Post-Effective Amendment No. 3 to
SEC File No. 70-7862
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM U-1
APPLICATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("Act")
JERSEY CENTRAL POWER & LIGHT COMPANY ("JCP&L")
300 Madison Avenue
Morristown, New Jersey 07962-1911
METROPOLITAN EDISON COMPANY ("Met-Ed")
2800 Pottsville Pike, Muhlenberg Township
Berks County, Pennsylvania 19605
PENNSYLVANIA ELECTRIC COMPANY ("Penelec")
2800 Pottsville Pike, Muhlenberg Township
Berks County, Pennsylvania 19605
(Names of companies filing this statement
and addresses of principal executive offices)
GENERAL PUBLIC UTILITIES CORPORATION ("GPU")
(Name of top registered holding company parent of applicants)
T. G. Howson, Vice President Douglas E. Davidson, Esq.
and Treasurer Berlack, Israels & Liberman LLP
M. A. Nalewako, Secretary 120 West 45th Street
GPU Service Corporation New York, New York 10036
100 Interpace Parkway
Parsippany, New Jersey 07054
R. S. Cohen, Secretary W. Edwin Ogden, Esq.
Jersey Central Power & Ryan, Russell, Ogden & Seltzer
Light Company 1100 Berkshire Boulevard
300 Madison Avenue P.O. Box 6219
Morristown, New Jersey 07962-1911 Reading, Pennsylvania 19610
W. C. Matthews, II, Secretary Robert C. Gerlach, Esq.
Metropolitan Edison Company Ballard Spahr Andrews &
Pennsylvania Electric Company Ingersoll
2800 Pottsville Pike 1735 Market Street, 51st Fl.
Reading, Pennsylvania 19605 Philadelphia, PA 19103-7599
________________________________________________________________
(Names and addresses of agents for service of process) <PAGE>
JCP&L, Met-Ed and Penelec hereby post-effectively amend
their Application on Form U-1, as heretofore amended, docketed in
SEC File No. 70-7862, as follows:
1. By filing the following exhibits in Item 6 thereof:
B-2(b) - Forms of New Letters of Representa-
tion.
D-2(c) - Copy of Order of the PaPUC
registering Met-Ed's Securities
Certificate.
D-3(c) - Copy of Order of PaPUC registering
Penelec's Securities Certificate.
1<PAGE>
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935, THE UNDERSIGNED COMPANIES HAVE DULY
CAUSED THIS POST-EFFECTIVE AMENDMENT TO BE SIGNED ON THEIR BEHALF
BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
JERSEY CENTRAL POWER & LIGHT COMPANY
METROPOLITAN EDISON COMPANY
PENNSYLVANIA ELECTRIC COMPANY
By:________________________________
T. G. Howson, Vice President
and Treasurer
Date: October 18, 1995<PAGE>
EXHIBITS TO BE FILED BY EDGAR
Exhibits:
B-2(b) - Forms of New Letters of Representa-
tion.
D-2(c) - Copy of Order of the PaPUC
registering Met-Ed's Securities
Certificate.
D-3(c) - Copy of Order of PaPUC registering
Penelec's Securities Certificate.
<PAGE>
EXHIBIT B-2(b)(i)
K&S DRAFT
10.10.95
EXHIBIT N-1
to Credit Agreement
JERSEY CENTRAL POWER & LIGHT COMPANY
LESSEE'S LETTER AGREEMENT
Regarding
TMI-1 FUEL CORP.
Dated as of November __, 1995<PAGE>
TABLE OF CONTENTS
Section Page
1. Definitions. . . . . . . . . . . . . . . . . . . . 1
2. Performance of Fuel Lease and Liens. . . . . . . . 2
3. Security Interest of Collateral. . . . . . . . . . 2
4. Sale of Nuclear Material and Assignment of Rights
under Nuclear Material Contracts. . . . . . . 2
5. Collateral Equivalence Test; No Additional Collateral
or Covenants; Condemnation Statements;
Exercise of Rights of Secured Parties. . . . . 3
6. Fuel Management; Quiet Enjoyment. . . . . . . . . . 5
7. Insurance. . . . . . . . . . . . . . . . . . . . . 5
8. Representations and Warranties. . . . . . . . . . . 6
9. General Covenants of the Lessee. . . . . . . . . . 10
10. GPU Events . . . . . . . . . . . . . . . . . . . . 17
11. Credit Agreement and Notes. . . . . . . . . . . . . 17
12. Consent to Assignment; Direct Payment of
Payments Under the Fuel Lease. . . . . . . . . 17
13. Severability. . . . . . . . . . . . . . . . . . . . 18
14. Indemnification. . . . . . . . . . . . . . . . . . 18
15. No Waiver; Amendments. . . . . . . . . . . . . . . 20
16. Successors and Assigns. . . . . . . . . . . . . . . 20
17. Notices. . . . . . . . . . . . . . . . . . . . . . 20
18. Governing Law . . . . . . . . . . . . . . . . . . . 21<PAGE>
THIS LESSEE'S LETTER AGREEMENT (the "Letter Agreement") is
made as of November __, 1995, by and between Jersey Central
Power & Light Company, a New Jersey corporation (the "Lessee"),
TMI-1 Fuel Corp, a Delaware corporation (the "Company"), and
Union Bank of Switzerland, New York Branch, as Administrative
Agent (the "Administrative Agent"), for the Banks party to the
Credit Agreement referred to below (the "Banks").
WHEREAS, the Lessee has entered into the Amended and
Restated Nuclear Material Lease Agreement, dated as of
November __, 1995 ("Fuel Lease"), with the Company in order to
enable the Company to obtain financing for the acquisition,
processing and use of Nuclear Material in the Generating
Facility; and
WHEREAS, pursuant to the Fuel Lease, the Company has agreed
to make payments due to Manufacturers and/or to reimburse the
Lessee for payments previously made to Manufacturers with respect
to the Nuclear Material; and
WHEREAS, in order to finance the cost of such Nuclear
Material, the Company proposes to (i) sell its Commercial Paper
which shall be entitled to the benefit of a letter of credit to
be issued by the Issuing Bank, and (ii) obtain the Commitment of
the Issuing Bank to issue its letter of credit and of each Bank
to make Loans from time to time as hereinafter provided; and
WHEREAS, the Lessee has agreed to make payments under the
Fuel Lease sufficient to enable the Company to meet its
obligations under the Company's financing arrangements, including
the Company's obligations under the Credit Agreement, dated as of
November __, 1995, among the Company, the Banks, the Issuing Bank
and the Administrative Agent (the "Credit Agreement");
NOW, THEREFORE, in consideration of the premises and mutual
agreements herein contained and other good and valuable
consideration, so long as any of the Loans, the Letter of Credit
or the Commercial Paper shall remain outstanding, or the
Commitments shall be continuing, notwithstanding any provision of
the Fuel Lease or any other agreement of the Lessee to the
contrary, the Lessee, the Company, the Administrative Agent and
the Banks agree that:
1. Definitions. Unless the context otherwise specifies or
requires, each term defined in the Credit Agreement or Appendix A
to the Fuel Lease, shall, when used in this Letter Agreement,
have the meaning indicated in the Credit Agreement or Appendix A
or set forth in the paragraph indicated therein.
2. Performance of Fuel Lease and Liens. The Lessee will
perform and comply with all the terms of the Fuel Lease to be
performed or complied with by it and will not omit to take an<PAGE>
2
action the omission of which would cause a Lease Event of
Default. The Lessee acknowledges that, except as otherwise
provided in the Fuel Lease, its obligations as set forth under
the Fuel Lease are absolute and unconditional. The Lessee will
not directly or indirectly create or permit to be created or to
remain, and will promptly take such action as may be necessary to
discharge, any Lien on any Collateral except Permitted Liens.
3. Security Interest of Collateral. The Lessee represents
that no other financing statement (other that those naming the
Secured Parties as a secured party) covering all or any part of
the Collateral (as defined in the Security Agreement) is on file
in any public office. The Lessee shall make, or shall cause to
be made, all filings and recordings, and shall take, or cause to
be taken, such other actions, including filing all continuation
statements, necessary to establish, preserve and perfect the
Secured Parties' lien on and security interest in, the Collateral
as a legal, valid and enforceable first priority lien and
security interest, or purchase money security interest, as the
case may be, therein, subject only to the existence or priority
of any Permitted Lien, and the Lessee represents that all such
filings, recordings and other actions have been duly made. The
Lessee shall deliver to the Administrative Agent evidence of the
due filings of any continuation statements to be delivered to the
Administrative Agent within the time period specified in
Section 8.05 of the Credit Agreement. In no event will the
Lessee permit the Nuclear Material to enter any jurisdiction in
which all necessary action has not been taken to establish,
maintain and protect the Secured Parties' first priority
perfected lien and security interest in the Nuclear Material
under the Security Agreement, subject only to Permitted Liens.
4. Sale of Nuclear Material and Assignment of Rights under
Nuclear Material Contracts.
(a) In the event that the Lessee desires the Company,
on behalf of the Lessee, to purchase Nuclear Material or to have
services performed on such Nuclear Material pursuant to any
Nuclear Material Contract, the Lessee shall provide the Company
with an Assignment Agreement and a Manufacturer's Consent, both
substantially in the form of Exhibit D to the Fuel Lease, with
such changes to Exhibit 2 to Exhibit D as the Secured Parties may
consent to in writing, which consent shall not be unreasonably
withheld, with respect to such Nuclear Material Contract on or
before the date on which the Company is to purchase such Nuclear
Material or to have such services performed pursuant thereto.
Notwithstanding the foregoing, the Lessee shall not be required
to have obtained a Manufacturer's Consent in any instance where
the Manufacturer's obligations under the applicable Nuclear
Material Contract have been fully discharged and performed, and
the Manufacturer's warranties with respect to such Nuclear<PAGE>
3
Material Contract have expired, and the Lessee has delivered to
theCompany and the Collateral Agent a certificate to such effect.
(b) The Lessee at its expense will perform and comply
with all the terms and provisions of each Assigned Agreement to
be performed or complied with by it, will maintain each Assigned
Agreement in full force and effect, will enforce each of the
Assigned Agreements in accordance with their respective terms,
and will take all such action to that end as from time to time
may reasonably be requested by the Majority Banks.
(c) The Lessee shall not enter into or consent to or
permit any cancellation, termination, amendment, supplement or
modification of or waiver with respect to any Assigned Agreement
without the prior written consent of the Majority Banks.
(d) The Lessee will from time to time, upon request of
the Administrative Agent, furnish to the Administrative Agent
such information concerning the Nuclear Material or any Assigned
Agreement, as any Bank may reasonably request.
(e) The Lessee will not change its principal place of
business or chief executive offices from the location specified
in paragraph 8(a) hereof or remove therefrom its records
concerning the Assigned Agreements unless it gives the
Administrative Agent at least 30 days' prior written notice
thereof.
5. Collateral Equivalence Test; No Additional Collateral
or Covenants; Condemnation Statements; Exercise of Rights of
Secured Parties.
(a) The Lessee shall not permit the sum of aggregate
Stipulated Casualty Value of the Nuclear Material leased under
the Fuel Lease and the Lessee's Percentage of Cash Collateral to
be less than the Lessee's Percentage Outstandings.
(b) The Lessee shall not provide to any Person (other
than the Banks), in order to induce such Person to extend credit
to the Company, any collateral or any guarantee or other
assurance against loss or non-payment, nor shall the Lessee
consent to the provision thereof by the Company.
(c) The Lessee shall not agree to any affirmative or
negative covenant with respect to the condition, financial or
otherwise, of the Lessee with any Person in order to induce such
Person to extend credit to the Company.
(d) The Lessee shall not sell, assign, convey, pledge
or otherwise dispose of or encumber in any manner any interest it
may have in the Trust or any rights it may have under the Trust
Agreement. The Lessee shall not direct the Owner Trustee to<PAGE>
4
liquidate, dissolve, merge or consolidate the Company except if
such transaction is consented to in writing by the Banks. The
Lessee shall not direct the Owner Trustee to take any action
under the Trust Agreement which is inconsistent with the duties
imposed upon the Company by the Basic Documents and any other
agreements, documents, instruments and articles executed and
delivered, and to be executed and delivered, by the Owner Trustee
in connection therewith.
(e) The Nuclear Material leased under the Fuel Lease
shall constitute the Lessee's entire ownership interest in the
items used or to be used by it as nuclear fuel in the Generating
Facility. The Lessee agrees that 25% of the Lessor's ownership
interest in any Nuclear Material which is subject to the Fuel
Lease will be leased to the Lessee. The Lessee further agrees
not to take any action under the terms of the Fuel Lease,
including, but not limited to, the delivery of any Leasing
Record, which would result in 25% of the Lessor's ownership
interest in any such Nuclear Material not being so leased.
(f) As provided in the Security Agreement, (i) the
Secured Parties may, on and after the occurrence of a Credit
Agreement Default, Credit Agreement Event of Default, Lessee
Default or Lessee Event of Default, pursuant to Section 10 of the
Security Agreement, exercise any and all of the Company's rights
under the Fuel Lease, the Assigned Agreements and each other
Basic Document to which the Lessee is a party, and (i) if a Lease
Event of Default occurs and is continuing, the Secured Parties
may, pursuant to Section 10 of the Security Agreement, enforce
and exercise any and all of the Company's rights under the Fuel
Lease, the Assigned Agreements and each other Basic Document to
which the Lessee is a party, or the rights and remedies granted
to the Secured Parties under the Security Agreement at their
election and in their sole discretion, and, in the event that any
Secured Parties are permitted to exercise such rights pursuant to
Section 10 of the Security Agreement, the Lessee agrees that the
Collateral Agent may do so either in concert with or in place of
the Company, and the Lessee shall assist in, comply with and
perform in accordance with all rights or remedies so enforced or
exercised by the Collateral Agent for the ratable benefit of the
Secured Parties.
6. Fuel Management; Quiet Enjoyment. The occurrence of a
Credit Agreement Default, a Credit Agreement Event of Default,
Lease Event of Default, Lessee Default, Lessee Event of Default
or an event or condition which would, with the lapse of time or
the giving of notice or both, become a Lease Event of Default,
shall not affect the Lessee's sole obligation to engage in Fuel
Management; provided that, upon the occurrence of a Credit
Agreement Event of Default or Lessee Event of Default, the
Majority Secured Parties may, at their option, by written notice
to the Lessee, elect to revoke such power and authority, in which<PAGE>
5
case the Person from time to time designated by the Majority
Secured Parties may (but shall not be obligated to), to the
extent that the Majority Secured Parties desire and to the extent
permitted by law, engage in Fuel Management and/or remove all or
any part of the responsibility for Fuel Management from the
Lessee; provided, however, that, subject to the right of the
Secured Parties to exercise any or all rights granted to the
Secured Parties under the Security Agreement, the rights granted
to the Secured Parties under this Section 6 shall not be
construed to include the right to direct, whether directly or
indirectly, the operation of the Generating Facility. In the
event the Majority Secured Parties, in accordance with the
preceding sentence, shall revoke the Lessee's power and authority
to engage in Fuel Management, all rights conferred by the Company
to the Lessee pursuant to Section 3 of the Fuel Lease shall be
deemed to be automatically reassigned to the Company and the
Lessee shall execute such documents and instruments as the
Secured Parties shall request to further confirm such assignment.
7. Insurance. Each year, the Lessee will furnish the
Administrative Agent and each Bank a detailed statement
certified by an officer of Lessee setting forth (i) the location
of all Nuclear Material and (i) the insurance policies and
indemnification agreements provided pursuant to Sections 14 and
17 of the Fuel Lease and certifying that such insurance policies
and indemnification agreements comply with the requirements of
the Fuel Lease. In addition, the Lessee shall promptly furnish
at any time to the Administrative Agent and any Bank such
information as any such Bank shall reasonably request concerning
location of Nuclear Material, insurance policies and
indemnification agreements and Manufacturers or other third
parties with whom arrangements exist with respect to
transportation, storage or processing of Nuclear Material.
8. Representations and Warranties. The Lessee hereby
represents and warrants to the Company, the Administrative Agent
and the Banks that as of the date hereof:
(a) Organization and Standing. The Lessee is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of New Jersey, and is
qualified to do business in each state or other jurisdiction in
which the nature of its business makes such qualification
necessary, except where the failure to be so qualified would not
have a material adverse effect on its ability to perform its
obligations under this Letter Agreement or each other Basic
Document to which the Lessee is a party. The Lessee's chief
executive office is located at 300 Madison Avenue, Morristown,
New Jersey 07960.
(b) Corporate Authority. The Lessee has the corporate
power and authority to execute and perform this Letter Agreement<PAGE>
6
and the Fuel Lease and to lease the Nuclear Material thereunder.
The execution and delivery of this Letter Agreement and the Fuel
Lease and the lease of the Nuclear Material thereunder will not
have a material adverse effect on the financial condition,
results of operations, business, properties or operations of the
Lessee.
(c) Compliance with Other Instruments, etc. The
execution, delivery and performance by the Lessee of this Letter
Agreement and each Basic Document to which the Lessee is a party,
and other related instruments, documents and agreements, and the
compliance by the Lessee with the terms hereof and thereof,
(i) have been duly and legally authorized by appropriate
corporate action taken by the Lessee, (i) are not in
contravention of, and will not result in a violation or breach
of, any of the terms of the Lessee's articles of incorporation,
its by-laws or of any provisions relating to shares of the
capital stock of the Lessee and (i) will not violate or
constitute a breach of any provision of (x) any applicable law,
order, rule or regulation, rule or regulation of any governmental
authority (except in those cases where non-compliance with any
such law, order, rule or regulation could not reasonably be
expected to have a material adverse effect on the financial
condition, results of operations, business, properties or
operations of the Lessee or its ability to perform its
obligations hereunder or under each Basic Document) or (y) any
indenture, agreement or other instrument to which the Lessee is
party, or by or under which the Lessee or any of the Lessee's
property is bound, or be in conflict with, result in breach of,
or constitute (with due notice and/or lapse of time) a default
under any such indenture, agreement or instrument, or result in
the creation or imposition of any Lien upon any of the Lessee's
property or assets or any Nuclear Material.
(d) Legal Obligations. This Letter Agreement and the
Fuel Lease have been executed by a duly authorized officer of the
Lessee, and this Letter Agreement and the Fuel Lease constitute,
and each Leasing Record, when executed by a duly authorized
officer of the Lessee and delivered to the Company, will
constitute, the legal, valid and binding obligations of the
Lessee, enforceable against the Lessee in accordance with their
respective terms, except as the enforceability thereof may be
limited by the Atomic Energy Act and the rules, regulations or
orders issued pursuant thereto, or by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights
in general, and except as the availability of the remedy of
specific performance is subject to general principles of equity
(regardless of whether such remedy is sought in a proceeding in
equity or at law).
(e) Governmental Consents. Neither the execution and
delivery of this Letter Agreement, the Fuel Lease or any Leasing<PAGE>
7
Record by the Lessee, nor the performance by the Lessee of all of
its obligations hereunder or thereunder, requires the consent or
approval of, the giving of notice to, or the registration, filing
or recording with, or the taking of any other action in respect
of, any Federal, state, local or foreign government or
governmental authority or agency or any other person except for
the order of the Securities and Exchange Commission (the "SEC"),
dated _________, 1995, the order of the PaPUC, dated ________,
1995, and the filing of any statement or other instrument
pursuant to Section 10(b) of the Fuel Lease, and except for the
filing of certificates by the Lessee with the SEC pursuant to SEC
Rule 24 under the Public Utility Holding Company Act to report on
the transactions authorized by such SEC order, the filing of
which is not necessary to the execution or delivery of this
Letter Agreement, the Fuel Lease or any Leasing Record by the
Lessee or for the performance by the Lessee of any of its
obligations hereunder or thereunder, and the failure to file any
of which will not affect the validity or enforceability of any of
this Letter Agreement, the Fuel Lease or any Leasing Record.
(f) Consents and Permits. The Lessee possesses all
material licenses, permits, franchises and certificates which
are necessary or appropriate to own or operate its material
properties and assets and to conduct its business as now
conducted.
(g) Litigation. There is no litigation or other
proceeding now pending or, to the best of the Lessee's knowledge,
threatened, against or affecting the Lessee, before any court,
arbitrator or administrative or governmental agency (i) which
would adversely affect or impair the title of the Company to the
Nuclear Material, (i) which questions the validity or
enforceability of this Letter Agreement, the Fuel Lease, the
Assigned Agreements or any other Basic Document to which the
Lessee is a party or any action taken or to be taken by the
Lessee pursuant to or in connection with this Letter Agreement,
or (i) except as disclosed in the Lessee's Annual Report on Form
10-K for the year ended December 31, 1994 and Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995, copies of which
have previously been delivered to the Administrative Agent and
the Banks, which, if decided adversely to the Lessee, would
materially adversely affect the condition, financial or
otherwise, of the Lessee.
(h) Taxes. The Lessee has filed or caused to be filed
all tax returns which are required to be filed, and has paid or
caused to be paid all taxes as shown on said returns and all
assessments received by it to the extent that such taxes and
assessments have become due, except for taxes and assessments
which are being contested in good faith and by appropriate
proceedings and as to which it has provided reserves which are<PAGE>
8
adequate in accordance with generally accepted accounting
principles.
(i) Reaffirmation and Restatement of Representations
and Warranties. The Lessee repeats and reaffirms as of the date
hereof for the benefit of the Administrative Agent and each Bank
the representations and warranties made by the Lessee in the Fuel
Lease as though set forth in full herein with the same effect as
though such representations and warranties had been made on and
as of the date hereof. In addition, the Lessee represents and
warrants that as of the date hereof (i) the Lessee is in
compliance with all the terms and provisions set forth in the
Fuel Lease on its part to be observed or performed, (i) no
Terminating Event has occurred and no event has occurred which,
with the lapse of time or the giving of notice, or both, would
constitute such a Terminating Event, and (i) no Lease Event of
Default has occurred and is continuing and no event has occurred
and is continuing on such date which, with the lapse of time or
the giving of notice, or both, would constitute a Lease Event of
Default.
(j) First Perfected Security Interest. Except for
Permitted Liens, upon the execution and delivery of this Letter
Agreement and the Security Agreement and the due filing of the
Uniform Commercial Code financing statements required to be
executed and filed from time to time, the Secured Parties will
have a legal, valid and enforceable first priority security
interest (i) in the rights, titles and interests of the Company
in and to the Fuel Lease and (i) in and to the other Collateral.
Such security interest will constitute a perfected security
interest in the Collateral consisting of Nuclear Material
Contracts and the Collateral consisting of Nuclear Material
located in the States of Illinois, New Jersey and Pennsylvania,
except for any such Collateral which consists of cash,
instruments (as defined in the New York Uniform Commercial Code)
and other items in which a security interest may only be
perfected by possession, enforceable against all third parties as
security for the Secured Obligations.
(k) No Material Adverse Change. Since June 30, 1995,
there has been no material adverse change in the financial
condition, results of operations, business, properties or
operations of the Lessee or in its ability to perform its
obligations under the Basic Documents.
(l) No Defaults. The Lessee is not in default under
any bond, debenture, note or any other evidence of Obligations
for Borrowed Money or Deferred Purchase Price or any mortgage,
deed of trust, indenture, loan agreement or other agreement
relating thereto, where the amount thereof is in excess of
$20,000,000.<PAGE>
9
(m) Pension Plans. No accumulated funding deficiency
(as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, exists with respect to any plan (other
than a multiemployer plan). No liability to the Pension Benefit
Guaranty Corporation has been, or is expected by the Lessee to
be, incurred with respect to any plan (other than a multiemployer
plan) by the Lessee which is or would be materially adverse to
the Lessee. The Lessee has not incurred and presently does not
expect to incur any withdrawal liability under Title IV of ERISA
with respect to any multiemployer plan which is or would be
materially adverse to the Lessee. Neither the execution and
delivery by the Company of the Credit Agreement and the other
Basic Documents, and the issuance of the Commercial Paper, nor
the execution and delivery by the Lessee of this Letter
Agreement, the Trust Agreement and each other Basic Document to
which the Lessee is a party, will involve any transaction which
is subject to the prohibitions of Section 406 of ERISA or in
connection with which a tax could be imposed pursuant to
Section 4975. As used herein, the term "plan" shall mean an
"employee pension benefit plan" (as defined in Section 3 of
ERISA) which is and has been established or maintained, or to
which contributions are or have been made, by the Lessee or by
any trade or business, whether or not incorporated, which,
together with the Lessee is under common control as described in
Section 414(b) or (c) of the Code, and the term "multiemployer
plan" shall mean any plan which is a "multiemployer plan" (as
such term is defined in Section 4001(a)(3) of ERISA).
(n) Financial Statements. The audited balance sheet
of the Lessee as of December 31, 1994, and the related statements
of income and cash flows (including the notes thereto) of the
Lessee for the year then ended, copies of which have been
delivered to the Company, the Administrative Agent and the Banks,
and all other annual or quarterly financial statements including,
without limitation, the quarterly statement dated as of June 30,
1995 so delivered fairly present the financial condition of the
Lessee on the dates for which, and the results of its operations
for the periods for which, the same have been furnished and have
been prepared in accordance with generally accepted accounting
principles consistently applied.
(o) Nuclear Material. The Nuclear Material is free
and clear of any Lien in favor of any Person claiming by, through
or under the Lessee or any Affiliate thereof, other than
Permitted Liens. No default or event which with the giving of
notice or lapse of time would constitute a default has occurred
and is continuing under any Nuclear Material Contract.
(p) Disclosure. Neither the representations in this
Letter Agreement, or in any other document, certificate or
statement furnished in writing to the Administrative Agent or any
Bank by or on behalf of the Lessee in connection with the<PAGE>
10
transactions contemplated hereby, nor the information disclosed
in the Lessee's Annual Report on Form 10-K for the year ended
December 31, 1994 or Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, contained as of its date, any untrue
statement of a material fact or omitted to state a material fact
necessary in order to make such representations or information
not misleading in light of the circumstances under which they
were made.
(q) Collateral Equivalence Test Met. The sum of the
aggregate Stipulated Casualty Value of the Nuclear Material
leased under the Fuel Lease and the Lessee's Percentage of the
Cash Collateral equals or exceeds the Lessee's Percentage of
Outstandings.
9. General Covenants of the Lessee.
(a) Information. The Lessee will furnish to the
Company and the Administrative Agent in sufficient copies for
each Bank:
(i) Quarterly Statements. As soon as practicable
after the end of each of the first three quarterly fiscal
periods in each fiscal year of the Lessee, and in any event
within 60 days thereafter, copies of:
(A) a balance sheet of the Lessee as at the end of
such quarter, and (B) statements of income and cash
flows of the Lessee for such quarter and for the
twelve-month period ending as of the end of such
quarter and (in the case of the second and third
quarters) for the portion of the fiscal year ending
with the end of such quarter, setting forth in each
case in comparative form the figures for the
corresponding periods in the previous fiscal year, all
in reasonable detail and certified as complete and
correct, subject to changes resulting from year-end
adjustments, by a principal financial officer of the
Lessee; provided that it is understood that the
delivery of the Lessee's Quarterly Report on Form 10-Q
shall be deemed to satisfy the requirements with
respect to such financial statements;
(ii) Annual Statements. As soon as practicable after
the end of each fiscal year of the Lessee, and in any event
within 120 days thereafter, copies of:
(A) a balance sheet of the Lessee at the end of such
fiscal year, and (B) statements of income and cash
flows of the Lessee for such year, setting forth in
each case in comparative form the figures for the
previous fiscal year, all in reasonable detail and<PAGE>
11
accompanied by an opinion thereon of independent
certified public accountants of recognized national
standing selected by the Lessee, which opinion shall
state that such financial statements have been prepared
in accordance with generally accepted accounting
principles consistently applied (except for changes in
application in which such accountants concur) and that
the examination of such accountants in connection with
such financial statements has been made in accordance
with generally accepted auditing standards; provided
that it is understood that the delivery of the Lessee's
Annual Report on Form 10-K shall be deemed to satisfy
the requirement with respect to such financial
statements;
(iii) Officer's Compliance Certificate.
Simultaneously with the financial statements referred to in
Sections 9(a)(i) and (ii), a certificate of an authorized
officer of the Lessee stating that such officer has reviewed
the relevant terms and conditions of the Fuel Lease and
other Basic Documents to which the Lessee is a party, and
has made, or caused to be made, under such officer's
supervision, a review of the transactions and financial
condition of the Lessee from the beginning of the accounting
period covered by the income statements being delivered
therewith to the date of the certificate, and that the
Lessee has observed or performed all of its covenants and
other agreements, and satisfied every condition, contained
in this Letter Agreement, the Fuel Lease and any other Basic
Document to which the Lessee is a party, and no Terminating
Event, Lessee Default, Lessee Event of Default, Lease Event
of Default or default or event of default under any such
Basic Document has occurred and is continuing and no event
has occurred and is continuing which, with the lapse of time
or the giving of notice, or both, would constitute a
Terminating Event, Lessee Default, Lessee Event of Default,
Lease Event of Default or a default or event of default
under any such Basic Document or, if such condition or event
has occurred and is continuing, a statement as to the nature
thereof and the action which is proposed to be taken with
respect thereto;
(iv) Auditor's Compliance Certificate. Simultaneously
with the financial statements referred to in Section
9(a)(ii), a certificate of the independent public
accountants who audited such statements stating that such
accountants have reviewed the relevant terms and conditions
of the Fuel Lease and other Basic Agreements to which the
Lessee is a party, and that, in making the examination
necessary for the audit of such statements, they have
obtained no knowledge of any condition or event which
constitutes or which with notice or lapse of time or both<PAGE>
12
would constitute a Terminating Event, Lessee Default, Lessee
Event of Default, Lease Event of Default or default or event
of default under any such Basic Document, or if such
accountants shall have obtained knowledge of any such
condition or event, specifying in such certificate each such
condition or event of which they have knowledge and the
nature and status thereof;
(v) Notices Required under the Basic Documents.
Immediately upon delivery to the Lessee or the Company, all
notices, consents, documents, certificates or instruments of
any kind relating to the Lessee required pursuant to the
Fuel Lease;
(vi) Defaults. (A) Promptly upon becoming aware of the
occurrence thereof, notice of any Terminating Event, Lessee
Default, Lessee Event of Default, Lease Event of Default or
any event which, with the lapse of time or the giving of
notice, or both, would constitute a Terminating Event or a
Lease Event of Default, and within 10 days of becoming aware
of the occurrence thereof, notice of any other material
event affecting the Lessee's obligations under any Basic
Document or any Nuclear Material Contract (except to the
extent such event has previously been disclosed in the
Lessee's SEC reports delivered pursuant to clause (viii)
below);
(vii) Notice of Claimed Default. Immediately upon
becoming aware that the holder or holders of any evidence of
Obligations for Borrowed Money or Deferred Purchase Price or
other security of the Lessee or any subsidiary exceeding
$20,000,000 in the aggregate have given notice (or taken any
other action) with respect to a claimed default, breach or
event of default, a notice describing the notice given (or
action taken) and the nature of the claimed default, breach,
or event of default;
(viii) SEC and Other Reports. Promptly after filing
thereof, copies of all regular and periodic reports and
registration statements which the Lessee may file with the
Securities and Exchange Commission ("SEC") or any
governmental agency substituted therefor and, promptly upon
written request therefor, copies of the financial statements
which the Lessee may file annually with any state regulatory
agency or agencies; and
(ix) Requested Information. With reasonable
promptness, such other data and information, including,
without limitation, information regarding Nuclear Material
or any Nuclear Material Contract, with respect to the
Lessee as from time to time may be reasonably requested by
the Administrative Agent or any Bank.<PAGE>
13
(b) Notice of Litigation. Immediately upon the Lessee
becoming aware thereof, written notice of (i) any litigation or
proceedings which would be required to be disclosed as an
exception to the representations and warranties contained herein
or in the Fuel Lease in order that such representations and
warranties would be true and correct on a continuing basis; and
(i) any dispute between the Lessee and any governmental authority
or other party relating to any part of the transactions
contemplated by this Letter Agreement or any of the other Basic
Documents to which the Lessee is a party which would have a
material adverse effect on the ability of the Lessee to carry out
its obligations hereunder or under any other Basic Document to
which the Lessee is a party; provided, however, that the notice
requirement in this Section 9(b) shall be satisfied if the Lessee
furnishes the Company and the Administrative Agent in sufficient
copies for each Bank a Current Report on Form 8-K regarding the
event requiring notice by the time that the Current Report is
required to be filed with the Securities and Exchange Commission.
(c) General Obligations. Subject to the last sentence of
this Section 9(c), the Lessee will:
(i) duly comply with all laws, rules, orders,
regulations or other valid requirements
(including, without limitation, any of the
foregoing which are applicable to Nuclear Material
or the operation of the Generating Facility) of
any governmental authority necessary to the
conduct of its business or to its properties or
assets, noncompliance with which could reasonably
be expected to have a material adverse effect upon
the transactions contemplated by this Letter
Agreement or any other Basic Document, or upon the
financial condition, results of operations,
business, properties or operations of the Lessee,
or the ability of the Lessee to carry out its
obligations under any Basic Document or this
Letter Agreement);
(ii) continue to engage principally in the electric
utility business;
(iii) obtain, maintain and keep in full force and effect
all consents, permits, licenses and approvals, the
absence of which would have a material adverse
effect upon the transactions contemplated by this
Letter Agreement or any other Basic Document to
which the Lessee is a party, or upon the financial
condition, results of operations, business,
properties or operations of the Lessee, or the
ability of the Lessee to carry out its obligations<PAGE>
14
under this Letter Agreement or any other Basic
Document to which the Lessee is a party;
(iv) maintain its material operating properties used or
useful in its business in good repair, working
order and condition consistent with prudent
utility practice; provided, however, that the
Lessee shall not be prevented from discontinuing
the operation and maintenance of any of its
properties if it shall determine that the
continued operation and maintenance of such
properties is no longer necessary, desirable or
permissible;
(v) pay when due all fees, taxes, assessments and
governmental charges or levies imposed upon it or
upon its income or profits or upon any property
belonging to it, and maintain appropriate reserves
for the accrual of the same in accordance with
generally accepted accounting principles;
(vi) except as permitted by clause (vii) below, at all
times maintain its corporate existence,
privileges, franchises and rights to carry on
business, and duly procure all renewals and
extensions thereof, if and when any shall be
necessary;
(vii) not consolidate or merge with, or sell or
otherwise dispose of all or substantially all of
its properties and assets to any Person unless
(i) the surviving or resulting entity is the
Lessee hereunder, (i) immediately after giving
effect thereto no Credit Agreement Event of
Default, Credit Agreement Default, Lease Event of
Default, Lessee Default, Lessee Event of Default
or event which with the giving of notice or
passage of time would constitute a Lease Event of
Default shall have occurred and be continuing, and
(i) the senior unsecured debt of the surviving or
resulting Lessee shall be rated at least
investment grade by S&P or Moody's;
(viii) perform and comply with each of the material
provisions of each material indenture, credit
agreement, contract or other agreement by which
the Lessee is bound, non-performance or non-
compliance with which would have a material
adverse effect upon its business or credit or in
any way affect its ability to perform its
obligations hereunder except material contracts or
other agreements being contested in good faith;<PAGE>
15
(ix) preserve and maintain its corporate existence in
the jurisdiction of its incorporation, and qualify
and remain qualified as a foreign corporation in
good standing in each jurisdiction in which such
qualification is necessary or desirable in view of
its business and operations or the ownership of
its properties, except where the failure to be so
qualified would not materially adversely affect
its financial condition, operations, properties or
business, and preserve its material rights,
franchises and privileges to conduct its business
substantially as conducted on the date hereof;
(x) maintain insurance in effect at all times in such
amounts as are available to the Lessee and
covering such risks as is usually carried by
companies of a similar size, engaged in similar
businesses and owning similar properties
(including, without limitation, the operation and
ownership of nuclear generating facilities) in the
same general geographical area in which the Lessee
operates, either with responsible and reputable
insurance companies or associations, or, in whole
or in part, by establishing reserves of one or
more insurance funds, either alone or with other
corporations or associations;
(xi) at any reasonable time and from time to time,
permit the Administrative Agent or any Bank or any
agents or representatives thereof to examine and
make copies of and abstracts from the records and
books of account of, and visit the properties of,
the Lessee and discuss the affairs, finances and
accounts of the Lessee with any of its officers or
directors;
(xii) not sell, transfer, lease, assign or otherwise
convey or dispose of more than 25% of its assets
(whether now owned or hereafter acquired), in any
single or series of transactions, whether or not
related, except for dispositions of current assets
in the ordinary course of business as presently
conducted, if immediately prior to such sale,
transfer, lease, assignment, conveyance or
disposition or as a result of such sale, transfer,
lease, assignment, conveyance or disposition, the
senior unsecured debt of the Lessee shall not be
rated at least investment grade by S&P or Moody's.
(xiii) comply with the Letter Agreement and such other
Basic Documents to which the Lessee is a party in<PAGE>
16
accordance with the respective terms and
conditions set forth herein and therein; and
(xiv) except for Permitted Liens, permit the creation of
any Liens on the Collateral.
Notwithstanding the foregoing provisions of this Section 9(c),
the Lessee may contest by appropriate proceedings conducted in
good faith and due diligence, the amount, validity or
application, in whole or in part of any fee, tax, assessment or
government charge or levy, or any legal requirement, provided
that the Lessee shall have set aside on its books adequate
reserves, if required in accordance with generally accepted
accounting principles with respect thereto and shall furnish such
security, if any, as may be required in the proceeding.
10. GPU Events. It shall be a default hereunder if
General Public Utilities Corporation (a) fails to maintain at all
times beneficial ownership of at least 75% of all outstanding
shares of common stock of each of the Lessee, Met-Ed and PE; or
(b) pledges, grants options on, create any charge on or security
interest in, or otherwise subjects to any charge or encumbrance,
any of the common stock of the Lessee, Met-Ed or PE unless the
obligations hereunder are secured ratably and with equal
priority, in form and substance reasonably satisfactory to the
Majority Banks.
11. Credit Agreement and Notes. The Lessee hereby
acknowledges receipt of executed counterparts of the Credit
Agreement and photostatic copies of the Notes evidencing the
Loans, and consents to all of the terms and provisions of the
Credit Agreement and the Notes.
12. Consent to Assignment; Direct Payment of Payments
Under the Fuel Lease.
(a) Consent to Assignment. The Lessee hereby
acknowledges notice of and consents to all the terms and
provisions of the Security Agreement and hereby confirms to and
agrees with the Secured Parties that all representations,
warranties, indemnities and agreements of the Lessee contained in
this Letter Agreement and each other Basic Document to which the
Lessee is a party shall inure to the benefit of, and shall be
enforceable by, the Secured Parties to the same extent as if such
Secured Parties were originally parties to or named in the such
documents and agreements. The Lessee further acknowledges and
consents to the assignment and transfer, and any future
assignments and transfers, to the Secured Parties by the Company
of the Company's right to exercise any and all of its rights,
remedies, powers and privileges (but none of its obligations,
duties or liabilities) under the Fuel Lease, the Assigned
Agreements and each other Basic Document to which the Lessee is a<PAGE>
17
party. The Lessee hereby agrees with the Secured Parties to
comply with any exercise by the Secured Parties, either directly
or through the Company, of any rights, remedies, powers or
privileges pursuant to the Security Agreement. The Secured
Parties acknowledge that neither the Security Agreement nor this
Section 12 shall in any way add to the obligations of the Lessee
(except those obligations of the Lessee to any Person, which, if
not previously so, hereby become enforceable directly by the
Secured Parties) under the Fuel Lease, the Assigned Agreements
and each other Basic Document to which the Lessee is a party.
Notwithstanding the foregoing, so long as no Lease Event of
Default shall have occurred and be continuing, the Lessee shall
have exclusive right to possession and use of the Nuclear
Material in accordance with the Fuel Lease and may use such
Nuclear Material for any lawful purpose consistent with the Fuel
Lease.
(b) Direct Payment of Payments Under the Fuel Lease. The
Lessee acknowledges that it has been directed by the Company to,
and agrees that it will, make all payments of monies due and to
become due to the Company under the Fuel Lease, the Assigned
Agreements and each other Basic Document to which the Lessee is a
party, directly to the Collateral Agent, including, without
limitation, Basic Rent, Additional Rent, the purchase price of
Nuclear Material pursuant to Section 8(c), 8(d), 8(e) and 8(g) of
the Fuel Lease, payments pursuant to Sections 9(e), 14, 17 and 18
of the Fuel Lease in the manner and to the accounts of the
Secured Parties as specified in Section 3.03 of the Credit
Agreement.
13. Severability. Any provision of this Letter Agreement
which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability, without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
To the extent permitted by applicable law, the Lessee hereby
waives any provision of law which renders any provision hereof
prohibited or unenforceable in any respect.
14. Indemnification. The Lessee shall pay and indemnify
and hold harmless the Administrative Agent and each Bank, and
their respective officers, directors, incorporators,
shareholders, partners, employees, agents and servants from and
against any and all liabilities (other than liabilities arising
out of the gross negligence or willful misconduct of such
Person), taxes, (excluding, however, taxes measured solely by the
net income of any Person indemnified or intended to be
indemnified pursuant to this Section 14, except as otherwise
provided in Section 14 hereof), losses, obligations, claims,
damages, penalties, causes of action, suits, costs and expenses<PAGE>
18
(including, without limitation, reasonable attorneys' and
accountants' fees and expenses) and judgments of any nature
arising from or in any way relating to any and all of the
following during the term of the Fuel Lease and thereafter:
(a) any injury to or disease, sickness or death of Persons, or
loss of or damage to property, occurring through or resulting
from any nuclear incident (as that term is defined in the Atomic
Energy Act, 42 U.S.C. Paragraph 2011 et seq.) involving or
connected in any way with the Nuclear Material or any portion
thereof, (a) the acquisition, ownership (including strict
liability of an owner or liability without fault), possession,
disposition, sale, use, nonuse, misuse, leasing, fabrication,
design, cycling, recycling, transportation, containerization,
cooling, processing, reprocessing, storing, condition,
management, operation, construction, maintenance, repair or
rebuilding of the Nuclear Material or any portion thereof or
resulting from the condition of adjoining and underlying land,
buildings, streets or ways, (a) any use, nonuse or condition of,
or any other matter of circumstance relating to, the Generating
Facility, any other property associated therewith or any
adjoining and underlying land, buildings, streets and ways,
(a) any violation or default, or alleged violation or default, of
the Fuel Lease or this Letter Agreement by or on behalf of
Lessee, or of any contracts or agreements to which the Lessee is
a party or by which it is bound, or any Legal Requirements,
(a) performance of any labor or services or the furnishing of any
materials or other property in respect of the Nuclear Material or
any portion thereof, (a) any infringement or alleged infringement
of any patent, copyright, trade secret or other similar right
relating to the Nuclear Material or any portion thereof,
(a) Lessee's agreements or obligations contained in the Fuel
Lease or this Letter Agreement, (a) any claim arising out of loss
of damage to the environment, (a) any claim arising out of strict
or absolute liability in tort, or (a) the offering and sale of
Commercial Paper. The Lessee also indemnifies each indemnitee,
as aforesaid, from and against all other liabilities, taxes,
losses, obligations, claims, damages, penalties, causes of
action, suits, costs and expenses (including, without limitation,
reasonable attorneys' and accountants' fees and expenses) and
judgments of any nature which may be imposed on, incurred by, or
asserted at any time against any indemnitee in any way relating
to or arising out of the performance of this Letter Agreement,
the Fuel Lease or any other Basic Document to which Lessee is a
party, provided, except for claims of a nature contemplated by
(i) above, that the Lessee shall not be required to indemnify any
indemnitee with respect to any liability relating to or arising
out of indemnitee's gross negligence or willful misconduct and
provided, further, that the foregoing immunity shall not limit
the terms of any indemnity that the Lessee may grant separately
to any indemnitee pursuant to any separate agreement. In the
event that any action, suit or proceeding is brought against the
Company or any other Person indemnified or intended to be<PAGE>
19
indemnified pursuant to this Section 14 by reason of any such
occurrence, the Lessee shall, at the Lessee's expense, resist and
defend such action, suit or proceeding or cause the same to be
resisted and defended by counsel designated by the Lessee and
reasonably acceptable to the Person or Persons indemnified or
intended to be indemnified under this Section 14 provided there
is no conflict of interest with the Person or Persons indemnified
or intended to be indemnified under this Section 14. In the
event a conflict of interest contemplated by the proviso of the
immediately preceding sentence shall exist, then the Person or
Persons as to which such conflict exists may be defended by
counsel of its or their choice at Lessee's expense, provided
Lessee's obligation for such expense shall be limited to one firm
for all such Persons as to which such a conflict exists. The
obligations of the Lessee under this Section 14 shall survive any
termination of this Letter Agreement, the Credit Agreement, the
Fuel Lease or the Security Agreement, in whole or in part.
15. No Waiver; Amendments. Neither the Administrative
Agent, the Collateral Agent, the Banks, the Company nor the
Lessee shall, by any act, delay, omission or otherwise, be deemed
to have waived any of its rights and remedies hereunder, and no
waiver shall be valid unless in writing signed by the party or
parties sought to be bound thereby. A waiver by the
Administrative Agent, the Collateral Agent, the Banks, the
Company or the Lessee of any of their respective rights or
remedies hereunder on any one occasion shall not be construed as
a bar to any right or remedy which the Administrative Agent, the
Banks, the Company or the Lessee, as applicable, would otherwise
have had on any future occasion. No failure to exercise nor any
delay in exercise of any such right or remedy hereunder shall
preclude any other or future exercise or partial exercise of any
other right or remedy. The rights and remedies hereunder
provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies
provided by law. None of the terms or provisions of this Letter
Agreement may be waived, altered, modified or amended except by
an instrument in writing, duly executed by the party or parties
sought to be bound thereby.
16. Successors and Assigns. This Letter Agreement shall
bind the successors and assigns of the Lessee and the Company and
shall inure to the benefit of permitted successors and assigns
of either. The Letter Agreement shall not be assignable by the
Lessee or the Company, either voluntarily or by operation of law,
unless consented to by the Administrative Agent and the Majority
Banks. No permitted assignment by the Lessee or the Company
shall release the Lessee or the Company from any of its
obligations hereunder. This Letter Agreement shall inure to and
shall be binding upon the successors and assigns of the
Administrative Agent and the Banks. <PAGE>
20
17. Notices. Any notice, demand or other communication
which by any provision of this Letter Agreement is required or
provided to be given shall be deemed to have been delivered if in
writing addressed as provided below and actually delivered by
mail, courier or facsimile to the following addresses:
(a) except as otherwise requested in writing by the
Administrative Agent or any Bank, any notice, demand
or communication which by any provision of this
Letter Agreement is required or provided to be given
to the Administrative Agent or any Bank shall be
deemed to have been delivered to the Administrative
Agent or any Bank if a single copy thereof is
delivered to the Administrative Agent at its address
set forth in Section 12.01 of the Credit Agreement or
at such other address as either may have furnished
the Company and the Lessee in writing;
(b) if to the Company (with copies to the Lessee at the
address listed below), TMI-1 Fuel Corp. c/o United
States Trust Company of New York, 114 West 47th
Street, New York, New York 10036, marked for the
attention of the Corporate Trust and Agency Division,
telecopy number 212-852-1626, or at such other
address as it may have furnished in writing to the
Administrative Agent and the Lessee; or
(c) if to the Lessee, to Jersey Central Power & Light
Company, 300 Madison Avenue, Morristown, New Jersey
07960; Attention: Vice President and Comptroller;
Telecopier: (201) 455-4217, and to GPU Service
Corporation, 100 Interpace Parkway, Parsippany, New
Jersey 07054-1149, marked for the attention of the
Assistant Treasurer, Telecopier: (201) 263-6397, or
at such other address or addresses as the Lessee may
have furnished to the Administrative Agent and the
Company.
18. Governing Law. This Letter Agreement shall be
governed by, and be construed and interpreted in accordance with
the laws of the State of New York.<PAGE>
21
IN WITNESS WHEREOF, the undersigned have caused this
Letter Agreement to be executed as of the date first above
written.
JERSEY CENTRAL POWER &
LIGHT COMPANY
By
Vice President
TMI-1 FUEL CORP.
By
Title
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH,
as Administrative Agent
By
Title <PAGE>
EXHIBIT B-2(b)(ii)
K&S DRAFT
10.10.95
EXHIBIT N-2
to Credit Agreement
METROPOLITAN EDISON COMPANY
LESSEE'S LETTER AGREEMENT
Regarding
TMI-1 FUEL CORP.
Dated as of November __, 1995<PAGE>
TABLE OF CONTENTS
Section Page
1. Definitions. . . . . . . . . . . . . . . . . . . 1
2. Performance of Fuel Lease and Liens. . . . . . . 2
3. Security Interest of Collateral. . . . . . . . . 2
4. Sale of Nuclear Material and Assignment of Rights
under Nuclear Material Contracts. . . . . . 2
5. Collateral Equivalence Test; No Additional Col-
lateral or Covenants; Condemnation Statements;
Exercise of Rights of Secured Parties. . . . 3
6. Fuel Management; Quiet Enjoyment. . . . . . . . . 5
7. Insurance. . . . . . . . . . . . . . . . . . . . 5
8. Representations and Warranties. . . . . . . . . . 6
9. General Covenants of the Lessee. . . . . . . . . 10
10. GPU Events . . . . . . . . . . . . . . . . . . . 17
11. Credit Agreement and Notes. . . . . . . . . . . . 17
12. Consent to Assignment; Direct Payment of
Payments Under the Fuel Lease. . . . . . . . 17
13. Severability. . . . . . . . . . . . . . . . . . . 18
14. Indemnification. . . . . . . . . . . . . . . . . 18
15. No Waiver; Amendments. . . . . . . . . . . . . . 20
16. Successors and Assigns. . . . . . . . . . . . . . 20
17. Notices. . . . . . . . . . . . . . . . . . . . . 20
18. Governing Law . . . . . . . . . . . . . . . . . . 21<PAGE>
THIS LESSEE'S LETTER AGREEMENT (the "Letter Agreement") is
made as of November __, 1995, by and between Metropolitan Edison
Company, a Pennsylvania corporation (the "Lessee"), TMI-1 Fuel
Corp, a Delaware corporation (the "Company"), and Union Bank of
Switzerland, New York Branch, as Administrative Agent (the
"Administrative Agent"), for the Banks party to the Credit
Agreement referred to below (the "Banks").
WHEREAS, the Lessee has entered into the Amended and
Restated Nuclear Material Lease Agreement, dated as of
November __, 1995 ("Fuel Lease"), with the Company in order to
enable the Company to obtain financing for the acquisition,
processing and use of Nuclear Material in the Generating
Facility; and
WHEREAS, pursuant to the Fuel Lease, the Company has agreed
to make payments due to Manufacturers and/or to reimburse the
Lessee for payments previously made to Manufacturers with respect
to the Nuclear Material; and
WHEREAS, in order to finance the cost of such Nuclear
Material, the Company proposes to (i) sell its Commercial Paper
which shall be entitled to the benefit of a letter of credit to
be issued by the Issuing Bank, and (ii) obtain the Commitment of
the Issuing Bank to issue its letter of credit and of each Bank
to make Loans from time to time as hereinafter provided; and
WHEREAS, the Lessee has agreed to make payments under the
Fuel Lease sufficient to enable the Company to meet its
obligations under the Company's financing arrangements, including
the Company's obligations under the Credit Agreement, dated as of
November __, 1995, among the Company, the Banks, the Issuing Bank
and the Administrative Agent (the "Credit Agreement");
NOW, THEREFORE, in consideration of the premises and mutual
agreements herein contained and other good and valuable
consideration, so long as any of the Loans, the Letter of Credit
or the Commercial Paper shall remain outstanding, or the
Commitments shall be continuing, notwithstanding any provision of
the Fuel Lease or any other agreement of the Lessee to the
contrary, the Lessee, the Company, the Administrative Agent and
the Banks agree that:
1. Definitions. Unless the context otherwise specifies or
requires, each term defined in the Credit Agreement or Appendix A
to the Fuel Lease, shall, when used in this Letter Agreement,
have the meaning indicated in the Credit Agreement or Appendix A
or set forth in the paragraph indicated therein.
2. Performance of Fuel Lease and Liens. The Lessee will
perform and comply with all the terms of the Fuel Lease to be
performed or complied with by it and will not omit to take an
action the omission of which would cause a Lease Event of
Default. The Lessee acknowledges that, except as otherwise
provided in the Fuel Lease, its obligations as set forth under<PAGE>
2
the Fuel Lease are absolute and unconditional. The Lessee will
not directly or indirectly create or permit to be created or to
remain, and will promptly take such action as may be necessary to
discharge, any Lien on any Collateral except Permitted Liens.
3. Security Interest of Collateral. The Lessee represents
that no other financing statement (other that those naming the
Secured Parties as a secured party) covering all or any part of
the Collateral (as defined in the Security Agreement) is on file
in any public office. The Lessee shall make, or shall cause to
be made, all filings and recordings, and shall take, or cause to
be taken, such other actions, including filing all continuation
statements, necessary to establish, preserve and perfect the
Secured Parties' lien on and security interest in, the Collateral
as a legal, valid and enforceable first priority lien and
security interest, or purchase money security interest, as the
case may be, therein, subject only to the existence or priority
of any Permitted Lien, and the Lessee represents that all such
filings, recordings and other actions have been duly made. The
Lessee shall deliver to the Administrative Agent evidence of the
due filings of any continuation statements to be delivered to the
Administrative Agent within the time period specified in
Section 8.05 of the Credit Agreement. In no event will the
Lessee permit the Nuclear Material to enter any jurisdiction in
which all necessary action has not been taken to establish,
maintain and protect the Secured Parties' first priority
perfected lien and security interest in the Nuclear Material
under the Security Agreement, subject only to Permitted Liens.
4. Sale of Nuclear Material and Assignment of Rights under
Nuclear Material Contracts.
(a) In the event that the Lessee desires the Company,
on behalf of the Lessee, to purchase Nuclear Material or to have
services performed on such Nuclear Material pursuant to any
Nuclear Material Contract, the Lessee shall provide the Company
with an Assignment Agreement and a Manufacturer's Consent, both
substantially in the form of Exhibit D to the Fuel Lease, with
such changes to Exhibit 2 to Exhibit D as the Secured Parties may
consent to in writing, which consent shall not be unreasonably
withheld, with respect to such Nuclear Material Contract on or
before the date on which the Company is to purchase such Nuclear
Material or to have such services performed pursuant thereto.
Notwithstanding the foregoing, the Lessee shall not be required
to have obtained a Manufacturer's Consent in any instance where
the Manufacturer's obligations under the applicable Nuclear
Material Contract have been fully discharged and performed, and
the Manufacturer's warranties with respect to such Nuclear
Material Contract have expired, and the Lessee has delivered to
the Company and the Collateral Agent a certificate to such
effect.
(b) The Lessee at its expense will perform and comply
with all the terms and provisions of each Assigned Agreement to
be performed or complied with by it, will maintain each Assigned<PAGE>
3
Agreement in full force and effect, will enforce each of the
Assigned Agreements in accordance with their respective terms,
and will take all such action to that end as from time to time
may reasonably be requested by the Majority Banks.
(c) The Lessee shall not enter into or consent to or
permit any cancellation, termination, amendment, supplement or
modification of or waiver with respect to any Assigned Agreement
without the prior written consent of the Majority Banks.
(d) The Lessee will from time to time, upon request of
the Administrative Agent, furnish to the Administrative Agent
such information concerning the Nuclear Material or any Assigned
Agreement, as any Bank may reasonably request.
(e) The Lessee will not change its principal place of
business or chief executive offices from the location specified
in paragraph 8(a) hereof or remove therefrom its records
concerning the Assigned Agreements unless it gives the
Administrative Agent at least 30 days' prior written notice
thereof.
5. Collateral Equivalence Test; No Additional Collateral
or Covenants; Condemnation Statements; Exercise of Rights of
Secured Parties.
(a) The Lessee shall not permit the sum of aggregate
Stipulated Casualty Value of the Nuclear Material leased under
the Fuel Lease and the Lessee's Percentage of Cash Collateral to
be less than the Lessee's Percentage Outstandings.
(b) The Lessee shall not provide to any Person (other
than the Banks), in order to induce such Person to extend credit
to the Company, any collateral or any guarantee or other
assurance against loss or non-payment, nor shall the Lessee
consent to the provision thereof by the Company.
(c) The Lessee shall not agree to any affirmative or
negative covenant with respect to the condition, financial or
otherwise, of the Lessee with any Person in order to induce such
Person to extend credit to the Company.
(d) The Lessee shall not sell, assign, convey, pledge
or otherwise dispose of or encumber in any manner any interest it
may have in the Trust or any rights it may have under the Trust
Agreement. The Lessee shall not direct the Owner Trustee to
liquidate, dissolve, merge or consolidate the Company except if
such transaction is consented to in writing by the Banks. The
Lessee shall not direct the Owner Trustee to take any action
under the Trust Agreement which is inconsistent with the duties
imposed upon the Company by the Basic Documents and any other
agreements, documents, instruments and articles executed and
delivered, and to be executed and delivered, by the Owner Trustee
in connection therewith.<PAGE>
4
(e) The Nuclear Material leased under the Fuel Lease
shall constitute the Lessee's entire ownership interest in the
items used or to be used by it as nuclear fuel in the Generating
Facility. The Lessee agrees that 50% of the Lessor's ownership
interest in any Nuclear Material which is subject to the Fuel
Lease will be leased to the Lessee. The Lessee further agrees
not to take any action under the terms of the Fuel Lease,
including, but not limited to, the delivery of any Leasing
Record, which would result in 50% of the Lessor's ownership
interest in any such Nuclear Material not being so leased.
(f) As provided in the Security Agreement, (i) the
Secured Parties may, on and after the occurrence of a Credit
Agreement Default, Credit Agreement Event of Default, Lessee
Default or Lessee Event of Default, pursuant to Section 10 of the
Security Agreement, exercise any and all of the Company's rights
under the Fuel Lease, the Assigned Agreements and each other
Basic Document to which the Lessee is a party, and (i) if a Lease
Event of Default occurs and is continuing, the Secured Parties
may, pursuant to Section 10 of the Security Agreement, enforce
and exercise any and all of the Company's rights under the Fuel
Lease, the Assigned Agreements and each other Basic Document to
which the Lessee is a party, or the rights and remedies granted
to the Secured Parties under the Security Agreement at their
election and in their sole discretion, and, in the event that any
Secured Parties are permitted to exercise such rights pursuant to
Section 10 of the Security Agreement, the Lessee agrees that the
Collateral Agent may do so either in concert with or in place of
the Company, and the Lessee shall assist in, comply with and
perform in accordance with all rights or remedies so enforced or
exercised by the Collateral Agent for the ratable benefit of the
Secured Parties.
6. Fuel Management; Quiet Enjoyment. The occurrence of a
Credit Agreement Default, a Credit Agreement Event of Default,
Lease Event of Default, Lessee Default, Lessee Event of Default
or an event or condition which would, with the lapse of time or
the giving of notice or both, become a Lease Event of Default,
shall not affect the Lessee's sole obligation to engage in Fuel
Management; provided that, upon the occurrence of a Credit
Agreement Event of Default, Lessee Event of Default or Lease
Event of Default, the Majority Secured Parties may, at their
option, by written notice to the Lessee, elect to revoke such
power and authority, in which case the Person from time to time
designated by the Majority Secured Parties may (but shall not be
obligated to), to the extent that the Majority Secured Parties
desire and to the extent permitted by law, engage in Fuel
Management and/or remove all or any part of the responsibility
for Fuel Management from the Lessee; provided, however, that,
subject to the right of the Secured Parties to exercise any or
all rights granted to the Secured Parties under the Security
Agreement, the rights granted to the Secured Parties under this
Section 6 shall not be construed to include the right to direct,
whether directly or indirectly, the operation of the Generating
Facility. In the event the Majority Secured Parties, in<PAGE>
5
accordance with the preceding sentence, shall revoke the Lessee's
power and authority to engage in Fuel Management, all rights
conferred by the Company to the Lessee pursuant to Section 3 of
the Fuel Lease shall be deemed to be automatically reassigned to
the Company and the Lessee shall execute such documents and
instruments as the Secured Parties shall request to further
confirm such assignment.
7. Insurance. Each year, the Lessee will furnish the
Administrative Agent and each Bank a detailed statement
certified by an officer of Lessee setting forth (i) the location
of all Nuclear Material and (i) the insurance policies and
indemnification agreements provided pursuant to Sections 14 and
17 of the Fuel Lease and certifying that such insurance policies
and indemnification agreements comply with the requirements of
the Fuel Lease. In addition, the Lessee shall promptly furnish
at any time to the Administrative Agent and any Bank such
information as any such Bank shall reasonably request concerning
location of Nuclear Material, insurance policies and
indemnification agreements and Manufacturers or other third
parties with whom arrangements exist with respect to
transportation, storage or processing of Nuclear Material.
8. Representations and Warranties. The Lessee hereby
represents and warrants to the Company, the Administrative Agent
and the Banks that as of the date hereof:
(a) Organization and Standing. The Lessee is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Pennsylvania, and is
qualified to do business in each state or other jurisdiction in
which the nature of its business makes such qualification
necessary, except where the failure to be so qualified would not
have a material adverse effect on its ability to perform its
obligations under this Letter Agreement or each other Basic
Document to which the Lessee is a party. The Lessee's chief
executive office is located at 2800 Pottsville Pike, Reading,
Pennsylvania 19640-0000.
(b) Corporate Authority. The Lessee has the corporate
power and authority to execute and perform this Letter Agreement
and the Fuel Lease and to lease the Nuclear Material thereunder.
The execution and delivery of this Letter Agreement and the Fuel
Lease and the lease of the Nuclear Material thereunder will not
have a material adverse effect on the financial condition,
results of operations, business, properties or operations of the
Lessee.
(c) Compliance with Other Instruments, etc. The
execution, delivery and performance by the Lessee of this Letter
Agreement and each Basic Document to which the Lessee is a party,
and other related instruments, documents and agreements, and the
compliance by the Lessee with the terms hereof and thereof,
(i) have been duly and legally authorized by appropriate
corporate action taken by the Lessee, (i) are not in<PAGE>
6
contravention of, and will not result in a violation or breach
of, any of the terms of the Lessee's articles of incorporation,
its by-laws or of any provisions relating to shares of the
capital stock of the Lessee and (i) will not violate or
constitute a breach of any provision of (x) any applicable law,
order, rule or regulation, rule or regulation of any governmental
authority (except in those cases where non-compliance with any
such law, order, rule or regulation could not reasonably be
expected to have a material adverse effect on the financial
condition, results of operations, business, properties or
operations of the Lessee or its ability to perform its
obligations hereunder or under each Basic Document) or (y) any
indenture, agreement or other instrument to which the Lessee is
party, or by or under which the Lessee or any of the Lessee's
property is bound, or be in conflict with, result in breach of,
or constitute (with due notice and/or lapse of time) a default
under any such indenture, agreement or instrument, or result in
the creation or imposition of any Lien upon any of the Lessee's
property or assets or any Nuclear Material.
(d) Legal Obligations. This Letter Agreement and the
Fuel Lease have been executed by a duly authorized officer of the
Lessee, and this Letter Agreement and the Fuel Lease constitute,
and each Leasing Record, when executed by a duly authorized
officer of the Lessee and delivered to the Company, will
constitute, the legal, valid and binding obligations of the
Lessee, enforceable against the Lessee in accordance with their
respective terms, except as the enforceability thereof may be
limited by the Atomic Energy Act and the rules, regulations or
orders issued pursuant thereto, or by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights
in general, and except as the availability of the remedy of
specific performance is subject to general principles of equity
(regardless of whether such remedy is sought in a proceeding in
equity or at law).
(e) Governmental Consents. Neither the execution and
delivery of this Letter Agreement, the Fuel Lease or any Leasing
Record by the Lessee, nor the performance by the Lessee of all of
its obligations hereunder or thereunder, requires the consent or
approval of, the giving of notice to, or the registration, filing
or recording with, or the taking of any other action in respect
of, any Federal, state, local or foreign government or
governmental authority or agency or any other person except for
the order of the Securities and Exchange Commission (the "SEC"),
dated _________, 1995, the order of the PaPUC, dated ________,
1995, and the filing of any statement or other instrument
pursuant to Section 10(b) of the Fuel Lease, and except for the
filing of certificates by the Lessee with the SEC pursuant to SEC
Rule 24 under the Public Utility Holding Company Act to report on
the transactions authorized by such SEC order, the filing of
which is not necessary to the execution or delivery of this
Letter Agreement, the Fuel Lease or any Leasing Record by the
Lessee or for the performance by the Lessee of any of its
obligations hereunder or thereunder, and the failure to file any<PAGE>
7
of which will not affect the validity or enforceability of any of
this Letter Agreement, the Fuel Lease or any Leasing Record.
(f) Consents and Permits. The Lessee possesses all
material licenses, permits, franchises and certificates which
are necessary or appropriate to own or operate its material
properties and assets andto conduct its business asnow conducted.
(g) Litigation. There is no litigation or other
proceeding now pending or, to the best of the Lessee's knowledge,
threatened, against or affecting the Lessee, before any court,
arbitrator or administrative or governmental agency (i) which
would adversely affect or impair the title of the Company to the
Nuclear Material, (i) which questions the validity or
enforceability of this Letter Agreement, the Fuel Lease, the
Assigned Agreements or any other Basic Document to which the
Lessee is a party or any action taken or to be taken by the
Lessee pursuant to or in connection with this Letter Agreement,
or (i) except as disclosed in the Lessee's Annual Report on Form
10-K for the year ended December 31, 1994 and Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995, copies of which
have previously been delivered to the Administrative Agent and
the Banks, which, if decided adversely to the Lessee, would
materially adversely affect the condition, financial or
otherwise, of the Lessee.
(h) Taxes. The Lessee has filed or caused to be filed
all tax returns which are required to be filed, and has paid or
caused to be paid all taxes as shown on said returns and all
assessments received by it to the extent that such taxes and
assessments have become due, except for taxes and assessments
which are being contested in good faith and by appropriate
proceedings and as to which it has provided reserves which are
adequate in accordance with generally accepted accounting
principles.
(i) Reaffirmation and Restatement of Representations
and Warranties. The Lessee repeats and reaffirms as of the date
hereof for the benefit of the Administrative Agent and each Bank
the representations and warranties made by the Lessee in the Fuel
Lease as though set forth in full herein with the same effect as
though such representations and warranties had been made on and
as of the date hereof. In addition, the Lessee represents and
warrants that as of the date hereof (i) the Lessee is in
compliance with all the terms and provisions set forth in the
Fuel Lease on its part to be observed or performed, (i) no
Terminating Event has occurred and no event has occurred which,
with the lapse of time or the giving of notice, or both, would
constitute such a Terminating Event, and (i) no Lease Event of
Default has occurred and is continuing and no event has occurred
and is continuing on such date which, with the lapse of time or
the giving of notice, or both, would constitute a Lease Event of
Default.<PAGE>
8
(j) First Perfected Security Interest. Except for
Permitted Liens, upon the execution and delivery of this Letter
Agreement and the Security Agreement and the due filing of the
Uniform Commercial Code financing statements required to be
executed and filed from time to time, the Secured Parties will
have a legal, valid and enforceable first priority security
interest (i) in the rights, titles and interests of the Company
in and to the Fuel Lease and (i) in and to the other Collateral.
Such security interest will constitute a perfected security
interest in the Collateral consisting of Nuclear Material
Contracts and the Collateral consisting of Nuclear Material
located in the States of Illinois, New Jersey and Pennsylvania,
except for any such Collateral which consists of cash,
instruments (as defined in the New York Uniform Commercial Code)
and other items in which a security interest may only be
perfected by possession, enforceable against all third parties as
security for the Secured Obligations.
(k) No Material Adverse Change. Since June 30, 1995,
there has been no material adverse change in the financial
condition, results of operations, business, properties or
operations of the Lessee or in its ability to perform its
obligations under the Basic Documents.
(l) No Defaults. The Lessee is not in default under
any bond, debenture, note or any other evidence of Obligations
for Borrowed Money or Deferred Purchase Price or any mortgage,
deed of trust, indenture, loan agreement or other agreement
relating thereto, where the amount thereof is in excess of
$20,000,000.
(m) Pension Plans. No accumulated funding deficiency
(as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, exists with respect to any plan (other
than a multiemployer plan). No liability to the Pension Benefit
Guaranty Corporation has been, or is expected by the Lessee to
be, incurred with respect to any plan (other than a multiemployer
plan) by the Lessee which is or would be materially adverse to
the Lessee. The Lessee has not incurred and presently does not
expect to incur any withdrawal liability under Title IV of ERISA
with respect to any multiemployer plan which is or would be
materially adverse to the Lessee. Neither the execution and
delivery by the Company of the Credit Agreement and the other
Basic Documents, and the issuance of the Commercial Paper, nor
the execution and delivery by the Lessee of this Letter
Agreement, the Trust Agreement and each other Basic Document to
which the Lessee is a party, will involve any transaction which
is subject to the prohibitions of Section 406 of ERISA or in
connection with which a tax could be imposed pursuant to
Section 4975. As used herein, the term "plan" shall mean an
"employee pension benefit plan" (as defined in Section 3 of
ERISA) which is and has been established or maintained, or to
which contributions are or have been made, by the Lessee or by
any trade or business, whether or not incorporated, which,
together with the Lessee is under common control as described in<PAGE>
9
Section 414(b) or (c) of the Code, and the term "multiemployer
plan" shall mean any plan which is a "multiemployer plan" (as
such term is defined in Section 4001(a)(3) of ERISA).
(n) Financial Statements. The audited balance sheet
of the Lessee as of December 31, 1994, and the related statements
of income and cash flows (including the notes thereto) of the
Lessee for the year then ended, copies of which have been
delivered to the Company, the Administrative Agent and the Banks,
and all other annual or quarterly financial statements including,
without limitation, the quarterly statement dated as of June 30,
1995 so delivered fairly present the financial condition of the
Lessee on the dates for which, and the results of its operations
for the periods for which, the same have been furnished and have
been prepared in accordance with generally accepted accounting
principles consistently applied.
(o) Nuclear Material. The Nuclear Material is free
and clear of any Lien in favor of any Person claiming by, through
or under the Lessee or any Affiliate thereof, other than
Permitted Liens. No default or event which with the giving of
notice or lapse of time would constitute a default has occurred
and is continuing under any Nuclear Material Contract.
(p) Disclosure. Neither the representations in this
Letter Agreement, or in any other document, certificate or
statement furnished in writing to the Administrative Agent or any
Bank by or on behalf of the Lessee in connection with the
transactions contemplated hereby, nor the information disclosed
in the Lessee's Annual Report on Form 10-K for the year ended
December 31, 1994 or Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, contained as of its date, any untrue
statement of a material fact or omitted to state a material fact
necessary in order to make such representations or information
not misleading in light of the circumstances under which they
were made.
(q) Collateral Equivalence Test Met. The sum of the
aggregate Stipulated Casualty Value of the Nuclear Material
leased under the Fuel Lease and the Lessee's Percentage of the
Cash Collateral equals or exceeds the Lessee's Percentage of
Outstandings.
9. General Covenants of the Lessee.
(a) Information. The Lessee will furnish to the
Company and the Administrative Agent in sufficient copies for
each Bank:
(i) Quarterly Statements. As soon as practicable
after the end of each of the first three quarterly fiscal
periods in each fiscal year of the Lessee, and in any event
within 60 days thereafter, copies of:<PAGE>
10
(A) a balance sheet of the Lessee as at the end of
such quarter, and (B) statements of income and cash
flows of the Lessee for such quarter and for the
twelve-month period ending as of the end of such
quarter and (in the case of the second and third
quarters) for the portion of the fiscal year ending
with the end of such quarter, setting forth in each
case in comparative form the figures for the
corresponding periods in the previous fiscal year, all
in reasonable detail and certified as complete and
correct, subject to changes resulting from year-end
adjustments, by a principal financial officer of the
Lessee; provided that it is understood that the
delivery of the Lessee's Quarterly Report on Form 10-Q
shall be deemed to satisfy the requirements with
respect to such financial statements;
(ii) Annual Statements. As soon as practicable after
the end of each fiscal year of the Lessee, and in any event
within 120 days thereafter, copies of:
(A) a balance sheet of the Lessee at the end of such
fiscal year, and (B) statements of income and cash
flows of the Lessee for such year, setting forth in
each case in comparative form the figures for the
previous fiscal year, all in reasonable detail and
accompanied by an opinion thereon of independent
certified public accountants of recognized national
standing selected by the Lessee, which opinion shall
state that such financial statements have been prepared
in accordance with generally accepted accounting
principles consistently applied (except for changes in
application in which such accountants concur) and that
the examination of such accountants in connection with
such financial statements has been made in accordance
with generally accepted auditing standards; provided
that it is understood that the delivery of the Lessee's
Annual Report on Form 10-K shall be deemed to satisfy
the requirement with respect to such financial
statements;
(iii) Officer's Compliance Certificate.
Simultaneously with the financial statements referred to in
Sections 9(a)(i) and (ii), a certificate of an authorized
officer of the Lessee stating that such officer has reviewed
the relevant terms and conditions of the Fuel Lease and
other Basic Documents to which the Lessee is a party, and
has made, or caused to be made, under such officer's
supervision, a review of the transactions and financial
condition of the Lessee from the beginning of the accounting
period covered by the income statements being delivered
therewith to the date of the certificate, and that the
Lessee has observed or performed all of its covenants and
other agreements, and satisfied every condition, contained
in this Letter Agreement, the Fuel Lease and any other Basic<PAGE>
11
Document to which the Lessee is a party, and no Terminating
Event, Lessee Default, Lessee Event of Default, Lease Event
of Default or default or event of default under any such
Basic Document has occurred and is continuing and no event
has occurred and is continuing which, with the lapse of time
or the giving of notice, or both, would constitute a
Terminating Event, Lessee Default, Lessee Event of Default,
Lease Event of Default or a default or event of default
under any such Basic Document or, if such condition or event
has occurred and is continuing, a statement as to the nature
thereof and the action which is proposed to be taken with
respect thereto;
(iv) Auditor's Compliance Certificate. Simultaneously
with the financial statements referred to in Section
9(a)(ii), a certificate of the independent public
accountants who audited such statements stating that such
accountants have reviewed the relevant terms and conditions
of the Fuel Lease and other Basic Agreements to which the
Lessee is a party, and that, in making the examination
necessary for the audit of such statements, they have
obtained no knowledge of any condition or event which
constitutes or which with notice or lapse of time or both
would constitute a Terminating Event, Lessee Default, Lessee
Event of Default, Lease Event of Default or default or event
of default under any such Basic Document, or if such
accountants shall have obtained knowledge of any such
condition or event, specifying in such certificate each such
condition or event of which they have knowledge and the
nature and status thereof;
(v) Notices Required under the Basic Documents.
Immediately upon delivery to the Lessee or the Company, all
notices, consents, documents, certificates or instruments of
any kind relating to the Lessee required pursuant to the
Fuel Lease;
(vi) Defaults. (A) Promptly upon becoming aware of the
occurrence thereof, notice of any Terminating Event, Lessee
Default, Lessee Event of Default, Lease Event of Default or
any event which, with the lapse of time or the giving of
notice, or both, would constitute a Terminating Event or a
Lease Event of Default, and (A) within 10 days of becoming
aware of the occurrence thereof, notice of any other
material event affecting the Lessee's obligations under any
Basic Document or any Nuclear Material Contract (except to
the extent such event has previously been disclosed in the
Lessee's SEC reports delivered pursuant to clause (viii)
below);
(vii) Notice of Claimed Default. Immediately upon
becoming aware that the holder or holders of any evidence of
Obligations for Borrowed Money or Deferred Purchase Price or
other security of the Lessee or any subsidiary exceeding
$20,000,000 in the aggregate have given notice (or taken any<PAGE>
12
other action) with respect to a claimed default, breach or
event of default, a notice describing the notice given (or
action taken) and the nature of the claimed default, breach,
or event of default;
(viii) SEC and Other Reports. Promptly after filing
thereof, copies of all regular and periodic reports and
registration statements which the Lessee may file with the
Securities and Exchange Commission ("SEC") or any
governmental agency substituted therefor and, promptly upon
written request therefor, copies of the financial statements
which the Lessee may file annually with any state regulatory
agency or agencies; and
(ix) Requested Information. With reasonable
promptness, such other data and information, including,
without limitation, information regarding Nuclear Material
or any Nuclear Material Contract, with respect to the
Lessee as from time to time may be reasonably requested by
the Administrative Agent or any Bank.
(b) Notice of Litigation. Immediately upon the Lessee
becoming aware thereof, written notice of (i) any litigation or
proceedings which would be required to be disclosed as an
exception to the representations and warranties contained herein
or in the Fuel Lease in order that such representations and
warranties would be true and correct on a continuing basis; and
(i) any dispute between the Lessee and any governmental authority
or other party relating to any part of the transactions
contemplated by this Letter Agreement or any of the other Basic
Documents to which the Lessee is a party which would have a
material adverse effect on the ability of the Lessee to carry out
its obligations hereunder or under any other Basic Document to
which the Lessee is a party; provided, however, that the notice
requirement in this Section 9(b) shall be satisfied if the Lessee
furnishes the Company and the Administrative Agent in sufficient
copies for each Bank a Current Report on Form 8-K regarding the
event requiring notice by the time that the Current Report is
required to be filed with the Securities and Exchange Commission.
(c) General Obligations. Subject to the last sentence of
this Section 9(c), the Lessee will:
(i) duly comply with all laws, rules, orders,
regulations or other valid requirements
(including, without limitation, any of the
foregoing which are applicable to Nuclear Material
or the operation of the Generating Facility) of
any governmental authority necessary to the
conduct of its business or to its properties or
assets, noncompliance with which could reasonably
be expected to have a material adverse effect upon
the transactions contemplated by this Letter
Agreement or any other Basic Document, or upon the
financial condition, results of operations,<PAGE>
13
business, properties or operations of the Lessee,
or the ability of the Lessee to carry out its
obligations under any Basic Document or this
Letter Agreement);
(ii) continue to engage principally in the electric
utility business;
(iii) obtain, maintain and keep in full force and effect
all consents, permits, licenses and approvals, the
absence of which would have a material adverse
effect upon the transactions contemplated by this
Letter Agreement or any other Basic Document to
which the Lessee is a party, or upon the financial
condition, results of operations, business,
properties or operations of the Lessee, or the
ability of the Lessee to carry out its obligations
under this Letter Agreement or any other Basic
Document to which the Lessee is a party;
(iv) maintain its material operating properties used or
useful in its business in good repair, working
order and condition consistent with prudent
utility practice; provided, however, that the
Lessee shall not be prevented from discontinuing
the operation and maintenance of any of its
properties if it shall determine that the
continued operation and maintenance of such
properties is no longer necessary, desirable or
permissible;
(v) pay when due all fees, taxes, assessments and
governmental charges or levies imposed upon it or
upon its income or profits or upon any property
belonging to it, and maintain appropriate reserves
for the accrual of the same in accordance with
generally accepted accounting principles;
(vi) except as permitted by clause (vii) below, at all
times maintain its corporate existence,
privileges, franchises and rights to carry on
business, and duly procure all renewals and
extensions thereof, if and when any shall be
necessary;
(vii) not consolidate or merge with, or sell or
otherwise dispose of all or substantially all of
its properties and assets to any Person unless
(i) the surviving or resulting entity is the
Lessee hereunder, (i) immediately after giving
effect thereto no Credit Agreement Event of
Default, Credit Agreement Default, Lease Event of
Default, Lessee Default, Lessee Event of Default
or event which with the giving of notice or
passage of time would constitute a Lease Event of<PAGE>
14
Default shall have occurred and be continuing, and
(i) the senior unsecured debt of the surviving or
resulting Lessee shall be rated at least
investment grade by S&P or Moody's;
(viii) perform and comply with each of the material
provisions of each material indenture, credit
agreement, contract or other agreement by which
the Lessee is bound, non-performance or non-
compliance with which would have a material
adverse effect upon its business or credit or in
any way affect its ability to perform its
obligations hereunder except material contracts or
other agreements being contested in good faith;
(ix) preserve and maintain its corporate existence in
the jurisdiction of its incorporation, and qualify
and remain qualified as a foreign corporation in
good standing in each jurisdiction in which such
qualification is necessary or desirable in view of
its business and operations or the ownership of
its properties, except where the failure to be so
qualified would not materially adversely affect
its financial condition, operations, properties or
business, and preserve its material rights,
franchises and privileges to conduct its business
substantially as conducted on the date hereof;
(x) maintain insurance in effect at all times in such
amounts as are available to the Lessee and
covering such risks as is usually carried by
companies of a similar size, engaged in similar
businesses and owning similar properties
(including, without limitation, the operation and
ownership of nuclear generating facilities) in the
same general geographical area in which the Lessee
operates, either with responsible and reputable
insurance companies or associations, or, in whole
or in part, by establishing reserves of one or
more insurance funds, either alone or with other
corporations or associations;
(xi) at any reasonable time and from time to time,
permit the Administrative Agent or any Bank or any
agents or representatives thereof to examine and
make copies of and abstracts from the records and
books of account of, and visit the properties of,
the Lessee and discuss the affairs, finances and
accounts of the Lessee with any of its officers or
directors;
(xii) not sell, transfer, lease, assign or otherwise
convey or dispose of more than 25% of its assets
(whether now owned or hereafter acquired), in any
single or series of transactions, whether or not<PAGE>
15
related, except for dispositions of current assets
in the ordinary course of business as presently
conducted, if immediately prior to such sale,
transfer, lease, assignment, conveyance or
disposition or as a result of such sale, transfer,
lease, assignment, conveyance or disposition, the
senior unsecured debt of the Lessee shall not be
rated at least investment grade by S&P or Moody's.
(xiii) comply with the Letter Agreement and such other
Basic Documents to which the Lessee is a party in
accordance with the respective terms and
conditions set forth herein and therein; and
(xiv) except for Permitted Liens, permit the creation of
any Liens on the Collateral.
Notwithstanding the foregoing provisions of this Section 9(c),
the Lessee may contest by appropriate proceedings conducted in
good faith and due diligence, the amount, validity or
application, in whole or in part of any fee, tax, assessment or
government charge or levy, or any legal requirement, provided
that the Lessee shall have set aside on its books adequate
reserves, if required in accordance with generally accepted
accounting principles with respect thereto and shall furnish such
security, if any, as may be required in the proceeding.
10. GPU Events. It shall be a default hereunder if
General Public Utilities Corporation (a) fails to maintain at all
times beneficial ownership of at least 75% of all outstanding
shares of common stock of each of the Lessee, JCP&L and PE; or
(b) pledges, grants options on, create any charge on or security
interest in, or otherwise subjects to any charge or encumbrance,
any of the common stock of the Lessee, JCP&L or PE unless the
obligations hereunder are secured ratably and with equal
priority, in form and substance reasonably satisfactory to the
Majority Banks.
11. Credit Agreement and Notes. The Lessee hereby
acknowledges receipt of executed counterparts of the Credit
Agreement and photostatic copies of the Notes evidencing the
Loans, and consents to all of the terms and provisions of the
Credit Agreement and the Notes.
12. Consent to Assignment; Direct Payment of Payments
Under the Fuel Lease.
(a) Consent to Assignment. The Lessee hereby
acknowledges notice of and consents to all the terms and
provisions of the Security Agreement and hereby confirms to and
agrees with the Secured Parties that all representations,
warranties, indemnities and agreements of the Lessee contained in
this Letter Agreement and each other Basic Document to which the
Lessee is a party shall inure to the benefit of, and shall be
enforceable by, the Secured Parties to the same extent as if such<PAGE>
16
Secured Parties were originally parties to or named in the such
documents and agreements. The Lessee further acknowledges and
consents to the assignment and transfer, and any future
assignments and transfers, to the Secured Parties by the Company
of the Company's right to exercise any and all of its rights,
remedies, powers and privileges (but none of its obligations,
duties or liabilities) under the Fuel Lease, the Assigned
Agreements and each other Basic Document to which the Lessee is a
party. The Lessee hereby agrees with the Secured Parties to
comply with any exercise by the Secured Parties, either directly
or through the Company, of any rights, remedies, powers or
privileges pursuant to the Security Agreement. The Secured
Parties acknowledge that neither the Security Agreement nor this
Section 12 shall in any way add to the obligations of the Lessee
(except those obligations of the Lessee to any Person, which, if
not previously so, hereby become enforceable directly by the
Secured Parties) under the Fuel Lease, the Assigned Agreements
and each other Basic Document to which the Lessee is a party.
Notwithstanding the foregoing, so long as no Lease Event of
Default shall have occurred and be continuing, the Lessee shall
have exclusive right to possession and use of the Nuclear
Material in accordance with the Fuel Lease and may use such
Nuclear Material for any lawful purpose consistent with the Fuel
Lease.
(b) Direct Payment of Payments Under the Fuel Lease. The
Lessee acknowledges that it has been directed by the Company to,
and agrees that it will, make all payments of monies due and to
become due to the Company under the Fuel Lease, the Assigned
Agreements and each other Basic Document to which the Lessee is a
party, directly to the Collateral Agent, including, without
limitation, Basic Rent, Additional Rent, the purchase price of
Nuclear Material pursuant to Section 8(c), 8(d), 8(e) and 8(g) of
the Fuel Lease, payments pursuant to Sections 9(e), 14, 17 and 18
of the Fuel Lease in the manner and to the accounts of the
Secured Parties as specified in Section 3.03 of the Credit
Agreement.
13. Severability. Any provision of this Letter Agreement
which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability, without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
To the extent permitted by applicable law, the Lessee hereby
waives any provision of law which renders any provision hereof
prohibited or unenforceable in any respect.
14. Indemnification. The Lessee shall pay and indemnify
and hold harmless the Administrative Agent and each Bank, and
their respective officers, directors, incorporators,
shareholders, partners, employees, agents and servants from and
against any and all liabilities (other than liabilities arising
out of the gross negligence or willful misconduct of such<PAGE>
17
Person), taxes, (excluding, however, taxes measured solely by the
net income of any Person indemnified or intended to be
indemnified pursuant to this Section 14, except as otherwise
provided in Section 14 hereof), losses, obligations, claims,
damages, penalties, causes of action, suits, costs and expenses
(including, without limitation, reasonable attorneys' and
accountants' fees and expenses) and judgments of any nature
arising from or in any way relating to any and all of the
following during the term of the Fuel Lease and thereafter:
(a) any injury to or disease, sickness or death of Persons, or
loss of or damage to property, occurring through or resulting
from any nuclear incident (as that term is defined in the Atomic
Energy Act, 42 U.S.C. Paragraph 2011 et seq.) involving or
connected in any way with the Nuclear Material or any portion
thereof, (a) the acquisition, ownership (including strict
liability of an owner or liability without fault), possession,
disposition, sale, use, nonuse, misuse, leasing, fabrication,
design, cycling, recycling, transportation, containerization,
cooling, processing, reprocessing, storing, condition,
management, operation, construction, maintenance, repair or
rebuilding of the Nuclear Material or any portion thereof or
resulting from the condition of adjoining and underlying land,
buildings, streets or ways, (a) any use, nonuse or condition of,
or any other matter of circumstance relating to, the Generating
Facility, any other property associated therewith or any
adjoining and underlying land, buildings, streets and ways,
(a) any violation or default, or alleged violation or default, of
the Fuel Lease or this Letter Agreement by or on behalf of
Lessee, or of any contracts or agreements to which the Lessee is
a party or by which it is bound, or any Legal Requirements,
(a) performance of any labor or services or the furnishing of any
materials or other property in respect of the Nuclear Material or
any portion thereof, (a) any infringement or alleged infringement
of any patent, copyright, trade secret or other similar right
relating to the Nuclear Material or any portion thereof,
(a) Lessee's agreements or obligations contained in the Fuel
Lease or this Letter Agreement, (a) any claim arising out of loss
of damage to the environment, (a) any claim arising out of strict
or absolute liability in tort, or (a) the offering and sale of
Commercial Paper. The Lessee also indemnifies each indemnitee,
as aforesaid, from and against all other liabilities, taxes,
losses, obligations, claims, damages, penalties, causes of
action, suits, costs and expenses (including, without limitation,
reasonable attorneys' and accountants' fees and expenses) and
judgments of any nature which may be imposed on, incurred by, or
asserted at any time against any indemnitee in any way relating
to or arising out of the performance of this Letter Agreement,
the Fuel Lease or any other Basic Document to which Lessee is a
party, provided, except for claims of a nature contemplated by
(i) above, that the Lessee shall not be required to indemnify any
indemnitee with respect to any liability relating to or arising
out of indemnitee's gross negligence or willful misconduct and
provided, further, that the foregoing immunity shall not limit
the terms of any indemnity that the Lessee may grant separately
to any indemnitee pursuant to any separate agreement. In the<PAGE>
18
event that any action, suit or proceeding is brought against the
Company or any other Person indemnified or intended to be
indemnified pursuant to this Section 14 by reason of any such
occurrence, the Lessee shall, at the Lessee's expense, resist and
defend such action, suit or proceeding or cause the same to be
resisted and defended by counsel designated by the Lessee and
reasonably acceptable to the Person or Persons indemnified or
intended to be indemnified under this Section 14 provided there
is no conflict of interest with the Person or Persons indemnified
or intended to be indemnified under this Section 14. In the
event a conflict of interest contemplated by the proviso of the
immediately preceding sentence shall exist, then the Person or
Persons as to which such conflict exists may be defended by
counsel of its or their choice at Lessee's expense, provided
Lessee's obligation for such expense shall be limited to one firm
for all such Persons as to which such a conflict exists. The
obligations of the Lessee under this Section 14 shall survive any
termination of this Letter Agreement, the Credit Agreement, the
Fuel Lease or the Security Agreement, in whole or in part.
15. No Waiver; Amendments. Neither the Administrative
Agent, the Collateral Agent, the Banks, the Company nor the
Lessee shall, by any act, delay, omission or otherwise, be deemed
to have waived any of its rights and remedies hereunder, and no
waiver shall be valid unless in writing signed by the party or
parties sought to be bound thereby. A waiver by the
Administrative Agent, the Collateral Agent, the Banks, the
Company or the Lessee of any of their respective rights or
remedies hereunder on any one occasion shall not be construed as
a bar to any right or remedy which the Administrative Agent, the
Banks, the Company or the Lessee, as applicable, would otherwise
have had on any future occasion. No failure to exercise nor any
delay in exercise of any such right or remedy hereunder shall
preclude any other or future exercise or partial exercise of any
other right or remedy. The rights and remedies hereunder
provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies
provided by law. None of the terms or provisions of this Letter
Agreement may be waived, altered, modified or amended except by
an instrument in writing, duly executed by the party or parties
sought to be bound thereby.
16. Successors and Assigns. This Letter Agreement shall
bind the successors and assigns of the Lessee and the Company and
shall inure to the benefit of permitted successors and assigns
of either. The Letter Agreement shall not be assignable by the
Lessee or the Company, either voluntarily or by operation of law,
unless consented to by the Administrative Agent and the Majority
Banks. No permitted assignment by the Lessee or the Company
shall release the Lessee or the Company from any of its
obligations hereunder. This Letter Agreement shall inure to and
shall be binding upon the successors and assigns of the
Administrative Agent and the Banks. <PAGE>
19
17. Notices. Any notice, demand or other communication
which by any provision of this Letter Agreement is required or
provided to be given shall be deemed to have been delivered if in
writing addressed as provided below and actually delivered by
mail, courier or facsimile to the following addresses:
(a) except as otherwise requested in writing by the
Administrative Agent or any Bank, any notice, demand
or communication which by any provision of this
Letter Agreement is required or provided to be given
to the Administrative Agent or any Bank shall be
deemed to have been delivered to the Administrative
Agent or any Bank if a single copy thereof is
delivered to the Administrative Agent at its address
set forth in Section 12.01 of the Credit Agreement or
at such other address as either may have furnished
the Company and the Lessee in writing;
(b) if to the Company (with copies to the Lessee at the
address listed below), TMI-1 Fuel Corp. c/o United
States Trust Company of New York, 114 West 47th
Street, New York, New York 10036, marked for the
attention of the Corporate Trust and Agency Division,
telecopy number 212-852-1626, or at such other
address as it may have furnished in writing to the
Administrative Agent and the Lessee; or
(c) if to the Lessee, to Metropolitan Edison Company,
2800 Pottsville Pike, Reading, Pennsylvania 19640-
0001; Attention: Comptroller; Telecopier: (215) 921-
6676, and to GPU Service Corporation, 100 Interpace
Parkway, Parsippany, New Jersey 07054-1149, marked
for the attention of the Assistant Treasurer,
Telecopier: (201) 263-6397, or at such other address
or addresses as the Lessee may have furnished to the
Administrative Agent and the Company.
18. Governing Law. This Letter Agreement shall be
governed by, and be construed and interpreted in accordance with
the laws of the State of New York.<PAGE>
20
IN WITNESS WHEREOF, the undersigned have caused this
Letter Agreement to be executed as of the date first above
written.
METROPOLITAN EDISON COMPANY
By
Vice President
TMI-1 FUEL CORP.
By
Title
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH,
as Administrative Agent
By
Title <PAGE>
EXHIBIT B-2(b)(iii)
K&S DRAFT
10.10.95
EXHIBIT N-3
to Credit Agreement
PENNSYLVANIA ELECTRIC COMPANY
LESSEE'S LETTER AGREEMENT
Regarding
TMI-1 FUEL CORP.
Dated as of November __, 1995<PAGE>
TABLE OF CONTENTS
Section Page
1. Definitions. . . . . . . . . . . . . . . . . . . . . 1
2. Performance of Fuel Lease and Liens. . . . . . . . . 2
3. Security Interest of Collateral. . . . . . . . . . . 2
4. Sale of Nuclear Material and Assignment of Rights
under Nuclear Material Contracts. . . . . . . . . 2
5. Collateral Equivalence Test; No Additional Collateral
or Covenants; Condemnation Statements;
Exercise of Rights of Secured Parties. . . . . . 3
6. Fuel Management; Quiet Enjoyment. . . . . . . . . . . 5
7. Insurance. . . . . . . . . . . . . . . . . . . . . 5
8. Representations and Warranties. . . . . . . . . . . . 6
9. General Covenants of the Lessee. . . . . . . . . . . 10
10. GPU Events . . . . . . . . . . . . . . . . . . . . . 17
11. Credit Agreement and Notes. . . . . . . . . . . . . . 17
12. Consent to Assignment; Direct Payment of
Payments Under the Fuel Lease. . . . . . . . . . 17
13. Severability. . . . . . . . . . . . . . . . . . . . . 18
14. Indemnification. . . . . . . . . . . . . . . . . . . 18
15. No Waiver; Amendments. . . . . . . . . . . . . . . . 20
16. Successors and Assigns. . . . . . . . . . . . . . . . 20
17. Notices. . . . . . . . . . . . . . . . . . . . . . . 20
18. Governing Law . . . . . . . . . . . . . . . . . . . . 21<PAGE>
THIS LESSEE'S LETTER AGREEMENT (the "Letter Agreement") is
made as of November __, 1995, by and between Pennsylvania
Electric Company, a Pennsylvania corporation (the "Lessee"), TMI-
1 Fuel Corp, a Delaware corporation (the "Company"), and Union
Bank of Switzerland, New York Branch, as Administrative Agent
(the "Administrative Agent"), for the Banks party to the Credit
Agreement referred to below (the "Banks").
WHEREAS, the Lessee has entered into the Amended and
Restated Nuclear Material Lease Agreement, dated as of
November __, 1995 ("Fuel Lease"), with the Company in order to
enable the Company to obtain financing for the acquisition,
processing and use of Nuclear Material in the Generating
Facility; and
WHEREAS, pursuant to the Fuel Lease, the Company has agreed
to make payments due to Manufacturers and/or to reimburse the
Lessee for payments previously made to Manufacturers with respect
to the Nuclear Material; and
WHEREAS, in order to finance the cost of such Nuclear
Material, the Company proposes to (i) sell its Commercial Paper
which shall be entitled to the benefit of a letter of credit to
be issued by the Issuing Bank, and (ii) obtain the Commitment of
the Issuing Bank to issue its letter of credit and of each Bank
to make Loans from time to time as hereinafter provided; and
WHEREAS, the Lessee has agreed to make payments under the
Fuel Lease sufficient to enable the Company to meet its
obligations under the Company's financing arrangements, including
the Company's obligations under the Credit Agreement, dated as of
November __, 1995, among the Company, the Banks, the Issuing Bank
and the Administrative Agent (the "Credit Agreement");
NOW, THEREFORE, in consideration of the premises and mutual
agreements herein contained and other good and valuable
consideration, so long as any of the Loans, the Letter of Credit
or the Commercial Paper shall remain outstanding, or the
Commitments shall be continuing, notwithstanding any provision of
the Fuel Lease or any other agreement of the Lessee to the
contrary, the Lessee, the Company, the Administrative Agent and
the Banks agree that:
1. Definitions. Unless the context otherwise specifies or
requires, each term defined in the Credit Agreement or Appendix A
to the Fuel Lease, shall, when used in this Letter Agreement,
have the meaning indicated in the Credit Agreement or Appendix A
or set forth in the paragraph indicated therein.
2. Performance of Fuel Lease and Liens. The Lessee will
perform and comply with all the terms of the Fuel Lease to be
performed or complied with by it and will not omit to take an<PAGE>
2
action the omission of which would cause a Lease Event of
Default. The Lessee acknowledges that, except as otherwise
provided in the Fuel Lease, its obligations as set forth under
the Fuel Lease are absolute and unconditional. The Lessee will
not directly or indirectly create or permit to be created or to
remain, and will promptly take such action as may be necessary to
discharge, any Lien on any Collateral except Permitted Liens.
3. Security Interest of Collateral. The Lessee represents
that no other financing statement (other that those naming the
Secured Parties as a secured party) covering all or any part of
the Collateral (as defined in the Security Agreement) is on file
in any public office. The Lessee shall make, or shall cause to
be made, all filings and recordings, and shall take, or cause to
be taken, such other actions, including filing all continuation
statements, necessary to establish, preserve and perfect the
Secured Parties' lien on and security interest in, the Collateral
as a legal, valid and enforceable first priority lien and
security interest, or purchase money security interest, as the
case may be, therein, subject only to the existence or priority
of any Permitted Lien, and the Lessee represents that all such
filings, recordings and other actions have been duly made. The
Lessee shall deliver to the Administrative Agent evidence of the
due filings of any continuation statements to be delivered to the
Administrative Agent within the time period specified in
Section 8.05 of the Credit Agreement. In no event will the
Lessee permit the Nuclear Material to enter any jurisdiction in
which all necessary action has not been taken to establish,
maintain and protect the Secured Parties' first priority
perfected lien and security interest in the Nuclear Material
under the Security Agreement, subject only to Permitted Liens.
4. Sale of Nuclear Material and Assignment of Rights under
Nuclear Material Contracts.
(a) In the event that the Lessee desires the Company,
on behalf of the Lessee, to purchase Nuclear Material or to have
services performed on such Nuclear Material pursuant to any
Nuclear Material Contract, the Lessee shall provide the Company
with an Assignment Agreement and a Manufacturer's Consent, both
substantially in the form of Exhibit D to the Fuel Lease, with
such changes to Exhibit 2 to Exhibit D as the Secured Parties may
consent to in writing, which consent shall not be unreasonably
withheld, with respect to such Nuclear Material Contract on or
before the date on which the Company is to purchase such Nuclear
Material or to have such services performed pursuant thereto.
Notwithstanding the foregoing, the Lessee shall not be required
to have obtained a Manufacturer's Consent in any instance where
the Manufacturer's obligations under the applicable Nuclear
Material Contract have been fully discharged and performed, and
the Manufacturer's warranties with respect to such Nuclear<PAGE>
3
Material Contract have expired, and the Lessee has delivered to
theCompany and the Collateral Agent a certificate to such effect.
(b) The Lessee at its expense will perform and comply
with all the terms and provisions of each Assigned Agreement to
be performed or complied with by it, will maintain each Assigned
Agreement in full force and effect, will enforce each of the
Assigned Agreements in accordance with their respective terms,
and will take all such action to that end as from time to time
may reasonably be requested by the Majority Banks.
(c) The Lessee shall not enter into or consent to or
permit any cancellation, termination, amendment, supplement or
modification of or waiver with respect to any Assigned Agreement
without the prior written consent of the Majority Banks.
(d) The Lessee will from time to time, upon request of
the Administrative Agent, furnish to the Administrative Agent
such information concerning the Nuclear Material or any Assigned
Agreement, as any Bank may reasonably request.
(e) The Lessee will not change its principal place of
business or chief executive offices from the location specified
in paragraph 8(a) hereof or remove therefrom its records
concerning the Assigned Agreements unless it gives the
Administrative Agent at least 30 days' prior written notice
thereof.
5. Collateral Equivalence Test; No Additional Collateral
or Covenants; Condemnation Statements; Exercise of Rights of
Secured Parties.
(a) The Lessee shall not permit the sum of aggregate
Stipulated Casualty Value of the Nuclear Material leased under
the Fuel Lease and the Lessee's Percentage of Cash Collateral to
be less than the Lessee's Percentage Outstandings.
(b) The Lessee shall not provide to any Person (other
than the Banks), in order to induce such Person to extend credit
to the Company, any collateral or any guarantee or other
assurance against loss or non-payment, nor shall the Lessee
consent to the provision thereof by the Company.
(c) The Lessee shall not agree to any affirmative or
negative covenant with respect to the condition, financial or
otherwise, of the Lessee with any Person in order to induce such
Person to extend credit to the Company.
(d) The Lessee shall not sell, assign, convey, pledge
or otherwise dispose of or encumber in any manner any interest it
may have in the Trust or any rights it may have under the Trust
Agreement. The Lessee shall not direct the Owner Trustee to<PAGE>
4
liquidate, dissolve, merge or consolidate the Company except if
such transaction is consented to in writing by the Banks. The
Lessee shall not direct the Owner Trustee to take any action
under the Trust Agreement which is inconsistent with the duties
imposed upon the Company by the Basic Documents and any other
agreements, documents, instruments and articles executed and
delivered, and to be executed and delivered, by the Owner Trustee
in connection therewith.
(e) The Nuclear Material leased under the Fuel Lease
shall constitute the Lessee's entire ownership interest in the
items used or to be used by it as nuclear fuel in the Generating
Facility. The Lessee agrees that 25% of the Lessor's ownership
interest in any Nuclear Material which is subject to the Fuel
Lease will be leased to the Lessee. The Lessee further agrees
not to take any action under the terms of the Fuel Lease,
including, but not limited to, the delivery of any Leasing
Record, which would result in 25% of the Lessor's ownership
interest in any such Nuclear Material not being so leased.
(f_ As provided in the Security Agreement, (i) the
Secured Parties may, on and after the occurrence of a Credit
Agreement Default, Credit Agreement Event of Default, Lessee
Default or Lessee Event of Default, pursuant to Section 10 of the
Security Agreement, exercise any and all of the Company's rights
under the Fuel Lease, the Assigned Agreements and each other
Basic Document to which the Lessee is a party, and (i) if a Lease
Event of Default occurs and is continuing, the Secured Parties
may, pursuant to Section 10 of the Security Agreement, enforce
and exercise any and all of the Company's rights under the Fuel
Lease, the Assigned Agreements and each other Basic Document to
which the Lessee is a party, or the rights and remedies granted
to the Secured Parties under the Security Agreement at their
election and in their sole discretion, and, in the event that any
Secured Parties are permitted to exercise such rights pursuant to
Section 10 of the Security Agreement, the Lessee agrees that the
Collateral Agent may do so either in concert with or in place of
the Company, and the Lessee shall assist in, comply with and
perform in accordance with all rights or remedies so enforced or
exercised by the Collateral Agent for the ratable benefit of the
Secured Parties.
6. Fuel Management; Quiet Enjoyment. The occurrence of a
Credit Agreement Default, a Credit Agreement Event of Default,
Lease Event of Default, Lessee Default, Lessee Event of Default
or an event or condition which would, with the lapse of time or
the giving of notice or both, become a Lease Event of Default,
shall not affect the Lessee's sole obligation to engage in Fuel
Management; provided that, upon the occurrence of a Credit
Agreement Event of Default, Lessee Event of Default or Lease
Event of Default, the Majority Secured Parties may, at their
option, by written notice to the Lessee, elect to revoke such<PAGE>
5
power and authority, in which case the Person from time to time
designated by the Majority Secured Parties may (but shall not be
obligated to), to the extent that the Majority Secured Parties
desire and to the extent permitted by law, engage in Fuel
Management and/or remove all or any part of the responsibility
for Fuel Management from the Lessee; provided, however, that,
subject to the right of the Secured Parties to exercise any or
all rights granted to the Secured Parties under the Security
Agreement, the rights granted to the Secured Parties under this
Section 6 shall not be construed to include the right to direct,
whether directly or indirectly, the operation of the Generating
Facility. In the event the Majority Secured Parties, in
accordance with the preceding sentence, shall revoke the Lessee's
power and authority to engage in Fuel Management, all rights
conferred by the Company to the Lessee pursuant to Section 3 of
the Fuel Lease shall be deemed to be automatically reassigned to
the Company and the Lessee shall execute such documents and
instruments as the Secured Parties shall request to further
confirm such assignment.
7. Insurance. Each year, the Lessee will furnish the
Administrative Agent and each Bank a detailed statement
certified by an officer of Lessee setting forth (i) the location
of all Nuclear Material and (i) the insurance policies and
indemnification agreements provided pursuant to Sections 14 and
17 of the Fuel Lease and certifying that such insurance policies
and indemnification agreements comply with the requirements of
the Fuel Lease. In addition, the Lessee shall promptly furnish
at any time to the Administrative Agent and any Bank such
information as any such Bank shall reasonably request concerning
location of Nuclear Material, insurance policies and
indemnification agreements and Manufacturers or other third
parties with whom arrangements exist with respect to
transportation, storage or processing of Nuclear Material.
8. Representations and Warranties. The Lessee hereby
represents and warrants to the Company, the Administrative Agent
and the Banks that as of the date hereof:
(a) Organization and Standing. The Lessee is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Pennsylvania, and is
qualified to do business in each state or other jurisdiction in
which the nature of its business makes such qualification
necessary, except where the failure to be so qualified would not
have a material adverse effect on its ability to perform its
obligations under this Letter Agreement or each other Basic
Document to which the Lessee is a party. The Lessee's chief
executive office is located at 2800 Pottsville Pike, Reading,
Pennsylvania 19640-0001.<PAGE>
6
(b) Corporate Authority. The Lessee has the corporate
power and authority to execute and perform this Letter Agreement
and the Fuel Lease and to lease the Nuclear Material thereunder.
The execution and delivery of this Letter Agreement and the Fuel
Lease and the lease of the Nuclear Material thereunder will not
have a material adverse effect on the financial condition,
results of operations, business, properties or operations of the
Lessee.
(c) Compliance with Other Instruments, etc. The
execution, delivery and performance by the Lessee of this Letter
Agreement and each Basic Document to which the Lessee is a party,
and other related instruments, documents and agreements, and the
compliance by the Lessee with the terms hereof and thereof,
(i) have been duly and legally authorized by appropriate
corporate action taken by the Lessee, (i) are not in
contravention of, and will not result in a violation or breach
of, any of the terms of the Lessee's articles of incorporation,
its by-laws or of any provisions relating to shares of the
capital stock of the Lessee and (i) will not violate or
constitute a breach of any provision of (x) any applicable law,
order, rule or regulation, rule or regulation of any governmental
authority (except in those cases where non-compliance with any
such law, order, rule or regulation could not reasonably be
expected to have a material adverse effect on the financial
condition, results of operations, business, properties or
operations of the Lessee or its ability to perform its
obligations hereunder or under each Basic Document) or (y) any
indenture, agreement or other instrument to which the Lessee is
party, or by or under which the Lessee or any of the Lessee's
property is bound, or be in conflict with, result in breach of,
or constitute (with due notice and/or lapse of time) a default
under any such indenture, agreement or instrument, or result in
the creation or imposition of any Lien upon any of the Lessee's
property or assets or any Nuclear Material.
(d) Legal Obligations. This Letter Agreement and the
Fuel Lease have been executed by a duly authorized officer of the
Lessee, and this Letter Agreement and the Fuel Lease constitute,
and each Leasing Record, when executed by a duly authorized
officer of the Lessee and delivered to the Company, will
constitute, the legal, valid and binding obligations of the
Lessee, enforceable against the Lessee in accordance with their
respective terms, except as the enforceability thereof may be
limited by the Atomic Energy Act and the rules, regulations or
orders issued pursuant thereto, or by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights
in general, and except as the availability of the remedy of
specific performance is subject to general principles of equity
(regardless of whether such remedy is sought in a proceeding in
equity or at law).<PAGE>
7
(e) Governmental Consents. Neither the execution and
delivery of this Letter Agreement, the Fuel Lease or any Leasing
Record by the Lessee, nor the performance by the Lessee of all of
its obligations hereunder or thereunder, requires the consent or
approval of, the giving of notice to, or the registration, filing
or recording with, or the taking of any other action in respect
of, any Federal, state, local or foreign government or
governmental authority or agency or any other person except for
the order of the Securities and Exchange Commission (the "SEC"),
dated _________, 1995, the order of the PaPUC, dated ________,
1995, and the filing of any statement or other instrument
pursuant to Section 10(b) of the Fuel Lease, and except for the
filing of certificates by the Lessee with the SEC pursuant to SEC
Rule 24 under the Public Utility Holding Company Act to report on
the transactions authorized by such SEC order, the filing of
which is not necessary to the execution or delivery of this
Letter Agreement, the Fuel Lease or any Leasing Record by the
Lessee or for the performance by the Lessee of any of its
obligations hereunder or thereunder, and the failure to file any
of which will not affect the validity or enforceability of any of
this Letter Agreement, the Fuel Lease or any Leasing Record.
(f) Consents and Permits. The Lessee possesses all
material licenses, permits, franchises and certificates which
are necessary or appropriate to own or operate its material
properties and assets and to conduct its business as now
conducted.
(g) Litigation. There is no litigation or other
proceeding now pending or, to the best of the Lessee's knowledge,
threatened, against or affecting the Lessee, before any court,
arbitrator or administrative or governmental agency (i) which
would adversely affect or impair the title of the Company to the
Nuclear Material, (i) which questions the validity or
enforceability of this Letter Agreement, the Fuel Lease, the
Assigned Agreements or any other Basic Document to which the
Lessee is a party or any action taken or to be taken by the
Lessee pursuant to or in connection with this Letter Agreement,
or (i) except as disclosed in the Lessee's Annual Report on Form
10-K for the year ended December 31, 1994 and Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995, copies of which
have previously been delivered to the Administrative Agent and
the Banks, which, if decided adversely to the Lessee, would
materially adversely affect the condition, financial or
otherwise, of the Lessee.
(h) Taxes. The Lessee has filed or caused to be filed
all tax returns which are required to be filed, and has paid or
caused to be paid all taxes as shown on said returns and all
assessments received by it to the extent that such taxes and
assessments have become due, except for taxes and assessments
which are being contested in good faith and by appropriate<PAGE>
8
proceedings and as to which it has provided reserves which are
adequate in accordance with generally accepted accounting
principles.
(i) Reaffirmation and Restatement of Representations
and Warranties. The Lessee repeats and reaffirms as of the date
hereof for the benefit of the Administrative Agent and each Bank
the representations and warranties made by the Lessee in the Fuel
Lease as though set forth in full herein with the same effect as
though such representations and warranties had been made on and
as of the date hereof. In addition, the Lessee represents and
warrants that as of the date hereof (i) the Lessee is in
compliance with all the terms and provisions set forth in the
Fuel Lease on its part to be observed or performed, (i) no
Terminating Event has occurred and no event has occurred which,
with the lapse of time or the giving of notice, or both, would
constitute such a Terminating Event, and (i) no Lease Event of
Default has occurred and is continuing and no event has occurred
and is continuing on such date which, with the lapse of time or
the giving of notice, or both, would constitute a Lease Event of
Default.
(j) First Perfected Security Interest. Except for
Permitted Liens, upon the execution and delivery of this Letter
Agreement and the Security Agreement and the due filing of the
Uniform Commercial Code financing statements required to be
executed and filed from time to time, the Secured Parties will
have a legal, valid and enforceable first priority security
interest (i) in the rights, titles and interests of the Company
in and to the Fuel Lease and (i) in and to the other Collateral.
Such security interest will constitute a perfected security
interest in the Collateral consisting of Nuclear Material
Contracts and the Collateral consisting of Nuclear Material
located in the States of Illinois, New Jersey and Pennsylvania,
except for any such Collateral which consists of cash,
instruments (as defined in the New York Uniform Commercial Code)
and other items in which a security interest may only be
perfected by possession, enforceable against all third parties as
security for the Secured Obligations.
(k) No Material Adverse Change. Since June 30, 1995,
there has been no material adverse change in the financial
condition, results of operations, business, properties or
operations of the Lessee or in its ability to perform its
obligations under the Basic Documents.
(l) No Defaults. The Lessee is not in default under
any bond, debenture, note or any other evidence of Obligations
for Borrowed Money or Deferred Purchase Price or any mortgage,
deed of trust, indenture, loan agreement or other agreement
relating thereto, where the amount thereof is in excess of
$20,000,000.<PAGE>
9
(m) Pension Plans. No accumulated funding deficiency
(as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, exists with respect to any plan (other
than a multiemployer plan). No liability to the Pension Benefit
Guaranty Corporation has been, or is expected by the Lessee to
be, incurred with respect to any plan (other than a multiemployer
plan) by the Lessee which is or would be materially adverse to
the Lessee. The Lessee has not incurred and presently does not
expect to incur any withdrawal liability under Title IV of ERISA
with respect to any multiemployer plan which is or would be
materially adverse to the Lessee. Neither the execution and
delivery by the Company of the Credit Agreement and the other
Basic Documents, and the issuance of the Commercial Paper, nor
the execution and delivery by the Lessee of this Letter
Agreement, the Trust Agreement and each other Basic Document to
which the Lessee is a party, will involve any transaction which
is subject to the prohibitions of Section 406 of ERISA or in
connection with which a tax could be imposed pursuant to
Section 4975. As used herein, the term "plan" shall mean an
"employee pension benefit plan" (as defined in Section 3 of
ERISA) which is and has been established or maintained, or to
which contributions are or have been made, by the Lessee or by
any trade or business, whether or not incorporated, which,
together with the Lessee is under common control as described in
Section 414(b) or (c) of the Code, and the term "multiemployer
plan" shall mean any plan which is a "multiemployer plan" (as
such term is defined in Section 4001(a)(3) of ERISA).
(n) Financial Statements. The audited balance sheet
of the Lessee as of December 31, 1994, and the related statements
of income and cash flows (including the notes thereto) of the
Lessee for the year then ended, copies of which have been
delivered to the Company, the Administrative Agent and the Banks,
and all other annual or quarterly financial statements including,
without limitation, the quarterly statement dated as of June 30,
1995 so delivered fairly present the financial condition of the
Lessee on the dates for which, and the results of its operations
for the periods for which, the same have been furnished and have
been prepared in accordance with generally accepted accounting
principles consistently applied.
(o) Nuclear Material. The Nuclear Material is free
and clear of any Lien in favor of any Person claiming by, through
or under the Lessee or any Affiliate thereof, other than
Permitted Liens. No default or event which with the giving of
notice or lapse of time would constitute a default has occurred
and is continuing under any Nuclear Material Contract.
(p) Disclosure. Neither the representations in this
Letter Agreement, or in any other document, certificate or
statement furnished in writing to the Administrative Agent or any
Bank by or on behalf of the Lessee in connection with the<PAGE>
10
transactions contemplated hereby, nor the information disclosed
in the Lessee's Annual Report on Form 10-K for the year ended
December 31, 1994 or Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, contained as of its date, any untrue
statement of a material fact or omitted to state a material fact
necessary in order to make such representations or information
not misleading in light of the circumstances under which they
were made.
(q) Collateral Equivalence Test Met. The sum of the
aggregate Stipulated Casualty Value of the Nuclear Material
leased under the Fuel Lease and the Lessee's Percentage of the
Cash Collateral equals or exceeds the Lessee's Percentage of
Outstandings.
9. General Covenants of the Lessee.
(a) Information. The Lessee will furnish to the
Company and the Administrative Agent in sufficient copies for
each Bank:
(i) Quarterly Statements. As soon as practicable
after the end of each of the first three quarterly fiscal
periods in each fiscal year of the Lessee, and in any event
within 60 days thereafter, copies of:
(A) a balance sheet of the Lessee as at the end of
such quarter, and (B) statements of income and cash
flows of the Lessee for such quarter and for the
twelve-month period ending as of the end of such
quarter and (in the case of the second and third
quarters) for the portion of the fiscal year ending
with the end of such quarter, setting forth in each
case in comparative form the figures for the
corresponding periods in the previous fiscal year, all
in reasonable detail and certified as complete and
correct, subject to changes resulting from year-end
adjustments, by a principal financial officer of the
Lessee; provided that it is understood that the
delivery of the Lessee's Quarterly Report on Form 10-Q
shall be deemed to satisfy the requirements with
respect to such financial statements;
(ii) Annual Statements. As soon as practicable after
the end of each fiscal year of the Lessee, and in any event
within 120 days thereafter, copies of:
(A) a balance sheet of the Lessee at the end of such
fiscal year, and (B) statements of income and cash
flows of the Lessee for such year, setting forth in
each case in comparative form the figures for the
previous fiscal year, all in reasonable detail and<PAGE>
11
accompanied by an opinion thereon of independent
certified public accountants of recognized national
standing selected by the Lessee, which opinion shall
state that such financial statements have been prepared
in accordance with generally accepted accounting
principles consistently applied (except for changes in
application in which such accountants concur) and that
the examination of such accountants in connection with
such financial statements has been made in accordance
with generally accepted auditing standards; provided
that it is understood that the delivery of the Lessee's
Annual Report on Form 10-K shall be deemed to satisfy
the requirement with respect to such financial
statements;
(iii) Officer's Compliance Certificate.
Simultaneously with the financial statements referred to in
Sections 9(a)(i) and (ii), a certificate of an authorized
officer of the Lessee stating that such officer has reviewed
the relevant terms and conditions of the Fuel Lease and
other Basic Documents to which the Lessee is a party, and
has made, or caused to be made, under such officer's
supervision, a review of the transactions and financial
condition of the Lessee from the beginning of the accounting
period covered by the income statements being delivered
therewith to the date of the certificate, and that the
Lessee has observed or performed all of its covenants and
other agreements, and satisfied every condition, contained
in this Letter Agreement, the Fuel Lease and any other Basic
Document to which the Lessee is a party, and no Terminating
Event, Lessee Default, Lessee Event of Default, Lease Event
of Default or default or event of default under any such
Basic Document has occurred and is continuing and no event
has occurred and is continuing which, with the lapse of time
or the giving of notice, or both, would constitute a
Terminating Event, Lessee Default, Lessee Event of Default,
Lease Event of Default or a default or event of default
under any such Basic Document or, if such condition or event
has occurred and is continuing, a statement as to the nature
thereof and the action which is proposed to be taken with
respect thereto;
(iv) Auditor's Compliance Certificate. Simultaneously
with the financial statements referred to in Section
9(a)(ii), a certificate of the independent public
accountants who audited such statements stating that such
accountants have reviewed the relevant terms and conditions
of the Fuel Lease and other Basic Agreements to which the
Lessee is a party, and that, in making the examination
necessary for the audit of such statements, they have
obtained no knowledge of any condition or event which
constitutes or which with notice or lapse of time or both<PAGE>
12
would constitute a Terminating Event, Lessee Default, Lessee
Event of Default, Lease Event of Default or default or event
of default under any such Basic Document, or if such
accountants shall have obtained knowledge of any such
condition or event, specifying in such certificate each such
condition or event of which they have knowledge and the
nature and status thereof;
(v) Notices Required under the Basic Documents.
Immediately upon delivery to the Lessee or the Company, all
notices, consents, documents, certificates or instruments of
any kind relating to the Lessee required pursuant to the
Fuel Lease;
(vi) Defaults. (A) Promptly upon becoming aware of the
occurrence thereof, notice of any Terminating Event, Lessee
Default, Lessee Event of Default, Lease Event of Default or
any event which, with the lapse of time or the giving of
notice, or both, would constitute a Terminating Event or a
Lease Event of Default, and (A) within 10 days of becoming
aware of the occurrence thereof, notice of any other
material event affecting the Lessee's obligations under any
Basic Document or any Nuclear Material Contract (except to
the extent such event has previously been disclosed in the
Lessee's SEC reports delivered pursuant to clause (viii)
below);
(vii) Notice of Claimed Default. Immediately upon
becoming aware that the holder or holders of any evidence of
Obligations for Borrowed Money or Deferred Purchase Price or
other security of the Lessee or any subsidiary exceeding
$20,000,000 in the aggregate have given notice (or taken any
other action) with respect to a claimed default, breach or
event of default, a notice describing the notice given (or
action taken) and the nature of the claimed default, breach,
or event of default;
(viii) SEC and Other Reports. Promptly after filing
thereof, copies of all regular and periodic reports and
registration statements which the Lessee may file with the
Securities and Exchange Commission ("SEC") or any
governmental agency substituted therefor and, promptly upon
written request therefor, copies of the financial statements
which the Lessee may file annually with any state regulatory
agency or agencies; and
(ix) Requested Information. With reasonable
promptness, such other data and information, including,
without limitation, information regarding Nuclear Material
or any Nuclear Material Contract, with respect to the
Lessee as from time to time may be reasonably requested by
the Administrative Agent or any Bank.<PAGE>
13
(b) Notice of Litigation. Immediately upon the Lessee
becoming aware thereof, written notice of (i) any litigation or
proceedings which would be required to be disclosed as an
exception to the representations and warranties contained herein
or in the Fuel Lease in order that such representations and
warranties would be true and correct on a continuing basis; and
(i) any dispute between the Lessee and any governmental authority
or other party relating to any part of the transactions
contemplated by this Letter Agreement or any of the other Basic
Documents to which the Lessee is a party which would have a
material adverse effect on the ability of the Lessee to carry out
its obligations hereunder or under any other Basic Document to
which the Lessee is a party; provided, however, that the notice
requirement in this Section 9(b) shall be satisfied if the Lessee
furnishes the Company and the Administrative Agent in sufficient
copies for each Bank a Current Report on Form 8-K regarding the
event requiring notice by the time that the Current Report is
required to be filed with the Securities and Exchange Commission.
(c) General Obligations. Subject to the last sentence
of this Section 9(c), the Lessee will:
(i) duly comply with all laws, rules, orders,
regulations or other valid requirements
(including, without limitation, any of the
foregoing which are applicable to Nuclear
Material or the operation of the Generating
Facility) of any governmental authority
necessary to the conduct of its business or
to its properties or assets, noncompliance
with which could reasonably be expected to
have a material adverse effect upon the
transactions contemplated by this Letter
Agreement or any other Basic Document, or
upon the financial condition, results of
operations, business, properties or
operations of the Lessee, or the ability of
the Lessee to carry out its obligations under
any Basic Document or this Letter Agreement);
(ii) continue to engage principally in the
electric utility business;
(iii) obtain, maintain and keep in full force and
effect all consents, permits, licenses and
approvals, the absence of which would have a
material adverse effect upon the transactions
contemplated by this Letter Agreement or any
other Basic Document to which the Lessee is a
party, or upon the financial condition,
results of operations, business, properties<PAGE>
14
or operations of the Lessee, or the ability
of the Lessee to carry out its obligations
under this Letter Agreement or any other
Basic Document to which the Lessee is a
party;
(iv) maintain its material operating properties
used or useful in its business in good
repair, working order and condition
consistent with prudent utility practice;
provided, however, that the Lessee shall not
be prevented from discontinuing the operation
and maintenance of any of its properties if
it shall determine that the continued
operation and maintenance of such properties
is no longer necessary, desirable or
permissible;
(v) pay when due all fees, taxes, assessments and
governmental charges or levies imposed upon
it or upon its income or profits or upon any
property belonging to it, and maintain
appropriate reserves for the accrual of the
same in accordance with generally accepted
accounting principles;
(vi) except as permitted by clause (vii) below, at
all times maintain its corporate existence,
privileges, franchises and rights to carry on
business, and duly procure all renewals and
extensions thereof, if and when any shall be
necessary;
(vii) not consolidate or merge with, or sell or
otherwise dispose of all or substantially all
of its properties and assets to any Person
unless (i) the surviving or resulting entity
is the Lessee hereunder, (i) immediately
after giving effect thereto no Credit
Agreement Event of Default, Credit Agreement
Default, Lease Event of Default, Lessee
Default, Lessee Event of Default or event
which with the giving of notice or passage of
time would constitute a Lease Event of
Default shall have occurred and be
continuing, and (i) the senior unsecured debt
of the surviving or resulting Lessee shall be
rated at least investment grade by S&P or
Moody's;
(viii) perform and comply with each of the material
provisions of each material indenture, credit<PAGE>
15
agreement, contract or other agreement by
which the Lessee is bound, non-performance or
non- compliance with which would have a
material adverse effect upon its business or
credit or in any way affect its ability to
perform its obligations hereunder except
material contracts or other agreements being
contested in good faith;
(ix) preserve and maintain its corporate existence
in the jurisdiction of its incorporation, and
qualify and remain qualified as a foreign
corporation in good standing in each
jurisdiction in which such qualification is
necessary or desirable in view of its
business and operations or the ownership of
its properties, except where the failure to
be so qualified would not materially
adversely affect its financial condition,
operations, properties or business, and
preserve its material rights, franchises and
privileges to conduct its business
substantiallyas conducted on the date hereof;
(x) maintain insurance in effect at all times in
such amounts as are available to the Lessee
and covering such risks as is usually carried
by companies of a similar size, engaged in
similar businesses and owning similar
properties (including, without limitation,
the operation and ownership of nuclear
generating facilities) in the same general
geographical area in which the Lessee
operates, either with responsible and
reputable insurance companies or
associations, or, in whole or in part, by
establishing reserves of one or more
insurance funds, either alone or with other
corporations or associations;
(xi) at any reasonable time and from time to time,
permit the Administrative Agent or any Bank
or any agents or representatives thereof to
examine and make copies of and abstracts from
the records and books of account of, and
visit the properties of, the Lessee and
discuss the affairs, finances and accounts of
the Lessee with any of its officers or
directors;
(xii) not sell, transfer, lease, assign or
otherwise convey or dispose of more than 25%<PAGE>
16
of its assets (whether now owned or hereafter
acquired), in any single or series of
transactions, whether or not related, except
for dispositions of current assets in the
ordinary course of business as presently
conducted, if immediately prior to such sale,
transfer, lease, assignment, conveyance or
disposition or as a result of such sale,
transfer, lease, assignment, conveyance or
disposition, the senior unsecured debt of the
Lessee shall not be rated at least investment
grade by S&P or Moody's.
(xiii) comply with the Letter Agreement and such
other Basic Documents to which the Lessee is
a party in accordance with the respective
terms and conditions set forth herein and
therein; and
(xiv) except for Permitted Liens, permit the
creation of any Liens on the Collateral.
Notwithstanding the foregoing provisions of this Section 9(c),
the Lessee may contest by appropriate proceedings conducted in
good faith and due diligence, the amount, validity or
application, in whole or in part of any fee, tax, assessment or
government charge or levy, or any legal requirement, provided
that the Lessee shall have set aside on its books adequate
reserves, if required in accordance with generally accepted
accounting principles with respect thereto and shall furnish such
security, if any, as may be required in the proceeding.
10. GPU Events. It shall be a default hereunder if General
Public Utilities Corporation (a) fails to maintain at all times
beneficial ownership of at least 75% of all outstanding shares of
common stock of each of the Lessee, Met-Ed and JCP&L; or
(b) pledges, grants options on, create any charge on or security
interest in, or otherwise subjects to any charge or encumbrance,
any of the common stock of the Lessee, Met-Ed or JCP&L unless the
obligations hereunder are secured ratably and with equal
priority, in form and substance reasonably satisfactory to the
Majority Banks.
11. Credit Agreement and Notes. The Lessee hereby
acknowledges receipt of executed counterparts of the Credit
Agreement and photostatic copies of the Notes evidencing the
Loans, and consents to all of the terms and provisions of the
Credit Agreement and the Notes.<PAGE>
17
12. Consent to Assignment; Direct Payment of Payments Under
the Fuel Lease.
(a) Consent to Assignment. The Lessee hereby
acknowledges notice of and consents to all the terms and
provisions of the Security Agreement and hereby confirms to and
agrees with the Secured Parties that all representations,
warranties, indemnities and agreements of the Lessee contained in
this Letter Agreement and each other Basic Document to which the
Lessee is a party shall inure to the benefit of, and shall be
enforceable by, the Secured Parties to the same extent as if such
Secured Parties were originally parties to or named in the such
documents and agreements. The Lessee further acknowledges and
consents to the assignment and transfer, and any future
assignments and transfers, to the Secured Parties by the Company
of the Company's right to exercise any and all of its rights,
remedies, powers and privileges (but none of its obligations,
duties or liabilities) under the Fuel Lease, the Assigned
Agreements and each other Basic Document to which the Lessee is a
party. The Lessee hereby agrees with the Secured Parties to
comply with any exercise by the Secured Parties, either directly
or through the Company, of any rights, remedies, powers or
privileges pursuant to the Security Agreement. The Secured
Parties acknowledge that neither the Security Agreement nor this
Section 12 shall in any way add to the obligations of the Lessee
(except those obligations of the Lessee to any Person, which, if
not previously so, hereby become enforceable directly by the
Secured Parties) under the Fuel Lease, the Assigned Agreements
and each other Basic Document to which the Lessee is a party.
Notwithstanding the foregoing, so long as no Lease Event of
Default shall have occurred and be continuing, the Lessee shall
have exclusive right to possession and use of the Nuclear
Material in accordance with the Fuel Lease and may use such
Nuclear Material for any lawful purpose consistent with the Fuel
Lease.
(b) Direct Payment of Payments Under the Fuel Lease.
The Lessee acknowledges that it has been directed by the Company
to, and agrees that it will, make all payments of monies due and
to become due to the Company under the Fuel Lease, the Assigned
Agreements and each other Basic Document to which the Lessee is a
party, directly to the Collateral Agent, including, without
limitation, Basic Rent, Additional Rent, the purchase price of
Nuclear Material pursuant to Section 8(c), 8(d), 8(e) and 8(g) of
the Fuel Lease, payments pursuant to Sections 9(e), 14, 17 and 18
of the Fuel Lease in the manner and to the accounts of the
Secured Parties as specified in Section 3.03 of the Credit
Agreement.
13. Severability. Any provision of this Letter Agreement
which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such<PAGE>
18
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 Lessee hereby
waives any provision of law which renders any provision hereof
prohibited or unenforceable in any respect.
14. Indemnification. The Lessee shall pay and indemnify
and hold harmless the Administrative Agent and each Bank, and
their respective officers, directors, incorporators,
shareholders, partners, employees, agents and servants from and
against any and all liabilities (other than liabilities arising
out of the gross negligence or willful misconduct of such
Person), taxes, (excluding, however, taxes measured solely by the
net income of any Person indemnified or intended to be
indemnified pursuant to this Section 14, except as otherwise
provided in Section 14 hereof), losses, obligations, claims,
damages, penalties, causes of action, suits, costs and expenses
(including, without limitation, reasonable attorneys' and
accountants' fees and expenses) and judgments of any nature
arising from or in any way relating to any and all of the
following during the term of the Fuel Lease and thereafter:
(a) any injury to or disease, sickness or death of Persons, or
loss of or damage to property, occurring through or resulting
from any nuclear incident (as that term is defined in the Atomic
Energy Act, 42 U.S.C. Paragraph 2011 et seq.) involving or
connected in any way with the Nuclear Material or any portion
thereof, (a) the acquisition, ownership (including strict
liability of an owner or liability without fault), possession,
disposition, sale, use, nonuse, misuse, leasing, fabrication,
design, cycling, recycling, transportation, containerization,
cooling, processing, reprocessing, storing, condition,
management, operation, construction, maintenance, repair or
rebuilding of the Nuclear Material or any portion thereof or
resulting from the condition of adjoining and underlying land,
buildings, streets or ways, (a) any use, nonuse or condition of,
or any other matter of circumstance relating to, the Generating
Facility, any other property associated therewith or any
adjoining and underlying land, buildings, streets and ways,
(a) any violation or default, or alleged violation or default, of
the Fuel Lease or this Letter Agreement by or on behalf of
Lessee, or of any contracts or agreements to which the Lessee is
a party or by which it is bound, or any Legal Requirements,
(a) performance of any labor or services or the furnishing of any
materials or other property in respect of the Nuclear Material or
any portion thereof, (a) any infringement or alleged infringement
of any patent, copyright, trade secret or other similar right
relating to the Nuclear Material or any portion thereof,
(a) Lessee's agreements or obligations contained in the Fuel
Lease or this Letter Agreement, (a) any claim arising out of loss
of damage to the environment, (a) any claim arising out of strict<PAGE>
19
or absolute liability in tort, or (a) the offering and sale of
Commercial Paper. The Lessee also indemnifies each indemnitee,
as aforesaid, from and against all other liabilities, taxes,
losses, obligations, claims, damages, penalties, causes of
action, suits, costs and expenses (including, without limitation,
reasonable attorneys' and accountants' fees and expenses) and
judgments of any nature which may be imposed on, incurred by, or
asserted at any time against any indemnitee in any way relating
to or arising out of the performance of this Letter Agreement,
the Fuel Lease or any other Basic Document to which Lessee is a
party, provided, except for claims of a nature contemplated by
(i) above, that the Lessee shall not be required to indemnify any
indemnitee with respect to any liability relating to or arising
out of indemnitee's gross negligence or willful misconduct and
provided, further, that the foregoing immunity shall not limit
the terms of any indemnity that the Lessee may grant separately
to any indemnitee pursuant to any separate agreement. In the
event that any action, suit or proceeding is brought against the
Company or any other Person indemnified or intended to be
indemnified pursuant to this Section 14 by reason of any such
occurrence, the Lessee shall, at the Lessee's expense, resist and
defend such action, suit or proceeding or cause the same to be
resisted and defended by counsel designated by the Lessee and
reasonably acceptable to the Person or Persons indemnified or
intended to be indemnified under this Section 14 provided there
is no conflict of interest with the Person or Persons indemnified
or intended to be indemnified under this Section 14. In the
event a conflict of interest contemplated by the proviso of the
immediately preceding sentence shall exist, then the Person or
Persons as to which such conflict exists may be defended by
counsel of its or their choice at Lessee's expense, provided
Lessee's obligation for such expense shall be limited to one firm
for all such Persons as to which such a conflict exists. The
obligations of the Lessee under this Section 14 shall survive any
termination of this Letter Agreement, the Credit Agreement, the
Fuel Lease or the Security Agreement, in whole or in part.
15. No Waiver; Amendments. Neither the Administrative
Agent, the Collateral Agent, the Banks, the Company nor the
Lessee shall, by any act, delay, omission or otherwise, be deemed
to have waived any of its rights and remedies hereunder, and no
waiver shall be valid unless in writing signed by the party or
parties sought to be bound thereby. A waiver by the
Administrative Agent, the Collateral Agent, the Banks, the
Company or the Lessee of any of their respective rights or
remedies hereunder on any one occasion shall not be construed as
a bar to any right or remedy which the Administrative Agent, the
Banks, the Company or the Lessee, as applicable, would otherwise
have had on any future occasion. No failure to exercise nor any
delay in exercise of any such right or remedy hereunder shall
preclude any other or future exercise or partial exercise of any
other right or remedy. The rights and remedies hereunder<PAGE>
20
provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies
provided by law. None of the terms or provisions of this Letter
Agreement may be waived, altered, modified or amended except by
an instrument in writing, duly executed by the party or parties
sought to be bound thereby.
16. Successors and Assigns. This Letter Agreement shall
bind the successors and assigns of the Lessee and the Company and
shall inure to the benefit of permitted successors and assigns
of either. The Letter Agreement shall not be assignable by the
Lessee or the Company, either voluntarily or by operation of law,
unless consented to by the Administrative Agent and the Majority
Banks. No permitted assignment by the Lessee or the Company
shall release the Lessee or the Company from any of its
obligations hereunder. This Letter Agreement shall inure to and
shall be binding upon the successors and assigns of the
Administrative Agent and the Banks.
17. Notices. Any notice, demand or other communication
which by any provision of this Letter Agreement is required or
provided to be given shall be deemed to have been delivered if in
writing addressed as provided below and actually delivered by
mail, courier or facsimile to the following addresses:
(a) except as otherwise requested in writing by the
Administrative Agent or any Bank, any notice, demand or
communication which by any provision of this Letter
Agreement is required or provided to be given to the
Administrative Agent or any Bank shall be deemed to
have been delivered to the Administrative Agent or any
Bank if a single copy thereof is delivered to the
Administrative Agent at its address set forth in
Section 12.01 of the Credit Agreement or at such other
address as either may have furnished the Company and
the Lessee in writing;
(b) if to the Company (with copies to the Lessee at the
address listed below), TMI-1 Fuel Corp. c/o United
States Trust Company of New York, 114 West 47th Street,
New York, New York 10036, marked for the attention of
the Corporate Trust and Agency Division, telecopy
number 212-852-1626, or at such other address as it may
have furnished in writing to the Administrative Agent
and the Lessee; or
(c) if to the Lessee, to Pennsylvania Electric Company,
2800 Pottsville Pike, Reading Pennsylvania 19640-0001;
Attention: Comptroller; Telecopier: (215) 921-6676],
and to GPU Service Corporation, 100 Interpace Parkway,
Parsippany, New Jersey 07054-1149, marked for the
attention of the Assistant Treasurer, Telecopier: (201)<PAGE>
21
263-6397, or at such other address or addresses as the
Lessee may have furnished to the Administrative Agent
and the Company.
18. Governing Law. This Letter Agreement shall be governed
by, and be construed and interpreted in accordance with the laws
of the State of New York.<PAGE>
22
IN WITNESS WHEREOF, the undersigned have caused this
Letter Agreement to be executed as of the date first above
written.
PENNSYLVANIA ELECTRIC COMPANY
By
Vice President
TMI-1 FUEL CORP.
By
Title
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH,
as Administrative Agent
By
Title <PAGE>
EXHIBIT B-2(b)(iv)
K&S DRAFT
10.10.95
EXHIBIT L
to Credit Agreement
JERSEY CENTRAL POWER & LIGHT COMPANY
LESSEE'S LETTER AGREEMENT
Regarding
OYSTER CREEK FUEL CORP.
Dated as of November __, 1995<PAGE>
TABLE OF CONTENTS
Section Page
1. Definitions . . . . . . . . . . . . . . . . . . . . . . 1
2. Performance of Fuel Lease and Liens. . . . . . . . . . . 1
3. Security Interest of Collateral . . . . . . . . . . . . 2
4. Sale of Nuclear Material and Assignment of Rights
under Nuclear Material Contracts . . . . . . . . . . . 2
5. Collateral Equivalence Test; No Additional Collateral or
Covenants; Condemnation Statements; Exercise of
Rights of Secured Parties . . . . . . . . . . . . . . . 3
6. Fuel Management; Quiet Enjoyment . . . . . . . . . . . . 4
7. Insurance . . . . . . . . . . . . . . . . . . . . . . . 5
8. Representations and Warranties . . . . . . . . . . . . . 5
9. General Covenants of the Lessee . . . . . . . . . . . . 10
10. GPU Events . . . . . . . . . . . . . . . . . . . . . . . 15
11. Credit Agreement and Notes . . . . . . . . . . . . . . . 16
12. Consent to Assignment; Direct Payment of
Payments Under the Fuel Lease . . . . . . . . . . . . 16
13. Severability . . . . . . . . . . . . . . . . . . . . . . 17
14. Indemnification. . . . . . . . . . . . . . . . . . . . . 17
15. No Waiver; Amendments . . . . . . . . . . . . . . . . . 18
16. Successors and Assigns . . . . . . . . . . . . . . . . . 19
17. Notices . . . . . . . . . . . . . . . . . . . . . . . . 19
18. Governing Law . . . . . . . . . . . . . . . . . . . . . 20<PAGE>
THIS LESSEE'S LETTER AGREEMENT (the "Letter Agreement") is
made as of November __, 1995, by and between Jersey Central
Power & Light Company, a New Jersey corporation (the "Lessee"),
Oyster Creek Fuel Corp, a Delaware corporation (the "Company"),
and Union Bank of Switzerland, New York Branch, as Administrative
Agent (the "Administrative Agent"), for the Banks party to the
Credit Agreement referred to below (the "Banks").
WHEREAS, the Lessee has entered into the Amended and
Restated Nuclear Material Lease Agreement, dated as of
November __, 1995 ("Fuel Lease"), with the Company in order to
enable the Company to obtain financing for the acquisition,
processing and use of Nuclear Material in the Generating
Facility; and
WHEREAS, pursuant to the Fuel Lease, the Company has agreed
to make payments due to Manufacturers and/or to reimburse the
Lessee for payments previously made to Manufacturers with respect
to the Nuclear Material; and
WHEREAS, in order to finance the cost of such Nuclear
Material, the Company proposes to (i) sell its Commercial Paper
which shall be entitled to the benefit of a letter of credit to
be issued by the Issuing Bank, and (ii) obtain the Commitment of
the Issuing Bank to issue its letter of credit and of each Bank
to make Loans from time to time as hereinafter provided; and
WHEREAS, the Lessee has agreed to make payments under the
Fuel Lease sufficient to enable the Company to meet its
obligations under the Company's financing arrangements, including
the Company's obligations under the Credit Agreement, dated as of
November __, 1995, among the Company, the Banks, the Issuing Bank
and the Administrative Agent (the "Credit Agreement");
NOW, THEREFORE, in consideration of the premises and mutual
agreements herein contained and other good and valuable
consideration, so long as any of the Loans, the Letter of Credit
or the Commercial Paper shall remain outstanding, or the
Commitments shall be continuing, notwithstanding any provision of
the Fuel Lease or any other agreement of the Lessee to the
contrary, the Lessee, the Company, the Administrative Agent and
the Banks agree that:
1. Definitions. Unless the context otherwise specifies or
requires, each term defined in the Credit Agreement or Appendix A
to the Fuel Lease, shall, when used in this Letter Agreement,
have the meaning indicated in the Credit Agreement or Appendix A
or set forth in the paragraph indicated therein.
2. Performance of Fuel Lease and Liens. The Lessee will
perform and comply with all the terms of the Fuel Lease to be
performed or complied with by it and will not omit to take an<PAGE>
2
action the omission of which would cause a Lease Event of
Default. The Lessee acknowledges that, except as otherwise
provided in the Fuel Lease, its obligations as set forth under
the Fuel Lease are absolute and unconditional. The Lessee will
not directly or indirectly create or permit to be created or to
remain, and will promptly take such action as may be necessary to
discharge, any Lien on any Collateral except Permitted Liens.
3. Security Interest of Collateral. The Lessee represents
that no other financing statement (other that those naming the
Secured Parties as a secured party) covering all or any part of
the Collateral is on file in any public office. The Lessee shall
make, or shall cause to be made, all filings and recordings, and
shall take, or cause to be taken, such other actions, including
filing all continuation statements, necessary to establish,
preserve and perfect the Secured Parties' lien on and security
interest in, the Collateral as a legal, valid and enforceable
first priority lien and security interest, or purchase money
security interest, as the case may be, therein, subject only to
the existence or priority of any Permitted Lien, and the Lessee
represents that all such filings, recordings and other actions
have been duly made. The Lessee shall deliver to the
Administrative Agent evidence of the due filings of any
continuation statements to be delivered to the Administrative
Agent within the time period specified in Section 8.05 of the
Credit Agreement. In no event will the Lessee permit the Nuclear
Material to enter any jurisdiction in which all necessary action
has not been taken to establish, maintain and protect the Secured
Parties' first priority perfected lien and security interest in
the Nuclear Material under the Security Agreement, subject only
to Permitted Liens.
4. Sale of Nuclear Material and Assignment of Rights under
Nuclear Material Contracts.
(a) In the event that the Lessee desires the Company,
on behalf of the Lessee, to purchase Nuclear Material or to have
services performed on such Nuclear Material pursuant to any
Nuclear Material Contract, the Lessee shall provide the Company
with an Assignment Agreement and a Manufacturer's Consent, both
substantially in the form of Exhibit D to the Fuel Lease, with
such changes to Exhibit 2 to Exhibit D as the Secured Parties may
consent to in writing, which consent shall not be unreasonably
withheld, with respect to such Nuclear Material Contract on or
before the date on which the Company is to purchase such Nuclear
Material or to have such services performed pursuant thereto.
Notwithstanding the foregoing, the Lessee shall not be required
to have obtained a Manufacturer's Consent in any instance where
the Manufacturer's obligations under the applicable Nuclear
Material Contract have been fully discharged and performed, and
the Manufacturer's warranties with respect to such Nuclear
Material Contract have expired, and the Lessee has delivered to<PAGE>
3
the Company and the Collateral Agent a certificate to such
effect.
(b) The Lessee at its expense will perform and comply
with all the terms and provisions of each Assigned Agreement to
be performed or complied with by it, will maintain each Assigned
Agreement in full force and effect, will enforce each of the
Assigned Agreements in accordance with their respective terms,
and will take all such action to that end as from time to time
may reasonably be requested by the Majority Banks.
(c) The Lessee shall not enter into or consent to or
permit any cancellation, termination, amendment, supplement or
modification of or waiver with respect to any Assigned Agreement
without the prior written consent of the Majority Banks.
(d) The Lessee will from time to time, upon request of
the Administrative Agent, furnish to the Administrative Agent
such information concerning the Nuclear Material or any Assigned
Agreement, as any Bank may reasonably request.
(e) The Lessee will not change its principal place of
business or chief executive offices from the location specified
in paragraph 8(a) hereof or remove therefrom its records
concerning the Assigned Agreements unless it gives the
Administrative Agent at least 30 days' prior written notice
thereof.
5. Collateral Equivalence Test; No Additional Collateral
or Covenants; Condemnation Statements; Exercise of Rights of
Secured Parties.
(a) The Lessee shall not permit the sum of aggregate
Stipulated Casualty Value of the Nuclear Material leased under
the Fuel Lease and Cash Collateral to be less than Outstandings.
(b) The Lessee shall not provide to any Person (other
than the Banks), in order to induce such Person to extend credit
to the Company, any collateral or any guarantee or other
assurance against loss or non-payment, nor shall the Lessee
consent to the provision thereof by the Company.
(c) The Lessee shall not agree to any affirmative or
negative covenant with respect to the condition, financial or
otherwise, of the Lessee with any Person in order to induce such
Person to extend credit to the Company.
(d) The Lessee shall not sell, assign, convey, pledge
or otherwise dispose of or encumber in any manner any interest it
may have in the Trust or any rights it may have under the Trust
Agreement. The Lessee shall not direct the Owner Trustee to
liquidate, dissolve, merge or consolidate the Company except if<PAGE>
4
such transaction is consented to in writing by the Banks. The
Lessee shall not direct the Owner Trustee to take any action
under the Trust Agreement which is inconsistent with the duties
imposed upon the Company by the Basic Documents and any other
agreements, documents, instruments and articles executed and
delivered, and to be executed and delivered, by the Owner Trustee
in connection therewith.
(e) The Nuclear Material leased under the Fuel Lease
shall constitute the Lessee's entire ownership interest in the
items used or to be used by it as nuclear fuel in the Generating
Facility. The Lessee agrees that 100% of the Lessor's ownership
interest in any Nuclear Material which is subject to the Fuel
Lease will be leased to the Lessee. The Lessee further agrees
not to take any action under the terms of the Fuel Lease,
including, but not limited to, the delivery of any Leasing
Record, which would result in 100% of the Lessor's ownership
interest in any such Nuclear Material not being so leased.
(f) As provided in the Security Agreement, (i) the
Secured Parties may, on and after the occurrence of a Credit
Agreement Default or Credit Agreement Event of Default, pursuant
to Section 10 of the Security Agreement, exercise any and all of
the Company's rights under the Fuel Lease, the Assigned
Agreements and each other Basic Document to which the Lessee is a
party, and (i) if a Lease Event of Default occurs and is
continuing, the Secured Parties may, pursuant to Section 10 of
the Security Agreement, enforce and exercise any and all of the
Company's rights under the Fuel Lease, the Assigned Agreements
and each other Basic Document to which the Lessee is a party, or
the rights and remedies granted to the Secured Parties under the
Security Agreement at their election and in their sole
discretion, and, in the event that any Secured Parties are
permitted to exercise such rights pursuant to Section 10 of the
Security Agreement, the Lessee agrees that the Collateral Agent
may do so either in concert with or in place of the Company, and
the Lessee shall assist in, comply with and perform in accordance
with all rights or remedies so enforced or exercised by the
Collateral Agent for the ratable benefit of the Secured Parties.
6. Fuel Management; Quiet Enjoyment. The occurrence of a
Credit Agreement Default, a Credit Agreement Event of Default,
Lease Event of Default or an event or condition which would, with
the lapse of time or the giving of notice or both, become a Lease
Event of Default, shall not affect the Lessee's sole obligation
to engage in Fuel Management; provided that, upon the occurrence
of a Credit Agreement Event of Default or Lease Event of Default,
the Majority Secured Parties may, at their option, by written
notice to the Lessee, elect to revoke such power and authority,
in which case the Person from time to time designated by the
Majority Secured Parties may (but shall not be obligated to), to
the extent that the Majority Secured Parties desire and to the<PAGE>
5
extent permitted by law, engage in Fuel Management and/or remove
all or any part of the responsibility for Fuel Management from
the Lessee; provided, however, that, subject to the right of the
Secured Parties to exercise any or all rights granted to the
Secured Parties under the Security Agreement, the rights granted
to the Secured Parties under this Section 6 shall not be
construed to include the right to direct, whether directly or
indirectly, the operation of the Generating Facility. In the
event the Majority Secured Parties, in accordance with the
preceding sentence, shall revoke the Lessee's power and authority
to engage in Fuel Management, all rights conferred by the Company
to the Lessee pursuant to Section 3 of the Fuel Lease shall be
deemed to be automatically reassigned to the Company and the
Lessee shall execute such documents and instruments as the
Secured Parties shall request to further confirm such assignment.
7. Insurance. Each year, the Lessee will furnish the
Administrative Agent and each Bank a detailed statement
certified by an officer of Lessee setting forth (i) the location
of all Nuclear Material and (i) the insurance policies and
indemnification agreements provided pursuant to Sections 14 and
17 of the Fuel Lease and certifying that such insurance policies
and indemnification agreements comply with the requirements of
the Fuel Lease. In addition, the Lessee shall promptly furnish
at any time to the Administrative Agent and any Bank such
information as any such Bank shall reasonably request concerning
location of Nuclear Material, insurance policies and
indemnification agreements and Manufacturers or other third
parties with whom arrangements exist with respect to
transportation, storage or processing of Nuclear Material.
8. Representations and Warranties. The Lessee hereby
represents and warrants to the Company, the Administrative Agent
and the Banks that as of the date hereof:
(a) Organization and Standing. The Lessee is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of New Jersey, and is
qualified to do business in each state or other jurisdiction in
which the nature of its business makes such qualification
necessary, except where the failure to be so qualified would not
have a material adverse effect on its ability to perform its
obligations under this Letter Agreement or each other Basic
Document to which the Lessee is a party. The Lessee's chief
executive office is located at 300 Madison Avenue, Morristown,
New Jersey 07960.
(b) Corporate Authority. The Lessee has the corporate
power and authority to execute and perform this Letter Agreement
and the Fuel Lease and to lease the Nuclear Material thereunder.
The execution and delivery of this Letter Agreement and the Fuel
Lease and the lease of the Nuclear Material thereunder will not<PAGE>
6
have a material adverse effect on the financial condition,
results of operations, business, properties or operations of the
Lessee.
(c) Compliance with Other Instruments, etc. The
execution, delivery and performance by the Lessee of this Letter
Agreement and each Basic Document to which the Lessee is a party,
and other related instruments, documents and agreements, and the
compliance by the Lessee with the terms hereof and thereof,
(i) have been duly and legally authorized by appropriate
corporate action taken by the Lessee, (i) are not in
contravention of, and will not result in a violation or breach
of, any of the terms of the Lessee's articles of incorporation,
its by-laws or of any provisions relating to shares of the
capital stock of the Lessee and (i) will not violate or
constitute a breach of any provision of (x) any applicable law,
order, rule or regulation, rule or regulation of any governmental
authority (except in those cases where non-compliance with any
such law, order, rule or regulation could not reasonably be
expected to have a material adverse effect on the financial
condition, results of operations, business, properties or
operations of the Lessee or its ability to perform its
obligations hereunder or under each Basic Document) or (y) any
indenture, agreement or other instrument to which the Lessee is
party, or by or under which the Lessee or any of the Lessee's
property is bound, or be in conflict with, result in breach of,
or constitute (with due notice and/or lapse of time) a default
under any such indenture, agreement or instrument, or result in
the creation or imposition of any Lien upon any of the Lessee's
property or assets or any Nuclear Material.
(d) Legal Obligations. This Letter Agreement and the
Fuel Lease have been executed by a duly authorized officer of the
Lessee, and this Letter Agreement and the Fuel Lease constitute,
and each Leasing Record, when executed by a duly authorized
officer of the Lessee and delivered to the Company, will
constitute, the legal, valid and binding obligations of the
Lessee, enforceable against the Lessee in accordance with their
respective terms, except as the enforceability thereof may be
limited by the Atomic Energy Act and the rules, regulations or
orders issued pursuant thereto, or by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights
in general, and except as the availability of the remedy of
specific performance is subject to general principles of equity
(regardless of whether such remedy is sought in a proceeding in
equity or at law).
(e) Governmental Consents. Neither the execution and
delivery of this Letter Agreement, the Fuel Lease or any Leasing
Record by the Lessee, nor the performance by the Lessee of all of
its obligations hereunder or thereunder, requires the consent or
approval of, the giving of notice to, or the registration, filing<PAGE>
7
or recording with, or the taking of any other action in respect
of, any Federal, state, local or foreign government or
governmental authority or agency or any other person except for
the order of the Securities and Exchange Commission (the "SEC"),
dated _________, 1995, the order of the PaPUC, dated ________,
1995, and the filing of any statement or other instrument
pursuant to Section 10(b) of the Fuel Lease, and except for the
filing of certificates by the Lessee with the SEC pursuant to SEC
Rule 24 under the Public Utility Holding Company Act to report on
the transactions authorized by such SEC order, the filing of
which is not necessary to the execution or delivery of this
Letter Agreement, the Fuel Lease or any Leasing Record by the
Lessee or for the performance by the Lessee of any of its
obligations hereunder or thereunder, and the failure to file any
of which will not affect the validity or enforceability of any of
this Letter Agreement, the Fuel Lease or any Leasing Record.
(f) Consents and Permits. The Lessee possesses all
material licenses, permits, franchises and certificates which
are necessary or appropriate to own or operate its material
properties and assets and to conduct its business as now
conducted.
(g) Litigation. There is no litigation or other
proceeding now pending or, to the best of the Lessee's knowledge,
threatened, against or affecting the Lessee, before any court,
arbitrator or administrative or governmental agency (i) which
would adversely affect or impair the title of the Company to the
Nuclear Material, (i) which questions the validity or
enforceability of this Letter Agreement, the Fuel Lease, the
Assigned Agreements or any other Basic Document to which the
Lessee is a party or any action taken or to be taken by the
Lessee pursuant to or in connection with this Letter Agreement,
or (i) except as disclosed in the Lessee's Annual Report on Form
10-K for the year ended December 31, 1994 and Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995, copies of which
have previously been delivered to the Administrative Agent and
the Banks, which, if decided adversely to the Lessee, would
materially adversely affect the condition, financial or
otherwise, of the Lessee.
(h) Taxes. The Lessee has filed or caused to be filed
all tax returns which are required to be filed, and has paid or
caused to be paid all taxes as shown on said returns and all
assessments received by it to the extent that such taxes and
assessments have become due, except for taxes and assessments
which are being contested in good faith and by appropriate
proceedings and as to which it has provided reserves which are
adequate in accordance with generally accepted accounting
principles.<PAGE>
8
(i) Reaffirmation and Restatement of Representations
and Warranties. The Lessee repeats and reaffirms as of the date
hereof for the benefit of the Administrative Agent and each Bank
the representations and warranties made by the Lessee in the Fuel
Lease as though set forth in full herein with the same effect as
though such representations and warranties had been made on and
as of the date hereof. In addition, the Lessee represents and
warrants that as of the date hereof (i) the Lessee is in
compliance with all the terms and provisions set forth in the
Fuel Lease on its part to be observed or performed, (i) no
Terminating Event has occurred and no event has occurred which,
with the lapse of time or the giving of notice, or both, would
constitute such a Terminating Event, and (i) no Lease Event of
Default has occurred and is continuing and no event has occurred
and is continuing on such date which, with the lapse of time or
the giving of notice, or both, would constitute a Lease Event of
Default.
(j) First Perfected Security Interest. Except for
Permitted Liens, upon the execution and delivery of this Letter
Agreement and the Security Agreement and the due filing of the
Uniform Commercial Code financing statements required to be
executed and filed from time to time, the Secured Parties will
have a legal, valid and enforceable first priority security
interest (i) in the rights, titles and interests of the Company
in and to the Fuel Lease and (i) in and to the other Collateral.
Such security interest will constitute a perfected security
interest in the Collateral consisting of Nuclear Material
Contracts and the Collateral consisting of Nuclear Material
located in the States of [Illinois, New Jersey and Pennsylvania],
except for any such Collateral which consists of cash,
instruments (as defined in the New York Uniform Commercial Code)
and other items in which a security interest may only be
perfected by possession, enforceable against all third parties as
security for the Secured Obligations.
(k) No Material Adverse Change. Since June 30, 1995,
there has been no material adverse change in the financial
condition, results of operations, business, properties or
operations of the Lessee or in its ability to perform its
obligations under the Basic Documents.
(l) No Defaults. The Lessee is not in default under
any bond, debenture, note or any other evidence of Obligations
for Borrowed Money or Deferred Purchase Price or any mortgage,
deed of trust, indenture, loan agreement or other agreement
relating thereto, where the amount thereof is in excess of
$20,000,000.
(m) Pension Plans. No accumulated funding deficiency
(as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, exists with respect to any plan (other<PAGE>
9
than a multiemployer plan). No liability to the Pension Benefit
Guaranty Corporation has been, or is expected by the Lessee to
be, incurred with respect to any plan (other than a multiemployer
plan) by the Lessee which is or would be materially adverse to
the Lessee. The Lessee has not incurred and presently does not
expect to incur any withdrawal liability under Title IV of ERISA
with respect to any multiemployer plan which is or would be
materially adverse to the Lessee. Neither the execution and
delivery by the Company of the Credit Agreement and the other
Basic Documents, and the issuance of the Commercial Paper, nor
the execution and delivery by the Lessee of this Letter
Agreement, the Trust Agreement and each other Basic Document to
which the Lessee is a party, will involve any transaction which
is subject to the prohibitions of Section 406 of ERISA or in
connection with which a tax could be imposed pursuant to
Section 4975. As used herein, the term "plan" shall mean an
"employee pension benefit plan" (as defined in Section 3 of
ERISA) which is and has been established or maintained, or to
which contributions are or have been made, by the Lessee or by
any trade or business, whether or not incorporated, which,
together with the Lessee is under common control as described in
Section 414(b) or (c) of the Code, and the term "multiemployer
plan" shall mean any plan which is a "multiemployer plan" (as
such term is defined in Section 4001(a)(3) of ERISA).
(n) Financial Statements. The audited balance sheet
of the Lessee as of December 31, 1994, and the related statements
of income and cash flows (including the notes thereto) of the
Lessee for the year then ended, copies of which have been
delivered to the Company, the Administrative Agent and the Banks,
and all other annual or quarterly financial statements including,
without limitation, the quarterly statement dated as of June 30,
1995 so delivered fairly present the financial condition of the
Lessee on the dates for which, and the results of its operations
for the periods for which, the same have been furnished and have
been prepared in accordance with generally accepted accounting
principles consistently applied.
(o) Nuclear Material. The Nuclear Material is free
and clear of any Lien in favor of any Person claiming by, through
or under the Lessee or any Affiliate thereof, other than
Permitted Liens. No default or event which with the giving of
notice or lapse of time would constitute a default has occurred
and is continuing under any Nuclear Material Contract.
(p) Disclosure. Neither the representations in this
Letter Agreement, or in any other document, certificate or
statement furnished in writing to the Administrative Agent or any
Bank by or on behalf of the Lessee in connection with the
transactions contemplated hereby, nor the information disclosed
in the Lessee's Annual Report on Form 10-K for the year ended
December 31, 1994 or Quarterly Report on Form 10-Q for the<PAGE>
10
quarter ended June 30, 1995, contained as of its date, any untrue
statement of a material fact or omitted to state a material fact
necessary in order to make such representations or information
not misleading in light of the circumstances under which they
were made.
(q) Collateral Equivalence Test Met. The sum of the
aggregate Stipulated Casualty Value of the Nuclear Material
leased under the Fuel Lease and the Cash Collateral equals or
exceeds the Outstandings.
9. General Covenants of the Lessee.
(a) Information. The Lessee will furnish to the
Company and the Administrative Agent in sufficient copies for
each Bank:
(i) Quarterly Statements. As soon as practicable
after the end of each of the first three quarterly fiscal
periods in each fiscal year of the Lessee, and in any event
within 60 days thereafter, copies of:
(A) a balance sheet of the Lessee as at the end of
such quarter, and (B) statements of income and cash
flows of the Lessee for such quarter and for the
twelve-month period ending as of the end of such
quarter and (in the case of the second and third
quarters) for the portion of the fiscal year ending
with the end of such quarter, setting forth in each
case in comparative form the figures for the
corresponding periods in the previous fiscal year, all
in reasonable detail and certified as complete and
correct, subject to changes resulting from year-end
adjustments, by a principal financial officer of the
Lessee; provided that it is understood that the
delivery of the Lessee's Quarterly Report on Form 10-Q
shall be deemed to satisfy the requirements with respec
t to such financial statements;
(ii) Annual Statements. As soon as practicable
after the end of each fiscal year of the Lessee, and in any
event within 120 days thereafter, copies of:
(A) a balance sheet of the Lessee at the end of such
fiscal year, and (B) statements of income and cash flow
s of the Lessee for such year, setting forth in each ca
se in comparative form the figures for the previous
fiscal year, all in reasonable detail and accompanied
by an opinion thereon of independent certified public
accountants of recognized national standing selected by
the Lessee, which opinion shall state that such
financial statements have been prepared in accordance<PAGE>
11
with generally accepted accounting principles
consistently applied (except for changes in application
in which such accountants concur) and that the
examination of such accountants in connection with such
financial statements has been made in accordance with
generally accepted auditing standards; provided that it
is understood that the delivery of the Lessee's Annual
Report on Form 10-K shall be deemed to satisfy the
requirement with respect to such financial statements;
(iii) Officer's Compliance Certificate.
Simultaneously with the financial statements referred to in
Sections 9(a)(i) and (ii), a certificate of an authorized
officer of the Lessee stating that such officer has reviewed
the relevant terms and conditions of the Fuel Lease and
other Basic Documents to which the Lessee is a party, and
has made, or caused to be made, under such officer's
supervision, a review of the transactions and financial
condition of the Lessee from the beginning of the accounting
period covered by the income statements being delivered
therewith to the date of the certificate, and that the
Lessee has observed or performed all of its covenants and
other agreements, and satisfied every condition, contained
in this Letter Agreement, the Fuel Lease and any other Basic
Document to which the Lessee is a party, and no Terminating
Event, Lease Event of Default or default or event of default
under any such Basic Document has occurred and is continuing
and no event has occurred and is continuing which, with the
lapse of time or the giving of notice, or both, would
constitute a Terminating Event, Lease Event of Default or a
default or event of default under any such Basic Document
or, if such condition or event has occurred and is
continuing, a statement as to the nature thereof and the
action which is proposed to be taken with respect thereto;
(iv) Auditor's Compliance Certificate.
Simultaneously with the financial statements referred to in
Section 9(a)(ii), a certificate of the independent public
accountants who audited such statements stating that such
accountants have reviewed the relevant terms and conditions
of the Fuel Lease and other Basic Agreements to which the
Lessee is a party, and that, in making the examination
necessary for the audit of such statements, they have
obtained no knowledge of any condition or event which
constitutes or which with notice or lapse of time or both
would constitute a Terminating Event, Lease Event of Default
or default or event of default under any such Basic
Document, or if such accountants shall have obtained
knowledge of any such condition or event, specifying in such
certificate each such condition or event of which they have
knowledge and the nature and status thereof;<PAGE>
12
(v) Notices Required under the Basic Documents.
Immediately upon delivery to the Lessee or the Company, all
notices, consents, documents, certificates or instruments of
any kind relating to the Lessee required pursuant to the
Fuel Lease;
(vi) Defaults. (A) Promptly upon becoming aware
of the occurrence thereof, notice of any Terminating Event,
Lease Event of Default or any event which, with the lapse of
time or the giving of notice, or both, would constitute a
Terminating Event or a Lease Event of Default, and
(A) within 10 days of becoming aware of the occurrence
thereof, notice of any other material event affecting the
Lessee's obligations under any Basic Document or any Nuclear
Material Contract (except to the extent such event has
previously been disclosed in the Lessee's SEC reports
delivered pursuant to clause (viii) below);
(vii) Notice of Claimed Default. Immediately upon
becoming aware that the holder or holders of any evidence of
Obligations for Borrowed Money or Deferred Purchase Price or
other security of the Lessee or any subsidiary exceeding
$20,000,000 in the aggregate have given notice (or taken any
other action) with respect to a claimed default, breach or
event of default, a notice describing the notice given (or
action taken) and the nature of the claimed default, breach,
or event of default;
(viii) SEC and Other Reports. Promptly after filing
thereof, copies of all regular and periodic reports and
registration statements which the Lessee may file with the
Securities and Exchange Commission ("SEC") or any
governmental agency substituted therefor and, promptly upon
written request therefor, copies of the financial statements
which the Lessee may file annually with any state regulatory
agency or agencies; and
(ix) Requested Information. With reasonable
promptness, such other data and information, including,
without limitation, information regarding Nuclear Material
or any Nuclear Material Contract, with respect to the
Lessee as from time to time may be reasonably requested by
the Administrative Agent or any Bank.
(b) Notice of Litigation. Immediately upon the Lessee
becoming aware thereof, written notice of (i) any litigation or
proceedings which would be required to be disclosed as an
exception to the representations and warranties contained herein
or in the Fuel Lease in order that such representations and
warranties would be true and correct on a continuing basis; and
(i) any dispute between the Lessee and any governmental authority
or other party relating to any part of the transactions<PAGE>
13
contemplated by this Letter Agreement or any of the other Basic
Documents to which the Lessee is a party which would have a
material adverse effect on the ability of the Lessee to carry out
its obligations hereunder or under any other Basic Document to
which the Lessee is a party; provided, however, that the notice
requirement in this Section 9(b) shall be satisfied if the Lessee
furnishes the Company and the Administrative Agent in sufficient
copies for each Bank a Current Report on Form 8-K regarding the
event requiring notice by the time that the Current Report is
required to be filed with the Securities and Exchange Commission.
(c) General Obligations. Subject to the last sentence of
this Section 9(c), the Lessee will:
(i) duly comply with all laws, rules, orders,
regulations or other valid requirements
(including, without limitation, any of the
foregoing which are applicable to Nuclear Material
or the operation of the Generating Facility) of
any governmental authority necessary to the
conduct of its business or to its properties or
assets, noncompliance with which could reasonably
be expected to have a material adverse effect upon
the transactions contemplated by this Letter
Agreement or any other Basic Document, or upon the
financial condition, results of operations,
business, properties or operations of the Lessee,
or the ability of the Lessee to carry out its
obligations under any Basic Document or this
Letter Agreement);
(ii) continue to engage principally in the electric
utility business;
(iii) obtain, maintain and keep in full force and effect
all consents, permits, licenses and approvals, the
absence of which would have a material adverse
effect upon the transactions contemplated by this
Letter Agreement or any other Basic Document to
which the Lessee is a party, or upon the financial
condition, results of operations, business,
properties or operations of the Lessee, or the
ability of the Lessee to carry out its obligations
under this Letter Agreement or any other Basic
Document to which the Lessee is a party;
(iv) maintain its material operating properties used or
useful in its business in good repair, working
order and condition consistent with prudent
utility practice; provided, however, that the
Lessee shall not be prevented from discontinuing
the operation and maintenance of any of its<PAGE>
14
properties if it shall determine that the
continued operation and maintenance of such
properties is no longer necessary, desirable or
permissible;
(v) pay when due all fees, taxes, assessments and
governmental charges or levies imposed upon it or
upon its income or profits or upon any property
belonging to it, and maintain appropriate reserves
for the accrual of the same in accordance with
generally accepted accounting principles;
(vi) except as permitted by clause (vii) below, at all
times maintain its corporate existence,
privileges, franchises and rights to carry on
business, and duly procure all renewals and
extensions thereof, if and when any shall be
necessary;
(vii) not consolidate or merge with, or sell or
otherwise dispose of all or substantially all of
its properties and assets to any Person unless
(i) the surviving or resulting entity is the
Lessee hereunder, (i) immediately after giving
effect thereto no Credit Agreement Event of
Default, Credit Agreement Default, Lease Event of
Default or event which with the giving of notice
or passage of time would constitute a Lease Event
of Default shall have occurred and be continuing,
and (i) the senior unsecured debt of the surviving
or resulting Lessee shall be rated at least
investment grade by S&P or Moody's;
(viii) perform and comply with each of the material
provisions of each material indenture, credit
agreement, contract or other agreement by which
the Lessee is bound, non-performance or non-
compliance with which would have a material
adverse effect upon its business or credit or in
any way affect its ability to perform its
obligations hereunder except material contracts or
other agreements being contested in good faith;
(ix) preserve and maintain its corporate existence in
the jurisdiction of its incorporation, and qualify
and remain qualified as a foreign corporation in
good standing in each jurisdiction in which such
qualification is necessary or desirable in view of
its business and operations or the ownership of
its properties, except where the failure to be so
qualified would not materially adversely affect
its financial condition, operations, properties or<PAGE>
15
business, and preserve its material rights,
franchises and privileges to conduct its business
substantially as conducted on the date hereof;
(x) maintain insurance in effect at all times in such
amounts as are available to the Lessee and
covering such risks as is usually carried by
companies of a similar size, engaged in similar
businesses and owning similar properties
(including, without limitation, the operation and
ownership of nuclear generating facilities) in the
same general geographical area in which the Lessee
operates, either with responsible and reputable
insurance companies or associations, or, in whole
or in part, by establishing reserves of one or
more insurance funds, either alone or with other
corporations or associations;
(xi) at any reasonable time and from time to time,
permit the Administrative Agent or any Bank or any
agents or representatives thereof to examine and
make copies of and abstracts from the records and
books of account of, and visit the properties of,
the Lessee and discuss the affairs, finances and
accounts of the Lessee with any of its officers or
directors;
(xii) not sell, transfer, lease, assign or otherwise
convey or dispose of more than 25% of its assets
(whether now owned or hereafter acquired), in any
single or series of transactions, whether or not
related, except for dispositions of current assets
in the ordinary course of business as presently
conducted, if immediately prior to such sale,
transfer, lease, assignment, conveyance or
disposition or as a result of such sale, transfer,
lease, assignment, conveyance or disposition, the
senior unsecured debt of the Lessee shall not be
rated at least investment grade by S&P or Moody's.
(xiii) comply with the Letter Agreement and such other
Basic Documents to which the Lessee is a party in
accordance with the respective terms and
conditions set forth herein and therein; and
(xiv) except for Permitted Liens, permit the creation of
any Liens on the Collateral.
Notwithstanding the foregoing provisions of this Section 9(c),
the Lessee may contest by appropriate proceedings conducted in
good faith and due diligence, the amount, validity or
application, in whole or in part of any fee, tax, assessment or<PAGE>
16
government charge or levy, or any legal requirement, provided
that the Lessee shall have set aside on its books adequate
reserves, if required in accordance with generally accepted
accounting principles with respect thereto and shall furnish such
security, if any, as may be required in the proceeding.
10. GPU Events. It shall be a default hereunder if
General Public Utilities Corporation (g) fails to maintain at all
times beneficial ownership of at least 75% of all outstanding
shares of common stock of each of the Lessee, Met-Ed and PE; or
(h) pledges, grants options on, create any charge on or security
interest in, or otherwise subjects to any charge or encumbrance,
any of the common stock of the Lessee, Met-Ed or PE unless the
obligations hereunder are secured ratably and with equal
priority, in form and substance reasonably satisfactory to the
Majority Banks.
11. Credit Agreement and Notes. The Lessee hereby
acknowledges receipt of executed counterparts of the Credit
Agreement and photostatic copies of the Notes evidencing the
Loans, and consents to all of the terms and provisions of the
Credit Agreement and the Notes.
12. Consent to Assignment; Direct Payment of Payments
Under the Fuel Lease.
(a) Consent to Assignment. The Lessee hereby
acknowledges notice of and consents to all the terms and
provisions of the Security Agreement and hereby confirms to and
agrees with the Secured Parties that all representations,
warranties, indemnities and agreements of the Lessee contained in
this Letter Agreement and each other Basic Document to which the
Lessee is a party shall inure to the benefit of, and shall be
enforceable by, the Secured Parties to the same extent as if such
Secured Parties were originally parties to or named in the such
documents and agreements. The Lessee further acknowledges and
consents to the assignment and transfer, and any future
assignments and transfers, to the Secured Parties by the Company
of the Company's right to exercise any and all of its rights,
remedies, powers and privileges (but none of its obligations,
duties or liabilities) under the Fuel Lease, the Assigned
Agreements and each other Basic Document to which the Lessee is a
party. The Lessee hereby agrees with the Secured Parties to
comply with any exercise by the Secured Parties, either directly
or through the Company, of any rights, remedies, powers or
privileges pursuant to the Security Agreement. The Secured
Parties acknowledge that neither the Security Agreement nor this
Section 12 shall in any way add to the obligations of the Lessee
(except those obligations of the Lessee to any Person, which, if
not previously so, hereby become enforceable directly by the
Secured Parties) under the Fuel Lease, the Assigned Agreements
and each other Basic Document to which the Lessee is a party.<PAGE>
17
Notwithstanding the foregoing, so long as no Lease Event of
Default shall have occurred and be continuing, the Lessee shall
have exclusive right to possession and use of the Nuclear
Material in accordance with the Fuel Lease and may use such
Nuclear Material for any lawful purpose consistent with the Fuel
Lease.
(b) Direct Payment of Payments Under the Fuel Lease. The
Lessee acknowledges that it has been directed by the Company to,
and agrees that it will, make all payments of monies due and to
become due to the Company under the Fuel Lease, the Assigned
Agreements and each other Basic Document to which the Lessee is a
party, directly to the Collateral Agent, including, without
limitation, Basic Rent, Additional Rent, the purchase price of
Nuclear Material pursuant to Section 8(c), 8(d), 8(e) and 8(g) of
the Fuel Lease, payments pursuant to Sections 9(e), 14, 17 and 18
of the Fuel Lease in the manner and to the accounts of the
Secured Parties as specified in Section 3.03 of the Credit
Agreement.
13. Severability. Any provision of this Letter Agreement
which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability, without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
To the extent permitted by applicable law, the Lessee hereby
waives any provision of law which renders any provision hereof
prohibited or unenforceable in any respect.
14. Indemnification. The Lessee shall pay and indemnify
and hold harmless the Administrative Agent and each Bank, and
their respective officers, directors, incorporators,
shareholders, partners, employees, agents and servants from and
against any and all liabilities (other than liabilities arising
out of the gross negligence or willful misconduct of such
Person), taxes, (excluding, however, taxes measured solely by the
net income of any Person indemnified or intended to be
indemnified pursuant to this Section 14, except as otherwise
provided in Section 14 hereof), losses, obligations, claims,
damages, penalties, causes of action, suits, costs and expenses
(including, without limitation, reasonable attorneys' and
accountants' fees and expenses) and judgments of any nature
arising from or in any way relating to any and all of the
following during the term of the Fuel Lease and thereafter:
(a) any injury to or disease, sickness or death of Persons, or
loss of or damage to property, occurring through or resulting
from any nuclear incident (as that term is defined in the Atomic
Energy Act, 42 U.S.C. Paragraph 2011 et seq.) involving or
connected in any way with the Nuclear Material or any portion
thereof, (a) the acquisition, ownership (including strict<PAGE>
18
liability of an owner or liability without fault), possession,
disposition, sale, use, nonuse, misuse, leasing, fabrication,
design, cycling, recycling, transportation, containerization,
cooling, processing, reprocessing, storing, condition,
management, operation, construction, maintenance, repair or
rebuilding of the Nuclear Material or any portion thereof or
resulting from the condition of adjoining and underlying land,
buildings, streets or ways, (a) any use, nonuse or condition of,
or any other matter of circumstance relating to, the Generating
Facility, any other property associated therewith or any
adjoining and underlying land, buildings, streets and ways,
(a) any violation or default, or alleged violation or default, of
the Fuel Lease or this Letter Agreement by or on behalf of
Lessee, or of any contracts or agreements to which the Lessee is
a party or by which it is bound, or any Legal Requirements,
(a) performance of any labor or services or the furnishing of any
materials or other property in respect of the Nuclear Material or
any portion thereof, (a) any infringement or alleged infringement
of any patent, copyright, trade secret or other similar right
relating to the Nuclear Material or any portion thereof,
(a) Lessee's agreements or obligations contained in the Fuel
Lease or this Letter Agreement, (a) any claim arising out of loss
of damage to the environment, (a) any claim arising out of strict
or absolute liability in tort, or (a) the offering and sale of
Commercial Paper. The Lessee also indemnifies each indemnitee,
as aforesaid, from and against all other liabilities, taxes,
losses, obligations, claims, damages, penalties, causes of
action, suits, costs and expenses (including, without limitation,
reasonable attorneys' and accountants' fees and expenses) and
judgments of any nature which may be imposed on, incurred by, or
asserted at any time against any indemnitee in any way relating
to or arising out of the performance of this Letter Agreement,
the Fuel Lease or any other Basic Document to which Lessee is a
party, provided, except for claims of a nature contemplated by
(i) above, that the Lessee shall not be required to indemnify any
indemnitee with respect to any liability relating to or arising
out of indemnitee's gross negligence or willful misconduct and
provided, further, that the foregoing immunity shall not limit
the terms of any indemnity that the Lessee may grant separately
to any indemnitee pursuant to any separate agreement. In the
event that any action, suit or proceeding is brought against the
Company or any other Person indemnified or intended to be
indemnified pursuant to this Section 14 by reason of any such
occurrence, the Lessee shall, at the Lessee's expense, resist and
defend such action, suit or proceeding or cause the same to be
resisted and defended by counsel designated by the Lessee and
reasonably acceptable to the Person or Persons indemnified or
intended to be indemnified under this Section 14 provided there
is no conflict of interest with the Person or Persons indemnified
or intended to be indemnified under this Section 14. In the
event a conflict of interest contemplated by the proviso of the
immediately preceding sentence shall exist, then the Person or<PAGE>
19
Persons as to which such conflict exists may be defended by
counsel of its or their choice at Lessee's expense, provided
Lessee's obligation for such expense shall be limited to one firm
for all such Persons as to which such a conflict exists. The
obligations of the Lessee under this Section 14 shall survive any
termination of this Letter Agreement, the Credit Agreement, the
Fuel Lease or the Security Agreement, in whole or in part.
15. No Waiver; Amendments. Neither the Administrative
Agent, the Collateral Agent, the Banks, the Company nor the
Lessee shall, by any act, delay, omission or otherwise, be deemed
to have waived any of its rights and remedies hereunder, and no
waiver shall be valid unless in writing signed by the party or
parties sought to be bound thereby. A waiver by the
Administrative Agent, the Collateral Agent, the Banks, the
Company or the Lessee of any of their respective rights or
remedies hereunder on any one occasion shall not be construed as
a bar to any right or remedy which the Administrative Agent, the
Banks, the Company or the Lessee, as applicable, would otherwise
have had on any future occasion. No failure to exercise nor any
delay in exercise of any such right or remedy hereunder shall
preclude any other or future exercise or partial exercise of any
other right or remedy. The rights and remedies hereunder
provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies
provided by law. None of the terms or provisions of this Letter
Agreement may be waived, altered, modified or amended except by
an instrument in writing, duly executed by the party or parties
sought to be bound thereby.
16. Successors and Assigns. This Letter Agreement shall
bind the successors and assigns of the Lessee and the Company and
shall inure to the benefit of permitted successors and assigns
of either. The Letter Agreement shall not be assignable by the
Lessee or the Company, either voluntarily or by operation of law,
unless consented to by the Administrative Agent and the Majority
Banks. No permitted assignment by the Lessee or the Company
shall release the Lessee or the Company from any of its
obligations hereunder. This Letter Agreement shall inure to and
shall be binding upon the successors and assigns of the
Administrative Agent and the Banks.
17. Notices. Any notice, demand or other communication
which by any provision of this Letter Agreement is required or
provided to be given shall be deemed to have been delivered if in
writing addressed as provided below and actually delivered by
mail, courier or facsimile to the following addresses:
(a) except as otherwise requested in writing by the
Administrative Agent or any Bank, any notice, demand
or communication which by any provision of this
Letter Agreement is required or provided to be given<PAGE>
20
to the Administrative Agent or any Bank shall be
deemed to have been delivered to the Administrative
Agent or any Bank if a single copy thereof is
delivered to the Administrative Agent at its address
set forth in Section 12.01 of the Credit Agreement or
at such other address as either may have furnished
the Company and the Lessee in writing;
(b) if to the Company (with copies to the Lessee at the
address listed below), Oyster Creek Fuel Corp. c/o
United States Trust Company of New York, 114 West
47th Street, New York, New York 10036, marked for the
attention of the Corporate Trust and Agency Division,
telecopy number 212-852-1626, or at such other
address as it may have furnished in writing to the
Administrative Agent and the Lessee; or
(c) if to the Lessee, to Jersey Central Power & Light
Company, 300 Madison Avenue, Morristown, New Jersey
07960; Attention: Vice President and Comptroller;
Telecopier: (201) 455-4217, and to GPU Service
Corporation, 100 Interpace Parkway, Parsippany, New
Jersey 07054-1149, marked for the attention of the
Assistant Treasurer, Telecopier: (201) 263-6397, or
at such other address or addresses as the Lessee may
have furnished to the Administrative Agent and the
Company.
18. Governing Law. This Letter Agreement shall be
governed by, and be construed and interpreted in accordance with
the laws of the State of New York.<PAGE>
21
IN WITNESS WHEREOF, the undersigned have caused this
Letter Agreement to be executed as of the date first above
written.
JERSEY CENTRAL POWER &
LIGHT COMPANY
By
Vice President
OYSTER CREEK FUEL CORP.
By
Title
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH,
as Administrative Agent
By
Title <PAGE>
Exhibit D-2(c)
PENNSYLVANIA
PUBLIC UTILITY COMMISSION
Harrisburg, PA 17105-3265
Public Meeting held October 13, 1995
Commissioners Present:
John M. Quain, Chairman
Lisa Crutchfield, Vice-Chairman
John Hanger
David W. Rolka
Robert K. Bloom
Securities Certificate of Metropolitan S-00950535
Edison Company for the assumption of
certain contingent liabilities in
connection with a nuclear fuel lease.
OPINION AND ORDER
BY THE COMMISSION:
On September 15, 1995, Metropolitan Edison Company
(Met-Ed) filed for registration pursuant to Chapter 19 of the
Pennsylvania Public Utility Code, 66 Pa. C.S. Sections 1901, et
seq., a Securities Certificate for the assumption of certain
contingent liabilities in connection with a nuclear fuel lease.
Met-Ed currently leases its share of the nuclear
material, which includes nuclear fuel, fuel assemblies, and
component parts, that is used at Three Mile Island Unit No. 1
(TMI-1). Met-Ed holds a 50% ownership in TMI-1. Pursuant to a
lease agreement which was the subject of Securities Certificate
S-910136 approved by Order of the Commission entered August 1,
1991, Met-Ed leases its share of TMI-1 fuel from TMI-1 Fuel
Corporation (TMI-1 Fuel), a special purpose unaffiliated entity.<PAGE>
TMI-1 is now proposing to enter into a new credit
facility (New Credit Facility) with Union Bank of Switzerland and
other lenders (collectively, "UBS" which would provide for
borrowings by TMI-1 Fuel from UBS for the value of fuel under
lease to Met-Ed not to exceed $55 million. The New Credit
Facility will have an initial term of three years, renewable
annually thereafter.
Lease payments made by Met-Ed pursuant to the new
leasing arrangement consist of a British Thermal Unit charge and
a finance charge. To finance the costs of the nuclear fuel, TMI-1
Fuel will issue commercial paper backed by letters of credit
issued by UBS. Met-Ed estimates that the New Credit Facility
will produce annual savings of approximately $82,500. In lieu of
issuing commercial paper, TMI-1 Fuel could also borrow directly
from UBS.
We have examined Met-Ed's instant Securities
Certificate and have determined that the proposed New Credit
Facility and revised lease for fuel to be employed at TMI-1
appears to be necessary or proper for the present and probable
future capital needs of the company, and as a result the
Securities Certificate should be registered; THEREFORE,
IT IS ORDERED:
That the Securities Certificate filed by Metropolitan
Edison Company at Docket No. S-00950535 for the assumption of
certain contingent liabilities in connection with a nuclear fuel
lease is hereby registered.
BY THE COMMISSION,
John G. Alford<PAGE>
Secretary
(SEAL)
ORDER ADOPTED: October 13, 1995
ORDER ENTERED: October 13, 1995
- 3 -<PAGE>
Exhibit D-3(c)
PENNSYLVANIA
PUBLIC UTILITY COMMISSION
Harrisburg, PA 17105-3265
Public Meeting held October 13, 1995
Commissioners Present:
John M. Quain, Chairman
Lisa Crutchfield, Vice-Chairman
John Hanger
David W. Rolka
Robert K. Bloom
Securities Certificate of Pennsylvania S-00950534
Electric Company for the assumption of
certain contingent liabilities in
connection with a nuclear fuel lease.
OPINION AND ORDER
BY THE COMMISSION:
On September 15, 1995, Pennsylvania Electric Company
(Penelec) filed for registration pursuant to Chapter 19 of the
Pennsylvania Public Utility Code, 66 Pa. C.S. Sections 1901, et
seq., a Securities Certificate for the assumption of certain
contingent liabilities in connection with a nuclear fuel lease.
Penelec currently leases its share of the nuclear
material, which includes nuclear fuel, fuel assemblies, and
component parts, that is used at Three Mile Island Unit No. 1
(TMI-1). Penelec holds a 25% ownership in TMI-1. Pursuant to a
lease agreement which was the subject of Securities Certificate
S-910140 approved by Order of the Commission entered August 1,
1991, Penelec leases its share of TMI-1 fuel from TMI-1 Fuel
Corporation (TMI-1 Fuel), a special purpose unaffiliated entity.<PAGE>
TMI-1 is now proposing to enter into a new credit
facility (New Credit Facility) with Union Bank of Switzerland and
other lenders (collectively, "UBS") which would provide for
borrowings by TMI-1 Fuel from UBS for the value of fuel under
lease to Penelec not to exceed $27.5 million. The New Credit
Facility will have an initial term of three years, renewable
annually thereafter.
Lease payments made by Penelec pursuant to the new
leasing arrangement consist of a British Thermal Unit charge and
a finance charge. To finance the costs of the nuclear fuel, TMI-1
Fuel will issue commercial paper backed by letters of credit
issued by UBS. Penelec estimates that the New Credit Facility
will produce annual savings of approximately $41,250. In lieu of
issuing commercial paper, TMI-1 Fuel could also borrow directly
from UBS.
We have examined Penelec's instant Securities
Certificate and have determined that the proposed New Credit
Facility and revised lease for fuel to be employed at TMI-1
appears to be necessary or proper for the present and probable
future capital needs of the company, and as a result the
Securities Certificate should be registered; THEREFORE,
IT IS ORDERED:
That the Securities Certificate filed by Pennsylvania
Electric Company at Docket No. S-00950534 for the assumption of
certain contingent liabilities in connection with a nuclear fuel
lease is hereby registered.
BY THE COMMISSION,
John G. Alford<PAGE>
Secretary
(SEAL)
ORDER ADOPTED: October 13, 1995
ORDER ENTERED: October 13, 1995
- 3 -<PAGE>
