Model Equity Contribution Agreement for Project Finance Transactions (with Commentary)

Abstract

This Model Equity Contribution Agreement has been prepared by the Project Finance and Development Committee of the ABA Business Law Section.

It is intended to serve as a reference for practitioners negotiating and documenting a project finance transaction that includes an obligation on such project’s sponsors to provide equity contributions.

The accompanying footnotes provide a commentary intended to enhance an understanding of how the constituent elements of the Model Equity Contribution Agreement function together as a whole and, where appropriate, to explain why they are used.

Introduction

This Model Equity Contribution Agreement has been prepared by the Project Finance and Development Committee of the ABA Business Law Section. It is intended to serve as a reference for practitioners negotiating and documenting a project finance transaction that includes an obligation on such project’s sponsors to provide equity contributions. The accompanying footnotes provide a commentary intended to enhance an understanding of how the constituent elements of the Model Equity Contribution Agreement function together as a whole and, where appropriate, to explain why they are used.

While a project finance transaction typically provides no recourse, or very limited recourse, to the sponsors in the event of a borrower default (or otherwise), there may be occasional exceptions to this rule, which would typically be covered in an equity contribution agreement, providing for, among other things, commitments of base (and sometimes contingent) equity, obligations relating to holding periods (non-transferability) for equity in the borrower, and any relevant representations that are uniquely within the purview of the sponsors (such as capitalization of the borrower). An equity contribution agreement is generally the only agreement executed between the lenders (or their agent) and the sponsors in their role as sponsors. The lenders may require an equity contribution agreement from the sponsors of the project or the parent company (or an affiliate) of the project company as a means to secure the obligations described above, as well as any other relevant support that has been negotiated to come directly from the sponsors.

An equity contribution agreement is primarily intended to provide the lenders with comfort that specified financial support will be available to the project as agreed. The equity contribution agreement clarifies both the obligation of the sponsors to contribute equity, and the timing for contribution of both the base equity and any contingent equity. Generally, the sponsors’ obligations under the equity contribution agreement will run only through the date the project begins commercial operations or some specified period thereafter. To be clear, the support from the sponsors under the equity contribution agreement is rarely, if ever, an obligation to repay the loan, but rather is a source of equity funds for the project; however, in some cases, such funds may be available to pay loan servicing costs prior to the commercial operation date of the project. The most common equity contribution structure creates a direct obligation by the sponsors to the lenders for making the scheduled or expected equity contributions. This Model Equity Contribution Agreement is based on that structure.

Equity contribution agreements are customarily drafted by the lenders initially, though many lenders do not currently have standard forms. It is hoped that this Model Equity Contribution Agreement will serve to expedite and increase efficiency when drafting and negotiating such agreements. The goal has been to provide this Model Equity Contribution Agreement as a reasonable first draft to be shared by lenders to sponsors. This Model Equity Contribution Agreement is intended to serve as a common reference tool and a starting point for drafting such agreements.

The credit agreement and the equity contribution agreement are coordinated to set forth the funding steps, beyond any prior capital contributions to the project, needed to achieve the completion of the project. The equity contribution agreement specifies the amounts, forms, and schedule of base equity contributions, as anticipated in the budget provided by the sponsors upon which the lenders base the credit provided to the project. The equity contribution agreement also sets forth how funding will be provided for certain contingencies that may occur, in the form of further equity or, possibly, debt that is subordinated to the credit advanced by the lenders. Such contingencies may include cost overruns during construction, expenses resulting from delays or shortfalls in operations, or credit enhancements required upon certain events of default. The equity contribution agreement would also typically provide for the apportionment of such obligations among multiple sponsors (including possible caps on the amount of equity support) and for the waiver of rights upon the bankruptcy of one or more of the parties.

Beyond the foregoing structuring issues to be addressed by the equity contribution agreement, there are a number of mechanical issues to be resolved, including (a) the description of how the equity will be provided and in what form, (b) the mechanisms for making the contributions, including a list of trigger events for contingencies and deadlines for contributions, (c) the specification of any uses to which the contributions must be applied, (d) the specification of security arrangements provided by the sponsors to support their obligations, (e) appropriate covenants by the sponsors, (f ) appropriate representations and warranties by the sponsors, and (g) appropriate provisions for the termination of the equity contribution agreement.

It is recognized that many of the points included in this Model Equity Contribution Agreement will be negotiated among the parties, and the footnotes discuss many of the issues that may arise in such discussions. There will inevitably be a wide range of outcomes to these negotiations, and this Model Equity Contribution Agreement is not intended to limit or restrict that process. It is expected that practitioners will revise the form to address the specific circumstances of each transaction.

Model Equity Contribution Agreement (with Commentary)

This EQUITY CONTRIBUTION AGREEMENT dated as of [_] (this “Agreement”) by and among [_] ([the][each, a] “Sponsor”[ and, together with all Joining Sponsors, collectively the “Sponsors”]), [_] (the “Borrower”), ([the][each, a] “Guarantor”[ and collectively the “Guarantors”]) and [_] acting in the capacity of [collateral agent] for the benefit of the Secured Parties (such agent, in such capacity, together with its successors and assigns in such capacity, the “[Collateral Agent]”). Initially capitalized terms used herein shall have the meanings ascribed thereto in Section 9 or otherwise herein, or in the Credit Agreement.

Recitals

WHEREAS, the Borrower, [_] as administrative agent, the [Collateral Agent] and the lenders party thereto (the “Lenders”) are parties to the Credit Agreement of event date herewith (as amended, restated, modified or otherwise supplemented from time to time, the “Credit Agreement”), providing for, subject to the terms and conditions thereof, a loan (the “Loan”) and other extensions of credit to be made to the Borrower to finance the construction and development of the ____________ (the “Project”); and

WHEREAS, the Sponsor[s] own[s], directly or indirectly, [all] [____] percent of the Equity Interests in the Borrower [or are contractual counterparties to ______] and will benefit from the making of the Loan and the other extensions of credit under the Credit Agreement, in each case, to the Borrower for the construction and development of the Project.

NOW THEREFORE, to induce the Secured Parties to enter into the Credit Agreement and the other Financing Documents and to extend credit thereunder, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Sponsor[s], the [Collateral Agent] and the Borrower hereby agree as follows:

Section 1 Base Equity and Contingent Contribution Obligations

1.01 Base Equity Contribution Obligations.

[The][Each] Sponsor hereby agrees to make, or cause to be made, equity contributions to the Borrower (all such contributions collectively, the “Base Equity Contributions”) from time to time in the amounts, for the purposes and in accordance with the timing, funding terms and conditions for draws set forth in Schedule B, in an aggregate amount up to but not exceeding [its Proportionate Equity Share of] the Base Equity Contribution Cap in accordance with the mechanics set forth in Section 1.03.

1.02 Contingent Equity Contribution Obligations.

[The][Each] Sponsor hereby agrees to make, or cause to be made, equity contributions to the Borrower (all such contributions collectively, “Contingent Equity Contributions”) [or, in lieu of Contingent Equity Contributions, subordinated loans (“Subordinated Loans”)] from time to time prior to the Termination Date upon receipt of an Equity Contribution Notice, in an aggregate amount up to but not exceeding [its Proportionate Equity Share of] the Contingent Equity Contribution Cap in accordance with the mechanics set forth in Section 1.03. Such Contingent Equity Contributions [and/or Subordinated Loans] shall be provided by [the][each] Sponsor from time to time, to allow the Borrower (or the [Collateral Agent], at its election, on behalf of the Borrower) to have sufficient funds to complete the Project if any of the following occur (unless waived by [the Required Lenders/all Lenders]): (a) cost increases that are not otherwise covered by the budget or that may jeopardize completion of the Project, (b) the Borrower Abandons the Project, or (c) the Borrower publicly evidences an intention not to pursue Project Completion.

1.03 Contribution Procedures.

• (a) Notices. The Borrower shall deliver to [the][each] Sponsor (with a copy thereof delivered to the [Collateral Agent]) an Equity Contribution Notice at any time an Equity Contribution [and/or Subordinated Loan] is required to be funded in accordance with Section 1.01 or 1.02. Each such Equity Contribution Notice shall specify the aggregate of such Sponsor’s Base Equity Contribution and/or Contingent Equity Contribution [and/or Subordinated Loan contribution (the “Subordinated Loan Contribution”)] then being requested to be funded on a Base Equity Contribution Date for a Base Equity Contribution or, in the case of a Contingent Equity Contribution, the requested date for such Contingent Equity Contribution to be funded (the “Contingent Equity Contribution Date”), [or, in the case of a Subordinated Loan Contribution the requested date for such Subordinated Loan to be funded (the “Subordinated Loan Contribution Date”)]. On each Equity Contribution Date, [the][such] Sponsor shall make its Equity Contribution [or Subordinated Loan] in the amount required to be made by it on such Equity Contribution Date, which shall be paid to the [Collateral Agent] pursuant to Section 2.02 for deposit into the Designated Account and application in accordance with the Credit Agreement. Upon payment by [the][such] Sponsor of [the][such] Equity Contribution [or Subordinated Loan], [the][such] Sponsor shall be deemed to have made an Equity Contribution to the Borrower in the amount of such Equity Contribution [or Subordinated Loan in the amount of such Subordinated Loan].
• (b) Equity Contribution Notices by the [Collateral Agent]. If the Borrower has failed to deliver an Equity Contribution Notice with respect to any Equity Contribution [or Subordinated Loan] pursuant to Section 1.03(a), the [Collateral Agent] may deliver an Equity Contribution Notice (each, a “[Collateral Agent] Contribution Request”) in accordance with Section 1.03(a), on behalf of the Borrower, and [the][each] Sponsor shall comply with such [Collateral Agent] Contribution Request as if delivered by the Borrower; in the event of any inconsistency between a [Collateral Agent] Contribution Request and an Equity Contribution Notice, the [Collateral Agent] Contribution Request shall, absent manifest error, be determinative.
• (c) [Unavailability of Subordinated Loans. If [the][any] Sponsor is ever prohibited from making, or unable to make, any Subordinated Loan required to be made hereunder due to any Applicable Law, or for any other reason, such Sponsor shall make instead Equity Contributions as required under Section 1.02.]
• (d) Cash Funding. [The][Each] Sponsor shall, on or prior to the applicable Equity Contribution Date, make the Equity Contribution [or Subordinated Loan] required to be made pursuant to Section 1.01 or 1.02, as the case may be, by depositing an amount equal to such Equity Contribution [or Subordinated Loan], in each case as specified in the applicable Equity Contribution Notice, into the Designated Account, no later than 1:00 p.m. (New York City time) on the applicable Equity Contribution Date.

1.04 No Limitation on Additional Contributions.

Nothing herein shall be construed to prohibit or otherwise limit any Sponsor or any of its Affiliates from making or causing to be made equity contributions or loans to the Borrower or the Sponsor[s] in addition to the Equity Contributions [and Subordinated Loans] required to be made pursuant to this Agreement at the time and in the amount elected by such Sponsor or Affiliate in its sole discretion or from making or causing to be made equity contributions [or loans] to the Borrower or the Sponsors pursuant to their applicable organizational documents.

1.05 Maximum Equity Contributions[/Subordinated Loans].

Notwithstanding anything to the contrary set forth in Section 1.01 or 1.02 (or in any other section of this Agreement or other Financing Document), in no event shall any Sponsor be obligated to make any Equity Contribution [or Subordinated Loan] pursuant to this Agreement or be obligated to make any payment of money to any other party to the Credit Agreement (other than any payment with respect to expenses incurred in enforcing such Sponsor’s obligations under this Agreement) to the extent that such Equity Contribution [or Subordinated Loan] or payment would cause the aggregate amount of Equity Contributions [and Subordinated Loans] and payments made by or on behalf of such Sponsor (and payments made in lieu of any of the foregoing by guarantors of such Sponsor) to exceed such Sponsor’s Maximum Available Equity Contribution Amount.

1.06 Waiver of Indirect Damages.

To the extent permitted by Applicable Law, no Sponsor or other party to the Credit Agreement shall assert, and [the][each] Sponsor hereby waives as against the other parties to the Credit Agreement, and the other parties to the Credit Agreement hereby waive as against [the][each] Sponsor, any claim against any such other Person, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, the Credit Agreement, or any agreement or instrument contemplated hereby or thereby; provided, nothing in this Section 1.06 shall relieve any Sponsor of any obligation it may have in connection herewith to make any Equity Contribution, [Subordinated Loan,] or other payment with respect to obligations owing by the Borrower pursuant to its indemnification obligations under the Credit Agreement.

Section 2 Security for Contribution Obligations

2.01 Equity Letter of Credit.

• (a) Security for Equity Contribution Obligations. To secure the obligations of [the][a] Sponsor to fund Base Equity Contributions or Contingent Equity Contributions, [or Subordinated Loan Contributions], as applicable, [the][such] Sponsor shall deliver to the [Collateral Agent] as a condition precedent to the initial advance of the Loan pursuant to the Credit Agreement, one or more Equity Letters of Credit in an available face amount initially equal to the sum of the Base Equity Contribution Cap and the Contingent Equity Contribution Cap, as applicable, of [the][such] Sponsor.
• (b) Draw Conditions. Upon the failure of [the][a] Sponsor to make a payment when due in respect of any Funding Amount, the [Collateral Agent] shall be authorized to make a drawing under the applicable Equity Letter of Credit issued on its behalf in an amount equal to the amount of such payment of a Funding Amount not made by [the][such] Sponsor when due and shall promptly deposit or cause to be deposited the proceeds thereof in the Designated Account. Any such drawing shall be deemed to satisfy, to the extent of such drawing, the funding obligations of [the][such] Sponsor in respect of the applicable Funding Amount.
• (c) Termination and Return of Equity Letter of Credit. Upon the Termination Date, the [Collateral Agent] shall return [the][each] Equity Letter of Credit, as applicable, to the issuer thereof together with a written request from the [Collateral Agent] to cancel [the][such] Equity Letter of Credit.
• (d) Non-Renewal of Equity Letter of Credit. If either (i) the [Collateral Agent] receives written notice from the issuer of [an][the] Equity Letter of Credit or otherwise becomes aware that such issuer has elected not to renew [the][such] Equity Letter of Credit and on or before [10] Business Days prior to the expiration date thereof the [Collateral Agent] has not received a replacement Equity Letter of Credit (such date, the “Non-Renewal Drawing Date”) or (ii) a Negative Credit Event with respect to the issuer of [an][the] Equity Letter of Credit occurs and the Sponsor [on whose behalf such Equity Letter of Credit was delivered] has failed to deliver a replacement Equity Letter of Credit within the earlier of (A) [(10)] Business Days after such Negative Credit Event and (B) [(10)] Business Days prior to the expiration date of the Equity Letter of Credit (the earlier of (A) and (B) being the “Negative Credit Event Drawing Date”) then, in the case of either (i) or (ii), the [Collateral Agent] has the right and authority to make a drawing under [the][such] Equity Letter of Credit in an amount equal to the full amount available to be drawn under [the][such] Equity Letter of Credit, at any time, in the case of clause (i), on or after the Non‑Renewal Drawing Date, or, in the case of clause (ii), after the Negative Credit Event Drawing Date, and deposit the proceeds thereof in the Designated Account as cash collateral on behalf of [the][such] Sponsor, and any remaining amount available to be drawn under such Equity Letter of Credit may be returned by the issuer of such Equity Letter of Credit to such Sponsor.
• (e) Costs of Equity Letter of Credit. The Sponsor [on whose behalf the Equity Letter of Credit was issued] shall be responsible for all fees, costs and expenses in connection with the issuance and/or maintenance of [the][an] Equity Letter of Credit.
• (f ) Equity Letter of Credit and the Borrower. For the avoidance of doubt, the Borrower and [the][each] Sponsor acknowledge and agree that the Borrower shall not be the account party in respect of any Equity Letter of Credit, and that any such letter of credit shall not otherwise constitute indebtedness of the Borrower or be secured by a Lien on any of the property of the Borrower.

2.02 Payment of Funding Amounts–Equity Letter of Credit.

• (a) Notice re Payment or Draw on Equity Letter of Credit. If on any Funding Date the full amount available to be drawn under any Equity Letter of Credit is sufficient to pay the applicable Funding Amount, then not later than [12:00] noon [New York] time one Business Day prior to each Funding Date, [the][each] Sponsor shall notify the [Collateral Agent] in writing whether it intends to pay the applicable Funding Amount directly (such notice, a “Funding Notice”) or whether the [Collateral Agent] should draw upon the Equity Letter of Credit. Subject to Section 2.02(b) below, if [the][such] Sponsor has elected to fund the applicable Funding Amount directly, it shall pay such Funding Amount on the applicable Funding Date to the [Collateral Agent], in Dollars and in immediately available funds, for deposit into the Designated Account. If [the][such] Sponsor has elected that the [Collateral Agent] draw upon the Equity Letter of Credit issued on its behalf (or if no Funding Notice is provided by [the][such] Sponsor or if no election is specified in the Funding Notice), the [Collateral Agent] shall draw upon such Equity Letter of Credit in the amount of such Funding Amount on the applicable Funding Date and shall deposit the proceeds of such draw (or draws) into the Designated Account.
• (b) Draw Constitutes Equity Contribution. Any draw upon an Equity Letter of Credit issued on behalf of [the][a] Sponsor paid to the [Collateral Agent] in accordance with the terms of such Equity Letter of Credit shall be deemed to be an Equity Contribution [or Subordinated Loan] to the Borrower as provided herein.
• (c) Delivery of Reduction Certificate. If [the][a] Sponsor funds any Funding Amount without resort to a draw on an Equity Letter of Credit issued on its behalf, the [Collateral Agent] shall deliver a Reduction Certificate to the issuer of such Equity Letter of Credit instructing such issuer to reduce the amount available for drawing on such Equity Letter of Credit by an amount equal to the amount, if any, by which such amount available for drawing exceeds the Maximum Available Equity Contribution Amount.
• (d) Taxes, Withholdings, etc. Any and all sums payable by [the][each] Sponsor hereunder shall be paid in full, free and clear of any deductions or withholdings for any and all present and future Taxes, unless required by Applicable Law. If [the][any] Sponsor is required by Applicable Law to deduct any Taxes from or in respect of any sum payable pursuant hereto, (i) [the][such] Sponsor shall make such deductions, (ii) [the][such] Sponsor shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with Applicable Law, and (iii) the sum payable shall be increased as may be necessary so that after making all required deductions and withholdings (including such deductions and withholdings applicable to additional sums payable under [this Section]) the amount payable hereunder shall equal the sum that would have been received had no such deductions been required.
• (e) Payments to Governmental Authority. As soon as practicable after any payment of Taxes by [the][each] Sponsor to a Governmental Authority pursuant to this Section, [the][each] Sponsor shall deliver to the Borrower (with a copy to the [Collateral Agent]) the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Borrower.

Section 3 Scope of Contribution Obligations

3.01 Obligations Unconditional.

The undertakings of [the][each] Sponsor[s] under Section 1.01, 2.01 and 2.02 are [several obligations but as to such Sponsor are] absolute and unconditional, irrespective of the value, genuineness, validity or enforceability of the Credit Agreement or any of the other Financing Documents or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of, or security for, any of the Secured Obligations, and, to the fullest extent permitted by Applicable Law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of their undertakings hereunder, it being the intent of this Section 3.01 that the obligations of the Sponsor[s] under this Agreement shall be absolute and unconditional, under any and all circumstances. This Agreement shall be discharged only by complete performance of the obligations contained herein and the Sponsor[s] shall not have the right to withhold or set‑off against any payment due hereunder for any reason. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter, impair or reduce the liability of [the][any] Sponsor[s] hereunder, which shall remain absolute and unconditional [although several] as described above:

• (a) Changed Performance. At any time or from time to time, without notice to the Sponsor[s], the time for any performance of, or compliance with, any of the Secured Obligations or any of the obligations of the Borrower or any other Person under the Credit Agreement or any of the other Financing Documents shall be extended, or such performance or compliance shall be waived, or any of the acts mentioned in any of the provisions of the Credit Agreement or any of the other Financing Documents or any other agreement or instrument referred to herein or therein shall be done or omitted in breach or violation of the Credit Agreement or other Financing Document.
• (b) Acceleration. The maturity of any of the Secured Obligations shall be accelerated, or any of the Secured Obligations or any of the obligations of the Borrower under the Credit Agreement or any of the other Financing Documents shall be modified, supplemented or amended in any respect, or any right under the Credit Agreement or any of the other Financing Documents or any other agreement or instrument referred to herein or therein shall be waived or any other guarantee of any of the Secured Obligations or any of the obligations of the Borrower under the Credit Agreement or any of the other Financing Documents or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with in any way that could be adverse to the Sponsor[s].
• (c) Liens. Any Lien or security interest granted to, or in favor of, the [Collateral Agent] or any other Secured Party, or any party to the Credit Agreement or any of the other Financing Documents as security for any of the Secured Obligations (including without limitation Liens intended to be created by the Security Documents) or any of the obligations of the Borrower under the Credit Agreement or any of the other Financing Documents shall fail to be perfected or shall be released in whole or in part.
• (d) Failure to Perform. The performance or failure to perform by [the][any] Sponsor of its obligations hereunder, or under any other agreement, or any change in the condition (financial, legal or otherwise), affairs, status, nature or actions of [the][any] Sponsor, the Borrower or any other Person.
• (e) Insolvency. The voluntary or involuntary liquidation, dissolution, sale of assets, marshaling of assets and liabilities, receivership, conservatorship, custodianship, insolvency, Bankruptcy Event, assignment for the benefit of creditors, reorganization, arrangement, readjustment or similar proceeding affecting any Person.
• (f ) Project Performance. The performance (or failure to perform) of the Project as to any aspect of construction or operation, including cost overrun, schedule delay or specification or design error or failure.
• (g) Change of Control. The occurrence of a Change of Control.
• (h) Assertion of Claims. The failure of any other party to the Credit Agreement to (i) assert any claim or demand or to enforce any right or remedy against the Borrower, any Sponsor or any other Person under the provisions of the Financing Documents or otherwise or (ii) exercise any right or remedy against any collateral.
• (i) Changes. Any change in the time, manner or place of payment of, or in any other term of, all or any portion of such obligations, or any other extension or renewal of any such obligation of the Borrower, any Sponsor or otherwise.
• ( j) Impairment. Any reduction, limitation, impairment or termination of any of such obligations for any reason other than the full and final payment thereof.
• (k) Amendment. Any amendment to, rescission, waiver or other modification of, or any consent to departure from, any term of any Financing Document unless entered into and approved in accordance therewith.
• (l) Collateral. Any addition, exchange, release, surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition of, or consent to departure from, any other security interest held by any other party to the Credit Agreement.

[The][Each] Sponsor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever (other than any notices required under this Agreement) and any requirement that the [Collateral Agent] or any other Secured Party or any party to a Financing Document exhaust any right, power or remedy or proceed against the Borrower under this Agreement, any other Financing Document or any other agreement or instrument referred to herein, or against any other Person under any other guarantee of, or security for, any of the Secured Obligations or any of the obligations of the Borrower under any other Financing Document.

3.02 Reinstatement.

The obligations of [the][a] Sponsor under this Agreement shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of [the][such] Sponsor under this Agreement is rescinded or must be otherwise restored by the Borrower or the [Collateral Agent] to [the][such] Sponsor as a result of any proceedings in bankruptcy, other Bankruptcy Event or any other reason. [The][Such] Sponsor agrees that it will indemnify each Secured Party on demand for all reasonable costs and expenses (including reasonable and documented fees and expenses of counsel) incurred by such Secured Party in connection with such rescission or restoration.

3.03 Waiver of Defenses.

[The][Each] Sponsor hereby unconditionally and irrevocably waives and relinquishes, to the maximum extent permitted by Applicable Law, all rights or remedies accorded by Applicable Law to sureties or guarantors (other than the defense of payment of the applicable amounts and the defense that [the][such] Sponsor has fully performed the matter in question) and agrees not to assert or take advantage of any such right or remedies, including:

• (a) Exhaustion of Remedies. Any right to require any other party to the Credit Agreement to proceed against the Borrower or any other Person or to proceed against or exhaust any security held by any party to the Credit Agreement at any time or to pursue any other remedy in any other party to the Credit Agreement’s power before proceeding against [the][such] Sponsor to enforce the provisions of this Agreement.
• (b) Incapacity. Any defense that may arise by reason of the incapacity, lack of power or authority, death, dissolution, merger, termination or disability of the Borrower, [the][such] Sponsor or any other Person or the failure of any other party to the Credit Agreement to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of the Borrower, [the][such] Sponsor or any other Person.
• (c) Demand. Demand, presentment, protest and notice of any kind (other than any notices expressly required to be delivered to [the][such] Sponsor hereunder), creation or incurrence of any new or additional indebtedness or obligation or of any action or non-action on the part of the Borrower, [the][such] Sponsor or any other party to the Credit Agreement, any endorser or creditor of the foregoing or on the part of any other Person under the Financing Documents.
• (d) Elections. Any defense based upon an election of remedies by any other party to the Credit Agreement, including an election to proceed by non-judicial rather than judicial foreclosure, which destroys or otherwise impairs the subrogation rights of [the][such] Sponsor, the right of [the][such] Sponsor to proceed against the Borrower, [the][such] Sponsor or another Person for reimbursement, or both.
• (e) Offsets. Any defense based on any offset against any amounts which may be owed by any Person to [the][such] Sponsor or the Borrower [or any other Sponsor] or for any other reason whatsoever.
• (f ) Surety. Any defense based upon any Applicable Law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal.
• (g) Failure to Act. Any defense based on any failure to act, delay or omission whatsoever on the part of the Borrower or [the][such] Sponsor or the failure by the Borrower or [the][such] Sponsor to do any act or thing or to observe or perform any covenant, condition or agreement to be observed or performed by it under the Financing Documents (other than a failure to provide any notices expressly required to be delivered to [the][such] Sponsor hereunder), provided any failure by the Borrower or the [Collateral Agent] to give any such notice shall not relieve any party hereto of any of its obligations hereunder except to the extent of any delay directly caused by such failure.
• (h) Counterclaim. Any defense, setoff or counterclaim which may at any time be available to or asserted by the Borrower or [the][such] Sponsor against any other party to the Credit Agreement or any other Person under the Financing Documents based on or related to the bankruptcy or insolvency of the Borrower or [the][such] Sponsor.
• (i) Duty to Disclose. Any duty on the part of any other party to the Credit Agreement to disclose to [the][such] Sponsor any facts such other party to the Credit Agreement may now or hereafter know about the Borrower or [the][such] Sponsor, regardless of whether such other party to the Credit Agreement has reason to believe that any such facts materially increase the risk beyond that which [the][such] Sponsor intends to assume, or have reason to believe that such facts are unknown to [the][such] Sponsor, or have a reasonable opportunity to communicate such facts to [the][such] Sponsor ([the][such]Sponsor acknowledging that it is fully responsible for being and keeping informed of the financial condition of the Borrower).
• ( j) Changes. Any defense based on any change in the time, manner or place of any payment under, or in any other term of, the Financing Documents or any other amendment, renewal, extension, acceleration, compromise or waiver of or any consent or departure from the terms of the Financing Documents (other than this Agreement).
• (k) Other Circumstance. Any other circumstance (including any statute of limitations) or any existence of or reliance on any representation by any other party to the Credit Agreement that might otherwise constitute a defense available to, or discharge of, any guarantor or surety (other than setoff against such Sponsor or, subject to Section 3.02, the defense of payment of the applicable amounts).

3.04 Subrogation.

[The][Each] Sponsor will not, prior to or on the Termination Date, exercise any rights of subrogation, indemnification or contribution against the Borrower, whether arising by contract or operation of law or otherwise (including, without limitation, any such right arising under Section 509 of the Bankruptcy Code or any other applicable bankruptcy or insolvency law), arising by reason of any payment by [the][such] Sponsor (including any draw on an Equity Letter of Credit) pursuant to the provisions of this Agreement or the issuance, provision or maintenance of such Equity Letter of Credit.

Section 4 Covenants

[The][Each] Sponsor covenants and agrees to comply with the following covenants at all times prior to the Termination Date:

4.01 Dispositions.

[The][Such] Sponsor shall not sell or transfer any portion of its Proportionate Equity Share, or consent to the issuance by the Borrower of any additional Equity Interests of the Borrower, in either case to any Person, if such sale, transfer or issuance would result in a Change of Control. A transfer by a Sponsor of a portion of its Proportionate Equity Share not prohibited under this Section 4.01 will result in a reduction in the amount of its Proportionate Equity Interest by an amount equal to the Proportionate Equity Interest assumed by a Joining Sponsor upon receipt by the [Collateral Agent] of the Joinder Agreement.

4.02 Bankruptcy; Insolvency; Winding-Up.

[The][Such] Sponsor shall not agree to or cause the Borrower to (a) commence any legal proceedings seeking to directly or indirectly liquidate, windup, terminate, reorganize or dissolve itself, (b) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (c) make a general assignment for the benefit of its creditors, (d) commence a voluntary case under or file a petition to take advantage of any bankruptcy law (as now or hereafter in effect), (e) fail to controvert in an appropriate manner, or acquiesce in writing to or file an answer admitting the allegations of any petition filed against it in an involuntary case under any bankruptcy law, (f ) take any corporate action for the purpose of effecting any of the foregoing or (g) take any action under any other Applicable Law that would result in a similar or equivalent outcome as set forth in the foregoing clauses (a) through (f ).

4.03 Further Assurances.

[The][Such] Sponsor shall perform, upon request of the [Collateral Agent], all reasonable acts incidental to such Sponsor’s obligations under this Agreement as may be necessary to carry out its obligations in accordance with the intent of this Agreement; provided, that in no case shall [the][any] Sponsor be required to make any payment or provide any financial consideration in excess of that required under this Agreement.

4.04 Existence.

[The][Such] Sponsor shall (a) maintain and preserve its existence as a [ ] in good standing and maintain its qualification to do business in each other jurisdiction where such qualification is necessary to perform its obligations hereunder and (b) maintain and preserve all rights, privileges and franchises necessary in the normal course of conduct of its business, except, in the case of this clause (b), where the failure to do so could not reasonably be expected to have a material adverse effect on its ability to perform under this Agreement.

4.05 Specific Performance.

The Lenders may demand specific performance of this Agreement. [The][Such] Sponsor hereby irrevocably waives, to the extent it may do so under Applicable Law, any defense based on the adequacy of a remedy at law that may be asserted as a bar to the remedy of specific performance in any action brought against [the][such] Sponsor for specific performance of this Agreement by the Lenders, the [Collateral Agent] or any successor or assign thereof or for their benefit by a receiver, custodian or trustee appointed for the Borrower or [the][such] Sponsor or in respect of all or a substantial part of its assets, under the bankruptcy or insolvency laws of any jurisdiction to which it or its assets are subject.

4.06 Further Assurances.

[The][Such] Sponsor shall perform, upon the reasonable request of the [Collateral Agent], reasonable acts as may be necessary or advisable to carry out the intent of this Agreement.

Section 5 Representations and Warrenties

[The][Each] Sponsor [severally] represents and warrants to the [Collateral Agent] [as to itself only] that:

5.01 Organization.

[The][Such] Sponsor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, and is duly qualified, authorized to do business, and in good standing as a foreign entity in every jurisdiction in which the failure to be so qualified could reasonably be expected to have a material adverse effect on its ability to perform under this Agreement. [The][Such] Sponsor has all requisite power and authority, corporate or otherwise, to enter into and to perform its obligations under this Agreement.

5.02 Authorization.

The execution, delivery, and performance by [the][such] Sponsor of this Agreement have been duly authorized by all necessary organizational or other action on the part of [the][such] Sponsor.

5.03 Binding and Enforceable.

This Agreement has been duly executed and delivered on behalf of [the][such] Sponsor by an Authorized Officer of [the][such] Sponsor and constitutes the legal, valid and binding obligation of [the][such] Sponsor, enforceable against [the][such] Sponsor in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or other similar laws affecting creditors’ rights generally, and subject to general principles of equity, including without limitation the possible unavailability of specific performance or injunctive relief, regardless of whether such enforceability is considered in a proceeding in equity or at law.

5.04 Litigation.

There are no actions, suits, proceedings, investigations or similar actions by or before any Governmental Authority or arbitral tribunal pending or, to [the][such] Sponsor’s knowledge, threatened that (a) have had or could reasonably be expected to have a material adverse effect on the performance by [the][such] Sponsor of its obligations hereunder, (b) have had or could reasonably be expected to have a material adverse effect on the condition (financial or otherwise), business, or operations of [the][such] Sponsor, or (c) question the validity, binding effect, or enforceability of this Agreement or any of the transactions contemplated hereby.

5.05 Governmental Approvals.

No Governmental Approval is required to be obtained by [the][such] Sponsor in connection with the execution, delivery or performance of this Agreement except such Governmental Approvals that have previously been obtained and that are in full force and effect.

5.06 No Violation.

The execution, delivery and performance by [the][such] Sponsor of this Agreement will not violate or constitute a default under (a) its organizational documents, (b) any other contract or agreement to which it is a party or by which it or its property is bound or (c) any Applicable Law.

5.07 No Default.

Neither the Sponsor[s] nor, to [the][such] Sponsor’s knowledge, any other Obligor is in default under any of the Financing Documents. The Sponsor[s] and, to [the][such] Sponsor’s knowledge, each other Obligor has complied with all conditions precedent to the respective obligations of each such party to perform under this Agreement. No event or condition exists that would either immediately, or with the passage of any applicable grace period or giving of notice or both, either enable [such][the] Sponsor to terminate or suspend its obligations under this Agreement or excuse [the][such] Sponsor or the Borrower from liability for non‑performance thereunder.

5.08 Corrupt Practices and Anti-Money Laundering Laws.

[Such][The] Sponsor and its officers, directors, employees, and agents have complied with applicable Corrupt Practices Laws in respect of the Borrower’s business and the Project and are otherwise conducting the Project and the Borrower’s business in compliance with applicable Corrupt Practices Laws. The internal management and accounting practices and controls of [the][such] Sponsor are sufficient to provide reasonable assurances of compliance with applicable Corrupt Practices Laws and the prevention of the giving or making by any Person (such Person, the “Payor”) of any offer, gift, payment, promise to pay or authorization of the payment of any money or anything of value, directly or indirectly, to or for the use or benefit of any Official (including to or for the use or benefit of any other Person if the Payor knows, or has reasonable grounds for believing, that the other Person would use such offer, gift, payment, promise or authorization of payment for the benefit of any such Official), for the purpose of influencing any act or decision or omission of any Official in order to obtain, retain or direct business to, or to secure any improper benefit or advantage for, the Borrower or the Project, or any other Person (any such giving or making, a “Prohibited Payment”); provided, that any such offer, gift, payment, promise or authorization of payment shall not be considered a Prohibited Payment if it (a) is expressly permitted by Applicable Law or (b) is made for the purpose of expediting or securing the performance of a routine governmental action (as such term is construed under Applicable Law.) Neither [such][the] Sponsor nor any Person acting on behalf of [such][the] Sponsor has made any Prohibited Payment.

[Such][The] Sponsor is in compliance with the applicable requirements of (A) the Anti-Money Laundering Laws, (B) OFAC Regulations and (C) all other applicable export control, anti-boycott and economic sanctions laws of the U.S. and other applicable jurisdictions relating to its business and facilities. Neither [the][such] Sponsor nor any of its directors or members of its senior management is a Person included on any OFAC List or otherwise subject to sanctions under OFAC Regulations. All officers of [such][the] Sponsor involved in the management of the Project have read the Anti-Corruption Handbook.

5.09 No Immunity.

[The][Such] Sponsor has no immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution, sovereign immunity, or otherwise) with respect to itself or its property.

5.10 Equity Interests.

As of the date hereof, [the][such] Sponsor owns [directly][indirectly] the percentage of the [issued and outstanding] Equity Interests as the [majority shareholder in][[sole] general partner of] the Borrower, [and such other Sponsor[s] own[s]][directly][indirectly], the percentage of the [issued and outstanding] Equity Interests, as the [minority shareholder[s] in][[sole] limited partner[s] of] the Borrower, set forth in Schedule B. Without limiting the provisions of Section 3.01 above, [the][each] Sponsor undertakes that it shall neither cause nor suffer to occur or exist a Change of Control with respect to the Borrower.

5.11 Investment Company Act of 1940.

[The][Such] Sponsor is not (i) an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, or an “investment advisor” within the meaning of the Investment Advisors Act of 1940, as amended or (ii) if the Sponsor is, or may be, an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, or an “investment advisor” within the meaning of the Investment Advisors Act of 1940, Sponsor has registered as such and is in compliance with all applicable regulations.

5.12 Municipality and Energy Regulation.

[The][Such] Sponsor [(i)] is not subject to regulation as an “electric utility,” “electric corporation,” “electrical company,” “public utility,” “public utility holding company” or similar entity under any existing law, rule or regulation of any Governmental Authority; and [(ii) is not a “municipality” as defined under the Bankruptcy Code or another type of entity that may be eligible to file under Chapter 9 of the Bankruptcy Code.]

5.13 Financial Statements; Material Liabilities.

[The][Such] Sponsor has delivered copies of the financial statements of [the][such] Sponsor listed on Schedule 5.13. All of such financial statements fairly present in all material respects the financial position of [the][such] Sponsor as of the respective dates specified in such Schedule 5.13 and the results of operations and cash flows of [the][such] Sponsor for the respective periods so specified and have been prepared in accordance with [GAAP/IFRS] consistently applied throughout the periods involved except as set forth as noted on Schedule 5.13 (subject, in the case of any quarterly financial statements, to normal year-end adjustments). [The][Such] Sponsor does not have any material liabilities that are not disclosed on Schedule 5.13.

Section 6 Enforcement

[The][Each] Sponsor and the Borrower agree that the [Collateral Agent] (acting for the benefit of the Secured Parties) and any assignee thereof shall be entitled to enforce this Agreement in its own name and to exercise any and all rights under this Agreement in accordance with the terms hereof (either in its own name or in the name of the Borrower, as the [Collateral Agent] may elect), and the Sponsor[s] and the Borrower agree to comply and cooperate in all respects with such exercise. Without limiting the generality of the foregoing, the [Collateral Agent] and any assignee thereof shall have the full right and power to enforce directly against [the][each] Sponsor all of its obligations under this Agreement and otherwise to exercise all remedies hereunder and to make all demands and give all notices and make all requests (either in its own name or in the name of the Borrower, as the [Collateral Agent] may elect) required or permitted to be made or given by the Borrower under this Agreement, including without limitation the right to make any demand for Equity Contributions [and Subordinated Loans] pursuant to this Agreement, and [the][each] Sponsor acknowledges and agrees that any such action taken by the [Collateral Agent] shall be deemed effective for all purposes of this Agreement to the same extent as if such action had been taken directly by the Borrower. If [the][any] Sponsor shall receive inconsistent directions from the Borrower and the [Collateral Agent], the directions of the [Collateral Agent] shall be deemed the effective directions, and [the][such] Sponsor, as applicable, shall accordingly comply with such directions of the [Collateral Agent].

Section 7 Bail-in of EEA Financial Institutions

For the purposes of this Section, the following terms have the meanings specified below:

“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.

“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.

“Bail-In Legislation” means (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation, rule or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing UK Financial Institutions (other than through liquidation, administration or other insolvency proceedings).

“Bank of England” is the United Kingdom’s central bank.

“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

“EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegate) having responsibility for the resolution of any EEA Financial Institution.

“EU” or the “European Union” means the unique economic and political union between 27 EU countries that together cover much of the continent, and its goals and values as laid out in the Treaty of the European Union (the Lisbon Treaty) and the EU charter of fundamental rights.

“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

“Financial Conduct Authority” or “FCA” is the conduct regulator for around 51,000 financial services firms and financial markets in the UK and the prudential supervisor for 49,000 firms, setting specific standards for around 18,000 firms.

“Prudential Regulation Authority” or the “PRA” is the UK regulatory authority through which the Bank of England prudentially regulates and supervises financial services in the United Kingdom; the PRA regulates around 1,500 banks, building societies, credit unions, insurers and major investment firms.

“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Authority, a UK Resolution Authority.

“UK” or the “United Kingdom” means Great Britain and Northern Ireland, and Great Britain comprises England, Scotland and Wales.

“UK Financial Institution” means any bank, financial or credit institution or investment firm and affiliates of such entities regulated by the Prudential Regulatory Authority, or the Financial Conduct Authority, as applicable.

“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.

“Write-Down and Conversion Powers” means (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.

Notwithstanding anything to the contrary in any Financing Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Financing Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

• (a) the application of any Write-Down and Conversion Powers by Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and
• (b) the effects of any Bail-In Action on any such liability, including, if applicable:
  • (i) a reduction in full or in part or cancellation of any such liability;
  • (ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Financing Document; or
  • (iii) the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of any the applicable Resolution Authority.