Pattern Energy Group Inc.
Pattern Energy Group Inc. (Form: 8-K, Received: 06/19/2017 08:17:11)

UNITED STATES  

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8-K

 

 

 

CURRENT REPORT  

Pursuant to Section 13 or 15(d)  

of the Securities Exchange Act of 1934

 

Date of Report (Date of Earliest Event Reported): June 16, 2017

 

 

 

PATTERN ENERGY GROUP INC.  

(Exact name of registrant as specified in its charter)

 

Delaware 001-36087 90-0893251
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)

 

Pier 1, Bay 3  

San Francisco, CA 94111  

(Address and zip code of principal executive offices)  

(415) 283-4000  

(Registrant’s telephone number, including area code)  

Not Applicable  

(Former name or former address, if changed since last report)

 

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act (17 CFR 230.405) or Rule 12b-2 of the Exchange Act (17 CFR 240.12b-2).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐[

 

 

 

Item 1.01. Entry into a Material Definitive Agreement.

 

Amended and Restated Pattern Development 1.0 Purchase Rights Agreement

 

On June 16, 2017, Pattern Energy Group Inc. (the “ Company ”, “ we ” or “ us” ) entered into the Amended and Restated Purchase Rights Agreement (the “ A&R 1.0 PRA ”) that amends and restates that certain Purchase Rights Agreement, dated as of October 2, 2013, by and among Pattern Energy Group LP (“ Pattern Development 1.0 ”), the Company, Pattern Energy Group Holdings LP (solely with respect to Article IV therein) and Pattern Energy GP LLC (the “ Original 1.0 PRA ), which was filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 001-36087) filed on October 2, 2013 (the “ Original 1.0 PRA 8-K ”) and is incorporated by reference herein .

 

The A&R 1.0 PRA modifies certain terms of the Original 1.0 PRA by, among other things, (a) expanding our first offer rights with respect to power generation or transmission facilities or projects that Pattern Development 1.0 decides to sell (other than certain projects that have been designated for transfer to Pattern Energy Group 2 LP (“ Pattern Development 2.0 ” and together with Pattern Development 1.0, “ Pattern Development ”)) (which we refer to as our “ 1.0 Project Rights ”) by allowing us to submit a Final Rights Project Offer (as defined therein) in the event Pattern Development 1.0 rejects a First Rights Project Offer (as defined therein) or we decline to submit a First Rights Project Offer; (b) allowing us to assign our right to submit a Final Rights Project Offer to Public Sector Pension Investment Board (“ PSP Investments ”) as contemplated by the Joint Venture Agreement (as defined below); (c) amending the term of our 1.0 Project Rights so that such rights survive until either (i) we deliver to Pattern Development 1.0 three First Rights Project Declinations (as defined therein) with respect to operational or construction-ready projects (other than the Conejo Project (as defined therein)) for which no Final Rights Project Offer is made or (ii) Pattern Development 1.0 is wound up in accordance with its governing documents; (d) specifying that, if Pattern Development 1.0 rejects our offer to acquire a project, such project can only be sold to a third party at a price that, in addition to being greater than or equal to 105% of our offer price (which was an existing requirement under the Original 1.0 PRA), is also greater than the Final Offer Price (as defined therein), if any and (e) setting forth a form of Purchase and Sale Agreement for acquisitions of projects pursuant to the A&R 1.0 PRA.

 

The A&R 1.0 PRA was recommended by the Conflicts Committee of our Board of Directors, which is comprised solely of independent directors, for approval by our Board of Directors, and was subsequently approved by our Board of Directors.

 

A copy of the A&R 1.0 PRA is attached as Exhibit 10.1 hereto and is incorporated by reference herein. The foregoing descriptions of the Original 1.0 PRA and the A&R 1.0 PRA do not purport to be complete and are qualified in their entirety by reference to the Original 1.0 PRA 8-K and Exhibit 10.1 hereto, respectively.

 

Amended and Restated Pattern Development 2.0 Purchase Rights Agreement

 

On June 16, 2017, we entered into the Amended and Restated Purchase Rights Agreement (the “ A&R 2.0 PRA ” and together with the A&R 1.0 PRA, the “ A&R PRAs ”) that amends and restates that certain Purchase Rights Agreement, dated as of December 8, 2016, by and among Pattern Development 2.0, the Company, Pattern Energy Group Holdings 2 LP (“ PEGH 2 ”) (solely with respect to Article III therein) and Pattern Energy Group Holdings GP 2 LLC (the “ Original 2.0 PRA ”), which was filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-36087) filed on December 14, 2016 (the “ Original 2.0 PRA 8-K ”) and is incorporated by reference herein .

 

The A&R 2.0 PRA modifies certain terms of the Original 2.0 PRA by, among other things, (a) expanding our first offer rights with respect to power generation, storage or transmission facilities or projects that Pattern Development 2.0 decides to sell (which we refer to as our “ 2.0 Project Rights ” and, together with the 1.0 Project Rights, the “ Project Rights ”) by allowing us to submit a Final Rights Project Offer (as defined therein) in the event Pattern Development 2.0 rejects a First Rights Project Offer (as defined therein) or we decline to submit a First Rights Project Offer; (b) allowing us to assign our right to submit a Final Rights Project Offer to PSP Investments as contemplated by the Joint Venture Agreement; (c) modifying Pattern Development 2.0’s right to transfer a project to, and PEGH 2’s or Pattern Development 2.0’s, as applicable, right to transfer a material portion of the equity interests or all or substantially all of the assets of Pattern Development 2.0 (a “ PEG 2.0 Interest ”) to a third party if Pattern Development 2.0 or PEGH 2, as applicable, rejects our offer to acquire the applicable project or PEG 2.0

 

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Interest, by, among other things, (i) increasing the “clearing price” at which the project or PEG 2.0 Interest can be sold to 110% (as opposed to 105%) of the applicable Project Offer Price or PEG 2 LP Offer Price (as such terms are defined therein), (ii) in the case of a project, requiring that it be sold at a price greater than 100% of the Final Offer Price (as defined therein), if any and (iii) obligating Pattern Development 2.0 or PEGH 2, as applicable, to, subject to certain exceptions, sell the applicable project or PEG 2.0 Interest to us at a price equal to 96% of the Project Offer Price or PEG 2 LP Offer Price, as applicable, if Pattern Development 2.0 or PEGH 2, as applicable, does not enter into a definitive agreement to sell such project or PEG 2.0 Interest to a third party at a price equal to or greater than the clearing price within six months following its rejection of our offer (or does not consummate such transaction within twelve months following its rejection of our offer); (d) amending the term of our 2.0 Project Rights so that such rights survive until Pattern Development 2.0 is wound up in accordance with its governing documents; (e) giving us the right to acquire any Early Stage Project or Mid-Stage Project (as such terms are defined therein) that is abandoned by Pattern Development 2.0 at a price equal to Pattern Development 2.0’s cost basis in such project (as well as, in the case of a Mid-Stage Project, an earn-out payment to be paid to Pattern Development 2.0 if we subsequently sell such project to a third party) and requiring that Pattern Development 2.0 promptly sell (subject to our 2.0 Project Rights) any Advanced Project (as defined therein) that it abandons; (f) setting forth a form of Purchase and Sale Agreement for acquisitions of projects pursuant to the A&R 2.0 PRA and (g) providing us the option, if Pattern Development 2.0 rejects a development project that is offered for sale by a third party, to acquire such project directly from such third party.

 

The A&R 2.0 PRA was recommended by the Conflicts Committee of our Board of Directors, which is comprised solely of independent directors, for approval by our Board of Directors, and was subsequently approved by our Board of Directors.

 

A copy of the A&R 2.0 PRA is attached as Exhibit 10.2 hereto and is incorporated by reference herein. The foregoing descriptions of the Original 2.0 PRA and the A&R 2.0 PRA do not purport to be complete and are qualified in their entirety by reference to the Original 2.0 PRA 8-K and Exhibit 10.2 hereto, respectively.

 

Second Amended and Restated Non-Competition Agreement

 

On June 16, 2017 , we entered into the Second Amended and Restated Non-Competition Agreement, by and among Pattern Development 1.0, the Company and Pattern Development 2.0 (the “ Second A&R Non-Competition Agreement ”), which further amends and restates the Amended and Restated Non-Competition Agreement, dated as of December 8, 2016, by and among Pattern Development 1.0, the Company and Pattern Development 2.0 (the “ Original Non-Competition Agreement ”), which was filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 001-36087) filed on December 14, 2016 (the “ Original Non-Competition Agreement 8-K ”) and is incorporated by reference herein. The Second A&R Non-Competition Agreement, among other things, grants Pattern Development 2.0 the exclusive right to pursue all power generation, storage or transmission development projects in the US, Canada and Mexico that have not completed construction, other than (a) development activities related to the expansion, improvement, enhancement, or protection of an existing power generation, transmission or storage facility that we may, directly or indirectly, manage or majority own from time to time; (b) continued development by Pattern Development 1.0 of projects not transferred to Pattern Development 2.0; (c) development projects acquired by us or PSP Investments pursuant to the A&R PRAs and (d) projects that have achieved or issued, or are likely to achieve or issue within thirty days of closing an acquisition of such project, readiness for construction financing or issuance of full notice to proceed. The Second A&R Non-Competition Agreement does not restrict us from acquiring any company or business that is principally engaged in the business of owning and operating renewable energy facilities. However, if we desire to purchase a portfolio of projects that contains a mix of development, construction and/or operating projects, we are required to reasonably cooperate with Pattern Development 2.0 to divide such portfolio so that Pattern Development 2.0 may acquire the development projects in such portfolio and we may acquire the construction and operating projects in such portfolio. At any time that Tokyo, Japan-based Green Power Investment Corporation (“ Green Power ”) is majority owned by either us, Pattern Development 1.0 or Pattern Development 2.0, the Second A&R Non-Competition Agreement grants such majority owner exclusive development rights over power generation, storage or transmission projects in Japan (subject to the same exceptions set forth above in clauses (a) through (d) and the above provisions regarding operating businesses and the division of project portfolios). Pattern Development 1.0 currently owns a majority interest in Green Power.

 

The Second A&R Non-Competition Agreement shall terminate (a) with respect to Pattern Development 1.0, upon the termination of our collective purchase rights under the A&R 1.0 PRA and (b) with respect to Pattern Development 2.0, upon the termination of our collective purchase rights under the A&R 2.0 PRA or the earlier

 

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wind-up of Pattern Development 2.0 or the valid rejection by Pattern Development 2.0 of three or more First Rights Project Offers (as defined in the A&R 2.0 PRA) representing a cumulative net capacity of at least 600 megawatts.

 

The Second A&R Non-Competition Agreement was recommended by the Conflicts Committee of our Board of Directors, which is comprised solely of independent directors, for approval by our Board of Directors, and was subsequently approved by our Board of Directors.

 

A copy of the Second A&R Non-Competition Agreement is attached as Exhibit 10.3 hereto and is incorporated by reference herein. The foregoing description of the Original Non-Competition Agreement and the Second A&R Non-Competition Agreement do not purport to be complete and are qualified in their entirety by reference to the Original Non-Competition Agreement 8-K and Exhibit 10.3 hereto, respectively.

 

Amended and Restated Multilateral Management Services Agreement

 

On June 16, 2017, we entered into the Amended and Restated Multilateral Management Services Agreement (the “ A&R MMSA ”) that amended and restated that certain Multilateral Management Services Agreement, dated as of December 8, 2016, by and among the Company, Pattern Development 1.0 and Pattern Development 2.0 (the “ Original MMSA ”), which was filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 001-36087) filed on December 14, 2016 (the “ Original MMSA 8-K ”) and is incorporated by reference herein.

 

The A&R MMSA amends certain provisions of the Original MMSA in order to, among other things, (a) allow Pattern Development 2.0 to, in the event of a failure by the service provider to provide adequate resources and services as set forth therein, (i) in the case of a failure by Pattern Development 1.0, take over the performance of the management services contemplated to be performed by Pattern Development 1.0 thereby, (ii) cause the service provider to hire additional development personnel, (iii) in the case of a failure by us, suspend us from taking on certain further developments or (iv) initiate a wind down of Pattern Development 2.0; (b) allow Pattern Development 2.0 to effect a PEG 2 Transition (as defined therein) (whereby Pattern Development 2.0 can cause Pattern Development 1.0 to cause its employees to become employees of Pattern Development 2.0), provided that Pattern Development 2.0 shall not exercise such right if we have provided Pattern Development 2.0 with written notice that we intend to effect a PEG 1 Employee Reintegration (as defined therein and described below) within six months, (c) amend the circumstances in which we can effect a PEG 1 Employee Reintegration (whereby we can cause Pattern Development 1.0 to cause its employees to become our employees) by removing the December 31, 2017 expiration date for such right and instead allowing us to effect a PEG 1 Employee Reintegration after the earliest to occur of (x) the date that Pattern Development 1.0 provides us with written notice that it will complete a wind-down within six months, (y) June 16, 2020 and (z) a PEG 1 Services Failure (as defined therein) ; (d) allow us to effect a PEG 2 Employee Reintegration (as defined therein) (whereby we can require Pattern Development 2.0 to cause its employees to become our employees) at any time after the earliest to occur of (A) the date Pattern Development 2.0 notifies Pattern Development 1.0 it will exercise its right to cause a PEG 2 Transition (as described above) but before such PEG 2 Transition occurs, (B) June 16, 2020, (C) a PEG 2 Services Failure (as defined therein) and (D) the initiation of a wind-up of Pattern Development 2.0 ; (e) provide us the exclusive right, but not the obligation, to provide services pursuant to the MOMAs and PAAs (each as defined therein) for projects developed by Pattern Development 1.0 or Pattern Development 2.0 and (f) amend the term of the agreement such that the A&R MMSA survives, with respect to each of Pattern Development 1.0 and Pattern Development 2.0, until a wind-up of the applicable entity pursuant to its governing documents, unless terminated earlier pursuant to the terms of the A&R MMSA.

 

The A&R MMSA was recommended by the Conflicts Committee of our Board of Directors, which is comprised solely of independent directors, for approval by our Board of Directors, and was subsequently approved by our Board of Directors.

 

A copy of the A&R MMSA is attached as Exhibit 10.4 hereto and is incorporated by reference herein. The foregoing description of the Original MMSA and A&R MMSA do not purport to be complete and are qualified in their entirety by reference to the Original MMSA 8-K and Exhibit 10.4 hereto, respectively.

 

Investment in PEGH 2

 

On June 16, 2017, we entered into the Second Amended and Restated Agreement of Limited Partnership of PEGH 2, dated as of June 16, 2017, by and among PEGH 2, the Class A Limited Partners set forth therein and the

 

 

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Class B Limited Partners set forth therein (the “ A&R PEGH 2 LPA ”). Pattern Development 2.0 is a wholly owned subsidiary of PEGH 2. In July 2017, PEGH 2 is expected to receive funds pursuant to a capital call under the A&R PEGH 2 LPA (the “ Initial PEGH 2 Capital Call ”) from new limited partners (including us) in PEGH 2 (the “ New PEGH 2 Investors ”) to, among other things, (a) redeem approximately 49% of the total ownership interests held by existing limited partners in PEGH 2 (the “ Legacy PEGH 2 Investors ”), (b) acquire certain development assets from Pattern Development 1.0, and (c) provide working capital for general business purposes. After the funding of the Initial PEGH2 Capital Call (in which only the New PEGH 2 Investors will participate) and the consummation of the foregoing redemption of the Legacy PEGH 2 Investors’ ownership interests, the Legacy PEGH 2 Investors will hold approximately 31% of the total ownership interests in PEGH 2 (with the remaining approximately 69% of the total ownership interests in PEGH 2 being held by the New PEGH 2 Investors). In connection with the Initial PEGH2 Capital Call, we anticipate making an initial capital contribution to PEGH 2 of approximately $60,000,000 (equating to approximately 29% of the total Initial PEGH 2 Capital Call), in exchange for an approximately 20% ownership interest in PEGH 2 (equating to approximately 29% of the 69% ownership interest in PEGH 2 held by the New PEGH 2 Investors immediately after the Initial PEGH 2 Capital Call). Under the A&R PEGH 2 LPA, we have also committed to contribute up to an additional approximately $240,000,000 to PEGH 2 in one or more subsequent rounds of financing, which could result in our ownership interest in PEGH 2 increasing to up to approximately 29%. If we do not participate in such subsequent rounds of financing, our ownership interest in PEGH 2 may be diluted on a pro rata basis based on fair market value. We also have certain rights under the A&R PEGH 2 LPA to cause the dissolution of PEGH 2, including (a) at any time following the fifth anniversary of the date PEGH 2 issues its first capital call on or after June 16, 2017 and (b) at any time following PEGH 2’s board of directors’ rejection of three or more of our First Rights Project Offers or First Rights PEG 2 LP Offers (each as defined in the A&R 2.0 PRA) representing a cumulative net capacity of at least 600 megawatts.

 

The entry into the A&R PEGH 2 LPA was recommended by the Conflicts Committee of our Board of Directors, which is comprised solely of independent directors, for approval by our Board of Directors, and was subsequently approved by our Board of Directors.

 

A copy of the A&R PEGH 2 LPA is attached as Exhibit 10.5 hereto and is incorporated by reference herein. The foregoing description of the A&R PEGH 2 LPA does not purport to be complete and is qualified in its entirety by reference to such exhibit.

 

Joint Venture Agreement

 

On June 16, 2017, we entered into a Joint Venture Agreement (the “ Joint Venture Agreement ”) with PSP Investments, pursuant to which, among other things, (a) PSP Investments will have the right to co-invest up to an aggregate amount of approximately $500,000,000 (the “ PSP Investments Co-Investment Amount ”) alongside us in energy projects we may acquire pursuant to our rights under the A&R PRAs (with PSP Investments acquiring, at its election on a project-by-project basis, either (x) 30% or (y) a greater percentage that we may elect to offer to PSP Investments, of our combined ownership interest in such project); (b) PSP Investments will reasonably cooperate with us to complete third party acquisitions and to arrange for or provide bridge loans and construction financing for certain projects that PSP Investments will invest in alongside us (although PSP Investments has no commitment to provide any such financing) and (c) we may add a person that has been designated by PSP Investments to our Board of Directors promptly following the PSP Compliance Date (as defined therein). The purchase price paid by PSP Investments under each of the Meikle PSA, the MSM PSA and the PH2 PSA (each defined below) will be applied towards the PSP Investments Co-Investment Amount. Under the Joint Venture Agreement we have also agreed to, in certain limited circumstances, allow PSP Investments to cause the early termination of contracts between PEGI and a jointly owned project, including the Sponsor Services Agreement (defined below) and the applicable MOMAs and PAAs (as defined therein) and have waived any early termination fees in those circumstances. In connection with the Joint Venture Agreement and the PEGI Share Acquisition (defined below), PSP Investments also agreed to a customary “standstill” for a period of twelve months.

 

The Joint Venture Agreement was recommended by the Conflicts Committee of our Board of Directors, which is comprised solely of independent directors, for approval by our Board of Directors, and was subsequently approved by our Board of Directors.

 

A copy of the Joint Venture Agreement is attached as Exhibit 10.6 hereto and is incorporated by reference herein. The foregoing description of the Joint Venture Agreement does not purport to be complete and is qualified in its entirety by reference to such exhibit.

 

Sponsor Services Agreement

 

On June 16, 2017 , we entered into a Sponsor Services Agreement with PSP Investments (the “ Sponsor Services Agreement ”), pursuant to which we will provide certain mutually agreed services to PSP Investments and its affiliates with respect to the administration of the joint ownership of the project companies that PSP Investments invests in alongside us pursuant to the Joint Venture Agreement in exchange for certain fees set forth in the Sponsor Services Agreement.

 

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The Sponsor Services Agreement was recommended by the Conflicts Committee of our Board of Directors, which is comprised solely of independent directors, for approval by our Board of Directors, and was subsequently approved by our Board of Directors.

 

A copy of the Sponsor Services Agreement is attached as Exhibit 10.7 hereto and is incorporated by reference herein. The foregoing description of the Sponsor Services Agreement does not purport to be complete and is qualified in its entirety by reference to such exhibit.

 

Meikle and MSM Purchase and Sale Agreements

 

On June 16, 2017, we entered into (a) a Purchase and Sale Agreement (the “ Meikle PSA ”) by and among the Company, Vertuous Energy Canada Inc. (“ Vertuous Canada ”) (a wholly owned subsidiary of PSP Investments) and Pattern Development 1.0 and (b) a Purchase and Sale Agreement (the “ MSM PSA ”) by and among the Company, Vertuous Canada and Pattern Development 1.0.

 

Upon the terms and subject to the conditions set forth in the Meikle PSA, at the closing (a) we (or one of our wholly owned subsidiaries) will purchase from affiliates of Pattern Development 1.0 a 50.99% limited partner interest in Meikle Wind Energy Limited Partnership (the “ Meikle Project Company ”) and 70% of the issued and outstanding shares of Meikle Wind Energy Corp. (“ Meikle Corp ”) (which holds a 0.02% general partner interest in the Meikle Project Company) in exchange for aggregate consideration of CAD $85,425,000 (subject to certain adjustments) and (b) Vertuous Canada will purchase from affiliates of Pattern Development 1.0 a 48.99% limited partner interest in the Meikle Project Company and 30% of the issued and outstanding shares of Meikle Corp in exchange for aggregate consideration of CAD $82,075,000 (subject to certain adjustments) .  The Meikle Project Company operates the approximately 179 megawatt wind farm located in the Peace River Regional District of British Columbia, Canada, which achieved commercial operations in the first quarter of 2017.  Immediately after the closing, our owned capacity with respect to the wind farm will be approximately 91 megawatts.

 

Upon the terms and subject to the conditions set forth in the MSM PSA, at the closing (a) we (or one of our wholly owned subsidiaries) will purchase from affiliates of Pattern Development 1.0 (i) a 50.99% limited partner interest in a newly-formed limited partnership (“ New MSM LP Holdco ”) (which, following closing, will hold 100% of the economic interests in Mont Sainte-Marguerite Wind Farm LP (the “ MSM Project Company ”)), (ii) 70% of the issued and outstanding shares of Pattern MSM GP Holdings Inc. (“ MSM Corp ”) (which, following the closing, will hold a 0.02% general partner interest in New MSM LP Holdco) and (iii) a 70% interest in Pattern Development MSM Management ULC (“ MSM ULC ”), in exchange for aggregate consideration of CAD $53,040,000 (subject to certain adjustments) and (b) Vertuous Canada will purchase from affiliates of Pattern Development 1.0 (i) a 48.99% limited partner interest in New MSM LP Holdco, (ii) 30% of the issued and outstanding shares of MSM Corp and (iii) a 30% interest in MSM ULC, in exchange for aggregate consideration of CAD $50,960,000 (subject to certain adjustments).  The MSM Project Company operates the approximately 143 megawatt wind farm located in the Chaudière-Appalaches region south of Québec City, Canada, which is expected to achieve commercial operation in late 2017.  Immediately after the closing, our owned capacity with respect to the wind farm will be approximately 73 megawatts.

 

The parties’ obligations to consummate the transactions contemplated by each of the Meikle PSA and the MSM PSA, respectively, are subject to the satisfaction or waiver of various customary conditions, including, among others (a) approval under the Competition Act (Canada) and of the counterparties to power purchase agreements to which the Meikle Project Company and the MSM Project Company are parties, (b) no violation of governmental rules, and no order of any court or administrative agency being in effect which restrains or prohibits the transactions contemplated thereby and (c) subject to certain exceptions, the accuracy of the representations of the parties set forth therein.

 

Each of the Meikle PSA and the MSM PSA, respectively, includes customary representations by the parties thereto, including as to due authorization, non-contravention, governmental consents and approvals, enforceability, ownership and title, no litigation or adverse claims, tax matters and with respect to the underlying wind farm.  Each of the Meikle PSA and the MSM PSA, respectively, provides for customary indemnification by the parties thereto for breaches of representations or covenants, which indemnification is subject to customary limitations including, among other things, a cap and time limits.

 

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Each of the Meikle PSA and the MSM PSA, respectively, was recommended by the Conflicts Committee of our Board of Directors, which is comprised solely of independent directors, for approval by our Board of Directors, and was subsequently approved by our Board of Directors.

 

A copy of the Meikle PSA is attached as Exhibit 10.8 hereto and is incorporated by reference, and a copy of the MSM PSA is attached as Exhibit 10.9 hereto and is incorporated by reference.  The foregoing description of each of the Meikle PSA and the MSM PSA, respectively, does not purport to be complete and is qualified in its entirety by reference to the applicable exhibit.

 

PH2 Purchase and Sale Agreement

 

On June 16, 2017, we entered into a Purchase and Sale Agreement (the “ PH2 PSA ”) with Vertuous Energy LLC (“ Vertuous ”) (a wholly owned subsidiary of PSP Investments).

 

Upon the terms and subject to the conditions set forth in the PH2 PSA, at the closing, we (or one or more of our affiliates) will sell to Vertuous a 98% membership interest in a newly-formed limited liability company that will hold 50% of the Class B membership interests in Panhandle Wind Holdings 2 LLC (“ PH2 Holdings ”) (which holds 100% of the membership interests in Pattern Panhandle Wind 2 LLC (the “ PH2 Project Company ”)) for consideration of $58,800,000 (subject to certain adjustments).  The PH2 Project Company operates the approximately 182 megawatt wind farm located in Carson County, Texas, which achieved commercial operation in the fourth quarter of 2014.  Immediately after the closing, our owned capacity with respect to the wind farm will be approximately 75 megawatts.

 

The parties’ obligations to consummate the transactions contemplated by the PH2 PSA are subject to the satisfaction or waiver of various customary conditions, including, among others (a) approval by the Committee on Foreign Investment in the United States and the Public Utility Commission of Texas and the holders of the Class A membership interests in PH2 Holdings, (b) no violation of governmental rules, and no order of any court or administrative agency being in effect which restrains or prohibits the transactions contemplated thereby and (c) subject to certain exceptions, the accuracy of the representations of the parties set forth therein.

 

The PH2 PSA includes customary representations by the parties thereto, including as to due authorization, non-contravention, governmental consents and approvals, enforceability, ownership and title, no litigation or adverse claims, tax matters and with respect to the underlying wind farm.  The PH2 PSA provides for customary indemnification by the parties thereto for breaches of representations or covenants, which indemnification is subject to customary limitations including, among other things, a cap and time limits.

 

The PH2 PSA was recommended by the Conflicts Committee of our Board of Directors, which is comprised solely of independent directors, for approval by our Board of Directors, and was subsequently approved by our Board of Directors.

 

A copy of the PH2 PSA is attached as Exhibit 10.10 hereto and is incorporated by reference.  The foregoing description of the PH2 PSA does not purport to be complete and is qualified in its entirety by reference to such exhibit.

 

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

 

During the course of planning and structuring the transactions contemplated by the agreements described in Item 1.01, in light of the additional workload required by each of Michael J. Lyon and Esben W. Pedersen, who serve as the Company’s chief financial officer and chief investment officer, respectively, the Nominating, Governance, and Compensation Committee and our Board of Directors initiated a review of such officers’ compensation arrangements. Such review considered the following factors:

 

· A consideration of the base salaries of Mr. Lyon and Mr. Pedersen compared to persons holding comparable positions at the Company’s peers;

 

· The leadership efforts and additional workload placed upon Mr. Lyon and Mr. Pedersen in connection with the planning, structuring, negotiation, and execution of the agreements described under Item 1.01 and the consummation of the transactions contemplated thereby; and

 

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· A desire to continue to motivate and retain Mr. Lyon and Mr. Pedersen.

 

After consideration, a determination was made to make the following adjustments for each of Mr. Lyon and Mr. Pedersen effective and contingent upon the execution of the agreements described under Item 1.01 of this Current Report on Form 8-K:

 

· An increase in base salary to $330,000 per annum;

 

· A special one-time award of vested restricted shares amounting to $250,000 to be issued under the Company’s Equity Incentive Award Plan. The number of shares is determined based upon the Company’s trailing 20 trading day volume weighted average share price for the period ending on and including one trading day prior to the execution of the agreements described under Item 1.01; and

 

· A special one-time cash bonus of $250,000.

 

Item 7.01. Regulation FD Disclosure.

 

On June 19, 2017, we issued a press release and made available supplemental slides. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K, and a copy of the supplemental slides is furnished as Exhibit 99.2 to this Current Report on Form 8-K.

 

The information included in this Current Report on Form 8-K under this Item 7.01 (including Exhibit 99.1 and Exhibit 99.2 hereto) is being “furnished” and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18, nor shall it be incorporated by reference into a filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly set forth by specific reference in such filing. The information included in this Current Report on Form 8-K under this Item 7.01 (including Exhibit 99.1 and Exhibit 99.2 hereto) will not be deemed an admission as to the materiality of any information required to be disclosed solely to satisfy the requirements of Regulation FD.

 

Item 8.01. Other Events.

 

Share Purchase Agreement and Assignment of Registration Rights

 

On June 16, 2017, PSP Investments acquired 8.7 million shares, or approximately 9.9%, of the Company’s outstanding Class A common stock from Pattern Development Finance Company LLC, a wholly owned subsidiary of Pattern Development 1.0 (the “ PEGI Share Acquisition ”). In connection with the PEGI Share Acquisition, Pattern Development 1.0 assigned to PSP Investments its existing piggyback registration rights with respect to such shares under the Registration Rights Agreement between Pattern Development 1.0 and the Company, which was filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-36087) filed on October 2, 2013 and is incorporated by reference herein.

 

Expanded Identified Right of First Offer Projects

 

Pattern Development has expanded its pipeline to 10 GW of development projects, which are subject to our Project Rights.

 

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From Pattern Development’s expanded pipeline, an additional 275 MW of owned capacity has been added to the identified right of first offer list as of June 16, 2017, for a total of 910 MW.

 

Since its initial public offering, we have purchased, or agreed to purchase, 1,358 MW from Pattern Development 1.0 and in aggregate grown the identified right of first offer list from 746 MW to more than 2 GW (including projects that have already been acquired). Below is the current updated list of the identified right of first offer projects owned by Pattern Development that we expect to acquire from Pattern Development 1.0 and Pattern Development 2.0, as applicable, in connection with our Project Rights:

 

                        Capacity (MW)
Identified
ROFO Projects
  Status   Location   Construction
Start (1)
  Commercial
Operations  (2)
  Contract
Type
  Rated (3)   Pattern
Development-
Owned (4)
Pattern Development 1.0 Projects
Kanagi Solar   Operational   Japan   2014   2016   PPA   14   6
Futtsu Solar   Operational   Japan   2014   2016   PPA   42   19
Conejo Solar (5)   Operational   Chile   2015   2016   PPA   104   104
Belle River   In construction   Ontario   2016   2017   PPA   100   43
Ohorayama   In construction   Japan   2016   2018   PPA   33   31
North Kent   In construction   Ontario   2017   2018   PPA   100   35
Henvey Inlet   Late stage development   Ontario   2017   2018   PPA   300   150
Tsugaru   Late stage development   Japan   2017   2020   PPA   122   91
El Cabo   Late stage   U.S.   2016   2017   PPA   298   125
Sumita   Late stage   Japan   2019   2021   PPA   100   50
Pattern Development 2.0 Projects
Crazy Mountain   Late stage   U.S.   2018   2018   PPA   80   68
Grady   Late stage development   New Mexico   2018   2019   PPA   220   188
                        1,513   910
                               
(1) Represents year of actual or anticipated commencement of construction.

 

(2) Represents year of actual or anticipated commencement of commercial operations.

 

(3) Rated capacity represents the maximum electricity generating capacity of a project in MW. As a result of wind and other conditions, a project or a turbine will not operate at its rated capacity at all times and the amount of electricity generated will be less than its rated capacity. The amount of electricity generated may vary based on a variety of factors.

 

(4) Pattern Development-Owned capacity represents the maximum, or rated, electricity generating capacity of the project in MW multiplied by Pattern Development 1.0’s or Pattern Development 2.0’s percentage ownership interest in the distributable cash flow of the project.

 

(5) From time to time, we conduct strategic reviews of our markets. We have been conducting a strategic review of the market, growth, and opportunities in Chile. In the event we believe we can utilize funds that have already been invested in Chile or funds that might otherwise be invested in Chile in a more productive manner elsewhere that could generate a higher return on investment, we may decide to exit Chile for other opportunities with greater potential. In addition, Pattern Development 1.0 is also concurrently exploring strategic alternatives for its assets in Chile.

 

Item 9.01. Financial Statements and Exhibits.

 

Exhibit Number Description
   
10.1 Amended and Restated Purchase Rights Agreement by and among Pattern Development 1.0, the Company, Pattern Energy Group Holdings LP (solely with respect to Article IV therein) and Pattern Energy GP LLC, dated as of June 16, 2017
   
10.2 Amended and Restated Purchase Rights Agreement by and among Pattern Development 2.0, the Company, Pattern Energy Group Holdings 2 LP (solely with respect to Article III therein) and Pattern Energy Group Holdings 2 GP LLC, dated as of June 16, 2017
   
10.3 Second Amended and Restated Non-Competition Agreement by and among Pattern Development 1.0, the Company and Pattern Development 2.0, dated as of June 16, 2017
   
10.4 Amended and Restated Multilateral Management Services Agreement among by and among the Company, Pattern Development 1.0 and Pattern Development 2.0, dated as of June 16, 2017
   
10.5 Second Amended and Restated Limited Partnership Agreement of PEGH 2, dated as of June 16, 2017
   
10.6 Joint Venture Agreement between PSP Investments and the Company, dated as of June 16, 2017

 

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10.7 Sponsor Services Agreement between the Company and PSP Investments, dated as of June 16, 2017
   
10.8 Purchase and Sale Agreement by and among the Company, Vertuous Canada and Pattern Development 1.0, dated as of June 16, 2017
   
10.9 Purchase and Sale Agreement by and among the Company, Vertuous Canada and Pattern Development 1.0, dated as of June 16, 2017
   
10.10 Purchase and Sale Agreement by and among Vertuous and the Company, dated as of June 16, 2017
   
99.1 Press Release issued by the Company, dated June 19, 2017.
   
99.2 Supplemental slides, dated June 19, 2017.
   

——————

 

 

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SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, Pattern Energy Group Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: June 16, 2017

 

  PATTERN ENERGY GROUP INC.
   
   
  By: /s/ Esben Pedersen
    Name: Esben Pedersen
    Title: Chief Investment Officer

 

 

 

 

11  

 

Exhibit 10.1

 

 

 

 

 

AMENDED AND RESTATED

PURCHASE RIGHTS AGREEMENT

 

BY AND AMONG

 

PATTERN ENERGY GROUP LP,

 

PATTERN ENERGY GROUP INC.

 

AND

 

(SOLELY WITH RESPECT TO ARTICLE IV)

 

PATTERN ENERGY GROUP HOLDINGS LP

 

AND

 

PATTERN ENERGY GP LLC

 

 

 

 

 

 

 

 

 
 

TABLE OF CONTENTS

 

Page

 

Article I. DEFINITIONS 1
Section 1.1. Definitions   1
Article II. [Intentionally Omitted]   4
Article III. PROJECT PURCHASE RIGHT OF FIRST OFFER   4
Section 3.1. Project Purchase Right of First Offer   4
Section 3.2. Procedures for Rights of First Offer   5
Section 3.3. Term of the Project Purchase Right of First Offer   7
Article IV. PEG LP PURCHASE RIGHT OF FIRST OFFER   7
Section 4.1. PEG LP Purchase Right of First Offer   7
Section 4.2. Procedures for Rights of First Offer.   7
Section 4.3. Term of the PEG LP Purchase Right of First Offer   8
Article V. MISCELLANEOUS   8
Section 5.1. Choice of Law; Submission To Jurisdiction; Waiver of Jury Trial   8
Section 5.2. Enforcement   9
Section 5.3. Notice   9
Section 5.4. Entire Agreement   9
Section 5.5. Waiver; Effect of Waiver or Consent   9
Section 5.6. Amendment or Modification   10
Section 5.7. Assignment   10
Section 5.8. Counterparts   10
Section 5.9. Severability   10
Section 5.10. Rules of Construction   10
Section 5.11. Further Assurances   10
Section 5.12. Laws and Regulations   11
Section 5.13. No Third Party Beneficiaries   11

Exhibit A: Form of Purchase and Sale Agreement
Exhibit B: Pattern Energy Group Holdings 2 LP Designated Projects

 

 
 

AMENDED AND RESTATED
PURCHASE RIGHTS AGREEMENT

 

THIS AMENDED AND RESTATED PURCHASE RIGHTS AGREEMENT is entered into on, and effective as of June 16, 2017, among Pattern Energy Group LP, a Delaware limited partnership (“ PEG LP ”), Pattern Energy Group Inc., a Delaware corporation (“ PEG Inc. ”) and, solely with respect to Article IV , Pattern Energy Group Holdings LP, a Delaware limited partnership, and Pattern Energy GP LLC, a Delaware limited liability company (together, the “ PEG LP Partners ”).

 

R E C I T A L S:

 

1.                   The Parties desire by their execution of this Agreement to evidence their understanding, as more fully set forth in Article III , with respect to PEG Inc.’s right of first offer relating to power projects sold by PEG LP.

 

2.                   The Parties desire by their execution of this Agreement to evidence their understanding, as more fully set forth in Article IV , with respect to PEG Inc.’s right of first offer relating to a sale of PEG LP or all or substantially all of PEG LP’s assets.

 

3.                   The Parties previously entered into the Purchase Rights Agreement, effective as of October 2, 2013 (the “ Initial Agreement ”), and desire to amend the Initial Agreement in its entirety.

 

In consideration of the premises and the covenants, conditions, and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby amend and restate the Initial Agreement in its entirety and further agree as follows:

 

Article I.
DEFINITIONS

 

Section 1.1.           Definitions . As used in this Agreement, the following terms shall have the respective meanings set forth below:

 

Affiliate ” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries Controls, is Controlled by or is under common Control with, the Person in question. 

 

Agreement ” means this Amended and Restated Purchase Rights Agreement, as it may be amended, modified, or supplemented from time to time in accordance with Section 5.6 hereof.

 

Applicable Law ” means any applicable constitutional provision, statute, act, code, law, regulation, rule, ordinance, Order, decree, ruling, proclamation, resolution, judgment, decision, declaration, or interpretative or advisory opinion or letter, of a Governmental Authority having valid jurisdiction.

 

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Business Day ” means a day other than a Saturday, Sunday or any other day on which commercial banks in Toronto, Ontario or New York, NY are authorized or required by Applicable Law to close. Any event the scheduled occurrence of which would fall on a day that is not a Business Day shall be deferred until the next succeeding Business Day.

 

Conejo Project ” means the approximately 122MW capacity solar project located in the Antofagasta region of northern Chile that is owned by PEG LP as of the date hereof.

 

Construction-Ready Project ” means any Project that (i) is (A) ready to close construction financing with commercial financing parties or (B) ready to, or has, issued a full notice to proceed under an Engineering, Procurement and Construction contract; or (ii) (x) has all material project agreements required to construct, operate and maintain the Project (including an interconnection agreement and a long-term power sales agreement at pricing that supports the closing of financing for construction of the Project), (y) has all requisite real estate rights and (z) has obtained all governmental approvals required for that stage of construction and such governmental approvals are in full force and effect.

 

Control ” or “ Controlled ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

 

Equity Interests ” means all shares, capital stock, partnership or limited liability company interests, membership interests, units, participations, distribution rights or similar equity interests issued by any Person, however designated.

 

Final Offer Price ” has the meaning given such term in Section 3.2(b) .

 

Final Project Offeror ” has the meaning given such term in Section 3.2(c) .

 

Final Rights Acceptance Period ” has the meaning given such term in Section 3.2(b) .

 

Final Rights Offer Period ” has the meaning given such term in Section 3.2(b) .

 

Final Rights Project Offer ” has the meaning given such term in Section 3.2(b) .

 

First Rights Acceptance Period ” has the meaning given such term in Section 3.2(b) .

 

First Rights Offer Period ” has the meaning given such term in Section 3.2(b) .

 

First Rights PEG LP Offer ” has the meaning given such term in Section 4.2(b) .

 

First Rights Project Declination ” has the meaning given such term in Section 3.2(b) .

 

First Rights Project Offer ” has the meaning given such term in Section 3.2(b) .

 

Governmental Authority ” means:

 

(i) any government, whether national, federal, provincial, state, territorial, municipal or local (whether administrative, legislative, executive or otherwise);

 

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(ii) any agency, authority, ministry, department, regulatory body, court, central bank, bureau, board or other instrumentality having legislative, judicial, taxing, regulatory, prosecutorial or administrative powers or functions of, or pertaining to, government;

 

(iii) any court, commission, individual, arbitrator, arbitration panel or other body having adjudicative, regulatory, judicial, quasi-judicial, administrative or similar functions; and

 

(iv) any other body or entity created under the authority of or otherwise subject to the jurisdiction of any of the foregoing, including any stock or other securities exchange or professional association.

 

Initial Agreement ” is defined in the introduction to this Agreement.

 

Operational Project ” means any Project that has: (i) achieved commercial operations in accordance with the terms of its applicable construction agreement, power sales agreement or interconnection agreement, as the case may be; and (ii) generated operating revenue from the sale of electricity or transmission services under its applicable power sales agreement or transmission services agreement.

 

Order ” means any order, directive, judgment, decree, injunction, decision, ruling, award or writ of any Governmental Authority.

 

Parties ” means the parties to this Agreement and their successors and permitted assigns.

 

PEG Inc. ” is defined in the introduction to this Agreement.

 

PEG Inc. Entities ” means PEG Inc. and any Person Controlled by PEG Inc.

 

PEG LP ” is defined in the introduction to this Agreement.

 

PEG LP Entities ” means PEG LP and its Subsidiaries, and any other Person Controlled, directly or indirectly, by PEG LP, in each case, other than the PEG Inc. Entities.

 

PEG LP Interests ” has the meaning given such term in Section 4.2(a) .

 

PEG LP Offer Price ” has the meaning given such term in Section 4.2(b) .

 

PEG LP Partners ” is defined in the introduction to this Agreement.

 

PEG LP Transfer ” has the meaning given such term in Section 4.1 .

 

Permitted Assignee ” means Public Sector Pension Investment Board, an entity having its registered office at 1250 Rene-Levesque Blvd. West, Suite 1400, Montreal, Quebec, H3B 5E9, Canada, or any of its Affiliates.

 

Person ” means an individual, corporation, partnership, joint venture, trust, limited liability company, unlimited liability company, unincorporated organization or any other entity.

 

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Project ” has the meaning given such term in Section 3.1 .

 

Project Offer Price ” has the meaning given such term in Section 3.2(b) .

 

Project Transfer Notice ” has the meaning given such term in Section 3.2(a) .

 

Subject Project Interest ” has the meaning given such term in Section 3.2(a) .

 

Subsidiary ” or “ Subsidiaries ” means, with respect to any Person, any corporation, limited liability company, unlimited liability company, joint venture or partnership of which such Person (a) beneficially owns, either directly or indirectly, fifty percent (50%) or more of (i) the total combined voting power of all classes of voting securities of such entity, (ii) the total combined Equity Interests, or (iii) the capital or profit interests, in the case of a partnership; or (b) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.

 

Third Party Advisor ” means an investment banking firm or other expert advisor, in each case, mutually agreed upon by PEG Inc. and PEG LP.

 

Transfer ” means any direct or indirect transfer, assignment, sale or other disposition, whether through the direct or indirect transfer, assignment, sale or other disposition of Equity Interests or assets, by merger or otherwise; provided , however , that such term shall not include: (a) transfers, assignments, sales or other dispositions from a PEG LP Entity to another PEG LP Entity; (b) grants of security interests in or mortgages or liens in favor of a bona fide third party lender in the business of providing debt financing; or (c) transfers, assignments, sales or other dispositions as part of a transaction with a tax equity counterparty (other than PEG LP, PEG Inc. or their respective Affiliates), such as sale-leaseback transactions or partnership flip transactions (excluding, for the avoidance of doubt, any transfer of the interest retained by the PEG LP Entity that entered into such tax equity financing).

 

Transferee ” means the recipient of a Transfer.

 

Article II.
[Intentionally Omitted]

 

Article III.
PROJECT PURCHASE RIGHT OF FIRST OFFER

 

Section 3.1.           Project Purchase Right of First Offer . For the term set forth in Section 3.3 , PEG LP hereby grants PEG Inc. a right of first offer on any proposed Transfer by any PEG LP Entity of all or any portion of such PEG LP Entity’s ownership interest in any power generation or transmission facility or project now or hereafter owned in whole or in part by any PEG LP Entity in any stage, including in development, construction or commercial operation (each a “ Project ”) (other than any such facility or project that has been designated, as of the date hereof, to be transferred to Pattern Energy Group Holdings 2 LP or its Subsidiaries, a list of which is set forth as Exhibit B ), in accordance with Section 3.2 . PEG LP will take all actions necessary to cause such right of first offer to be exercisable in accordance with this Article III ,

 

4

 

including by causing each PEG LP Entity to take any actions necessary to facilitate and enforce such exercise and to consummate the transactions contemplated by this Article III .

 

Section 3.2.           Procedures for Rights of First Offer .

 

(a)                 In the event that any PEG LP Entity proposes to Transfer all or any portion of its ownership interest in any Project, PEG LP shall give PEG Inc. written notice within a commercially reasonable amount of time (that is intended to be sufficiently early to permit the Parties to exercise their rights set forth in this Section 3.2 ) setting forth the details of the proposed Transfer, including a description of the Project (including the mega-wattage, stage of development or construction, material counterparties, details of the project contracts and other material information with respect to the Project that an acquiror thereof would reasonably be anticipated to request in order to reasonably diligence and assess such Project), the interest to be Transferred (the “ Subject Project Interest ”) and any other material terms of the proposed Transfer reasonably known or anticipated by PEG LP (a “ Project Transfer Notice ”).

 

(b)                Within 20 calendar days after delivery of a Project Transfer Notice (a “ First Rights Offer Period ”), PEG Inc. shall either: (i) deliver a written offer to PEG LP to purchase the Subject Project Interest setting forth PEG Inc.’s offer price (a “ Project Offer Price ”) and other material terms and conditions on which PEG Inc. proposes to purchase such Subject Project Interest (a “ First Rights Project Offer ”) or (ii) deliver a written notice to PEG LP that PEG Inc. will not make a First Rights Project Offer in response to the Project Transfer Notice (a “ First Rights Project Declination ”). Unless a First Rights Project Offer is rejected pursuant to written notice from PEG LP delivered to PEG Inc. within five (5) Business Days following the delivery of a First Rights Project Offer (the “ First Rights Acceptance Period ”), such First Rights Project Offer shall be deemed to have been accepted by PEG LP, and PEG Inc. shall have the right to acquire the Subject Project Interest, and PEG LP shall transfer the Subject Project Interest to PEG Inc., on the terms set forth in such First Rights Project Offer, and subject to documentation reasonably agreed between the parties based on the form attached hereto as Exhibit A .

 

(c)                 In the event that (A) PEG LP rejects a First Rights Project Offer by delivering notice thereof to PEG Inc. before the expiration of the First Rights Acceptance Period or (B) other than with respect to the Conejo Project, PEG Inc. fails to deliver either a First Rights Project Offer or a First Rights Project Declination or delivers a First Rights Project Declination, in each case before the expiration of the First Rights Offer Period, PEG Inc. or its Permitted Assignee (a “ Final Project Offeror ”) shall have an additional opportunity, exercisable within the thirty (30) calendar day period following, in the case of (A), the date that the rejection of the First Rights Project Offer is delivered to PEG Inc. or, in the case of (B), the expiration of the First Rights Offer Period or earlier delivery of a First Rights Project Declination to PEG LP (a “ Final Rights Offer Period ”), to deliver a written offer to PEG LP to purchase the Subject Project Interest setting forth such Final Project Offeror’s offer price (a “ Final Offer Price ”) and other material terms and conditions on which such Final Project Offeror proposes to purchase such Subject Project Interest (a “ Final Rights Project Offer ”). Unless a Final Rights Project Offer is rejected pursuant to written notice from PEG LP delivered to such Final Project Offeror and PEG Inc. within five (5) Business days following the delivery of a Final Rights Offer to PEG LP (the “ Final Rights Acceptance Period ”), such Final Rights Project Offer shall be deemed to have been accepted by PEG LP, such Final Project Offeror shall have the right to acquire the Subject

 

5

 

Project Interest, and PEG LP shall transfer the Subject Project Interest to such Final Project Offeror, on the terms and conditions set forth in the Final Rights Project Offer, and subject to documentation reasonably agreed between the parties based on the form attached hereto as Exhibit A .

 

(d)                In the event that (i) PEG LP validly rejects a Final Rights Project Offer, (ii) PEG LP validly rejects a First Rights Project Offer and PEG Inc. or its Permitted Assignee thereafter fails to deliver a Final Rights Project Offer, (iii) other than with respect to the Conejo Project, PEG Inc. delivers a First Rights Project Declination and PEG Inc. or its Permitted Assignee thereafter fails to deliver a Final Rights Project Offer or (iv) with respect to the Conejo Project, PEG Inc. fails to deliver either a First Rights Project Offer or a First Rights Project Declination or delivers a First Rights Project Declination, in each case as provided in Section 3.2(b) or 3.2(c), as applicable, PEG LP shall, subject to the restrictions in this Section 3.2(d) , be entitled to Transfer the applicable Subject Project Interest to any Person; provided , however , that PEG LP shall not provide any material information with respect to the applicable Subject Project Interest to any actual or potential Transferee of such Subject Project Interest that was not provided to PEG Inc. together with the Project Transfer Notice. In the event that PEG Inc. has previously delivered a First Rights Project Offer in respect of the Subject Project Interest which offer was rejected by PEG LP, PEG LP shall only be permitted to Transfer the Subject Project Interest to a party other than PEG Inc. (including, for the avoidance of doubt, any Final Project Offeror that is not PEG Inc.) and to enter into a definitive agreement to so Transfer the Subject Project Interest with such party (A) during the nine month period following the earlier of (x) the expiration of the Final Rights Acceptance Period and (y) PEG LP’s receipt of notice that no Final Project Offeror will submit a Final Rights Project Offer, (B) at a price greater than or equal to 105% of the applicable Project Offer Price; provided that if such party is a tax exempt Canadian Crown Corporation and as a result of such status the proceeds received by PEG LP will be subject to incremental tax or tax withholding, for purposes of this clause (B) the price paid will be deemed decreased by the amount of such incremental tax or tax withholding; and (C) on other terms and conditions that are not materially less favorable to PEG LP than the terms and conditions set forth in the applicable First Rights Project Offer. Furthermore, in the event that PEG LP validly rejects a Final Rights Project Offer, PEG LP shall only be permitted to Transfer the Subject Project Interest to a party other than PEG Inc. or a Permitted Transferee at a price greater than 100% of the Final Offer Price. If PEG LP does not so consummate the Transfer of the Subject Project Interest within such nine month period, the terms of this Section 3.2 shall apply anew with respect to any Transfer of such Subject Project Interest.

 

(e)                 PEG Inc. shall be entitled to assign from time to time, without the prior consent of PEG LP, its rights to (i) submit a Final Rights Project Offer described in Section 3.2(c) and (ii) acquire all or any portion of a Subject Project Interest under Section 3.2(b) and Section 3.2(c) , in each case to any Permitted Assignee.

 

Section 3.3.           Term of the Project Purchase Right of First Offer . Section 3.1 and Section 3.2 , including the obligations and rights of PEG LP and PEG Inc. thereunder, shall survive until the earlier to occur of: (a) any time following PEG Inc.’s delivery to PEG LP of three (3) First Rights Project Declinations in accordance with Section 3.2 with respect to an Operational Project or Construction-Ready Project that is not the Conejo Project (for the avoidance of doubt, any such project must have been an Operational Project or Construction-Ready Project when the

 

6

 

related Project Transfer Notice was delivered to PEG Inc.) for which no Final Rights Project Offer is made and (b) the wind-up of PEG LP in accordance with the terms of its governing documents; provided , that notwithstanding any termination or expiration of Section 3.1 and Section 3.2 , if any First Rights Project Offer or Final Rights Project Offer shall have been delivered prior to such termination or expiration, the obligations and rights of the Parties with respect to the Subject Project Interest subject thereto shall survive until the applicable terms of Section 3.2 with respect thereto have been complied with and performed in full.

 

Article IV.
PEG LP PURCHASE RIGHT OF FIRST OFFER

 

Section 4.1.           PEG LP Purchase Right of First Offer . For the term set forth in Section 4.3 , PEG LP and the PEG LP Partners hereby grant PEG Inc. a right of first offer on any proposed Transfer of any material portion of the Equity Interests or all or substantially all of the assets of PEG LP in accordance with Section 4.2 . PEG LP and the PEG LP Partners will take all actions necessary to cause such right of first offer to be exercisable in accordance with this Article IV , including by causing each PEG LP Entity to take any actions necessary to facilitate and enforce such exercise and to consummate the transactions contemplated by this Article IV . The Parties will reasonably cooperate in determining the scope of any proposed Transfer that PEG LP and the PEG LP Partners consider to be an immaterial portion of Equity Interests of PEG LP with a view of not circumventing the purpose of this Article IV .

 

Section 4.2.           Procedures for Rights of First Offer.

 

(a)                 In the event that the PEG LP Partners or PEG LP propose to Transfer any material portion of the Equity Interests or all or substantially all of the assets of PEG LP, PEG LP and the PEG LP Partners shall give PEG Inc. written notice setting forth the details of the proposed Transfer, including a description of PEG LP's assets (including, with respect to each of PEG LP’s Projects, the mega-wattage, stage of development or construction, material counterparties, details of any project contracts and other material information with respect to PEG LP and the Projects that an acquiror thereof would reasonably be anticipated to request in order to reasonably diligence and assess PEG LP and such Projects), the Equity Interests or assets to be Transferred (in each case, the “ PEG LP Interests ”) and any other material terms of the proposed Transfer reasonably known or anticipated by PEG LP or the PEG LP Partners (a “ PEG LP Transfer Notice ”).

 

(b)                Within 45 calendar days after delivery of a PEG LP Transfer Notice, PEG Inc. shall either: (i) deliver a written offer to PEG LP and the PEG LP Partners to purchase the PEG LP Interests setting forth PEG Inc.’s offer price (a “ PEG LP Offer Price ”) and other material terms and conditions on which PEG Inc. proposes to purchase the PEG LP Interests (a “ First Rights PEG LP Offer ”) or (ii) deliver a written notice to PEG LP that PEG Inc. will not make a First Rights PEG LP Offer in response to the PEG LP Transfer Notice (a “ First Rights PEG LP Declination ”). Unless a First Rights PEG LP Offer is rejected pursuant to written notice from PEG LP delivered to PEG Inc. within 30 calendar days of PEG Inc.’s delivery of a First Rights PEG LP Offer, such First Rights PEG LP Offer shall be deemed to have been accepted by PEG LP and the PEG LP Partners, and PEG Inc. shall have the right to acquire the PEG LP Interests, and PEG LP and the PEG LP Partners shall transfer the PEG LP Interests to PEG Inc., on the

 

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terms set forth in First Rights PEG LP Offer, and subject to documentation reasonably agreed between the parties.

 

(c)                 In the event that PEG Inc. delivers a First Rights PEG LP Declination as provided in Section 4.2(b) above, or PEG LP validly rejects a First Rights PEG LP Offer by delivering notice of the same as provided in Section 4.2(b) above, PEG LP and the PEG LP Partners shall be free to Transfer the PEG LP Interests to any Person within nine months of the date that the First Rights PEG LP Declination or the notice of rejection (as applicable) was delivered; provided , however , that in the event that PEG Inc. had previously delivered a First Rights PEG LP Offer that was rejected by PEG LP, PEG LP and the PEG LP Partners shall only be permitted to Transfer the PEG LP Interests to a party other than PEG Inc. during such nine month period at a price greater than or equal to 105% of the applicable PEG LP Offer Price and on other terms and conditions that are not materially less favorable to PEG LP and the PEG LP Partners than the terms and conditions set forth in any applicable First Rights PEG LP Offer; provided , further , that PEG LP and the PEG LP Partners may not provide any material information with respect to PEG LP, its assets or the PEG LP Interests to any actual or potential Transferee of the PEG LP Interests that was not provided to PEG Inc. together with the PEG LP Transfer Notice. If PEG LP does not so consummate the Transfer of the PEG LP Interests within such nine month period, the terms of this Section 4.2 shall apply anew with respect to any Transfer of the PEG LP Interests.

 

Section 4.3.           Term of the PEG LP Purchase Right of First Offer . Section 4.1 and Section 4.2 , including the obligations and rights of PEG LP, the PEG LP Partners and PEG Inc. thereunder, shall survive until the earlier of: (a) the acquisition of the PEG LP Interests by PEG Inc. pursuant to Section 4.1 and Section 4.2 ; and (b) the termination of the rights and obligations in Section 3.1 and Section 3.2 pursuant to Section 3.3 .

 

Article V.
MISCELLANEOUS

 

Section 5.1.           Choice of Law; Submission To Jurisdiction; Waiver of Jury Trial .  This Agreement shall be governed by and construed and interpreted in accordance with the Laws of the State of New York, excluding any conflict-of-laws rule or principle that might refer the governance or the construction of this Agreement to the law of another jurisdiction irrespective of the choice of laws principles. Except as may otherwise expressly be set forth in any purchase and sale agreement entered into between or among the Parties or their Affiliates in connection with the exercise of the purchase rights set forth in Article III and Article IV , and subject to Section 5.2 , each of the Parties hereby irrevocably submits to the exclusive jurisdiction of any state or federal court sitting in New York, New York in connection with any claim, suit, action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby or any dealings between them relating to the subject matter of this Agreement and the relationship that is being established. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM, SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY DEALINGS

 

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BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED.

 

Section 5.2.           Enforcement .  Each Party agrees and acknowledges that the other Parties do not have an adequate remedy at law for the breach by any such Party of its covenants and agreements set forth in this Agreement, and that any breach by any such Party of its covenants and agreements set forth in this Agreement would result in irreparable injury to each other Party. Each Party shall be entitled to enforce its rights under this Agreement specifically, to recover damages by reason of any breach of any provision of this Agreement (including costs of enforcement) and to exercise any and all other rights existing in its favor. The Parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that each Party may, in its sole discretion, apply to any court of law or equity of competent jurisdiction for, and shall be entitled to specific performance or injunctive relief (without posting a bond or other security) in order to enforce or prevent any violation or threatened violation of the provisions of this Agreement.

 

Section 5.3.           Notice .  All notices, requests or consents provided for or permitted to be given pursuant to this Agreement must be in writing and must be given by depositing the same in the mail, addressed to the Person to be notified, postpaid, and registered or certified with return receipt requested or by delivering such notice in person or by private-courier, prepaid, or by telecopier to such party.  Notice given by personal delivery or mail shall be effective upon actual receipt.  Couriered notices shall be deemed delivered on the date the courier represents that delivery will occur.  Notice given by telecopier shall be effective upon actual receipt if received during the recipient’s normal business hours, or at the beginning of the recipient’s next Business Day after receipt if not received during the recipient’s normal business hours.  All notices to be sent to a Party pursuant to this Agreement shall be sent to or made at the address set forth below such Party’s signature to this Agreement, or at such other address as such Party may stipulate to the other Parties in the manner provided in this Section 5.3 .

 

Section 5.4.           Entire Agreement .  This Agreement constitutes the entire agreement of the Parties relating to the matters contained herein, superseding all prior contracts or agreements, whether oral or written, relating to the matters contained herein.

 

Section 5.5.           Waiver; Effect of Waiver or Consent .  Any Party hereto may (a) extend the time for the performance of any obligation or other act of any other Party hereto or (b) waive compliance with any agreement or condition of any other Party contained herein.  Except as otherwise specifically provided herein, any such extension or waiver shall be valid only if set forth in a written instrument duly executed by the party or parties to be bound thereby.  No waiver or consent, express or implied, by any Party of or to any breach or default by any Person in the performance by such Person of its obligations hereunder shall be deemed or construed to be a waiver or consent of or to any other breach or default in the performance by such Person of the same or any other obligations of such Person hereunder.  Failure on the part of a Party to complain of any act of any Person or to declare any Person in default, irrespective of how long such failure continues, shall not constitute a waiver by such Party of its rights hereunder until the applicable statute of limitations period has run.

 

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Section 5.6.           Amendment or Modification .  This Agreement may be amended or modified from time to time only by the written agreement of all the Parties hereto.

 

Section 5.7.           Assignment . No Party shall have the right to assign its rights or obligations under this Agreement without the consent of the other Parties hereto, except that PEG Inc. shall be enabled to assign its rights hereunder to an Affiliate that agrees to be bound to the terms hereof; provided , however , that PEG Inc. may assign its rights to a Permitted Assignee to the extent expressly provided in Section 3.2(e) ; provided, further, that subject to the foregoing, this Agreement shall be binding on the Parties and their respective successors and assigns.

 

Section 5.8.           Counterparts .  This Agreement may be executed in any number of counterparts with the same effect as if all signatory parties had signed the same document.  All counterparts shall be construed together and shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or electronic transmission shall be as effective as delivery of a manually executed counterpart of this Agreement.

 

Section 5.9.           Severability .  If any provision of this Agreement or the application thereof to any Person or circumstance shall be held invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

 

Section 5.10.       Rules of Construction .  Interpretation of this Agreement shall be governed by the following rules of construction: (a) words in the singular shall be held to include the plural and vice versa, and words of one gender shall be held to include the other gender as the context requires, (b) references to the terms Article, Section, paragraph, and Schedule are references to the Articles, Sections, paragraphs, and Schedules to this Agreement unless otherwise specified, (c) the word “including” and words of similar import shall mean “including, without limitation,” (d) provisions shall apply, when appropriate, to successive events and transactions, (e) the headings contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement and (f) this Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted.

 

Section 5.11.       Further Assurances .  In connection with this Agreement and all transactions contemplated by this Agreement, each signatory party hereto agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement and all such transactions.

 

Section 5.12.       Laws and Regulations .  Notwithstanding any provision of this Agreement to the contrary, no party to this Agreement shall be required to take any act, or fail to take any act, under this Agreement if the effect thereof would be to cause such party to be in violation of any Applicable Law.

 

Section 5.13.       Third Party Beneficiaries .  Each Final Project Offeror and, solely to the extent of the applicable assignment, each Permitted Assignee (if any) shall be a beneficiary of

 

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this Agreement, entitled to the benefits of this Agreement. The provisions of this Agreement are enforceable solely by the Parties and, solely to the extent of the applicable assignment, each Permitted Assignee (if any), and no other Person, including any limited partner, member or equity holder of the Parties, shall have the right, separate and apart from the Parties, as applicable, to enforce any provision of this Agreement or to compel any Party to this Agreement to comply with the terms of this Agreement.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement on, and effective as of, the date hereof.

 

 

      PATTERN ENERGY GROUP LP  
             
             
      By: /s/ Daniel M. Elkort  
        Name: Daniel M. Elkort  
        Title: Vice President  
             

 

      PATTERN ENERGY GROUP INC.  
             
             
      By: /s/ Esben Pedersen  
        Name: Esben Pedersen  
        Title: Chief Investment Officer  
             

 

 

 

 
 

Solely with Respect to Article IV :

 

 

      PATTERN ENERGY GROUP HOLDINGS LP  
             
             
      By: /s/ Daniel M. Elkort  
        Name: Daniel M. Elkort  
        Title: Vice President  
             

 

      PATTERN ENERGY GP LLC  
             
             
      By: /s/ Daniel M. Elkort  
        Name: Daniel M. Elkort  
        Title: Vice President  
             

 

 

 
 

Exhibit A

 

Form of Purchase and Sale Agreement

 

[Attached]

 

 
 

Exhibit B

 

Pattern Energy Group Holdings 2 LP Designated Projects

 

1. Guadalupe Wind

2. Buenos Aires Wind

3. Tuli Energy

4. Helios Generation

5. San Matias Wind

6. White Valley Wind

7. North Kent Wind 2

8. Incubator projects in Mexico

9. Incubator projects in Canada

 

 

Exhibit 10.2

 

 

 

 

 

 

AMENDED AND RESTATED PURCHASE RIGHTS AGREEMENT

 

BY AND AMONG

 

PATTERN ENERGY GROUP 2 LP ,

 

PATTERN ENERGY GROUP INC.

 

AND (SOLELY WITH RESPECT TO ARTICLE III),

 

PATTERN ENERGY GROUP HOLDINGS 2 LP

 

AND

 

PATTERN ENERGY GP 2 LLC

 

 

 

 

 

 

 
 

AMENDED AND RESTATED
PURCHASE RIGHTS AGREEMENT

 

THIS AMENDED AND RESTATED PURCHASE RIGHTS AGREEMENT is entered into on, and effective as of June 16, 2017, among Pattern Energy Group 2 LP, a Delaware limited partnership (“ PEG 2 LP ”), Pattern Energy Group Inc., a Delaware corporation (“ PEG Inc. ”) and, solely with respect to Article III , Pattern Energy Group Holdings 2 LP, a Delaware limited partnership (“ PEGH 2 ”), and Pattern Energy GP 2 LLC, a Delaware limited liability company (“ PEGH 2 GP ” and together with PEGH 2, the “ PEGH 2 Partners ”).

 

R E C I T A L S:

 

1.         The Parties desire by their execution of this Agreement to evidence their understanding, as more fully set forth in Article II , with respect to PEG Inc.’s right of first offer relating to projects sold by PEG 2 LP.

 

2.         The Parties desire by their execution of this Agreement to evidence their understanding, as more fully set forth in Article III , with respect to PEG Inc.’s right of first offer relating to a sale of PEG 2 LP or all or substantially all of PEG 2 LP’s assets.

 

3.       The Parties desire by their execution of this Agreement to evidence their understanding, as more fully set forth in Article IV, with respect to PEG Inc.’s rights relating to unfunded and abandoned projects of PEG 2 LP.

 

4.       The Parties entered into the Purchase Rights Agreement, dated as of December 8, 2016 (the “ Initial Agreement ”), and desire to amend and restate the Initial Agreement to further provide for their rights and obligations as described herein.

 

   In consideration of the premises and the covenants, conditions, and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby amend and restate the Initial Agreement in its entirety and further agree as follows:

 

Article I.
DEFINITIONS

 

Section 1.1             Definitions . As used in this Agreement, the following terms shall have the respective meanings set forth below:

 

Advanced Project ” means, as of any date, any Project that (i) is not an Early Stage Project or a Mid Stage Project, or (ii) is an Early Stage Project or a Mid Stage Project that is a Construction-Ready Project.

 

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Affiliate ” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries Controls, is Controlled by or is under common Control with, the Person in question.

 

Agreement ” means this Amended and Restated Purchase Rights Agreement, as it may be amended, modified, or supplemented from time to time in accordance with Section 6.6 hereof.

 

Applicable Law ” means any applicable constitutional provision, statute, act, code, law, regulation, rule, ordinance, Order, decree, ruling, proclamation, resolution, judgment, decision, declaration, or interpretative or advisory opinion or letter, of a Governmental Authority having valid jurisdiction.

 

Business Day ” means a day other than a Saturday, Sunday or any other day on which commercial banks in Toronto, Ontario or New York, NY are authorized or required by Applicable Law to close. Any event the scheduled occurrence of which would fall on a day that is not a Business Day shall be deferred until the next succeeding Business Day.

 

COD ” means the date on which an independent engineer certifies that a Project becomes an Operational Project.

 

Construction-Ready Project ” means any Project that (i) is (A) ready to close construction financing with commercial financing parties or (B) ready to, or has, issued a full notice to proceed under an Engineering, Procurement and Construction contract; or (ii) (x) has all material project agreements required to construct, operate and maintain the Project (including an interconnection agreement and a long-term power sales agreement at pricing that supports the closing of financing for construction of the Project), (y) has all requisite real estate rights and (z) has obtained all governmental approvals required for that stage of construction and such governmental approvals are in full force and effect.

 

Control ” or “ Controlled ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

 

Early Stage Information Notice ” has the meaning given to such term in Section 4.1(a) .

 

Early Stage Project ” means, as of any date, any Project for which the aggregate investment amount in such Project as of such date (including, without limitation, any acquisition costs, overhead, development costs, and letters of credit exposure) is $5 million or less.

 

Equity Interests ” means all shares, capital stock, partnership or limited liability company interests, membership interests, units, participations, distribution rights or similar equity interests issued by any Person, however designated.

 

Final Offer Price ” has the meaning given such term in Section 2.2(b) .

 

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Final Project Offeror ” has the meaning given such term in Section 2.2(d) .

 

Final Rights Acceptance Period ” has the meaning given such term in Section 2.2(b) .

 

Final Rights Offer Period ” has the meaning given such term in Section 2.2(b) .

 

" First Rights PEG 2 LP Offer " has the meaning given to such term in Section 3.2(b) .

 

Final Rights Project Offer ” has the meaning given such term in Section 2.2(b) .

 

First Rights Acceptance Period ” has the meaning given such term in Section 2.2(b) .

 

First Rights Offer Period ” has the meaning given such term in Section 2.2(b) .

 

First Rights Project Declination ” has the meaning given such term in Section 2.2(b) .

 

First Rights Project Offer ” has the meaning given such term in Section 2.2(b) .

 

Governmental Authority ” means:

 

(i) any government, whether national, federal, provincial, state, territorial, municipal or local (whether administrative, legislative, executive or otherwise);

 

(ii) any agency, authority, ministry, department, regulatory body, court, central bank, bureau, board or other instrumentality having legislative, judicial, taxing, regulatory, prosecutorial or administrative powers or functions of, or pertaining to, government;

 

(iii) any court, commission, individual, arbitrator, arbitration panel or other body having adjudicative, regulatory, judicial, quasi-judicial, administrative or similar functions; and

 

(iv) any other body or entity created under the authority of or otherwise subject to the jurisdiction of any of the foregoing, including any stock or other securities exchange or professional association.

 

Initial Agreement ” is defined in the Recitals to this Agreement.

 

Mid Stage Project ” means, as of any date, any Project for which the aggregate investment amount as of such date (including, without limitation, any acquisition costs, overhead, development costs, and letters of credit exposure) is greater than $5 million but less than $25 million.

 

Mid Stage Project Exit ” has the meaning set forth in Section 4.1(b) .

 

Offer Rejection Date ” has the meaning set forth in Section 2.2(d) .

 

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Operational Project ” means any Project that has: (i) achieved commercial operations in accordance with the terms of its applicable construction agreement, power sales agreement or interconnection agreement, as the case may be; and (ii) generated operating revenue from the sale of electricity or transmission services under its applicable power sales agreement or transmission services agreement.

 

Order ” means any order, directive, judgment, decree, injunction, decision, ruling, award or writ of any Governmental Authority.

 

Parties ” means the parties to this Agreement and their successors and permitted assigns.

 

PEGH 2 ” is defined in the introduction to this Agreement.

 

PEGH 2 Board ” means the Board of Directors of PEGH 2.

 

PEGH 2 GP ” is defined in the introduction to this Agreement.

 

PEGH LP Partners ” is defined in the introduction to this Agreement.

 

PEGH 2 Project Percentage ” means, with respect to a Project, the amount of equity funded by PEGH 2 in such Project, divided by the total amount of equity funded by both PEGH 2 and PEG Inc., in the aggregate, in such Project.

 

PEG Inc. ” is defined in the introduction to this Agreement.

 

PEG Inc. Entities ” means PEG Inc. and any Person Controlled by PEG Inc.

 

PEG 2 LP ” is defined in the introduction to this Agreement.

 

PEG 2 LPA ” means the Second Amended and Restated Agreement of Limited Partnership of PEG 2 LP, dated as of the date hereof, as the same may be amended from time to time.

 

PEG 2 LP Entities ” means PEG 2 LP and its Subsidiaries, and any other Person Controlled, directly or indirectly, by PEG 2 LP, in each case, other than the PEG Inc. Entities.

 

PEG 2 LP Offer Price ” has the meaning given such term in Section 3.2(b) .

 

PEG 2 LP Transfer Notice ” has the meaning given such term in Section 3.2(a) .

 

Permitted Assignee ” means Public Sector Pension Investment Board, an entity having its registered office at 1250 Rene-Levesque Blvd. West, Suite 1400, Montreal, Quebec, H3B 5E9, Canada, or any of its Affiliates.

 

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Person ” means an individual, corporation, partnership, joint venture, trust, limited liability company, unlimited liability company, unincorporated organization or any other entity.

 

Project ” has the meaning given such term in Section 2.1 .

 

Project Offer Price ” has the meaning given such term in Section 2.2(b) .

 

Project Transfer Notice ” has the meaning given such term in Section 2.2(a) .

 

Subject Project Interest ” has the meaning given such term in Section 2.2(a) .

 

Subsidiary ” or “ Subsidiaries ” means, with respect to any Person, any corporation, limited liability company, unlimited liability company, joint venture or partnership of which such Person (a) beneficially owns, either directly or indirectly, fifty percent (50%) or more of (i) the total combined voting power of all classes of voting securities of such entity, (ii) the total combined Equity Interests, or (iii) the capital or profit interests, in the case of a partnership; or (b) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.

 

Transfer ” means any direct or indirect transfer, assignment, sale or other disposition, whether through the direct or indirect transfer, assignment, sale or other disposition of Equity Interests or assets, by merger or otherwise; provided , however , that such term shall not include: (a) transfers, assignments, sales or other dispositions from a PEG 2 LP Entity to another PEG 2 LP Entity; (b) grants of security interests in or mortgages or liens in favor of a bona fide third party lender in the business of providing debt financing; or (c) transfers, assignments, sales or other dispositions as part of a transaction with a tax equity counterparty (other than PEG 2 LP, PEG Inc. or their respective Affiliates), such as sale-leaseback transactions or partnership flip transactions (excluding, for the avoidance of doubt, any transfer of the interest retained by the PEG 2 LP Entity that entered into such tax equity financing).

 

Transferee ” means the recipient of a Transfer.

 

Updated Portfolio Description ” has the meaning given such term in Section 3.2(c) .

 

Updated Project Description ” has the meaning given such term in Section 2.2(d) .

 

Wind-Up Pipeline Project ” means a Project that is not a Wind-Up ROFO Project.

 

Wind-Up ROFO Project ” means a Project that has advanced to a point where, as of such date of determination, a reasonable person would conclude that the Project will likely be a Construction-Ready Project within twelve months.

 

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Article II.
PROJECT PURCHASE RIGHT OF FIRST OFFER

 

Section 2.1             Project Purchase Right of First Offer . For the term set forth in Section 2.3 , PEG 2 LP hereby grants PEG Inc. a right of first offer on any proposed Transfer by any PEG 2 LP Entity of all or any portion of such PEG 2 LP Entity’s ownership interest in any power generation, storage or transmission facility or project now or hereafter owned in whole or in part by any PEG 2 LP Entity in any stage, including in development, construction or commercial operation (each a “ Project ”), in accordance with Section 2.2 . PEG 2 LP will take all actions necessary to cause such right of first offer to be exercisable in accordance with this Article II , including by causing each PEG 2 LP Entity to take any actions necessary to facilitate and enforce such exercise and to consummate the transactions contemplated by this Article II .

 

Section 2.2             Procedures for Rights of First Offer .

 

(a)                 In the event that any PEG 2 LP Entity proposes to Transfer all or any portion of its ownership interest in any Project, PEG 2 LP shall give PEG Inc. written notice within a commercially reasonable amount of time (that is intended to be sufficiently early to permit the Parties to exercise their rights set forth in this Section 2.2 ) setting forth the details of the proposed Transfer, including a description of the Project (including the mega-wattage, stage of development or construction, material counterparties, details of the project contracts and other material information with respect to the Project that an acquiror thereof would reasonably be anticipated to request in order to reasonably diligence and assess such Project), the interest to be Transferred (the “ Subject Project Interest ”) and any other material terms of the proposed Transfer reasonably known or anticipated by PEG 2 LP (a “ Project Transfer Notice ”). For the avoidance of doubt, PEG 2 LP shall, and shall cause each other PEG 2 LP Entity to, seek to Transfer each Project (in accordance with the terms hereof) at or around COD; provided , that at the reasonable request of either PEG 2 LP or PEG Inc., the Parties may agree (acting reasonably) to effect such Transfer at a time other than COD.

 

(b)                Within 20 calendar days after delivery of a Project Transfer Notice (a “ First Rights Offer Period ”), PEG Inc. shall either: (i) deliver a written offer to PEG 2 LP to purchase the Subject Project Interest setting forth PEG Inc.’s offer price (a “ Project Offer Price ”) and other material terms and conditions on which PEG Inc. proposes to purchase such Subject Project Interest (a “ First Rights Project Offer ”) or (ii) deliver a written notice to PEG 2 LP that PEG Inc. will not make a First Rights Project Offer in response to the Project Transfer Notice (a “ First Rights Project Declination ”). Unless a First Rights Project Offer is rejected pursuant to written notice from PEG 2 LP delivered to PEG Inc. within five (5) Business Days following the delivery of a First Rights Project Offer (the “ First Rights Acceptance Period ”), such First Rights Project Offer shall be deemed to have been accepted by PEG 2 LP, and PEG Inc. shall have the right to acquire the Subject Project Interest, and PEG 2 LP shall transfer the Subject Project Interest to PEG Inc., on the terms set forth in such First Rights Project Offer, and subject to

 

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documentation reasonably agreed between the parties based on the form attached hereto as Exhibit A .

 

(c)                 In the event that (A) PEG 2 LP rejects a First Rights Project Offer by delivering notice thereof to PEG Inc. before the expiration of the First Rights Acceptance Period or (B) PEG Inc. fails to deliver either a First Rights Project Offer or a First Rights Project Declination or delivers a First Rights Project Declination, in each case before the expiration of the First Rights Offer Period, PEG Inc. or its Permitted Assignee (a “ Final Project Offeror ”) shall have an additional opportunity, exercisable within the thirty (30) calendar day period following, in the case of (A), the date that the rejection of the First Rights Project Offer is delivered to PEG Inc. or, in the case of (B), the expiration of the First Rights Offer Period or earlier delivery of a First Rights Project Declination to PEG 2 LP (a “ Final Rights Offer Period ”), to deliver a written offer to PEG 2 LP to purchase the Subject Project Interest setting forth such Final Project Offeror’s offer price (a “ Final Offer Price ”) and other material terms and conditions on which such Final Project Offeror proposes to purchase such Subject Project Interest (a “ Final Rights Project Offer ”). Unless a Final Rights Project Offer is rejected pursuant to written notice from PEG 2 LP delivered to such Final Project Offeror and PEG Inc. within five (5) Business Days following the delivery of a Final Rights Project Offer to PEG 2 LP (the “ Final Rights Acceptance Period ”), such Final Rights Project Offer shall be deemed to have been accepted by PEG 2 LP, and such Final Project Offeror shall have the right to acquire the Subject Project Interest, and PEG 2 LP shall transfer the Subject Project Interest to such Final Project Offeror, on the terms and conditions set forth in the Final Rights Project Offer, and subject to documentation reasonably agreed between the parties based on the form attached hereto as Exhibit A .

 

(d)                In the event that (i) PEG 2 LP validly rejects a Final Rights Project Offer, (ii) PEG 2 LP validly rejects a First Rights Project Offer and PEG Inc. or its Permitted Assignee thereafter fails to deliver a Final Rights Project Offer or (iii) PEG Inc. delivers a First Rights Project Declination and PEG Inc. or its Permitted Assignee thereafter fails to deliver a Final Rights Project Offer, in each case as provided in Section 2.2(b) , PEG 2 LP shall, subject to the restrictions in this Section 2.2(d) , be entitled to Transfer the applicable Subject Project Interest to any Person; provided , however , that PEG 2 LP shall not provide any material information with respect to the applicable Subject Project Interest to any actual or potential Transferee of such Subject Project Interest that was not provided to PEG Inc. together with the Project Transfer Notice. In the event that PEG Inc. has previously delivered a First Rights Project Offer in respect of the Subject Project Interest which offer was rejected by PEG 2 LP, PEG 2 LP shall only be permitted to Transfer the Subject Project Interest to a party that is not PEG Inc. (including, for the avoidance of doubt, any Final Project Offeror that is not PEG Inc.) (A) if it enters into a definitive agreement to so Transfer the Subject Project Interest with such party during the six month period following the date on which PEG 2 LP rejected the applicable First Rights Project Offer (the date of such rejection, the “ Offer Rejection Date ”), (B) if it consummates the transactions contemplated by such definitive agreement prior to the twelve-month anniversary of the Offer Rejection Date, (C) at a price greater than or equal to 110% of the applicable Project Offer Price; provided that if such party is a tax exempt Canadian Crown

 

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Corporation and as a result of such status the proceeds received by PEG LP will be subject to incremental tax or tax withholding, for purposes of this clause (C) the price paid will be deemed decreased by the amount of such incremental tax or tax withholding, and (D) on other terms and conditions that are not materially less favorable to PEG 2 LP than the terms and conditions set forth in the applicable First Rights Project Offer. If PEG 2 LP does not enter into such a definitive agreement to Transfer the Subject Project Interest during the six-month period following the Offer Rejection Date or does not consummate the Transfer pursuant to such definitive agreement within the twelve-month period following the Offer Rejection Date, then PEG 2 LP shall provide PEG Inc. with an updated description of the Project (including the mega-wattage, stage of development, construction or operations, material counterparties, details of the Project contracts and other material information with respect to the Project that an acquiror thereof would reasonably be anticipated to request in order to reasonably diligence and assess such Project) (an “ Updated Project Description ”), and PEG Inc. shall have the option, but not the obligation, to purchase the applicable Subject Project Interest at a price equal to 96% of the applicable Project Offer Price on the terms and conditions set forth in the applicable First Rights Project Offer, in accordance with the procedures set forth in the following sentence (the “ 96% Offer ”). Within 30 calendar days after delivery of an Updated Project Description (a “ 96% Offer Period ”), PEG Inc. shall either: (i) deliver a written notice to PEG 2 LP exercising such option to purchase the applicable Subject Project Interest, in which case PEG 2 LP shall transfer the Subject Project Interest to PEG Inc. at a price equal to 96% of the applicable Project Offer Price and on the other terms and conditions set forth in the applicable First Rights Project Offer, subject to documentation reasonably agreed between the parties based on the form attached hereto as Exhibit A or (ii) deliver a written notice to PEG 2 LP that PEG Inc. will not exercise such option; provided , that if PEG Inc. does not exercise such option within thirty (30) calendar days of receiving such Updated Project Description, the terms of this Section 2.2 shall apply anew with respect to any Transfer of such Subject Project Interest. Furthermore, in the event that PEG 2 LP validly rejects a Final Rights Project Offer, PEG 2 LP shall only be permitted to Transfer the Subject Project Interest to a party other than PEG Inc. or a Permitted Assignee at a price greater than 100% of the applicable Final Offer Price (it being understood and agreed that if the party making a Final Rights Project Offer is a tax exempt Canadian Crown Corporation and as a result of such status the proceeds received by PEG LP in such Final Rights Project Offer will be subject to incremental tax or tax withholding, for purposes of this sentence and the immediately following proviso the Final Offer Price will be deemed decreased by the amount of such incremental tax or tax withholding); provided that if such transfer price is less than the Final Offer Price and greater than or equal to 110% of the applicable Project Offer Price, PEG 2 LP shall not be required to sell the applicable Subject Project Interest to PEG Inc. pursuant to the 96% Offer if it instead elects that the terms of this Section 2.2 shall apply anew with respect to any Transfer of such Subject Project Interest.

 

(e)                 PEG Inc. shall be entitled to assign from time to time, without the prior consent of PEG 2 LP, its rights to (i) submit a Final Rights Project Offer described in Section 2.2(b) and (ii) acquire all or any portion of a Subject Project Interest under Section 2.2(b) or Section 2.2(c) , in each case to any Permitted Assignee.

 

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Section 2.3             Term of the Project Purchase Right of First Offer . Section 2.1 and Section 2.2 , including the obligations and rights of PEG 2 LP and PEG Inc. thereunder, shall survive until a wind-up of PEG 2 LP in accordance with the terms of the PEG 2 LPA; provided , however , that notwithstanding any termination or expiration of Section 2.1 and Section 2.2 , if any First Rights Project Offer or Final Rights Project Offer shall have been delivered prior to such termination or expiration, the obligations and rights of the Parties with respect to the Subject Project Interest subject thereto shall survive until the applicable terms of Section 2.2 with respect thereto have been complied with and performed in full.

 

Article III.
PEG 2 LP PURCHASE RIGHT OF FIRST OFFER

 

Section 3.1             PEG 2 LP Purchase Right of First Offer . For the term set forth in Section 3.3 , PEG 2 LP and the PEGH 2 Partners hereby grant PEG Inc. a right of first offer on any proposed Transfer of any material portion of the Equity Interests or all or substantially all of the assets of PEG 2 LP in accordance with Section 3.2 . PEG 2 LP and the PEGH 2 Partners will take all actions necessary to cause such right of first offer to be exercisable in accordance with this Article III , including by causing each PEG 2 LP Entity to take any actions necessary to facilitate and enforce such exercise and to consummate the transactions contemplated by this Article III . The Parties will reasonably cooperate in determining the scope of any proposed Transfer that PEG 2 LP and the PEGH 2 Partners consider to be an immaterial portion of Equity Interests of PEG 2 LP with a view of not circumventing the purpose of this Article III .

 

Section 3.2             Procedures for Rights of First Offer .

 

(a)                 In the event that the PEGH 2 Partners or PEG 2 LP propose to Transfer any material portion of the Equity Interests or all or substantially all of the assets of PEG 2 LP, PEG 2 LP and the PEGH 2 Partners shall give PEG Inc. written notice setting forth the details of the proposed Transfer, including a description of PEG 2 LP’s assets (including, with respect to each of PEG 2 LP’s Projects, the mega-wattage, stage of development or construction, material counterparties, details of any project contracts and other material information with respect to PEG 2 LP and the Projects that an acquiror thereof would reasonably be anticipated to request in order to reasonably diligence and assess PEG 2 LP and such Projects), the Equity Interests or assets to be Transferred (in each case, the “ PEG 2 LP Interests ”) and any other material terms of the proposed Transfer reasonably known or anticipated by PEG 2 LP or the PEGH 2 Partners (a “ PEG 2 LP Transfer Notice ”).

 

(b)                Within 45 calendar days after delivery of a PEG 2 LP Transfer Notice, PEG Inc. shall either: (i) deliver a written offer to PEG 2 LP and the PEGH 2 Partners to purchase the PEG 2 LP Interests setting forth PEG Inc.’s offer price (a “ PEG 2 LP Offer Price ”) and other material terms and conditions on which PEG Inc. proposes to purchase the PEG 2 LP Interests (a “ First Rights PEG 2 LP Offer ”) or (ii) deliver a written notice to PEG 2 LP that PEG Inc. will not make a First Rights PEG 2 LP Offer in response to the PEG 2 LP Transfer Notice (a “ First Rights PEG

 

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2 LP Declination ”). Unless a First Rights PEG 2 LP Offer is rejected pursuant to written notice from PEG 2 LP delivered to PEG Inc. within 30 calendar days of PEG Inc.’s delivery of a First Rights PEG 2 LP Offer, such First Rights PEG 2 LP Offer shall be deemed to have been accepted by PEG 2 LP and the PEGH 2 Partners, and PEG Inc. shall have the right to acquire the PEG 2 LP Interests, and PEG 2 LP and the PEGH 2 Partners shall Transfer the PEG 2 LP Interests to PEG Inc., on the terms set forth in First Rights PEG 2 LP Offer, and subject to documentation reasonably agreed between the parties.

 

(c)                 In the event that (a) PEG Inc. delivers a First Rights PEG 2 LP Declination, (b) PEG 2 LP validly rejects a First Rights PEG 2 LP Offer, or (c) PEG Inc. fails to deliver either a First Rights PEG 2 LP Declination or a First Rights PEG 2 LP Offer, each as provided in and pursuant to the terms of Section 3.2(b) above, PEG 2 LP and the PEGH 2 Partners shall be free to Transfer the PEG 2 LP Interests to any Person; provided , however , that PEG 2 LP and the PEGH 2 Partners may not provide any material information with respect to PEG 2 LP, its assets or the PEG 2 LP Interests to any actual or potential Transferee of the PEG 2 LP Interests that was not provided to PEG Inc. together with the PEG 2 LP Transfer Notice. In the event that PEG Inc. had previously delivered a First Rights PEG 2 LP Offer that was rejected, PEG 2 LP and the PEGH 2 Partners shall only be permitted to enter into a definitive agreement to Transfer the PEG 2 LP Interests to a party other than PEG Inc. (A) during the six month period following such rejection, (B) at a price greater than or equal to 110% of the applicable PEG 2 LP Offer Price and (C) on other terms and conditions that are not materially less favorable to PEG 2 LP and the PEGH 2 Partners than the terms and conditions set forth in the applicable First Rights PEG 2 LP Offer. If PEG 2 LP does not enter into such a definitive agreement to Transfer the PEG 2 LP Interests within the six month period following delivery of the applicable First Rights Project Declination or does not consummate the Transfer of the PEG 2 LP Interests pursuant to such definitive agreement within the twelve month period following such rejection, then PEG 2 LP shall provide PEG Inc. with an updated description of PEG 2 LP’s assets (including, with respect to each of PEG 2 LP’s Projects, the mega-wattage, stage of development or construction, material counterparties, details of any project contracts and other material information with respect to PEG 2 LP and the Projects that an acquiror thereof would reasonably be anticipated to request in order to reasonably diligence and assess PEG 2 LP and such Projects) (an “ Updated Portfolio Description ”), and PEG Inc. shall have the option, but not the obligation, to purchase the applicable PEG 2 LP Interests at a price equal to 96% of the applicable PEG 2 LP Offer Price on the terms and conditions set forth in the applicable First Rights PEG 2 LP Offer, in accordance with the procedures set forth in the following sentence. Within 30 calendar days after delivery of an Updated Portfolio Description (a “ PEG 2 LP 96% Offer Period ”), PEG Inc. shall either: (i) deliver a written notice to PEG 2 LP and the PEGH 2 Partners exercising such option to purchase the applicable PEG 2 LP Interests, in which case PEG 2 LP and the PEGH 2 Partners shall Transfer the PEG 2 LP Interests to PEG Inc. at a price equal to 96% of the applicable PEG 2 LP Offer Price and on the other terms and conditions set forth in the applicable First Rights PEG 2 LP Offer, subject to documentation reasonably agreed between the parties or (ii) deliver a written notice to PEG 2 LP and the PEGH 2 Partners that PEG Inc. will not exercise such option; provided that if PEG Inc. does not exercise such option within thirty (30) calendar

 

10

 

days of receiving such Updated Portfolio Description, the terms of this Section 3.2 shall apply anew with respect to any Transfer of such PEG 2 LP Interest.

 

Section 3.3             Term of the PEG 2 LP Purchase Right of First Offer . Section 3.1 and Section 3.2 , including the obligations and rights of PEG 2 LP, the PEGH 2 Partners and PEG Inc. thereunder, shall survive until the earlier of: (a) the acquisition of the PEG 2 LP Interests by PEG Inc. pursuant to Section 3.1 and Section 3.2 ; and (b) the termination of the rights and obligations in Section 2.1 and Section 2.2 pursuant to Section 2.3 .

 

Article IV.
PURCHASE RIGHTS WITH RESPECT TO New PROJECTS THAT ARE REJECTED OR ABANDONED BY PEG 2 LP

 

Section 4.1             Notwithstanding any provision of this Agreement to the contrary, in the event that the PEGH 2 Board passes a decision to decline (or cease) the development of or funding for, or, in the case of clause (d) the evaluation, negotiation, interest or pursuit of:

 

(a)                 an Early Stage Project, then PEG Inc. shall have the option, but not the obligation, to acquire such Early Stage Project in accordance with the procedures set forth in this Section 4.1(a) . Within a commercially reasonable time period following such decision by the PEGH 2 Board, PEG 2 LP shall give PEG Inc. written notice of such decision (an “ Early Stage Information Notice ”), including a description of the Early Stage Project (including, to the extent applicable, the mega-wattage, stage of development or construction, material counterparties, details of the project contracts and other material information with respect to the Early Stage Project that an acquirer thereof would reasonably be anticipated to request in order to reasonably diligence and assess such Early Stage Project). Within twenty calendar days after delivery of an Early Stage Information Notice, PEG Inc. shall have the option, but not the obligation, to deliver a written notice to PEG 2 LP exercising PEG Inc.’s option to purchase the applicable Early Stage Project, in which case PEG 2 LP shall transfer such Early Stage Project to PEG Inc. in exchange for an amount in cash equal to PEG 2 LP’s cost basis (reasonably documented by PEG 2 LP) in such Early Stage Project (including any overhead expenses) to be paid within sixty calendar days after delivery for the Early Stage Information Notice, subject to documentation reasonably agreed between the parties;

 

(b)                a Mid Stage Project, PEG Inc. shall have the option, but not the obligation, to acquire such Mid Stage Project in accordance with the procedures set forth in this Section 4.1(b) . Within a commercially reasonable time period following such decision by the PEGH 2 Board, PEG 2 LP shall give PEG Inc. written notice of such decision, including a description of the Mid Stage Project (including, to the extent applicable, the mega-wattage, stage of development or construction, material counterparties, details of the project contracts and other material information with respect to the Mid Stage Project that an acquirer thereof would reasonably be anticipated to request in order to reasonably diligence and assess such Mid Stage Project). Within twenty calendar days after delivery of such notice, PEG Inc. shall have the option, but not

 

11

 

the obligation, to deliver a written notice to PEG 2 LP exercising PEG Inc.’s option to purchase the applicable Mid Stage Project, in which case PEG 2 LP shall, subject to documentation reasonably agreed between the parties, transfer such Mid Stage Project to PEG Inc. in exchange for the following consideration: (i) an amount in cash equal to PEG 2 LP’s cost basis (reasonably documented by PEG 2 LP) in such Mid Stage Project (including any overhead expenses), to be paid on the date that construction financing closes on such Mid Stage Project and (ii) if a PEG Inc. Entity subsequently Transfers such Mid Stage Project to a Person that is not a PEG Inc. Entity (a “ Mid Stage Project Exit ”), an amount in cash equal to (x) the PEGH 2 Project Percentage multiplied by (y) the aggregate development profit achieved on such Mid Stage Project, to be paid upon the consummation of the Mid Stage Project Exit;

 

(c)                 an Advanced Project, PEG 2 LP shall promptly seek to Transfer such Advanced Project pursuant to the terms and procedures set forth in Article II ; and

 

(d)                the acquisition of any new development project (regardless of size) from a third party, PEG Inc. shall have the right, but not the obligation, to acquire such project directly from such third party.

 

Article V.
WIND UP ARRANGEMENTS

 

Section 5.1             Notwithstanding any provision of this Agreement to the contrary, promptly following any wind-up of PEG 2 LP in accordance with the terms of the PEG 2 LPA, the Parties shall cooperate to classify each existing Project (acting reasonably) as either a Wind-Up Pipeline Project or a Wind-Up ROFO Project. Promptly following such classification, (a) PEG 2 LP shall promptly seek to Transfer each of the Wind-Up Pipeline Projects pursuant to the terms and procedures set forth in Article II , and (b) PEG 2 LP shall, at the discretion of the PEGH 2 Board, promptly either (i) continue to develop each Wind-Up ROFO Project until such Wind-Up ROFO Project becomes a Construction-Ready Project, after which time PEG 2 LP shall promptly seek to Transfer such Wind-Up ROFO Project pursuant to the terms and procedures set forth in Article II or (ii) cease to develop and/or fund any Wind-Up ROFO Project and promptly seek to Transfer such Wind-Up ROFO Project pursuant to the terms and procedures set forth in Article II .

 

Article VI.
MISCELLANEOUS

 

Section 6.1             Choice of Law; Submission To Jurisdiction; Waiver of Jury Trial . This Agreement shall be governed by and construed and interpreted in accordance with the Laws of the State of New York, excluding any conflict-of-laws rule or principle that might refer the governance or the construction of this Agreement to the law of another jurisdiction irrespective of the choice of laws principles. Except as may otherwise expressly be set forth in any purchase and sale agreement entered into between or among the Parties or their Affiliates in connection

 

12

 

with the exercise of the purchase rights set forth in Article II and Article III , and subject to Section 6.2 , each of the Parties hereby irrevocably submits to the exclusive jurisdiction of any state or federal court sitting in New York, New York in connection with any claim, suit, action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby or any dealings between them relating to the subject matter of this Agreement and the relationship that is being established. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM, SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED.

 

Section 6.2             Enforcement . Each Party agrees and acknowledges that the other Parties do not have an adequate remedy at law for the breach by any such Party of its covenants and agreements set forth in this Agreement, and that any breach by any such Party of its covenants and agreements set forth in this Agreement would result in irreparable injury to each other Party. Each Party shall be entitled to enforce its rights under this Agreement specifically, to recover damages by reason of any breach of any provision of this Agreement (including costs of enforcement) and to exercise any and all other rights existing in its favor. The Parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that each Party may, in its sole discretion, apply to any court of law or equity of competent jurisdiction for, and shall be entitled to specific performance or injunctive relief (without posting a bond or other security) in order to enforce or prevent any violation or threatened violation of the provisions of this Agreement.

 

Section 6.3             Notice . All notices, requests or consents provided for or permitted to be given pursuant to this Agreement must be in writing and must be given by depositing the same in the mail, addressed to the Person to be notified, postpaid, and registered or certified with return receipt requested or by delivering such notice in person or by private-courier, prepaid, or by telecopier to such party. Notice given by personal delivery or mail shall be effective upon actual receipt. Couriered notices shall be deemed delivered on the date the courier represents that delivery will occur. Notice given by telecopier shall be effective upon actual receipt if received during the recipient’s normal business hours, or at the beginning of the recipient’s next Business Day after receipt if not received during the recipient’s normal business hours. All notices to be sent to a Party pursuant to this Agreement shall be sent to or made at the address set forth below such Party’s signature to this Agreement, or at such other address as such Party may stipulate to the other Parties in the manner provided in this Section 6.3 .

 

Section 6.4             Entire Agreement . This Agreement constitutes the entire agreement of the Parties relating to the matters contained herein, superseding all prior contracts or agreements, whether oral or written, relating to the matters contained herein.

 

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Section 6.5             Waiver; Effect of Waiver or Consent . Any Party hereto may (a) extend the time for the performance of any obligation or other act of any other Party hereto or (b) waive compliance with any agreement or condition of any other Party contained herein. Except as otherwise specifically provided herein, any such extension or waiver shall be valid only if set forth in a written instrument duly executed by the party or parties to be bound thereby. No waiver or consent, express or implied, by any Party of or to any breach or default by any Person in the performance by such Person of its obligations hereunder shall be deemed or construed to be a waiver or consent of or to any other breach or default in the performance by such Person of the same or any other obligations of such Person hereunder. Failure on the part of a Party to complain of any act of any Person or to declare any Person in default, irrespective of how long such failure continues, shall not constitute a waiver by such Party of its rights hereunder until the applicable statute of limitations period has run.

 

Section 6.6             Amendment or Modification . This Agreement may be amended or modified from time to time only by the written agreement of all the Parties hereto.

 

Section 6.7             Assignment . No Party shall have the right to assign its rights or obligations under this Agreement without the consent of the other Parties hereto, except that PEG Inc. shall be enabled to assign its rights hereunder to an Affiliate that agrees to be bound to the terms hereof; provided , however , that PEG Inc. may assign its rights to a Permitted Assignee to the extent expressly provided in Section 2.2(e) ; provided , further , that subject to the foregoing, this Agreement shall be binding on the Parties and their respective successors and assigns.

 

Section 6.8             Counterparts . This Agreement may be executed in any number of counterparts with the same effect as if all signatory parties had signed the same document. All counterparts shall be construed together and shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or electronic transmission shall be as effective as delivery of a manually executed counterpart of this Agreement.

 

Section 6.9             Severability . If any provision of this Agreement or the application thereof to any Person or circumstance shall be held invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

 

Section 6.10         Rules of Construction . Interpretation of this Agreement shall be governed by the following rules of construction: (a) words in the singular shall be held to include the plural and vice versa, and words of one gender shall be held to include the other gender as the context requires, (b) references to the terms Article, Section, and paragraph are references to the Articles, Sections, and paragraphs to this Agreement unless otherwise specified, (c) the word “including” and words of similar import shall mean “including, without limitation,” (d) provisions shall apply, when appropriate, to successive events and transactions, (e) the headings contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation of

 

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this Agreement and (f) this Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted.

 

Section 6.11         Further Assurances . In connection with this Agreement and all transactions contemplated by this Agreement, each signatory party hereto agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement and all such transactions.

 

Section 6.12         Laws and Regulations . Notwithstanding any provision of this Agreement to the contrary, no party to this Agreement shall be required to take any act, or fail to take any act, under this Agreement if the effect thereof would be to cause such party to be in violation of any Applicable Law.

 

Section 6.13         No Third Party Beneficiaries . Each Final Project Offeror and, solely to the extent of the applicable assignment, each Permitted Assignee (if any) shall be a beneficiary of this Agreement, entitled to the benefits of this Agreement. The provisions of this Agreement are enforceable solely by the Parties and, solely to the extent of the applicable assignment, each Permitted Assignee (if any), and no other Person, including any limited partner, member or equity holder of the Parties, shall have the right, separate and apart from the Parties, as applicable, to enforce any provision of this Agreement or to compel any Party to this Agreement to comply with the terms of this Agreement.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement on, and effective as of, the date hereof.

 

      PATTERN ENERGY GROUP 2 LP  
             
             
      By: /s/ Dyann Blaine  
        Name: Dyann Blaine  
        Title: Vice President  
             

 

      PATTERN ENERGY GROUP INC.  
             
             
      By: /s/ Esben Pedersen  
        Name: Esben Pedersen  
        Title: Chief Investment Officer  
             

 

 

 

 

 

 

 

Amended and Restated Purchase Rights Agreement

 

 
 

Solely with Respect to Article III

 

      PATTERN ENERGY GROUP HOLDINGS 2 LP  
             
             
      By: /s/ Dyann Blaine  
        Name: Dyann Blaine  
        Title: Vice President  
             

 

 

 

 

 

 

 

Amended and Restated Purchase Rights Agreement

 

 
 

Solely with Respect to Article III

 

 

      PATTERN ENERGY GP 2 LLC  
             
             
      By: /s/ Dyann Blaine  
        Name: Dyann Blaine  
        Title: Vice President  
             

 

 

 

 

 

 

Amended and Restated Purchase Rights Agreement

 

 
 

Exhibit A

 

Form of Purchase and Sale Agreement

 

[Attached]

 

 

 

 

 

Exhibit 10.3

 

Execution Version

 

 

 

 

 

 

SECOND AMENDED AND RESTATED

 

NONCOMPETITION AGREEMENT

 

BY AND AMONG

 

PATTERN ENERGY GROUP LP,

 

PATTERN ENERGY GROUP INC., AND

 

PATTERN ENERGY GROUP 2 LP

 

Dated as of June 16, 2017

 

 

 

 

 
 

TABLE OF CONTENTS

 

Article I

DEFINITIONS

 

Section 1.1 Definitions 1

 

Article II

 

Exclusivity

 

Section 2.1 Exclusivity 3

 

Article III

MISCELLANEOUS

 

Section 3.1 Choice of Law; Submission to Jurisdiction; Waiver of Jury Trial 5
Section 3.2 Enforcement 5
Section 3.3 Notice 5
Section 3.4 Entire Agreement 6
Section 3.5 Termination 6
Section 3.6 Waiver; Effect of Waiver or Consent 6
Section 3.7 Amendment or Modification 6
Section 3.8 Assignment 6
Section 3.9 Counterparts 7
Section 3.10 Severability 7
Section 3.11 Rules of Construction 7
Section 3.12 Further Assurances 7
Section 3.13 Laws and Regulations 7
Section 3.14 No Third Party Beneficiaries 7

 

i
 

SECOND AMENDED AND RESTATED NONCOMPETITION AGREEMENT

 

THIS SECOND AMENDED AND RESTATED NONCOMPETITION AGREEMENT is entered into on, and effective as of June 16, 2017, by and between Pattern Energy Group LP, a Delaware limited partnership (“ PEG LP ”), Pattern Energy Group Inc., a Delaware corporation (“ PEG Inc. ”), and Pattern Energy Group 2 LP, a Delaware limited partnership (“ PEG 2 ”).

 

R E C I T A L S:

 

A.       PEG LP and PEG Inc. entered into a Non-Competition Agreement, dated as of October 2, 2013 (the “ Initial Agreement ”) to evidence their understanding with respect to certain interests in Projects.

 

B.       The Parties entered into the Amended and Restated Non-Competition Agreement, dated December 8, 2016 (the “ A&R Agreement ”), amending and restating the Initial Agreement to, among other things, add PEG 2 as a party.

 

C.       The Parties desire to amend and restate the A&R Agreement to further provide for their rights and obligations as described herein.

 

In consideration of the premises and the covenants, conditions, and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby amend and restate the A&R Agreement in its entirety and further agree as follows:

 

Article I

DEFINITIONS

 

Section 1.1             Definitions.  As used in this Agreement, the following terms shall have the respective meanings set forth below:

 

 

A&R Agreement ” is defined in the introduction to this Agreement.

 

Agreement ” means this Second Amended and Restated NonCompetition Agreement, as it may be amended, modified, or supplemented from time to time in accordance with Section 3.7 hereof.

 

Applicable Law ” means any applicable constitutional provision, statute, act, code, law, regulation, rule, ordinance, Order, decree, ruling, proclamation, resolution, judgment, decision, declaration, or interpretative or advisory opinion or letter, of a Governmental Authority having valid jurisdiction.

 

Business Day ” means a day other than a Saturday, Sunday or any other day on which commercial banks in Toronto, Ontario or New York, NY are authorized or required by Applicable Law to close. Any event the scheduled occurrence of which would fall on a day that is not a Business Day shall be deferred until the next succeeding Business Day.

 

 
 

Control ” or “ controlled ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

 

Equity Interests ” means all shares, capital stock, partnership or limited liability company interests, units, participations, distribution rights, joint venture interest or similar equity interests issued by any Person, however designated.

 

Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 

Governmental Authority ” means:

 

(i)                  any government, whether national, federal, provincial, state, territorial, municipal or local (whether administrative, legislative, executive or otherwise);

 

(ii)                any agency, authority, ministry, department, regulatory body, court, central bank, bureau, board or other instrumentality having legislative, judicial, taxing, regulatory, prosecutorial or administrative powers or functions of, or pertaining to, government;

 

(iii)              any court, commission, individual, arbitrator, arbitration panel or other body having adjudicative, regulatory, judicial, quasijudicial, administrative or similar functions; and

 

(iv)              any other body or entity created under the authority of or otherwise subject to the jurisdiction of any of the foregoing, including any stock or other securities exchange or professional association.

 

Order ” means any order, directive, judgment, decree, injunction, decision, ruling, award or writ of any Governmental Authority.

 

Parties ” means the parties to this Agreement and their successors (whether through merger or otherwise) and permitted assigns.

 

PEG 2 ” is defined in the introduction to this Agreement.

 

PEG 2 Entities ” means PEG 2 and any Person Controlled by PEG 2, other than the PEG Inc. Entities.

 

PEG 2 LPA ” means that certain Second Amended and Restated Agreement of Limited Partnership of PEG 2, dated as of the date hereof.

 

PEG 2 Purchase Rights Agreement ” means that certain Amended and Restated Purchase Rights Agreement, entered into on, and effective as of the date hereof, among PEG 2, PEG Inc., and, solely with respect to Article III thereof, Pattern Energy Group Holdings 2 LP, a Delaware limited partnership, and Pattern Energy Group Holdings 2 GP LLC, a Delaware limited liability company, as the same may be amended from time to time.

 

 
 

PEG Inc. ” is defined in the introduction to this Agreement.

 

PEG Inc. Entities ” means PEG Inc. and any Person Controlled by PEG Inc.

 

PEG LP ” is defined in the introduction to this Agreement.

 

PEG LP Entities ” means PEG LP and any Person Controlled by PEG LP, other than the PEG Inc. Entities.

 

PEG LP Purchase Rights Agreement ” means that certain Amended and Restated Purchase Rights Agreement, entered into on, and effective as of the date hereof, among PEG LP, PEG Inc., and, solely with respect to Article IV thereof, Pattern Energy Group Holdings LP, a Delaware limited partnership, and Pattern Energy GP LLC, a Delaware limited liability company, as the same may be amended from time to time.

 

PEG LP Retained Assets ” means the development assets owned by PEG LP as set forth on Schedule 1 attached hereto.

 

Person ” means an individual, corporation, partnership, joint venture, trust, limited liability company, unlimited liability company, unincorporated organization or any other entity.

 

Project ” means any power generation, storage or transmission development project, prior to completion of construction.

 

Relevant Geographies ” means the United States, Canada, and Mexico.

 

Article II 

 

Exclusivity

 

Section 2.1            Exclusivity .

 

(a)                Each of PEG Inc. and PEG LP hereby grant PEG 2 the exclusive right to develop, and each of PEG Inc. and PEG LP hereby agree to refrain from developing or otherwise entering into any agreement or arrangement with a Person other than PEG 2 to develop, all Projects located in the Relevant Geographies except: (i) any development activities intended to expand, improve, enhance or protect an existing power generation, transmission or storage facility that is directly or indirectly managed or majority owned by PEG Inc. as of the applicable date of determination (a list of such facilities as of the date hereof is set forth on Schedule 2 attached hereto); (ii) any Project associated with a PEG LP Retained Asset; (iii) any Project acquired in whole or in part by PEG Inc. or a Permitted Assignee (as defined in the PEG 2 Purchase Rights Agreement) pursuant to the PEG 2 Purchase Rights Agreement; (iv) any Project acquired in whole or in part by PEG Inc. or a Permitted Assignee (as defined in the PEG LP Purchase Rights Agreement) pursuant to the PEG LP Purchase Rights Agreement, or (v) any Project that has issued or achieved, or the parties agree (acting reasonably) is likely to issue or achieve within thirty (30) days of closing an acquisition of such Project, readiness for construction financing or issuance of full notice to proceed; provided, however, that nothing in this Section 2.1 shall restrict PEG Inc. from acquiring (whether through a stock or asset purchase, merger,

 

 
 

combination, amalgamation or other business combination transaction) any company or business that is principally engaged in the business of owning and operating renewable energy facilities (“Operating Business”); provided, further, that a portfolio of Projects for sale is not an Operating Business and, if it contains a mix of development, construction or operating Projects, PEG 2 and PEG Inc. will reasonably cooperate to split the assets so that PEG 2 may acquire (whether through a stock or asset purchase, merger, combination or other business combination transaction) the development Projects and PEG Inc. may acquire (whether through a stock or asset purchase, merger, combination or other business combination transaction) the construction and operating Projects contained in such portfolios, on mutually acceptable terms.

 

(b)                Until such time as a controlling interest in Green Power Investments is no longer held by PEG LP (whether by sale of equity or a sale of all or substantially all assets of Green Power Investments), each of PEG Inc. and PEG 2 hereby grant PEG LP the exclusive right to develop, and each of PEG Inc. and PEG 2 hereby agree to refrain from developing or otherwise entering into any agreement or arrangement with a Person other than PEG LP to develop , all Projects in Japan except: (i) any development activities intended to expand, improve, enhance or protect an existing power generation, transmission or storage facility that is directly or indirectly managed or majority owned by PEG Inc. as of the applicable date of determination, (ii) any Project acquired in whole or in part by PEG Inc. or a Permitted Assignee (as defined in the PEG 2 Purchase Rights Agreement) pursuant to the PEG 2 Purchase Rights Agreement, (iii) any Project acquired in whole or in part by PEG Inc. or a Permitted Assignee (as defined in the PEG LP Purchase Rights Agreement pursuant to the PEG LP Purchase Rights Agreement, or (iv) any Project that has issued or achieved, or the parties agree (acting reasonably) is likely to issue or achieve within thirty (30) days of closing an acquisition of such Project, readiness for construction financing or issuance of full notice to proceed; provided, however, that nothing in this Section 2.1(b) shall restrict PEG Inc. from acquiring (whether through a stock or asset purchase, merger, combination or other business combination transaction) any company or business that is principally engaged in the business of owning and operating renewable energy facilities (“Operating Business”); provided, further, that a portfolio of Projects for sale is not an Operating Business and, if it contains a mix of development, construction or operating Projects, PEG 2 and PEG Inc. will reasonably cooperate to split the assets so that PEG 2 may acquire (whether through a stock or asset purchase, merger, combination or other business combination transaction) the development Projects and PEG Inc. may acquire (whether through a stock or asset purchase, merger, combination or other business combination transaction) the construction and operating Projects contained in such portfolios on mutually acceptable terms. If PEG 2 or PEG Inc. acquires (whether through a stock or asset purchase, merger, combination or other business combination transaction) a direct or indirect controlling interest in Green Power Investments (the “ Japanese Development Acquisition ”), then effective upon such Japanese Development Acquisition, and without further action, each of PEG LP and either of PEG Inc. or PEG 2 (to the extent it is not the acquirer of such Japanese Development Acquisition) hereby grant to the acquirer of such Japanese Development Acquisition the exclusive right to develop all Projects in Japan subject to the exceptions set forth in clauses (i) through (iv) above.

 

 
 

Article III

MISCELLANEOUS

 

Section 3.1             Choice of Law; Submission to Jurisdiction; Waiver of Jury Trial . This Agreement shall be governed by and construed and interpreted in accordance with the Laws of the State of New York, excluding any conflict-oflaws rule or principle that might refer the governance or the construction of this Agreement to the law of another jurisdiction irrespective of the choice of laws principles. Subject to Section 3.2 , each Party hereby irrevocably submits to the exclusive jurisdiction of any state or federal court sitting in New York, New York in connection with any claim, suit, action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby or any dealings between the Parties relating to the subject matter of this Agreement and the relationship that is being established. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM, SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED.

 

 

Section 3.2              Enforcement . Each Party agrees and acknowledges that the other Parties do not have an adequate remedy at law for the breach by any such Party of its covenants and agreements set forth in this Agreement, and that any breach by any such Party of its covenants and agreements set forth in this Agreement would result in irreparable injury to such other Party. Each Party shall be entitled to enforce its rights under this Agreement specifically, to recover damages by reason of any breach of any provision of this Agreement (including costs of enforcement) and to exercise any and all other rights existing in its favor. The Parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that each Party may, in its sole discretion, apply to any court of law or equity of competent jurisdiction for, and shall be entitled to specific performance or injunctive relief (without posting a bond or other security) in order to enforce or prevent any violation or threatened violation of the provisions of this Agreement.

 

 

Section 3.3             Notice . All notices, requests or consents provided for or permitted to be given pursuant to this Agreement must be in writing and must be given by depositing the same in the mail, addressed to the Person to be notified, postpaid, and registered or certified with return receipt requested or by delivering such notice in person or by privatecourier, prepaid, or by telecopier to such party. Notice given by personal delivery or mail shall be effective upon actual receipt. Couriered notices shall be deemed delivered on the date the courier represents that delivery will occur. Notice given by telecopier shall be effective upon actual receipt if received during the recipient’s normal business hours, or at the beginning of the recipient’s next Business Day after receipt if not received during the recipient’s normal business hours. All notices to be sent to a Party pursuant to this Agreement shall be sent to or made at the address set forth below such Party’s signature to this Agreement, or at such other address as such Party may stipulate to the other Parties in the manner provided in this Section 3.3 .

 

 

 
 

Section 3.4              Entire Agreement . This Agreement, the PEG LP Purchase Rights Agreement and the PEG 2 Purchase Rights Agreement constitute the entire agreement of the Parties relating to the matters contained herein, superseding all prior contracts or agreements, whether oral or written, relating to the matters contained herein.

 

 

Section 3.5             Termination . Upon the termination of all of PEG Inc.’s collective purchase rights set forth in Articles III and IV of the PEG LP Purchase Rights Agreement in accordance with the terms of the PEG LP Purchase Rights Agreement, this Agreement shall automatically and immediately terminate as between PEG Inc. and PEG LP, but will remain in full force and effect as between PEG Inc. and PEG 2 and as between PEG LP and PEG 2.

 

(b)               Upon the termination of all of PEG Inc.’s collective purchase rights set forth in Articles II and III of the PEG 2 Purchase Rights Agreement in accordance with the terms of the PEG 2 Purchase Rights Agreement, this Agreement shall automatically and immediately terminate as between PEG Inc. and PEG 2, but will remain in full force and effect as between PEG Inc. and PEG LP and as between PEG 2 and PEG LP.

 

(c)                Notwithstanding anything to the contrary, upon the earlier to occur of (i) the wind-up of PEG 2 pursuant to the terms of the PEG 2 LPA and (ii) PEG 2’s rejection of three (3) or more First Rights Project Offers (as defined in the PEG 2 Purchase Rights Agreement) in accordance with the terms of the PEG 2 Purchase Rights Agreement, representing a cumulative net capacity of at least 600 MW, in the aggregate, PEG Inc. shall have the right to terminate Section 2.1 .

 

Section 3.6              Waiver; Effect of Waiver or Consent . Any Party hereto may (a) extend the time for the performance of any obligation or other act of any other Party hereto or (b) waive compliance with any agreement or condition of any other Party contained herein. Except as otherwise specifically provided herein, any such extension or waiver shall be valid only if set forth in a written instrument duly executed by the party or parties to be bound thereby. No waiver or consent, express or implied, by any Party of or to any breach or default by any Person in the performance by such Person of its obligations hereunder shall be deemed or construed to be a waiver or consent of or to any other breach or default in the performance by such Person of the same or any other obligations of such Person hereunder. Failure on the part of a Party to complain of any act of any Person or to declare any Person in default, irrespective of how long such failure continues, shall not constitute a waiver by such Party of its rights hereunder until the applicable statute of limitations period has run.

 

 

Section 3.7             Amendment or Modification . This Agreement may be amended or modified from time to time only by the written agreement of all the Parties hereto.

 

 

Section 3.8             Assignment . No Party shall have the right to assign its rights or obligations under this Agreement without the consent of the other Parties hereto; provided, that this Agreement shall be binding on the Parties and their respective successors (whether through merger or otherwise) and permitted assigns.

 

 

Section 3.9              Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all signatory parties had signed the same document. All

 

 

 
 

counterparts shall be construed together and shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or electronic transmission shall be as effective as delivery of a manually executed counterpart of this Agreement.

 

Section 3.10         Severability . If any provision of this Agreement or the application thereof to any Person or circumstance shall be held invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

 

 

Section 3.11         R ules of Construction . Interpretation of this Agreement shall be governed by the following rules of construction: (a) words in the singular shall be held to include the plural and vice versa, and words of one gender shall be held to include the other gender as the context requires, (b) references to the terms Article, Section, paragraph, and Schedule are references to the Articles, Sections, paragraphs, and Schedules to this Agreement unless otherwise specified, (c) the word “including” and words of similar import shall mean “including, without limitation,” (d) provisions shall apply, when appropriate, to successive events and transactions, (e) the headings contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement and (f) this Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted.

 

 

Section 3.12         Further Assurances . In connection with this Agreement and all transactions contemplated by this Agreement, each signatory party hereto agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement and all such transactions.

 

 

Section 3.13         Laws and Regulations . Notwithstanding any provision of this Agreement to the contrary, no party to this Agreement shall be required to take any act, or fail to take any act, under this Agreement if the effect thereof would be to cause such party to be in violation of any Applicable Law.

 

 

Section 3.14         No Third Party Beneficiaries . The provisions of this Agreement are enforceable solely by the Parties to this Agreement, and no other Person, including any limited partner, member or equity holder of PEG LP, PEG 2 or PEG Inc., shall have the right, separate and apart from PEG LP, PEG 2 and PEG Inc., as applicable, to enforce any provision of this Agreement or to compel any Party to this Agreement to comply with the terms of this Agreement.

 

 

[SIGNATURE PAGE FOLLOWS]

 

 
 

IN WITNESS WHEREOF, the Parties have executed this Agreement on, and effective as of, the date of this Agreement.

 

 

      PATTERN ENERGY GROUP LP  
             
             
      By: /s/ Daniel M. Elkort  
        Its: Daniel M. Elkort  
        Vice President  
             

 

      PATTERN ENERGY GROUP INC.  
             
             
      By: /s/ Esben Pedersen  
        Its: Esben Pedersen  
        Chief Investment Officer  
             

 

      PATTERN ENERGY GROUP 2 LP  
             
             
      By: /s/ Dyann Blaine  
        Its: Dyann Blaine  
        Vice President  
             

 

 

 

 

 

Signature Page to
Second Amended and Restated Non-Competition Agreement

 

 
 

SCHEDULE 1

 

PEG LP Retained Assets

 

PEG LP Retained Asset Location Approximate Owned MW
Meikle British Columbia 180
Conejo Solar Chile 84
Belle River Ontario 50
Henvey Inlet Ontario 150
Mont Sainte-Marguerite Québec 147
North Kent Ontario 43
El Cabo New Mexico 147

 

 

 

 

 

 

Schedule 1

 

 
 

SCHEDULE 2

 

PEG Inc. Facilities

 

Project Name Size (MW)
Gulf Wind, TX 283
Hatchet Ridge, CA 101
St. Joseph, MB 138
Spring Valley, NV 152
Santa Isabel,Puerto Rico 101
Ocotillo, CA 265
South Kent,ON 270
El Arrayán, Chile 115
Panhandle 1, TX 218
Panhandle 2, TX 182
Grand,ON 149
Post Rock, KS 201
Lost Creek, MO 150
K2,ON 270
Logan’s Gap, TX 200
Amazon Wind Farm (F),IN 150
Broadview, NM 324
Armow, ON 180

 

 

 

 

 

 

Schedule 2

 

 

 

Exhibit 10.4

 

 

EXECUTION VERSION 

 

 

 

 

 

 

 

AMENDED AND RESTATED
MULTILATERAL MANAGEMENT SERVICES AGREEMENT

 

Dated as of June 16, 2017

 

by and among

 

PATTERN ENERGY GROUP INC.,

 

PATTERN ENERGY GROUP LP,

 

and

 

PATTERN ENERGY GROUP 2 LP

 

 

 

 

 

 

 

 
 

Table of Contents

 

Article I
DEFINITIONS AND USAGE

 

Section 1.01 Definitions 1

 

Article II
PEG 1’S RESPONSIBILITIES

 

Section 2.01 PEG 1 Services 4

 

Article III
PEG INC.’S RESPONSIBILITIES

 

Section 3.01 PEG Inc. Services 5
Section 3.02 MOMA and PAA Services 6

 

Article IV
PEG 2 RESPONSIBILITIES

 

Section 4.01 PEG 2 Services 6

 

Article V
STANDARD OF PERFORMANCE

 

Section 5.01 Diligence, Care and Prudence 8
Section 5.02 Limitation on Liability 8

 

Article VI
COMPENSATION AND PAYMENT

 

Section 6.01 PEG 1 Services 8
Section 6.02 PEG Inc. Services 9
Section 6.03 PEG 2 Services 10
Section 6.04 Billing and Payment 11
Section 6.05 Records 11

 

Article VII
PEG 2 TRANSITION

 

Section 7.01 PEG 2 Transition 11
Section 7.02 No Payments 12
Section 7.03 Reimbursement following PEG 2 Transition 12
Section 7.04 Transition 12
 
 

Article VIII
REINTEGRATION EVENTS

 

Section 8.01 Reintegration Event 12
Section 8.02 No Payments 13
Section 8.03 Services Following the PEG 1 Employee Reintegration 13
Section 8.04 Services Following the PEG 2 Employee Reintegration 13
Section 8.05 Reimbursement following Employee Reintegrations 13
Section 8.06 Transition 13

 

Article IX

EMPLOYMENT OF PERSONNEL

 

Section 9.01 Personnel 14

 

Article X
DISPUTE RESOLUTION

 

Section 10.01 Procedure 14
Section 10.02 Continuation of Work 14

 

Article XI
COMMENCEMENT AND TERMINATION

 

Section 11.01 Term 15
Section 11.02 Cooperation 15
Section 11.03 Early Termination by PEG Inc. 15
Section 11.04 Early Termination by PEG 1 16
Section 11.05 Early Termination by PEG 2 16

 

Article XII
INDEMNIFICATION AND LIMITATION OF LIABILITY

 

Section 12.01 Indemnification 17
Section 12.02 Exclusion of Consequential Damages 18
Section 12.03 Total Limitation on Liability 18
Section 12.04 Survival 18

 

Article XIII
RIGHT TO PURCHASE CERTAIN ASSETS

 

Section 13.01 Purchase Right 18
Section 13.02 Procedure 18
Section 13.03 Disputes 18
Section 13.04 Transfer 18

 

 
 

Article XIV
MISCELLANEOUS

 

Section 14.01 Assignment 19
Section 14.02 Authorization 19
Section 14.03 Governing Law, Jurisdiction, Venue 19
Section 14.04 No Partnership 20
Section 14.05 Notice 20
Section 14.06 Usage 21
Section 14.07 Entire Agreement 21
Section 14.08 Amendment 21
Section 14.09 Confidential Information 21
Section 14.10 Discharge of Obligations 22
Section 14.11 Third Party Beneficiaries 22
Section 14.12 Severability 22
Section 14.13 Binding Effect 22
Section 14.14 Counterparts 22

 

 
 

AMENDED AND RESTATED
MULTILATERAL MANAGEMENT SERVICES AGREEMENT

 

THIS AMENDED AND RESTATED MULTILATERAL MANAGEMENT SERVICES AGREEMENT (the “ Agreement ”) is made as of this 16 th day of June, 2017 (the “ Effective Date ”), by and among PATTERN ENERGY GROUP INC., a Delaware corporation (“ PEG Inc. ”), PATTERN ENERGY GROUP LP, a Delaware limited partnership (“ PEG 1 ”), and PATTERN ENERGY GROUP 2 LP, a Delaware limited partnership (“ PEG 2 ”). Each of PEG Inc., PEG 1, and PEG 2 is referred to herein as a “ Party ” and collectively as the “ Parties.

 

W I T N E S S E T H :

 

WHEREAS, PEG Inc. and PEG 1 entered into a Bilateral Management Services Agreement, dated as of October 2, 2013 (the “ Initial Agreement ”), as amended by the First Amendment to Bilateral Management Services Agreement dated as of July 3, 2015, whereby each of PEG Inc. and PEG 1 wishes to engage the other to provide certain management services and each of PEG Inc. and PEG 1 wishes to accept such engagement to provide such services for the benefit of the other in accordance with the terms and conditions set forth therein;

 

WHEREAS, the Parties entered into a Multilateral Management Services Agreement, dated as of December 8, 2016, amending and restating the Initial Agreement in its entirety (the “ Multilateral Agreement ”), among other things, to add PEG 2 as a party;

 

WHEREAS, the Parties desire to amend and restate the Multilateral Agreement to further provide for the rights and obligations of the Parties;

 

WHEREAS, the Parties contemplate the transfer of PEG 1 employees and employees of its subsidiaries into PEG Inc. or PEG 2 upon the occurrence of certain events, after which the services provided by PEG 1 will be internalized by PEG Inc. or PEG 2, as applicable, as set forth herein; and

 

WHEREAS, entering into this Agreement is mutually beneficial to all Parties as the Parties will be sharing the costs of such services and by so doing will reduce the respective costs of each Party.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, the parties hereto, intending to be legally bound, hereby amend and restate the Multilateral Agreement in its entirety and further agree as follows:

 

Article I
DEFINITIONS AND USAGE

 

Section 1.01        Definitions . Unless the context shall otherwise require or the express terms of this Agreement shall otherwise provide, capitalized terms used herein shall have the following meanings:

 

1

 

Affiliate ” of a specified Person means any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the Person specified.

 

Agreement ” is defined in the preamble.

 

Effective Date ” is defined in the preamble.

 

GAAP ” means generally accepted accounting principles in the United States, consistently applied.

 

Initial Agreement ” is defined in the preamble.

 

Multilateral Agreement ” is defined in the preamble.

 

NASDAQ ” means the NASDAQ Global Market.

 

notices ” is defined in Section 14.05 .

 

Person ” means any individual, corporation, partnership, joint venture, association, limited liability company, joint stock company, trust, unincorporated organization or governmental authority.

 

PEG 1 ” is defined in the preamble.

 

PEG 1 Employee Reintegration ” is defined in Section 8.01 .

 

PEG 1 LPA ” means the First Amended and Restated Agreement of Limited Partnership of PEG 1, dated as of July 15, 2010, as the same may be amended from time to time.

 

PEG 1 Reintegration Event ” is defined in Section 8.01 .

 

PEG 1 Services ” means the services set forth in Section 2.01 .

 

PEG 1 Services Failure ” is defined in Section 2.01 .

 

PEG 1 Services Period ” is defined in Section 2.01 .

 

PEG 2 ” is defined in the preamble.

 

PEG 2 Services Failure ” is defined in Section 4.01 .

 

PEG 2 Employee Reintegration ” is defined in Section 8.02 .

 

PEG 2 LPA ” means the Second Amended and Restated Agreement of Limited Partnership of PEG 2, dated as of the date hereof, as the same may be amended from time to time.

 

PEG 2 Reintegration Event ” is defined in Section 8.02 .

 

2

 

PEG 2 Services ” means the services set forth in Section 4.01 .

 

PEG 2 Transition ” is defined in Section 7.01 .

 

PEG 2 Transition Trigger Event ” is defined in Section 7.01 .

 

PEG Inc. ” is defined in the preamble.

 

PEG Inc. Services ” means the services set forth in Section 3.01 .

 

Reference Rate ” means the rate as published, from time to time, in The Wall Street Journal as the prime lending rate or “ prime rate ” plus one percent (1%).

 

Senior Officer ” means an officer that has been appointed to the relevant Party’s management committee, board or similar body charged with the management of such Party.

 

Shared PEG Executives ” means the senior executives of PEG Inc. who will provide executive management services to PEG 1 or PEG 2 in accordance with Section 3.01 and devote the percentage of time and have the responsibilities to PEG 1 or PEG 2, in each case, as set forth on Schedule 1 hereto (as such schedule may be updated by mutual agreement of the Parties from time to time).

 

Support Assets ” means, with respect to any Party, any asset or assets that may be reasonably necessary for and related to the administration of such Party’s business, such as computer hardware, software, data back-up infrastructure, facilities and any other assets as may be reasonably determined by such Party.

 

Term ” is defined in Section 11.01 .

 

Total Market Capitalization ” means the aggregate value of PEG Inc.’s issued and outstanding Class A Shares (assuming that all of PEG Inc.’s then outstanding Class B Shares had converted into Class A Shares on a one-forone basis prior to such date) determined based on the daily volume weighted average price of the Class A Shares on the NASDAQ (or the then primary securities exchange or association or over-thecounter market on which the Class A Shares are listed for trading).

 

Trading Day ” means a day on which the Class A Shares:

 

(i)       are not suspended from trading on any national or regional securities exchange or association or over-thecounter market at the close of business; and

 

(ii)       have traded at least once on the NASDAQ or the national or regional securities exchange or association or over-thecounter market that is the primary market for the trading of the Class A Shares.

 

Transaction ” is defined in Section 14.09(c) .

 

3

 

Article II
PEG 1’S RESPONSIBILITIES

 

Section 2.01        PEG 1 Services . Until the earlier of (i) the PEG 1 Reintegration and (ii) the PEG 2 Transition (the “ PEG 1 Services Period ”), PEG 1 shall make its personnel and the personnel of its subsidiaries available to PEG Inc. and PEG 2 to provide and perform the following services for PEG Inc., PEG 2 and their respective Affiliates and project entities in accordance with, subject to Section 9.01 , the scope, instruction, and policies of PEG Inc. or PEG 2, as applicable (the “ PEG 1 Services ”):

 

(a)                day-today administrative services;

 

(b)               services related to accounting and tax, including, preparation and filing of tax returns and maintaining books and records;

 

(c)                services related to preparation of annual consolidated financial statements, and quarterly interim financial statements;

 

(d)               services related to regulatory reporting and other public filings and disclosures;

 

(e)                services related to preparation of annual budgets;

 

(f)                legal and corporate secretarial support and other corporate services;

 

(g)               services related to financial analysis, financing, and, when requested to do so, assisting in the process of raising capital by way of debt, equity or otherwise;

 

(h)               services related to human resources support and administration;

 

(i)                 services related to information technology support;

 

(j)                 providing advice with respect to issues concerning project development, permitting, construction management and engineering, power marketing, environmental management and implementation;

 

(k)               providing assistance in connection with PEG Inc.’s pursuit of acquisition opportunities;

 

(l)                 services related to obtaining and maintaining insurance;

 

(m)             services related to maintaining required governmental approvals and permits and preparing and submitting filings with respect to PEG Inc.’s projects;

 

(n)               services with respect to compliance with applicable laws and other obligations of PEG Inc. and PEG 2 and their respective projects;

 

(o)               supervising and monitoring PEG Inc.’s and PEG 2’s and their respective counterparties’ compliance with the terms and conditions of PEG Inc.’s and PEG 2’s respective

 

4

 

contracts and performing on behalf of PEG Inc. and PEG 2 reporting and other routine administrative responsibilities under such contracts; and

 

(p)               performing such other tasks of an administrative nature as PEG Inc. or PEG 2 may reasonably request from time to time in connection with or related to PEG Inc. or PEG 2, their respective Affiliates and/or their respective operations.

 

Prior to taking any action that will materially diminish its ability to provide the PEG 1 Services as contemplated under this Agreement, PEG 1 will provide PEG Inc. and PEG 2 with advance written notice of such anticipated action. PEG Inc. and PEG 2 shall then have a period of 30 days to deliver a written response to PEG 1, either consenting to such action or stating that such action may only be taken following a notice period of six (6) months. Failure by PEG Inc. or PEG 2 to deliver such response within such 30 day period shall be deemed, with respect to such respective party, consent of the described action. For the avoidance of doubt, PEG 1 may determine, in its sole discretion based on its own business considerations, to take any such action.

 

PEG 1 agrees that, during the PEG 1 Services Period, the PEG 1 Services shall include such resources and services that a reasonably prudent professional operating in the wind industry would deem appropriate taking into account the business plan, approved budget, costs and expenses to support the foregoing for each of PEG Inc. and PEG 2. Following notice to PEG 1 by PEG Inc. or PEG 2, as applicable, notifying PEG 1 of its failure to provide such sufficient resources and services, PEG 1 shall have a period of thirty (30) days to cure any such failure; provided , however , that if the fact, circumstance or condition that is the subject of such failure cannot reasonably be remedied within such 30-day period and if, within such period, PEG 1 provides reasonable evidence to PEG Inc. and PEG 2 that it has commenced, and thereafter proceeds with reasonable due diligence, to remedy such failure, such period shall be extended for a reasonable period satisfactory to PEG Inc. and PEG 2, acting reasonably, for PEG 1 to remedy the same. Following such period, in the event that PEG 1 has not cured such failure (unless such failure is a result of the PEG 2 Board of Directors or the PEG LP Board of Directors not providing approval to fund such increased resources and services) (a “ PEG 1 Services Failure ”) then, except any time following a PEG 2 Transition, PEG 1 Employee Reintegration, or PEG 2 Employee Reintegration, PEG 2 shall have the right, in its sole discretion, to (A) cause PEG 1 to hire additional development personnel, or (B) initiate a wind-down of PEG 2 in accordance with the terms of the PEG 2 LPA; provided that PEG Inc. shall be afforded a reasonable opportunity to effect a PEG 1 Employee Reintegration following a PEG 1 Services Failure prior to PEG 2 having such right to initiate a wind-down of PEG 2.

 

Article III
PEG INC.’S RESPONSIBILITIES

 

Section 3.01        PEG Inc. Services . PEG Inc. shall make its personnel and the personnel of its subsidiaries available to PEG 1 and PEG 2 to provide and perform the following services for PEG 1, PEG 2, and their respective Affiliates in accordance with, subject to Section 8.01 and Section 8.03 , the scope, instruction, and policies of PEG 1 or PEG 2, as applicable (the “ PEG Inc. Services ”):

 

5

 

(a)                provide and perform the PEG 1 Services after a PEG 1 Employee Reintegration;

 

(b)               provide and perform the PEG 2 Services after a PEG 2 Employee Reintegration;

 

(c)                act as a Shared PEG Executive, as agreed from time to time (with the Shared PEG Executives on the Effective Date indicated on Schedule 1 hereto);

 

(d)               support PEG 1’s and PEG 2’s development activities, analysis of development opportunities and cost analysis and assist with respect to issues concerning project operations and maintenance to the extent required for PEG 1’s or PEG 2’s development activities; and

 

(e)                perform such other tasks of an administrative nature as PEG 1 or PEG 2 may reasonably request from time to time in connection with or related to PEG 1 or PEG 2 and/or their respective business activities.

 

PEG Inc. agrees that the PEG Inc. Services shall include such resources and services that a reasonably prudent professional operating in the wind industry would deem appropriate taking into account the business plan, approved budget, costs and expenses to support the foregoing for each of PEG 1 and PEG 2. Following notice to PEG Inc. by PEG 2, notifying PEG Inc. of its failure to provide such sufficient resources and services, PEG Inc. shall have a period of thirty (30) days to cure any such failure; provided , however , that if the fact, circumstance or condition that is the subject of such failure cannot reasonably be remedied within such 30-day period and if, within such period, PEG Inc. provides reasonable evidence to PEG 2 that it has commenced, and thereafter proceeds with reasonable due diligence, to remedy such failure, such period shall be extended for a reasonable period satisfactory to PEG 2, acting reasonably, for PEG Inc. to remedy the same. Following such period, in the event that PEG Inc. has not cured such failure (unless such failure is a result of the PEG 2 Board of Directors or the PEG LP Board of Directors not providing approval to fund such increased resources and services), PEG 2 shall have the right, in its sole discretion, to (A) suspend PEG Inc. from taking on any additional development projects until such time that PEG Inc. has reasonably demonstrated that sufficient resources and services are being provided to PEG 2, (B) cause PEG Inc. to hire additional development personnel (if the failure relates to the provision of (x) PEG 1 Services following the PEG 1 Employee Reintegration or (y) PEG 2 Services following the PEG 2 Employee Reintegration), or (C) initiate a wind-down of PEG 2 in accordance with the terms of the PEG 2 LPA.

 

Section 3.02        MOMA and PAA Services . PEG Inc. will have the exclusive right, but not the obligation, to provide services pursuant to Management Operation and Maintenance Agreements (“ MOMAs ”) and Project Administration Agreements (“ PAAs ”) for projects developed by PEG 1 or PEG 2, with all such MOMAs and PAAs to be negotiated on customary arms’ length terms.

 

Article IV
PEG 2 RESPONSIBILITIES

 

Section 4.01        PEG 2 Services . Following the consummation of a PEG 2 Transition, PEG 2 shall make its personnel and the personnel of its subsidiaries available to PEG Inc. and PEG 1 to provide and perform the following services for PEG Inc., PEG 1, and their respective

 

6

 

Affiliates in accordance with, subject to Section 9.01 , the scope, instruction, and policies of PEG Inc. or PEG 1, as applicable (the “ PEG 2 Services ”):

 

(a)                day-today administrative services;

 

(b)               services related to accounting and tax, including, preparation and filing of tax returns and maintaining books and records;

 

(c)                services related to preparation of annual consolidated financial statements, and quarterly interim financial statements;

 

(d)               services related to regulatory reporting and other public filings and disclosures;

 

(e)                services related to preparation of annual budgets;

 

(f)                legal and corporate secretarial support and other corporate services;

 

(g)               services related to financial analysis, financing, and, when requested to do so, assisting in the process of raising capital by way of debt, equity or otherwise;

 

(h)               services related to human resources support and administration;

 

(i)                 services related to information technology support;

 

(j)                 providing advice with respect to issues concerning project development, permitting, construction management and engineering, power marketing, environmental management and implementation;

 

(k)               providing assistance in connection with PEG Inc.’s pursuit of acquisition opportunities;

 

(l)                 services related to obtaining and maintaining insurance;

 

(m)             services related to maintaining required governmental approvals and permits and preparing and submitting filings with respect to PEG Inc.’s projects;

 

(n)               services with respect to compliance with applicable laws and other obligations of PEG Inc. and PEG 1 and their respective projects;

 

(o)               supervising and monitoring PEG Inc.’s and PEG 1’s and their respective counterparties’ compliance with the terms and conditions of PEG Inc.’s and PEG 1’s respective contracts and performing on behalf of PEG Inc. and PEG 1 reporting and other routine administrative responsibilities under such contracts; and

 

(p)               performing such other tasks of an administrative nature as PEG Inc. or PEG 1 may reasonably request from time to time in connection with or related to PEG Inc. or PEG 1, their respective Affiliates and/or their respective operations.

 

7

 

PEG 2 agrees that the PEG 2 Services shall include such resources and services that a reasonably prudent professional operating in the wind industry would deem appropriate taking into account the business plan, approved budget, costs and expenses to support the foregoing for each of PEG Inc. and PEG 1. Following notice to PEG 2 by PEG Inc. notifying PEG 2 of its failure to provide such sufficient resources and services, PEG 2 shall have a period of thirty (30) days to cure any such failure; provided , however , that if the fact, circumstance or condition that is the subject of such failure cannot reasonably be remedied within such 30-day period and if, within such period, PEG 2 provides reasonable evidence to PEG Inc. that it has commenced, and thereafter proceeds with reasonable due diligence, to remedy such failure, such period shall be extended for a reasonable period satisfactory to PEG Inc., acting reasonably, for PEG 2 to remedy the same. In the event that PEG 2 has not cured such failure upon the expiration of such period, a “ PEG 2 Services Failure ” shall have occurred.

 

Article V
STANDARD OF PERFORMANCE

 

Section 5.01        Diligence, Care and Prudence . Each Party shall use such diligence, care and prudence in the performance of its duties, including each Party’s respective services set forth in Article II and Article III hereof and shall devote such time, effort and skills, and shall cause its employees and the employees of its subsidiaries to devote such time effort and skills, as an ordinary professional in like position would do in like circumstances, with like executive responsibilities and fiduciary duties in the case of those employees that serve as executive officers of PEG Inc. who also serve as executive officers of either PEG 1 or PEG 2 (or both), but subject to and in accordance with the provisions of this Agreement.

 

Section 5.02        Limitation on Liability . A Party shall have no liability under this Agreement for failure to take actions as to which it has requested in writing the instruction of the other Party to perform if such instruction is not timely given.

 

Article VI
COMPENSATION AND PAYMENT

 

Section 6.01        PEG 1 Services . PEG Inc. and PEG 2 shall pay and reimburse PEG 1 for the PEG 1 Services as follows:

 

(a)                Reimbursable Costs.

 

(i)                 PEG Inc. shall reimburse PEG 1 for PEG Inc.’s allocable share of the costs incurred by PEG 1, on behalf of PEG Inc. in providing the PEG 1 Services. Such costs are expected to include, among other things, the share of costs allocable to PEG Inc. for internal, general and administrative overhead expenses (including rent, utilities, taxes, service contracts, office supplies, insurance and other such costs), and compensation provided to the personnel of PEG 1.

 

(ii)               PEG 2 shall reimburse PEG 1 for PEG 2’s allocable share of the costs incurred by PEG 1, on behalf of PEG 2 in providing the PEG 1 Services. Such costs are expected to include, among other things, the share of costs allocable to PEG 2 for

 

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internal, general and administrative overhead expenses (including rent, utilities, taxes, service contracts, office supplies, insurance and other such costs), and compensation provided to the personnel of PEG 1.

 

(b)               Reimbursable Expenses .

 

(i)                 PEG Inc. shall reimburse PEG 1, for PEG Inc.’s allocable share of all outof-pocket expenses that PEG 1 incurs or pays in connection with the performance of the PEG 1 Services.

 

(ii)               PEG 2 shall reimburse PEG 1, for PEG 2’s allocable share of all outof-pocket expenses that PEG 1 incurs or pays in connection with the performance of the PEG 1 Services.

 

(c)                Methodology . The allocation of costs and expenses attributable to PEG Inc. and PEG 2 under Sections 6.01(a) and (b) above shall be calculated in accordance with the methodology set forth on Exhibit A .

 

(d)               Certain Fees . For the PEG 1 Services set forth in Section 2.01(j) in addition to any reimbursements due under Sections 6.01(a) and (b) above, PEG Inc. and PEG 2 shall pay a fee in an amount equal to 5% of the cost of such services (such cost to be determined in accordance to Section 6.01(c) ) and the fee shall be payable in accordance with Section 6.04 .

 

Section 6.02        PEG Inc. Services . PEG 1 and PEG 2 shall pay and reimburse PEG Inc. for the PEG Inc. Services as follows:

 

(a)                Reimbursable Costs .

 

(i)                 PEG 1 shall reimburse PEG Inc. for PEG 1’s allocable share of the costs incurred by PEG Inc. on behalf of PEG 1 in providing the PEG Inc. Services. Such costs are expected to include, among other things, the share of costs allocable to PEG 1 for internal, general and administrative overhead expenses (including rent, utilities, taxes, service contracts, office supplies, any Support Assets transferred to PEG Inc. by PEG 1 pursuant to the Purchase Right herein, insurance and other such costs), and compensation provided to the personnel of PEG Inc., including, for the avoidance of doubt, compensation provided to executive officers of PEG Inc. who also serve as executive officers of PEG 1.

 

(ii)               PEG 2 shall reimburse PEG Inc. for PEG 2’s allocable share of the costs incurred by PEG Inc. on behalf of PEG 2 in providing the PEG Inc. Services. Such costs are expected to include, among other things, the share of costs allocable to PEG 2 for internal, general and administrative overhead expenses (including rent, utilities, taxes, service contracts, office supplies, any Support Assets transferred to PEG Inc. by PEG 2 pursuant to the Purchase Right herein, insurance and other such costs), and compensation provided to the personnel of PEG Inc., including, for the avoidance of doubt, compensation provided to executive officers of PEG Inc. who also serve as executive officers of PEG 2.

 

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(b)               Reimbursable Expenses .

 

(i)                 PEG 1 shall reimburse PEG Inc. for PEG 1’s allocable share of all out-ofpocket expenses that PEG Inc. incurs in connection with the performance of the PEG Inc. Services.

 

(ii)               PEG 2 shall reimburse PEG Inc. for PEG 2’s allocable share of all out-ofpocket expenses that PEG Inc. incurs in connection with the performance of the PEG Inc. Services.

 

(c)                Methodology . The allocation of costs and expenses attributable to PEG 1 and PEG 2 shall be calculated in accordance with the methodology set forth on Exhibit A .

 

(d)               Certain Fees . For the PEG Inc. Services set forth in Section 3.01(d) , in addition to any reimbursements due under Sections 6.02(a) and (b) above, PEG 1 shall pay a fee, in the aggregate, in an amount equal to 5% of the cost of such services (such cost to be determined in accordance to Section 6.02(c) ) and the fee shall be payable in accordance with Section 6.04 .

 

Section 6.03        PEG 2 Services . PEG Inc. and PEG 1 shall pay and reimburse PEG 2 for the PEG 2 Services as follows:

 

(a)                Reimbursable Costs .

 

(i)                 PEG Inc. shall reimburse PEG 2 for PEG Inc.’s allocable share of the costs incurred by PEG 2 on behalf of PEG Inc. in providing the PEG 2 Services. Such costs are expected to include, among other things, the share of costs allocable to PEG Inc. for internal, general and administrative overhead expenses (including rent, utilities, taxes, service contracts, office supplies, insurance and other such costs), and compensation provided to the personnel of PEG 2.

 

(ii)               PEG 1 shall reimburse PEG 2 for PEG 1’s allocable share of the costs incurred by PEG 2 on behalf of PEG 1 in providing the PEG 2 Services. Such costs are expected to include, among other things, the share of costs allocable to PEG 1 for internal, general and administrative overhead expenses (including rent, utilities, taxes, service contracts, office supplies, insurance and other such costs), and compensation provided to the personnel of PEG 2.

 

(b)               Reimbursable Expenses .

 

(i)                 PEG Inc. shall reimburse PEG 2 for PEG Inc.’s allocable share of all out-of-pocket expenses that PEG 2 incurs or pays in connection with the performance of the PEG 2 Services.

 

(ii)               PEG 1 shall reimburse PEG 2 for PEG 1’s allocable share of all out-of-pocket expenses that PEG 2 incurs or pays in connection with the performance of the PEG 2 Services.

 

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(c)                Methodology . The allocation of costs and expenses attributable to PEG Inc. and PEG 1 under Sections 6.03(a) and (b) above shall be calculated in accordance with the methodology set forth on Exhibit A .

 

(d)               Certain Fees . For the PEG 2 Services set forth in Section 4.01(j) in addition to any reimbursements due under Sections 6.03(a) and (b) above, PEG Inc. and PEG 1 shall pay a fee in an amount equal to 5% of the cost of such services (such cost to be determined in accordance to Section 6.03(c) ) and the fee shall be payable in accordance with Section 6.04 .

 

Section 6.04        Billing and Payment . Within thirty (30) days following submission by a Party of an invoice to the other Party reflecting any fees, costs and expenses due and payable by the other Party (which invoice shall include copies of third party invoices identifying and substantiating, in reasonable detail, the nature of such fees, costs and expenses and the basis for reimbursement thereof), the receiving Party shall:

 

(a)                Make such payment of the fees, costs and expenses, less any portion of such fees, costs and expenses that the receiving Party disputes in good faith;

 

(b)               With respect to any disputed portion of such invoice, provide the billing Party with a written statement explaining, in reasonable detail, the basis for such dispute. The parties shall attempt to resolve any such disputed portion. In the event that the Parties are unable to resolve such dispute, the provision of Article X hereof shall apply; and

 

(c)                Any amount owed hereunder that remains unpaid more than ten (10) days after the date such amount is due and payable under this Agreement shall accrue interest at the Reference Rate beginning on the first (1st) day after such amount became due and payable.

 

Section 6.05        Records . Each Party shall retain copies of invoices submitted by it under this Agreement and of any third party invoices or similar documentation contained or reflected therein, for a minimum period of three (3) years or such longer period to the extent required by law.

 

Article VII
PEG 2 TRANSITION

 

Section 7.01        PEG 2 Transition . PEG 2 shall have the option, exercisable by delivery of written notice of exercise to PEG 1, with a copy to PEG Inc., to require PEG 1 to cooperate and use reasonable efforts to cause the employees of PEG 1 and any of its subsidiaries to become employees of PEG 2 or any of its subsidiaries (the “ PEG 2 Transition ”, and the date, if any, such notice is so delivered, the “ PEG 2 Transition Trigger Event ”) and to execute all employment and other agreements and documents reasonably necessary to implement the PEG 2 Transition. From and after the occurrence of the PEG 2 Transition Trigger Event, PEG 1 will cooperate to cause the PEG 2 Transition to occur within six (6) months following the PEG 2 Transition Trigger Event or as soon as reasonably practicable thereafter; provided, however, that PEG 2 shall consult with PEG Inc. at least fifteen (15) calendar days prior to a PEG 2 Transition Trigger Event; provided, further, that PEG 2 shall not exercise a PEG 2 Transition (or, if a PEG 2 Transition has been exercised, proceed with such PEG 2 Transition) if PEG Inc. provides PEG 2

 

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with written notice of its intent to exercise a PEG 1 Employee Reintegration within six (6) months following the PEG 2 Transition Trigger Event.

 

Section 7.02        No Payments . Neither PEG 1 nor PEG Inc. will be required to make any payments to PEG 2 upon the occurrence of the PEG 2 Transition other than as described in Section 7.03 . PEG 2 will not be required to make any payments to PEG 1 or PEG Inc. upon the occurrence of the PEG 2 Transition, other than the payment of any statutory severance payments that may be due and payable to Canadian and Chilean employees as result of the PEG 2 Transition. Notwithstanding anything to the contrary herein, PEG 2 shall not assume any employee-related liabilities (including, without limitation, back salaries, medical reimbursements, or deferred compensation) of PEG 1 that accrued prior to the consummation of the PEG 2 Transition.

 

Section 7.03        Reimbursement following PEG 2 Transition . Following the PEG 2 Transition, all third-party transactional costs incurred by PEG 1 or PEG Inc. in connection with the PEG 2 Transition shall be borne by PEG 2.

 

Section 7.04        Transition . Following the PEG 2 Transition Trigger Event, the Parties shall mutually cooperate and use reasonable best efforts to cause the employees of PEG 1 and its subsidiaries to become the employees of PEG 2 and to execute all employment and other agreements and documents necessary to implement the PEG 2 Transition.

 

Article VIII
REINTEGRATION EVENTS

 

Section 8.01        Reintegration Event . Notwithstanding any other provision of this Agreement to the contrary, PEG Inc. shall have the option, exercisable by delivery of written notice of exercise to PEG 1 or PEG 2:

 

(a)                at any time after the earliest to occur of (i) the date that PEG 1 provides written notice to PEG Inc. that PEG 1 will complete a wind-down within six (6) months following the date of such notice, (ii) the third anniversary of the date hereof, and (iii) a PEG 1 Services Failure, to require PEG 1 to cause the employees of PEG 1 and its subsidiaries to become employees of PEG Inc. and its subsidiaries (the “ PEG 1 Employee Reintegration ” and the date, if any, such notice of exercise is so delivered, the “ PEG 1 Reintegration Event ”). From and after the occurrence of the PEG 1 Reintegration Event, PEG Inc., PEG 1, and PEG 2 will cooperate to cause the PEG 1 Employee Reintegration to occur by the six month anniversary of the PEG 1 Reintegration Event or as soon as reasonably practical thereafter; and

 

(b)               at any time after the earliest to occur of (i) the PEG 2 Transition Trigger Event but before the PEG 2 Transition, (ii) the third anniversary of the date hereof, (iii) a PEG 2 Services Failure and (iv) a wind-up of PEG 2 being initiated, to require PEG 2 to cause the employees of PEG 2 and its subsidiaries to become employees of PEG Inc. and its subsidiaries (the “ PEG 2 Employee Reintegration ” and the date, if any, such notice of exercise is so delivered, the “ PEG 2 Reintegration Event ”). From and after the occurrence of the PEG 2 Reintegration Event, PEG Inc., PEG 1, and PEG 2 will cooperate to cause the PEG 2 Employee Reintegration to occur by

 

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the six month anniversary of the PEG 2 Reintegration Event or as soon as reasonably practical thereafter.

 

Section 8.02        No Payments . Neither PEG 1 nor PEG 2 will be required to make any payments to PEG Inc. upon the occurrence of a PEG 1 Employee Reintegration or PEG 2 Employee Reintegration other than as described in Section 8.03 and Section 8.05 . PEG Inc. will not be required to make any payments to PEG 1 or PEG 2 upon the occurrence of the PEG 1 Employee Reintegration or PEG 2 Employee Reintegration, other than the payment of any statutory severance payments that may be due and payable to Canadian and Chilean employees as result of the PEG 1 Reintegration Event or PEG 2 Reintegration Event, as applicable. Notwithstanding anything to the contrary herein, PEG Inc. shall not assume any employee-related liabilities (including, without limitation, back salaries, medical reimbursements, or deferred compensation) of (a) PEG 1 that accrued prior to the consummation of the PEG 1 Employee Reintegration or (b) PEG 2 that accrued prior to the consummation of the PEG 2 Employee Reintegration.

 

Section 8.03        Services Following the PEG 1 Employee Reintegration . Following the PEG 1 Employee Reintegration, the PEG 1 Services set forth in Section 2.01 shall be deemed to be included in the PEG Inc. Services set forth in Section 3.01 . PEG Inc. shall thereafter continue to provide the PEG Inc. Services to PEG 1 and PEG 2 (including, for the avoidance of doubt, such capabilities that as result of the PEG 1 Employee Reintegration shall have become capabilities of PEG Inc.), solely to the extent requested by PEG 1 or PEG 2 in connection with the development, construction, and back-office activities of PEG 1 or PEG 2, as applicable.

 

Section 8.04        Services Following the PEG 2 Employee Reintegration . Following the PEG 2 Employee Reintegration, the PEG 2 Services set forth in Section 4.01 shall be deemed to be included in the PEG Inc. Services set forth in Section 3.01 . PEG Inc. shall thereafter continue to provide the PEG Inc. Services to PEG 1 and PEG 2 (including, for the avoidance of doubt, such capabilities that as result of the PEG 2 Employee Reintegration shall have become capabilities of PEG Inc.), solely to the extent requested by PEG 1 or PEG 2 in connection with the development, construction, and back-office activities of PEG 1 or PEG 2, as applicable.

 

Section 8.05        Reimbursement following Employee Reintegrations . Following either the PEG 1 Employee Reintegration or PEG 2 Employee Reintegration, PEG 1 and PEG 2 will continue to pay PEG Inc. for the PEG Inc. Services being provided to PEG 1 or PEG 2, as applicable, consistent with Section 6.02 . All third-party transactional costs incurred by PEG 1, PEG 2 or PEG Inc. in connection with the PEG 1 Employee Reintegration or PEG 2 Employee Reintegration shall be borne by PEG Inc.

 

Section 8.06        Transition . Following the PEG 1 Employee Reintegration Event or PEG 2 Employee Reintegration Event, the Parties shall mutually cooperate and use reasonable best efforts to cause the employees of PEG 1 or PEG 2, as applicable, and their respective subsidiaries, to become the employees of PEG Inc. and to execute all employment and other agreements and documents reasonably necessary to implement the PEG 1 Employee Reintegration or PEG 2 Employee Reintegration, as applicable.

 

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Article IX

EMPLOYMENT OF PERSONNEL

 

Section 9.01        Personnel . Notwithstanding any other provision of this Agreement to the contrary, (i) prior to the occurrence of the PEG 1 Employee Reintegration or PEG 2 Transition, all personnel performing the PEG 1 Services shall perform such services under the direction and supervision of PEG 1 and its subsidiaries and shall at all times remain employees or independent contractors, as the case may be, of PEG 1 or one of its subsidiaries (other than PEG Inc.) or a third party and shall not become or be deemed to be employees of PEG Inc. or PEG 2 or any of their respective subsidiaries (except pursuant to the PEG 1 Employee Reintegration, PEG 2 Employee Reintegration or PEG 2 Transition, as applicable), (ii) prior to the occurrence of the PEG 2 Employee Reintegration all personnel performing the PEG 2 Services shall perform such services under the direction and supervision of PEG 2 and its subsidiaries and shall at all times remain employees or independent contractors, as the case may be, of PEG 2 or one of its subsidiaries (other than PEG Inc.) or a third party and shall not become or be deemed to be employees of PEG Inc. or PEG 1 or any of their respective subsidiaries (except pursuant to the PEG 2 Employee Reintegration, as applicable), and (iii) all personnel performing the PEG Inc. Services shall perform such services under the direction and supervision of PEG Inc. and its subsidiaries and shall at all times remain employees or independent contractors, as the case may be, of PEG Inc. or one of its subsidiaries or a third party and shall not become or be deemed to be employees of PEG 1 or PEG 2 or any of their respective subsidiaries. No person shall perform any services hereunder not authorized to be performed hereunder by such person.

 

Article X
DISPUTE RESOLUTION

 

Section 10.01    Procedure . The Parties shall attempt, in good faith, to resolve or cure all disputes by mutual agreement in accordance with this Article X before initiating any legal action or attempting to enforce any rights or remedies hereunder (including termination), at law or in equity (regardless of whether this Article X is referenced in the provision of this Agreement which is the basis for any such dispute). If there is a dispute as to whether a breach or default has occurred or if any other dispute under this Agreement has arisen, any Party may give notice thereof to the other Parties which notice shall describe in reasonable detail the basis and specifics of the alleged breach, default or dispute. Within five (5), or such other time as the Parties may agree, days after delivery of such notice, the designated representatives of all Parties shall meet to discuss and attempt to resolve or cure such dispute or alleged breach or default. If such representatives are unable to resolve the dispute or alleged breach or default within fifteen (15) days after delivery of such notice, the matter shall be referred to a “Senior Officer” of PEG Inc., a “Senior Officer” of PEG 1, and a “Senior Officer” of PEG 2, for resolution or cure. If the Senior Officers are unable to resolve the matter within ten (10) days after the matter has been referred to them, the Parties may have recourse to mediation, arbitration or other alternative dispute resolution mechanism of their mutual selection. If the Parties cannot agree on an alternative dispute resolution mechanism, each Party may pursue its own legal remedies.

 

Section 10.02    Continuation of Work . Pending final resolution of any dispute, the Parties shall continue to fulfill their respective obligations under this Agreement; provided, however,

 

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that a Party may withhold any amount that is the subject of dispute from any payment otherwise due hereunder during the pendency of any dispute resolution proceeding, including the pursuit of legal remedies. Upon a Party prevailing in such dispute, the other Parties shall immediately pay to the prevailing Party the unpaid amount in dispute with interest thereon, which interest shall accrue, at the Reference Rate, for each day from and including the date on which such amount was originally due to, but excluding, the date of actual payment thereof.

 

Article XI
COMMENCEMENT AND TERMINATION

 

Section 11.01    Term . This Agreement shall continue in full force and effect (a) with respect to PEG 1, until a wind-up of PEG 1 is completed in accordance with the terms of the PEG 1 LPA, and (b) with respect to PEG 2, until a wind-up of PEG 2 is completed in accordance with the terms of the PEG 2 LPA, unless earlier terminated (in whole or in part) in accordance with Section 11.03 , Section 11.04 , or Section 11.05 (the “ Term ”).

 

Section 11.02    Cooperation . In connection with any termination of this Agreement each Party shall cooperate with all reasonable requests of the other Parties in connection with the transition of its respective services to the entity selected by the other Parties, if applicable, to undertake such services after such termination of the Term. Following any termination pursuant to Section 11.03 , neither PEG 1 nor PEG 2 shall be entitled to reimbursement of costs and expenses other than reimbursement for the services and reasonable expenses incurred by PEG 1 or PEG 2, as applicable, in connection with the transition of the PEG Inc. Services pursuant to this Section 11.02 for the period after such termination. Following any termination pursuant to Section 11.04 , neither PEG 2 nor PEG Inc. shall be entitled to reimbursement of costs and expenses other than reimbursement for the services and reasonable expenses incurred by PEG 2 or PEG Inc., as applicable, in connection with the transition of the PEG 1 Services pursuant to this Section 11.02, for the period after such termination. Following any termination pursuant to Section 11.05 , neither PEG Inc. nor PEG 1 shall be entitled to reimbursement of costs and expenses other than reimbursement for the services and reasonable expenses incurred by PEG Inc. or PEG 1, as applicable, in connection with the transition of the PEG 2 Services pursuant to this Section 11.02, for the period after such termination.

 

Section 11.03    Early Termination by PEG Inc. PEG Inc. may terminate this Agreement with respect to PEG 1 or PEG 2, as applicable, effective upon written notice of termination to PEG 1 and PEG 2, as applicable, if:

 

(a)                PEG 1 or PEG 2, as applicable, defaults in the performance or observance of any material term, condition or agreement contained in this Agreement and such default continues for a period of 30 days after written notice thereof specifying such default and requesting that the same be remedied in such 30-day period; provided , however , that if the fact, circumstance or condition that is the subject of such obligation cannot reasonably be remedied within such 30-day period and if, within such period, PEG 1 or PEG 2, as applicable, provides reasonable evidence to PEG Inc. that it has commenced, and thereafter proceeds with all due diligence, to remedy the fact, circumstance or condition that is the subject of such obligation, such period shall be extended for a reasonable period satisfactory to PEG Inc., acting reasonably, for PEG 1 or PEG 2, as applicable, to remedy the same;

 

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(b)               PEG 1 or PEG 2, as applicable, engages in any act of gross negligence, fraud or wilful misconduct in performance of its obligations under this Agreement;

 

(c)                PEG 1 or PEG 2, as applicable, makes a general assignment for the benefit of its creditors, institutes proceedings to be adjudicated voluntarily bankrupt, consents to the filing of a petition of bankruptcy against it, is adjudicated by a court of competent jurisdiction as being bankrupt or insolvent, seeks reorganization under any bankruptcy law or consents to the filing of a petition seeking such reorganization or has a decree entered against it by a court of competent jurisdiction appointing a receiver liquidator, trustee or assignee in bankruptcy or in insolvency; or

 

(d)               PEG 1 or PEG 2, as applicable, or substantially all of their respective assets, is acquired by an unrelated third party.

 

Section 11.04    Early Termination by PEG 1 . PEG 1 may terminate this Agreement with respect to PEG Inc. or PEG 2, as applicable, effective upon written notice of termination to PEG Inc. or PEG 2, as applicable, if:

 

(a)                PEG Inc. or PEG 2, as applicable, defaults in the performance or observance of any material term, condition or agreement contained in this Agreement and such default continues for a period of 30 days after written notice thereof specifying such default and requesting that the same be remedied in such 30-day period; provided , however , that if the fact, circumstance or condition that is the subject of such obligation cannot reasonably be remedied within such 30-day period and if, within such period, PEG Inc. or PEG 2, as applicable, provides reasonable evidence to PEG 1 that it has commenced, and thereafter proceeds with all due diligence, to remedy the fact, circumstance or condition that is the subject of such obligation, such period shall be extended for a reasonable period satisfactory to PEG 1, acting reasonably, for PEG Inc. or PEG 2, as applicable, to remedy the same;

 

(b)               PEG Inc. or PEG 2, as applicable, engages in any act of gross negligence, fraud or wilful misconduct in performance of its obligations under this Agreement; or

 

(c)                PEG Inc. or PEG 2, as applicable, makes a general assignment for the benefit of its creditors, institutes proceedings to be adjudicated voluntarily bankrupt, consents to the filing of a petition of bankruptcy against it, is adjudicated by a court of competent jurisdiction as being bankrupt or insolvent, seeks reorganization under any bankruptcy law or consents to the filing of a petition seeking such reorganization or has a decree entered against it by a court of competent jurisdiction appointing a receiver liquidator, trustee or assignee in bankruptcy or in insolvency.

 

Section 11.05    Early Termination by PEG 2 . PEG 2 may terminate this Agreement with respect to PEG Inc. or PEG 1, as applicable, effective upon written notice of termination to PEG Inc. or PEG 1, as applicable, if:

 

(a)                PEG Inc. or PEG 1, as applicable, defaults in the performance or observance of any material term, condition or agreement contained in this Agreement and such default continues for a period of 30 days after written notice thereof specifying such default and requesting that the same be remedied in such 30-day period; provided , however , that if the fact,

 

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circumstance or condition that is the subject of such obligation cannot reasonably be remedied within such 30-day period and if, within such period, PEG Inc. or PEG 1, as applicable, provides reasonable evidence to PEG 2 that it has commenced, and thereafter proceeds with all due diligence, to remedy the fact, circumstance or condition that is the subject of such obligation, such period shall be extended for a reasonable period satisfactory to PEG 2, acting reasonably, for PEG Inc. or PEG 1, as applicable, to remedy the same;

 

(b)               PEG Inc. or PEG 1, as applicable, engages in any act of gross negligence, fraud or wilful misconduct in performance of its obligations under this Agreement;

 

(c)                PEG Inc. or PEG 1, as applicable, makes a general assignment for the benefit of its creditors, institutes proceedings to be adjudicated voluntarily bankrupt, consents to the filing of a petition of bankruptcy against it, is adjudicated by a court of competent jurisdiction as being bankrupt or insolvent, seeks reorganization under any bankruptcy law or consents to the filing of a petition seeking such reorganization or has a decree entered against it by a court of competent jurisdiction appointing a receiver liquidator, trustee or assignee in bankruptcy or in insolvency; or

 

(d)               With respect to PEG 1, PEG 1, or substantially all of PEG 1’s assets, is or are acquired by an unrelated third party.

 

Article XII
INDEMNIFICATION AND LIMITATION OF LIABILITY

 

Section 12.01    Indemnification .

 

(a)                Each of PEG 1 and PEG 2 shall, individually and not joint and severally, indemnify and hold PEG Inc., its officers, directors, shareholders, employees, representatives, and agents acting on their behalf harmless from any damage, loss, liability or expense (including reasonable attorneys’ fees) incurred by PEG Inc. as a result of PEG 1’s or PEG 2’s, as applicable, performance of its respective obligations under this Agreement, except to the extent such damage, loss, liability or expense results from PEG Inc.’s gross negligence, fraud, wilful misconduct or breach of its obligations under this Agreement.

 

(b)               Each of PEG Inc. and PEG 1 shall, individually and not joint and severally, indemnify and hold PEG 2, its officers, partners, members, employees, representatives and agents acting on their behalf harmless from any damage, loss, liability or expense (including reasonable attorneys’ fees) incurred by PEG 2 as a result of PEG Inc.’s or PEG 1’s, as applicable, performance of its respective obligations under this Agreement, except to the extent such damage, loss, liability or expense results from PEG 2’s gross negligence, fraud, wilful misconduct or breach of its obligations under this Agreement.

 

(c)                Each of PEG Inc. and PEG 2 shall, individually and not joint and severally, indemnify and hold PEG 1, its officers, partners, members, employees, representatives and agents acting on their behalf harmless from any damage, loss, liability or expense (including reasonable attorneys’ fees) incurred by PEG 1 as a result of PEG Inc.’s or PEG 2’s, as applicable, performance of its respective obligations under this Agreement, except to the extent

 

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such damage, loss, liability or expense results from PEG 1’s gross negligence, fraud, wilful misconduct or breach of its obligations under this Agreement.

 

Section 12.02    Exclusion of Consequential Damages . None of PEG Inc., PEG 1, or PEG 2 shall be liable hereunder for punitive, consequential or indirect damages of any nature including, but not limited to, damages for lost profits or revenues or the loss or use of such profits or revenue.

 

Section 12.03    Total Limitation on Liability . An indemnifying Party’s total liability to an indemnified Party in any fiscal year during the Term on all claims of any kind, whether based on contract, indemnity, warranty, tort (including negligence), strict liability or otherwise, for all losses or damages arising out of, connected with, or resulting from this Agreement or from the performance or breach thereof, or from any services covered by or furnished during the Term of this Agreement, shall in no case exceed the aggregate value of the fees paid by the applicable indemnified Party to the applicable indemnifying Party for such fiscal year; provided , however , that the foregoing limitation on liability shall not apply to damage to the applicable indemnified Party caused by the gross negligence, fraud or willful misconduct of the applicable indemnifying Party with respect to the subject matter of this Agreement.

 

Section 12.04    Survival . For the avoidance of doubt, the provisions of this Article XII shall survive the completion of the respective services rendered under, or any termination or purported termination of, this Agreement.

 

Article XIII
RIGHT TO PURCHASE CERTAIN ASSETS

 

Section 13.01    Purchase Right . To the extent PEG 2 or PEG Inc., as applicable, exercises its right to effect a PEG 1 Reintegration, PEG 2 Reintegration, or PEG 2 Transition, PEG 2 or PEG Inc., as applicable, shall have the unconditional right and option to purchase for fair market value (as determined in accordance with this Agreement) any Support Assets owned by PEG 1 or PEG 2, as applicable, exercisable by such Party in its sole discretion at any time during the Term (the “ Purchase Right ”), and PEG 1 or PEG 2, as applicable, will take all actions necessary to cause the sale and transfer to PEG 2 or PEG Inc., as applicable, of any Support Assets with respect to which PEG 2 or PEG Inc., as applicable, has exercised the Purchase Right.

 

Section 13.02    Procedure . PEG Inc. shall deliver to PEG 1 or PEG 2, as applicable, written notice upon the exercise of the Purchase Right, which notice shall specify the Support Assets with respect to which PEG Inc. is exercising the Purchase Right. Thereafter, the Parties will negotiate in good faith the fair market value that PEG Inc. or PEG 2, as applicable, will pay PEG 1 or PEG 2, as applicable, for any Support Asset being purchased and the other terms and conditions with respect thereto. The Parties will complete the purchase and sale within thirty (30) days following receipt of PEG Inc.’s or PEG 2’s, as applicable, initial notice to PEG 1 or PEG 2.

 

Section 13.03    Disputes . Any dispute between the Parties arising with respect to the purchase and sale of Support Assets, including with respect to the fair market value of any Support Assets, shall be settled in accordance with Article X hereof.

 

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Section 13.04    Transfer . PEG 1 or PEG 2, as applicable, will exercise commercially reasonable efforts to promptly transfer and assign to PEG Inc. or PEG 2, as applicable, any licenses, registrations, warranties, consents and other rights associated with any Support Assets purchased by PEG Inc. or PEG 2, as applicable, pursuant to the Purchase Right. In the event that any such license, registration, warranty, consent or other right is not by its terms transferable to PEG Inc. or PEG 2, as applicable,, PEG 1 or PEG 2, as applicable, will enter into such arrangements that give PEG Inc. or PEG 2, as applicable, substantially the same benefit as though such license, registration, warranty, consent or other right was transferred to PEG Inc. or PEG 2, as applicable, pursuant to the Purchase Right.

 

Article XIV
MISCELLANEOUS

 

Section 14.01    Assignment .

 

(a)                Assignment by PEG 1 . PEG 1 may not assign this Agreement without the prior written consent of PEG Inc. and PEG 2.

 

(b)               Assignment by PEG 2 . PEG 2 may not assign this Agreement without the prior written consent of PEG Inc. and PEG 1.

 

(c)                Assignment by PEG Inc. PEG Inc. may not assign this Agreement without the prior written consent of PEG 1 and PEG 2, provided , however , that PEG Inc. may pledge, collaterally assign, or encumber its rights under this Agreement to any lender of PEG Inc. or its Affiliates. In such event, PEG 1 and PEG 2 agree to execute a consent and/or acknowledgement to such collateral assignment in form and substance reasonably acceptable to PEG 1 and PEG 2 and consistent with thencurrent financing practices. Notwithstanding the foregoing, PEG Inc. may assign this Agreement without the prior written consent of PEG 1 or PEG 2 to any of its Affiliates, provided that such Affiliate agrees to be bound by the terms of this Agreement.

 

Section 14.02    Authorization . Except as expressly authorized in writing by PEG Inc. or PEG 2, as applicable, or as contemplated under the PEG 1 Services, PEG 1 nor any of its employees, officers or agents, shall have the right to bind PEG Inc. or PEG 2 or create any obligation or to make any representation on behalf of PEG Inc. or PEG 2. Except as expressly authorized in writing by PEG Inc. or PEG 1, as applicable, PEG 2 nor any of its officers or agents, shall have the right to bind PEG Inc. or PEG 1 or create any obligation or to make any representation on behalf of PEG Inc. or PEG 1. Except as expressly authorized in writing by PEG 1 and PEG 2, as applicable, or as contemplated under the PEG Inc. Services, PEG Inc. nor any of its employees, officers or agents, shall have the right to bind PEG 1 or PEG 2 or create any obligation or to make any representation on behalf of PEG 1 or PEG 2.

 

Section 14.03    Governing Law, Jurisdiction, Venue . This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York excluding any conflict-oflaws rule or principle that might refer the governance or the construction of this Agreement to the law of another jurisdiction irrespective of the choice of laws principles. Each Party hereby irrevocably submits to the exclusive jurisdiction of any state or federal court sitting in New York, New York in connection with any claim, suit, action or proceeding arising out of or relating to

 

19

 

this Agreement or the transactions contemplated hereby or any dealings between the Parties relating to the subject matter of this Agreement and the relationship that is being established. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM, SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED.

 

Section 14.04    No Partnership . Nothing contained in this Agreement and no action taken by any Party to this Agreement shall be (i) deemed to create any company, partnership, joint venture, association or syndicate among or between any of the Parties; or (ii) except as contemplated under the PEG Inc. Services, the PEG 1 Services, or the PEG 2 Services, as applicable, deemed to confer on any Party any expressed or implied right, power or authority to enter into any agreement or commitment, express or implied, or to incur any obligation or liability on behalf of any other Party, except as expressly authorized in writing.

 

Section 14.05    Notice . All notices, requests, consents, demands and other communications (collectively “ notices ”) required or permitted to be given under this Agreement shall be in writing signed by the Party giving such notice and shall be given to each Party at its address or fax number set forth in this Section 14.05 or at such other address or fax number as such Party may hereafter specify for such purpose by notice to the other Party and shall be either delivered personally or sent by fax or registered or certified mail, return receipt requested, postage prepaid, or by a nationally recognized overnight courier service. A notice shall be deemed to have been given (i) when transmitted if given by fax or (ii) when delivered, if given by any other means. Notices shall be sent to the following addresses:

 

To PEG Inc.:

 

Pattern Energy Group Inc.
Pier 1, Bay 3
San Francisco, CA 94111
Attention: General Counsel
Facsimile: (415) 362¬7900

 

To PEG 1:

 

Pattern Energy Group LP
Pier 1, Bay 3
San Francisco, CA 94111
Attention: General Counsel
Facsimile: (415) 362¬7900

 

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To PEG 2:

 

Pattern Energy Group 2 LP
Pier 1, Bay 3
San Francisco, CA 94111
Attention: General Counsel
Facsimile: (415) 362¬7900

 

Section 14.06    Usage . This Agreement shall be governed by the following rules of usage: (i) a reference in this Agreement to a Person includes, unless the context otherwise requires, such Person’s successors and permitted assignees; (ii) a reference in this Agreement to a law, license, or permit includes any amendment, modification or replacement to such law, license or permit; (iii) accounting terms used in this Agreement shall have the meanings assigned to them by GAAP; (iv) a reference in this Agreement to an article, section, exhibit, schedule or appendix is to an article, section, exhibit, schedule or appendix of this Agreement unless otherwise stated; (v) a reference in this Agreement to any document, instrument or agreement shall be deemed to include all appendices, exhibits, schedules and other attachments thereto and all documents, instruments or agreements issued or executed in substitution thereof, and shall mean such document, instrument or agreement, or replacement thereof, as amended, modified and supplemented from time to time in accordance with its terms and as the same is in effect at any given time; (vi) unless otherwise specified, the words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and (vii) the words “include” and “including” and words of similar import used in this Agreement are not limiting and shall be construed to be followed by the words “without limitation”, whether or not they are in fact followed by such words.

 

Section 14.07    Entire Agreement . This Agreement (including all appendices and exhibits thereto) constitutes the entire agreement and understanding of the parties thereto with respect to the subject matter hereof and supersedes all prior written and oral agreements and understandings with respect to such subject matter.

 

Section 14.08    Amendment . Neither this Agreement nor any of the terms hereof may be terminated, amended, supplemented, waived or modified orally, but only by a document in writing signed by both Parties.

 

Section 14.09    Confidential Information .

 

(a)                Except as required by applicable law or explicitly required or permitted by this Agreement, no Party shall, without the prior written consent of the other Party, (i) disclose any confidential information obtained from the other Party to any third parties, other than to consultants, employees, officers and potential financing parties who have agreed to keep such information confidential as contemplated by this Agreement and who need the information to carry out the purpose for which they were engaged (ii) use any confidential information obtained from the other party except for the purposes set forth in the Agreement.

 

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(b)               This Section 14.09 does not apply to information that the receiving party can demonstrate is presently a matter of public knowledge or which is or becomes available as a matter of public knowledge from a source which is not known to be prohibited from disclosing such information. In the event that a Party is requested or required by legal or regulatory authority to disclose any confidential information, the Party shall promptly notify the disclosing Party of such request or requirement prior to disclosure so that the disclosing Party may seek an appropriate protective order. Notwithstanding any other provision of this Agreement, the receiving Party shall have the right to disclose only so much of the confidential information as, in the advice of its legal counsel, the receiving party is legally required to disclose. In such an event, the receiving Party agrees to use good faith efforts to ensure that all confidential information that is so disclosed will be accorded confidential treatment.

 

(c)                The foregoing obligations will not apply to the tax treatment or tax structure of the transactions contemplated by this Agreement (the “ Transaction ”) and each Party (and any employee, representative, or agent of any party) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the Transaction and all other materials of any kind (including opinions or other tax analysis) that are provided to any party relating to such tax treatment and tax structure. However, any such information relating to such tax treatment and tax structure is required to be kept confidential to the extent necessary to comply with any applicable securities laws. The preceding sentences are intended to cause the Transaction not to be treated as having been offered under conditions of confidentiality for purposes of Sections 1.6011-4(b)(3) and 301.6111-2(a)(2)(ii) (or any successor provision) of the Treasury Regulations issued under the Internal Revenue Code of 1986, as amended, and will be construed in a manner consistent with such purpose.

 

Section 14.10    Discharge of Obligations . With respect to any duties or obligations discharged hereunder by a Party, such Party may discharge such duties or obligations through the personnel of an affiliate of such Party; provided that, notwithstanding the foregoing, the Party shall remain fully liable hereunder for such discharged duties and obligations, unless such duties are assigned pursuant to Section 14.01 .

 

Section 14.11    Third Party Beneficiaries . Except as otherwise expressly stated herein, this Agreement is intended to be solely for the benefit of the Parties hereto and their permitted assignees and is not intended to and shall not confer any rights or benefits to the general public or any other third party not a signatory hereto.

 

Section 14.12    Severability . Any provision of this Agreement that shall be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereto hereby waive any provision of law that renders any provision hereof prohibited or unenforceable in any respect.

 

Section 14.13    Binding Effect . The terms of this Agreement shall be binding upon, and inure to the benefit of, the Parties hereto and their successors and permitted assigns. Subject to Section 14.11 , nothing in this Agreement, whether express or implied, shall be construed to

 

22

 

give any Person other than a Party hereto any legal or equitable right, remedy or claim under or in respect of this Agreement or any covenants, conditions or provisions contained herein.

 

Section 14.14    Counterparts . This Agreement may be executed by the Parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

 

[REST OF PAGE INTENTIONALLY LEFT BLANK]

 

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

 

      PATTERN ENERGY GROUP INC.  
             
             
      By: /s/ Esben Pedersen  
        Name: Esben Pedersen  
        Title: Chief Investment Officer  
             

 

 

 

 

 

[Signature Page to Multilateral Management Services Agreement]

 

 
 

 

      PATTERN ENERGY GROUP LP  
             
             
      By: /s/ Daniel M. Elkort  
        Name: Daniel M. Elkort  
        Title: Vice President  
             

 

 

 

 

[Signature Page to Multilateral Management Services Agreement]

 

 
 

 

      PATTERN ENERGY GROUP 2 LP  
             
             
      By: /s/ Dyann Blaine  
        Name: Dyann Blaine  
        Title: Vice President  
             

 

 

 

 

 

 

[Signature Page to Multilateral Management Services Agreement]

 

 
 

Schedule 1 

Shared PEG Executives

 

Executive 

Title at PEG 1 

Approximate Expected Allocation to PEG 1 and PEG 2 (collectively) 

Mike Garland Chief Executive Officer 30-50%
Hunter Armistead Executive Vice President, Business Development 60-80%
Daniel Elkort Executive Vice President and General Counsel 50-70%
Mike Lyon Chief Financial Officer 20-40%
Esben Pedersen Chief Investment Officer 40-60%
Kevin Deters Vice President, Engineering & Construction 70-90%
Kevin Devlin Senior Vice President, Strategic Operations 40-50%
Chris Shugart Senior Vice President, Operations 10-20%

 

 

 

Schedule 1

 

 
 

Exhibit A

 

M ethodology for Determining Allocation of Cost and Expenses

 

1. Allocation of costs and expenses will be between Pattern Energy Group LP (PEG 1), Pattern Energy Group 2 LP (PEG 2) and Pattern Energy Group Inc. (PEG Inc.).

 

2. Costs and expenses relating to the provision of Services by one Party to another Party that are incurred by (a) PEG 1 or any of its subsidiaries will be allocated to PEG Inc. and PEG 2, as applicable, (b) PEG Inc. or any of its subsidiaries will be allocated to PEG 1 and PEG 2, as applicable, and (c) PEG 2 or any of its subsidiaries will be allocated to PEG 1 and PEG Inc., as applicable.

 

3. Costs and expenses incurred in connection with the provision of Services by one Party to another Party included in the allocation will be:

 

a. Employee (labor) related, including but not limited to salaries and benefits;

 

b. Travel and entertainment;

 

c. Professional fees, including but not limited to consulting and legal;

 

d. Information technology, including but not limited to computer hardware, network services, software licenses and telecom;

 

e. General and administrative, including but not limited to insurance, rent, and other facilities, advertising, office supplies, public relations, and delivery charges;

 

f. Cash bonus compensation for employees; provided , however , with respect to members of the executive management team of PEG Inc., PEG 1, or PEG 2, as applicable, such bonus compensation will only be included to the extent that such compensation does not exceed 120% of the average compensation paid to such executive during the three (3) prior calendar years (or fewer if such executive has less than three (3) years of service) (after disregarding from such three-year average any compensation in any such year that exceeded the three-year trailing average of such 120% threshold). For the avoidance of doubt, cash bonus compensation includes variable cash incentive awards settled in cash in an applicable period; and

 

g. Non-cash compensation for employees, to the extent such non-cash compensation does not exceed 10% of the total compensation paid in such calendar year.

 

4. Allocating labor and other costs and expenses will be determined by percentages based on timestudy results. Quarterly questionnaires will be completed by all employees and will require all employees to accurately designate time spent on various categories, including but not limited to development, construction, operating projects owned by PEG Inc. or general corporate matters.

 

5. PEG 1 and PEG 2 will allocate costs and expenses to PEG Inc. by:

 

 

 

Exhibit A

 
 
a. Determining its total costs and expenses as listed above.

 

b. Determine the allocation percentage from quarterly timestudy questionnaire results. In general, percent classifications to operating projects owned by PEG Inc. will be used to allocate costs from PEG 1 or PEG 2, as applicable, to PEG Inc.

 

c. Allocated costs and expenses will be equal to total costs and expenses multiplied by the allocation percentage.

 

6. PEG Inc. and PEG 2 will allocate costs and expenses to PEG 1 by:

 

a. Determining its total costs and expenses as listed above.

 

b. Determine allocation percentage from quarterly timestudy questionnaire results. In general, percent classifications to operating projects owned by PEG Inc. will be attributed to PEG Inc. The remaining percentage will be used to allocate costs from PEG Inc. and PEG 2 to PEG 1.

 

c. Allocated costs and expenses will be equal to total costs multiplied by the allocation percentage.

 

7. PEG Inc. and PEG 1 will allocate costs and expenses to PEG 2 by:

 

a. Determining its total costs and expenses as listed above.

 

b. Determine allocation percentage from quarterly timestudy questionnaire results. In general, percent classifications to operating projects owned by PEG Inc. will be attributed to PEG Inc. The remaining percentage will be used to allocate costs from PEG Inc. and PEG 1 to PEG 2.

 

c. Allocated costs and expenses will be equal to total costs multiplied by the allocation percentage.

 

 

 

Exhibit A

 

 

 

Exhibit 10.5

 

 

Execution Version 

 

 

 

 

 

SECOND AMENDED AND RESTATED


aGREEMENT OF


LIMITED PARTNERSHIP


OF


Pattern Energy Group Holdings 2 LP


Dated effective as of

 


June 16, 2017

 

 

 

 

 

 

 

THE UNITS IN PATTERN ENERGY GROUP HOLDINGS 2 LP HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY JURISDICTION. NO UNIT MAY BE SOLD OR OFFERED FOR SALE (WITHIN THE MEANING OF ANY SECURITIES LAW) UNLESS A REGISTRATION STATEMENT UNDER ALL APPLICABLE SECURITIES LAWS WITH RESPECT TO THE UNIT IS THEN IN EFFECT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS IS THEN APPLICABLE TO THE UNIT. A UNIT ALSO MAY NOT BE TRANSFERRED OR ENCUMBERED UNLESS THE PROVISIONS OF THIS AGREEMENT ARE SATISFIED.

 

 

 
 

Table of Contents

 

Article I

DEFINITIONS

 

Article II

ORGANIZATIONAL AND OTHER MATTERS

 

Section 2.01 Organization; Ratification 16
Section 2.02 Name 16
Section 2.03 Registered Office; Registered Agent; Principal Office in the United States; Other Offices 17
Section 2.04 Purpose 17
Section 2.05 Foreign Qualification 17
Section 2.06 Term 17
Section 2.07 Alternative Investment Vehicles 18

 

Article III

partners; REPRESENTATIONS

 

Section 3.01 Class A Limited Partners 18
Section 3.02 Class B Limited Partners 19
Section 3.03 Units; Certificates 20
Section 3.04 Conflicts of Interest 20
Section 3.05 Representations, Warranties and Covenants 23

 

Article IV

BOOKS AND RECORDS

 

Section 4.01 Books, Records, Access and Tax Information 25
Section 4.02 Tax Elections 26
Section 4.03 Tax Matters Partner 26
Section 4.04 Section 83(b) Election 28
Section 4.05 Bipartisan Budget Act 28

 

Article V

CAPITAL CONTRIBUTIONS

 

Section 5.01 Initial Capital Contributions of Class A Limited Partners 28
Section 5.02 Further Capital Contributions 29
Section 5.03 PEG 1 Option 30
Section 5.04 Withdrawal of Capital 31
Section 5.05 Alternative Sources of Capital 31

 

 

 

i

 
 
Section 5.06 Capital Accounts 32

 

Article VI

ALLOCATIONS

 

Section 6.01 Allocations of Profits and Losses 33
Section 6.02 Regulatory Allocations 33
Section 6.03 Income Tax Allocations 35
Section 6.04 Other Allocation Rules 36

 

Article VII

DISTRIBUTIONS

 

Section 7.01 Distributions 36
Section 7.02 Distributions in Kind 37
Section 7.03 Tax Distributions 37
Section 7.04 Redemption/Repurchase of Units 38
Section 7.05 Proceeds from Projects 38
Section 7.06 Withholding 38

 

Article VIII

MEETINGS OF partners

 

Section 8.01 Meetings 40
Section 8.02 Place of Meetings 40
Section 8.03 Notice of Meetings 40
Section 8.04 Record Date 40
Section 8.05 Quorum 40
Section 8.06 Proxies 41
Section 8.07 Action by Partners Without a Meeting 41
Section 8.08 Waiver of Notice 41
Section 8.09 Conduct of Meetings 41
Section 8.10 Limited Class B Voting Rights 42

 

Article IX

MANAGEMENT OF THE PARTNERSHIP

 

Section 9.01 Management 42
Section 9.02 Board of Directors 44
Section 9.03 Officers 47
Section 9.04 Actions Requiring Board Approval 47
Section 9.05 Actions Requiring Board Approval and Approval of the Class A Limited Partners 48
Section 9.06 Actions Requiring Board Approval and Approval of Pattern Energy 49

 

 

 

ii

 
 
Section 9.07 Actions Requiring Board Approval and Approval of the Class B Limited Partners 50
Section 9.08 Certain Expenses 50
Section 9.09 Grant of Authority 51

 

Article X

INDEMNIFICATION

 

Section 10.01 Power to Indemnify in Actions, Suits or Proceedings 51
Section 10.02 Expenses Payable in Advance 52
Section 10.03 Unpaid Claims 52
Section 10.04 Nonexclusivity of Indemnification and Advancement of Expenses 52
Section 10.05 Survival of Indemnification and Advancement of Expenses; Third Party Beneficiaries 53
Section 10.06 Limitation on Indemnification 53
Section 10.07 Indemnification of Employees and Agents 53
Section 10.08 Severability 53
Section 10.09 Fiduciary Service 54
Section 10.10 Exculpation 54
Section 10.11 Indemnitor of First Resort 54
Section 10.12 Insurance 55

 

Article XI

TRANSFER OF UNITS

 

Section 11.01 Request for Sale of Partnership by a Class A Majority 55
Section 11.02 Conversion to a Corporation; Qualified Public Offering 57
Section 11.03 Demand Registration Rights 59
Section 11.04 Piggyback Registration Rights. 61
Section 11.05 Tag Along Rights 61
Section 11.06 Certain Events Not Deemed Transfers 63
Section 11.07 Transfer and Exchange 63
Section 11.08 Vesting Terms; Redemption/Forfeiture 63
Section 11.09 Determination of Fair Market Value 68
Section 11.10 Substituted Limited Partners 69
Section 11.11 Transfer of Rights 70
Section 11.12 Transfer 70
Section 11.13 Taxable Non-Cash Transactions 70

 

Article XII

LIMITATIONS ON TRANSFERS

 

Section 12.01 Restrictions on Transfer 70
Section 12.02 Restrictive Legends 71

 

 

iii

 
 
Section 12.03 Spouses 72
Section 12.04 Termination of Certain Restrictions 73

 

Article XIII

ISSUANCE OF ADDITIONAL UNITS

 

Section 13.01 Issuance of Additional Units 73
Section 13.02 Preemptive Rights 74

 

Article XIV

DISSOLUTION AND LIQUIDATION

 

Section 14.01 Dissolution 75
Section 14.02 Effect of Dissolution 75
Section 14.03 Liquidation Upon Dissolution 75
Section 14.04 Negative Capital Accounts 76
Section 14.05 Winding Up and Certificate of Cancellation 76

 

Article XV

MISCELLANEOUS PROVISIONS

 

Section 15.01 Notices 76
Section 15.02 Governing Law 76
Section 15.03 Arbitration 76
Section 15.04 Waiver of Jury Trial 77
Section 15.05 Entire Agreement; Amendments 77
Section 15.06 Confidentiality 79
Section 15.07 Non-Disparagement 80
Section 15.08 Waiver 80
Section 15.09 Severability 80
Section 15.10 Ownership of Property and Right of Partition 80
Section 15.11 Successors and Assigns 80
Section 15.12 Further Assurances 81
Section 15.13 Parties in Interest; Third Party Beneficiaries 81
Section 15.14 Counterparts 81

 

 

 

iv

 
 

SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
PATTERN ENERGY GROUP HOLDINGS 2 LP

 

This SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (this “ Agreement ”) of Pattern Energy Group Holdings 2 LP, a Delaware limited partnership (the “ Partnership ”), dated as of June 16, 2017 (“ Signing Date ”), is made by and among Pattern Energy Group Holdings 2 GP LLC, a Delaware limited liability company (the “ General Partner ”), the Class A Limited Partners set forth on Exhibit B hereto and the Class B Limited Partners set forth on Exhibit D hereto.

 

W I T N E S S E T H:

 

WHEREAS, the Partnership was formed as a limited partnership under the Delaware Revised Uniform Limited Partnership Act, 6 Del. Code §17-101 et seq. , (as it may be amended from time to time, the “ Act ”) by filing a Certificate of Limited Partnership (the “ Certificate ”) with the Secretary of State of the State of Delaware on November 10, 2016;

 

WHEREAS , on November 14, 2016, the General Partner and Pattern Energy Group Holdings LP, a Delaware limited partnership (the “ Initial Limited Partner ”), entered into a limited partnership agreement of the Partnership (the “ Initial LPA ”);

 

WHEREAS , on December 8, 2016 (the “ Initial Closing Date ”), the General Partner and the Class A Limited Partners and Class B Limited Partners of the Partnership as of the Initial Closing Date entered into the Amended and Restated Agreement of Limited Partnership of the Partnership (as amended on March 1, 2017) (the “ First A&R LPA ”), amending and restating the Initial LPA in its entirety;

 

WHEREAS , on the Initial Closing Date, pursuant to the Contribution Agreement, the Initial Limited Partner (i) contributed certain assets to the Partnership in exchange for Class A Units, and (ii) distributed and transferred such Class A Units to the Class A limited partners of the Initial Limited Partner;

 

WHEREAS, the parties hereto desire to amend and restate the First A&R LPA to provide for their rights and obligations of the Partners with respect to the Partnership;

 

NOW, THEREFORE, in consideration of the premises and the covenants and provisions hereinafter contained, the Partners hereby amend and restate the First A&R LPA in its entirety and further agree as follows:

 

Article I

DEFINITIONS

 

Accredited Investor ” has the meaning set forth in Regulation D promulgated under the Securities Act.

 

Act ” has the meaning set forth in the recitals of this Agreement.

 

1

 

Adjusted Capital Account ” means the Capital Account maintained for each Partner, (a) increased by any amounts that such Partner is obligated to restore or is treated as obligated to restore under Treasury Regulation Sections 1.704-1(b)(2)(ii)(c), 1.704-2(g)(1) and 1.704-2(i)(5)), and (b) decreased by any amounts described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6) with respect to such Partner.

 

Adoption Agreement ” means an agreement of a newly admitted Partner substantially in the form of Exhibit G .

 

Affected Partner ” has the meaning set forth in ‎Section 11.13 of this Agreement.

 

Affiliate ” means, with respect to any Person, any Person directly or indirectly through one or more intermediaries, Controlling, Controlled by or under common Control with such Person.

 

Alternative Investment Vehicle ” has the meaning set forth in ‎Section 2.07 .

 

Amended Code ” means the Code, as amended by the Bipartisan Budget Act.

 

Annual Budget ” means the first twelve months of each Budget.

 

Approved Sale ” has the meaning set forth in ‎Section 11.01(a) of this Agreement.

 

Assumed Non-Cash Transaction T ax Liability ” means, with respect to any Partner and any Taxable Non-Cash Transaction, the amount of federal, state and local income taxes (including any applicable estimated taxes) that would be due from such Partner, assuming such Partner is subject to federal, state and local income tax at the highest marginal tax rate for an individual residing in the State of California (or, if higher in the case of Riverstone, a U.S. corporation doing business in the State of California) who earned solely the items of income or gain recognized by the Partner by reason of such Taxable Non-Cash Transaction.

 

Assumed Tax Liability ” of any Partner means an amount, determined in the sole discretion of the Board of Directors, equal to (1) the cumulative amount of federal, state and local income taxes (including any applicable estimated taxes) that would be due from such Partner as of such Tax Distribution Date, assuming such Partner were an individual residing in the State of California subject to federal, state and local income tax at the highest marginal tax rate (or, if higher in the case of Riverstone, a U.S. corporation doing business in the State of California) who earned solely the items of income, gain, deduction, loss, and/or credit allocated to such Partner pursuant to ‎Section 6.03 and after taking proper account of loss carryforwards available to such Partner resulting from losses allocated to the Partners by the Partnership, to the extent not taken into account in prior periods, reduced by (2) all previous distributions made to such Partner pursuant to ‎Section 7.03 .

 

Bipartisan Budget Act ” means Title XI of the Bipartisan Budget Act of 2015 and any related provisions of law, court decisions, regulations, rules, and administrative guidance.

 

Blocker Corporation ” has the meaning set forth in ‎Section 11.02(a)(i) of this Agreement.

 

2

 

Board Approval ” means the affirmative vote of a majority of the members of the Board of Directors of the Partnership.

 

Board of Directors ” means the board of directors of the Partnership, to whom the General Partner irrevocably delegates, and in which is vested with, pursuant to ‎Section 9.01(a) , the power to manage the business and affairs of the Partnership (other than the General Partner’s duties as “tax matters partner” under ‎Section 4.03(a) hereof). The Board of Directors shall constitute a committee within the meaning of Section 17-303(b)(7) of the Act, and its members may include one or more individual Limited Partners. The members of the initial Board of Directors are listed on Exhibit E attached hereto.

 

Book Value ” means, with respect to any property of the Partnership, such property’s adjusted basis for federal income tax purposes, except as follows:

 

(a)       The initial Book Value of any property contributed by a Partner to the Partnership shall be the Fair Market Value of such property as of the date of such contribution.

 

(b)       The Book Values of all properties shall be adjusted to equal their respective Fair Market Values in connection with (i) the acquisition of an interest (or additional interest) in the Partnership by any new or existing Partner in exchange for more than a de minimis Capital Contribution to the Partnership or in exchange for the performance of services to or for the benefit of the Partnership, (ii) the distribution by the Partnership to a Partner of more than a de minimis amount of property as consideration for an interest in the Partnership, (iii) the liquidation of the Partnership within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g)(1) (other than pursuant to Section 708(b)(1)(B) of the Code), or (iv) any other event to the extent determined by the Board of Directors to be permitted and necessary to properly reflect Book Values in accordance with the standards set forth in Treasury Regulation Section 1.704-1(b)(2)(iv)(q); provided that adjustments pursuant to clauses (i) and (ii) above shall be made only if the Board of Directors reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership.

 

(c)       The Book Value of property distributed to a Partner shall be the Fair Market Value of such property as of the date of such distribution.

 

(d)       The Book Value of all property shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such property pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m) and clause (g) of the definition of Profits and Losses; provided, however, that the Book Value of property shall not be adjusted pursuant to this clause (d) to the extent that an adjustment pursuant to clause (b) is required in connection with a transaction that would otherwise result in an adjustment pursuant to this clause (d).

 

(e)       If the Book Value of property has been determined or adjusted pursuant to clauses (b) or (d) hereof, such Book Value shall thereafter be adjusted by the Depreciation taken into

 

3

 

account with respect to such property for purposes of computing Profits and Losses and other items allocated pursuant to Article VI .

 

Budget ” means each two-year budget approved by the Board of Directors prior to the first day of each Fiscal Year.

 

Business Day ” means any day except a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized by law to be closed.

 

Capital Account ” has the meaning set forth in ‎Section 5.06 of this Agreement.

 

Capital Contribution ” means, with respect to any Partner, the amount of money and the initial Book Value of any property contributed or deemed contributed to the Partnership by such Partner, in accordance with ‎Article V of this Agreement.

 

Cause ” means the definition of “Cause” used in the applicable Class B Limited Partner’s Employment Agreement, or, if such Class B Limited Partner who is an Employee does not have such an Employment Agreement that defines “Cause,” then Cause shall mean (A) any material breach of this Agreement (other than a failure by a Class A Limited Partner that is not a Class A Contingent Partner to fund such Limited Partner’s Class A Commitment Amount, if any) or the Employment Agreement by the Class B Limited Partner, including without limitation the material breach of any representation, warranty or covenant made under this Agreement or his Employment Agreement, by the Class B Limited Partner, which such material breach remains uncorrected for thirty (30) days after the applicable member of the PEG Group provides the Class B Limited Partner written notice of its belief that this clause (A) is being or has been violated by the Class B Limited Partner; provided that the applicable member of the PEG Group must exercise its right to terminate employment within ninety (90) days after it first becomes aware of such breach; (B) the Class B Limited Partner’s being the subject of any order, judicial or administrative, obtained or issued by the Securities and Exchange Commission for any securities violation involving fraud, including without limitation any order in which findings of facts or any legal conclusions establishing liability are neither admitted nor denied; provided that the applicable member of the PEG Group must exercise its right to terminate employment within ninety (90) days after it first becomes aware of such order; (C) conviction of the Class B Limited Partner, or plea of nolo contendere by the Class B Limited Partner, to any felony or crime involving moral turpitude; provided that the applicable member of the PEG Group must exercise its right to terminate employment within ninety (90) days after it first becomes aware of such conviction or plea; or (D) the Class B Limited Partner’s material mismanagement in providing material services to the Partnership or its Subsidiaries, which such mismanagement is not cured within thirty (30) days after the applicable member of the PEG Group provides the Class B Limited Partner written notice of its belief that this clause is being or has been violated; provided that such termination of employment must be effected within ninety (90) days of the date that the applicable member of the PEG Group first became aware of such mismanagement.

 

Certificate ” has the meaning set forth in the recitals of this Agreement.

 

Class A Commitment Amount ” means, (i) with respect to each Class A Limited Partner, an amount equal to its Class A Fixed Commitment Amount as of the Signing Date as

 

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described in Exhibit B , plus (ii) in the case of any Class A Contingent Partner, such Class A Contingent Partner’s Class A Contingent Commitment Amount.

 

Class A Commitment Ratio ” means, with respect to each Class A Limited Partner as of such date of determination, such Class A Limited Partner’s (a) Class A Commitment Amount divided by (b) the sum of all Class A Commitment Amounts.

 

Class A Contingent Commitment Amount ” means, with respect to each Class A Contingent Partner, an amount equal to the percentage opposite such Class A Contingent Partner’s name in Exhibit C (each, a “ Class A Contingent Commitment Percentage ”) of any PEG 1 Distributions received by such Class A Contingent Partner, in the aggregate as of such date, from the Initial Limited Partner, during the period beginning on the Effective Date and ending eighteen (18) months thereafter, to the extent such amount exceeds such Class A Contingent Partner’s Class A Fixed Commitment Amount.

 

Class A Contingent Partner ” means each of the Class A Limited Partners listed on Exhibit C .

 

Class A Fixed Commitment Amount ” means, with respect to each Class A Limited Partner, its Class A Fixed Commitment Amount set forth opposite such Class A Limited Partner’s name in Exhibit B .

 

Class A Limited Partner ” means any Limited Partner executing this Agreement as a Class A Limited Partner or hereafter admitted to the Partnership as a Class A Limited Partner as provided in this Agreement, including any member of the Riverstone Group who is a Transferee of Class A Units, but does not include any Person who has ceased to be a Limited Partner.

 

Class A Majority ” means the holders of a majority of the outstanding Class A Units.

 

Class A Payout ” means, with respect to each Class A Unit held by a Class A Limited Partner, that point in time when both of the Unreturned Capital Contributions and Unpaid Class A Preference Amount with respect to such Class A Unit of such Class A Limited Partner shall have been reduced to zero (0).

 

Class A Preference Amount ” means, with respect to each Class A Unit held by a Class A Limited Partner, an amount equal to an annual pre-tax return of 8%, compounded quarterly, on all Unreturned Capital Contributions made by such Class A Limited Partner with respect to such Class A Unit. For the sake of clarity, the Class A Preference Amount shall be calculated with respect to a given Capital Contribution starting on the later to occur of (i) the date of contribution and (ii) the Effective Date, and shall be applied (and compounded) to the sum of (a) the portion of such Capital Contribution not, as of the time of calculation, repaid to such Class A Limited Partner and (b) any Class A Preference Amount accrued and not, as of the time of calculation, distributed to such Class A Limited Partner until the amount of such Capital Contribution has been returned to such Class A Limited Partner in its entirety and all such accrued Class A Preference Amount has been distributed to such Class A Limited Partner in its entirety.

 

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Class A Unit ” means a Unit representing a fractional part of the Partnership Interests and having the rights and obligations specified with respect to the Class A Units in this Agreement.

 

Class A Unit Sharing Percentage ” means, as to any Class A Limited Partner, the percentage obtained by dividing the number of Class A Units owned by such Class A Limited Partner by the total number of Class A Units issued and outstanding at the time in question.

 

Class B Limited Partner ” means a holder of Class B Units, whether such Class B Units are vested or unvested, who is executing this Agreement as a Class B Limited Partner or is hereafter admitted to the Partnership as a Class B Limited Partner as provided in this Agreement, but does not include any Person who has ceased to be a Class B Limited Partner.

 

Class B Majority ” means the holders of a majority of the Class B Units (excluding Class B Units held by Management Holdco).

 

Class B Payout ” means that point in time when the sum of the aggregate amount of distributions, made by the Partnership to the Class B Limited Partners pursuant to ‎Section 7.01(c) on account of their ownership of Class B Units, equals 15% of the sum of (i) the amounts distributed to the Class A Limited Partners pursuant to ‎Section 7.01(b) (excluding any Class A Preference Amount paid with respect to Pre-Effective Date Class A Units, whether as a distribution or as part of a redemption or purchase price) and (ii) the amounts distributed to the Class A Limited Partners and Class B Limited Partners pursuant to ‎Section 7.01(c) .

 

Class B Unit ” means a Unit representing a fractional part of the Partnership Interests and having the rights and obligations specified with respect to the Class B Units in this Agreement.

 

Class B Unit Sharing Percentage ” means, as to any Class B Limited Partner, the percentage obtained by dividing the number of Class B Units owned by such Class B Limited Partner by the total number of Class B Units issued and outstanding at the time in question.

 

Code ” means the Internal Revenue Code of 1986, as amended (excluding any amendments made by the Bipartisan Budget Act).

 

Competitor ” means any Person (other than any investment fund managed by a member of the Riverstone Group) who is engaged in the active development or operation of renewable energy projects in any geographic region where Pattern Energy or any of its Subsidiaries is conducting business.

 

Competitive Business ” has the meaning set forth in ‎Section 11.08(c)(iv) of this Agreement.

 

Contribution Agreement ” means the Contribution Agreement, dated as of December 8, 2016, by and between the Initial Limited Partner and the Partnership.

 

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Contribution Loan ” means any loan made by the Partnership to Pattern Energy, to enable Pattern Energy to make an additional Capital Contribution to the Partnership pursuant to ‎Section 5.02(a) .

 

Control ” (including the correlative terms “ Controlled by ” and “ Controlling ”) means the possession, directly or indirectly, of the power to direct, or to cause the direction of, the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

 

Co-Seller ” has the meaning set forth in ‎Section 11.05(a) of this Agreement.

 

Depreciation ” means, for each Fiscal Period, an amount equal to the depreciation, amortization or other cost recovery deduction allowable for federal income tax purposes with respect to property for such Fiscal Period, except that (A) with respect to any such property the Book Value of which differs from its adjusted tax basis for federal income tax purposes and which difference is being eliminated by use of the “remedial method” pursuant to Treasury Regulation Section 1.704-3(d), Depreciation for such taxable year shall be the amount of book basis recovered for such Fiscal Period under the rules prescribed by Treasury Regulation Section 1.704-3(d)(2), and (B) with respect to any other such property the Book Value of which differs from its adjusted tax basis at the beginning of such Fiscal Period, Depreciation shall be an amount which bears the same ratio to such beginning Book Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Fiscal Period bears to such beginning adjusted tax basis; provided that if the adjusted tax basis of any property at the beginning of such Fiscal Period is zero, Depreciation with respect to such property shall be determined with reference to such beginning value using any reasonable method selected by the Tax Matters Partner.

 

Director ” means a member of the Board of Directors.

 

Disabled ” or “ Disability ” means, as used to describe any Class B Limited Partner who is an Employee, the definition of “Disabled” or “Disability” used in such Class B Limited Partner’s Employment Agreement, or, if such Class B Limited Partner does not have such an Employment Agreement that defines “Disabled” or “Disability,” “Disabled” or “Disability” shall exist if the Class B Limited Partner is unable to perform the essential functions of his position, with reasonable accommodation, due to physical or mental illness or injury which continues for a period in excess of four (4) consecutive months. The determination of a Disability will be made by the Partnership or the applicable member of the PEG Group, as the case may be; provided that if the Class B Limited Partner disputes the determination, the matter shall be submitted to a qualified doctor mutually acceptable to the Partnership or such member of the PEG Group, as the case may be, and the Class B Limited Partner for final determination, and the Class B Limited Partner shall submit to such examinations as the doctor shall reasonably request in order to enable the doctor to make the determination. If requested by the Partnership or such member of the PEG Group, as the case may be, the Class B Limited Partner shall submit to a mental or physical examination to be performed by an independent physician selected by the Partnership or such member of the PEG Group, as the case may be, to assist the Partnership or such member of the PEG Group, as the case may be, in making such determination.

 

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Distributable Property ” means the excess of cash and property on hand over the amount that the Board of Directors determines is required to be retained as a reasonable reserve to meet any liabilities or proposed expenditures of the Partnership which are accrued or reasonably foreseeable or that is otherwise reasonably necessary to be retained. In determining any reserves, the Board of Directors shall consider, in its reasonable discretion and in good faith, anticipated committed expenditures and prospective sources of cash.

 

Economic Risk of Loss ” has the meaning set forth in Treasury Regulation Section 1.752-2(a).

 

Effective Date ” means the date on which the Partnership issues its first capital call after the Signing Date.

 

Effective Date Contributing Partner ” means any Class A Limited Partner making a Capital Contribution on or about the Effective Date in accordance with ‎Section 5.01(b) . The identity of each individual Effective Date Contributing Partner is listed on Exhibit A under the heading “Effective Date Contributing Partner.”

 

Employee ” means any Person who is employed by any member of the PEG Group.

 

Employment Agreement ” means the then effective employment agreement, if any, entered into between any member of the PEG Group and a Class B Limited Partner.

 

Equity Securities ” has the meaning set forth in ‎Section 13.02(a) of this Agreement.

 

Executive Management Team ” means the Persons listed under the heading “Executive Management Team on Exhibit E hereto, as the same may be amended, modified or supplemented from time to time. The initial members of the Executive Management Team are Michael Garland, Hunter Armistead, Daniel Elkort, Mike Lyon, Chris Shugart, Esben Pedersen, and Kevin Devlin.

 

Family Member ” has the meaning set forth in ‎Section 12.01(b) of this Agreement.

 

Fair Market Value ” has the meaning set forth in ‎Section 11.09 of this Agreement.

 

Fiscal Period ” means (i) any period commencing on the date hereof or the day following the end of a prior Fiscal Period and (ii) ending on the last day of each Fiscal Year, the day preceding any day in which an adjustment to the Book Value of the Partnership’s properties pursuant to clause (b) of the definition of Book Value occurs, or any other date determined by the Board of Directors.

 

Fiscal Year ” means the fiscal year of the Partnership which shall end on December 31 of each calendar year unless, for United States federal income tax purposes, another fiscal year is required. The Partnership shall have the same fiscal year for United States federal income tax purposes and for accounting purposes.

 

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General Partner ” means Pattern Energy Group Holdings 2 GP LLC, a Delaware limited liability company, and its successors and permitted assigns as general partner of the Partnership.

 

Good Reason ” means the definition of “Good Reason” used in the applicable Class B Limited Partner’s Employment Agreement, or if the Class B Limited Partner does not have such an Employment Agreement that defines “Good Reason,” then Good Reason shall mean (A) a material diminution in the Class B Limited Partner’s authority, title or position, duties, or responsibilities; (B) a material breach by the Partnership of its obligations to the Class B Limited Partner pursuant to this Agreement or a material breach by the Partnership or the applicable member of the PEG Group of the Class B Limited Partner’s Employment Agreement; (C) the involuntary relocation of the geographic location of the Class B Limited Partner’s principal place of employment by more than 40 miles from the location of the Class B Limited Partner’s principal place of employment as of the effective date of employment; or (D) a diminution in the Class B Limited Partner’s base salary or a material diminution in the discretionary target bonus, if applicable (as such terms are defined in his Employment Agreement), for which the Class B Limited Partner is eligible in one year, as compared to the target bonus, if applicable, for which the Class B Limited Partner was eligible in the previous year. Notwithstanding the foregoing provisions of this definition or any other provision of this Agreement to the contrary, any assertion of a Class B Limited Partner of a termination for Good Reason shall not be effective unless all of the following conditions are satisfied: (i) the Class B Limited Partner must provide written notice to the applicable member of the PEG Group of the conditions described in (A), (B), (C) or (D) that give rise to the Class B Limited Partner’s belief that Good Reason for termination exists within sixty (60) days after the Class B Limited Partner first becomes aware of the initial existence of the condition; (ii) the condition specified in such notice must remain uncorrected for thirty (30) days after receipt of such notice by such member of the PEG Group; and (iii) the date of the Class B Limited Partner’s termination of employment must occur within ninety-one (91) days after the Class B Limited Partner first becomes aware of the initial existence of the condition specified in such notice.

 

Grant Date ” means, with respect to any Class B Unit, the date on which such Class B Unit is issued to an Employee or Management Holdco, as applicable, whether pursuant to this Agreement or otherwise.

 

Holder ” means (i) any Person that was a Limited Partner immediately prior to a Qualified Public Offering owning Registrable Securities that have not been sold to the public, and (ii) any Transferee of Registrable Securities in a private transaction after a Qualified Public Offering.

 

Immediate Family ” means the spouse of an individual and the grandparents, parents, siblings and children (and children and spouses of any of the foregoing) of the individual or his or her spouse. An adopted child will be treated as a child of his or her adoptive parent or parents if (but only if) he or she was adopted before he or she reached 21 years of age.

 

Identified Development Properties ” has the meaning set forth in ‎Section 11.08(c)(iv) .

 

Independent Advisor ” has the meaning set forth in ‎Section 11.09(c) of this Agreement.

 

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Indemnitee has the meaning set forth in ‎Section 10.01 of this Agreement.

 

Initial Closing Date ” means December 8, 2016.

 

Initial Contributing Partners ” means any Class A Limited Partner deemed to have made a Capital Contribution on the Initial Closing Date in accordance with ‎Section 5.01(a) . The identity of each individual Initial Contributing Partner is listed on Exhibit A under the heading “Initial Contributing Partner.”

 

Initial Limited Partner ” has the meaning set forth in the recitals of this Agreement.

 

Initial Limited Partner LPA ” means the First Amended and Restated Agreement of Limited Partnership of the Initial Partner, dated effective as of July 15, 2010, as the same may be amended from time to time.

 

Initial LPA ” has the meaning set forth in the recitals of this Agreement.

 

Initiating Holder ” has the meaning set forth in ‎Section 11.03(a) of this Agreement.

 

Investment Criteria ” means investments in projects that meet the following criteria:

 

i. Expected net pre-tax proceeds to equity upon sale of no less than 1.40 times the total amount of equity invested prior to sale;

 

ii. Wind, solar, transmission or storage in countries that are members of the Organization for Economic Co-operation and Development; and

 

iii. Fixed-price power purchase arrangements with a term of no less than 10 years, covering no less than 60% of the project’s forecast output.

 

Liquidation Event ” means the occurrence of any of the following: (i) a merger, consolidation or sale of substantially all of the assets of the Partnership, (ii) the Transfer in a single transaction or a series of related transactions of 100% of the Units of the Partnership and (iii) the winding up, dissolution or liquidation of the Partnership.

 

Limited Partner ” means any Person (i) executing this Agreement or any other writing evidencing the interest of such Person to become a limited partner of the Partnership, (ii) complying with the conditions for becoming a limited partner of the Partnership as set forth in this Agreement or any other writing and requesting (orally, in writing or by other action such as payment for a Partnership Interest) that the records of the Partnership reflect such admission, and (iii) hereafter admitted to the Partnership as a limited partner as herein provided; but shall not include any Person who has ceased to be a limited partner of the Partnership. For the avoidance of doubt, the term “Limited Partner” includes each Class A Limited Partner and each Class B Limited Partner.

 

Management Designee ” has the meaning set forth in ‎Section 9.02(a) .

 

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Management Holdco ” means Pattern Equity Holdings 2 LLC, a Delaware limited liability company formed and controlled by the Partnership for the purpose of owning Units.

 

Management Holdco LLC Units ” refers to the units representing membership interests in Management Holdco.

 

Management Services Agreement ” means the Amended and Restated Management Services Agreement, dated as of the Signing Date, by and between the Initial Limited Partner, Pattern Energy and the Partnership, as the same may be amended from time to time.

 

Market Area ” has the meaning set forth in ‎Section 11.08(c)(iv) of this Agreement.

 

Marketable Securities ” means securities that are (i) traded on an established United States securities exchange or stock market, free of all liens, claims and encumbrances (excluding those arising under applicable securities laws), and (ii) either, (A) freely tradeable, or (B) transferable by Limited Partners that are not Affiliates of the issuer thereof pursuant to Rule 144 under the Securities Act, or any successor rule thereto without any volume limitations.

 

Minimum Gain ” has the meaning assigned to that term in Treasury Regulation Section 1.704-2(d).

 

Non-Competition Agreement ” means the Second Amended and Restated Non-Competition Agreement, dated as of the Signing Date, by and between the Initial Limited Partner, Pattern Energy and the Partnership, as the same may be amended from time to time.

 

Nonrecourse Deduction ” has the meaning assigned to that term in Treasury Regulation Section 1.704-2(b).

 

Officers ” has the meaning set forth in ‎Section 9.03 of this Agreement.

 

Other Investments ” has the meaning set forth in ‎Section 3.04(a)(i)(A) of this Agreement.

 

Participation Offer ” has the meaning set forth in ‎Section 11.05 of this Agreement.

 

Partner ” means any General Partner or Limited Partner.

 

Partner Nonrecourse Debt ” has the meaning assigned to that term in Treasury Regulation Section 1.704-2(b)(4).

 

Partner Nonrecourse Debt Minimum Gain ” has the meaning assigned to that term in Treasury Regulation Section 1.704-2(i)(2).

 

Partner Nonrecourse Deduction ” has the meaning assigned to that term in Treasury Regulation Section 1.704-2(i)(1).

 

Partnership ” has the meaning set forth in the preamble of this Agreement.

 

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Partnership Group Member ” means the Partnership and any Person in which the Partnership owns a capital or profits interest.

 

Partnership Interests ” means, collectively, the interests of the Partners in the Partnership, including, without limitation, rights to distributions (liquidating or otherwise), allocations, information, and, if applicable, to consent or approve, as represented by Units.

 

Partnership Representative ” has the meaning assigned to that term in Section 6223 of the Amended Code and any Treasury Regulations or other administrative or judicial pronouncements promulgated thereunder.

 

Pattern Energy ” means Pattern Energy Group Inc., a Delaware corporation.

 

PEG 1 Distributions ” means, with respect to a Class A Limited Partner, any amounts distributed to such Class A Limited Partner directly by the Initial Limited Partner pursuant to the Initial Limited Partner LPA on or after the Effective Date, in connection with such Class A Limited Partner’s Class B Units (as such term is defined in the Initial Limited Partner LPA) in the Initial Limited Partner, or indirectly through Pattern Equity Holdings LLC pursuant to the Limited Liability Company Agreement of Pattern Equity Holdings LLC, dated effective as of August 31, 2010, in connection with such Class A Limited Partner’s Class B Units in Pattern Equity Holdings LLC, in each case, net of federal, state, and local taxes paid or payable on such distributions, determined at the highest marginal rate applicable to individuals resident in the State of California for the taxable year during which any such distribution is made.

 

PEG 1 Services Failure ” has the meaning given to such term in the Management Services Agreement.

 

PEG Indemnitors ” has the meaning set forth in ‎Section 10.11 of this Agreement.

 

PEG Group ” means, collectively, the Partnership, the Initial Limited Partner, Pattern Energy and their respective Subsidiaries.

 

PEG 1 Limited Partner ” means any Person who has received a distribution of Class A Units from the Initial Limited Partner pursuant to the Initial Limited Partner LPA.

 

Person ” means any individual, partnership, corporation, limited liability company, trust or other entity.

 

Pre-Effective Date Class A Units ” means the Class A Units outstanding immediately prior to the Effective Date.

 

Profits ” or “ Losses ” means, for each Fiscal Period, an amount equal to the Partnership’s taxable income or loss for such period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments (without duplication):

 

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(a)       Any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Profits and Losses pursuant to this definition of “Profits” and “Losses” shall be added to such taxable income or loss;

 

(b)       Any expenditures of the Partnership described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or Losses pursuant to this definition of “Profits” and “Losses,” shall be subtracted from such taxable income or loss;

 

(c)       In the event the Book Value of any asset is adjusted pursuant to clause (b) or clause (c) of the definition of Book Value, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the Book Value of the asset) or an item of loss (if the adjustment decreases the Book Value of the asset) from the disposition of such asset and shall, except to the extent allocated pursuant to the Regulatory Allocations, be taken into account for purposes of computing Profits or Losses;

 

(d)       Gain or loss resulting from any disposition of property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Book Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Book Value;

 

(e)       In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation;

 

(f)       To the extent an adjustment to the adjusted tax basis of any asset pursuant to Code Section 734(b) is required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Account balances as a result of a distribution other than in liquidation of a Partner’s interest in the Partnership, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or an item of loss (if the adjustment decreases such basis) from the disposition of such asset and shall be taken into account for purposes of computing Profits or Losses; and

 

(g)       Any items that are allocated pursuant to the Regulatory Allocations shall not be taken into account in computing Profits and Losses.

 

Public Entity ” has the meaning set forth in ‎Section 11.03(a) of this Agreement.

 

Purchase Rights Agreement ” means the Amended and Restated Purchase Rights Agreement, dated as of the Signing Date, by and between Pattern Energy and the Partnership, as the same may be amended from time to time.

 

Qualified Public Offering ” means the sale in an underwritten public offering registered under the Securities Act of the equity securities of the Partnership (or any successor thereto) approved by the Board of Directors and with anticipated net proceeds to the Partnership (or successor entity) of $100 million or more.

 

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Recapitalization ” has the meaning set forth in ‎Section 11.02(f)(i) of this Agreement.

 

Registrable Securities ” means securities of the Public Entity owned by a Holder which are the same class as the equity securities sold in the Qualified Public Offering.

 

Regulatory Allocations ” means the allocations pursuant to ‎Section 6.02 of this Agreement.

 

Remaining Class A Commitment Amount ” means, with respect to each Class A Limited Partner, such Class A Limited Partner’s Class A Commitment Amount as described on Exhibit B , as amended from time to time pursuant to this Agreement, less all amounts funded by such Class A Limited Partner as of the date of determination.

 

Renounced Business Opportunity ” has the meaning set forth in ‎Section 3.04(c) of this Agreement.

 

Reorganization ” has the meaning set forth in ‎Section 11.02(a) of this Agreement.

 

Restricted Securities ” means securities that are subject to restrictions or limitations on resale in order to comply with Rules 144 or 145 (and any successor rules) as promulgated under the Securities Act or sales or dispositions of securities that are otherwise restricted under the terms of any agreement pursuant to which such securities were acquired or issued.

 

Retained Distributions ” has the meaning set forth in ‎Section 7.01(f) of this Agreement.

 

Riverstone ” means Riverstone Pattern Energy II Holdings, L.P.

 

Riverstone Designee ” has the meaning set forth in ‎Section 9.02(a) of this Agreement.

 

Riverstone Group ” means Riverstone or any analogous entities that are used to form, organize or establish such funds, and their respective Affiliates and partners, officers, directors and employees (and members of their respective Immediate Families and trusts for the primary benefit of such family members).

 

Riverstone Indemnitors ” has the meaning set forth in ‎Section 10.11 of this Agreement.

 

Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations thereunder as in effect from time to time.

 

Selling Partner ” has the meaning set forth in ‎Section 11.05(a) of this Agreement.

 

Signing Date ” has the meaning set forth in the preamble of this Agreement.

 

Sponsor Indemnitees ” has the meaning set forth in ‎Section 10.11 of this Agreement

 

Sponsor Indemnitors ” has the meaning set forth in ‎Section 10.11 of this Agreement.

 

SteelRiver Entities means SteelRiver Infrastructure Partners LP, SteelRiver Infrastructure Fund North America LP, SteelRiver Management Holdings LLC, SteelRiver

 

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Infrastructure Associates LLC, SteelRiver Offshore Infrastructure Associates Ltd., SteelRiver Services LLC, SteelRiver AIV Management LLC, ICS AIV LP, NGPL AIV LP, TransBay AIV LP and their respective investment vehicles and Affiliates.

 

Subsidiary ” means any Person of which 50% or more of the securities or other equity interests having ordinary voting power for the election of managers, directors or similar Persons is now, or shall hereafter be, owned or controlled, directly or indirectly, by another Person. For the sake of clarity, a limited partnership of which at least 50% of the general partner interests and 50% of the limited partner interests are owned or controlled, directly or indirectly, by any other person, is a Subsidiary of such Person.

 

Substitute Limited Partner ” means a Person who is admitted as a Limited Partner to the Partnership pursuant to ‎Section 11.10(b) in place of and with all the rights of a Limited Partner and who is shown as a Limited Partner on the books and records of the Partnership.

 

Tag Sale ” has the meaning set forth in ‎Section 11.05(a) of this Agreement.

 

Tag Sale Value ” means, as of the date of a Tag Sale, the aggregate amount that would be received by holders of Units in a sale of all of the Units, based on a valuation of all Units of the Partnership determined by reference to the aggregate consideration to be paid by the acquiring party for the Units to be sold in the Tag Sale, as determined by the Board of Directors in good faith.

 

Tax Distribution Date ” means any date that is two Business Days prior to the date on which estimated U.S. federal income tax payments are required to be made by calendar year individual taxpayers or, if earlier, a calendar year corporate taxpayer and each due date for the U.S. federal income tax return of an individual calendar year taxpayer or, if earlier, a calendar year corporate taxpayer (without regard to extensions).

 

Tax Matters Partner ” has the meaning set forth in ‎Section 4.03(a) of this Agreement.

 

Taxable Non-Cash Transaction ” has the meaning set forth in ‎Section 11.13 of this Agreement.

 

Termination Event ” has the meaning set forth in ‎Section 2.06 of this Agreement.

 

Threshold Amount ” has the meaning set forth in ‎Section 3.02(c) of this Agreement.

 

Transfer ” means the sale, assignment, pledge, hypothecation, transfer or other voluntary disposition (by gift or otherwise, and whether as security or otherwise) by a Partner of all or a portion of his, her or its Units. For purposes of this definition, “Transfer” of a Unit includes (a) the sale, assignment, pledge, hypothecation, transfer or other voluntary disposition (by gift or otherwise, and whether as security or otherwise) of an equity interest in any Person substantially all of the assets of which consist, directly or indirectly, of Units, or (b) the merger or consolidation of a Partner, or of any Person referred to in clause (a), with another Person. Transferor ,” “ Transferee ,” “ Transferred ” and “ Transferring ” have meanings corresponding to the forgoing.

 

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Treasury Regulations ” means the Income Tax Regulations promulgated under the Code, as they may be amended from time to time.

 

Units ” means a Partnership Interest of a Partner representing a fractional part of the Partnership Interests of all the Partners and shall include Class A Units and Class B Units; provided that any class or group of Units issued shall have the relative rights, powers and duties set forth in this Agreement and the Partnership Interest represented by such class or group of Units shall be determined in accordance with such relative rights, powers and duties set forth in this Agreement.

 

Unpaid Class A Preference Amount ” means, with respect to each Class A Unit held by a Class A Limited Partner, at any time, the excess, if any, of (i) the Class A Preference Amount of such Class A Limited Partner with respect to such Class A Unit at such time over (ii) the cumulative amount of distributions to such Class A Limited Partner with respect to such Class A Unit in payment thereof pursuant to ‎Section 7.01(b) .

 

Unreturned Capital Contributions ” means, with respect to each Class A Unit held by a Class A Limited Partner, the aggregate amount of Capital Contributions made by such Class A Limited Partner with respect to such Class A Unit less the cumulative amount of distributions to such Class A Limited Partner with respect to such Class A Unit in return thereof pursuant to ‎Section 7.01(a) .

 

Withheld Items ” has the meaning set forth in ‎Section 11.08(b)(i).

 

Article II

ORGANIZATIONAL AND OTHER MATTERS

 

Section 2.01        Organization; Ratification

 

(a)                The Partnership was formed as a Delaware limited partnership by the filing of the Certificate in the office of the Secretary of State on November 14, 2016.

 

(b)               The Board of Directors hereby ratify any and all acts taken or caused to be taken by any “authorized person” (within the meaning of the Act) in the name of or on behalf of the Partnership prior to the date hereof, including entry by the Partnership (or, as applicable, one of its Subsidiaries) into (and performance by such Person of its obligations under) the Contribution Agreement, the Purchase Rights Agreement, the Management Services Agreement, and the Non-Competition Agreement.

 

Section 2.02        Name

 

The name of the Partnership is “Pattern Energy Group Holdings 2 LP,” and all Partnership business must be conducted in such name or such other names that comply with applicable law as the Board of Directors may select from time to time.

 

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Section 2.03        Registered Office; Registered Agent; Principal Office in the United States; Other Offices

 

The registered office of the Partnership in the State of Delaware shall be the initial registered office designated in the Certificate or such other office (which need not be a place of business of the Partnership) as the Board of Directors may designate from time to time in the manner provided by law. The registered agent of the Partnership in the State of Delaware shall be the initial registered agent designated in the Certific ate or such other Person or Persons as the Board of Directors may designate from time to time in the manner provided by law. The registered office of the Partnership in the United States shall be at the place specified in the Certificate, or such other place(s) as the Board of Directors may designate from time to time. The Partnership may have such other offices as the Board of Directors may determine appropriate.

 

Section 2.04         Purpose

 

The Partnership may carry on, directly or through one or more Subsidiaries, any lawful business, purpose or activity permitted by the Act.

 

Section 2.05        Foreign Qualification

 

Prior to conducting business in any jurisdiction other than the State of Delaware, the Board of Directors shall cause the Partnership to comply, to the extent procedures are available, with all requirements necessary to qualify the Partnership as a foreign limited partnership in such jurisdiction. Each Partner shall execute, acknowledge, swear to and deliver all certificates and other instruments conforming to this Agreement that are necessary or appropriate to qualify, or, as appropriate, to continue or terminate such qualification of, the Partnership as a foreign limited partnership in all such jurisdictions in which the Partnership may conduct business.

 

Section 2.06        Term

 

The Partnership commenced on the date the Certificate was filed with the Secretary of State of the State of Delaware, and its term shall continue until the earliest to occur of (a) ten (10) years after the Effective Date, (b) such date falling at least five (5) years after the Effective Date on which either Pattern Energy or Riverstone, in either of their sole discretion, decide to terminate the Partnership, (c) in Pattern Energy’s sole discretion, at any time following the Board of Directors’ rejection of three (3) or more First Rights Project Offers or First Rights PEG 2 LP Offers (each as defined in the Purchase Rights Agreement), in the aggregate, in accordance with the terms of the Purchase Rights Agreement, representing a cumulative net capacity of at least 600 MW, (d) in the event that the condition described in clause (c) applies, in either Pattern Energy’s or Riverstone’s sole discretion at any time following the termination of the exclusivity provisions in the Non-Competition Agreement in accordance with the terms therein and in accordance with this Agreement and the Purchase Rights Agreement, or (e) in the Board of Directors sole discretion, at any time following a PEG 1 Services Failure (any such date specified in clauses (a)-(e), a “ Termination Event ”). Upon a Termination Event, the Partnership shall (i) cease to undertake any new project development activities and (ii) be wound up, liquidated and dissolved in accordance with this Agreement and applicable law.

 

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Section 2.07        Alternative Investment Vehicles

 

If in the determination of Riverstone or the Board of Directors, it is in the best interest of the Partnership or any of its Limited Partners that certain or all of the Partners participate in an investment or a potential investment in foreign assets, Riverstone or the Board of Directors may direct that Capital Contributions of certain or all Limited Partners with respect to such investment or potential investment in foreign assets be effected through one or more alternative investment vehicles (each, an “ Alternative Investment Vehicle ”), provided that Pattern Energy will not, without its prior written consent, be required to participate in an Alternative Investment Vehicle that, at the time of admission of Pattern Energy, would have a material adverse impact on Pattern Energy. In determining whether it is in the best interest of the Partnership or any of its Limited Partners for certain or all of the Partners to participate in an Alternative Investment Vehicle, Riverstone and the Board of Directors will take into account the costs of forming and operating any such Alternative Investment Vehicle and the impact such costs will have on all the Partners. Each Alternative Investment Vehicle shall be governed by documents containing economic and governance terms substantially comparable to this Agreement or expressly subjecting itself to the terms of this Agreement, and the investment results of any Alternative Investment Vehicle will be aggregated with the investment results of this Partnership for purposes of determining the amounts to be distributed to each Limited Partner pursuant to ‎Article VII of this Agreement and the corresponding provisions of any Alternative Investment Vehicle. In furtherance of the foregoing, for purposes of calculating the amounts to be contributed to and distributed from this Partnership, all amounts contributed to an Alternative Investment Vehicle shall be treated as contributed by the Limited Partners participating in such investment through such Alternative Investment Vehicle to this Partnership and all amounts distributed by such Alternative Investment Vehicle shall be treated as distributed from this Partnership to such Limited Partners pursuant to the applicable provisions set forth in ‎Article VII of this Agreement. Each of the Partners will cooperate and take such further actions as Riverstone or the Board of Directors may deem necessary or appropriate to give effect to the purposes of this ‎Section 2.07 , including without limitation executing and delivering counterparts to the organizational documents of any Alternative Investment Vehicle

 

Article III

partners; REPRESENTATIONS

 

Section 3.01        Cl ass A Limited Partners

 

The identity of all of the Class A Limited Partners and the number of Units held by each Class A Limited Partner are reflected on Exhibit B attached hereto, which shall be amended as necessary by the Board of Directors to reflect any changes in such information. The Partnership is authorized to issue additional Class A Units at a price of $1.00 per Unit (unless otherwise provided herein or as otherwise determined by the Board of Directors) and admit additional Class A Limited Partners only after (a) the Board of Directors consents thereto, (b) so long as the Riverstone Group holds the Class A Majority, Riverstone consents thereto, (c) each such additional Class A Limited Partner pays any Capital Contribution required by the Board of Directors and (d) each such additional Class A Limited Partner executes an Adoption Agreement and any other documents in form and substance as the Board of Directors may deem necessary or

 

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desirable to effect such admission. The issuance of additional Class A Units shall dilute the Class A Limited Partners pro rata.

 

Section 3.02        Class B Limited Partners

 

(a)                The Partnership shall have the authority to issue not more than 1,000,000 Class B Units of which 752,500 Class B Units are outstanding on the Signing Date. Class B Units shall be issuable only to Employees or to Management Holdco. The identity of all of the Class B Limited Partners and the number of Units held by each Class B Limited Partner as of the Signing Date are reflected on Exhibit D attached hereto, which shall be amended as necessary by the Board of Directors to reflect any changes in such information. The remaining 247,500 authorized but unissued Class B Units may be issued, and the Persons to whom they are issued may be admitted as additional Class B Limited Partners, only by the Board of Directors, with the consent of the Class B Majority. As a condition to the issuance of the Class B Units, each such additional Class B Limited Partner shall execute an Adoption Agreement and any other instruments in form and substance as the Board of Directors may deem necessary or desirable to effect such admission if such Person is not already a Class B Limited Partner. The issuance of such remaining 247,500 authorized but unissued Class B Units shall dilute the Class B Limited Partners pro rata subject to the Threshold Amount provisions of ‎Section 3.02(c) . No Class B Units shall be issued following the first to occur of (i) a Qualified Public Offering, (ii) a Liquidation Event, (iii) a Transfer after the Effective Date in a single transaction or a series of related transactions of 50% or more of the Class A Units, and (iv) a Reorganization. For the purposes of ‎Section 3.02(a) and ‎Section 9.06(c) , the Class B Majority shall be determined by including only those holders of a majority of the Class B Units who are Employees at the time of the issuance of such additional Class B Units pursuant to this ‎Section 3.02(a).

 

(b)               The Class B Units are intended to constitute “profits interests” within the meaning of Revenue Procedures 93-27 and 2001-43 (or the corresponding requirements of any subsequent guidance promulgated by the Internal Revenue Service or other applicable law). Accordingly, the Capital Account associated with each Class B Unit at the time of its issuance shall be equal to zero dollars ($0.00). The Partnership and the holders of Class B Units shall file all federal income tax returns consistent with such characterization.

 

(c)                The Partnership may from time to time effect one or more additional issuances of series of Class B Units, in accordance with the provisions of ‎Section 3.02(a) , the first of which to be issued after the Effective Date shall be designated as Class B-2 Units and each subsequent issuance shall be designated by a sequential number (Class B-3, Class B-4, etc.). Each series of Class B Units shall have a “ Threshold Amount ” to the extent necessary to cause such Class B Units to constitute “profits interests” as provided in ‎Section 3.02(b) of this Agreement, but not less than zero (taking into account the adjustments to Book Value contemplated in clause (ii) of subparagraph (b) of the definition thereof). The Threshold Amount of each Class B Unit issued on the Initial Closing Date (designated herein as a “Class B-1 Unit”) shall be zero (0). The Threshold Amount for each other series of Class B Units shall equal the amount that would, in the reasonable determination of the Board of Directors, be distributable with respect to each then outstanding Class B Unit of any then outstanding series if, immediately prior to the issuance of such new series of Class B Units, the assets of the Partnership were sold for their fair market

 

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value and the proceeds (net of any liabilities of the Partnership) were distributed pursuant to ‎Section 7.01 of this Agreement.

 

Section 3.03         Units; Certificates

 

Units may be (but need not be) represented by certificates in such form as the Board of Directors shall from time to time approve, but shall be recorded in a register thereof maintained by the Partnership, and shall be subject to such rules for the issuance thereof as the Board of Directors may from time to time determine. If the Board of Directors elects to certificate the Units and a mutilated Unit is surrendered to the Partnership or if the Partner claims and submits an affidavit or other evidence, satisfactory to the Partnership, to the effect that the Unit has been lost, destroyed or wrongfully taken, the Partnership shall issue a replacement Unit if the Partnership’s requirements are met. If required by the Partnership, such Partner must provide an indemnity bond, or other form of indemnity, sufficient in the judgment of the Partnership to protect the Partnership against any loss which may be suffered. The Partnership may charge such Partner for its reasonable out-of-pocket expenses in replacing a Unit which has been mutilated, lost, destroyed or wrongfully taken. For the avoidance of doubt, the Partnership may issue fractional Units.

 

Section 3.04        Conflicts of Interest

 

(a)                Generally. Each Partner acknowledges and affirms that the Riverstone Group and its Affiliates:

 

(i)                 (A) have participated (directly or indirectly) and/or will continue to participate (directly or indirectly) in private equity, venture capital and other direct investments in corporations, joint ventures, limited liability companies, limited partnerships and other entities, including those engaged in various aspects of businesses that may, are or will be competitive with the Partnership’s business or that could be suitable for the Partnership (“ Other Investments ”), (B) have interests in, participate with, aid and maintain seats on the boards of directors or similar governing bodies of, Other Investments, and (C) may develop or become aware of business opportunities for Other Investments; and

 

(ii)               may or will, as a result of or arising from the matters referenced in clause (i) above, the nature of the Riverstone Group and its Affiliates business and other factors, have conflicts of interest or potential conflicts of interest.

 

(b)               Waiver of Conflicts . Each of the Partners (in their own names and in the name and on behalf of the Partnership) expressly, except as set forth in ‎Section 3.04(c) of this Agreement, waive any such conflicts of interest and agree that neither the Riverstone Group nor its Affiliates shall have any liability to any Partner, any Affiliate thereof, or the Partnership with respect to such conflicts of interest or potential conflicts of interest and (y) except as set forth in ‎Section 3.04(c) of this Agreement, acknowledge and agree that neither the Riverstone Group nor its Affiliates and their respective representatives (excluding the Class B Limited Partners) will have any duty to disclose to the Partnership, any other Partner or the Board of Directors any such business opportunities, whether or not competitive with the Partnership’s business and

 

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whether or not the Partnership might be interested in such business opportunity for itself. The Partners (and the Partners on behalf of the Partnership) also acknowledge that the Riverstone Group, its Affiliates and their representatives have duties not to disclose confidential information of or related to the Other Investments. Each of the Partners (in their own names and in the name and on behalf of the Partnership) hereby:

 

(i)                 agree that (A) the terms of this ‎Section 3.04 to the extent that they modify or limit a duty or other obligation, if any, that the Riverstone Group or its Affiliates may have to the Partnership or another Partner under the Act or other applicable law, rule or regulation, are reasonable in form, scope and content; and (B) the terms of this ‎Section 3.04 shall control to the fullest extent possible if such terms conflict with a duty, if any, that the Riverstone Group and its Affiliates may have to the Partnership or another Partner, under the Act or any other applicable law, rule or regulation;

 

(ii)               waive any duty or other obligation, if any, that the Riverstone Group and its Affiliates may have to the Partnership or another Partner, pursuant to the Act or any other applicable law, rule or regulation, to the extent necessary to give effect to the terms of this ‎Section 3.04 ; and

 

(iii)             agree that nothing in this ‎Section 3.04 shall negate, contravene, or modify any existing duty, obligation or restriction owed by any Partner, any member of the Riverstone Group, or any of their Affiliates to any other Partner or any member of the PEG Group pursuant to any agreement in effect as of the Signing Date.

 

(c)                Business Opportunities. A Person who is not a Director or Officer, or a director or officer of a Subsidiary of the Partnership shall not be obligated to communicate or offer to the Partnership, and the Partnership shall not have any interest or expectancy in, any business opportunities, transactions or other matter, regardless of whether such opportunities, transactions or matters are within the Partnership’s business. Without limiting the foregoing, each of the Partners acknowledge and agree that the Partnership hereby renounces any interest or expectancy in any business opportunity, transaction or other matter in which the Riverstone Group or its Affiliates participates in or desires to participate in and that involves any aspect related to the business or affairs of the Partnership other than a business opportunity that is presented to an individual that is a member of Riverstone Group in such individual’s capacity as a Director or Officer (each such business opportunity, other than the exception referred to immediately preceding, is referred to as a “ Renounced Business Opportunity ”). Neither the Riverstone Group nor its Affiliates shall have any obligation to communicate or offer any Renounced Business Opportunity to the Partnership or any Partner thereof and may pursue any Renounced Business Opportunity solely for its own account.

 

(d)               Acknowledgement . Each of the Partners (in their own names and in the name and on behalf of the Partnership) acknowledge, affirm and agree that (i) the execution and delivery of this Agreement by the members of the Riverstone Group and/or its Affiliates is of material benefit to the Partnership and the Partners, and that the Partners would not be willing to (x) execute and deliver this Agreement, and (y) make their agreed Capital Contributions to the Partnership, without the benefit of this ‎Section 3.04 and the agreement of the parties thereto; and (ii) they have reviewed and understand the provisions of §§ 17-1101 of the Act.

 

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(e)                Resolution of Conflicts of Interest. Unless otherwise expressly provided in this Agreement, whenever a potential conflict of interest exists or arises between the General Partner or any of its Affiliates, or any Officer or member of the Board of Directors, on the one hand, and the Partnership, any Partner or any Transferee, on the other hand, any resolution or course of action in respect of such conflict of interest shall be permitted and deemed approved by all Partners, and shall not constitute a breach of this Agreement, of any agreement contemplated herein, or of any standard of care or duty stated or implied by law or equity, if the resolution or course of action is or, by operation of this Agreement is deemed to be, fair and reasonable to the Partnership. Any conflict of interest and any resolution of such conflict of interest shall be conclusively deemed fair and reasonable to the Partnership if such conflict of interest or resolution is (i) on terms no less favorable to the Partnership than those generally being provided to or available from unrelated third parties or (ii) fair to the Partnership, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to the Partnership). The Board of Directors shall be authorized in connection with its determination of what is “fair and reasonable” to the Partnership and in connection with its resolution of any conflict of interest to consider (i) the relative interests of any party to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interest; (ii) any customary or accepted industry practices and any customary or historical dealings with a particular Person; (iii) any applicable generally accepted accounting or engineering practices or principles; and (iv) such additional factors as the Board of Directors determines in its sole discretion to be relevant, reasonable or appropriate under the circumstances. For the avoidance of doubt, (A) with respect to the parties to the Non-Competition Agreement, any activity, action or transaction allowed under the Non-Competition Agreement or the Initial Limited Partner LPA, (B) to the extent a Limited Partner is an Employee, any employment relationship between such Limited Partner and an entity that is a member of the PEG Group, or (C) ownership of equity in, and service as an officer, director, authorized signatory, manager, or other governance position for, an entity that is a member of the PEG Group, shall not be treated as a conflict of interest for purposes of this Agreement. Nothing contained in this Agreement, however, is intended to nor shall it be construed to require the Board of Directors to consider the interest of any Person other than the Partnership. So long as the Board of Directors acts in good faith, the resolution, action or terms so made, taken or provided by the Board of Directors with respect to such matter shall not constitute a breach of this Agreement or any other agreement contemplated herein or a breach of any standard of care or duty stated or implied by law or equity.

 

(f)                No Duty to Consider Other Interests. Whenever this Agreement or any other agreement contemplated hereby provides that the Board of Directors is permitted or required to make a decision (i) in its “sole discretion” or “discretion,” that it deems “necessary or appropriate” or under a grant of similar authority or latitude, the Board of Directors shall be entitled to consider only such interests and factors as it desires and shall have no duty or obligation to give any consideration to any interest of, or factors affecting, the Partnership, any Partner or any Transferee, (ii) it will make such decision in good faith unless another express standard is provided for, or (iii) in “good faith” or under another express standard, the Board of Directors shall act under such express standard and shall not be subject to any other or different standards imposed by this Agreement or any other agreement contemplated hereby or under the Act or any other law, rule or regulation.

 

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(g)               Requirement of Fair and Reasonable. Whenever a particular transaction, arrangement or resolution of a conflict of interest is required under this Agreement to be “fair and reasonable” to any Person, the fair and reasonable nature of such transaction, arrangement or resolution shall be considered in the context of all similar or related transactions.

 

(h)               Garland Conflict of Interest. Notwithstanding anything else in this Partnership Agreement or Michael Garland’s Employment Agreement to the contrary, each of the Partners (in their own names and on behalf of the Partnership) hereby acknowledge, agree and affirm that:

 

(i)                 Mr. Garland holds a position on the board of directors and the investment committee of the SteelRiver Entities and may continue to hold such positions and devote such time as is reasonably required to perform such duties;

 

(ii)               Mr. Garland owns an economic interest in the SteelRiver Entities and any conflict of interest resulting from such economic interest is hereby waived; provided, however, that Mr. Garland agrees to notify the Partnership of any substantial increases in his economic interest in the SteelRiver Entities by virtue of amendments to the constitutive documents of the SteelRiver Entities or additional investments;

 

(iii)             Mr. Garland shall be under no obligation to disclose confidential information (whether confidentiality arises by operation of law or contract and whether or not such information represents a business opportunity) of, or related to, the SteelRiver Entities, including, without limitation confidential information relating to business opportunities (or to the SteelRiver Entities’ pursuit, acquisition and consummation of such opportunities);

 

(iv)             Mr. Garland is hereby authorized to disclose the provisions of this ‎Section 3.04(h) to the board of directors of the SteelRiver Entities; and

 

(v)               Any duty or other obligation, if any, that Mr. Garland may have to the Partnership or another Partner, pursuant to the Act or any other applicable law, rule or regulation, is waived to the extent necessary to give effect to the terms of this ‎Section 3.04(h) .

 

Section 3.05         Representations, Warranties and Covenants

 

Each Partner hereby represents, warrants and covenants to the Partnership and each other Partner that the following statements are true and correct as of the date hereof and shall be true and correct at all times that such Partner is a Partner:

 

(a)                if the Partner is a corporation, limited liability company, partnership or other entity, such Partner is duly incorporated, organized or formed (as applicable), validly existing, and (if applicable) in good standing under the laws of the jurisdiction of its incorporation, organization or formation; and such Partner has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and all necessary actions by the board of directors, shareholders, managers, members, partners, trustees, beneficiaries, or other applicable Persons necessary for the due authorization, execution, delivery, and performance of this Agreement by such Partner have been duly taken;

 

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(b)               such Partner has duly executed and delivered this Agreement and the other documents contemplated herein, and they constitute the legal, valid and binding obligation of such Partner enforceable against it in accordance with their terms (except as may be limited by bankruptcy, insolvency or similar laws of general application and by the effect of general principles of equity, regardless of whether considered at law or in equity);

 

(c)                such Partner’s authorization, execution, delivery, and performance of this Agreement does not and will not (i) conflict with, or result in a breach, default or violation of, (A) the organizational documents of such Partner, (B) any contract or agreement to which such Partner is a party or is otherwise subject, or (C) any law, order, judgment, decree, writ, injunction or arbitral award to which such Partner is subject; or (ii) require any consent, approval or authorization from, filing or registration with, or notice to, any governmental authority or other Person, unless such requirement has already been satisfied;

 

(d)               the Units to be acquired by such Partner pursuant to this Agreement will be acquired for investment for such Partner’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of applicable securities laws;

 

(e)                such Partner is an experienced investor in securities and acknowledges that he, she or it can bear the economic risk of its investment in the Units acquired pursuant to this Agreement and has such knowledge and experience in financial or business matters that he, she or it is capable of evaluating the merits and risks of the investment in the Units;

 

(f)                in the case of each Class A Limited Partner, such Partner is an Accredited Investor;

 

(g)               such Partner has had an opportunity to discuss the Partnership’s and its Subsidiaries’ businesses, management, financial affairs and the terms and conditions of the offering of Units with the Partnership’s management;

 

(h)               such Partner understands that the Units issued hereunder have not been, and will not be, registered under the Securities Act, but have been issued by reason of a specific exemption from the registration provisions of the Securities Act that depends upon, among other things, the bona fide nature of the investment intent and the accuracy of such Partner’s representations as expressed herein; such Partner further understands that the Units acquired by it hereunder are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, such Partner must hold the Units acquired by it hereunder indefinitely unless they are registered with the United States Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available; and

 

(i)                 such Partner understands that no public market now exists for the Units or any other securities issued by the Partnership, and that the Partnership has made no assurances that a public market will ever exist for the Units or any other securities issued by the Partnership.

 

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Article IV

BOOKS AND RECORDS

 

Section 4.01        Books, Records, Access and Tax Information

 

(a)                The Partnership shall keep and maintain proper and complete books and records of accounts, taxes, financial information and all matters pertaining to the Partnership. The Partnership and the Tax Matters Partner shall cause to be prepared and filed all necessary federal, state and local income tax returns for the Partnership, including making the elections described herein and shall cause an Internal Revenue Service Schedule K-1 or any successor form to be prepared and delivered to the Partners within one hundred twenty (120) days after the end of each Fiscal Year. Each Partner shall furnish to the Tax Matters Partner all pertinent information in its possession relating to Operations that is necessary to enable the Partnership’s tax returns to be prepared and filed. It is acknowledged, understood and agreed that none of the information contained in Exhibit B and Exhibit D , each as amended from time to time, other than the names of the Partners has been nor will it be furnished to the Class B Limited Partners other than the Chief Executive Officer of the Partnership for the purpose of preserving privacy with respect to the Unit ownership of the Partners, unless the Board of Directors agrees otherwise. The Partners agree that the preceding sentence is reasonable and appropriate. The Class A Limited Partners shall have the reasonable right (i) to consult from time to time with the Officers and the supervisors or independent accountants of the Partnership (and its direct or indirect subsidiaries) at their respective place of business regarding operating and financial matters, and (ii) to visit and inspect any of the properties of the Partnership (and any of its direct or indirect subsidiaries), so long as the exercise of such rights does not interfere with the operations or business of the Partnership.

 

(b)               The Partnership shall (i) provide each Partner with an estimate of its share of the Partnership’s taxable income for each Fiscal Year by December 15 of each such Fiscal Year, including an estimate of state and local apportionment information, (ii) cause an estimated Internal Revenue Service Schedule K-1 or any successor form to be prepared and delivered to each Partner within sixty (60) days after the end of each Fiscal Year, including any appropriate state and local apportionment information, and (iii) provide to each Partner any other information such Partner reasonably requests for purposes of complying with applicable tax reporting requirements that arise as a result of it being a Partner in the Partnership.

 

(c)                Unless determined otherwise by the Board of Directors, the Partnership shall provide to each of the Partners the following reports:

 

(i)                 within one hundred twenty (120) days of the Partnership’s year-end, audited consolidated financial statements of the Partnership and a schedule showing any variance between actual and budgeted figures;

 

(ii)               within forty-five (45) days of the end of any fiscal quarter, unaudited quarterly consolidated financial statements of the Partnership for the previous quarter and a schedule showing any variance between actual and budgeted figures;

 

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(iii)             promptly upon request, copies of any budget;

 

(iv)             prompt notice of any event that would reasonably be expected to have a material effect on the Partnership’s financial condition, business or operations; and

 

(v)               such other reports and information (in any form, electronic or otherwise) as a Partner may reasonably request or as the Board of Directors may determine.

 

Section 4.02         Tax Elections

 

. The Partnership shall make the following elections on the appropriate tax returns:

 

(a)                to adopt the calendar year as the Partnership’s Fiscal Year;

 

(b)               to adopt an appropriate federal income tax method of accounting and to keep the Partnership’s books and records on such income tax method;

 

(c)                to elect pursuant to Code Section 6231(a)(1)(B)(ii) or take any other action necessary to cause the provisions of Code Sections 6221 through 6231 to apply to the Partnership; and

 

(d)               any other election the Board of Directors may deem appropriate and in the best interests of the Partnership.

 

Section 4.03        Tax Matters Partner

 

(a)                The “tax matters partner” of the Partnership pursuant to Code Section 6231(a)(7) for taxable years of the Partnership beginning before January 1, 2018 shall be an eligible Partner designated from time to time by the Board of Directors subject to replacement by the Board of Directors. (Any Partner who is designated as the tax matters partner is referred to herein as the “ Tax Matters Partner ”). The initial Tax Matters Partner will be the General Partner, and may be changed only upon Board Approval and in accordance with the Code and applicable Treasury Regulations.

 

(b)               The Tax Matters Partner shall take such action as may be necessary to cause to the extent possible each other Partner to become a notice partner within the meaning of Code Section 6231(a)(8). The Tax Matters Partner shall inform the Board of Directors and each other Partner of all significant matters that may come to its attention in its capacity as Tax Matters Partner by giving notice thereof on or before the fifth day after becoming aware thereof and, within that time, shall forward to the Board of Directors and each other Partner copies of all significant written communications it may receive in that capacity.

 

(c)                The Tax Matters Partner shall take no action without the authorization of the Board of Directors, other than such action as may be required by law. Any cost or expense incurred by the Tax Matters Partner in connection with its duties, including the preparation for or pursuance of administrative or judicial proceedings, shall be paid by the Partnership.

 

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(d)               The Tax Matters Partner shall not enter into any extension of the period of limitations for making assessments on behalf of the Partners without first obtaining the consent of the Board of Directors. The Tax Matters Partner shall not bind any Partner to a settlement agreement without obtaining the consent of such Partner; provided , however , this sentence shall not apply to the Partnership Representative in respect of any Partnership audit that occurs with respect to any Fiscal Year beginning on or after January 1, 2018. Any Partner that enters into a settlement agreement with respect to any Partnership item (within the meaning of Code Section 6231(a)(3)) shall notify the other Partners of such settlement agreement and its terms within ninety (90) days from the date of the settlement.

 

(e)                No Partner shall file a request pursuant to Code Section 6227 for an administrative adjustment of Partnership items for any taxable year without first notifying the Tax Matters Partner and the other Partners. If the Board of Directors consents to the requested adjustment, the Tax Matters Partner shall file the request for the administrative adjustment on behalf of the Partners. If such consent is not obtained within thirty (30) days from such notice, or within the period required to timely file the request for administrative adjustment, if shorter, any Partner, including the Tax Matters Partner, may file a request for administrative adjustment on its own behalf. Any Partner intending to file a petition under Code Sections 6226 or 6228 or other Code section with respect to any item involving the Partnership shall notify the Tax Matters Partner and the other Partners of such intention and the nature of the contemplated proceeding. In the case where the Tax Matters Partner is the Partner intending to file such petition on behalf of the Partnership, such notice shall be given within a reasonable period of time to allow the other Partners to participate in the choosing of the forum in which such petition will be filed.