3 Preference Shares (at its address shown on the books of the Corporation) its calculation of any payments to be made to the holders of Class 3 Preference Shares and a detailed calculation of the Part VI.1 tax.  Affected holders shall be entitled to discuss the calculation of the adjustments pursuant to this Section J(iii) with the Corporation.

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