Post-Effective Amendment No. 5 to
SEC File No. 70-7862
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM U-l
APPLICATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("Act")
JERSEY CENTRAL POWER & LIGHT COMPANY ("JCP&L")
PENNSYLVANIA ELECTRIC COMPANY ("Penelec")
METROPOLITAN EDISON COMPANY ("Met-Ed")
2800 Pottsville Pike
Reading, Pennsylvania 19605
(Name of companies filing this statement and addresses
of principal executive offices)
GPU, INC. ("GPU")
(Name of top registered holding company parent of applicants)
Terrance G. Howson, Douglas E. Davidson, Esq.
Vice President and Treasurer Berlack, Israels & Liberman LLP
Mary A. Nalewako, Secretary 120 West 45th Street
Michael J. Connolly, New York, New York 10036
Assistant General Counsel
GPU Service, Inc.
300 Madison Avenue
Morristown, New Jersey 07962
Scott L. Guibord, Secretary Robert C. Gerlach, Esq.
Jersey Central Power & Ballard Spahr Andrews &
Light Company Ingersoll, LLP
Metropolitan Edison Company 1735 Market Street - 51st Floor
Pennsylvania Electric Company Philadelphia, PA 19103-7599
2800 Pottsville Pike
Reading, Pennsylvania 19605
W. Edwin Ogden, Esq.
Ryan, Russell, Ogden
& Seltzer LLP
1100 Berkshire Boulevard
P.O. Box 6219
Reading, PA 19610
---------------------------------------------------------------
(Names and addresses of agents for service)
<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 completing Item 2 thereof to read in its entirety as follows:
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
The GPU Companies estimate that the fees, commissions and expenses
to be incurred in connection with the transactions which are the subject of
Post-Effective Amendment No. 4, will be as follows:
Legal Fees:
Berlack, Israels & Liberman LLP $ 90,000
Ryan, Russell, Ogden & Seltzer LLP $ 10,000
Ballard Spahr Andrews & Ingersoll, LLP $ 14,000
Special Lenders Counsel $ 90,000
Trustee and Depository Counsel $ 21,000
Depository Fees $ 7,500
Arrangement Fee $ 40,000
Trustee Fees and Expenses $ 10,000
Miscellaneous $ 15,000
------
$297,500
2. By filing the following exhibits in Item 6 thereof:
B-1(b) - Term Sheet between the GPU Companies and The
First National Bank of Chicago and PNC Bank, N.A.
B-2(b) - Forms of Amended and Restated Nuclear
Material Lease Agreements.
B-2(c) - Forms of new Letters of Representation.
B-3(b) - Form of Amended and Restated Trust Agreement.
C - None.
D-2(b) - Copy of Securities Certificate of Met-Ed filed
with the PaPUC.
D-2(c) - Copy of Securities Certificate of Penelec filed
with the PaPUC.
D-3(b) - Copy of Order of PaPUC registering Met-Ed's
Securities Certificate.
D-3(c) - Copy of Order of PaPUC registering Penelec's
Securities Certificate.
2
<PAGE>
E - Not Applicable.
F-1(a) - Opinion of Berlack, Israels & Liberman LLP.
F-2(b) - Opinion of Ryan, Russell, Ogden & Seltzer LLP.
F-3(b) - Opinion of Ballard Spahr Andrews & Ingersoll, LLP.
3
<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
Dated: October 14, 1998
4
EXHIBITS TO BE FILED BY EDGAR
Exhibits:
B-1(b) - Term Sheet between the GPU Companies and The First
National Bank of Chicago and PNC Bank, N.A..
B-2(b)(1) - Forms of Amended and Restated Nuclear Material
Lease Agreements.
B-2(b)(2) - Forms of Amended and Restated Nuclear Material
Lease Agreements.
B-2(b)(3) - Forms of Amended and Restated Nuclear Material
Lease Agreements.
B-2(b)(4) - Forms of Amended and Restated Nuclear Material
Lease Agreements.
B-2(c)(1) - Forms of new Lessee's Letter Agreements.
B-2(c)(2) - Forms of new Lessee's Letter Agreements.
B-2(c)(3) - Forms of new Lessee's Letter Agreements.
B-2(c)(4 - Forms of new Lessee's Letter Agreements.
B-3(b) - Form of Amended and Restated Trust Agreement.
C - None
D-2(b) - Copy of Securities Certificate of Met-Ed filed
with the PaPUC
D-2(c) - Copy of Securities Certificate of Penelec filed
with the PaPUC
D-3(b) - Copy of Order of PaPUC registering Met-Ed's
Securities Certificate
D-3(c) - Copy of Order of PaPUC registering Penelec's
Securities Certificate
E - Not Applicable
F-1(a) - Opinion of Berlack, Israels & Liberman LLP.
F-2(b) - Opinion of Ryan, Russell, Ogden & Seltzer LLP.
F-3(b) - Opinion of Ballard Spahr Andrews & Ingersoll, LLP.
Exhibit B-1(b)
TMI - 1 FUEL CORP./OYSTER CREEK FUEL CORP.
TERM SHEET
July 1998
This Term Sheet is delivered with a commitment letter of even date
herewith (the "Commitment Letter") from The First National Bank of Chicago,
First Chicago Capital Markets, Inc., PNC Capital Markets, Inc. and PNC Bank,
National Association to the Borrowers and the Utilities referred to herein.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings attributed to such terms in the Commitment Letter.
Borrowers: TMI-1 Fuel Corp. and Oyster Creek Fuel Corp.
(the "Borrowers").
Utilities: Jersey Central Power & Light Company,
Metropolitan Edison Company, Pennsylvania
Electric Company
Arrangers: First Chicago Capital Markets, Inc. and PNC
Capital Markets, Inc. (the "Arrangers"). This
term sheet contemplates a best efforts
arrangement, whereby The First National Bank of
Chicago and PNC Bank, National Association will
each seek internal credit approval to commit
$40 million as a Lender.
Administrative Agent: The First National Bank of Chicago (in such
capacity the "Administrative Agent").
Syndication Agent: PNC Bank, National Association (in such
capacity the "Syndication Agent").
Facilities: $190,000,000 364-Day Revolving Credit
Facilities (the "Facilities") with sublimits as
follows:
Jersey Central Power & Light Company
$115.0 million
Metropolitan Edison Company $ 50.0
million
Pennsylvania Electric Company $ 25.0
million.
Purpose: The Facilities will provide for revolving loans
funded directly by the Lenders (the "Advances") to
provide liquidity support for taxable commercial
paper ("CP Notes") issued by the Borrowers.
Lenders: The First National Bank of Chicago, PNC Bank,
National Association and other banks selected
by the Arrangers and reasonably satisfactory to
the Borrowers (collectively, the "Lenders").
<PAGE>
2
Syndication Management: The Arrangers will manage all aspects of
the syndication including, without limitation, the
timing of offers to potential Lenders, the amounts
offered to potential Lenders, the acceptance of
commitments, and the compensation provided.
Term: The initial term of the Facilities will be 364
days. A renewal provision will provide for
364-Day extensions thereafter at the sole
discretion of the Lenders.
Principal Amortization: None.
Security/Credit Support: Nuclear fuel leases (each a "Lease") between
the Borrowers and Pennsylvania Electric
Company, Metropolitan Edison Company, and
Jersey Central Power & Light Company (the
"Utilities") obligating the Utilities to pay
rent sufficient to pay all principal, interest,
and fees of the Borrowers. The Borrowers would
pledge such nuclear fuel leases to the Lenders
as collateral for the Facilities, together with
the nuclear fuel leased under the Leases
("Nuclear Fuel"), all nuclear fuel contracts
and any and all assets of, as well as all
proceeds and moneys received by the Borrowers
related to the Lease or Nuclear Fuel. The
Utilities would execute consents to such pledge
in favor of the Lenders.
Availability: The aggregate principal amount of Advances
outstanding to either Borrower shall not at any
time exceed the lesser of (a) $190,000,000 less
the outstanding amount of CP Notes or (b) the
Stipulated Casualty Value of all Nuclear Fuel
leased at such time under the Leases less the
outstanding amount of CP Notes.
"Stipulated Casualty Value" for any leased Nuclear
Fuel is an amount equal to the acquisition cost for
such Nuclear Fuel reduced by the aggregate total
amount, if any, of Monthly Rent Components paid by
the Utilities to the Borrowers with respect to such
Nuclear Fuel. Monthly Rent Component will be defined
in the Lease, but is generally described as the
monthly charge for any leased Nuclear Fuel based on
the amount of heat produced by such Nuclear Fuel.
<PAGE>
3
Interest Rates: At the Borrower's option:
ABR
Eurodollar Rate plus .40%
"ABR" means an interest rate per annum equal to the
greater of First Chicago's corporate base rate or
the federal funds rate plus 1/2% per annum. Interest
on ABR Advances will be computed for actual days
elapsed on a 365-, or when appropriate 366-day-year
basis.
"Eurodollar Rate" means the rate at which the
Administrative Agent offers to place deposits in U.S.
dollars with first-class banks in the London
interbank market at 11:00 a.m. (London time) two
business days prior to the borrowing date in the
approximate amount of, and for a maturity
corresponding to, the Administrative Agent's (in its
capacity as a Lender) portion of the Advances,
adjusted for Federal Reserve Board reserve
requirements.
Interest periods for Eurodollar Rate-based
Advances will be one, two, three or six months.
Interest will be payable in arrears (i) with
respect to ABR-based Advances on the last day of
each quarter, (ii) with respect to Eurodollar
Rate-based Advances on the last day of each
interest period and, in the case of an interest
period longer than three months, quarterly and
(iii) in any event upon any prepayment (whether
due to acceleration or otherwise) and at
maturity. Interest on all Advances and fees will
be calculated for actual days elapsed on the
basis of a 360-day-year.
The Credit Agreements governing the contemplated
transaction (collectively, the "Credit Agreement")
will include customary provisions (a) protecting the
Lenders against increased costs or loss of yield
resulting from changes in reserve, tax, capital
adequacy and other requirements of law and (b)
indemnifying the Lenders for breakage costs incurred
in connection with among other things, any prepayment
of Eurodollar Rate Advances on a day other than the
last day of an interest period with respect thereto.
After default, the interest rate will be equal to the
then-effective rate plus 2% per annum.
<PAGE>
4
Administrative Agent and An Arrangement Fee of $20,000 payable to each
Arranger Fees of the Arrangers on the Closing Date; and an
Administrative Agency Fee of $16,000 payable to the
Administrative Agent annually in advance on the
Closing Date and each subsequent anniversary thereof.
Commitment Fee: A commitment fee equal to .125% per annum on
the average daily unborrowed portion of the
Facilities, payable quarterly in arrears to the
Administrative Agent for the ratable benefit of
the Lenders (including the Administrative
Agent) from the date of execution of the Credit
Agreement until maturity.
Prepayment: Optional Prepayment: The Borrowers shall have the
right, upon three business days notice, to prepay
outstanding Advances under the Facilities subject to
the payment of all breakage costs, if applicable.
Mandatory Prepayment: The Borrowers, as applicable,
shall prepay outstanding Advances under the
Facilities equal to the sum of: (a) the amount of
Basic Rent in excess of Monthly Debt Service and (b)
the amount received by the Borrowers related to a
sale or transfer (other than by lease) of Nuclear
Fuel to the Utilities or a third party. In lieu of
prepaying outstanding Advances, or if the aggregate
amount received by the Borrowers is in excess of
outstanding Advances, the Borrowers may place any
such amount in a collateral account for the benefit
of the Lenders.
"Basic Rent", on a monthly basis, is equal to the
cost of Nuclear Fuel which has been consumed in the
generation of electricity plus any finance charges
directly or indirectly incurred in connection with
Nuclear Fuel which the Borrowers are not able to
capitalize and finance. "Monthly Debt Service" for
any month means the interest and principal due on
indebtedness of the Borrowers and other costs
incurred in connection with the Facilities and the
Basic Documents (as defined herein).
Reduction of Commitment: The Borrowers may at their discretion, upon
three business days notice, terminate or
cancel, in whole or in part, the Facilities,
subject to the payment in full of any
outstanding Advances and all interest, fees,
and other amounts payable under the Facilities,
and the payment of any breakage costs if
applicable.
<PAGE>
5
Conditions Precedent to Usual and customary for nuclear fuel financings
Closing of this type, including but not limited to:
(1) Receipt of legal opinions satisfactory in form
and substance to the Administrative Agent from
counsel to the Borrowers, the Utilities, and
U.S. Trust Company, as the
Owner Trustee;
(2) All representations and warranties in the
Facilities and the Basic Documents (as defined
below) shall be true and correct and no
material adverse change in the financial
condition, operations, properties, or assets
of the Borrowers or the Utilities shall have
occurred since June 30, 1998;
(3) The final terms and conditions of the
Facilities and the transactions contemplated
thereby and all documentation relating
thereto, including the Leases (which shall be
either new leases or amendments to the
existing) shall be in form and substance
satisfactory to the Administrative Agent and
the Lenders and the Borrowers shall have
performed and complied with all agreements and
conditions contained in the Facilities;
(4) Receipt of copies of the Trust Agreements and
the Leases and of appropriate and customary
Lessee Letter Agreements, Security Agreements,
Issuing and Paying Agent Agreement, Dealer
Agreements, promissory notes and other related
agreements (collectively and including the
Credit Agreement and the CP Notes, the "Basic
Documents") all of which shall be in form and
substance satisfactory to the Administrative
Agent and the Lenders;
(5) No Default or Event of Default shall have
occurred under the Facilities and related
documents or under the other Basic Documents;
(6) Delivery of standard certified resolutions,
certified articles of incorporation and
bylaws, incumbency certificates, good standing
certificates and copies of all governmental
and regulatory approvals, including, without
limitation all governmental and regulatory
approvals necessary for the Borrowers and the
Utilities to enter into the Facilities and all
Basic Documents;
<PAGE>
6
(7) Delivery of written information satisfactory
to the Administrative Agent and the Lenders
regarding the Utilities' plans for addressing
Year 2000 issues;
(8) All necessary UCC financing statements have
been filed and duly recorded and there has
been created and perfected a valid first
priority security interest in the Collateral
of the Borrowers securing all obligations of
the Borrowers under the Facilities;
(9) All governmental and third party consents and
approvals required shall have been obtained
and shall be in form and substance
satisfactory to the Administrative Agent and
the Lenders;
(10) Payment of all reasonable fees and expenses,
including reasonable fees and disbursements
of legal counsel on the terms agreed to by
the parties in this term sheet and
elsewhere;
(11) Any other approvals, opinions or documents
that the Administrative Agent or the Lenders
may reasonably request;
(12) A certificate of the Utilities (a)
acknowledging the Facilities, (b) stating that
there has been no material adverse change in
the Utilities' respective businesses or
financial condition since June 30, 1998, and
(c) certifying that the Utilities are not in
default under the Basic Documents to which
they are a party and such documents are in
full force and effect;
(13) The Administrative Agent and the Lenders
shall be reasonably satisfied with the CP
Note dealers, the Issuing and Paying Agent
Agreement and all CP Note offering
materials.
<PAGE>
7
Conditions Precedent to Usual and customary for nuclear fuel financings
all Advances under the of this type, including but not limited to:
Facilities:
(1) All representations and warranties in the
Facilities and all Basic Documents shall be
true and correct ;
(2) No Default or Event of Default shall have
occurred and be continuing under the
Facilities or under the Basic Documents;
(3) All other terms of the Facilities and the
Basic Documents applicable to such Advances
have been complied with;
(4) After giving effect to any Advances, the
Stipulated Casualty Value of Nuclear Fuel
subject to the Leases is greater than the sum
of the outstanding amount of CP Notes and
Advances under the Facilities
Representations and
Warranties: Usual and customary for nuclear fuel financings
of this type, including but not limited to:
(1) Existence and authority;
(2) Execution and delivery of documents;
(3) Required consents;
(4) Binding effect;
(5) No litigation and adverse rulings;
(6) Financial information related to the
Borrowers;
(7) No material adverse change since June 30,
1998;
(8) All of the capital stock of the Borrowers is
owned by U.S. Trust or another acceptable
owner trustee;
<PAGE>
8
(9) Title to properties;
(10) Payment of Taxes;
(11) Compliance with laws including
environmental, and ERISA;
(12) Each representation and warranty of the
Borrowers set forth in any of the Basic
Documents is true and correct;
(13) Adequacy of Utilities' Year 2000 preparations;
(14) Disclosure; and
(15) Perfected first priority security interest in
the Collateral.
Covenants: Usual and customary for nuclear fuel financings
of this type, including but not limited to:
(1) Maintain corporate existence;
(2) Payment of obligations and taxes;
(3) Financial reporting;
(4) Default, termination, and litigation
notice;
(5) Access to and records; maintain
properties;
(6) Indemnification of the Lenders;
(7) Insurance;
(8) Compliance by Borrowers with obligations under
Basic Documents;
(9) Achievement of Utilities' Year 2000 milestones
as outlined in the letter dated July 10, 1998
to The First National
Bank of Chicago;
<PAGE>
9
(10) No Indebtedness, other than CP Notes and
Advances under the Facilities not to exceed
the lesser of $190,000,000 or the Stipulated
Casualty value at such time of all Nuclear
Fuel leased at such time under the Leases
(Indebtedness shall be defined in the
Facilities but is generally described as all
items which in accordance with GAAP should
be reflected on the liability side of a
balance sheet and any guaranties,
endorsements and contingent obligations);
(11) No liens other than liens in favor of the
Lenders pursuant to the Security Agreements;
(12) The Borrowers shall not engage in any
business other than owning and leasing
Nuclear Fuel and engaging in the activities
contemplated by the Facilities and the Basic
Documents;
(13) Not sell, transfer, assign or otherwise
dispose of material assets except pursuant
to the Basic Documents;
(14) No mergers or consolidations;
(15) No sale of capital stock of the Borrowers to
any person other than the Utilities, their
affiliates or U.S. Trust;
(16) No investments, loans, advances, guarantees
or purchases of securities other than
investments held in a collateral account for
the benefit of the Lenders;
(17) No dividends other than amounts to the owner
trustee in the nature of a reasonable fee
for services rendered;
(18) No sale of CP Notes except with an offering
memorandum satisfactory to the
Administrative Agent; and
(19) No amendment or waiver of any provision of
the Leases, the other Basic Documents or any
agreement or contract constituting part of
the Collateral.
<PAGE>
10
Events of Default: Those usual and customary for transactions of
this type, including but not limited to:
(1) any representation or warranty made or deemed
made by the Borrowers or the Utilities in the
Facilities or Basic Documents shall prove to
be false or misleading in any material
respect;
(2) failure by the Borrowers to make any payment
of principal, interest or fees under the
Facilities or in respect of the CP Notes when
due, subject to applicable grace periods to be
determined;
(3) failure of the Borrowers to make any other
payment owing under the Facilities on or
before 20 business days after such payment is
due;
(4) failure by the Borrowers to observe or perform
any negative covenant and certain affirmative
covenants contained in the Facilities;
(5) failure by the Borrowers or the Utilities to
observe or perform any other covenants, terms
or conditions contained in the Facilities or
the Basic Documents that continue for 30 days;
(6) voluntary or involuntary bankruptcy of either
Borrower or any Utility;
(7) judgment against either Borrower for the
payment of money in excess of $500,000 that
remains undischarged or unstayed pending
appeal for 30 days;
(8) any Event of Default under the Basic Documents
or failure by any Utility to comply with the
terms and covenants of the Letter Agreement to
the Lenders to which it is a party;
(9) termination of any Lease;
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11
(10) failure of the security to provide a first
priority perfected security interest to the
Lenders;
(11) any material provision on the Basic
Documents shall cease to be valid and
binding on any party thereto;
(12) ERISA defaults;
(13) failure by any Utility to observe or perform
any covenant or obligation under such
Utility's Letter Agreement to the Lenders;
and
(14) defaults in payment or any other material
obligation in respect of any nuclear fuel
contract unless contested in good faith.
Remedies: Remedies of the Administrative Agent and the
Lenders for an Event of Default shall be usual
and customary for transactions of this type
including but not limited to:
(1) acceleration of all amounts outstanding
under the Facilities;
(2) termination of commitments under the
Facilities; and
(3) exercise of rights with respect to the
Collateral.
Assignments After the closing each Lender may, in its sole
and Participations: discretion, sell participations in its Advances
and in its commitment. Additionally, each of the
Lenders will have the right, with the consent of the
Borrowers and the Administrative Agent (which shall
not be unreasonably withheld), to sell assignments
(and the Borrowers shall release the assignor Lender
for the amount so assigned) in a minimum amount equal
to the lesser of all of such Lender's Advances or
$5,000,000. Notwithstanding the foregoing, neither
The First National Bank of Chicago nor PNC Bank,
National Association shall sell participations in its
Commitment or Advances or assign any portion of its
Commitment or Advances without the prior written
consent of the Utilities.
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12
Expenses: The expenses of the Administrative Agent and
the Arrangers, whether incurred prior to or
subsequent to closing, in investigation,
preparation, negotiation, documentation,
syndication, administration and collection will
be for the account of the Borrowers, including
expenses of and fees for attorneys for the
Administrative Agent and the Arrangers (who may
or may not be employees of the Administrative
Agent or the Arrangers) and other advisors and
professionals engaged by the Administrative
Agent or the Arrangers.
Governing Law: New York
<PAGE>
* * *
This Term Sheet is intended as an outline only and does not purport to summarize
all the conditions, covenants, representations, warranties and other provisions
which would be contained in definitive legal documentation for the financing
contemplated hereby. Any commitment of The First National Bank of Chicago, PNC
Bank, National Association and the other Lenders is subject to negotiation and
execution of definitive Credit Documents in form and substance satisfactory to
the Lenders and their respective counsel.
Exhibit B-2(b)(1)
COUNTERPART NO.
SECOND AMENDED AND RESTATED
NUCLEAR MATERIAL LEASE AGREEMENT
Dated as of , 1998
-------
between
TMI-1 FUEL CORP.,
as Lessor
and
PENNSYLVANIA ELECTRIC COMPANY
as Lessee
AS OF THE DATE OF THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT, THE LESSOR
UNDER THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT (THE "LESSOR") HAS
GRANTED TO THE SECURED PARTIES, AS DEFINED HEREIN, A SECURITY INTEREST IN THIS
SECOND AMENDED AND RESTATED LEASE AGREEMENT AND IN ALL OF THE LESSOR'S RIGHTS
AND INTERESTS UNDER THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT, INCLUDING,
WITHOUT LIMITATION, ALL OF THE LESSOR'S RIGHTS TO AND INTERESTS IN NUCLEAR
MATERIAL AS DEFINED IN THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT.
THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT HAS BEEN MANUALLY EXECUTED IN
EIGHTEEN (18) COUNTERPARTS, NUMBERED CONSECUTIVELY FROM 1 TO 18. NO SECURITY
INTEREST IN THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT OR IN ANY OF THE
LESSOR'S RIGHTS AND INTERESTS UNDER THIS SECOND AMENDED AND RESTATED LEASE
AGREEMENT MAY BE PERFECTED BY THE POSSESSION OF ANY SUCH COUNTERPART OTHER THAN
COUNTERPART NO. 1.
<PAGE>
TABLE OF CONTENTS
1 Definitions
2 Notices
3 Title to Remain in the Lessor; Quiet Enjoyment; Fuel Management
Location
4 Agreement for Lease of Nuclear Material
5 Orders for Nuclear Material and Services; Assigned Agreements
6 Leasing Records; Payment of Costs of Lessor
7 No Warranties or Representation by Lessor
8 Lease Term; Early Termination; Termination of Leasing Record
9 Payment of Rent; Payments with Respect to the Lessor's
Financing Costs
10 Compliance with Laws; Restricted Use of Nuclear Material;
Assignments; Permitted Liens; Spent Fuel
11 Permitted Contests
12 Insurance; Compliance with Insurance Requirements
13 Indemnity
14 Casualty and Other Events
15 Nuclear Material to Remain Personal Property
16 Events of Default
17 Rights of the Lessor Upon Default of the Lessee
18 Termination After Certain Events
19 Investment Tax Credit
20 Certificates; Information; Financial Statements
21 Obligation of the Lessee to Pay Rent
22 Miscellaneous
<PAGE>
SECOND AMENDED AND RESTATED NUCLEAR MATERIAL LEASE AGREEMENT
SECOND AMENDED AND RESTATED LEASE AGREEMENT (this "Lease Agreement")
dated as of the---- day of------ , 1998, by and between TMI-1 FUEL CORP., a
Delaware corporation (herein called the "Lessor"), and PENNSYLVANIA ELECTRIC
COMPANY, a Pennsylvania corporation (herein called the "Lessee").
RECITALS
A. The Lessor and Lessee entered into a Nuclear Material Lease
Agreement dated as of August 1, 1991 ("Original Lease") to provide for the lease
of Nuclear Material to the Lessee;
B. The Original Lease provided for the Lessor to enter into
certain loan agreements and ancillary documents with The Prudential Insurance
Company of America and certain affiliates thereof ("Prudential") to provide
financing from Prudential for the acquisition of Nuclear Material under the
Original Lease;
C. Such loan arrangements with Prudential were terminated and
Lessor entered into a new credit agreement and related instruments pursuant to
which a bank syndicate for which Union Bank of Switzerland, New York Branch
("UBS") acted as agent to provide financing for the acquisition of Nuclear
Material being leased hereunder;
D. Lessor and Lessee entered into an Amended and Restated
Nuclear Material Lease Agreement, dated as of November 17, 1995 ("Amended and
Restated Lease") to reflect the necessary modifications consistent with the
establishment of the credit facility with UBS;
E. Concurrent with the execution and delivery hereof, such
credit agreements with UBS are being terminated and Lessor is entering into a
new credit agreement and related instruments to which a bank syndicate for which
The First National Bank of Chicago and PNC Bank, National Association, will act
as agents to provide financing for the acquisition of the Nuclear Material being
leased hereunder;
F. Accordingly, the Lessor and the Lessee desire to enter into
this Second Amended and Restated Lease Agreement in order to reflect necessary
modifications consistent with establishment of such new credit facility and
other modifications thereof in certain other respects, which agreement shall
supercede the Original Lease and the Amended and Restated Lease;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and intending to be legally bound hereby, the parties covenant
and agree as follows:
1. Definitions. Except as otherwise provided herein, capitalized
terms used in this Lease Agreement (including the Exhibits) shall have the
respective meanings set forth in Appendix A.
2. Notices. Any notice, demand or other communication which by any
provision of this Lease Agreement is required or permitted to be given shall be
deemed to have been delivered if in writing and actually delivered by mail,
courier, telex or facsimile to the following addresses:
(i) If to the Lessor, TMI-1 Fuel Corp., c/o United States
Trust Company of New York, 114 West 47th Street, New York, New York 10036,
Attention: Corporate Trust and Agency Division, telecopy number
212-852-1626, or at such other address as the Lessor may have furnished to
the Lessee and the Secured Parties in writing; or
(ii) If to the Lessee, Pennsylvania Electric Company c/o GPU
Service, Inc., 310 Madison Avenue, Morristown, New Jersey 07962-1957,
Attention: Vice President and Treasurer, telecopy number 973-644-4224, or
at such other address as the Lessee may have furnished the Lessor and the
Secured Parties in writing; or
(iii) except as provided in the following sentence or as
otherwise requested in writing by any Secured Party, any notice, demand or
communication which by any provision of this Lease Agreement is required
or permitted to be given to the Secured Parties shall be deemed to have
been delivered to all the Secured Parties if a single copy thereof is
delivered to --------------, Attention: ---------------------------------
----------facsimile number (---) ---------- ; or at such other address as
either may have furnished the Lessor and the Lessee in writing. Any
Leasing Record or invoice of a Manufacturer or other Person performing
services covering the Nuclear Material which is required to be delivered
to the Secured Parties pursuant to Section 6(c)(ii) of this Lease
Agreement and any Rent Due and SCV Confirmation Schedule which is required
to be delivered to the Secured Parties pursuant to Sections 8(g) or 9(d)
of this Lease Agreement shall be deemed to have been delivered to all the
Secured Parties if a single copy thereof is delivered to -------------
at the address indicated in this Section 2(iii).
1. Title to Remain in the Lessor; Quiet Enjoyment; Fuel
Management; Location.
(a) The Lessor and the Lessee hereby acknowledge that this
Lease Agreement is a lease and is intended to provide for the obligations of the
Lessee to pay installments of Rent as the same become due; that, subject to the
provisions of Section 10(h), the Lessor has title to and is the owner of the
Nuclear Material; and that the relationship between the Lessor and the Lessee
shall always be only that of lessor and lessee.
(b) The Lessor (including its successors and assigns) agrees
and covenants that, so long as the Lessee makes timely payments of Rent and
fully performs all other obligations to be performed by the Lessee under this
Lease Agreement, the Lessor (including its successors and assigns) shall not
hinder or interfere with the Lessee's peaceable and quiet enjoyment of the
possession and use of the Nuclear Material, for the term or terms herein
provided, subject, however, to the terms of this Lease Agreement.
(c) So long as no Lease Event of Default shall have occurred
and be continuing and the Lessor shall not have elected to exercise any of its
remedies under Section 17 hereof, the Lessee shall have the right to engage in
Fuel Management. The Lessee is hereby designated the agent of the Lessor in all
dealings with Manufacturers and any regulatory agency having jurisdiction over
the ownership or possession of the Nuclear Material for so long as the Lessee
shall have the right to engage in Fuel Management. As such agent of the Lessor,
the Lessee agrees to make, or cause to be made, all filings and to obtain all
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consents and permits required as a result of the Lessor's ownership and
leasing of the Nuclear Material.
(d) The Lessee covenants to the Lessor that the location of
Nuclear Material will be limited to: (w) any Manufacturer's facility, (x)
transit between one Manufacturer's facility and another Manufacturer's facility
or the site of the Generating Facility, (y) the site of the Generating Facility
and (z) the Generating Facility. Each assembly of the Nuclear Material will be
located during its Heat Production and "cooling-off" stage at the Generating
Facility or the site of the Generating Facility.
4. Agreement for Lease of Nuclear Material. From and after the
Closing, the Lessor shall lease to the Lessee and the Lessee shall lease from
the Lessor such Nuclear Material as may be from time to time mutually agreed
upon, provided that the total Stipulated Casualty Value of all Nuclear Material
leased under this Lease Agreement shall not exceed at any one time $25,000,000
in the aggregate or such other amount as the Lessor and the Lessee may agree to
in writing (the "Maximum Stipulated Casualty Value"). The Lessor and the Lessee
shall evidence their agreement to lease particular Nuclear Material in
accordance with the terms and provisions of this Lease Agreement by signing and
delivering to each other, from time to time, Leasing Records, substantially in
the forms of Exhibit A or Exhibit B, as applicable, prepared by the Lessee,
covering such Nuclear Material. Nothing contained herein shall be deemed to
prohibit the Lessee from leasing from other lessors or otherwise obtaining other
nuclear material for use in the Generating Facility, subject to the provisions
with respect to intermingling of fuel assemblies or sub-assemblies with other
fuel assemblies or sub-assemblies contained in Section 6 hereof.
5. Orders for Nuclear Material and Services; Assigned Agreements.
(a) The Nuclear Material Contracts listed in Exhibit C hereto,
relating, among other things, to the purchase of, and services to be performed
with respect to, Nuclear Material were entered into by the Lessee prior to the
date of this Lease Agreement, and, except as otherwise indicated on Exhibit C,
the interests of the Lessee under such Nuclear Material Contracts have been
assigned to the Lessor under an Assignment Agreement substantially in the form
of Exhibit D. Any further Nuclear Material Contracts which the Lessee deems
necessary or desirable may be negotiated by the Lessee and executed by the
Lessee in its own name or, where authorized by the Lessor, as agent for the
Lessor.
(b) So long as no Lease Event of Default shall have occurred
and be continuing, and subject to the approval of the Lessor and to the
limitation on the Maximum Stipulated Casualty Value of the Nuclear Material set
forth in Section 4, the interests of the Lessee under any further Nuclear
Material Contracts (whether executed and delivered before or after the date of
this Lease Agreement) pursuant to which the Lessee desires the Lessor to
purchase Nuclear Material or have services performed on any Nuclear Material on
behalf of the Lessee may be assigned to the Lessor under an Assignment Agreement
substantially in the form of Exhibit D, 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. The Lessee shall use its best efforts to cause the
other parties to such agreements to consent to each such assignment. Upon each
such assignment and the obtaining of such consents with respect to any Nuclear
Material Contract, the Lessor, subject to the limitation on the Maximum
Stipulated Casualty Value of the Nuclear Material set forth in Section 4, shall
make all payments which are required under such Assigned Agreements for the
purchase of Nuclear Material or for services to be performed on the Nuclear
Material in accordance with the procedures set forth in Section 6.
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(c) So long as no Lease Event of Default shall have occurred
and be continuing, the Lessor hereby authorizes the Lessee, at the Lessee's own
cost and expense, to assert all rights and claims and to bring suits, actions
and proceedings, in its own name or in the name of the Lessor, in respect of any
Manufacturer's warranties or undertakings, express or implied, relating to any
portion of the Nuclear Material and to retain the proceeds of any such suits,
actions and proceedings.
6. Leasing Records; Payment of Costs of Lessor.
(a) Interim Leasing Records. An Interim Leasing Record shall be
prepared by the Lessee, shall be dated the date that the Lessor first makes
any payment with respect to the Acquisition Cost of any Nuclear Material and
shall set forth a full description of such Nuclear Material, the Acquisition
Cost and location thereof, and such other details with respect to such
Nuclear Material upon which the parties may agree. During the period of
preparation and processing or reprocessing of Nuclear Material subject to an
Interim Leasing Record, if the Lessor shall make any further payment or
payments or if the Lessor shall receive any payment or payments representing
a credit against the Acquisition Cost previously paid with respect to such
Nuclear Material, a supplemental Interim Leasing Record dated the date that
the Lessor makes each such further payment or the date of receipt of any such
credit shall be signed by the Lessor and the Lessee to record the revised
Acquisition Cost, after giving effect to any such payments or credits with
respect to such Nuclear Material, any change in location and such additional
details upon which the parties may agree.
(b) Final Leasing Records. For Nuclear Material previously
covered by an Interim Leasing Record, the Final Leasing Record shall be prepared
by the Lessee, shall be dated the first day of the month following the date of
installation of such Nuclear Material in the Generating Facility, unless such
date is the first day of a month, in which case the Final Leasing Record shall
be dated such date. For Nuclear Material not previously covered by an Interim
Leasing Record, the Final Leasing Record shall be dated the date that the Lessor
first makes any payment with respect to the Acquisition Cost of such Nuclear
Material. A Final Leasing Record shall set forth a full description of such
Nuclear Material, the Acquisition Cost thereof, the BTU Charge, the location,
and such other details with respect to such Nuclear Material upon which the
parties may agree.
(c) Payment of Nuclear Material Costs.
(i) On the Closing, the Lessor shall pay UBS pursuant to
Section 5.02 of the UBS Credit Agreement the principal amount of all loans
outstanding thereunder together with accrued interest thereon to the extent
not paid previously, and related costs and expenses in connection therewith.
(ii) From time to time after the Closing, invoices of
Manufacturers, or of other Persons performing services, covering Nuclear
Material shall be forwarded to the Lessor in care of the Lessee at the
Lessee's address. Upon receipt by the Lessee of an invoice covering
Nuclear Material, the Lessee shall review such invoice and, upon the
Lessee's approval thereof, the Lessee shall forward such invoice endorsed
with the Lessee's approval to the Lessor, together with a Leasing Record
completed and signed by a Lessee Representative covering such Nuclear
Material. The Lessee's invoice for any cost incurred by it and includable
in the Acquisition Cost of any Nuclear Material shall be forwarded to the
Lessor and to the Secured Parties, together with a Leasing Record
completed and signed by a Lessee Representative covering such costs. After
receipt
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of such invoice and Leasing Record, in form and substance satisfactory to
the Lessor, the Lessor, subject to the limitation on Maximum Stipulated
Casualty Value of the Nuclear Material set forth in Section 4, shall pay
such invoice as provided therein or in the related purchase agreement and
shall execute the Leasing Record and return a copy of such Leasing Record
to the Lessee and the Secured Parties. The Leasing Record shall be dated
as provided for in this Lease Agreement. In the event that the Acquisition
Cost of the Nuclear Material covered by any Leasing Record has been paid
or incurred by the Lessee, the Lessor, subject to the limitation on
Maximum Stipulated Casualty Value of the Nuclear Material set forth in
Section 4 shall promptly reimburse the Lessee for the amount of the
Acquisition Cost paid or incurred by the Lessee.
(iii) The Lessee shall: (A) pay all costs and expenses of
freight, packing, insurance, handling, storage, shipment and delivery of
the Nuclear Material to the extent that the same have not been included in
the Acquisition Cost, and (B) at its own cost and expense, furnish such
labor, equipment and other facilities and supplies, if any, as may be
required to install and erect the Nuclear Material to the extent that the
cost and expense thereof have not been included in the Acquisition Cost.
Such installation and erection shall be in accordance with the
specifications and requirements of each Manufacturer. The Lessor shall not
be liable to the Lessee for any failure or delay in obtaining Nuclear
Material or making delivery thereof.
(d) Intermingling of Fuel Assemblies. Subject to the
provisions of Section 10(h) hereof, the Nuclear Material shall be owned
exclusively by the Lessor and leased to the Lessee under this Lease Agreement.
Prior to the fabrication of Nuclear Material into a completed fuel assembly or
sub-assembly or while such Nuclear Material is being reprocessed, the Lessee
will cause or permit such Nuclear Material to be fabricated or assembled only
into fuel assemblies or sub-assemblies owned by the Lessor and leased under this
Lease Agreement. However, fuel assemblies or sub-assemblies owned by the Lessor
and leased to the Lessee hereunder may be intermingled in the Generating
Facility with fuel assemblies or sub-assemblies not owned by the Lessor and
leased to the Lessee under this Lease Agreement, provided that such assemblies
or sub-assemblies owned by the Lessor shall be readily identifiable by serial
number or other distinguishing marks.
7. No Warranties or Representation by Lessor. THE NUCLEAR MATERIAL IS LEASED
AS-IS, WHERE-IS, IN THE CONDITION THEREOF AND SUBJECT TO THE RIGHTS OF ANY
PARTIES IN POSSESSION THEREOF, THE STATE OF THE TITLE THERETO, THE RIGHTS OF
OWNERSHIP THEREIN AND TO ALL APPLICABLE LAWS, RULES, REGULATIONS, ORDERS,
WRITS, INJUNCTIONS, DECREES, CONSENTS, APPROVALS, EXEMPTIONS, AUTHORIZATIONS,
LICENSES AND WITHHOLDING OF OBJECTIONS OF ANY GOVERNMENTAL OR PUBLIC BODY OR
AUTHORITY AND ALL OTHER REQUIREMENTS HAVING THE FORCE OF LAW APPLICABLE AT
ANY TIME TO ANY OF THE NUCLEAR MATERIALS OR ANY ACT OR TRANSACTION WITH
RESPECT THERETO OR PURSUANT TO THIS LEASE AGREEMENT, IN EACH CASE AS IN
EXISTENCE WHEN THE SAME FIRST BECOMES SUBJECT TO THIS LEASE AGREEMENT,
WITHOUT REPRESENTATIONS OR WARRANTIES OF ANY KIND BY THE LESSOR OR ANY
SECURED PARTY OR ANY PERSON ACTING ON BEHALF OF THE LESSOR OR ANY SECURED
PARTY. THE LESSEE ACKNOWLEDGES AND AGREES THAT NEITHER THE LESSOR NOR ANY
SECURED PARTY NOR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS AND EMPLOYEES,
NOR ANY COMPANY, PERSON OR FIRM CONTROLLING, CONTROLLED BY OR UNDER COMMON
CONTROL WITH ANY OF THEM NOR ANY OTHER PERSON ACTING ON BEHALF OF THE LESSOR
OR ANY SECURED PARTY HAS HAD AT ANY TIME PHYSICAL POSSESSION OF ANY PORTION
OF THE NUCLEAR MATERIAL, HAS MADE ANY INSPECTION THEREOF, HAS GIVEN ANY
ADVICE TO THE LESSEE OR HAS MADE ANY RECOMMENDATION TO THE LESSEE WITH
RESPECT TO THE
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CHOICE OF THE SUPPLIER, VENDOR OR PROCESSOR OF THE NUCLEAR MATERIAL OR WITH
RESPECT TO THE PROCESSING, MILLING, CONVERSION, ENRICHMENT, FABRICATION,
CONTAINERIZATION, TRANSPORTATION, UTILIZATION, STORAGE OR REPROCESSING OF THE
SAME. THE LESSEE ALSO ACKNOWLEDGES AND AGREES THAT NEITHER THE LESSOR NOR ANY
SECURED PARTY NOR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS AND EMPLOYEES,
NOR ANY COMPANY, PERSON OR FIRM CONTROLLING, CONTROLLED BY OR UNDER COMMON
CONTROL WITH ANY OF THEM, NOR ANYONE ACTING ON BEHALF OF THE LESSOR OR ANY
SECURED PARTY HAS MADE ANY WARRANTY OR OTHER REPRESENTATION, EXPRESS OR
IMPLIED, THAT THE NUCLEAR MATERIAL LEASED OR TO BE LEASED UNDER THIS LEASE
AGREEMENT (a) WILL NOT RESULT IN INJURY OR DAMAGE TO PERSONS OR PROPERTY, (b)
WILL BE USEABLE BY THE LESSEE OR WILL ACCOMPLISH THE RESULTS WHICH THE LESSEE
INTENDS FOR SUCH NUCLEAR MATERIAL OR (c) IS SAFE IN ANY MANNER OR RESPECT.
THE LESSEE ALSO ACKNOWLEDGES AND AGREES THAT NEITHER THE LESSOR NOR ANY
SECURED PARTY NOR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS AND EMPLOYEES,
NOR ANY COMPANY, PERSON OR FIRM CONTROLLING, CONTROLLED BY OR UNDER COMMON
CONTROL WITH ANY OF THEM, AND ANYONE ACTING ON BEHALF OF ANY OF THEM IS A
MANUFACTURER OR ENGAGED IN THE SALE OR DISTRIBUTION OF NUCLEAR MATERIAL AND
THAT NONE OF THE FOREGOING PERSONS HAS MADE OR DOES HEREBY MAKE ANY
REPRESENTATION, WARRANTY OR COVENANT, EXPRESS OR IMPLIED, WITH RESPECT TO THE
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, CONDITION, QUALITY,
USEABILITY, DURABILITY, SUITABILITY OR CONSEQUENCES OF USE OR MISUSE OF THE
NUCLEAR MATERIAL IN ANY RESPECT OR IN CONNECTION WITH OR FOR THE PURPOSES OR
USES OF THE LESSEE, OR ANY OTHER REPRESENTATION OR WARRANTY OF ANY KIND OR
CHARACTER WHATSOEVER, EXPRESS OR IMPLIED.
8. Lease Term; Early Termination; Termination of Leasing Record.
(a) The Lessor hereby leases to the Lessee, and the Lessee
hereby leases from the Lessor, the Nuclear Material for the term provided in
this Lease Agreement and subject to the terms and provisions hereof.
(b) This Lease Agreement shall become effective at 12:01 A.M.,
Eastern time, on the Closing, and, unless earlier terminated as provided in
Sections 8(c), 17 or 18, the term of this Lease Agreement shall end at the close
of business on the later of (i) the date on which there is no outstanding
principal of, or interest or premium, if any, on any of the Outstandings or (ii)
the Termination Date but in each case in no event later than November 17, 2015.
(c) In the event that during the term of this Lease Agreement,
the then effective Termination Date is not extended pursuant to Section 5.01 of
the Credit Agreement, the Lessee shall have the option, exercisable at any time
beginning 180 days before such Termination Date upon written notice to the
Lessor and the Secured Parties prior to such Termination Date to purchase all
(but not less than all) of the Nuclear Material and any spent fuel related
thereto for which title has not been transferred to the Lessee for a purchase
price equal to the Stipulated Casualty Value of such Nuclear Material at the
time of such purchase plus the Termination Rent. If the Lessee exercises such
purchase option, the purchase of the Nuclear Material shall occur on such date,
on or prior to such Termination Date, as may be agreed upon by the Lessor and
the Lessee and of which the Lessee has given the Secured Parties prior written
notice. Upon receipt of payment of the purchase price, the Lessor shall deliver
to the Lessee a Lessor's Bill of Sale, substantially in the form of Exhibit E,
transferring all right, title, interest and claim of the Lessor to the Nuclear
Material and any spent fuel related thereto for which title has not already been
transferred to the Lessee, to the Lessee or the Lessee's designee, free and
clear of all Liens created by the Collateral Agreements, together with such
documents, if any, as may be required to evidence the release of such Liens. The
later of (i) the date on which there is no outstanding principal of, or
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interest or premium, if any, on any of the Outstandings or (ii) the date of any
sale by the Lessor of all of the Nuclear Material as provided in this Section
8(c) shall constitute the Termination Settlement Date, and this Lease Agreement
shall terminate as of such date.
(d) In the event that during the term of this Lease Agreement
the then effective Termination Date is not extended pursuant to Section 5.01 of
the Credit Agreement and the Lessee shall not have exercised its option to
purchase pursuant to Section 8(c), the Lessee shall attempt to sell, or if no
sale is possible, to otherwise convey, on behalf of the Lessor, ownership of the
Nuclear Material to a third party not disqualified by any applicable statute,
law, regulation or agreement from acquiring such Nuclear Material, and, upon
prior written notice to the Lessor and the Secured Parties of the terms and date
of such sale, the Lessor shall furnish title papers as may be necessary to
effect such sale or conveyance on an as-is, where-is, non-installment, cash sale
basis, without recourse to or warranty or agreement of any kind by the Lessor.
The proceeds of such sale or conveyance shall be paid to the Lessor, and any
amount so paid shall constitute a credit against the amount of the Stipulated
Casualty Value payable by the Lessee under Section 8(e); provided, however, that
any proceeds of such sale or conveyance in excess of the amount payable by the
Lessee under Section 8(e) shall be retained by the Lessee.
(e) On the Termination Date unless the Lessee shall have
exercised its purchase option set forth in Section 8(c) and paid the Lessor the
purchase price of the Nuclear Material as provided therein, the Lessee shall pay
to the Lessor an amount equal to the sum of (i) the Stipulated Casualty Value of
all Nuclear Material leased under this Lease Agreement as of such Termination
Date and of all Nuclear Material sold or conveyed pursuant to Section 8(d) (less
any credit provided in Section 8(d)), and (ii) the Termination Rent as of such
Termination Date. Upon receipt of such payment, the Lessor shall deliver to the
Lessee or any designee of the Lessee a Lessor's Bill of Sale, substantially in
the form of Exhibit E, transferring all right, title, interest and claim of the
Lessor to the Nuclear Material and any spent fuel relating thereto for which
title has not been transferred to the Lessee to the Lessee or the Lessee's
designee, free and clear of all Liens created by the Collateral Agreements,
together with such documents, if any, as may be required to evidence the release
of such Liens.
(f) In the event that during the term of this Lease Agreement,
the then effective Termination Date is not extended pursuant to Section 5.01 of
the Credit Agreement, all obligations of the Lessor and Lessee under this Lease
Agreement with respect to the Nuclear Material, including the obligation of the
Lessee to pay Basic Rent and the obligation of the Lessor to acquire and pay for
the Nuclear Material and to lease the same to the Lessee shall terminate on the
date on which the Lessor receives the payment specified in Section 8(c) or
Section 8(e).
(g) The Lessee shall deliver to the Lessor and to the Secured
Parties a Rent Due and SCV Confirmation Schedule in the form of Exhibit F within
thirty (30) days following the date on which any Nuclear Material or spent fuel
resulting from the Nuclear Material is removed from the reactor of the
Generating Facility for purposes of "cooling-off" preliminary to reprocessing or
permanent on-site safe storage and/or off-site disposal. If the Lessee elects
within thirty (30) days following the receipt by the Lessor of such Rent Due and
SCV Confirmation Schedule to extend the lease term for the purposes of
reprocessing any such Nuclear Material, then the Lessor and the Lessee shall
enter into an Interim Leasing Record with respect to such Nuclear Material in
its then condition. In all other cases, the Final Leasing Record with respect to
any such Nuclear Material or spent fuel resulting from such Nuclear Material
shall be
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terminated and the Lessee shall immediately pay to the Lessor all amounts,
including the Stipulated Casualty Value, if any, with respect to such Nuclear
Material or spent fuel resulting from such Nuclear Material, and, upon receipt
thereof, the Lessor shall deliver to the Lessee or to any designee of the Lessee
a Lessor's Bill of Sale, substantially in the form of Exhibit E, transferring
all right, title, interest and claim of the Lessor to such Nuclear Material or
spent fuel resulting from such Nuclear Material for which title has not already
been transferred to the Lessee or the Lessee's designee, free and clear of all
Liens created by the Collateral Agreements, together with such documents, if
any, as may be required to evidence the release of such Liens.
9. Payment of Rent; Payments with Respect to the Lessor's Financing Costs.
(a) Basic Rent. The Lessee shall pay Basic Rent monthly in
arrears on the first day of the next succeeding month. If such first day of the
month is not a Business Day, then payment shall be made on the next succeeding
Business Day.
(b) Additional Rent. In addition to the Basic Rent, the Lessee
will also pay from time to time as provided in this Lease Agreement or on demand
of the Lessor, all Additional Rent on the due date thereof. In the event of any
failure by the Lessee to pay any Additional Rent, the Lessor shall have all the
rights, powers and remedies as in the case of failure to pay Basic Rent.
(c) Prepayments of Basic Rent. The Lessee may prepay Basic
Rent at any time. Such payment shall be credited against subsequent amounts owed
by the Lessee on account of Basic Rent.
(d) Wire Payment Procedure for Paying Basic Rent. All payments
of Rent and other payments to be made by the Lessee to the Lessor pursuant to
this Lease Agreement shall be paid to the Lessor (or, at the Lessor's request,
to the Secured Parties) in lawful money of the United States in Collected Funds
by wire transfer pursuant to Section 3.03 of the Credit Agreement. The Lessee
shall furnish to the Lessor and the Secured Parties each month during the term
of the Lease Agreement a summary of the rental calculations for such month
covering all outstanding Leasing Records. On each Basic Rent Payment Date, the
Lessee shall deliver to the Lessor and the Secured Parties a signed and
completed Rent Due and SCV Confirmation Schedule. The Lessee shall be
responsible for the accuracy of the matters contained in all such schedules
delivered by the Lessee pursuant to the provisions of this Lease Agreement.
10. Compliance with Laws; Restricted Use of Nuclear Material; Assignments;
Permitted Liens; Spent Fuel.
(a) Compliance with Legal Requirements. Subject to the
provisions of Section 11 hereof, the Lessee agrees to comply with all Legal
Requirements.
(b) Recording of Title. The Lessee shall promptly and duly
execute, deliver, file and record all such further counterparts of this Lease
Agreement or such certificates, Bills of Sale, financing and continuation
statements and other instruments as may be reasonably requested by the Lessor
and take such further actions as the Lessor shall from time to time reasonably
request, in order to establish, perfect and maintain the rights and remedies
created or intended to be created in favor of the Lessor and the Secured Parties
under this Lease Agreement and the Lessor's title to and interest in the Nuclear
Material as against the Lessee or any third party in any applicable
jurisdiction.
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(c) Exclusive Use of Nuclear Material. So long as no Lease
Event Default shall have occurred and be continuing, the Lessee may use the
Nuclear Material in the regular course of its business or in the business of any
subsidiary or affiliate of the Lessee, and, subject to Section 3(d) and upon
thirty (30) days' prior notice in writing to the Lessor and the Secured Parties,
or upon such shorter prior notice in writing promptly given upon the Lessee's
receipt of notice from any Manufacturer that the Nuclear Material is to be
moved, and at the Lessee's sole expense (without limiting the Lessee's rights to
request payment by the Lessor of such expense as provided in Section 6 hereof)
move such Nuclear Material to any jurisdiction approved in writing by the Lessor
in the contiguous forty-eight (48) states of the United States of America and
the District of Columbia for the purpose of having services performed on such
Nuclear Material in connection with any stage of the Nuclear Material Cycle
other than Heat Production and the "cooling off" stage, provided that (i) no
such movement of the Nuclear Material shall materially reduce the then fair
market value of such Nuclear Material, (ii) such Nuclear Material shall be and
remain the property of the Lessor, subject to this Lease Agreement, and (iii)
all Legal Requirements (including, without limitation, all necessary government
consents, permits and approvals) shall have been met or obtained by the Lessee,
on its own behalf and on behalf of the Lessor, and all necessary recordings,
filings and registrations or recordings, filings and registrations which the
Lessor shall reasonably consider advisable shall have been duly made in order to
protect the validity and effectiveness of this Lease Agreement and the security
interest created in the Security Agreement. At least once each year, or more
frequently if the Lessor reasonably so requests, the Lessee shall advise the
Lessor and the Secured Parties in writing where all Nuclear Material as of such
date is located. The Lessee shall maintain and make available to the Lessor for
examination upon reasonable notice complete and adequate records pertaining to
receipt, possession, use, location, movement, physical inventories and any other
information reasonably requested by the Lessor with respect to the Nuclear
Material.
(d) Additional Lessee Covenants. The Lessee agrees to use
every reasonable precaution to prevent loss or damage to the Nuclear Material.
All individuals handling or operating Nuclear Material in the possession of the
Lessee shall be conclusively presumed not to be agents of the Lessor. The Lessee
shall cooperate fully with the Lessor and all insurance companies and
governmental agencies providing insurance under Section 12 hereof in the
investigation and defense of any claims or suits arising from the licensing,
acquisition, storage, containerization, transportation, blending, transfer,
consumption, leasing, insuring, operating, disposing, fabricating and
reprocessing of the Nuclear Material. To the extent required by any applicable
law or regulation, the Lessee shall attach to the Nuclear Material the form of
required notice to protect or disclose the ownership of the Lessor or that the
Nuclear Material is leased. So long as no Lease Event of Default shall have
occurred and be continuing, the Lessor will assign or otherwise make available
to the Lessee all of its rights under any Manufacturer's warranty on Nuclear
Material. The Lessee shall pay all costs, expenses, fees and charges, except
Acquisition Costs, incurred by the Lessee in connection with the use and
operation of the Nuclear Material during the term of the lease of such Nuclear
Material. The Lessee hereby assumes all risks of loss or damage of Nuclear
Material however caused and shall, at its own expense, keep the Nuclear Material
in good operating condition and repair, reasonable wear and tear, obsolescence
and exhaustion excepted.
(e) Assignment by Lessor. Except as otherwise herein provided,
the Lessor may not, without the prior written consent of the Lessee, sell,
assign, transfer or convey the Nuclear Material or any interest therein or in
the Lease Agreement, or grant to any party a security interest in, or create a
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lien or encumbrance upon, all or any part of its right, title and interest in
this Lease Agreement and in any Nuclear Material. After receipt by the Lessee of
written notice from the Lessor of any assignment by the Lessor of Rents or other
sums payable by the Lessee under this Lease Agreement, the Lessee shall make
such payments as directed in such notice of assignment, and such payments shall
discharge the obligations of the Lessee hereunder to the extent of such
payments. The Lessee hereby consents to the security interest and other rights
and interests granted to the Secured Parties under the Security Agreement, dated
as of the date first above written.
(f) Liens; Permitted Liens. The Lessee will not directly or
indirectly create or permit to be created or to remain and will discharge any
Lien with respect to the Nuclear Material or any portion thereof, or upon the
Lessee's leasehold interest therein, or upon the Basic Rent, Additional Rent, or
any other sum payable under this Lease Agreement, other than Permitted Liens.
(g) Assignment by Lessee. Notwithstanding any provision of
this Lease Agreement to the contrary, subject to applicable laws and regulations
and so long as no Lease Event of Default shall have occurred and be continuing,
the Lessee may sublease the Nuclear Material provided that (i) the Lessee has
given prior written notice of such sublease to the Lessor, (ii) such sublease is
not inconsistent with, and is expressly subject to, this Lease Agreement and
(iii) such sublease does not in any way limit or affect the Lessee's duties and
obligations under this Lease Agreement.
(h) Transfer of Title to Manufacturers. The parties recognize
that, during the processing and reprocessing of Nuclear Material before and
after its utilization in the Generating Facility for the production of power,
the Manufacturer performing services on the Nuclear Material may require that
title thereto be transferred to such Manufacturer and/or that the Nuclear
Material be commingled with other nuclear material, with an obligation for the
Manufacturer, upon completion of the services, to reconvey a specified amount of
nuclear material. The standard enrichment contracts of the Department of Energy
contain such provisions. Therefore, the parties agree that (i) Nuclear Material
may become subject to such a contract provision and that the action contemplated
by such a provision may be taken, notwithstanding any provision of this Lease
Agreement to the contrary, (ii) as between the Lessor and the Lessee, such
Nuclear Material shall be deemed to remain leased under this Lease Agreement
while title thereto is in the Manufacturer, and (iii) the nuclear material
exchanged by the Manufacturer upon completion of its services shall be
automatically leased under this Lease Agreement in substitution for the Nuclear
Material originally delivered to the Manufacturer.
(i) Substitution of Nuclear Material. The Lessee shall be
permitted to exchange Nuclear Material for other Nuclear Material of equal or
greater fair market value provided that the Lessor receives title to such
substituted Nuclear Material free and clear of any Lien other than such Liens as
may be created by the Security Agreement or permitted under Section 10(h). Any
additional costs incurred in order to effect such an exchange shall be paid by
the Lessor in accordance with the procedures set forth in Section 6(c) and shall
be added to the Acquisition Cost of the Nuclear Material. A supplemental Leasing
Record dated the date that the Lessor makes such further payment shall be signed
by the Lessor and the Lessee to record the revised Acquisition Cost and shall
include a full description of the substituted Nuclear Material, notice of any
change in location and such additional details upon which the parties may agree.
(j) Spent Fuel. Without the consent of the Lessor, the Lessee
shall not permit any Nuclear Material, which shall have been removed from a
Generating Facility for the purpose of "cooling-off," storage, repair or
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reprocessing to be removed from the site of the Generating Facility unless (i)
the new site of such Nuclear Material is a facility maintaining liability
insurance and indemnification fully insuring and indemnifying the Lessor, the
Lessee and the Secured Parties under the Atomic Energy Act and any other
applicable law, rule or regulation, and (ii) except if the lease term is
extended pursuant to the second sentence of Section 8(g), the lease of such
Nuclear Material shall, concurrently with its removal from the Generating
Facility, be terminated by the Lessee pursuant to the provisions of Section 8 or
18 hereof, as applicable, with the Lessee acquiring the ownership thereof
pursuant to Section 8(e), 8(g) or Section 18(c), as applicable.
11. Permitted Contests. The Lessee at its expense may, in its own
name or, if necessary and permitted, in the name of the Lessor (and, if
necessary but not so permitted, the Lessee may require the Lessor to) contest
after prior notice to the Lessor, by appropriate legal or administrative
proceedings conducted in good faith and with due diligence, the amount, validity
or application, in whole or in part, of any Imposition or Lien therefor, or any
Legal Requirements or Insurance Requirements, or any matter underlying Lessee's
indemnity obligations under Section 13 hereof, or any other Lien or contract or
agreement referred to in Section 10(f) hereof; provided that (i) in the case of
an unpaid Imposition or Lien therefor, such proceedings shall suspend the
collection of such Imposition or the enforcement of such Lien against the
Lessor, (ii) neither the Lessee's use of the Nuclear Material or any portion
thereof nor the taking of any step necessary or proper with respect to such
Nuclear Material in any stage of the Nuclear Material Cycle nor the performance
of any other act required to be performed by the Lessee under this Lease
Agreement would be enjoined, prevented or otherwise interfered with, (iii) the
Lessor would not be subject to any additional civil liability (other than
interest which the Lessee agrees to pay) or any criminal liability for failure
to pay any such Imposition or to comply with any such Legal Requirements or
Insurance Requirements or any such other Lien, contract or agreement, and (iv)
the Lessee shall have set aside on its books adequate reserves (in accordance
with generally accepted accounting principles) and shall have furnished such
security, if any, as may be required in the proceedings or reasonably requested
by the Lessor. The Lessee will pay, and save the Lessor, the Owner Trustee, U.S.
Trust and the Secured Parties harmless against, all losses, judgments, decrees
and costs, including attorneys' fees and expenses, in connection with any such
contest and will, promptly after the determination of such contest, pay and
discharge the amounts which shall be levied, assessed or imposed or determined
to be payable, together with all penalties, fines, interest, costs and expenses
incurred in connection with such contest. All rights and indemnification
obligations under this Section 11 and each other indemnification obligation in
favor of the Lessor, the Owner Trustee, U.S. Trust and the Secured Parties under
this Lease Agreement shall survive any termination of this Lease Agreement or of
the lease of any Nuclear Material hereunder.
12. Insurance; Compliance with Insurance Requirements. The Lessee
shall comply with all Insurance Requirements and with all Legal Requirements
pertaining to insurance. Without limiting the foregoing:
(a) Liability and Casualty Insurance. The Lessee shall, at its
own cost and expense, procure and maintain, or cause to be procured and
maintained, liability insurance and indemnification with respect to the Nuclear
Material insuring and indemnifying the Lessor, the Owner Trustee, U.S. Trust,
the Lessee, and the Secured Parties to the full extent required or available,
whichever may be greater, under the Atomic Energy Act or under any other
applicable law, rule or regulation. In the event the provisions of the Atomic
Energy Act with respect to liability insurance and the indemnification of
owners,
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licensees and operators of Nuclear Material or any other provisions of the
Atomic Energy Act which benefit the Lessor, the Owner Trustee, U.S. Trust or the
Secured Parties shall change, then the Lessee shall use its best efforts to
obtain equivalent insurance and indemnification agreements from the Nuclear
Regulatory Commission or from such other public and/or private sources from
which such coverage is available. The Lessee shall also, at its own cost and
expense, procure and maintain, or cause to be procured and maintained, physical
damage insurance with respect to the Nuclear Material insuring the Lessor, the
Owner Trustee, U.S. Trust and the Secured Parties against loss or damage to the
Nuclear Material in a manner which is consistent at all times with current
prudent utility industry practice in the United States; provided, however, that
the Lessee shall in any event maintain physical damage insurance coverage for
its Three Mile Island Unit 1 nuclear generating station site, including the
Nuclear Material, in an amount not less than $1.11 billion. Such liability and
physical damage insurance and indemnification agreements may be subject to
deductible amounts which do not exceed in the aggregate $5,000,000, and the
Lessee may self-insure with respect to such liability and physical damage
insurance and indemnification agreements to the extent of $5,000,000, provided
that such deductible amounts and such self-insurance are permitted under all
applicable law, rules and regulations.
(b) Third Parties; Insurance Requirements. The Lessee shall
use its best efforts to provide that the Nuclear Material, while in the
possession of third parties, is covered for liability insurance and
indemnification to the maximum extent available, and for physical damage
insurance in an amount not less than the Stipulated Casualty Value of such
Nuclear Material. To the extent that any such third party is maintaining such
insurance coverage for the Nuclear Material, the Lessee shall have no obligation
to do so under this Lease Agreement.
(c) Named Insureds; Loss Payees. The Lessee shall provide for
the Lessor, the Owner Trustee, U.S. Trust and the Collateral Agent to be named
additional insureds where possible, and, with respect to physical damage
coverage, named loss payees to the full extent of their interests in all
insurance policies and indemnification agreements relating to the Nuclear
Material required under this Section. All such policies and, where possible,
indemnification agreements, shall provide for at least ten (10) days' prior
written notice to the Lessor, the Owner Trustee, U.S. Trust and the Collateral
Agent of any cancellation or material alteration of such policies.
(d) Insurance Certificates. The Lessee shall, upon request of
the Lessor, the Owner Trustee, U.S. Trust or the Collateral Agent, provide the
Lessor, the Owner Trustee, U.S. Trust or the Collateral Agent, as the case may
be, with copies of the policies or insurance certificates in respect of the
insurance procured pursuant to the provisions of this Section and shall advise
the Lessor, the Owner Trustee, U.S. Trust and the Collateral Agent of all
expirations and renewals of policies and all notices issued by the insurers with
respect to such policies. Within a six-month period from the execution of this
Lease Agreement and at yearly intervals thereafter, the Lessee shall furnish to
the Lessor, the Owner Trustee, U.S. Trust and the Collateral Agent a certificate
as to the insurance coverage provided pursuant to this Section and shall further
give notice as to any material change in the nature or availability of such
coverage, including any material change whatsoever in the provisions of the
Atomic Energy Act or any other applicable law, rule or regulation with respect
to liability insurance and indemnification, or, immediately after the Lessee
becomes aware, or should reasonably be expected to become aware, of any material
change in the application, interpretation or enforcement thereof. The Lessor,
the Owner Trustee, U.S. Trust or the Collateral Agent shall be under no duty to
examine such insurance policies or indemnification agreements or to advise the
Lessee in case the Lessee is not in compliance with any Insurance Requirements.
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13. Indemnity. Without limitation of any other provision of this
Lease Agreement, including Section 11, the Lessee agrees to indemnify and hold
harmless each of the Lessor, the Owner Trustee, U.S. Trust and the Secured
Parties and all companies, persons or firms controlling, controlled by, or under
common control with any of them and the respective shareholders, directors,
officers and employees of the foregoing against any and all claims, demands and
liabilities of whatever nature and all costs, losses, damages, obligations,
penalties, causes of action, judgments and expenses (including attorneys' fees
and expenses) directly or indirectly relating to or in any way arising out of:
(a) defects in title to Nuclear Material upon acquisition by
the Lessor or in ownership of and interest in the Nuclear Material (the term
"Nuclear Material" when used in this Section 13 shall include, in addition to
all other Nuclear Material, nuclear material the lease of which has been
terminated and which is in storage, or is being transported to storage, and
which has not been sold or disposed of by the Lessor to the Lessee or to a third
party);
(b) the ownership, licensing, ordering, rejection, use,
nonuse, misuse, possession, control, installation, acquisition, storage,
containerization, transportation, blending, transfer, consumption, leasing,
insuring, operating, disposing, fabricating, channelling, refining, milling,
enriching, conversion, cooling, processing, condition, operation, inspection,
repair and reprocessing of the Nuclear Material, or resulting from the condition
of the environment including the adjoining and/or underlying land, water,
buildings, streets or ways, except to the extent that such costs are included in
the Acquisition Cost of such Nuclear Material within the limits specified in
Section 4 (or within any change of such limits agreed to in writing by the
Lessor and the Lessee) and except for any general administrative expenses of the
Secured Parties and of their representatives;
(c) the assertion of any claim or demand based upon any
infringement or alleged infringement of any patent or other right, by or in
respect of any Nuclear Material; provided, however, that the Lessor shall have
made available to the Lessee all of the Lessor's rights under any similar
indemnification from the Manufacturer of such Nuclear Material under any Nuclear
Material Contract;
(d) all federal, state, county, municipal, foreign or other
fees and taxes of whatever nature including, but not limited to, license,
qualification, franchise, sales, use, business, gross receipts, ad valorem,
property, excise, and occupation fees and taxes and penalties and interest
thereon, whether assessed, levied against or payable by the Lessor or any
Secured Party or to which the Lessor or any Secured Party is subject with
respect to the Nuclear Material or the Lessor's or any Secured Party's ownership
thereof or interest therein or the licensing, ordering, ownership, use,
possession, control, acquisition, storage, containerization, transportation,
blending, milling, enriching, transfer, consumption, leasing, insuring,
operating, disposing, fabricating, channelling, refining, conversion, cooling
and reprocessing of Nuclear Material or measured in any way by the value thereof
or by the business of investment in, financing of or ownership by the Lessor or
any Secured Party with respect thereto; provided, however, that the Lessee shall
not be obligated to indemnify any Secured Party for any taxes, whether federal,
state or local, based on or measured by net income of any Secured Party where
taxable income is computed in substantially the same manner as taxable income is
computed under the Code;
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(e) 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 involving or connected in any way with the Nuclear Material or any
portion thereof;
(f) any violation, or alleged violation, of this Lease
Agreement by the Lessee or of any contracts or agreements to which the Lessee is
a party or by which it is bound or any laws, rules, regulations, orders, writs,
injunctions, decrees, consents, approvals, exemptions, authorizations, licenses
and withholdings of objection, of any governmental or public body or authority
and all other requirements having the force of law applicable at any time to the
Nuclear Material or any action or transaction by the Lessee with respect thereto
or pursuant to this Lease Agreement;
(g) performance of any labor or service or the furnishing of
any materials in respect of the Nuclear Material or any portion thereof, except
to the extent that such costs are included in the Acquisition Cost of such
Nuclear Material within the limits specified in Section 4 (or within any change
of such limits agreed to in writing by the Lessor and the Lessee); or
(h) liabilities based upon a theory of strict liability in
tort, negligence or willful acts to the extent that such liabilities relate to
the Nuclear Material or any action or transaction with respect thereto or
pursuant to this Lease Agreement.
The Lessee shall, upon demand, reimburse the Lessor, the Owner Trustee, U.S.
Trust, the Secured Parties or other indemnified parties, as the case may be, for
any sum or sums expended with respect to any of the foregoing or advance such
amount, upon request by the Lessor, the Owner Trustee, U.S. Trust, the Secured
Parties or such other party for payment thereof. With respect solely to the
Lessor, the amount of any payment obligation of the Lessee under this Section 13
shall be determined on a net, after-tax basis, taking into account any tax
benefit to the Lessor. Notwithstanding the foregoing, the Lessee shall not
indemnify or hold harmless the Lessor, the Owner Trustee, U.S. Trust, the
Secured Parties or other indemnified parties for (i) any claims, demands,
liabilities, costs or expenses which arise, result from or relate to obligations
of such party as an insurer under contracts or agreements of insurance or
reinsurance or (ii) any liability arising from the willful misconduct or gross
negligence of the Lessor, the Owner Trustee, U.S. Trust, the Secured Parties or
other indemnified parties; provided, however, that the Lessee shall in any event
indemnify and hold harmless the Lessor, the Owner Trustee, U.S. Trust, the
Secured Parties and other indemnified parties for that part of any such
liability to which the Lessee has contributed. Without limiting any of the
foregoing provisions of this Section 13, to the extent that the Lessee in fact
indemnifies the Lessor, the Owner Trustee, U.S. Trust, the Secured Parties or
such other party under this indemnity provision, the Lessee shall be subrogated
to the rights of the Lessor, the Owner Trustee, U.S. Trust, the Secured Parties
and such other party in the affected transaction and shall have a right to
determine the settlement of claims with respect to such transaction, provided
that any such rights to which the Lessee shall be subrogated shall be
subordinate and subject in right of payment to the prior payment in full of all
liabilities to the Lessor, the Owner Trustee, U.S. Trust, the Secured Parties or
other indemnified parties of the person or entity in respect of which such
rights exist. The Lessor shall claim, on a timely basis, any refund to which it
may be entitled with respect to any fees or taxes for which the Lessor has
sought indemnification from the Lessee under Section 13(d), shall take all steps
necessary to prosecute diligently such claim and shall pay over to the Lessee
any refund (together with any interest received thereon) recovered by the Lessor
with respect to such fees or taxes as soon as practicable following receipt
thereof, provided that the Lessee shall have
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previously indemnified the Lessor with respect to such fees or taxes. The Owner
Trustee, U.S. Trust and the Secured Parties, at the expense of the Lessee, (i)
shall cooperate with the Lessee in such manner as the Lessee shall reasonably
request in order to claim, on a timely basis, any refund to which the Owner
Trustee, U.S. Trust or the Secured Parties may be entitled with respect to any
fees or taxes for which the Lessee has indemnified the Owner Trustee, U.S. Trust
or any Secured Party or for which the Lessee has an obligation to indemnify the
Owner Trustee, U.S. Trust or the Secured Parties under Section 13(d) (provided
that the Lessee is not in default of such obligation) if such cooperation is
necessary in order to claim such refund, (ii) shall take all steps which the
Lessee shall reasonably request which are necessary to prosecute such claim, and
(iii) shall pay over to the Lessee any refund (together with any interest
received thereon) recovered by the Owner Trustee, U.S. Trust or any Secured
Party with respect to such fees or taxes as soon as practicable following
receipt thereof, provided that the Lessee shall have previously indemnified the
Owner Trustee, U.S. Trust or such Secured Party with respect to such fees or
taxes. All rights and indemnification obligations under this Section 13, and
each other indemnification obligation in favor of the Lessor, the Owner Trustee,
U.S. Trust and the Secured Parties under this Agreement, shall survive any
termination of this Lease Agreement or of the lease of any Nuclear Material
hereunder.
14. Casualty and Other Events. Upon the occurrence of any one or more of the
following events:
(a) the loss, destruction or damage beyond repair of any
Nuclear Material, or
(b) the commandeering, condemnation, attachment or loss of use
to the Lessee of any Nuclear Material by reason of the act of any third party or
governmental instrumentality or the deprivation or loss of use to the Lessee of
any Nuclear Material for any other reason, other than by reason of a Lease Event
of Default, for a period exceeding ninety (90) days; or
(c) a determination by the Lessee in its sole discretion that
any Nuclear Material is no longer useful to the Lessee, provided, however, that
(i) no Lease Event of Default has occurred and is continuing, and (ii) no such
determination may be made by the Lessee with respect to any Nuclear Material
prior to ---------- --;
Then, in any such case, the Lessee promptly shall give written
notice to the Lessor and the Secured Parties of any such event, and upon the
earlier of (i) ten (10) days following receipt of any insurance or other
proceeds paid with respect to the foregoing or (ii) one hundred and twenty (120)
days after the occurrence of any such event, the Lessee shall pay to the Lessor
an amount equal to the then Stipulated Casualty Value of such Nuclear Material,
together with any Basic Rent and Additional Rent then due with respect to such
Nuclear Material. The lease of such Nuclear Material hereunder and the
obligation of the Lessee to pay Basic Rent and Additional Rent with respect to
such Nuclear Material shall continue until the day on which the Lessor receives
payment of such Stipulated Casualty Value, Basic Rent and Additional Rent. Upon
the giving of written notice of the occurrence of such an event, the Lessee
shall promptly use its best efforts to sell, or, if no sale is possible, to
otherwise convey, on behalf of the Lessor, ownership of such Nuclear Material to
a third party not disqualified by any applicable statute, law, regulation or
agreement from acquiring such Nuclear Material, and the Lessor shall furnish
title papers as may be necessary to effect such sale or conveyance on an as-is,
where-is, non-installment, cash sale basis without recourse to or warranty or
agreement of any kind by the Lessor. Any such sale or conveyance shall be
effected on or
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before the date one hundred and twenty (120) days after the date of the
occurrence of such event. The proceeds of such sale or conveyance shall be paid
to the Lessor, and any amount so paid shall constitute a credit against the
amount of the Stipulated Casualty Value payable by the Lessee under this Section
14.
15. Nuclear Material to Remain Personal Property. It is expressly understood
and agreed that the Nuclear Material shall be and remain personal property
notwithstanding the manner in which it may be attached or affixed to realty
and notwithstanding any law or custom or the provisions of any lease,
mortgage or other instrument applicable to any such realty. The Lessee agrees
to indemnify the Lessor and the Secured Parties against, and to hold the
Lessor and the Secured Parties harmless from, all losses, costs and expenses
(including reasonable attorneys' fees and expenses) resulting from any of the
Nuclear Material becoming part of any realty. Upon termination of the lease
of any Nuclear Material, any costs of removal, transportation, storage and
delivery of such Nuclear Material shall be paid by the Lessee. The Lessor and
the Secured Parties shall not be liable for any physical damage caused to any
realty or any building by reason of the removal of the Nuclear Material
therefrom.
16. Events of Default. Each of the following events of default by the Lessee
shall constitute a "Lease Event of Default" and give rise to the rights on
the part of the Lessor described in Section 17 hereof:
(i) Default in the payment of Basic Rent or Additional
Rent, if any, on the date on which such payment is due and the continuance
of such default for five (5) days;
(ii) Default in the payment of Termination Rent;
(iii) The Lessee shall fail to maintain liability and
casualty insurance pursuant to its obligations under Section 12(a) of this
Lease Agreement;
(iv) The Lessee shall fail to perform its obligations to
purchase Nuclear Material pursuant to Section 8(e) of this Lease
Agreement;
(v) Any representation or warranty or statement made by
the Lessee (or any of its officers) herein or in connection with this
Lease Agreement shall prove to be incorrect or misleading in any material
respect when made;
(vi) Default in the payment or performance of any other
material liability or obligation or covenant of the Lessee to the Lessor,
and the continuance of such default for thirty (30) days after written
notice to the Lessee sent by registered or certified mail;
(vii) The Lessee suspends or discontinues its business
operations or becomes insolvent (however such insolvency may be evidenced)
or admits insolvency or bankruptcy or its inability to pay its debts as
they mature, makes an assignment for the benefit of creditors or applies
for or consents to the appointment of a trustee or receiver for the Lessee
or for the major part of its property;
(viii) The institution of bankruptcy, reorganization,
liquidation or receivership proceedings for relief under any bankruptcy
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law or similar law for the relief of debtors by or against the Lessee and,
if instituted against the Lessee, its consent thereto or the pendency of
such proceedings for sixty (60) days;
(ix) An event of default (the effect of which is to
permit the holder or holders of any instrument, or the trustee or agent on
behalf of such holder or holders, to cause the indebtedness evidenced by
such instrument to become due prior to its stated maturity) shall occur
under the provisions of any instrument evidencing indebtedness for
borrowed money of the Lessee in a principal amount equal to at least
$20,000,000 or if any obligation of the Lessee for the payment of such
indebtedness shall become or be declared to be due and payable prior to
its stated maturity, or shall not be paid when due and is not paid within
the applicable cure period, if any, provided for the payment of such
indebtedness under such instrument;
(x) An event of default shall occur under the provisions
of any Basic Document and such default shall have continued beyond any
applicable cure period.
(xi) A final judgment in an amount in excess of
$20,000,000 is rendered against the Lessee, and within thirty (30) days
after the entry thereof, such judgment is not discharged or execution
thereof stayed pending appeal, or within thirty (30) days after the
expiration of any such stay, such judgment is not discharged; or
(xii) Other than pursuant to a condemnation proceeding,
any court, governmental officer or agency shall, under color of legal
authority, take and hold possession of any substantial part of the
property or assets of the Lessee.
17. Rights of the Lessor Upon Default of the Lessee. Upon the occurrence of
any Lease Event of Default, the Lessor may, in its discretion, and shall, at the
direction of the Secured Parties, do one or more of the following:
(a) Terminate the lease term of any or all Nuclear Material
upon five (5) days written notice to the Lessee sent by registered or certified
mail;
(b) Whether or not any lease of any Nuclear Material is
terminated, and, subject to any applicable law or regulation, take immediate
possession of any or all Nuclear Material or cause such Nuclear Material to be
taken from the possession of the Lessee, and/or take immediate possession of and
remove other property of the Lessor in the possession of the Lessee, wherever
situated and for such purpose enter upon any premises without liability for so
doing or require the Lessee, at the Lessee's expense, to deliver the Nuclear
Material, properly containerized and insulated for shipping to the Lessor or to
such other person as the Lessor may designate, in which case the risk of loss
shall be upon the Lessee until such delivery is made;
(c) Whether or not any action has been taken under (a) or (b)
above, and subject to any applicable law or regulation, sell any Nuclear
Material (with or without the concurrence and whether or not at the request of
the Lessee) at public or private sale, and the Lessee shall be liable for and
shall promptly pay to the Lessor all unpaid Rent to the date of receipt by the
Lessor of the proceeds of such sale plus any deficiency between the net proceeds
of such sale and the Stipulated Casualty Value of such Nuclear Material at the
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time of such payment by the Lessee; provided, however, that any proceeds of such
sale in excess of the sum of such unpaid Rent, the Stipulated Casualty Value of
such Nuclear Material and all other amounts payable by the Lessee under this
Section 17 shall be received for the benefit of, and shall be paid over to the
Lessee, as soon as practicable after receipt thereof;
(d) Subject to any applicable law or regulation, sell in a
commercially reasonable manner, dispose of, hold, use, operate, remove, lease or
keep idle any Nuclear Material as the Lessor in its sole discretion may
determine, without any obligation to account to the Lessee with respect to such
action or inaction or for any proceeds thereof, except that the net proceeds of
any such selling, disposing of, holding, using, operating or leasing shall be
credited by the Lessor against any Rent accruing after the Lessor shall have
declared this Lease Agreement as to any or all of the Nuclear Material to be in
default pursuant to this Section; provided, however, that any net proceeds of
any such selling, disposing of, holding, using, operating or leasing in excess
of the sum of any such accrued Rent and all other amounts payable by the Lessee
under this Section 17 shall be received for the benefit of, and shall be paid
over to the Lessee, as soon as practicable after receipt thereof;
(e) Terminate this Lease Agreement as to any or all of the
Nuclear Material or exercise any other right or remedy which may be available
under applicable law or proceed by appropriate court action to enforce the terms
hereof or to recover damages for the breach hereof. If the Lessee fails to
deliver, promptly after written request, the Nuclear Material pursuant to (b),
above, subject to reasonable wear and tear, obsolescence and exhaustion, in good
operating condition and repair, or converts or destroys any Nuclear Material,
the Lessee shall be liable to the Lessor for all Rent then due and payable on
the Nuclear Material, all other amounts then due and payable under this Lease
Agreement, the then Stipulated Casualty Value of such Nuclear Material, plus any
loss, damage and expense (including without limitation reasonable attorneys'
fees and expenses) sustained by the Lessor by reason of such Lease Event of
Default and the exercise of the Lessor's remedies with respect thereto,
including any costs incurred under the Credit Agreement and the Security
Agreement, and any other amounts owed to the Secured Parties with respect to the
Notes. If, upon the occurrence of a Lease Event of Default, the Lessee delivers
Nuclear Material to the Lessor or to such other person as the Lessor may
designate, or if the Lessor repossesses or causes Nuclear Material to be
repossessed on its behalf, the Lessee shall be liable for and the Lessor may
recover from the Lessee all Rent on the Nuclear Material due and payable to the
date of such delivery or repossession, all other amounts due and payable under
this Lease Agreement, plus any loss, damage and expense (including without
limitation reasonable attorneys' fees and expenses) sustained by the Lessor by
reason of such Lease Event of Default and the exercise of the Lessor's remedies
with respect thereto. No remedy referred to in this Section 17 is intended to be
exclusive, but each shall be cumulative and in addition to any other remedy
referred to above or otherwise available to the Lessor at law or in equity and
the exercise in whole or in part by the Lessor of any one or more of such
remedies shall not preclude the simultaneous or later exercise by the Lessor of
any or all such other remedies. No waiver by the Lessor of any Lease Event of
Default shall in any way be, or be construed to be, a waiver of any future or
subsequent Lease Event of Default.
18. Termination After Certain Events.
(a) This Lease Agreement may terminate as provided in Section
18(b) below prior to the expiration of its term in connection with any of the
following "Terminating Events":
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(i) The Lessor shall have given notice that the Lessor
is not satisfied with any change in the insurers, coverage, amount or
terms of any insurance policy or indemnity agreement required to be
obtained and maintained by the Lessee pursuant to Section 12;
(ii) There shall occur the revocation or material
adverse modification of any authorization, consent, exemption or approval
theretofore obtained from any regulatory body or governmental authority
necessary for the carrying out of the intent and purposes of this Lease
Agreement or the actions or transactions contemplated hereby, and the
effectiveness of any such revocation or material adverse modification
shall not be stayed pending any appeal thereof;
(iii) A Nuclear Incident involving or connected in any
way with the Nuclear Material shall have occurred, and the Lessor shall
have given notice to the Lessee that the Lessor believes such Nuclear
Incident may give rise to an aggregate liability, or to damage,
destruction or personal injury in excess of $20,000,000;
(iv) There shall have occurred a Deemed Loss Event;
(v) Any change in, or new interpretation by a
governmental authority having jurisdiction relating to, the Price-Anderson
Act, as amended, or the Atomic Energy Act, or the regulations of the
Nuclear Regulatory Commission thereunder, in each case as in effect on the
date of this Lease Agreement, shall have been adopted, and the Lessor
shall have given notice to the Lessee that, in the opinion of independent
counsel selected by the Lessor and reasonably satisfactory to the Lessee
and the Secured Parties as a result of such change or new interpretation
the Lessor is prohibited from asserting any material right, protection or
defense available under applicable law as of the date of this Lease
Agreement with respect to civil or criminal actions brought in connection
with a Nuclear Incident;
(vi) Any law or regulation or interpretation (judicial,
regulatory or otherwise) of any law or regulation shall be adopted or
enforced by any Court or governmental authority, and as a result of such
adoption or enforcement, approval of the transactions contemplated by this
Lease Agreement shall be required and shall not have been obtained within
any applicable grace period after such adoption or enforcement or as a
result of which adoption or enforcement this Lease Agreement or any
transaction contemplated hereby, including any payments to be made by the
Lessee or the ownership of the Nuclear Material by the Lessor, shall be or
become unlawful, or the performance of this Lease Agreement shall be
rendered impracticable in any material way; or
(vii) Any governmental licenses, approvals or consents
with respect to the Generating Facility, without which the Generating
Facility cannot continue to operate, shall have been revoked and the
Lessee shall not have, in good faith, within one hundred and eighty (180)
days of such revocation, represented in writing to the Lessor that the
Lessee has made a good faith determination that such Generating Facility
will return to operation within twenty-four (24) months of such
revocation, or for any other reason the Generating Facility shall cease to
be operated for a period of twenty-four (24) consecutive months.
(b) Upon the happening of any of the Terminating Events listed
in Section 18(a), Lessor and/or the Secured Parties may, at their option,
terminate this Lease Agreement, such termination to be effective upon delivery
of the Notice contemplated by paragraph (d)(ii) below, except with respect to
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obligations and liabilities of the Lessee, actual or contingent, which arose
under the Lease Agreement on or prior to the date of termination and except for
the Lessee's obligations set forth in Sections 10, 12 and 13, and in this
Section 18, all of which obligations will continue until the delivery of
documentation by the Lessor and the payment by the Lessee provided for below,
and except that after such delivery and payment, the Lessee's obligations under
Section 13 shall continue as therein set forth as shall all of Lessee's
indemnification obligations set forth in other sections of this Lease Agreement.
(c) Upon any such termination, the entire interest of the
Lessor in the Nuclear Material and any spent fuel relating thereto for which
title has not been transferred to the Lessee shall automatically transfer to and
be vested in the Lessee, without the necessity of any action by either the
Lessor or the Lessee, provided, however, that if the Lessor shall have
theretofore approved in writing such Person and the terms of such transfer, the
entire interest of the Lessor in such Nuclear Material and any spent fuel
relating thereto for which title has not been transferred to the Lessee shall,
upon such termination, automatically transfer to and be vested in any Person
designated by the Lessee.
(d) Promptly after either party shall learn of the happening
of any Terminating Event, such party shall give notice of the same to the other
party and to the Secured Parties.
(ii) If the Lessor and/or Secured Parties elect to
terminate the Lease Agreement, they shall give notice to the Lessee and the
Secured Parties or the Lessor, as the case may be, which notice shall (x)
acknowledge that the Lease Agreement has terminated, subject to the continuing
obligations of the Lessee mentioned above, and that title to and ownership of
such Nuclear Material and any spent fuel relating thereto for which title has
not been transferred to the Lessee has transferred to and vested in the Lessee
or such other Person, and (y) specify a Termination Settlement Date occurring
one hundred and fifty (150) days after the giving of such notice. After such
termination of this Lease Agreement and until such Termination Settlement Date,
the Lessee shall continue to pay Basic Rent and Additional Rent. On such
Termination Settlement Date, the Lessee shall be obligated to pay to the Lessor
as the purchase price for the Nuclear Material an amount equal to the sum of (x)
Stipulated Casualty Value of the Nuclear Material as of the Termination
Settlement Date and (y) the Termination Rent on the Termination Settlement Date.
The Lessor shall be obligated to deliver to the Lessee a Lessor's Bill of Sale,
substantially in the form of Exhibit E, on an as-is, where-is, non-installment,
cash sale basis, without recourse to or warranty or agreement of any kind by the
Lessor acknowledging the transfer and vesting of title and ownership of the
Nuclear Material and any spent fuel relating thereto for which title has not
been transferred to the Lessee, in accordance with paragraph (c) above and
confirming that upon payment by the Lessee of the amounts set forth in the
immediately preceding sentence, the Nuclear Material is free and clear of the
Liens created by the Collateral Agreements, together with such documents, if
any, as may be required to evidence the release of such Liens.
19. Investment Tax Credit. To the extent that the Lessee determines the Nuclear
Material is or becomes eligible for any investment or similar credit under the
Code as now or hereafter in effect, the Lessee shall request in writing that the
Lessor elect to treat the Lessee as having acquired such Nuclear Material, and,
if permitted to do so under the Code and under any other applicable law, rule or
regulation, the Lessor, pursuant to such request of the Lessee, shall provide
the Lessee with an appropriate investment credit election and the Lessee shall
consent to such election. A condition to the Lessor's making such election will
be the provision by the Lessee of a report or statement with respect to all
Nuclear Material as to which the investment credit election is applicable. Such
report or statement shall contain such information and be in such form as may be
required for Internal Revenue Service reporting purposes. The Lessee shall
indemnify and hold harmless the Lessor and any affiliates with respect to any
adverse tax consequence, other than the loss of the credit, which may result
from such election including, but not limited to, any increase in the Lessor's
income taxes due to any required reduction of the Lessor's tax basis below the
Lessor's cost of the Nuclear Material, and the Lessee agrees to pay to or on
behalf of the Lessor, or otherwise make available to the Lessor, funds
sufficient to put the Lessor in the same after-tax position (other than by
reason of the loss of the investment credit) the Lessor would have been in if
such election had not been made.
20. Certificates; Information; Financial Statements.
(a) The Lessee will from time to time deliver to the Lessor
and the Secured Parties, promptly upon reasonable request (i) a statement
executed by any Vice President, Treasurer or Assistant Treasurer or any other
assistant officer of the Lessee, certifying the dates to which the sums payable
hereunder have been paid, that this Lease Agreement is unmodified and in full
effect (or, if there have been modifications, that this Lease Agreement is in
full effect as modified, and identifying such modifications) and that no Lease
Event of Default or Terminating Event has occurred and is continuing (or
specifying the nature and period of existence of any thereof and what action the
Lessee is taking or proposes to take with respect thereto), (ii) such
information with respect to the Nuclear Material as the Lessor or the Secured
Parties may reasonably request, and (iii) such information with respect to the
Lessee's operations, business, property, assets, financial condition or
litigation as the Lessor or any assignee of the Lessor or the Secured Parties
may reasonably request.
(b) The Lessee will deliver to the Lessor and the Secured
Parties:
(i) Quarterly Financial Statements. As soon as
practicable and in any event within ninety (90) days after the end of each
fiscal quarter (other than the last fiscal quarter in each fiscal year),
three (3) copies of a balance sheet of the Lessee (consolidated and
consolidating if the Lessee has any subsidiaries) as of the end of such
quarter and of statements of income and cash flows of the Lessee
(consolidated and consolidating if the Lessee has any subsidiaries) for
such quarter, setting forth in each case corresponding figures in
comparative form for the corresponding period of the preceding fiscal
year, each certified as true and correct by the chief accounting officer
thereof; provided, however, that delivery pursuant to clause (iii) below
of copies of the Lessee's Quarterly Report on Form 10-Q for such quarter
containing such financial statements filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirements of this
clause (i);
(ii) Annual Financial Statements. As soon as practicable
and in any event within one hundred and twenty (120) days after the end of
each fiscal year, three (3) copies of an annual report of the Lessee
consisting of its financial statements, including a balance sheet as of
the end of such fiscal year (consolidated and consolidating if the Lessee
has any subsidiaries) and statements of income and cash flows for the year
then ended (consolidated and consolidating if the Lessee has any
subsidiaries), setting forth corresponding figures in comparative form for
the preceding fiscal year, with all notes thereto, all in reasonable
detail and certified by independent public accountants of recognized
standing
21
<PAGE>
selected by the Lessee (only with respect to the consolidated financial
statements, if applicable); provided, however, that delivery pursuant to
clause (iii) below of copies of the Lessee's Annual Report on Form 10-K
for such fiscal year containing such financial statements filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this clause (ii); and
(iii) SEC Reports, etc. With reasonable promptness,
copies of all notices, reports or materials filed by the Lessee with the
Securities and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange Commission)
under the Securities Act of 1933, as amended, other than Registration
Statements on Form S-8 or any amendments thereto, or the Securities
Exchange Act of 1934, as amended, other than Annual Reports on Form 10-K,
and including without limitation, all Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Together with each delivery of financial statements required by clause (b)(i)
above, the Lessee will deliver to the Lessor and the Secured Parties an
Officer's Certificate stating that the Lessee is in compliance with the terms of
this Lease Agreement and stating that there exists no Lease Event of Default, or
Terminating Event or, if any Lease Event of Default, or Terminating Event
exists, specifying the nature and period of existence thereof and what action
the Lessee proposes to take with respect thereto. The Lessee also covenants that
promptly upon the obtaining of knowledge of a Lease Event of Default by the
chief executive officer, principal financial officer or principal accounting
officer of the Lessee, it will deliver to the Lessor and the Secured Parties an
Officer's Certificate specifying the nature and period of existence thereof and
what action the Lessee proposes to take with respect thereto.
21. Obligation of the Lessee to Pay Rent. The Lessee's obligation to pay, as
the same becomes due, Basic Rent, Additional Rent, Termination Rent, and all
other amounts payable hereunder shall, subject to the covenant of the Lessor
contained in Section 3 hereof, be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (i) any setoff,
counterclaim, recoupment, defense or other right which the Lessee may have
against the Lessor or anyone else for any reason whatsoever, (ii) any defect in
the title, compliance with specifications, condition, design, operation or
fitness for use of, or any damage to or loss or destruction of, any Nuclear
Material, or (iii) any interruption or cessation in the use or possession of any
Nuclear Material by the Lessee for any reason whatsoever. The Lessee hereby
waives, to the extent permitted by applicable law, any and all rights which it
may now have or which at any time hereafter may be conferred upon it, by statute
or otherwise, to terminate, cancel, quit or surrender this Lease Agreement
except in accordance with its express terms. Each payment of Rent and each other
payment made by the Lessee shall be final, and the Lessee will not seek to
recover all or any part of such payment from the Lessor for any reason
whatsoever.
22. Miscellaneous.
(a) Successors and Assigns. This Lease Agreement shall be
binding upon the Lessee and the Lessor and their respective successors and
assigns and shall inure to the benefit of the Lessee and the Lessor and their
respective successors and assigns.
(b) Waiver. Neither party shall by act, delay, omission or
otherwise be deemed to have waived any of its rights or remedies hereunder
unless
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such waiver is given in writing. A waiver on one occasion shall not be
construed as a waiver on any other occasion.
(c) Entire Agreement. This Lease Agreement, together with the
written instruments provided for or contemplated hereby, the other Basic
Documents and other written agreements between the parties dated as of the date
hereof, constitute the entire agreement between the parties with respect to the
leasing of Nuclear Material, and no representations, warranties, promises,
guaranties or agreements, oral or written, express or implied, have been made by
either party or by any one else with respect to this Lease Agreement or the
Nuclear Material, except as may be expressly provided for herein or therein. Any
change or modification of this Lease Agreement must be in writing and duly
executed by the parties.
(d) Descriptive Headings. The captions in this Lease Agreement
are for convenience of reference only and shall not be deemed to affect the
meaning or construction of any of the provisions.
(e) Severability. Any provision of this Lease 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.
(f) Governing Law. This Lease Agreement and the rights and
obligations of the parties hereunder shall be construed in accordance with and
be governed by the law of the Commonwealth of Pennsylvania.
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<PAGE>
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this
Lease Agreement to be executed and delivered by their duly authorized officers
as of the day and year first above written.
TMI-1 FUEL CORP.
Lessor
ATTEST
By:
- -------------------------------- ----------------------------
(Assistant) Secretary Name:
----------------------------
Title:
----------------------------
PENNSYLVANIA ELECTRIC COMPANY
Lessee
ATTEST
By:
- -------------------------------- ----------------------------
(Assistant) Secretary Name:T. G. Howson
----------------------------
Title: Vice President
----------------------------
24
<PAGE>
STATE OF )
----------------
COUNTY OF ) SS:
--------------
On this day of , 1998, before me personally
----- ------------
appeared , to me personally known, who, being by me duly sworn, says that he is
of TMI-1 Fuel Corp. and that said instrument was signed on behalf of said
corporation by authority of its Board of Directors, and he acknowledged that the
execution of the foregoing instrument was the free act and deed of said
corporation.
-----------------------
Notary Public
My commission Expires:
STATE OF )
---------------
COUNTY OF ) SS:
--------------
On this day of , 1998, before me personally
---- -------------
appeared T. G. Howson, to me personally known, who, being by me duly sworn, says
that he is a Vice President of Pennsylvania Electric Company and that said
instrument was signed on behalf of said corporation by authority of its Board of
Directors, and he acknowledged that the execution of the foregoing instrument
was the free act and deed of said corporation.
-----------------------
Notary Public
My commission Expires:
25
<PAGE>
ATTACHMENTS
Appendix A -- Definitions
Exhibit A -- Form of Interim Leasing Record
Exhibit B -- Form of Final Leasing Record
Exhibit C -- Nuclear Material Contracts
Exhibit D -- Form of Assignment Agreement and Consent
Exhibit E -- Form of Lessor's Bill of Sale
Exhibit F -- Form of Rent Due and SCV Confirmation Schedule
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APPENDIX A
DEFINITIONS
As used in the Basic Documents (as defined below), the
following terms shall have the following meanings (such definitions to be
applicable to both singular and plural forms of the terms defined), except as
otherwise specifically defined therein:
"Acquisition Cost" means the purchase price of any Nuclear
Material, any progress payments made thereon, costs of milling, conversion,
enrichment, fabrication, installation, delivery, redelivery, containerization,
storage, reprocessing, any other costs incurred by the Company in acquiring the
Nuclear Material (less any discounts or credits actually utilized by the
Company), plus in any case (i) any allowance for funds used during construction
(including any income tax component associated with such allowance) with respect
to Nuclear Material purchased by the Company, (ii) at the option of the Lessee,
any Rent relating to costs incurred in the ordinary course of operations but
excluding Rent relating to extraordinary costs, including without limitation,
indemnification payments, payable by the lessee to the Company with respect to
any Nuclear Material prior to the installation of such Nuclear Material for
operation in the Generating Facility, (iii) any sales, excise or other taxes or
charges payable by the Company with respect to any such payment for such Nuclear
Material, (iv) at the option of the Lessee, any Monthly Financing Charge payable
by the Lessee to the Company with respect to Nuclear Material during any period
in which such Nuclear Material is subject to an Interim Leasing Record, but
excluding any interest charges or penalties for late payment by the Company of
the purchase price or any portion thereof, if such late payment results from the
negligence of the Company, (v) such other costs with respect to any Nuclear
Material as may be agreed by the Company and the Lessee and approved by the
Administrative Agent, in each case in writing, and, in the case of any Nuclear
Material removed from the Generating Facility for the purpose of "cooling off'
and repair or reprocessing, shall include the Stipulated Casualty Value thereof
at the time of such removal, if any, and (vi) at the option of the Lessee, any
Financing Costs. Any amount realized by the Company from the disposition of the
by-products (including, but not limited to, plutonium) of Nuclear Material
specified in a Leasing Record during the repair or reprocessing of such Nuclear
Material while leased hereunder shall be credited against the Acquisition Cost
of such Nuclear Material.
"Additional Rent" shall mean all legal, accounting,
administrative and other operating expenses and taxes incurred by the Company to
the extent not paid as part of Basic Rent (including, without limitation, any
Cancellation Fees and all other liabilities incurred or owed by the Company
pursuant to the Basic Documents) and all amounts (other than Basic Rent) that
the Lessee agrees to pay under the Lease Agreement (including, without
limitation, indemnification payable under the Lease Agreement, general and
administrative expenses of the Company, and, to the extent not included in
Acquisition Cost, Financing Costs) and interest at the rate incurred by the
Company or any Secured Party as a result of any delay in payment by the Lessee
to meet obligations that would have been satisfied out of prompt payment by the
Lessee, and the amount of any and all other costs, losses, damages, interest,
taxes, deficiencies, liabilities, obligations, actions, judgments, suits,
claims, fees (including, without limitation, attorneys' fees and disbursements)
and expenses, of every kind, nature, character and description, direct or
indirect, that may be imposed on or incurred by the Company as a result of,
arising from or relating to, in any manner whatsoever, one or more Basic
Documents, or any other document referred to therein, or the transactions
contemplated thereby or the enforcement thereof.
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<PAGE>
For purposes of calculating the interest incurred by the Company or any Secured
Party as a result of any such delay, it shall be assumed that the Company or any
Secured Party, as applicable, incurred interest at the Credit Agreement Default
Rate.
"Administrative Agent" shall have the meaning specified
therefor in the first paragraph of the Credit Agreement.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such Person. For purposes of this definition, the term "control," as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise.
"Aggregate Monthly Rent Component" shall mean the sum of the
Monthly Rent Components for all items of Nuclear Material which are installed in
the Generating Facility during the relevant period.
"Arranging Agent" shall have the meaning specified therefor in
the first paragraph of the Credit Agreement.
"Assigned Agreement" means a Nuclear Material Contract which
has been assigned to the Company in the manner specified in Section 5 of the
Lease Agreement pursuant to a duly executed and delivered Assignment Agreement.
The term Assigned Agreement shall include a Partially Assigned Agreement.
"Assignment Agreement" means an assignment agreement
substantially in the form of Exhibit D to the Lease Agreement.
"Atomic Energy Act" means the Atomic Energy Act of 1954, as
from time to time amended.
"Banks" shall have the meaning specified therefor in Section
1.02 of the Credit Agreement.
"Basic Documents" means the Lease Agreement, the Credit
Agreement, the Security Agreement, the Commercial Paper, the Notes, the Letter
Agreement, the Dealer Agreements, the Assigned Agreements, the Assignment
Agreements, the Trust Agreement, the Depositary Agreement, each Bill of Sale,
each Leasing Record, each SCV Confirmation Schedule, and other agreements
related or incidental thereto which are identified in writing by the Company,
the Lessee and the Secured Parties as one of the "Basic Documents," in each
case, as such documents may be amended from time to time.
"Basic Rent" means, for any Basic Rent Period, the sum of (a)
that portion of the Monthly Financing Charge not allocated to Acquisition Cost
pursuant to the Lease Agreement plus (b) the Aggregate Monthly Rent Component as
shown on a Rent Due and SCV Confirmation Schedule for such Basic Rent Period.
"Basic Rent Payment Date" means, for any Basic Rent Period,
the first Business Day of the next succeeding calendar month following such
Basic Rent Period.
"Basic Rent Period" means each calendar month or portion
thereof commencing on, in the case of the first such period, the effective date
of the Lease Agreement, and in the case of each succeeding period, the first day
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<PAGE>
following the immediately preceding Basic Rent Period, and ending on the
earliest of (i) the last day of any calendar month or (ii) the Termination
Settlement Date.
"BTU Charge" means the dollar amount set forth in the BTU
Charge Agreement which is used to calculate the Monthly Rent Component. The BTU
Charge initially set forth for any Nuclear Material in any Final Leasing Record
shall be the amount agreed upon by the Lessor and the Lessee as set forth in
Attachment 1 to Exhibit B to the Lease Agreement based upon the reasonably
anticipated operating life, BTU output, and utilization of such Nuclear
Material.
"BTU Charge Agreement" shall mean an agreement in the form of
Attachment 1 to Exhibit B to the Lease Agreement with respect to any Nuclear
Material executed by the Lessor and the Lessee on or prior to the date of the
Final Leasing Record covering such Nuclear Material.
"Business Day" means any day other than (i) a Saturday or
Sunday or (ii) a day on which banking institutions in New York City are
authorized by law to close.
"Capitalized Lease" means any and all lease obligations which
are or should be capitalized on the balance sheet of the Person in question in
accordance with generally accepted accounting principles and Statement No. 13 of
the Financial Accounting Standards Board or any successor to such pronouncement
regarding lease accounting, without regard for the accounting treatment
permitted or required under any applicable state or federal public utility
regulatory accounting system, unless such treatment controls the determination
of the generally accepted accounting principles applicable to such Person.
"Cash Collateral" shall have the meaning specified therefor in
Section 1.02 of the Credit Agreement.
"Closing," means , 1998.
-------------
"Code" means the Internal Revenue Code of 1986, as from time
to time amended.
"Collateral" has the meaning set forth in the granting clauses
of the Security Agreement and includes all property of the Company described in
the Security Agreement as comprising part of the Collateral.
"Collateral Agent" shall have the meaning specified therefor
in Section 1.02 of the Credit Agreement.
"Collateral Agreements" means, collectively, the Security
Agreement, all Assignment Agreements, and any other assignment, security
agreement or instrument executed and delivered to the Secured Parties hereafter
relating to property of the Company which is security for the Notes.
"Collected Funds" means funds which are immediately available
to the Secured Parties, as the Lessor's assignees, for its use in New York, New
York.
"Commercial Paper" shall have the meaning specified therefor
in Section 1.02 of the Credit Agreement.
"Commercial Paper Discount" shall mean, at any time, amounts
payable by the Company in respect of the Face Amount of Commercial Paper
outstanding in excess of the Acquisition Cost together with any Cash Collateral
reduced by the aggregate total amount, if any, of (i) the Monthly Rent
Components
29
<PAGE>
paid by the Lessee to the Lessor with respect to the Nuclear Material financed
thereby and (ii) any Monthly Financing Charge payable by the Lessee to the
Company with respect to Nuclear Material during any period in which such Nuclear
Material is subject to an Interim Leasing Record ("Excess Face Amount");
provided, however, that any such Excess Face Amount shall not exceed the
additional Face Amount of Commercial Paper necessary to be issued by the Company
at a discount to face value to purchasers thereof in the commercial paper market
in order to obtain proceeds in an amount equal to the Acquisition Cost reduced
by the aggregate total amount, if any, of (a) the Monthly Rent Components paid
by the Lessee to the Lessor with respect to the Nuclear Material financed
thereby and (b) any Monthly Financing Charge payable by the Lessee to the
Company with respect to Nuclear Material during any period in which such Nuclear
Material is subject to an Interim Lease Record, together with any Cash
Collateral. Amounts payable in respect of Commercial Paper Discount during any
calendar month or portion thereof shall be paid on the first Business Day of the
next succeeding month in which such amounts are incurred.
"Company" means the TMI-1 Fuel Corp., a Delaware
corporation.
"Consents and Agreements" means the agreements, each
substantially in the form attached as Exhibit 2 to Exhibit D to the Lease
Agreement, between the Lessee and the various contractors under the Nuclear
Material Contracts, 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.
"Controlled Group" means a controlled group of corporations of
which the Company is a member within the meaning of Section 414(b) of the Code,
any group of corporations or entities under common control with the Company
within the meaning of Section 414(c) of the Code or any affiliated service group
of which the Company is a member within the meaning of Section 414(m) of the
Code.
"Credit Agreement" means the Credit Agreement dated as of
______, 1998 among TMI-1 Fuel Corp. The First National Bank of Chicago, as
Administrative Agent, PNC Bank, National Association, as Syndication Agent, the
Banks parties thereto, and First Chicago Capital Markets, Inc. and PNC Capital
Markets, Inc., as Arrangers.
"Credit Agreement Default" means an event which would, with
the lapse of time or the giving of notice or both, constitute a Credit Agreement
Event of Default.
"Credit Agreement Event of Default" means any one or more of
the events specified in Section 10.01 of the Credit Agreement.
"Dealer Agreements" mean -----------------------------------.
"Deemed Loss Event" means the following event: if at any time
during the term of the Lease Agreement, (A) the Company, by reason solely of the
ownership of the Nuclear Material or any part thereof or the lease of the
Nuclear Material to the Lessee under the Lease Agreement, or the Company or any
Secured Party, by reason solely of any other transaction contemplated by the
Lease Agreement or any of the other Basic Documents, shall be deemed, by any
governmental authority having jurisdiction, to be, or to be subject to
regulation as an "electric utility" or a "public utility" or a "public utility
holding company" or similar type of entity, under any applicable law or deemed a
"public utility company" or a "subsidiary company" or a "holding company" within
the meaning of the Public Utility Holding Company Act, (B) the Public Utility
Holding
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<PAGE>
Company Act shall be amended, applied, or interpreted in a manner, or any rules
or regulations shall be adopted under the Public Utility Holding Company Act of
1935, which adversely affect the legality, validity and enforceability of the
lease obligations of the Company and the Lessee under the Lease Agreement, or
(C) either the Company or any of the Secured Parties, by reason solely of being
a party to the Basic Documents, shall be required to obtain any consent, order
or approval of, or to make any filing or registration with, or to give any
notice to, any governmental authority, or be subject to any liabilities, duties
or obligations under the Public Utility Holding Company Act, other than the
filing by the Company of a certificate on Form U-7D with the SEC pursuant to SEC
Rule 7(d) under the Public Utility Holding Company Act (17 C.F.R. Section
250.7(d)), except in any case if the same shall be solely the result of
Nonburdensome Regulation; provided, however, that if in compliance with
applicable laws, the Lessee, with the cooperation of the Company, shall have
acted diligently and in good faith to contest, or obtain an exemption from the
application of the laws, rules or regulations described in clauses (A), (B) or
(C) to the Company, the Secured Parties or the Lessee, as the case may be, the
application of which would otherwise constitute a Deemed Loss Event, such Deemed
Loss Event shall be deemed not to have occurred so long as (I) the Lessee shall
have furnished to the Company and the Secured Parties an opinion of counsel
reasonably satisfactory to the Company and the Secured Parties to the effect
that there exists a reasonable basis for such contest or exemption and that the
application of such laws, rules or regulations to the Company, the Secured
Parties or the Lessee, as the case may be, shall be effectively stayed during
the application for exemption or contest and such laws, rules or regulations
shall not be applied retroactively at the conclusion of such contest, (II) the
Company or the Secured Parties shall have determined in their sole discretion
that such contest or exemption shall not adversely affect their business or
involve any danger of the sale, foreclosure or loss of, or creation of a Lien
upon, the Collateral, and (III) the Lessee shall have agreed to indemnify the
Company or such Secured Parties, as the case may be, for expenses incurred in
connection with such contest or exemption; and further provided, that following
notice from the Lessee to the Company or the Secured Parties, as the case may
be, that the Lessee shall be unable to furnish the opinion described in clause
(I) of the next preceding proviso or that any such contest shall not be
successful or such exemption shall not be available, a Deemed Loss Event shall
be deemed not to have occurred for such period, not to exceed 270 days, as may
be approved by any governmental authority having jurisdiction during which
application of such law, rule or regulation to the Company, the Secured Parties
or the Lessee, as the case may be, shall be suspended to enable the Company to
assign or transfer its interest in the Collateral so long as during such period
the Company shall use reasonable efforts to assign or transfer its interest in
the Collateral upon commercially reasonable terms and conditions, provided that
the Company shall not be required to assign or transfer the Nuclear Material for
a price which, after deduction of sales tax and expenses of such sale incurred
by the Company, shall be less than the sum of (A) Stipulated Casualty Value
determined as of the date of such proposed sale, and (B) the Termination Rent
determined in accordance with Section 18 of the Lease Agreement.
"Depositary Agreement" means the Depositary Agreement, dated
as of , 1998, among the Company, Chase Manhattan Bank, as Depositary and
------
The First National Bank of Chicago, as Administrative Agent.
"ERISA" means the Employee Retirement Income Security Act of
1974, as from time to time amended.
"Excepted Payments" means any indemnity, expense, or other
payment which by the terms of any of the Basic Documents shall be payable to the
Company in order for the Company to satisfy its obligations pursuant to Section
7.8 of the Trust Agreement.
31
<PAGE>
"Face Amount" shall have the meaning specified therefor in
Section 1.02 of the Credit Agreement.
"Federal Energy Regulatory Commission" means the independent
regulatory commission of the Department of Energy of the United States
Government existing under the authority of the Department of Energy Organization
Act, as amended, or any successor organization or organizations performing any
identical or substantially identical licensing and related regulatory functions.
"Federal Power Act" means the Federal Power Act, as amended.
"Final Leasing Record" means a Leasing Record which records
the leasing of Nuclear Material during any period while such Nuclear Material is
installed for operation in the Generating Facility. A Final Leasing Record shall
be in the form of Exhibit B to the Lease Agreement.
"Financing Costs" means (a) fees and other amounts owing to
any Secured Party or to the Owner Trustee under the Trust Agreement, (b) legal
fees and disbursements and other amounts referred to in Section 10(b) of the
Security Agreement, (c) legal, accounting, and other fees and expenses incurred
by the Lessee and/or the Company in connection with the preparation, execution
and delivery of Basic Documents or the issuance of the Commercial Paper and/or
the Notes, and (d) such other reasonable fees and expenses of the Owner Trustee
and the Company as they may be entitled to under the Basic Documents.
"Fuel Management" means the design of, contracting for, fixing
the price and terms of acquisition of, management, movement, removal,
disengagement, storage and other activities in connection with the acquisition,
utilization, storage and disposal of the Nuclear Material.
"Generating Facility" means the nuclear reactor located at the
Three Mile Island Unit 1 Nuclear Generating Station, located in Londonderry
Township, Pennsylvania.
"Heat Production" means the stage of the Nuclear Material
Cycle commencing with the commercial operation of a Generating Facility, during
which the Nuclear Material in question is producing thermal energy which results
in the production of net positive electrical energy transmitted within the
distribution network of any utility and during which the Nuclear Material in
question is engaged in the reactor core of such Generating Facility.
"Hereof," "herein," "hereunder" and words of similar import
when used in a Basic Document refer to such Basic Document as a whole and not to
any particular section or provision thereof.
"Imposition" means any payment required by a public or
governmental authority in respect of any property subject to the Lease Agreement
or any transaction pursuant to the Lease Agreement or any right or interest held
by virtue of the Lease Agreement; provided, however, that Imposition shall not
include any taxes, whether federal, state or local, payable by any Secured Party
based on or measured by net income of any Secured Party where taxable income is
computed in substantially the same manner as taxable income is computed under
the Code.
"Insurance Requirements" means all terms of any insurance
policy or indemnification agreement covering or applicable to (i) any Nuclear
Material or (ii) the Generating Facility or the Lessee in its capacity as
licensee of the Generating Facility, in each case insofar as any insurance
policy or indemnification agreement directly or indirectly relates to the
Nuclear
32
<PAGE>
Material or the performance by the Lessee of its obligations under the Basic
Documents, and all requirements of the issuer of any such policy or agreement
necessary to keep such insurance or agreements in force.
"Interim Leasing Record" means a Leasing Record which records
the leasing of Nuclear Material (i) prior to installation for operation in the
Generating Facility, (ii) after removal from the Generating Facility during the
"cooling off" and storage period, and (iii) while being reprocessed. An Interim
Leasing Record shall be in the form of Exhibit A to the Lease Agreement.
"Investment Company Act" means the Investment Company Act of
1940, as from time to time amended.
"Issuing Bank" shall have the meaning specified therefor in
the first paragraph of the Credit Agreement.
"Lease Agreement" means the Second Amended and Restated
Nuclear Material Lease Agreement, dated as of -------- --, 1998 between TMI-1
Fuel Corp., as the Lessor, and Pennsylvania Electric Company, as the Lessee, as
the same may be modified, supplemented or amended from time to time.
"Lease Event of Default" has the meaning specified in
Section 16 of the Lease Agreement.
"Leasing Record" is a form signed by the Lessor and the Lessee
to record the leasing under the Lease Agreement of the Nuclear Material
specified in such Leasing Record. A Leasing Record shall be either an Interim
Leasing Record or a Final Leasing Record.
"Legal Requirements" means all applicable provisions of the
Atomic Energy Act, all applicable orders, rules, regulations and other
requirements of the Nuclear Regulatory Commission and the Federal Energy
Regulatory Commission, and all other laws, rules, regulations and orders of any
other jurisdiction or regulatory authority relating to (i) the licensing,
acquisition, storage, containerization, transportation, blending, transfer,
consumption, leasing, insuring, using, operating, disposing, fabricating,
channelling and reprocessing of the Nuclear Material, (ii) the Generating
Facility or the Lessee in its capacity as licensee of the Generating Facility,
in each case insofar as such provisions, orders, rules, regulations, laws and
other requirements directly or indirectly relate to the Nuclear Material or the
performance by the Lessee of its obligations under the Basic Documents or (iii)
the Basic Documents, insofar as any of the foregoing directly or indirectly
apply to the Lessee.
"Lessee" has the meaning specified in the introduction to
the Lease Agreement.
"Lessee Representative" means a person at the time designated
to act on behalf of the Lessee by a written instrument furnished to the Company
and the Secured Parties containing the specimen signature of such person and
signed on behalf of the Lessee by any of its officers. The certificate may
designate an alternate or alternates. A Lessee Representative may be an employee
of the Lessee or of the Owner Trustee.
"Lessor" has the meaning specified in the introduction to
the Lease Agreement, and its successors and assigns.
33
<PAGE>
"Lessor's Bill of Sale" means an instrument substantially in
the form of Exhibit E to the Lease Agreement, pursuant to which title to all or
any portion of the Nuclear Material is transferred to the Lessee or any designee
of the Lessee.
"Letter Agreement" means the Lessee's Letter Agreement
Regarding TMI-1 Fuel Corp., dated as of ----------- --- , 1998, between the
Lessee, the Company, and the Administrative Agent, as it may be amended from
time to time.
"Lien" means any mortgage, pledge, lien, security interest,
title retention, charge or other encumbrance of any nature whatsoever (including
any conditional sale or other title retention agreement, any lease in the nature
thereof and the filing of or agreement to execute and deliver any financing
statement under the Uniform Commercial Code of any jurisdiction).
"Loans" shall have the meaning specified therefor in Section
1.02 of the Credit Agreement.
"Majority Secured Parties" means at any time the Secured
Parties holding at such time more than 66% of the outstanding principal amount
of all Secured Obligations.
"Manufacturer" means any supplier of Nuclear Material or of
any service (including without limitation, enrichment, fabrication,
transportation, storage and processing) in connection therewith, or any agent or
licensee of any such supplier.
"Manufacturer's Consent" means any consent which may be given
by a Manufacturer under a Nuclear Material Contract to the assignment by the
Lessee to the Company of all or a portion of the Lessee's rights under such
Nuclear Material Contract or of all or a portion of any such rights previously
assigned by the Lessee to the Secured Parties.
"Monthly Debt Service" for any calendar month means the sum of
the Monthly Financing Charge for such calendar month.
"Monthly Financing Charge" means, for any calendar month or
portion thereof, the sum of:
(a) all Commercial Paper Discount payable by the Company with
respect to Commercial Paper outstanding during such month and/or all
interest payable by the Company during such month with respect to all
outstanding Notes and in each case, not included in Acquisition Cost; and
(b) the amounts paid or due and payable by the Company with respect
to the transactions contemplated by the Basic Documents during such
calendar month for the following other fees, costs, charges and expenses
incurred or owed by the Company under or in connection with the Lease
Agreement or the other Basic Documents: (i) legal, printing, reproduction
and closing fees and expenses, (ii) auditors', accountants' and attorneys'
fees and expenses, (iii) franchise taxes and income taxes, and (iv) any
other fees and expenses incurred by the Company under or in respect of the
Basic Documents.
Any figure used in the computation of any component of the Monthly Financing
Charge shall be stated to five decimal places.
34
<PAGE>
"Monthly Rent Component" for any Nuclear Material covered by a
Final Leasing Record for each calendar month during the lease of such Nuclear
Material shall be as follows:
(i) for the first partial calendar month the Monthly Rent
Component shall be zero;
(ii) for the first full calendar month the Monthly Rent
Component shall be zero;
(iii) for the second full calendar month the Monthly Rent
Component shall be zero;
(iv) for the third full calendar month the Monthly Rent
Component shall be an amount determined by multiplying (x) the amount of
thermal energy in millions of British Thermal Units of heat produced by
such Nuclear Material during the first calendar month while covered by the
Final Leasing Record and also during the first partial calendar month, if
any, such Nuclear Material was covered by an Interim or Final Leasing
Record and was engaged in Heat Production by (y) the BTU Charge set forth
in the Final Leasing Record covering such Nuclear Material; and
(v) for each full calendar month after the third full calendar
month, the Monthly Rent Component shall be an amount determined by
multiplying (x) the amount of thermal energy in millions of British
Thermal Units of heat produced by such Nuclear Material during the second
preceding month by (y) the BTU Charge set forth in the Final Leasing
Record covering such Nuclear Material.
The BTU Charge for any Nuclear Material may be revised by the Lessee at any time
during the lease thereof to reflect any reasonably anticipated change in its
operating life, BTU output, or utilization. Such revision shall be effected by
the Lessee's executing and forwarding to the Lessor a revised Final Leasing
Record dated the first day of the following month and setting forth such revised
BTU Charge. Upon receipt of such revised Final Leasing Record, the Lessor shall
execute and return a copy thereof to the Lessee. Such revised BTU Charge shall
be applicable to such Nuclear Material for each month thereafter beginning on
the date of the revised Final Leasing Record.
"Nonburdensome Regulation" means (i) ministerial regulatory
requirements that do not impose limitations or regulatory requirements on the
business or activities of, or adversely affect, the Company or any Secured Party
and that are deemed, in the reasonable discretion of the Company or any Secured
Party, not to be burdensome, or (ii) assuming redelivery of the Nuclear Material
in accordance with the Lease Agreement, regulation resulting from any possession
of the Nuclear Material (or right thereto) on or after the termination of the
Lease Agreement.
"Notes" shall have the meaning specified therefor in Section
1.02 of the Credit Agreement.
"Nuclear Incident" shall have the meaning specified in the
Atomic Energy Act, 42 U.S.C. ss.2014(q), as such definition may be amended from
time to time.
"Nuclear Material" means those items which have been purchased
by or on behalf of the Company for which a duly executed Leasing Record has been
delivered to the Company and which continue to be subject to the Lease Agreement
consisting of (i) the items described in such Leasing Record and each of the
35
<PAGE>
components thereof in the respective forms in which such items exist during each
stage of the Nuclear Material Cycle, being substances and equipment which, when
fabricated and assembled and loaded into a nuclear reactor, are intended to
produce heat, together with all attachments, accessories, parts and additions
and all improvements and repairs thereto, and all replacements thereof and
substitutions therefor and (ii) the substances and materials underlying the
right, title and interest of the Lessee under any Nuclear Material Contract
assigned to the Company pursuant to the Lease Agreement; provided, however, that
the term Nuclear Material shall not include spent fuel.
"Nuclear Material Contract" means any contract, as from time
to time amended, modified or supplemented, entered into by the Lessee, either in
its own name or as agent for the Lessor, with one or more Manufacturers relating
to the acquisition of Nuclear Material or any service in connection with the
Nuclear Material.
"Nuclear Material Cycle" means the various stages in the
process, whether physical or chemical, by which the component parts of the
Nuclear Material are designed, mined, milled, processed, converted, enriched,
fabricated into assemblies utilizable for Heat Production, loaded or installed
into a reactor core, utilized, disengaged from a reactor core or stored,
together with all incidental processes with respect to the Nuclear Material at
any such stage.
"Nuclear Regulatory Commission" means the independent
regulatory commission of the United States Government existing under the
authority of the Energy Reorganization Act of 1974, as amended, or any successor
organization or organizations performing any identical or substantially
identical licensing and related regulatory functions.
"Obligations" means (i) all items (including, without
limitation, Capitalized Leases but excluding shareholders' equity and minority
interests) which in accordance with generally accepted accounting principles
should be reflected on the liability side of a balance sheet as at the date as
of which such obligations are to be determined; (ii) all obligations and
liabilities (whether or not reflected upon such balance sheet) secured by any
Lien existing on the Property held subject to such Lien, whether or not the
obligation or liability secured thereby shall have been assumed; and (iii) all
guarantees, endorsements (other than for collection in the ordinary course of
business) and contingent obligations in respect of any liabilities of the type
described in clauses (i) and (ii) of this definition (whether or not reflected
on such balance sheet); provided, however, that the term 'Obligations' shall not
include deferred taxes.
"Obligations for Borrowed Money or Deferred Purchase Price"
means all Obligations in respect of borrowed money or the deferred purchase
price of property or services.
"Officer's Certificate" means, with respect to any
corporation, a certificate signed by the President, any Vice President, the
Treasurer, any Assistant Treasurer, the Comptroller, or any Assistant
Comptroller of such corporation, and with respect to any other entity, a
certificate signed by an individual generally authorized to execute and deliver
contracts on behalf of such entity.
"Outstandings" shall have the meaning specified therefor in
Section 1.02 of the Credit Agreement.
36
<PAGE>
"Owner Trust Estate" means all estate, right, title and
interest of the Owner Trustee in and to the outstanding stock of the Company and
in and to all monies, securities, investments, instruments, documents, rights,
claims, contracts, and other property held by the Owner Trustee under the Trust
Agreement; provided, however, that there shall be excluded from the Owner Trust
Estate all Excepted Payments.
"Owner Trustee" means United States Trust Company of New York,
not in its individual capacity but solely as trustee under and pursuant to the
Trust Agreement, and its permitted successors.
"PaPUC" means the Pennsylvania Public Utility Commission or
any successor agency thereto.
"Partially Assigned Agreement" means a Nuclear Material
Contract which has been assigned, in part but not in full, to the Company in the
manner specified in Section 5 of the Lease Agreement pursuant to a duly executed
and delivered Assignment Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation, created
by Section 4002(a) of ERISA and any successor thereto.
"Permitted Liens" means (i) any assignment of the Lease
Agreement permitted thereby, and by the Credit Agreement, (ii) liens for
Impositions not yet payable, or payable without the addition of any fine,
penalty, interest or cost for nonpayment, or being contested by the Lessee as
permitted by Section 11 of the Lease Agreement, (iii) liens and security
interests created by the Security Agreement, (iv) the title transfer and
commingling of the Nuclear Material contemplated by paragraph (h) of Section 10
of the Lease Agreement, and (v) liens of mechanics, laborers, materialmen,
suppliers or vendors, or rights thereto, incurred in the ordinary course of
business for sums of money which under the terms of the related contracts are
not more than 30 days past due or are being contested in good faith by the
Lessee as permitted by Section 11 of the Lease Agreement; provided, however,
that, in each case, such reserve or other appropriate provision, if any, as
shall be required by generally accepted accounting principles shall have been
made in respect thereto.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization or other business entity or any
government or any political subdivision or agency thereof.
"Plan" means, with respect to any Person, any plan of a type
described in Section 4021(a) of ERISA in respect of which such Person is an
"employer" or a "substantial employer" as defined in Sections 3(5) and 4001 (a)
(2) of ERISA, respectively.
"Proceeds" shall have the meaning assigned to it under the
Uniform Commercial Code, as amended, and, in any event, shall include, but not
be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to the Company from time to time with respect to the
Collateral, (ii) any and all payments (in any form whatsoever) made or due and
payable to the Company from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental body, authority, bureau or agency (or any person
acting under color of governmental authority), and (iii) any and all other
amounts from time to time paid or payable under or in connection with any of the
Collateral.
37
<PAGE>
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Public Utility Holding Company Act" means the Public Utility
Holding Company Act of 1935, as from time to time amended.
"Qualified Institution" means a commercial bank organized
under the laws of, and doing business in, the United States of America or in any
State thereof, which has combined capital, surplus and undivided profits of at
least $150,000,000 having trust power.
"Related Person" means, with respect to any Person, any trade
or business, (whether or not incorporated) which, together with such Person, is
under common control as described in Section 414(c) of the Code.
"Rent" means Basic Rent, Additional Rent and Termination
Rent.
"Rent Due and SCV Confirmation Schedule" means an instrument,
substantially in the form of Exhibit G to the Lease Agreement, which is to be
used by the Lessee (i) to calculate Basic Rent for each Basic Rent Period and
Other Rent and (ii) to calculate and acknowledge the SCV at the end of each
Basic Rent Period.
"Reportable Event" means any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder.
"Responsible Officer" means a duly elected or appointed,
authorized, and acting officer, agent or representative of the Person acting.
"Secured Obligations" means each and every debt, liability and
obligation of every type and description which the Company may now or at any
time hereafter owe to any Secured Party under, pursuant to or in connection with
the Credit Agreement, any Note, the Letter of Credit or any other Basic
Document, whether such debt, liability or obligation now exists or is hereafter
created or incurred, and whether it is or may be direct or indirect, due or to
become due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or joint, several or joint and several, including, without
limitation, the principal of, interest on and any premium due with respect to
any Loan and all indemnifications, costs, expenses, fees and other compensation
of the Secured Parties provided for, and all other amounts owed to the Secured
Parties, under the Security Agreement, Credit Agreement and the other Basic
Documents.
"Secured Parties" means the Banks, any other holder from time
to time of any Note and the Issuing Bank.
"Securities Act" means the Securities Act of 1933, as from
time to time amended.
"Security Agreement" means the Security Agreement and
Assignment of Contracts, dated as of , 1998, by and among the Company and
-------
The First National Bank of Chicago, as Collateral Agent in favor of the Secured
Parties.
"Single Employer Plan" means any Plan which is not a
multi-employer plan as defined in Section 4001(a) (3) of ERISA
"Stipulated Casualty Value" or "SCV" for any Nuclear Material
covered by any Leasing Record means an amount equal to the Acquisition Cost for
such Nuclear Material reduced by the aggregate total amount, if any, of the
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<PAGE>
Monthly Rent Components paid by the Lessee to the Lessor with respect to such
Nuclear Material together with Commercial Paper Discount.
"Termination Date" shall have the meaning specified therefor
in Section 1.02 of the Credit Agreement.
"Termination Rent" means an amount which, when added to the
Stipulated Casualty Value and Basic Rent then payable by the Lessee, if any,
will be sufficient to enable the Company to retire, at their respective
maturities, all outstanding Notes and to pay all charges, premiums and fees owed
to the Issuing Bank and all holders of Notes under the Credit Agreement and to
pay all other obligations of the Company incurred in connection with the
implementation of the transactions contemplated by the Basic Documents.
"Termination Settlement Date" has the meaning specified in
Section 8(c), or Section 18(c) of the Lease Agreement.
"Terminating Event" has the meaning specified in Section 18
of the Lease Agreement.
"Trust" means the TMI-I Fuel Corp. and Oyster Creek Fuel
Corp. Trust, a trust formed pursuant to the Trust Agreement.
"Trust Agreement" means the Second Amended and Restated Trust
Agreement dated as of ___________ __, 1998 among Lord Fuel Corp., as Trustor,
the Owner Trustee, as trustee, Lord Fuel Corp., as beneficiary, and Jersey
Central Power & Light Company, Metropolitan Edison Company and Pennsylvania
Electric Company, each as lessee under certain lease agreements, as the same may
be amended, modified or supplemented from time to time.
"Trustor" means the institution designated as such in the
Trust Agreement and its permitted successors.
"UBS Credit Agreement" means the Credit Agreement dated as of
November 17, 1995 among TMI-1 Fuel Corp., Union Bank of Switzerland, New York
Branch, as Arranging Agent, Union Bank of Switzerland, New York Branch, as
Issuing Bank, the Banks Party thereto and Union Bank of Switzerland, New York
Bank, as Administrative Agent.
"UCC" means the Uniform Commercial Code as adopted and in
effect in the State of New York.
"U.S. Trust" means United States Trust Company of New York.
39
<PAGE>
EXHIBIT A
INTERIM LEASING RECORD
Record No.
------
Name of Lessee: Pennsylvania Electric Company
Date of Record:
------------------
Date and No. of prior Interim or Final
Leasing Record (if any):
Description and location of Nuclear Material covered by this Record:
Assembly Serial Nos.:
Subassembly Serial Nos.:
Acquisition Cost of Nuclear Material
under prior Leasing Record (if any): $
------------
Acquisition Cost added by this Record: $
------------
Total: $
------------
Credits to Acquisition Cost: $
------------
Total Acquisition Cost under this Record $
------------
Specify nature of Acquisition Cost added by this Record and to whom paid:
Specify nature of any credits received by Lessor covered by this Record and from
whom received:
40
<PAGE>
Basic Rent for the Nuclear Material covered by this Record shall be calculated
and paid as provided in Section 9 of the Second Amended and Restated Nuclear
Material Lease Agreement referred to below.
The undersigned Lessor hereby leases to the undersigned Lessee the Nuclear
Material described above in accordance with the covenants, terms and conditions
of the Second Amended and Restated Nuclear Material Lease Agreement between the
undersigned Lessor and Lessee, dated as of , , 1998 which
------------- ----
covenants, terms and conditions are incorporated herein by reference.
TMI-1 FUEL CORP., Lessor PENNSYLVANIA ELECTRIC
COMPANY, Lessee
By By
- ------------------------------ --------------------
Authorized Signature Authorized Signature
41
<PAGE>
EXHIBIT B
FINAL LEASING RECORD
Record No.
------
Name of Lessee: Pennsylvania Electric Company
Date of Record:
------------------
Date and No. of prior Interim or Final
Leasing Record:
Description and location of Nuclear Material covered by this Record:
Assembly Serial Nos.:
Subassembly Serial Nos.:
Acquisition Cost of Nuclear Material
under prior Leasing Record (if any): $
------------
Acquisition Cost added by this Record: $
------------
Total: $
------------
Credits (if any) to Acquisition Cost: $
------------
Total Acquisition Cost under this Record $
------------
BTU Charge: $
------------
Specify nature of Acquisition Cost added by this Record and to whom paid:
Specify nature of any credits received by Lessor covered by this Record and from
whom received:
Basic Rent for the Nuclear Material covered by this Record shall be calculated
and paid as provided in Section 9 of the Second Amended and Restated Nuclear
Material Lease Agreement referred to below.
42
<PAGE>
The undersigned Lessor hereby leases to the undersigned Lessee the Nuclear
Material described above in accordance with the covenants, terms and conditions
of the Second Amended and Restated Nuclear Material Lease Agreement between the
undersigned Lessor and Lessee, dated as of , 1998, which covenants,
---------- ---
terms and conditions are incorporated herein by reference.
TMI-1 FUEL CORP., Lessor PENNSYLVANIA ELECTRIC
COMPANY, Lessee
By By
---------------------------------- ------------------------
Authorized Signature Authorized Signature
43
<PAGE>
Attachment 1 to Exhibit B
BRITISH THERMAL UNIT CHARGE AGREEMENT
Dated:
-------------------------------
The undersigned Lessor and Lessee agree that the initial
British Thermal Unit Charge to be used to calculate the Monthly Rent Component
for the Nuclear Material pursuant to the Second Amended and Restated Nuclear
Material Lease Agreement, dated as of , 1998, between the
---------- ----
undersigned Lessor and Lessee shall be as follows:
Description of Nuclear Material British Thermal Unit Charge
- ------------------------------- ---------------------------
TMI-1 FUEL CORP. PENNSYLVANIA ELECTRIC COMPANY
By: By:
---------------------------------- ---------------------------------
Its: Its:
---------------------------------- ---------------------------------
44
<PAGE>
EXHIBIT C
NUCLEAR MATERIAL CONTRACTS
The Agreements (each as amended and restated) referred to in
Section 5 of the Second Amended and Restated Nuclear Material Lease Agreement,
dated as of ---------- ---, 1998, between TMI-1 FUEL CORP. ("Lessor") and
PENNSYLVANIA ELECTRIC COMPANY ("Lessee") are:
(1) Agreement, dated January 30, 1975, between Sequoyah Fuels
Corporation and GPUN, as agent for the Lessee, JCP&L and Met-Ed.
(2) Agreement, dated February 12, 1996, between United States
Enrichment Corporation and GPUN, as agent for the Lessee, JCP&L and Met-Ed.
(3) Agreement, dated as of June 14, 1995 between Framatome
Cogema Fuels and GPUN, as agent for the Lessee, JCP&L and Met-Ed.
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<PAGE>
EXHIBIT D
ASSIGNMENT AGREEMENT
--------------------
KNOW ALL MEN BY THESE PRESENTS THAT:
Pennsylvania Electric Company (the "Assignor"), in
consideration of one dollar and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, does hereby sell, grant,
bargain, convey and assign to TMI-1 Fuel Corp. ("Assignee"), all right, title
and interest of the Assignor in, to and under the Nuclear Material Contract (the
"Nuclear Material Contract") described in Exhibit 1 attached hereto insofar as
such Nuclear Material Contract relates to the Nuclear Material described in
Exhibit 1 (all of such property, including the items described on Exhibit 1
attached hereto as included with the Property, being herein collectively called
the "Property"). Terms not defined herein shall have the meanings given in
Exhibit 1 attached hereto.
TO HAVE AND TO HOLD the Property unto the Assignee, its
successors and assigns, to its and their own use forever.
1. The interest of the Assignor in the Property, and the
interest transferred by this Assignment Agreement, is that of absolute
ownership.
2. The Assignor hereby warrants that it is the lawful owner of
the rights and interests conveyed by this Assignment Agreement and that its
title to such rights and interests is hereby conveyed to the Assignee free and
clear of all liens, charges, claims and encumbrances of every kind whatsoever,
other than (i) the amounts, if any, owing under the Nuclear Material Contract,
(ii) other claims, if any, of the Assignor and the Contractor which may exist as
between themselves and (iii) Permitted Liens (as defined in the Lease Agreement
referred to below); and that the Assignor will warrant and defend such title
forever against all claims and demands whatsoever.
3. The Assignor hereby releases and transfers to the Assignee
any right, title or interest in the Nuclear Material which may have been
acquired by the Assignor under the Nuclear Material Contract prior to the date
hereof.
4. This Assignment Agreement is made in accordance with the
Second Amended and Restated Nuclear Material Lease Agreement dated as of
- ---------- -, 1998, between the Assignor and the Assignee (said Nuclear Material
Lease Agreement, as the same may be from time to time amended, modified or
supplemented, being herein called the "Lease Agreement"). Pursuant to a Security
Agreement and Assignment of Contracts made by TMI-1 Fuel Corp. dated as of
- --------- --, 1998 (said Security Agreement and Assignment of Contracts, as the
same may from time to time be amended, modified or supplemented, being herein
called the "Security Agreement") made by Assignee in favor of the Secured
Parties, as defined therein, the Assignee is assigning and granting a security
interest in the Property and this Assignment Agreement to the Secured Parties,
as collateral security for all obligations and liabilities of the Assignee to
the Secured Parties, as such obligations are described in the Security
Agreement.
5. It is expressly agreed that, anything contained herein to
the contrary notwithstanding, (a) the Assignor shall at all times remain liable
to the Contractor to observe and perform all of its duties and obligations under
the Nuclear Material Contract to the same extent as if this Assignment
46
<PAGE>
Agreement and the Security Agreement had not been executed, (b) the exercise by
the Assignee or the Secured Parties of any of the rights assigned hereunder or
under the Security Agreement, as the case may be, shall not release the Assignor
from any of its duties or obligations to the Contractor under the Nuclear
Material Contract, and (c) neither the Assignee nor any of the Secured Parties
shall have any obligation or liability under the Nuclear Material Contract by
reason of or arising out of this Assignment Agreement, the Lease Agreement or
the Security Agreement, or be obligated to perform or fulfill any of the duties
or obligations of the Assignor under the Nuclear Material Contract, or to make
any payment thereunder, or to make any inquiry as to the nature or sufficiency
of any Property received by it thereunder, or to present or file any claim, or
to take any action to collect or enforce the payment of any amounts or the
delivery of any Property which may have been assigned to it or to which it may
be entitled at any time or times; provided, however, the Assignee agrees, solely
for the benefit of the Assignor, and subject to the terms and conditions of the
Lease Agreement, (i) to purchase the Nuclear Material from the Contractor
pursuant to the Nuclear Material Contract, (ii) to pay to the Contractor and/or
to the Assignor or their order the respective amounts specified in the Lease
Agreement with respect to such Nuclear Material and (iii) to lease such Nuclear
Material to the Assignor in accordance with and subject to the terms and
conditions of the Lease Agreement. The provisions of the Nuclear Material
Contract limiting the liability of the Contractor and its suppliers and
subcontractors' under that Contract shall remain effective against the Assignee
and Secured Parties to the same extent that such provisions are effective
against the Assignor.
6. Notwithstanding anything contained herein to the contrary,
subject to the terms and conditions of the Lease Agreement, the Assignor may
continue to engage in Fuel Management (as such term is defined in the Lease
Agreement) with respect to the Property, including, without limitation, all
dealings with the Contractor and, subject to such terms and conditions and
effective until the occurrence of a Lease Event of Default (as defined in the
Lease Agreement), (i) the Assignee reassigns to the Assignor the Assignee's
rights under clauses (iii), (iv), (v) and (vi) of subparagraph (b) of Exhibit 1
to this Assignment Agreement (provided, however, that insurance proceeds are
reassigned to the Assignor pursuant hereto only to the extent that such proceeds
are needed and used to reimburse the Assignor for the cost of repairing damage
or destruction to Nuclear Material or are used to purchase Nuclear Material from
the Assignee in accordance with the Lease Agreement, and provided further,
however, that the Assignee's rights under clause (vi) are reassigned to the
Assignor subject in all respects to the limitations set forth in paragraph 8.
below), and (ii) the Assignee agrees that the Assignor may, to the extent set
forth in clause (i) above, to the exclusion of the Assignee, exercise and
enforce such rights.
7. The Assignor shall promptly and duly execute, deliver, file
and record all such further counterparts of this Assignment Agreement or such
certificates, financing and continuation statements and other instruments as may
be reasonably requested by the Assignee, and take such further actions as the
Assignee shall from time to time reasonably request, in order to establish,
perfect and maintain the rights and remedies created or intended to be created
in favor of the Assignee and the Secured Parties hereunder and the Assignee's
title to and interest in the Property as against the Assignor or any third party
in any applicable jurisdiction.
8. The Assignor hereby agrees that it will not enter into or
consent to or permit any cancellation, termination, amendment, supplement or
modification of or waiver with respect to the Nuclear Material Contract insofar
as it relates to the Nuclear Material except for cancellations, terminations,
amendments, supplements, modifications or waivers which do not materially
adversely affect the Assignee or the Secured Parties or their respective
47
<PAGE>
interests in the Property, nor will the Assignor sell, assign, grant any
security interest in or otherwise transfer its rights or other interests in the
Property or any part thereof, except as permitted by the Lease Agreement.
9. The Assignor hereby represents and warrants that the
Nuclear Material Contract is in full force and effect and represents that it is
the only agreement between the Assignor and the Contractor with respect to the
Nuclear Material.
10. This Assignment Agreement shall become effective only upon
receipt of the written consent of the Contractor to the assignment of the rights
and interests conveyed hereunder, if such consent is required under the Nuclear
Material Contract. The Assignor hereby agrees to send the Contractor a copy of
this Assignment Agreement.
11. This Assignment Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Assignor has caused this Assignment
Agreement to be duly executed and delivered as of the ----- day of
- ------------,19----.
PENNSYLVANIA ELECTRIC COMPANY
By:
------------------------------
Title:
------------------------------
The foregoing Assignment Agreement is hereby accepted:
TMI-1 FUEL CORP.
------------------------------
By:
------------------------------
Title:
------------------------------
48
<PAGE>
EXHIBIT 1
to Assignment Agreement
(a) The ----------------(as the same may from time to time be
amended, modified or supplemented, being herein called the "Nuclear Material
Contract"), dated as of ------------ , between Pennsylvania Electric Company and
- --------------- (the "Contractor), insofar as, and only to the extent that, the
Contract relates to ----------------- (the "Nuclear Material"); but not insofar
as the Contract provides for the provision of other nuclear materials and
services to the Assignor; and
(b) The Property shall include, without limitation, (i) any
and all amendments and supplements to the Nuclear Material Contract from time to
time executed and delivered to the extent that any such amendment or supplement
relates to the Nuclear Material, (ii) the Nuclear Material, including the right
to receive title thereto, (iii) all rights, claims and proceeds, now or
hereafter existing, under any insurance, indemnities, warranties and guaranties
provided for in or arising out of the Nuclear Material Contract, to the extent
that such rights or claims relate to the Nuclear Material, (iv) any claim for
damages arising out of or for breach or default by the Contractor under or in
connection with the Nuclear Material Contract insofar as it relates to the
Nuclear Material, (v) any other amount, whether resulting from refunds or
otherwise, from time to time paid or payable by the Contractor under or in
connection with the Nuclear Material Contract insofar as it relates to the
Nuclear Material and (vi) the right of the Assignor to terminate the Nuclear
Material Contract or to perform or to exercise or enforce thereunder, insofar as
it or they relate to the Nuclear Material.
49
<PAGE>
EXHIBIT 2
to Assignment Agreement
CONSENT AND AGREEMENT
The undersigned, (the "Contractor"), has
-------------------
entered into a (as the same may from tune to time be amended,
----------------
modified or supplemented, being herein called the "Nuclear Material Contract"),
dated as of with Pennsylvania Electric Company (the
------------------------
"Assignor").
The Contractor hereby acknowledges notice that (i) in
accordance with the terms of the Second Amended and Restated Nuclear Material
Lease Agreement dated as of------------- , 1998, between the Assignor and TMI-1
Fuel Corp. (the "Assignee"), the Assignor has assigned to the Assignee a part of
the Assignor's rights under the Nuclear Material Contract pursuant to an
Assignment Agreement, in the form of Annex A hereto (such Assignment Agreement,
as the same may from time to time be amended, modified or supplemented, being
herein collectively called the "Assignment"), and (ii) pursuant to a Security
Agreement and Assignment of Contracts made by TMI-1 Fuel Corp. dated as of
- --------- --, 1998 (said Security Agreement and Assignment Contracts, as the
same may from time to time be amended, modified or supplemented, being herein
called the "Security Agreement") made by the Assignee in favor of the Secured
Parties as defined therein (the "Secured Parties"), the Assignee has assigned
and granted a security interest in all rights under the Nuclear Material
Contract from time to time assigned to it by Assignor, as collateral security
for all obligations and liabilities of the Assignee to the Secured Parties.
The Contractor hereby consents to (i) the assignment by the
Assignor to the Assignee of part of the Assignor's right, title and interest in,
to and under the Nuclear Material Contract and the other Property described in
the Assignment pursuant to the Assignment and (ii) the assignment and security
interest in favor of the Secured Parties as described above. The Contractor
further consents to all of the terms and provisions of the Security Agreement.
The Contractor agrees that, if requested by either the
Assignor or the Assignee, it will acknowledge in writing the Assignment
delivered by the Assignor to the Assignee; provided, that neither the lack of
notice to nor acknowledgment by the Contractor of the Assignment shall limit or
otherwise affect the validity or effectiveness of this consent to such
Assignment.
The Contractor hereby confirms to the Assignee and the Secured
Parties that:
(a) all representations, warranties and agreements of the
Contractor under the Nuclear Material Contract which relate to
the Nuclear Material described in the Assignment shall inure
to the benefit of, and shall be enforceable by, the Assignee
or any Secured. Party to the same extent as if originally
named in the Contract as the purchaser of such Nuclear
Material,
(b) the Contractor understands that, pursuant to the Lease
Agreement, the Assignee has agreed to lease the Nuclear
Material described in the Assignment to the Assignor, and
consents to the assignment to the Assignor, for so long as the
Lease Agreement shall be in effect or until otherwise notified
50
<PAGE>
by the Assignee, of the Assignee's rights under clauses (iii),
(iv), (v) and (vi) of subparagraph (b) of Exhibit 1 to the
Assignment to the extent that such rights are reassigned to
the Assignor pursuant to the Assignment,
(c) The Contractor is in the business of selling nuclear fuel and
related services of the kind described in the Assignment, and
the proposed sale of such nuclear fuel under the Nuclear
Material Contract will be in the ordinary course of business
of the Contractor, and
(d) Notwithstanding any provision to the contrary contained in
the Nuclear Material Contract, the Contractor agrees that
title to any Nuclear Material covered by the Assignment
shall pass directly to the Assignee under the Contract and
shall not pass to the Assignor; provided that the foregoing
shall not apply to any Nuclear Material for which title has
already passed from the Contractor prior to the execution
and delivery of the Assignment.
It is understood that neither the Assignment, the Security
Agreement nor this Consent and Agreement shall in any way add to the obligations
of the Contractor or the Assignor under the Nuclear Material Contract.
This Consent and. Agreement shall be governed by and
construed in accordance with the laws of the State of .
--------------
IN WITNESS WHEREOF, the undersigned has caused this Consent
and Agreement to be duly executed and delivered by its duly authorized officer
as of----- day of---- , 19-- .
----------------------------------------
By:
--------------------------------
Title:
--------------------------------
51
<PAGE>
EXHIBIT E
BILL OF SALE
TO
PENNSYLVANIA ELECTRIC COMPANY
-----------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, TMI-1
Fuel Corp., a Delaware corporation (the "Seller"), whose post office address is
c/o United States Trust Company of New York, 114 West 47th Street, New York, New
York 10036, Attention: Corporate Trust and Agency Division, for and in
consideration paid to the Seller upon or before the execution and delivery of
this Bill of Sale to Pennsylvania Electric Company (the "Purchaser"), a
Pennsylvania corporation, whose address is 2800 Pottsville Pike, Reading,
Pennsylvania 19640, Attention: Comptroller, hereby conveys, transfers, sells and
sets over unto the Purchaser all of its right, title and interest in all of the
personal property consisting of the assemblies of nuclear fuel or components
thereof or other nuclear material described in Annex I hereto (the "Assets"),
and by this Bill of Sale does hereby grant, bargain, sell, convey, transfer and
deliver the Assets unto the Purchaser, to have and to hold such undivided
interest in the Assets unto the Purchaser, for itself, its successors and
assigns, forever.
The Assets are transferred and conveyed by the Seller AS-IS,
WHERE-IS, WITHOUT REPRESENTATIONS OR WARRANTIES (EXPRESS OR IMPLIED) OF ANY KIND
WHATSOEVER BY THE SELLER OR ANY PERSON ACTING ON ITS BEHALF except that the
Seller represents and warrants that it has not by voluntary act or omission
created or granted any lien on the Assets, other than Permitted Liens, as
defined in that certain Second Amended and Restated Nuclear Material Lease
Agreement, dated as of --------- --, 1998 between the Seller and the Purchaser.
The Purchaser acknowledges and agrees that neither the Seller, its directors,
officers or employees, any company, person or firm controlling, controlled by,
or under common control with any of them nor any other person acting on behalf
of the Seller is a manufacturer of, or is engaged in the sale or distribution
of, nuclear material, has had at any time physical possession of any portion of
the Assets sold hereunder, or has made any inspection thereof. The Purchaser
further acknowledges and agrees that the Assets sold hereunder have been at all
times in the possession of the Purchaser and that the Purchaser has made such
inspections thereof as it deems necessary and that the Purchaser has been solely
responsible for all decisions made with respect to the choice of the suppliers
of such Assets and the enrichment, fabrication, transportation, storage and
processing of the same.
52
<PAGE>
IN WITNESS WHEREOF, the Seller has caused these presents to be
executed by one of its Vice Presidents, this -------- day-- of
,19 .
- ------------------ -----
TMI-1 FUEL CORP., Seller
By:
-------------------------------------
Vice President
Acknowledgment and Acceptance
The foregoing Bill of Sale is hereby acknowledged and accepted
by the undersigned as of the date last above written.
PENNSYLVANIA ELECTRIC COMPANY,
Purchaser
By:
-------------------------------------
Its:
-------------------------------------
53
<PAGE>
<TABLE>
EXHIBIT F
<CAPTION>
RENT DUE
AND SCV CONFIRMATION SCHEDULE
For the Basic Rent Period Ended
--------
In accordance with the Second Amended and Restated Lease
Agreement dated as of-----------, 1998, between TMI-1 Fuel Corp., as Lessor,
and Pennsylvania Electric Company, as Lessee, the Lessee certifies that all
amounts set forth below are true and correct in all respects, and both Lessor
and Lessee certify that this Schedule has been prepared in accordance with the
provisions of the Lease Agreement.
I. BASIC RENT, ADDITIONAL RENT AND TERMINATION RENT
A.Basic Rent Owed
1. Calculation of Portion of Monthly Financing Charge Not Allocated
to Acquisition Cost
<S> <C> <C>
a.Interest Payable with Respect to All Outstanding Notes (See $ -
attached summary calculation)
--------------
b.Other Amounts Included in Monthly Financing Charge $ -
--------------
c.TOTAL MONTHLY FINANCING CHARGE NOT ALLOCATED TO ACQUISITION COST $ -
(Total of 1(a) and 1(b))
--------------
2 Aggregate Monthly Rent Component (See attached summary $ -
calculation)
--------------
3. BASIC RENT (total of 1(c) and 2) $ -
==============
B. Additional Rent Owed (see attached summary calculation) $ -
--------------
C.Termination Rent Owed (see attached summary calculation) $ -
--------------
TOTAL RENT DUE (total of A, B and C) $ -
==============
54
</TABLE>
<PAGE>
<TABLE>
II. CALCULATION OF STIPULATED CASUALTY VALUE
<CAPTION>
Nuclear Material
----------------
Installed for Not Installed Total
Operation In for Operation -----
the in the
Generating Generating
---------- ----------
Facility Facility
-------- --------
<S> <C> <C> <C>
A. Stipulated Casualty Value as of $ - $ - $ -
--------------- --------------- ------------
B. Add: Acquisition Cost Incurred in Rent $ - $ - $ -
Period Covered by This Schedule (exclusive of
Monthly Financing Charges)
--------------- --------------- ------------
C. Add: Monthly Financing Charge Allocated $ - $ - $ -
to Acquisition Cost Incurred in Rent Period
Covered by This Schedule
--------------- --------------- ------------
D. Less: SCV of Nuclear Material $ - $ - $ -
Transferred to the Lessee Pursuant to Sections
8(c), 8(g) or 14 of the Lease Agreement during
the Basic Rent Period Covered by This Schedule
--------------- --------------- ------------
STIPULATED CASUALTY VALUE AS OF-------------- $ - $ - $ -
=============== =============== ============
Add: Commercial Paper Discount $ -
------------
STIPULATED CASUALTY VALUE AS OF -------------- $ -
============
55
</TABLE>
Exhibit B-2(b)(2)
COUNTERPART NO.
SECOND AMENDED AND RESTATED
NUCLEAR MATERIAL LEASE AGREEMENT
Dated as of , 1998
--------
between
TMI-1 FUEL CORP.,
as Lessor
and
METROPOLITAN EDISON COMPANY
as Lessee
AS OF THE DATE OF THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT, THE LESSOR
UNDER THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT (THE "LESSOR") HAS
GRANTED TO THE SECURED PARTIES, AS DEFINED HEREIN, A SECURITY INTEREST IN THIS
SECOND AMENDED AND RESTATED LEASE AGREEMENT AND IN ALL OF THE LESSOR'S RIGHTS
AND INTERESTS UNDER THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT, INCLUDING,
WITHOUT LIMITATION, ALL OF THE LESSOR'S RIGHTS TO AND INTERESTS IN NUCLEAR
MATERIAL AS DEFINED IN THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT.
THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT HAS BEEN MANUALLY EXECUTED IN
EIGHTEEN (18) COUNTERPARTS, NUMBERED CONSECUTIVELY FROM 1 TO 18. NO SECURITY
INTEREST IN THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT OR IN ANY OF THE
LESSOR'S RIGHTS AND INTERESTS UNDER THIS SECOND AMENDED AND RESTATED LEASE
AGREEMENT MAY BE PERFECTED BY THE POSSESSION OF ANY SUCH COUNTERPART OTHER THAN
COUNTERPART NO. 1.
<PAGE>
TABLE OF CONTENTS
1 Definitions
2 Notices
3 Title to Remain in the Lessor; Quiet Enjoyment; Fuel Management
Location
4 Agreement for Lease of Nuclear Material
5 Orders for Nuclear Material and Services; Assigned Agreements
6 Leasing Records; Payment of Costs of Lessor
7 No Warranties or Representation by Lessor
8 Lease Term; Early Termination; Termination of Leasing Record
9 Payment of Rent; Payments with Respect to the Lessor's
Financing Costs
10 Compliance with Laws; Restricted Use of Nuclear Material;
Assignments; Permitted Liens; Spent Fuel
11 Permitted Contests
12 Insurance; Compliance with Insurance Requirements
13 Indemnity
14 Casualty and Other Events
15 Nuclear Material to Remain Personal Property
16 Events of Default
17 Rights of the Lessor Upon Default of the Lessee
18 Termination After Certain Events
19 Investment Tax Credit
20 Certificates; Information; Financial Statements
21 Obligation of the Lessee to Pay Rent
22 Miscellaneous
<PAGE>
SECOND AMENDED AND RESTATED NUCLEAR MATERIAL LEASE AGREEMENT
SECOND AMENDED AND RESTATED LEASE AGREEMENT (this "Lease Agreement")
dated as of the ---- day of ---------, 1998, by and between TMI-1 FUEL CORP., a
Delaware corporation (herein called the "Lessor"), and METROPOLITAN EDISON
COMPANY, a Pennsylvania corporation (herein called the "Lessee").
RECITALS
A. The Lessor and Lessee entered into a Nuclear Material Lease
Agreement dated as of August 1, 1991 ("Original Lease") to provide for the lease
of Nuclear Material to the Lessee;
B. The Original Lease provided for the Lessor to enter into certain
loan agreements and ancillary documents with The Prudential Insurance Company of
America and certain affiliates thereof ("Prudential") to provide financing from
Prudential for the acquisition of Nuclear Material under the Original Lease;
C. Such loan arrangements with Prudential were terminated and Lessor
entered into a new credit agreement and related instruments pursuant to which a
bank syndicate for which Union Bank of Switzerland, New York Branch ("UBS")
acted as agent to provide financing for the acquisition of Nuclear Material
being leased hereunder;
D. Lessor and Lessee entered into an Amended and Restated Nuclear
Material Lease Agreement, dated as of November 17, 1995 ("Amended and Restated
Lease") to reflect the necessary modifications consistent with the establishment
of the credit facility with UBS;
E. Concurrent with the execution and delivery hereof, such credit
agreements with UBS are being terminated and Lessor is entering into a new
credit agreement and related instruments to which a bank syndicate for which The
First National Bank of Chicago and PNC Bank, National Association, will act as
agents to provide financing for the acquisition of the Nuclear Material being
leased hereunder;
F. Accordingly, the Lessor and the Lessee desire to enter into this
Second Amended and Restated Lease Agreement in order to reflect necessary
modifications consistent with establishment of such new credit facility and
other modifications thereof in certain other respects, which agreement shall
supercede the Original Lease and the Amended and Restated Lease;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and intending to be legally bound hereby, the parties covenant and agree
as follows:
1. Definitions. Except as otherwise provided herein, capitalized
terms used in this Lease Agreement (including the Exhibits) shall have the
respective meanings set forth in Appendix A.
2. Notices. Any notice, demand or other communication which by any
provision of this Lease Agreement is required or permitted to be given shall
<PAGE>
be deemed to have been delivered if in writing and actually delivered by mail,
courier, telex or facsimile to the following addresses:
(i) If to the Lessor, TMI-1 Fuel Corp., c/o United States
Trust Company of New York, 114 West 47th Street, New York, New York 10036,
Attention: Corporate Trust and Agency Division, telecopy number
212-852-1626, or at such other address as the Lessor may have furnished to
the Lessee and the Secured Parties in writing; or
(ii) If to the Lessee, Metropolitan Edison Company c/o GPU
Service, Inc., 310 Madison Avenue, Morristown, New Jersey 07962-1957,
Attention: Vice President and Treasurer, telecopy number 973-644-4224, or
at such other address as the Lessee may have furnished the Lessor and the
Secured Parties in writing; or
(iii) except as provided in the following sentence or as
otherwise requested in writing by any Secured Party, any notice, demand
or communication which by any provision of this Lease Agreement is
required or permitted to be given to the Secured Parties shall be
deemed to have been delivered to all the Secured Parties if a single
copy thereof is delivered to --------------, Attention:
-------------------------------- --------- facsimile number (---)
----------- ; or at such other address as either may have furnished the
Lessor and the Lessee in writing. Any Leasing Record or invoice of a
Manufacturer or other Person performing services covering the Nuclear
Material which is required to be delivered to the Secured Parties
pursuant to Section 6(c)(ii) of this Lease Agreement and any Rent Due
and SCV Confirmation Schedule which is required to be delivered to the
Secured Parties pursuant to Sections 8(g) or 9(d) of this Lease
Agreement shall be deemed to have been delivered to all the Secured
Parties if a single copy thereof is delivered to --------------- at the
address indicated in this Section 2(iii).
1. Title to Remain in the Lessor; Quiet Enjoyment; Fuel
Management; Location.
(a) The Lessor and the Lessee hereby acknowledge that this
Lease Agreement is a lease and is intended to provide for the obligations of the
Lessee to pay installments of Rent as the same become due; that, subject to the
provisions of Section 10(h), the Lessor has title to and is the owner of the
Nuclear Material; and that the relationship between the Lessor and the Lessee
shall always be only that of lessor and lessee.
(b) The Lessor (including its successors and assigns) agrees
and covenants that, so long as the Lessee makes timely payments of Rent and
fully performs all other obligations to be performed by the Lessee under this
Lease Agreement, the Lessor (including its successors and assigns) shall not
hinder or interfere with the Lessee's peaceable and quiet enjoyment of the
possession and use of the Nuclear Material, for the term or terms herein
provided, subject, however, to the terms of this Lease Agreement.
(c) So long as no Lease Event of Default shall have occurred
and be continuing and the Lessor shall not have elected to exercise any of its
remedies under Section 17 hereof, the Lessee shall have the right to engage in
Fuel Management. The Lessee is hereby designated the agent of the Lessor in all
dealings with Manufacturers and any regulatory agency having jurisdiction over
the ownership or possession of the Nuclear Material for so long as the Lessee
shall have the right to engage in Fuel Management. As such agent of the Lessor,
the Lessee agrees to make, or cause to be made, all filings and to obtain all
consents and permits required as a result of the Lessor's ownership and leasing
of the Nuclear Material.
2
<PAGE>
(d) The Lessee covenants to the Lessor that the location of
Nuclear Material will be limited to: (w) any Manufacturer's facility, (x)
transit between one Manufacturer's facility and another Manufacturer's facility
or the site of the Generating Facility, (y) the site of the Generating Facility
and (z) the Generating Facility. Each assembly of the Nuclear Material will be
located during its Heat Production and "cooling-off" stage at the Generating
Facility or the site of the Generating Facility.
4. Agreement for Lease of Nuclear Material. From and after the
Closing, the Lessor shall lease to the Lessee and the Lessee shall lease from
the Lessor such Nuclear Material as may be from time to time mutually agreed
upon, provided that the total Stipulated Casualty Value of all Nuclear Material
leased under this Lease Agreement shall not exceed at any one time $50,000,000
in the aggregate or such other amount as the Lessor and the Lessee may agree to
in writing (the "Maximum Stipulated Casualty Value"). The Lessor and the Lessee
shall evidence their agreement to lease particular Nuclear Material in
accordance with the terms and provisions of this Lease Agreement by signing and
delivering to each other, from time to time, Leasing Records, substantially in
the forms of Exhibit A or Exhibit B, as applicable, prepared by the Lessee,
covering such Nuclear Material. Nothing contained herein shall be deemed to
prohibit the Lessee from leasing from other lessors or otherwise obtaining other
nuclear material for use in the Generating Facility, subject to the provisions
with respect to intermingling of fuel assemblies or sub-assemblies with other
fuel assemblies or sub-assemblies contained in Section 6 hereof.
5. Orders for Nuclear Material and Services; Assigned Agreements.
(a) The Nuclear Material Contracts listed in Exhibit C hereto,
relating, among other things, to the purchase of, and services to be performed
with respect to, Nuclear Material were entered into by the Lessee prior to the
date of this Lease Agreement, and, except as otherwise indicated on Exhibit C,
the interests of the Lessee under such Nuclear Material Contracts have been
assigned to the Lessor under an Assignment Agreement substantially in the form
of Exhibit D. Any further Nuclear Material Contracts which the Lessee deems
necessary or desirable may be negotiated by the Lessee and executed by the
Lessee in its own name or, where authorized by the Lessor, as agent for the
Lessor.
(b) So long as no Lease Event of Default shall have occurred
and be continuing, and subject to the approval of the Lessor and to the
limitation on the Maximum Stipulated Casualty Value of the Nuclear Material set
forth in Section 4, the interests of the Lessee under any further Nuclear
Material Contracts (whether executed and delivered before or after the date of
this Lease Agreement) pursuant to which the Lessee desires the Lessor to
purchase Nuclear Material or have services performed on any Nuclear Material on
behalf of the Lessee may be assigned to the Lessor under an Assignment Agreement
substantially in the form of Exhibit D, 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. The Lessee shall use its best efforts to cause the
other parties to such agreements to consent to each such assignment. Upon each
such assignment and the obtaining of such consents with respect to any Nuclear
Material Contract, the Lessor, subject to the limitation on the Maximum
Stipulated Casualty Value of the Nuclear Material set forth in Section 4, shall
make all payments which are required under such Assigned Agreements for the
purchase of Nuclear Material or for services to be performed on the Nuclear
Material in accordance with the procedures set forth in Section 6.
3
<PAGE>
(c) So long as no Lease Event of Default shall have occurred
and be continuing, the Lessor hereby authorizes the Lessee, at the Lessee's own
cost and expense, to assert all rights and claims and to bring suits, actions
and proceedings, in its own name or in the name of the Lessor, in respect of any
Manufacturer's warranties or undertakings, express or implied, relating to any
portion of the Nuclear Material and to retain the proceeds of any such suits,
actions and proceedings.
6. Leasing Records; Payment of Costs of Lessor.
(a) Interim Leasing Records. An Interim Leasing Record shall
be prepared by the Lessee, shall be dated the date that the Lessor first makes
any payment with respect to the Acquisition Cost of any Nuclear Material and
shall set forth a full description of such Nuclear Material, the Acquisition
Cost and location thereof, and such other details with respect to such Nuclear
Material upon which the parties may agree. During the period of preparation and
processing or reprocessing of Nuclear Material subject to an Interim Leasing
Record, if the Lessor shall make any further payment or payments or if the
Lessor shall receive any payment or payments representing a credit against the
Acquisition Cost previously paid with respect to such Nuclear Material, a
supplemental Interim Leasing Record dated the date that the Lessor makes each
such further payment or the date of receipt of any such credit shall be signed
by the Lessor and the Lessee to record the revised Acquisition Cost, after
giving effect to any such payments or credits with respect to such Nuclear
Material, any change in location and such additional details upon which the
parties may agree.
(b) Final Leasing Records. For Nuclear Material previously
covered by an Interim Leasing Record, the Final Leasing Record shall be prepared
by the Lessee, shall be dated the first day of the month following the date of
installation of such Nuclear Material in the Generating Facility, unless such
date is the first day of a month, in which case the Final Leasing Record shall
be dated such date. For Nuclear Material not previously covered by an Interim
Leasing Record, the Final Leasing Record shall be dated the date that the Lessor
first makes any payment with respect to the Acquisition Cost of such Nuclear
Material. A Final Leasing Record shall set forth a full description of such
Nuclear Material, the Acquisition Cost thereof, the BTU Charge, the location,
and such other details with respect to such Nuclear Material upon which the
parties may agree.
(c) Payment of Nuclear Material Costs.
(i) On the Closing, the Lessor shall pay UBS pursuant to
Section 5.02 of the UBS Credit Agreement the principal amount of all loans
outstanding thereunder together with accrued interest thereon to the extent
not paid previously, and related costs and expenses in connection therewith.
(ii) From time to time after the Closing, invoices of
Manufacturers, or of other Persons performing services, covering Nuclear
Material shall be forwarded to the Lessor in care of the Lessee at the
Lessee's address. Upon receipt by the Lessee of an invoice covering
Nuclear Material, the Lessee shall review such invoice and, upon the
Lessee's approval thereof, the Lessee shall forward such invoice endorsed
with the Lessee's approval to the Lessor, together with a Leasing Record
completed and signed by a Lessee Representative covering such Nuclear
Material. The Lessee's invoice for any cost incurred by it and includable
in the Acquisition Cost of any Nuclear Material shall be forwarded to the
Lessor and to the Secured Parties, together with a Leasing Record
completed and signed by a Lessee Representative covering such costs. After
receipt
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of such invoice and Leasing Record, in form and substance satisfactory to
the Lessor, the Lessor, subject to the limitation on Maximum Stipulated
Casualty Value of the Nuclear Material set forth in Section 4, shall pay
such invoice as provided therein or in the related purchase agreement and
shall execute the Leasing Record and return a copy of such Leasing Record
to the Lessee and the Secured Parties. The Leasing Record shall be dated
as provided for in this Lease Agreement. In the event that the Acquisition
Cost of the Nuclear Material covered by any Leasing Record has been paid
or incurred by the Lessee, the Lessor, subject to the limitation on
Maximum Stipulated Casualty Value of the Nuclear Material set forth in
Section 4 shall promptly reimburse the Lessee for the amount of the
Acquisition Cost paid or incurred by the Lessee.
(iii) The Lessee shall: (A) pay all costs and expenses of
freight, packing, insurance, handling, storage, shipment and delivery of
the Nuclear Material to the extent that the same have not been included in
the Acquisition Cost, and (B) at its own cost and expense, furnish such
labor, equipment and other facilities and supplies, if any, as may be
required to install and erect the Nuclear Material to the extent that the
cost and expense thereof have not been included in the Acquisition Cost.
Such installation and erection shall be in accordance with the
specifications and requirements of each Manufacturer. The Lessor shall not
be liable to the Lessee for any failure or delay in obtaining Nuclear
Material or making delivery thereof.
(d) Intermingling of Fuel Assemblies. Subject to the
provisions of Section 10(h) hereof, the Nuclear Material shall be owned
exclusively by the Lessor and leased to the Lessee under this Lease Agreement.
Prior to the fabrication of Nuclear Material into a completed fuel assembly or
sub-assembly or while such Nuclear Material is being reprocessed, the Lessee
will cause or permit such Nuclear Material to be fabricated or assembled only
into fuel assemblies or sub-assemblies owned by the Lessor and leased under this
Lease Agreement. However, fuel assemblies or sub-assemblies owned by the Lessor
and leased to the Lessee hereunder may be intermingled in the Generating
Facility with fuel assemblies or sub-assemblies not owned by the Lessor and
leased to the Lessee under this Lease Agreement, provided that such assemblies
or sub-assemblies owned by the Lessor shall be readily identifiable by serial
number or other distinguishing marks.
7. No Warranties or Representation by Lessor. THE NUCLEAR MATERIAL IS
LEASED AS-IS, WHERE-IS, IN THE CONDITION THEREOF AND SUBJECT TO THE RIGHTS
OF ANY PARTIES IN POSSESSION THEREOF, THE STATE OF THE TITLE THERETO, THE
RIGHTS OF OWNERSHIP THEREIN AND TO ALL APPLICABLE LAWS, RULES, REGULATIONS,
ORDERS, WRITS, INJUNCTIONS, DECREES, CONSENTS, APPROVALS, EXEMPTIONS,
AUTHORIZATIONS, LICENSES AND WITHHOLDING OF OBJECTIONS OF ANY GOVERNMENTAL
OR PUBLIC BODY OR AUTHORITY AND ALL OTHER REQUIREMENTS HAVING THE FORCE OF
LAW APPLICABLE AT ANY TIME TO ANY OF THE NUCLEAR MATERIALS OR ANY ACT OR
TRANSACTION WITH RESPECT THERETO OR PURSUANT TO THIS LEASE AGREEMENT, IN
EACH CASE AS IN EXISTENCE WHEN THE SAME FIRST BECOMES SUBJECT TO THIS LEASE
AGREEMENT, WITHOUT REPRESENTATIONS OR WARRANTIES OF ANY KIND BY THE LESSOR
OR ANY SECURED PARTY OR ANY PERSON ACTING ON BEHALF OF THE LESSOR OR ANY
SECURED PARTY. THE LESSEE ACKNOWLEDGES AND AGREES THAT NEITHER THE LESSOR
NOR ANY SECURED PARTY NOR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS AND
EMPLOYEES, NOR ANY COMPANY, PERSON OR FIRM CONTROLLING, CONTROLLED BY OR
UNDER COMMON CONTROL WITH ANY OF THEM NOR ANY OTHER PERSON ACTING ON BEHALF
OF THE LESSOR OR ANY SECURED PARTY HAS HAD AT ANY TIME PHYSICAL POSSESSION
OF ANY PORTION OF THE NUCLEAR MATERIAL, HAS MADE ANY INSPECTION THEREOF,
HAS GIVEN ANY ADVICE TO THE LESSEE OR HAS MADE ANY RECOMMENDATION TO THE
LESSEE WITH RESPECT TO THE CHOICE OF THE SUPPLIER, VENDOR OR PROCESSOR OF
THE NUCLEAR MATERIAL OR WITH
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RESPECT TO THE PROCESSING, MILLING, CONVERSION, ENRICHMENT, FABRICATION,
CONTAINERIZATION, TRANSPORTATION, UTILIZATION, STORAGE OR REPROCESSING OF
THE SAME. THE LESSEE ALSO ACKNOWLEDGES AND AGREES THAT NEITHER THE LESSOR
NOR ANY SECURED PARTY NOR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS AND
EMPLOYEES, NOR ANY COMPANY, PERSON OR FIRM CONTROLLING, CONTROLLED BY OR
UNDER COMMON CONTROL WITH ANY OF THEM, NOR ANYONE ACTING ON BEHALF OF THE
LESSOR OR ANY SECURED PARTY HAS MADE ANY WARRANTY OR OTHER REPRESENTATION,
EXPRESS OR IMPLIED, THAT THE NUCLEAR MATERIAL LEASED OR TO BE LEASED UNDER
THIS LEASE AGREEMENT (a) WILL NOT RESULT IN INJURY OR DAMAGE TO PERSONS OR
PROPERTY, (b) WILL BE USEABLE BY THE LESSEE OR WILL ACCOMPLISH THE RESULTS
WHICH THE LESSEE INTENDS FOR SUCH NUCLEAR MATERIAL OR (c) IS SAFE IN ANY
MANNER OR RESPECT. THE LESSEE ALSO ACKNOWLEDGES AND AGREES THAT NEITHER THE
LESSOR NOR ANY SECURED PARTY NOR ANY OF THEIR RESPECTIVE DIRECTORS,
OFFICERS AND EMPLOYEES, NOR ANY COMPANY, PERSON OR FIRM CONTROLLING,
CONTROLLED BY OR UNDER COMMON CONTROL WITH ANY OF THEM, AND ANYONE ACTING
ON BEHALF OF ANY OF THEM IS A MANUFACTURER OR ENGAGED IN THE SALE OR
DISTRIBUTION OF NUCLEAR MATERIAL AND THAT NONE OF THE FOREGOING PERSONS HAS
MADE OR DOES HEREBY MAKE ANY REPRESENTATION, WARRANTY OR COVENANT, EXPRESS
OR IMPLIED, WITH RESPECT TO THE MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, CONDITION, QUALITY, USEABILITY, DURABILITY, SUITABILITY OR
CONSEQUENCES OF USE OR MISUSE OF THE NUCLEAR MATERIAL IN ANY RESPECT OR IN
CONNECTION WITH OR FOR THE PURPOSES OR USES OF THE LESSEE, OR ANY OTHER
REPRESENTATION OR WARRANTY OF ANY KIND OR CHARACTER WHATSOEVER, EXPRESS OR
IMPLIED.
8. Lease Term; Early Termination; Termination of Leasing Record.
(a) The Lessor hereby leases to the Lessee, and the Lessee
hereby leases from the Lessor, the Nuclear Material for the term provided in
this Lease Agreement and subject to the terms and provisions hereof.
(b) This Lease Agreement shall become effective at 12:01 A.M.,
Eastern time, on the Closing, and, unless earlier terminated as provided in
Sections 8(c), 17 or 18, the term of this Lease Agreement shall end at the close
of business on the later of (i) the date on which there is no outstanding
principal of, or interest or premium, if any, on any of the Outstandings or (ii)
the Termination Date but in each case in no event later than November 17, 2015.
(c) In the event that during the term of this Lease Agreement,
the then effective Termination Date is not extended pursuant to Section 5.01 of
the Credit Agreement, the Lessee shall have the option, exercisable at any time
beginning 180 days before such Termination Date upon written notice to the
Lessor and the Secured Parties prior to such Termination Date to purchase all
(but not less than all) of the Nuclear Material and any spent fuel related
thereto for which title has not been transferred to the Lessee for a purchase
price equal to the Stipulated Casualty Value of such Nuclear Material at the
time of such purchase plus the Termination Rent. If the Lessee exercises such
purchase option, the purchase of the Nuclear Material shall occur on such date,
on or prior to such Termination Date, as may be agreed upon by the Lessor and
the Lessee and of which the Lessee has given the Secured Parties prior written
notice. Upon receipt of payment of the purchase price, the Lessor shall deliver
to the Lessee a Lessor's Bill of Sale, substantially in the form of Exhibit E,
transferring all right, title, interest and claim of the Lessor to the Nuclear
Material and any spent fuel related thereto for which title has not already been
transferred to the Lessee, to the Lessee or the Lessee's designee, free and
clear of all Liens created by the Collateral Agreements, together with such
documents, if any, as may be required to evidence the release of such Liens. The
later of (i) the date on which there is no outstanding principal of, or interest
or premium, if any, on any of the Outstandings or (ii) the date of any sale by
the Lessor of all of the Nuclear Material as provided in this Section
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8(c) shall constitute the Termination Settlement Date, and this Lease Agreement
shall terminate as of such date.
(d) In the event that during the term of this Lease Agreement
the then effective Termination Date is not extended pursuant to Section 5.01 of
the Credit Agreement and the Lessee shall not have exercised its option to
purchase pursuant to Section 8(c), the Lessee shall attempt to sell, or if no
sale is possible, to otherwise convey, on behalf of the Lessor, ownership of the
Nuclear Material to a third party not disqualified by any applicable statute,
law, regulation or agreement from acquiring such Nuclear Material, and, upon
prior written notice to the Lessor and the Secured Parties of the terms and date
of such sale, the Lessor shall furnish title papers as may be necessary to
effect such sale or conveyance on an as-is, where-is, non-installment, cash sale
basis, without recourse to or warranty or agreement of any kind by the Lessor.
The proceeds of such sale or conveyance shall be paid to the Lessor, and any
amount so paid shall constitute a credit against the amount of the Stipulated
Casualty Value payable by the Lessee under Section 8(e); provided, however, that
any proceeds of such sale or conveyance in excess of the amount payable by the
Lessee under Section 8(e) shall be retained by the Lessee.
(e) On the Termination Date unless the Lessee shall have
exercised its purchase option set forth in Section 8(c) and paid the Lessor the
purchase price of the Nuclear Material as provided therein, the Lessee shall pay
to the Lessor an amount equal to the sum of (i) the Stipulated Casualty Value of
all Nuclear Material leased under this Lease Agreement as of such Termination
Date and of all Nuclear Material sold or conveyed pursuant to Section 8(d) (less
any credit provided in Section 8(d)), and (ii) the Termination Rent as of such
Termination Date. Upon receipt of such payment, the Lessor shall deliver to the
Lessee or any designee of the Lessee a Lessor's Bill of Sale, substantially in
the form of Exhibit E, transferring all right, title, interest and claim of the
Lessor to the Nuclear Material and any spent fuel relating thereto for which
title has not been transferred to the Lessee to the Lessee or the Lessee's
designee, free and clear of all Liens created by the Collateral Agreements,
together with such documents, if any, as may be required to evidence the release
of such Liens.
(f) In the event that during the term of this Lease Agreement,
the then effective Termination Date is not extended pursuant to Section 5.01 of
the Credit Agreement, all obligations of the Lessor and Lessee under this Lease
Agreement with respect to the Nuclear Material, including the obligation of the
Lessee to pay Basic Rent and the obligation of the Lessor to acquire and pay for
the Nuclear Material and to lease the same to the Lessee shall terminate on the
date on which the Lessor receives the payment specified in Section 8(c) or
Section 8(e).
(g) The Lessee shall deliver to the Lessor and to the Secured
Parties a Rent Due and SCV Confirmation Schedule in the form of Exhibit F within
thirty (30) days following the date on which any Nuclear Material or spent fuel
resulting from the Nuclear Material is removed from the reactor of the
Generating Facility for purposes of "cooling-off" preliminary to reprocessing or
permanent on-site safe storage and/or off-site disposal. If the Lessee elects
within thirty (30) days following the receipt by the Lessor of such Rent Due and
SCV Confirmation Schedule to extend the lease term for the purposes of
reprocessing any such Nuclear Material, then the Lessor and the Lessee shall
enter into an Interim Leasing Record with respect to such Nuclear Material in
its then condition. In all other cases, the Final Leasing Record with respect to
any such Nuclear Material or spent fuel resulting from such Nuclear Material
shall be terminated and the Lessee shall immediately pay to the Lessor all
amounts, including the Stipulated Casualty Value, if any, with respect to such
Nuclear Material or spent fuel resulting from such Nuclear Material, and, upon
receipt
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thereof, the Lessor shall deliver to the Lessee or to any designee of the Lessee
a Lessor's Bill of Sale, substantially in the form of Exhibit E, transferring
all right, title, interest and claim of the Lessor to such Nuclear Material or
spent fuel resulting from such Nuclear Material for which title has not already
been transferred to the Lessee or the Lessee's designee, free and clear of all
Liens created by the Collateral Agreements, together with such documents, if
any, as may be required to evidence the release of such Liens.
9. Payment of Rent; Payments with Respect to the Lessor's Financing Costs.
(a) Basic Rent. The Lessee shall pay Basic Rent monthly in
arrears on the first day of the next succeeding month. If such first day of the
month is not a Business Day, then payment shall be made on the next succeeding
Business Day.
(b) Additional Rent. In addition to the Basic Rent, the Lessee
will also pay from time to time as provided in this Lease Agreement or on demand
of the Lessor, all Additional Rent on the due date thereof. In the event of any
failure by the Lessee to pay any Additional Rent, the Lessor shall have all the
rights, powers and remedies as in the case of failure to pay Basic Rent.
(c) Prepayments of Basic Rent. The Lessee may prepay Basic
Rent at any time. Such payment shall be credited against subsequent amounts owed
by the Lessee on account of Basic Rent.
(d) Wire Payment Procedure for Paying Basic Rent. All payments
of Rent and other payments to be made by the Lessee to the Lessor pursuant to
this Lease Agreement shall be paid to the Lessor (or, at the Lessor's request,
to the Secured Parties) in lawful money of the United States in Collected Funds
by wire transfer pursuant to Section 3.03 of the Credit Agreement. The Lessee
shall furnish to the Lessor and the Secured Parties each month during the term
of the Lease Agreement a summary of the rental calculations for such month
covering all outstanding Leasing Records. On each Basic Rent Payment Date, the
Lessee shall deliver to the Lessor and the Secured Parties a signed and
completed Rent Due and SCV Confirmation Schedule. The Lessee shall be
responsible for the accuracy of the matters contained in all such schedules
delivered by the Lessee pursuant to the provisions of this Lease Agreement.
10. Compliance with Laws; Restricted Use of Nuclear Material; Assignments;
Permitted Liens; Spent Fuel.
(a) Compliance with Legal Requirements. Subject to the
provisions of Section 11 hereof, the Lessee agrees to comply with all Legal
Requirements.
(b) Recording of Title. The Lessee shall promptly and duly
execute, deliver, file and record all such further counterparts of this Lease
Agreement or such certificates, Bills of Sale, financing and continuation
statements and other instruments as may be reasonably requested by the Lessor
and take such further actions as the Lessor shall from time to time reasonably
request, in order to establish, perfect and maintain the rights and remedies
created or intended to be created in favor of the Lessor and the Secured Parties
under this Lease Agreement and the Lessor's title to and interest in the Nuclear
Material as against the Lessee or any third party in any applicable
jurisdiction.
(c) Exclusive Use of Nuclear Material. So long as no Lease
Event Default shall have occurred and be continuing, the Lessee may use the
Nuclear Material in the regular course of its business or in the business of any
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subsidiary or affiliate of the Lessee, and, subject to Section 3(d) and upon
thirty (30) days' prior notice in writing to the Lessor and the Secured Parties,
or upon such shorter prior notice in writing promptly given upon the Lessee's
receipt of notice from any Manufacturer that the Nuclear Material is to be
moved, and at the Lessee's sole expense (without limiting the Lessee's rights to
request payment by the Lessor of such expense as provided in Section 6 hereof)
move such Nuclear Material to any jurisdiction approved in writing by the Lessor
in the contiguous forty-eight (48) states of the United States of America and
the District of Columbia for the purpose of having services performed on such
Nuclear Material in connection with any stage of the Nuclear Material Cycle
other than Heat Production and the "cooling off" stage, provided that (i) no
such movement of the Nuclear Material shall materially reduce the then fair
market value of such Nuclear Material, (ii) such Nuclear Material shall be and
remain the property of the Lessor, subject to this Lease Agreement, and (iii)
all Legal Requirements (including, without limitation, all necessary government
consents, permits and approvals) shall have been met or obtained by the Lessee,
on its own behalf and on behalf of the Lessor, and all necessary recordings,
filings and registrations or recordings, filings and registrations which the
Lessor shall reasonably consider advisable shall have been duly made in order to
protect the validity and effectiveness of this Lease Agreement and the security
interest created in the Security Agreement. At least once each year, or more
frequently if the Lessor reasonably so requests, the Lessee shall advise the
Lessor and the Secured Parties in writing where all Nuclear Material as of such
date is located. The Lessee shall maintain and make available to the Lessor for
examination upon reasonable notice complete and adequate records pertaining to
receipt, possession, use, location, movement, physical inventories and any other
information reasonably requested by the Lessor with respect to the Nuclear
Material.
(d) Additional Lessee Covenants. The Lessee agrees to use
every reasonable precaution to prevent loss or damage to the Nuclear Material.
All individuals handling or operating Nuclear Material in the possession of the
Lessee shall be conclusively presumed not to be agents of the Lessor. The Lessee
shall cooperate fully with the Lessor and all insurance companies and
governmental agencies providing insurance under Section 12 hereof in the
investigation and defense of any claims or suits arising from the licensing,
acquisition, storage, containerization, transportation, blending, transfer,
consumption, leasing, insuring, operating, disposing, fabricating and
reprocessing of the Nuclear Material. To the extent required by any applicable
law or regulation, the Lessee shall attach to the Nuclear Material the form of
required notice to protect or disclose the ownership of the Lessor or that the
Nuclear Material is leased. So long as no Lease Event of Default shall have
occurred and be continuing, the Lessor will assign or otherwise make available
to the Lessee all of its rights under any Manufacturer's warranty on Nuclear
Material. The Lessee shall pay all costs, expenses, fees and charges, except
Acquisition Costs, incurred by the Lessee in connection with the use and
operation of the Nuclear Material during the term of the lease of such Nuclear
Material. The Lessee hereby assumes all risks of loss or damage of Nuclear
Material however caused and shall, at its own expense, keep the Nuclear Material
in good operating condition and repair, reasonable wear and tear, obsolescence
and exhaustion excepted.
(e) Assignment by Lessor. Except as otherwise herein provided,
the Lessor may not, without the prior written consent of the Lessee, sell,
assign, transfer or convey the Nuclear Material or any interest therein or in
the Lease Agreement, or grant to any party a security interest in, or create a
lien or encumbrance upon, all or any part of its right, title and interest in
this Lease Agreement and in any Nuclear Material. After receipt by the Lessee of
written notice from the Lessor of any assignment by the Lessor of Rents or other
sums payable by the Lessee under this Lease Agreement, the Lessee shall make
such
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payments as directed in such notice of assignment, and such payments shall
discharge the obligations of the Lessee hereunder to the extent of such
payments. The Lessee hereby consents to the security interest and other rights
and interests granted to the Secured Parties under the Security Agreement, dated
as of the date first above written.
(f) Liens; Permitted Liens. The Lessee will not directly or
indirectly create or permit to be created or to remain and will discharge any
Lien with respect to the Nuclear Material or any portion thereof, or upon the
Lessee's leasehold interest therein, or upon the Basic Rent, Additional Rent, or
any other sum payable under this Lease Agreement, other than Permitted Liens.
(g) Assignment by Lessee. Notwithstanding any provision of
this Lease Agreement to the contrary, subject to applicable laws and regulations
and so long as no Lease Event of Default shall have occurred and be continuing,
the Lessee may sublease the Nuclear Material provided that (i) the Lessee has
given prior written notice of such sublease to the Lessor, (ii) such sublease is
not inconsistent with, and is expressly subject to, this Lease Agreement and
(iii) such sublease does not in any way limit or affect the Lessee's duties and
obligations under this Lease Agreement.
(h) Transfer of Title to Manufacturers. The parties recognize
that, during the processing and reprocessing of Nuclear Material before and
after its utilization in the Generating Facility for the production of power,
the Manufacturer performing services on the Nuclear Material may require that
title thereto be transferred to such Manufacturer and/or that the Nuclear
Material be commingled with other nuclear material, with an obligation for the
Manufacturer, upon completion of the services, to reconvey a specified amount of
nuclear material. The standard enrichment contracts of the Department of Energy
contain such provisions. Therefore, the parties agree that (i) Nuclear Material
may become subject to such a contract provision and that the action contemplated
by such a provision may be taken, notwithstanding any provision of this Lease
Agreement to the contrary, (ii) as between the Lessor and the Lessee, such
Nuclear Material shall be deemed to remain leased under this Lease Agreement
while title thereto is in the Manufacturer, and (iii) the nuclear material
exchanged by the Manufacturer upon completion of its services shall be
automatically leased under this Lease Agreement in substitution for the Nuclear
Material originally delivered to the Manufacturer.
(i) Substitution of Nuclear Material. The Lessee shall be
permitted to exchange Nuclear Material for other Nuclear Material of equal or
greater fair market value provided that the Lessor receives title to such
substituted Nuclear Material free and clear of any Lien other than such Liens as
may be created by the Security Agreement or permitted under Section 10(h). Any
additional costs incurred in order to effect such an exchange shall be paid by
the Lessor in accordance with the procedures set forth in Section 6(c) and shall
be added to the Acquisition Cost of the Nuclear Material. A supplemental Leasing
Record dated the date that the Lessor makes such further payment shall be signed
by the Lessor and the Lessee to record the revised Acquisition Cost and shall
include a full description of the substituted Nuclear Material, notice of any
change in location and such additional details upon which the parties may agree.
(j) Spent Fuel. Without the consent of the Lessor, the Lessee
shall not permit any Nuclear Material, which shall have been removed from a
Generating Facility for the purpose of "cooling-off," storage, repair or
reprocessing to be removed from the site of the Generating Facility unless (i)
the new site of such Nuclear Material is a facility maintaining liability
insurance and indemnification fully insuring and indemnifying the Lessor, the
Lessee and the Secured Parties under the Atomic Energy Act and any other
applicable law, rule or regulation, and (ii) except if the lease term is
extended
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pursuant to the second sentence of Section 8(g), the lease of such Nuclear
Material shall, concurrently with its removal from the Generating Facility, be
terminated by the Lessee pursuant to the provisions of Section 8 or 18 hereof,
as applicable, with the Lessee acquiring the ownership thereof pursuant to
Section 8(e), 8(g) or Section 18(c), as applicable.
11. Permitted Contests. The Lessee at its expense may, in its own
name or, if necessary and permitted, in the name of the Lessor (and, if
necessary but not so permitted, the Lessee may require the Lessor to) contest
after prior notice to the Lessor, by appropriate legal or administrative
proceedings conducted in good faith and with due diligence, the amount, validity
or application, in whole or in part, of any Imposition or Lien therefor, or any
Legal Requirements or Insurance Requirements, or any matter underlying Lessee's
indemnity obligations under Section 13 hereof, or any other Lien or contract or
agreement referred to in Section 10(f) hereof; provided that (i) in the case of
an unpaid Imposition or Lien therefor, such proceedings shall suspend the
collection of such Imposition or the enforcement of such Lien against the
Lessor, (ii) neither the Lessee's use of the Nuclear Material or any portion
thereof nor the taking of any step necessary or proper with respect to such
Nuclear Material in any stage of the Nuclear Material Cycle nor the performance
of any other act required to be performed by the Lessee under this Lease
Agreement would be enjoined, prevented or otherwise interfered with, (iii) the
Lessor would not be subject to any additional civil liability (other than
interest which the Lessee agrees to pay) or any criminal liability for failure
to pay any such Imposition or to comply with any such Legal Requirements or
Insurance Requirements or any such other Lien, contract or agreement, and (iv)
the Lessee shall have set aside on its books adequate reserves (in accordance
with generally accepted accounting principles) and shall have furnished such
security, if any, as may be required in the proceedings or reasonably requested
by the Lessor. The Lessee will pay, and save the Lessor, the Owner Trustee, U.S.
Trust and the Secured Parties harmless against, all losses, judgments, decrees
and costs, including attorneys' fees and expenses, in connection with any such
contest and will, promptly after the determination of such contest, pay and
discharge the amounts which shall be levied, assessed or imposed or determined
to be payable, together with all penalties, fines, interest, costs and expenses
incurred in connection with such contest. All rights and indemnification
obligations under this Section 11 and each other indemnification obligation in
favor of the Lessor, the Owner Trustee, U.S. Trust and the Secured Parties under
this Lease Agreement shall survive any termination of this Lease Agreement or of
the lease of any Nuclear Material hereunder.
12. Insurance; Compliance with Insurance Requirements. The Lessee
shall comply with all Insurance Requirements and with all Legal Requirements
pertaining to insurance. Without limiting the foregoing:
(a) Liability and Casualty Insurance. The Lessee shall, at its
own cost and expense, procure and maintain, or cause to be procured and
maintained, liability insurance and indemnification with respect to the Nuclear
Material insuring and indemnifying the Lessor, the Owner Trustee, U.S. Trust,
the Lessee, and the Secured Parties to the full extent required or available,
whichever may be greater, under the Atomic Energy Act or under any other
applicable law, rule or regulation. In the event the provisions of the Atomic
Energy Act with respect to liability insurance and the indemnification of
owners, licensees and operators of Nuclear Material or any other provisions of
the Atomic Energy Act which benefit the Lessor, the Owner Trustee, U.S. Trust or
the Secured Parties shall change, then the Lessee shall use its best efforts to
obtain equivalent insurance and indemnification agreements from the Nuclear
Regulatory Commission or from such other public and/or private sources from
which such coverage is available. The Lessee shall also, at its own cost and
expense,
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procure and maintain, or cause to be procured and maintained, physical damage
insurance with respect to the Nuclear Material insuring the Lessor, the Owner
Trustee, U.S. Trust and the Secured Parties against loss or damage to the
Nuclear Material in a manner which is consistent at all times with current
prudent utility industry practice in the United States; provided, however, that
the Lessee shall in any event maintain physical damage insurance coverage for
its Three Mile Island Unit 1 nuclear generating station site, including the
Nuclear Material, in an amount not less than $1.11 billion. Such liability and
physical damage insurance and indemnification agreements may be subject to
deductible amounts which do not exceed in the aggregate $5,000,000, and the
Lessee may self-insure with respect to such liability and physical damage
insurance and indemnification agreements to the extent of $5,000,000, provided
that such deductible amounts and such self-insurance are permitted under all
applicable law, rules and regulations.
(b) Third Parties; Insurance Requirements. The Lessee shall
use its best efforts to provide that the Nuclear Material, while in the
possession of third parties, is covered for liability insurance and
indemnification to the maximum extent available, and for physical damage
insurance in an amount not less than the Stipulated Casualty Value of such
Nuclear Material. To the extent that any such third party is maintaining such
insurance coverage for the Nuclear Material, the Lessee shall have no obligation
to do so under this Lease Agreement.
(c) Named Insureds; Loss Payees. The Lessee shall provide for
the Lessor, the Owner Trustee, U.S. Trust and the Collateral Agent to be named
additional insureds where possible, and, with respect to physical damage
coverage, named loss payees to the full extent of their interests in all
insurance policies and indemnification agreements relating to the Nuclear
Material required under this Section. All such policies and, where possible,
indemnification agreements, shall provide for at least ten (10) days' prior
written notice to the Lessor, the Owner Trustee, U.S. Trust and the Collateral
Agent of any cancellation or material alteration of such policies.
(d) Insurance Certificates. The Lessee shall, upon request of
the Lessor, the Owner Trustee, U.S. Trust or the Collateral Agent, provide the
Lessor, the Owner Trustee, U.S. Trust or the Collateral Agent, as the case may
be, with copies of the policies or insurance certificates in respect of the
insurance procured pursuant to the provisions of this Section and shall advise
the Lessor, the Owner Trustee, U.S. Trust and the Collateral Agent of all
expirations and renewals of policies and all notices issued by the insurers with
respect to such policies. Within a six-month period from the execution of this
Lease Agreement and at yearly intervals thereafter, the Lessee shall furnish to
the Lessor, the Owner Trustee, U.S. Trust and the Collateral Agent a certificate
as to the insurance coverage provided pursuant to this Section and shall further
give notice as to any material change in the nature or availability of such
coverage, including any material change whatsoever in the provisions of the
Atomic Energy Act or any other applicable law, rule or regulation with respect
to liability insurance and indemnification, or, immediately after the Lessee
becomes aware, or should reasonably be expected to become aware, of any material
change in the application, interpretation or enforcement thereof. The Lessor,
the Owner Trustee, U.S. Trust or the Collateral Agent shall be under no duty to
examine such insurance policies or indemnification agreements or to advise the
Lessee in case the Lessee is not in compliance with any Insurance Requirements.
13. Indemnity. Without limitation of any other provision of this Lease
Agreement, including Section 11, the Lessee agrees to indemnify and hold
harmless each of the Lessor, the Owner Trustee, U.S. Trust and the Secured
Parties and all companies, persons or firms controlling, controlled by, or under
<PAGE>
common control with any of them and the respective shareholders, directors,
officers and employees of the foregoing against any and all claims, demands and
liabilities of whatever nature and all costs, losses, damages, obligations,
penalties, causes of action, judgments and expenses (including attorneys' fees
and expenses) directly or indirectly relating to or in any way arising out of:
(a) defects in title to Nuclear Material upon acquisition by
the Lessor or in ownership of and interest in the Nuclear Material (the term
"Nuclear Material" when used in this Section 13 shall include, in addition to
all other Nuclear Material, nuclear material the lease of which has been
terminated and which is in storage, or is being transported to storage, and
which has not been sold or disposed of by the Lessor to the Lessee or to a third
party);
(b) the ownership, licensing, ordering, rejection, use,
nonuse, misuse, possession, control, installation, acquisition, storage,
containerization, transportation, blending, transfer, consumption, leasing,
insuring, operating, disposing, fabricating, channelling, refining, milling,
enriching, conversion, cooling, processing, condition, operation, inspection,
repair and reprocessing of the Nuclear Material, or resulting from the condition
of the environment including the adjoining and/or underlying land, water,
buildings, streets or ways, except to the extent that such costs are included in
the Acquisition Cost of such Nuclear Material within the limits specified in
Section 4 (or within any change of such limits agreed to in writing by the
Lessor and the Lessee) and except for any general administrative expenses of the
Secured Parties and of their representatives;
(c) the assertion of any claim or demand based upon any
infringement or alleged infringement of any patent or other right, by or in
respect of any Nuclear Material; provided, however, that the Lessor shall have
made available to the Lessee all of the Lessor's rights under any similar
indemnification from the Manufacturer of such Nuclear Material under any Nuclear
Material Contract;
(d) all federal, state, county, municipal, foreign or other
fees and taxes of whatever nature including, but not limited to, license,
qualification, franchise, sales, use, business, gross receipts, ad valorem,
property, excise, and occupation fees and taxes and penalties and interest
thereon, whether assessed, levied against or payable by the Lessor or any
Secured Party or to which the Lessor or any Secured Party is subject with
respect to the Nuclear Material or the Lessor's or any Secured Party's ownership
thereof or interest therein or the licensing, ordering, ownership, use,
possession, control, acquisition, storage, containerization, transportation,
blending, milling, enriching, transfer, consumption, leasing, insuring,
operating, disposing, fabricating, channelling, refining, conversion, cooling
and reprocessing of Nuclear Material or measured in any way by the value thereof
or by the business of investment in, financing of or ownership by the Lessor or
any Secured Party with respect thereto; provided, however, that the Lessee shall
not be obligated to indemnify any Secured Party for any taxes, whether federal,
state or local, based on or measured by net income of any Secured Party where
taxable income is computed in substantially the same manner as taxable income is
computed under the Code;
(e) 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 involving or connected in any way with the Nuclear Material or any
portion thereof;
(f) any violation, or alleged violation, of this Lease
Agreement by the Lessee or of any contracts or agreements to which the Lessee is
a party or by which it is bound or any laws, rules, regulations, orders, writs,
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injunctions, decrees, consents, approvals, exemptions, authorizations, licenses
and withholdings of objection, of any governmental or public body or authority
and all other requirements having the force of law applicable at any time to the
Nuclear Material or any action or transaction by the Lessee with respect thereto
or pursuant to this Lease Agreement;
(g) performance of any labor or service or the furnishing of
any materials in respect of the Nuclear Material or any portion thereof, except
to the extent that such costs are included in the Acquisition Cost of such
Nuclear Material within the limits specified in Section 4 (or within any change
of such limits agreed to in writing by the Lessor and the Lessee); or
(h) liabilities based upon a theory of strict liability in
tort, negligence or willful acts to the extent that such liabilities relate to
the Nuclear Material or any action or transaction with respect thereto or
pursuant to this Lease Agreement.
The Lessee shall, upon demand, reimburse the Lessor, the Owner Trustee, U.S.
Trust, the Secured Parties or other indemnified parties, as the case may be, for
any sum or sums expended with respect to any of the foregoing or advance such
amount, upon request by the Lessor, the Owner Trustee, U.S. Trust, the Secured
Parties or such other party for payment thereof. With respect solely to the
Lessor, the amount of any payment obligation of the Lessee under this Section 13
shall be determined on a net, after-tax basis, taking into account any tax
benefit to the Lessor. Notwithstanding the foregoing, the Lessee shall not
indemnify or hold harmless the Lessor, the Owner Trustee, U.S. Trust, the
Secured Parties or other indemnified parties for (i) any claims, demands,
liabilities, costs or expenses which arise, result from or relate to obligations
of such party as an insurer under contracts or agreements of insurance or
reinsurance or (ii) any liability arising from the willful misconduct or gross
negligence of the Lessor, the Owner Trustee, U.S. Trust, the Secured Parties or
other indemnified parties; provided, however, that the Lessee shall in any event
indemnify and hold harmless the Lessor, the Owner Trustee, U.S. Trust, the
Secured Parties and other indemnified parties for that part of any such
liability to which the Lessee has contributed. Without limiting any of the
foregoing provisions of this Section 13, to the extent that the Lessee in fact
indemnifies the Lessor, the Owner Trustee, U.S. Trust, the Secured Parties or
such other party under this indemnity provision, the Lessee shall be subrogated
to the rights of the Lessor, the Owner Trustee, U.S. Trust, the Secured Parties
and such other party in the affected transaction and shall have a right to
determine the settlement of claims with respect to such transaction, provided
that any such rights to which the Lessee shall be subrogated shall be
subordinate and subject in right of payment to the prior payment in full of all
liabilities to the Lessor, the Owner Trustee, U.S. Trust, the Secured Parties or
other indemnified parties of the person or entity in respect of which such
rights exist. The Lessor shall claim, on a timely basis, any refund to which it
may be entitled with respect to any fees or taxes for which the Lessor has
sought indemnification from the Lessee under Section 13(d), shall take all steps
necessary to prosecute diligently such claim and shall pay over to the Lessee
any refund (together with any interest received thereon) recovered by the Lessor
with respect to such fees or taxes as soon as practicable following receipt
thereof, provided that the Lessee shall have previously indemnified the Lessor
with respect to such fees or taxes. The Owner Trustee, U.S. Trust and the
Secured Parties, at the expense of the Lessee, (i) shall cooperate with the
Lessee in such manner as the Lessee shall reasonably request in order to claim,
on a timely basis, any refund to which the Owner Trustee, U.S. Trust or the
Secured Parties may be entitled with respect to any fees or taxes for which the
Lessee has indemnified the Owner Trustee, U.S. Trust or any Secured Party or for
which the Lessee has an obligation to indemnify the Owner Trustee, U.S. Trust or
the Secured Parties under Section 13(d) (provided that the Lessee is not in
default of such obligation) if such cooperation is
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<PAGE>
necessary in order to claim such refund, (ii) shall take all steps which the
Lessee shall reasonably request which are necessary to prosecute such claim, and
(iii) shall pay over to the Lessee any refund (together with any interest
received thereon) recovered by the Owner Trustee, U.S. Trust or any Secured
Party with respect to such fees or taxes as soon as practicable following
receipt thereof, provided that the Lessee shall have previously indemnified the
Owner Trustee, U.S. Trust or such Secured Party with respect to such fees or
taxes. All rights and indemnification obligations under this Section 13, and
each other indemnification obligation in favor of the Lessor, the Owner Trustee,
U.S. Trust and the Secured Parties under this Agreement, shall survive any
termination of this Lease Agreement or of the lease of any Nuclear Material
hereunder.
14. Casualty and Other Events. Upon the occurrence of any one or more of
the following events:
(a) the loss, destruction or damage beyond repair of any
Nuclear Material, or
(b) the commandeering, condemnation, attachment or loss of use
to the Lessee of any Nuclear Material by reason of the act of any third party or
governmental instrumentality or the deprivation or loss of use to the Lessee of
any Nuclear Material for any other reason, other than by reason of a Lease Event
of Default, for a period exceeding ninety (90) days; or
(c) a determination by the Lessee in its sole discretion that
any Nuclear Material is no longer useful to the Lessee, provided, however, that
(i) no Lease Event of Default has occurred and is continuing, and (ii) no such
determination may be made by the Lessee with respect to any Nuclear Material
prior to __________ __;
Then, in any such case, the Lessee promptly shall give written
notice to the Lessor and the Secured Parties of any such event, and upon the
earlier of (i) ten (10) days following receipt of any insurance or other
proceeds paid with respect to the foregoing or (ii) one hundred and twenty (120)
days after the occurrence of any such event, the Lessee shall pay to the Lessor
an amount equal to the then Stipulated Casualty Value of such Nuclear Material,
together with any Basic Rent and Additional Rent then due with respect to such
Nuclear Material. The lease of such Nuclear Material hereunder and the
obligation of the Lessee to pay Basic Rent and Additional Rent with respect to
such Nuclear Material shall continue until the day on which the Lessor receives
payment of such Stipulated Casualty Value, Basic Rent and Additional Rent. Upon
the giving of written notice of the occurrence of such an event, the Lessee
shall promptly use its best efforts to sell, or, if no sale is possible, to
otherwise convey, on behalf of the Lessor, ownership of such Nuclear Material to
a third party not disqualified by any applicable statute, law, regulation or
agreement from acquiring such Nuclear Material, and the Lessor shall furnish
title papers as may be necessary to effect such sale or conveyance on an as-is,
where-is, non-installment, cash sale basis without recourse to or warranty or
agreement of any kind by the Lessor. Any such sale or conveyance shall be
effected on or before the date one hundred and twenty (120) days after the date
of the occurrence of such event. The proceeds of such sale or conveyance shall
be paid to the Lessor, and any amount so paid shall constitute a credit against
the amount of the Stipulated Casualty Value payable by the Lessee under this
Section 14.
15. Nuclear Material to Remain Personal Property. It is expressly
understood and agreed that the Nuclear Material shall be and remain personal
property notwithstanding the manner in which it may be attached or affixed to
realty and notwithstanding any law or custom or the provisions of any lease,
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<PAGE>
mortgage or other instrument applicable to any such realty. The Lessee agrees to
indemnify the Lessor and the Secured Parties against, and to hold the Lessor and
the Secured Parties harmless from, all losses, costs and expenses (including
reasonable attorneys' fees and expenses) resulting from any of the Nuclear
Material becoming part of any realty. Upon termination of the lease of any
Nuclear Material, any costs of removal, transportation, storage and delivery of
such Nuclear Material shall be paid by the Lessee. The Lessor and the Secured
Parties shall not be liable for any physical damage caused to any realty or any
building by reason of the removal of the Nuclear Material therefrom.
16. Events of Default. Each of the following events of default by the
Lessee shall constitute a "Lease Event of Default" and give rise to the rights
on the part of the Lessor described in Section 17 hereof:
(i) Default in the payment of Basic Rent or Additional Rent,
if any, on the date on which such payment is due and the continuance of
such default for five (5) days;
(ii) Default in the payment of Termination Rent;
(iii) The Lessee shall fail to maintain liability and casualty
insurance pursuant to its obligations under Section 12(a) of this Lease
Agreement;
(iv) The Lessee shall fail to perform its obligations to
purchase Nuclear Material pursuant to Section 8(e) of this Lease
Agreement;
(v) Any representation or warranty or statement made by the
Lessee (or any of its officers) herein or in connection with this Lease
Agreement shall prove to be incorrect or misleading in any material
respect when made;
(vi) Default in the payment or performance of any other
material liability or obligation or covenant of the Lessee to the Lessor,
and the continuance of such default for thirty (30) days after written
notice to the Lessee sent by registered or certified mail;
(vii) The Lessee suspends or discontinues its business
operations or becomes insolvent (however such insolvency may be evidenced)
or admits insolvency or bankruptcy or its inability to pay its debts as
they mature, makes an assignment for the benefit of creditors or applies
for or consents to the appointment of a trustee or receiver for the Lessee
or for the major part of its property;
(viii) The institution of bankruptcy, reorganization,
liquidation or receivership proceedings for relief under any bankruptcy
law or similar law for the relief of debtors by or against the Lessee and,
if instituted against the Lessee, its consent thereto or the pendency of
such proceedings for sixty (60) days;
(ix) An event of default (the effect of which is to permit the
holder or holders of any instrument, or the trustee or agent on behalf of
such holder or holders, to cause the indebtedness evidenced by such
instrument to become due prior to its stated maturity) shall occur under
the provisions of any instrument evidencing indebtedness for borrowed
money of the Lessee in a principal amount equal to at least $20,000,000 or
if any obligation of the Lessee for the payment of such indebtedness shall
become or be declared to be due and payable prior to its stated maturity,
or shall
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<PAGE>
not be paid when due and is not paid within the applicable cure period, if
any, provided for the payment of such indebtedness under such instrument;
(x) An event of default shall occur under the provisions of
any Basic Document and such default shall have continued beyond any
applicable cure period.
(xi) A final judgment in an amount in excess of $20,000,000 is
rendered against the Lessee, and within thirty (30) days after the entry
thereof, such judgment is not discharged or execution thereof stayed
pending appeal, or within thirty (30) days after the expiration of any
such stay, such judgment is not discharged; or
(xii) Other than pursuant to a condemnation proceeding, any
court, governmental officer or agency shall, under color of legal
authority, take and hold possession of any substantial part of the
property or assets of the Lessee.
17. Rights of the Lessor Upon Default of the Lessee. Upon the occurrence
of any Lease Event of Default, the Lessor may, in its discretion, and shall, at
the direction of the Secured Parties, do one or more of the following:
(a) Terminate the lease term of any or all Nuclear Material
upon five (5) days written notice to the Lessee sent by registered or certified
mail;
(b) Whether or not any lease of any Nuclear Material is
terminated, and, subject to any applicable law or regulation, take immediate
possession of any or all Nuclear Material or cause such Nuclear Material to be
taken from the possession of the Lessee, and/or take immediate possession of and
remove other property of the Lessor in the possession of the Lessee, wherever
situated and for such purpose enter upon any premises without liability for so
doing or require the Lessee, at the Lessee's expense, to deliver the Nuclear
Material, properly containerized and insulated for shipping to the Lessor or to
such other person as the Lessor may designate, in which case the risk of loss
shall be upon the Lessee until such delivery is made;
(c) Whether or not any action has been taken under (a) or (b)
above, and subject to any applicable law or regulation, sell any Nuclear
Material (with or without the concurrence and whether or not at the request of
the Lessee) at public or private sale, and the Lessee shall be liable for and
shall promptly pay to the Lessor all unpaid Rent to the date of receipt by the
Lessor of the proceeds of such sale plus any deficiency between the net proceeds
of such sale and the Stipulated Casualty Value of such Nuclear Material at the
time of such payment by the Lessee; provided, however, that any proceeds of such
sale in excess of the sum of such unpaid Rent, the Stipulated Casualty Value of
such Nuclear Material and all other amounts payable by the Lessee under this
Section 17 shall be received for the benefit of, and shall be paid over to the
Lessee, as soon as practicable after receipt thereof;
(d) Subject to any applicable law or regulation, sell in a
commercially reasonable manner, dispose of, hold, use, operate, remove, lease or
keep idle any Nuclear Material as the Lessor in its sole discretion may
determine, without any obligation to account to the Lessee with respect to such
action or inaction or for any proceeds thereof, except that the net proceeds of
any such selling, disposing of, holding, using, operating or leasing shall be
credited by the Lessor against any Rent accruing after the Lessor shall have
declared this Lease Agreement as to any or all of the Nuclear Material to be in
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<PAGE>
default pursuant to this Section; provided, however, that any net proceeds of
any such selling, disposing of, holding, using, operating or leasing in excess
of the sum of any such accrued Rent and all other amounts payable by the Lessee
under this Section 17 shall be received for the benefit of, and shall be paid
over to the Lessee, as soon as practicable after receipt thereof;
(a) Terminate this Lease Agreement as to any or all of the
Nuclear Material or exercise any other right or remedy which may be available
under applicable law or proceed by appropriate court action to enforce the terms
hereof or to recover damages for the breach hereof. If the Lessee fails to
deliver, promptly after written request, the Nuclear Material pursuant to (b),
above, subject to reasonable wear and tear, obsolescence and exhaustion, in good
operating condition and repair, or converts or destroys any Nuclear Material,
the Lessee shall be liable to the Lessor for all Rent then due and payable on
the Nuclear Material, all other amounts then due and payable under this Lease
Agreement, the then Stipulated Casualty Value of such Nuclear Material, plus any
loss, damage and expense (including without limitation reasonable attorneys'
fees and expenses) sustained by the Lessor by reason of such Lease Event of
Default and the exercise of the Lessor's remedies with respect thereto,
including any costs incurred under the Credit Agreement and the Security
Agreement, and any other amounts owed to the Secured Parties with respect to the
Notes. If, upon the occurrence of a Lease Event of Default, the Lessee delivers
Nuclear Material to the Lessor or to such other person as the Lessor may
designate, or if the Lessor repossesses or causes Nuclear Material to be
repossessed on its behalf, the Lessee shall be liable for and the Lessor may
recover from the Lessee all Rent on the Nuclear Material due and payable to the
date of such delivery or repossession, all other amounts due and payable under
this Lease Agreement, plus any loss, damage and expense (including without
limitation reasonable attorneys' fees and expenses) sustained by the Lessor by
reason of such Lease Event of Default and the exercise of the Lessor's remedies
with respect thereto. No remedy referred to in this Section 17 is intended to be
exclusive, but each shall be cumulative and in addition to any other remedy
referred to above or otherwise available to the Lessor at law or in equity and
the exercise in whole or in part by the Lessor of any one or more of such
remedies shall not preclude the simultaneous or later exercise by the Lessor of
any or all such other remedies. No waiver by the Lessor of any Lease Event of
Default shall in any way be, or be construed to be, a waiver of any future or
subsequent Lease Event of Default.
18. Termination After Certain Events
(a) This Lease Agreement may terminate as provided in Section
18(b) below prior to the expiration of its term in connection with any of the
following "Terminating Events":
(i) The Lessor shall have given notice that the Lessor
is not satisfied with any change in the insurers, coverage, amount or
terms of any insurance policy or indemnity agreement required to be
obtained and maintained by the Lessee pursuant to Section 12;
(ii) There shall occur the revocation or material
adverse modification of any authorization, consent, exemption or approval
theretofore obtained from any regulatory body or governmental authority
necessary for the carrying out of the intent and purposes of this Lease
Agreement or the actions or transactions contemplated hereby, and the
effectiveness of any such revocation or material adverse modification
shall not be stayed pending any appeal thereof;
(iii) A Nuclear Incident involving or connected in any
way with the Nuclear Material shall have occurred, and the Lessor shall
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<PAGE>
have given notice to the Lessee that the Lessor believes such Nuclear
Incident may give rise to an aggregate liability, or to damage,
destruction or personal injury in excess of $20,000,000;
(iv) There shall have occurred a Deemed Loss Event;
(v) Any change in, or new interpretation by a
governmental authority having jurisdiction relating to, the Price-Anderson
Act, as amended, or the Atomic Energy Act, or the regulations of the
Nuclear Regulatory Commission thereunder, in each case as in effect on the
date of this Lease Agreement, shall have been adopted, and the Lessor
shall have given notice to the Lessee that, in the opinion of independent
counsel selected by the Lessor and reasonably satisfactory to the Lessee
and the Secured Parties as a result of such change or new interpretation
the Lessor is prohibited from asserting any material right, protection or
defense available under applicable law as of the date of this Lease
Agreement with respect to civil or criminal actions brought in connection
with a Nuclear Incident;
(vi) Any law or regulation or interpretation (judicial,
regulatory or otherwise) of any law or regulation shall be adopted or
enforced by any Court or governmental authority, and as a result of such
adoption or enforcement, approval of the transactions contemplated by this
Lease Agreement shall be required and shall not have been obtained within
any applicable grace period after such adoption or enforcement or as a
result of which adoption or enforcement this Lease Agreement or any
transaction contemplated hereby, including any payments to be made by the
Lessee or the ownership of the Nuclear Material by the Lessor, shall be or
become unlawful, or the performance of this Lease Agreement shall be
rendered impracticable in any material way; or
(vii) Any governmental licenses, approvals or consents
with respect to the Generating Facility, without which the Generating
Facility cannot continue to operate, shall have been revoked and the
Lessee shall not have, in good faith, within one hundred and eighty (180)
days of such revocation, represented in writing to the Lessor that the
Lessee has made a good faith determination that such Generating Facility
will return to operation within twenty-four (24) months of such
revocation, or for any other reason the Generating Facility shall cease to
be operated for a period of twenty-four (24) consecutive months.
(b) Upon the happening of any of the Terminating Events listed
in Section 18(a), Lessor and/or the Secured Parties may, at their option,
terminate this Lease Agreement, such termination to be effective upon delivery
of the Notice contemplated by paragraph (d)(ii) below, except with respect to
obligations and liabilities of the Lessee, actual or contingent, which arose
under the Lease Agreement on or prior to the date of termination and except for
the Lessee's obligations set forth in Sections 10, 12 and 13, and in this
Section 18, all of which obligations will continue until the delivery of
documentation by the Lessor and the payment by the Lessee provided for below,
and except that after such delivery and payment, the Lessee's obligations under
Section 13 shall continue as therein set forth as shall all of Lessee's
indemnification obligations set forth in other sections of this Lease Agreement.
(c) Upon any such termination, the entire interest of the
Lessor in the Nuclear Material and any spent fuel relating thereto for which
title has not been transferred to the Lessee shall automatically transfer to and
be vested in the Lessee, without the necessity of any action by either the
Lessor or the Lessee, provided, however, that if the Lessor shall have
theretofore
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approved in writing such Person and the terms of such transfer, the entire
interest of the Lessor in such Nuclear Material and any spent fuel relating
thereto for which title has not been transferred to the Lessee shall, upon such
termination, automatically transfer to and be vested in any Person designated by
the Lessee.
(d) (i) Promptly after either party shall learn of the
happening of any Terminating Event, such party shall give notice of the same to
the other party and to the Secured Parties.
(ii) If the Lessor and/or Secured Parties elect to
terminate the Lease Agreement, they shall give notice to the Lessee and the
Secured Parties or the Lessor, as the case may be, which notice shall (x)
acknowledge that the Lease Agreement has terminated, subject to the continuing
obligations of the Lessee mentioned above, and that title to and ownership of
such Nuclear Material and any spent fuel relating thereto for which title has
not been transferred to the Lessee has transferred to and vested in the Lessee
or such other Person, and (y) specify a Termination Settlement Date occurring
one hundred and fifty (150) days after the giving of such notice. After such
termination of this Lease Agreement and until such Termination Settlement Date,
the Lessee shall continue to pay Basic Rent and Additional Rent. On such
Termination Settlement Date, the Lessee shall be obligated to pay to the Lessor
as the purchase price for the Nuclear Material an amount equal to the sum of (x)
Stipulated Casualty Value of the Nuclear Material as of the Termination
Settlement Date and (y) the Termination Rent on the Termination Settlement Date.
The Lessor shall be obligated to deliver to the Lessee a Lessor's Bill of Sale,
substantially in the form of Exhibit E, on an as-is, where-is, non-installment,
cash sale basis, without recourse to or warranty or agreement of any kind by the
Lessor acknowledging the transfer and vesting of title and ownership of the
Nuclear Material and any spent fuel relating thereto for which title has not
been transferred to the Lessee, in accordance with paragraph (c) above and
confirming that upon payment by the Lessee of the amounts set forth in the
immediately preceding sentence, the Nuclear Material is free and clear of the
Liens created by the Collateral Agreements, together with such documents, if
any, as may be required to evidence the release of such Liens.
19. Investment Tax Credit. To the extent that the Lessee determines the
Nuclear Material is or becomes eligible for any investment or similar credit
under the Code as now or hereafter in effect, the Lessee shall request in
writing that the Lessor elect to treat the Lessee as having acquired such
Nuclear Material, and, if permitted to do so under the Code and under any other
applicable law, rule or regulation, the Lessor, pursuant to such request of the
Lessee, shall provide the Lessee with an appropriate investment credit election
and the Lessee shall consent to such election. A condition to the Lessor's
making such election will be the provision by the Lessee of a report or
statement with respect to all Nuclear Material as to which the investment credit
election is applicable. Such report or statement shall contain such information
and be in such form as may be required for Internal Revenue Service reporting
purposes. The Lessee shall indemnify and hold harmless the Lessor and any
affiliates with respect to any adverse tax consequence, other than the loss of
the credit, which may result from such election including, but not limited to,
any increase in the Lessor's income taxes due to any required reduction of the
Lessor's tax basis below the Lessor's cost of the Nuclear Material, and the
Lessee agrees to pay to or on behalf of the Lessor, or otherwise make available
to the Lessor, funds sufficient to put the Lessor in the same after-tax position
(other than by reason of the loss of the investment credit) the Lessor would
have been in if such election had not been made.
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20. Certificates; Information; Financial Statements.
(a) The Lessee will from time to time deliver to the Lessor
and the Secured Parties, promptly upon reasonable request (i) a statement
executed by any Vice President, Treasurer or Assistant Treasurer or any other
assistant officer of the Lessee, certifying the dates to which the sums payable
hereunder have been paid, that this Lease Agreement is unmodified and in full
effect (or, if there have been modifications, that this Lease Agreement is in
full effect as modified, and identifying such modifications) and that no Lease
Event of Default or Terminating Event has occurred and is continuing (or
specifying the nature and period of existence of any thereof and what action the
Lessee is taking or proposes to take with respect thereto), (ii) such
information with respect to the Nuclear Material as the Lessor or the Secured
Parties may reasonably request, and (iii) such information with respect to the
Lessee's operations, business, property, assets, financial condition or
litigation as the Lessor or any assignee of the Lessor or the Secured Parties
may reasonably request.
(b) The Lessee will deliver to the Lessor and the Secured
Parties:
(i) Quarterly Financial Statements. As soon as
practicable and in any event within ninety (90) days after the end of each
fiscal quarter (other than the last fiscal quarter in each fiscal year),
three (3) copies of a balance sheet of the Lessee (consolidated and
consolidating if the Lessee has any subsidiaries) as of the end of such
quarter and of statements of income and cash flows of the Lessee
(consolidated and consolidating if the Lessee has any subsidiaries) for
such quarter, setting forth in each case corresponding figures in
comparative form for the corresponding period of the preceding fiscal
year, each certified as true and correct by the chief accounting officer
thereof; provided, however, that delivery pursuant to clause (iii) below
of copies of the Lessee's Quarterly Report on Form 10-Q for such quarter
containing such financial statements filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirements of this
clause (i);
(ii) Annual Financial Statements. As soon as practicable
and in any event within one hundred and twenty (120) days after the end of
each fiscal year, three (3) copies of an annual report of the Lessee
consisting of its financial statements, including a balance sheet as of
the end of such fiscal year (consolidated and consolidating if the Lessee
has any subsidiaries) and statements of income and cash flows for the year
then ended (consolidated and consolidating if the Lessee has any
subsidiaries), setting forth corresponding figures in comparative form for
the preceding fiscal year, with all notes thereto, all in reasonable
detail and certified by independent public accountants of recognized
standing selected by the Lessee (only with respect to the consolidated
financial statements, if applicable); provided, however, that delivery
pursuant to clause (iii) below of copies of the Lessee's Annual Report on
Form 10-K for such fiscal year containing such financial statements filed
with the Securities and Exchange Commission shall be deemed to satisfy the
requirements of this clause (ii); and
(iii) SEC Reports, etc. With reasonable promptness,
copies of all notices, reports or materials filed by the Lessee with the
Securities and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange Commission)
under the Securities Act of 1933, as amended, other than Registration
Statements on Form S-8 or any amendments thereto, or the Securities
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Exchange Act of 1934, as amended, other than Annual Reports on Form 10-K,
and including without limitation, all Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Together with each delivery of financial statements required by clause (b)(i)
above, the Lessee will deliver to the Lessor and the Secured Parties an
Officer's Certificate stating that the Lessee is in compliance with the terms of
this Lease Agreement and stating that there exists no Lease Event of Default, or
Terminating Event or, if any Lease Event of Default, or Terminating Event
exists, specifying the nature and period of existence thereof and what action
the Lessee proposes to take with respect thereto. The Lessee also covenants that
promptly upon the obtaining of knowledge of a Lease Event of Default by the
chief executive officer, principal financial officer or principal accounting
officer of the Lessee, it will deliver to the Lessor and the Secured Parties an
Officer's Certificate specifying the nature and period of existence thereof and
what action the Lessee proposes to take with respect thereto.
21. Obligation of the Lessee to Pay Rent. The Lessee's obligation to pay,
as the same becomes due, Basic Rent, Additional Rent, Termination Rent, and all
other amounts payable hereunder shall, subject to the covenant of the Lessor
contained in Section 3 hereof, be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (i) any setoff,
counterclaim, recoupment, defense or other right which the Lessee may have
against the Lessor or anyone else for any reason whatsoever, (ii) any defect in
the title, compliance with specifications, condition, design, operation or
fitness for use of, or any damage to or loss or destruction of, any Nuclear
Material, or (iii) any interruption or cessation in the use or possession of any
Nuclear Material by the Lessee for any reason whatsoever. The Lessee hereby
waives, to the extent permitted by applicable law, any and all rights which it
may now have or which at any time hereafter may be conferred upon it, by statute
or otherwise, to terminate, cancel, quit or surrender this Lease Agreement
except in accordance with its express terms. Each payment of Rent and each other
payment made by the Lessee shall be final, and the Lessee will not seek to
recover all or any part of such payment from the Lessor for any reason
whatsoever.
22. Miscellaneous.
(a) Successors and Assigns. This Lease Agreement shall be
binding upon the Lessee and the Lessor and their respective successors and
assigns and shall inure to the benefit of the Lessee and the Lessor and their
respective successors and assigns.
(b) Waiver. Neither party shall by act, delay, omission or
otherwise be deemed to have waived any of its rights or remedies hereunder
unless such waiver is given in writing. A waiver on one occasion shall not be
construed as a waiver on any other occasion.
(c) Entire Agreement. This Lease Agreement, together with the
written instruments provided for or contemplated hereby, the other Basic
Documents and other written agreements between the parties dated as of the date
hereof, constitute the entire agreement between the parties with respect to the
leasing of Nuclear Material, and no representations, warranties, promises,
guaranties or agreements, oral or written, express or implied, have been made by
either party or by any one else with respect to this Lease Agreement or the
Nuclear Material, except as may be expressly provided for herein or therein. Any
change or modification of this Lease Agreement must be in writing and duly
executed by the parties.
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(d) Descriptive Headings. The captions in this Lease Agreement
are for convenience of reference only and shall not be deemed to affect the
meaning or construction of any of the provisions.
(e) Severability. Any provision of this Lease 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.
(f) Governing Law. This Lease Agreement and the rights and
obligations of the parties hereunder shall be construed in accordance with and
be governed by the law of the Commonwealth of Pennsylvania.
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IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease
Agreement to be executed and delivered by their duly authorized officers as of
the day and year first above written.
TMI-1 FUEL CORP.
Lessor
ATTEST
By:
- -------------------------- ---------------------------
(Assistant) Secretary Name:
---------------------------
Title:
---------------------------
METROPOLITAN EDISON COMPANY
Lessee
ATTEST
By:
- -------------------------- ---------------------------
(Assistant) Secretary Name:T. G. Howson
---------------------------
Title: Vice President
---------------------------
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STATE OF )
------------------------------
COUNTY OF ) SS:
--------------
On this --- day of -----------, 1998, before me personally appeared
- ---------------------, to me personally known, who, being by me duly sworn, says
that he is ------------of TMI-1 Fuel Corp. and that said instrument was signed
on behalf of said corporation by authority of its Board of Directors, and he
acknowledged that the execution of the foregoing instrument was the free act and
deed of said corporation.
-------------------------------------
Notary Public
My commission Expires:
STATE OF )
------------------------------
COUNTY OF ) SS:
--------------
On this ----- day of ------------, 1998, before me personally appeared
T. G. Howson, to me personally known, who, being by me duly sworn, says that he
is a Vice President of Metropolitan Edison Company and that said instrument was
signed on behalf of said corporation by authority of its Board of Directors, and
he acknowledged that the execution of the foregoing instrument was the free act
and deed of said corporation.
-------------------------------------
Notary Public
My commission Expires:
25
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ATTACHMENTS
Appendix A -- Definitions
Exhibit A -- Form of Interim Leasing Record
Exhibit B -- Form of Final Leasing Record
Exhibit C -- Nuclear Material Contracts
Exhibit D -- Form of Assignment Agreement and Consent
Exhibit E -- Form of Lessor's Bill of Sale
Exhibit F -- Form of Rent Due and SCV Confirmation
Schedule
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APPENDIX A
DEFINITIONS
As used in the Basic Documents (as defined below), the following
terms shall have the following meanings (such definitions to be applicable to
both singular and plural forms of the terms defined), except as otherwise
specifically defined therein:
"Acquisition Cost" means the purchase price of any Nuclear Material,
any progress payments made thereon, costs of milling, conversion, enrichment,
fabrication, installation, delivery, redelivery, containerization, storage,
reprocessing, any other costs incurred by the Company in acquiring the Nuclear
Material (less any discounts or credits actually utilized by the Company), plus
in any case (i) any allowance for funds used during construction (including any
income tax component associated with such allowance) with respect to Nuclear
Material purchased by the Company, (ii) at the option of the Lessee, any Rent
relating to costs incurred in the ordinary course of operations but excluding
Rent relating to extraordinary costs, including without limitation,
indemnification payments, payable by the lessee to the Company with respect to
any Nuclear Material prior to the installation of such Nuclear Material for
operation in the Generating Facility, (iii) any sales, excise or other taxes or
charges payable by the Company with respect to any such payment for such Nuclear
Material, (iv) at the option of the Lessee, any Monthly Financing Charge payable
by the Lessee to the Company with respect to Nuclear Material during any period
in which such Nuclear Material is subject to an Interim Leasing Record, but
excluding any interest charges or penalties for late payment by the Company of
the purchase price or any portion thereof, if such late payment results from the
negligence of the Company, (v) such other costs with respect to any Nuclear
Material as may be agreed by the Company and the Lessee and approved by the
Administrative Agent, in each case in writing, and, in the case of any Nuclear
Material removed from the Generating Facility for the purpose of "cooling off'
and repair or reprocessing, shall include the Stipulated Casualty Value thereof
at the time of such removal, if any, and (vi) at the option of the Lessee, any
Financing Costs. Any amount realized by the Company from the disposition of the
by-products (including, but not limited to, plutonium) of Nuclear Material
specified in a Leasing Record during the repair or reprocessing of such Nuclear
Material while leased hereunder shall be credited against the Acquisition Cost
of such Nuclear Material.
"Additional Rent" shall mean all legal, accounting, administrative
and other operating expenses and taxes incurred by the Company to the extent not
paid as part of Basic Rent (including, without limitation, any Cancellation Fees
and all other liabilities incurred or owed by the Company pursuant to the Basic
Documents) and all amounts (other than Basic Rent) that the Lessee agrees to pay
under the Lease Agreement (including, without limitation, indemnification
payable under the Lease Agreement, general and administrative expenses of the
Company, and, to the extent not included in Acquisition Cost, Financing Costs)
and interest at the rate incurred by the Company or any Secured Party as a
result of any delay in payment by the Lessee to meet obligations that would have
been satisfied out of prompt payment by the Lessee, and the amount of any and
all other costs, losses, damages, interest, taxes, deficiencies, liabilities,
obligations, actions, judgments, suits, claims, fees (including, without
limitation, attorneys' fees and disbursements) and expenses, of every kind,
nature, character and description, direct or indirect, that may be imposed on or
incurred by the Company as a result of, arising from or relating to, in any
manner whatsoever, one or more Basic Documents, or any other document referred
to therein, or the transactions contemplated thereby or the enforcement thereof.
For purposes of calculating the interest incurred by the Company or any Secured
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Party as a result of any such delay, it shall be assumed that the Company or any
Secured Party, as applicable, incurred interest at the Credit Agreement Default
Rate.
"Administrative Agent" shall have the meaning specified therefor in
the first paragraph of the Credit Agreement.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such Person. For purposes of this definition, the term "control," as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise.
"Aggregate Monthly Rent Component" shall mean the sum of the Monthly
Rent Components for all items of Nuclear Material which are installed in the
Generating Facility during the relevant period.
"Arranging Agent" shall have the meaning specified therefor in the
first paragraph of the Credit Agreement.
"Assigned Agreement" means a Nuclear Material Contract which has
been assigned to the Company in the manner specified in Section 5 of the Lease
Agreement pursuant to a duly executed and delivered Assignment Agreement. The
term Assigned Agreement shall include a Partially Assigned Agreement.
"Assignment Agreement" means an assignment agreement substantially
in the form of Exhibit D to the Lease Agreement.
"Atomic Energy Act" means the Atomic Energy Act of 1954, as from
time to time amended.
"Banks" shall have the meaning specified therefor in Section 1.02 of
the Credit Agreement.
"Basic Documents" means the Lease Agreement, the Credit Agreement,
the Security Agreement, the Commercial Paper, the Notes, the Letter Agreement,
the Dealer Agreements, the Assigned Agreements, the Assignment Agreements, the
Trust Agreement, the Depositary Agreement, each Bill of Sale, each Leasing
Record, each SCV Confirmation Schedule, and other agreements related or
incidental thereto which are identified in writing by the Company, the Lessee
and the Secured Parties as one of the "Basic Documents," in each case, as such
documents may be amended from time to time.
"Basic Rent" means, for any Basic Rent Period, the sum of (a) that
portion of the Monthly Financing Charge not allocated to Acquisition Cost
pursuant to the Lease Agreement plus (b) the Aggregate Monthly Rent Component as
shown on a Rent Due and SCV Confirmation Schedule for such Basic Rent Period.
"Basic Rent Payment Date" means, for any Basic Rent Period, the
first Business Day of the next succeeding calendar month following such Basic
Rent Period.
"Basic Rent Period" means each calendar month or portion thereof
commencing on, in the case of the first such period, the effective date of the
Lease Agreement, and in the case of each succeeding period, the first day
following the immediately preceding Basic Rent Period, and ending on the
earliest
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of (i) the last day of any calendar month or (ii) the Termination Settlement
Date.
"BTU Charge" means the dollar amount set forth in the BTU Charge
Agreement which is used to calculate the Monthly Rent Component. The BTU Charge
initially set forth for any Nuclear Material in any Final Leasing Record shall
be the amount agreed upon by the Lessor and the Lessee as set forth in
Attachment 1 to Exhibit B to the Lease Agreement based upon the reasonably
anticipated operating life, BTU output, and utilization of such Nuclear
Material.
"BTU Charge Agreement" shall mean an agreement in the form of
Attachment 1 to Exhibit B to the Lease Agreement with respect to any Nuclear
Material executed by the Lessor and the Lessee on or prior to the date of the
Final Leasing Record covering such Nuclear Material.
"Business Day" means any day other than (i) a Saturday or Sunday or
(ii) a day on which banking institutions in New York City are authorized by law
to close.
"Capitalized Lease" means any and all lease obligations which are or
should be capitalized on the balance sheet of the Person in question in
accordance with generally accepted accounting principles and Statement No. 13 of
the Financial Accounting Standards Board or any successor to such pronouncement
regarding lease accounting, without regard for the accounting treatment
permitted or required under any applicable state or federal public utility
regulatory accounting system, unless such treatment controls the determination
of the generally accepted accounting principles applicable to such Person.
"Cash Collateral" shall have the meaning specified therefor in
Section 1.02 of the Credit Agreement.
"Closing," means ---------- --, 1998.
"Code" means the Internal Revenue Code of 1986, as from time to time
amended.
"Collateral" has the meaning set forth in the granting clauses of
the Security Agreement and includes all property of the Company described in the
Security Agreement as comprising part of the Collateral.
"Collateral Agent" shall have the meaning specified therefor in
Section 1.02 of the Credit Agreement.
"Collateral Agreements" means, collectively, the Security Agreement,
all Assignment Agreements, and any other assignment, security agreement or
instrument executed and delivered to the Secured Parties hereafter relating to
property of the Company which is security for the Notes.
"Collected Funds" means funds which are immediately available to the
Secured Parties, as the Lessor's assignees, for its use in New York, New York.
"Commercial Paper" shall have the meaning specified therefor in
Section 1.02 of the Credit Agreement.
"Commercial Paper Discount" shall mean, at any time, amounts payable
by the Company in respect of the Face Amount of Commercial Paper outstanding in
excess of the Acquisition Cost together with any Cash Collateral reduced by the
aggregate total amount, if any, of (i) the Monthly Rent Components paid by the
Lessee to the Lessor with respect to the Nuclear Material financed thereby and
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<PAGE>
(ii) any Monthly Financing Charge payable by the Lessee to the Company with
respect to Nuclear Material during any period in which such Nuclear Material is
subject to an Interim Leasing Record ("Excess Face Amount"); provided, however,
that any such Excess Face Amount shall not exceed the additional Face Amount of
Commercial Paper necessary to be issued by the Company at a discount to face
value to purchasers thereof in the commercial paper market in order to obtain
proceeds in an amount equal to the Acquisition Cost reduced by the aggregate
total amount, if any, of (a) the Monthly Rent Components paid by the Lessee to
the Lessor with respect to the Nuclear Material financed thereby and (b) any
Monthly Financing Charge payable by the Lessee to the Company with respect to
Nuclear Material during any period in which such Nuclear Material is subject to
an Interim Lease Record, together with any Cash Collateral. Amounts payable in
respect of Commercial Paper Discount during any calendar month or portion
thereof shall be paid on the first Business Day of the next succeeding month in
which such amounts are incurred.
"Company" means the TMI-1 Fuel Corp., a Delaware corporation.
"Consents and Agreements" means the agreements, each substantially
in the form attached as Exhibit 2 to Exhibit D to the Lease Agreement, between
the Lessee and the various contractors under the Nuclear Material Contracts,
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.
"Controlled Group" means a controlled group of corporations of which
the Company is a member within the meaning of Section 414(b) of the Code, any
group of corporations or entities under common control with the Company within
the meaning of Section 414(c) of the Code or any affiliated service group of
which the Company is a member within the meaning of Section 414(m) of the Code.
"Credit Agreement" means the Credit Agreement dated as of ------,
1998 among TMI-1 Fuel Corp. The First National Bank of Chicago, as
Administrative Agent, PNC Bank, National Association, as Syndication Agent, the
Banks parties thereto, and First Chicago Capital Markets, Inc. and PNC Capital
Markets, Inc., as Arrangers.
"Credit Agreement Default" means an event which would, with the
lapse of time or the giving of notice or both, constitute a Credit Agreement
Event of Default.
"Credit Agreement Event of Default" means any one or more of the
events specified in Section 10.01 of the Credit Agreement.
"Dealer Agreements" mean ----------------------------------------.
"Deemed Loss Event" means the following event: if at any time during
the term of the Lease Agreement, (A) the Company, by reason solely of the
ownership of the Nuclear Material or any part thereof or the lease of the
Nuclear Material to the Lessee under the Lease Agreement, or the Company or any
Secured Party, by reason solely of any other transaction contemplated by the
Lease Agreement or any of the other Basic Documents, shall be deemed, by any
governmental authority having jurisdiction, to be, or to be subject to
regulation as an "electric utility" or a "public utility" or a "public utility
holding company" or similar type of entity, under any applicable law or deemed a
"public utility company" or a "subsidiary company" or a "holding company" within
the meaning of the Public Utility Holding Company Act, (B) the Public Utility
Holding Company Act shall be amended, applied, or interpreted in a manner, or
any rules or regulations shall be adopted under the Public Utility Holding
Company Act of 1935, which adversely affect the legality, validity and
enforceability of the
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<PAGE>
lease obligations of the Company and the Lessee under the Lease Agreement, or
(C) either the Company or any of the Secured Parties, by reason solely of being
a party to the Basic Documents, shall be required to obtain any consent, order
or approval of, or to make any filing or registration with, or to give any
notice to, any governmental authority, or be subject to any liabilities, duties
or obligations under the Public Utility Holding Company Act, other than the
filing by the Company of a certificate on Form U-7D with the SEC pursuant to SEC
Rule 7(d) under the Public Utility Holding Company Act (17 C.F.R. Section
250.7(d)), except in any case if the same shall be solely the result of
Nonburdensome Regulation; provided, however, that if in compliance with
applicable laws, the Lessee, with the cooperation of the Company, shall have
acted diligently and in good faith to contest, or obtain an exemption from the
application of the laws, rules or regulations described in clauses (A), (B) or
(C) to the Company, the Secured Parties or the Lessee, as the case may be, the
application of which would otherwise constitute a Deemed Loss Event, such Deemed
Loss Event shall be deemed not to have occurred so long as (I) the Lessee shall
have furnished to the Company and the Secured Parties an opinion of counsel
reasonably satisfactory to the Company and the Secured Parties to the effect
that there exists a reasonable basis for such contest or exemption and that the
application of such laws, rules or regulations to the Company, the Secured
Parties or the Lessee, as the case may be, shall be effectively stayed during
the application for exemption or contest and such laws, rules or regulations
shall not be applied retroactively at the conclusion of such contest, (II) the
Company or the Secured Parties shall have determined in their sole discretion
that such contest or exemption shall not adversely affect their business or
involve any danger of the sale, foreclosure or loss of, or creation of a Lien
upon, the Collateral, and (III) the Lessee shall have agreed to indemnify the
Company or such Secured Parties, as the case may be, for expenses incurred in
connection with such contest or exemption; and further provided, that following
notice from the Lessee to the Company or the Secured Parties, as the case may
be, that the Lessee shall be unable to furnish the opinion described in clause
(I) of the next preceding proviso or that any such contest shall not be
successful or such exemption shall not be available, a Deemed Loss Event shall
be deemed not to have occurred for such period, not to exceed 270 days, as may
be approved by any governmental authority having jurisdiction during which
application of such law, rule or regulation to the Company, the Secured Parties
or the Lessee, as the case may be, shall be suspended to enable the Company to
assign or transfer its interest in the Collateral so long as during such period
the Company shall use reasonable efforts to assign or transfer its interest in
the Collateral upon commercially reasonable terms and conditions, provided that
the Company shall not be required to assign or transfer the Nuclear Material for
a price which, after deduction of sales tax and expenses of such sale incurred
by the Company, shall be less than the sum of (A) Stipulated Casualty Value
determined as of the date of such proposed sale, and (B) the Termination Rent
determined in accordance with Section 18 of the Lease Agreement.
"Depositary Agreement" means the Depositary Agreement, dated as of
- -------, 1998, among the Company, Chase Manhattan Bank, as Depositary and The
First National Bank of Chicago, as Administrative Agent.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as from time to time amended.
"Excepted Payments" means any indemnity, expense, or other payment
which by the terms of any of the Basic Documents shall be payable to the Company
in order for the Company to satisfy its obligations pursuant to Section 7.8 of
the Trust Agreement.
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"Face Amount" shall have the meaning specified therefor in Section
1.02 of the Credit Agreement.
"Federal Energy Regulatory Commission" means the independent
regulatory commission of the Department of Energy of the United States
Government existing under the authority of the Department of Energy Organization
Act, as amended, or any successor organization or organizations performing any
identical or substantially identical licensing and related regulatory functions.
"Federal Power Act" means the Federal Power Act, as amended.
"Final Leasing Record" means a Leasing Record which records the
leasing of Nuclear Material during any period while such Nuclear Material is
installed for operation in the Generating Facility. A Final Leasing Record shall
be in the form of Exhibit B to the Lease Agreement.
"Financing Costs" means (a) fees and other amounts owing to any
Secured Party or to the Owner Trustee under the Trust Agreement, (b) legal fees
and disbursements and other amounts referred to in Section 10(b) of the Security
Agreement, (c) legal, accounting, and other fees and expenses incurred by the
Lessee and/or the Company in connection with the preparation, execution and
delivery of Basic Documents or the issuance of the Commercial Paper and/or the
Notes, and (d) such other reasonable fees and expenses of the Owner Trustee and
the Company as they may be entitled to under the Basic Documents.
"Fuel Management" means the design of, contracting for, fixing the
price and terms of acquisition of, management, movement, removal, disengagement,
storage and other activities in connection with the acquisition, utilization,
storage and disposal of the Nuclear Material.
"Generating Facility" means the nuclear reactor located at the Three
Mile Island Unit 1 Nuclear Generating Station, located in Londonderry Township,
Pennsylvania.
"Heat Production" means the stage of the Nuclear Material Cycle
commencing with the commercial operation of a Generating Facility, during which
the Nuclear Material in question is producing thermal energy which results in
the production of net positive electrical energy transmitted within the
distribution network of any utility and during which the Nuclear Material in
question is engaged in the reactor core of such Generating Facility.
"Hereof," "herein," "hereunder" and words of similar import when
used in a Basic Document refer to such Basic Document as a whole and not to any
particular section or provision thereof.
"Imposition" means any payment required by a public or governmental
authority in respect of any property subject to the Lease Agreement or any
transaction pursuant to the Lease Agreement or any right or interest held by
virtue of the Lease Agreement; provided, however, that Imposition shall not
include any taxes, whether federal, state or local, payable by any Secured Party
based on or measured by net income of any Secured Party where taxable income is
computed in substantially the same manner as taxable income is computed under
the Code.
"Insurance Requirements" means all terms of any insurance policy or
indemnification agreement covering or applicable to (i) any Nuclear Material or
(ii) the Generating Facility or the Lessee in its capacity as licensee of the
Generating Facility, in each case insofar as any insurance policy or
indemnification agreement directly or indirectly relates to the Nuclear Material
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or the performance by the Lessee of its obligations under the Basic Documents,
and all requirements of the issuer of any such policy or agreement necessary to
keep such insurance or agreements in force.
"Interim Leasing Record" means a Leasing Record which records the
leasing of Nuclear Material (i) prior to installation for operation in the
Generating Facility, (ii) after removal from the Generating Facility during the
"cooling off" and storage period, and (iii) while being reprocessed. An Interim
Leasing Record shall be in the form of Exhibit A to the Lease Agreement.
"Investment Company Act" means the Investment Company Act of 1940,
as from time to time amended.
"Issuing Bank" shall have the meaning specified therefor in the
first paragraph of the Credit Agreement.
"Lease Agreement" means the Second Amended and Restated Nuclear
Material Lease Agreement, dated as of -------- --, 1998 between TMI-1 Fuel
Corp., as the Lessor, and Metropolitan Edison Company, as the Lessee, as the
same may be modified, supplemented or amended from time to time.
"Lease Event of Default" has the meaning specified in Section 16
of the Lease Agreement.
"Leasing Record" is a form signed by the Lessor and the Lessee to
record the leasing under the Lease Agreement of the Nuclear Material specified
in such Leasing Record. A Leasing Record shall be either an Interim Leasing
Record or a Final Leasing Record.
"Legal Requirements" means all applicable provisions of the Atomic
Energy Act, all applicable orders, rules, regulations and other requirements of
the Nuclear Regulatory Commission and the Federal Energy Regulatory Commission,
and all other laws, rules, regulations and orders of any other jurisdiction or
regulatory authority relating to (i) the licensing, acquisition, storage,
containerization, transportation, blending, transfer, consumption, leasing,
insuring, using, operating, disposing, fabricating, channelling and reprocessing
of the Nuclear Material, (ii) the Generating Facility or the Lessee in its
capacity as licensee of the Generating Facility, in each case insofar as such
provisions, orders, rules, regulations, laws and other requirements directly or
indirectly relate to the Nuclear Material or the performance by the Lessee of
its obligations under the Basic Documents or (iii) the Basic Documents, insofar
as any of the foregoing directly or indirectly apply to the Lessee.
"Lessee" has the meaning specified in the introduction to the
Lease Agreement.
"Lessee Representative" means a person at the time designated to act
on behalf of the Lessee by a written instrument furnished to the Company and the
Secured Parties containing the specimen signature of such person and signed on
behalf of the Lessee by any of its officers. The certificate may designate an
alternate or alternates. A Lessee Representative may be an employee of the
Lessee or of the Owner Trustee.
"Lessor" has the meaning specified in the introduction to the
Lease Agreement, and its successors and assigns.
"Lessor's Bill of Sale" means an instrument substantially in the
form of Exhibit E to the Lease Agreement, pursuant to which title to all or any
portion of the Nuclear Material is transferred to the Lessee or any designee of
the Lessee.
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"Letter Agreement" means the Lessee's Letter Agreement Regarding
TMI-1 Fuel Corp., dated as of ---------- ---, 1998, between the Lessee, the
Company, and the Administrative Agent, as it may be amended from time to time.
"Lien" means any mortgage, pledge, lien, security interest, title
retention, charge or other encumbrance of any nature whatsoever (including any
conditional sale or other title retention agreement, any lease in the nature
thereof and the filing of or agreement to execute and deliver any financing
statement under the Uniform Commercial Code of any jurisdiction).
"Loans" shall have the meaning specified therefor in Section 1.02 of
the Credit Agreement.
"Majority Secured Parties" means at any time the Secured Parties
holding at such time more than 66% of the outstanding principal amount of all
Secured Obligations.
"Manufacturer" means any supplier of Nuclear Material or of any
service (including without limitation, enrichment, fabrication, transportation,
storage and processing) in connection therewith, or any agent or licensee of any
such supplier.
"Manufacturer's Consent" means any consent which may be given by a
Manufacturer under a Nuclear Material Contract to the assignment by the Lessee
to the Company of all or a portion of the Lessee's rights under such Nuclear
Material Contract or of all or a portion of any such rights previously assigned
by the Lessee to the Secured Parties.
"Monthly Debt Service" for any calendar month means the sum of the
Monthly Financing Charge for such calendar month.
"Monthly Financing Charge" means, for any calendar month or
portion thereof, the sum of:
(a) all Commercial Paper Discount payable by the Company with
respect to Commercial Paper outstanding during such month and/or all
interest payable by the Company during such month with respect to all
outstanding Notes and in each case, not included in Acquisition Cost; and
(b) the amounts paid or due and payable by the Company with respect
to the transactions contemplated by the Basic Documents during such
calendar month for the following other fees, costs, charges and expenses
incurred or owed by the Company under or in connection with the Lease
Agreement or the other Basic Documents: (i) legal, printing, reproduction
and closing fees and expenses, (ii) auditors', accountants' and attorneys'
fees and expenses, (iii) franchise taxes and income taxes, and (iv) any
other fees and expenses incurred by the Company under or in respect of the
Basic Documents.
Any figure used in the computation of any component of the Monthly Financing
Charge shall be stated to five decimal places.
"Monthly Rent Component" for any Nuclear Material covered by a Final
Leasing Record for each calendar month during the lease of such Nuclear Material
shall be as follows:
(i) for the first partial calendar month the Monthly Rent
Component shall be zero;
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(ii) for the first full calendar month the Monthly Rent
Component shall be zero;
(iii) for the second full calendar month the Monthly Rent
Component shall be zero;
(iv) for the third full calendar month the Monthly Rent
Component shall be an amount determined by multiplying (x) the amount of
thermal energy in millions of British Thermal Units of heat produced by
such Nuclear Material during the first calendar month while covered by the
Final Leasing Record and also during the first partial calendar month, if
any, such Nuclear Material was covered by an Interim or Final Leasing
Record and was engaged in Heat Production by (y) the BTU Charge set forth
in the Final Leasing Record covering such Nuclear Material; and
(v) for each full calendar month after the third full calendar
month, the Monthly Rent Component shall be an amount determined by
multiplying (x) the amount of thermal energy in millions of British
Thermal Units of heat produced by such Nuclear Material during the second
preceding month by (y) the BTU Charge set forth in the Final Leasing
Record covering such Nuclear Material.
The BTU Charge for any Nuclear Material may be revised by the Lessee at any time
during the lease thereof to reflect any reasonably anticipated change in its
operating life, BTU output, or utilization. Such revision shall be effected by
the Lessee's executing and forwarding to the Lessor a revised Final Leasing
Record dated the first day of the following month and setting forth such revised
BTU Charge. Upon receipt of such revised Final Leasing Record, the Lessor shall
execute and return a copy thereof to the Lessee. Such revised BTU Charge shall
be applicable to such Nuclear Material for each month thereafter beginning on
the date of the revised Final Leasing Record.
"Nonburdensome Regulation" means (i) ministerial regulatory
requirements that do not impose limitations or regulatory requirements on the
business or activities of, or adversely affect, the Company or any Secured Party
and that are deemed, in the reasonable discretion of the Company or any Secured
Party, not to be burdensome, or (ii) assuming redelivery of the Nuclear Material
in accordance with the Lease Agreement, regulation resulting from any possession
of the Nuclear Material (or right thereto) on or after the termination of the
Lease Agreement.
"Notes" shall have the meaning specified therefor in Section 1.02 of
the Credit Agreement.
"Nuclear Incident" shall have the meaning specified in the Atomic
Energy Act, 42 U.S.C. ss.2014(q), as such definition may be amended from time
to time.
"Nuclear Material" means those items which have been purchased by or
on behalf of the Company for which a duly executed Leasing Record has been
delivered to the Company and which continue to be subject to the Lease Agreement
consisting of (i) the items described in such Leasing Record and each of the
components thereof in the respective forms in which such items exist during each
stage of the Nuclear Material Cycle, being substances and equipment which, when
fabricated and assembled and loaded into a nuclear reactor, are intended to
produce heat, together with all attachments, accessories, parts and additions
and all improvements and repairs thereto, and all replacements thereof and
substitutions therefor and (ii) the substances and materials underlying the
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right, title and interest of the Lessee under any Nuclear Material Contract
assigned to the Company pursuant to the Lease Agreement; provided, however, that
the term Nuclear Material shall not include spent fuel.
"Nuclear Material Contract" means any contract, as from time to time
amended, modified or supplemented, entered into by the Lessee, either in its own
name or as agent for the Lessor, with one or more Manufacturers relating to the
acquisition of Nuclear Material or any service in connection with the Nuclear
Material.
"Nuclear Material Cycle" means the various stages in the process,
whether physical or chemical, by which the component parts of the Nuclear
Material are designed, mined, milled, processed, converted, enriched, fabricated
into assemblies utilizable for Heat Production, loaded or installed into a
reactor core, utilized, disengaged from a reactor core or stored, together with
all incidental processes with respect to the Nuclear Material at any such stage.
"Nuclear Regulatory Commission" means the independent regulatory
commission of the United States Government existing under the authority of the
Energy Reorganization Act of 1974, as amended, or any successor organization or
organizations performing any identical or substantially identical licensing and
related regulatory functions.
"Obligations" means (i) all items (including, without limitation,
Capitalized Leases but excluding shareholders' equity and minority interests)
which in accordance with generally accepted accounting principles should be
reflected on the liability side of a balance sheet as at the date as of which
such obligations are to be determined; (ii) all obligations and liabilities
(whether or not reflected upon such balance sheet) secured by any Lien existing
on the Property held subject to such Lien, whether or not the obligation or
liability secured thereby shall have been assumed; and (iii) all guarantees,
endorsements (other than for collection in the ordinary course of business) and
contingent obligations in respect of any liabilities of the type described in
clauses (i) and (ii) of this definition (whether or not reflected on such
balance sheet); provided, however, that the term 'Obligations' shall not include
deferred taxes.
"Obligations for Borrowed Money or Deferred Purchase Price" means
all Obligations in respect of borrowed money or the deferred purchase price of
property or services.
"Officer's Certificate" means, with respect to any corporation, a
certificate signed by the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Comptroller, or any Assistant Comptroller of such
corporation, and with respect to any other entity, a certificate signed by an
individual generally authorized to execute and deliver contracts on behalf of
such entity.
"Outstandings" shall have the meaning specified therefor in Section
1.02 of the Credit Agreement.
"Owner Trust Estate" means all estate, right, title and interest of
the Owner Trustee in and to the outstanding stock of the Company and in and to
all monies, securities, investments, instruments, documents, rights, claims,
contracts, and other property held by the Owner Trustee under the Trust
Agreement; provided, however, that there shall be excluded from the Owner Trust
Estate all Excepted Payments.
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<PAGE>
"Owner Trustee" means United States Trust Company of New York, not
in its individual capacity but solely as trustee under and pursuant to the Trust
Agreement, and its permitted successors.
"PaPUC" means the Pennsylvania Public Utility Commission or any
successor agency thereto.
"Partially Assigned Agreement" means a Nuclear Material Contract
which has been assigned, in part but not in full, to the Company in the manner
specified in Section 5 of the Lease Agreement pursuant to a duly executed and
delivered Assignment Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation, created by
Section 4002(a) of ERISA and any successor thereto.
"Permitted Liens" means (i) any assignment of the Lease Agreement
permitted thereby, and by the Credit Agreement, (ii) liens for Impositions not
yet payable, or payable without the addition of any fine, penalty, interest or
cost for nonpayment, or being contested by the Lessee as permitted by Section 11
of the Lease Agreement, (iii) liens and security interests created by the
Security Agreement, (iv) the title transfer and commingling of the Nuclear
Material contemplated by paragraph (h) of Section 10 of the Lease Agreement, and
(v) liens of mechanics, laborers, materialmen, suppliers or vendors, or rights
thereto, incurred in the ordinary course of business for sums of money which
under the terms of the related contracts are not more than 30 days past due or
are being contested in good faith by the Lessee as permitted by Section 11 of
the Lease Agreement; provided, however, that, in each case, such reserve or
other appropriate provision, if any, as shall be required by generally accepted
accounting principles shall have been made in respect thereto.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization or other business entity or any
government or any political subdivision or agency thereof.
"Plan" means, with respect to any Person, any plan of a type
described in Section 4021(a) of ERISA in respect of which such Person is an
"employer" or a "substantial employer" as defined in Sections 3(5) and 4001 (a)
(2) of ERISA, respectively.
"Proceeds" shall have the meaning assigned to it under the Uniform
Commercial Code, as amended, and, in any event, shall include, but not be
limited to, (i) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to the Company from time to time with respect to the
Collateral, (ii) any and all payments (in any form whatsoever) made or due and
payable to the Company from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental body, authority, bureau or agency (or any person
acting under color of governmental authority), and (iii) any and all other
amounts from time to time paid or payable under or in connection with any of the
Collateral.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Public Utility Holding Company Act" means the Public Utility
Holding Company Act of 1935, as from time to time amended.
"Qualified Institution" means a commercial bank organized under the
laws of, and doing business in, the United States of America or in any State
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<PAGE>
thereof, which has combined capital, surplus and undivided profits of at least
$150,000,000 having trust power.
"Related Person" means, with respect to any Person, any trade or
business, (whether or not incorporated) which, together with such Person, is
under common control as described in Section 414(c) of the Code.
"Rent" means Basic Rent, Additional Rent and Termination Rent.
"Rent Due and SCV Confirmation Schedule" means an instrument,
substantially in the form of Exhibit G to the Lease Agreement, which is to be
used by the Lessee (i) to calculate Basic Rent for each Basic Rent Period and
Other Rent and (ii) to calculate and acknowledge the SCV at the end of each
Basic Rent Period.
"Reportable Event" means any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"Responsible Officer" means a duly elected or appointed, authorized,
and acting officer, agent or representative of the Person acting.
"Secured Obligations" means each and every debt, liability and
obligation of every type and description which the Company may now or at any
time hereafter owe to any Secured Party under, pursuant to or in connection with
the Credit Agreement, any Note, the Letter of Credit or any other Basic
Document, whether such debt, liability or obligation now exists or is hereafter
created or incurred, and whether it is or may be direct or indirect, due or to
become due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or joint, several or joint and several, including, without
limitation, the principal of, interest on and any premium due with respect to
any Loan and all indemnifications, costs, expenses, fees and other compensation
of the Secured Parties provided for, and all other amounts owed to the Secured
Parties, under the Security Agreement, Credit Agreement and the other Basic
Documents.
"Secured Parties" means the Banks, any other holder from time to
time of any Note and the Issuing Bank.
"Securities Act" means the Securities Act of 1933, as from time to
time amended.
"Security Agreement" means the Security Agreement and Assignment of
Contracts, dated as of -------, 1998, by and among the Company and The First
National Bank of Chicago, as Collateral Agent in favor of the Secured Parties.
"Single Employer Plan" means any Plan which is not a
multi-employer plan as defined in Section 4001(a) (3) of ERISA
"Stipulated Casualty Value" or "SCV" for any Nuclear Material
covered by any Leasing Record means an amount equal to the Acquisition Cost for
such Nuclear Material reduced by the aggregate total amount, if any, of the
Monthly Rent Components paid by the Lessee to the Lessor with respect to such
Nuclear Material together with Commercial Paper Discount.
"Termination Date" shall have the meaning specified therefor in
Section 1.02 of the Credit Agreement.
"Termination Rent" means an amount which, when added to the
Stipulated Casualty Value and Basic Rent then payable by the Lessee, if any,
will be sufficient to enable the Company to retire, at their respective
maturities,
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<PAGE>
all outstanding Notes and to pay all charges, premiums and fees owed to the
Issuing Bank and all holders of Notes under the Credit Agreement and to pay all
other obligations of the Company incurred in connection with the implementation
of the transactions contemplated by the Basic Documents.
"Termination Settlement Date" has the meaning specified in Section
8(c), or Section 18(c) of the Lease Agreement.
"Terminating Event" has the meaning specified in Section 18 of
the Lease Agreement.
"Trust" means the TMI-I Fuel Corp. and Oyster Creek Fuel Corp.
Trust, a trust formed pursuant to the Trust Agreement.
"Trust Agreement" means the Second Amended and Restated Trust
Agreement dated as of --------- ---, 1998 among Lord Fuel Corp., as Trustor, the
Owner Trustee, as trustee, Lord Fuel Corp., as beneficiary, and Jersey Central
Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric
Company, each as lessee under certain lease agreements, as the same may be
amended, modified or supplemented from time to time.
"Trustor" means the institution designated as such in the Trust
Agreement and its permitted successors.
"UBS Credit Agreement" means the Credit Agreement dated as of
November 17, 1995 among TMI-1 Fuel Corp., Union Bank of Switzerland, New York
Branch, as Arranging Agent, Union Bank of Switzerland, New York Branch, as
Issuing Bank, the Banks Party thereto and Union Bank of Switzerland, New York
Bank, as Administrative Agent.
"UCC" means the Uniform Commercial Code as adopted and in effect in
the State of New York.
"U.S. Trust" means United States Trust Company of New York.
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<PAGE>
EXHIBIT A
INTERIM LEASING RECORD
Record No. -----
Name of Lessee: Metropolitan Edison Company
Date of Record:-----------------
Date and No. of prior Interim or Final
Leasing Record (if any):
Description and location of Nuclear Material covered by this Record:
Assembly Serial Nos.:
Subassembly Serial Nos.:
Acquisition Cost of Nuclear Material
under prior Leasing Record (if any): $
-------------
Acquisition Cost added by this Record: $
-------------
Total: $
-------------
Credits to Acquisition Cost: $
-------------
Total Acquisition Cost under this Record $
-------------
Specify nature of Acquisition Cost added by this Record and to whom paid:
Specify nature of any credits received by Lessor covered by this Record and from
whom received:
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<PAGE>
Basic Rent for the Nuclear Material covered by this Record shall be calculated
and paid as provided in Section 9 of the Second Amended and Restated Nuclear
Material Lease Agreement referred to below.
The undersigned Lessor hereby leases to the undersigned Lessee the Nuclear
Material described above in accordance with the covenants, terms and conditions
of the Second Amended and Restated Nuclear Material Lease Agreement between the
undersigned Lessor and Lessee, dated as of ------------, ---, 1998 which
covenants, terms and conditions are incorporated herein by reference.
TMI-1 FUEL CORP., Lessor METROPOLITAN EDISON
COMPANY, Lessee
By By
------------------------------ -----------------------------
Authorized Signature Authorized Signature
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<PAGE>
EXHIBIT B
FINAL LEASING RECORD
Record No. ----
Name of Lessee: Metropolitan Edison Company
Date of Record:----------------
Date and No. of prior Interim or Final
Leasing Record:
Description and location of Nuclear Material covered by this Record:
Assembly Serial Nos.:
Subassembly Serial Nos.:
Acquisition Cost of Nuclear Material
under prior Leasing Record (if any): $
-------------
Acquisition Cost added by this Record: $
-------------
Total: $
-------------
Credits (if any) to Acquisition Cost: $
-------------
Total Acquisition Cost under this Record $
-------------
BTU Charge: $----------
Specify nature of Acquisition Cost added by this Record and to whom paid:
Specify nature of any credits received by Lessor covered by this Record and from
whom received:
Basic Rent for the Nuclear Material covered by this Record shall be calculated
and paid as provided in Section 9 of the Second Amended and Restated Nuclear
Material Lease Agreement referred to below.
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<PAGE>
The undersigned Lessor hereby leases to the undersigned Lessee the Nuclear
Material described above in accordance with the covenants, terms and conditions
of the Second Amended and Restated Nuclear Material Lease Agreement between the
undersigned Lessor and Lessee, dated as of ---------- --, 1998, which covenants,
terms and conditions are incorporated herein by reference.
TMI-1 FUEL CORP., Lessor METROPOLITAN EDISON
COMPANY, Lessee
By By
---------------------------- -----------------------------
Authorized Signature Authorized Signature
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<PAGE>
Attachment 1 to Exhibit B
BRITISH THERMAL UNIT CHARGE AGREEMENT
Dated:---------------------------
The undersigned Lessor and Lessee agree that the initial British
Thermal Unit Charge to be used to calculate the Monthly Rent Component for the
Nuclear Material pursuant to the Second Amended and Restated Nuclear Material
Lease Agreement, dated as of ------------- ---, 1998, between the undersigned
Lessor and Lessee shall be as follows:
Description of Nuclear Material British Thermal Unit Charge
- ------------------------------- ----------------------------
TMI-1 FUEL CORP. METROPOLITAN EDISON COMPANY
By: By:
--------------------------------
Its: Its:
-------------------------------- ------------------------------
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EXHIBIT C
NUCLEAR MATERIAL CONTRACTS
The Agreements (each as amended and restated) referred to in Section
5 of the Second Amended and Restated Nuclear Material Lease Agreement, dated as
of --------- --, 1998, between TMI-1 FUEL CORP. ("Lessor") and METROPOLITAN
EDISON COMPANY ("Lessee") are:
(1) Agreement, dated January 30, 1975, between Sequoyah Fuels
Corporation and GPUN, as agent for the Lessee, JCP&L and Penelec.
(2) Agreement, dated February 12, 1996, between United States
Enrichment Corporation and GPUN, as agent for the Lessee, JCP&L and Penelec.
(3) Agreement, dated as of June 14, 1995 between Framatome Cogema
Fuels and GPUN, as agent for the Lessee, JCP&L and Penelec.
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<PAGE>
EXHIBIT D
ASSIGNMENT AGREEMENT
KNOW ALL MEN BY THESE PRESENTS THAT:
Metropolitan Edison Company (the "Assignor"), in consideration of
one dollar and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, does hereby sell, grant, bargain, convey and
assign to TMI-1 Fuel Corp. ("Assignee"), all right, title and interest of the
Assignor in, to and under the Nuclear Material Contract (the "Nuclear Material
Contract") described in Exhibit 1 attached hereto insofar as such Nuclear
Material Contract relates to the Nuclear Material described in Exhibit 1 (all of
such property, including the items described on Exhibit 1 attached hereto as
included with the Property, being herein collectively called the "Property").
Terms not defined herein shall have the meanings given in Exhibit 1 attached
hereto.
TO HAVE AND TO HOLD the Property unto the Assignee, its successors
and assigns, to its and their own use forever.
1. The interest of the Assignor in the Property, and the interest
transferred by this Assignment Agreement, is that of absolute ownership.
2. The Assignor hereby warrants that it is the lawful owner of the
rights and interests conveyed by this Assignment Agreement and that its title to
such rights and interests is hereby conveyed to the Assignee free and clear of
all liens, charges, claims and encumbrances of every kind whatsoever, other than
(i) the amounts, if any, owing under the Nuclear Material Contract, (ii) other
claims, if any, of the Assignor and the Contractor which may exist as between
themselves and (iii) Permitted Liens (as defined in the Lease Agreement referred
to below); and that the Assignor will warrant and defend such title forever
against all claims and demands whatsoever.
3. The Assignor hereby releases and transfers to the Assignee any
right, title or interest in the Nuclear Material which may have been acquired by
the Assignor under the Nuclear Material Contract prior to the date hereof.
4. This Assignment Agreement is made in accordance with the Second
Amended and Restated Nuclear Material Lease Agreement dated as of --------- --,
1998, between the Assignor and the Assignee (said Nuclear Material Lease
Agreement, as the same may be from time to time amended, modified or
supplemented, being herein called the "Lease Agreement"). Pursuant to a Security
Agreement and Assignment of Contracts made by TMI-1 Fuel Corp. dated as of
- --------- --, 1998 (said Security Agreement and Assignment of Contracts, as the
same may from time to time be amended, modified or supplemented, being herein
called the "Security Agreement") made by Assignee in favor of the Secured
Parties, as defined therein, the Assignee is assigning and granting a security
interest in the Property and this Assignment Agreement to the Secured Parties,
as collateral security for all obligations and liabilities of the Assignee to
the Secured Parties, as such obligations are described in the Security
Agreement.
5. It is expressly agreed that, anything contained herein to the
contrary notwithstanding, (a) the Assignor shall at all times remain liable to
the Contractor to observe and perform all of its duties and obligations under
the Nuclear Material Contract to the same extent as if this Assignment Agreement
and the Security Agreement had not been executed, (b) the exercise by the
Assignee or
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<PAGE>
the Secured Parties of any of the rights assigned hereunder or under the
Security Agreement, as the case may be, shall not release the Assignor from any
of its duties or obligations to the Contractor under the Nuclear Material
Contract, and (c) neither the Assignee nor any of the Secured Parties shall have
any obligation or liability under the Nuclear Material Contract by reason of or
arising out of this Assignment Agreement, the Lease Agreement or the Security
Agreement, or be obligated to perform or fulfill any of the duties or
obligations of the Assignor under the Nuclear Material Contract, or to make any
payment thereunder, or to make any inquiry as to the nature or sufficiency of
any Property received by it thereunder, or to present or file any claim, or to
take any action to collect or enforce the payment of any amounts or the delivery
of any Property which may have been assigned to it or to which it may be
entitled at any time or times; provided, however, the Assignee agrees, solely
for the benefit of the Assignor, and subject to the terms and conditions of the
Lease Agreement, (i) to purchase the Nuclear Material from the Contractor
pursuant to the Nuclear Material Contract, (ii) to pay to the Contractor and/or
to the Assignor or their order the respective amounts specified in the Lease
Agreement with respect to such Nuclear Material and (iii) to lease such Nuclear
Material to the Assignor in accordance with and subject to the terms and
conditions of the Lease Agreement. The provisions of the Nuclear Material
Contract limiting the liability of the Contractor and its suppliers and
subcontractors' under that Contract shall remain effective against the Assignee
and Secured Parties to the same extent that such provisions are effective
against the Assignor.
6. Notwithstanding anything contained herein to the contrary,
subject to the terms and conditions of the Lease Agreement, the Assignor may
continue to engage in Fuel Management (as such term is defined in the Lease
Agreement) with respect to the Property, including, without limitation, all
dealings with the Contractor and, subject to such terms and conditions and
effective until the occurrence of a Lease Event of Default (as defined in the
Lease Agreement), (i) the Assignee reassigns to the Assignor the Assignee's
rights under clauses (iii), (iv), (v) and (vi) of subparagraph (b) of Exhibit 1
to this Assignment Agreement (provided, however, that insurance proceeds are
reassigned to the Assignor pursuant hereto only to the extent that such proceeds
are needed and used to reimburse the Assignor for the cost of repairing damage
or destruction to Nuclear Material or are used to purchase Nuclear Material from
the Assignee in accordance with the Lease Agreement, and provided further,
however, that the Assignee's rights under clause (vi) are reassigned to the
Assignor subject in all respects to the limitations set forth in paragraph 8.
below), and (ii) the Assignee agrees that the Assignor may, to the extent set
forth in clause (i) above, to the exclusion of the Assignee, exercise and
enforce such rights.
7. The Assignor shall promptly and duly execute, deliver, file and
record all such further counterparts of this Assignment Agreement or such
certificates, financing and continuation statements and other instruments as may
be reasonably requested by the Assignee, and take such further actions as the
Assignee shall from time to time reasonably request, in order to establish,
perfect and maintain the rights and remedies created or intended to be created
in favor of the Assignee and the Secured Parties hereunder and the Assignee's
title to and interest in the Property as against the Assignor or any third party
in any applicable jurisdiction.
8. The Assignor hereby agrees that it will not enter into or consent
to or permit any cancellation, termination, amendment, supplement or
modification of or waiver with respect to the Nuclear Material Contract insofar
as it relates to the Nuclear Material except for cancellations, terminations,
amendments, supplements, modifications or waivers which do not materially
adversely affect the Assignee or the Secured Parties or their respective
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<PAGE>
interests in the Property, nor will the Assignor sell, assign, grant any
security interest in or otherwise transfer its rights or other interests in the
Property or any part thereof, except as permitted by the Lease Agreement.
9. The Assignor hereby represents and warrants that the Nuclear
Material Contract is in full force and effect and represents that it is the only
agreement between the Assignor and the Contractor with respect to the Nuclear
Material.
10. This Assignment Agreement shall become effective only upon
receipt of the written consent of the Contractor to the assignment of the rights
and interests conveyed hereunder, if such consent is required under the Nuclear
Material Contract. The Assignor hereby agrees to send the Contractor a copy of
this Assignment Agreement.
11. This Assignment Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Assignor has caused this Assignment
Agreement to be duly executed and delivered as of the ----- day of
- ------------,19----.
METROPOLITAN EDISON COMPANY
By:
-----------------------------
Title:
-----------------------------
The foregoing Assignment Agreement is hereby accepted:
TMI-1 FUEL CORP.
By:
-----------------------------
Title:
-----------------------------
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<PAGE>
EXHIBIT 1
to Assignment Agreement
(a) The------------ (as the same may from time to time be amended,
modified or supplemented, being herein called the "Nuclear Material Contract"),
dated as of --------------, between Metropolitan Edison Company and
- -------------- (the "Contractor), insofar as, and only to the extent that, the
Contract relates to ----------------- (the "Nuclear Material"); but not insofar
as the Contract provides for the provision of other nuclear materials and
services to the Assignor; and
(b) The Property shall include, without limitation, (i) any and all
amendments and supplements to the Nuclear Material Contract from time to time
executed and delivered to the extent that any such amendment or supplement
relates to the Nuclear Material, (ii) the Nuclear Material, including the right
to receive title thereto, (iii) all rights, claims and proceeds, now or
hereafter existing, under any insurance, indemnities, warranties and guaranties
provided for in or arising out of the Nuclear Material Contract, to the extent
that such rights or claims relate to the Nuclear Material, (iv) any claim for
damages arising out of or for breach or default by the Contractor under or in
connection with the Nuclear Material Contract insofar as it relates to the
Nuclear Material, (v) any other amount, whether resulting from refunds or
otherwise, from time to time paid or payable by the Contractor under or in
connection with the Nuclear Material Contract insofar as it relates to the
Nuclear Material and (vi) the right of the Assignor to terminate the Nuclear
Material Contract or to perform or to exercise or enforce thereunder, insofar as
it or they relate to the Nuclear Material.
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<PAGE>
EXHIBIT 2
to Assignment Agreement
CONSENT AND AGREEMENT
The undersigned, ----------------- (the "Contractor"), has entered
into a --------------- (as the same may from tune to time be amended, modified
or supplemented, being herein called the "Nuclear Material Contract"), dated as
of -------------------- with Metropolitan Edison Company (the "Assignor").
The Contractor hereby acknowledges notice that (i) in accordance
with the terms of the Second Amended and Restated Nuclear Material Lease
Agreement dated as of --------- --, 1998, between the Assignor and TMI-1 Fuel
Corp. (the "Assignee"), the Assignor has assigned to the Assignee a part of the
Assignor's rights under the Nuclear Material Contract pursuant to an Assignment
Agreement, in the form of Annex A hereto (such Assignment Agreement, as the same
may from time to time be amended, modified or supplemented, being herein
collectively called the "Assignment"), and (ii) pursuant to a Security Agreement
and Assignment of Contracts made by TMI-1 Fuel Corp. dated as of --------- --,
1998 (said Security Agreement and Assignment Contracts, as the same may from
time to time be amended, modified or supplemented, being herein called the
"Security Agreement") made by the Assignee in favor of the Secured Parties as
defined therein (the "Secured Parties"), the Assignee has assigned and granted a
security interest in all rights under the Nuclear Material Contract from time to
time assigned to it by Assignor, as collateral security for all obligations and
liabilities of the Assignee to the Secured Parties.
The Contractor hereby consents to (i) the assignment by the Assignor
to the Assignee of part of the Assignor's right, title and interest in, to and
under the Nuclear Material Contract and the other Property described in the
Assignment pursuant to the Assignment and (ii) the assignment and security
interest in favor of the Secured Parties as described above. The Contractor
further consents to all of the terms and provisions of the Security Agreement.
The Contractor agrees that, if requested by either the Assignor or
the Assignee, it will acknowledge in writing the Assignment delivered by the
Assignor to the Assignee; provided, that neither the lack of notice to nor
acknowledgment by the Contractor of the Assignment shall limit or otherwise
affect the validity or effectiveness of this consent to such Assignment.
The Contractor hereby confirms to the Assignee and the Secured
Parties that:
(a) all representations, warranties and agreements of the
Contractor under the Nuclear Material Contract which relate to
the Nuclear Material described in the Assignment shall inure
to the benefit of, and shall be enforceable by, the Assignee
or any Secured. Party to the same extent as if originally
named in the Contract as the purchaser of such Nuclear
Material,
(b) the Contractor understands that, pursuant to the Lease
Agreement, the Assignee has agreed to lease the Nuclear
Material described in the Assignment to the Assignor, and
consents to the assignment to the Assignor, for so long as the
Lease Agreement shall be in effect or until otherwise notified
by the Assignee, of the Assignee's rights under clauses (iii),
50
<PAGE>
(iv), (v) and (vi) of subparagraph (b) of Exhibit 1 to the
Assignment to the extent that such rights are reassigned to
the Assignor pursuant to the Assignment,
(c) The Contractor is in the business of selling nuclear fuel and
related services of the kind described in the Assignment, and
the proposed sale of such nuclear fuel under the Nuclear
Material Contract will be in the ordinary course of business
of the Contractor, and
(d) Notwithstanding any provision to the contrary contained in
the Nuclear Material Contract, the Contractor agrees that
title to any Nuclear Material covered by the Assignment
shall pass directly to the Assignee under the Contract and
shall not pass to the Assignor; provided that the foregoing
shall not apply to any Nuclear Material for which title has
already passed from the Contractor prior to the execution
and delivery of the Assignment.
It is understood that neither the Assignment, the Security Agreement
nor this Consent and Agreement shall in any way add to the obligations of the
Contractor or the Assignor under the Nuclear Material Contract.
This Consent and. Agreement shall be governed by and construed in
accordance with the laws of the State of ------------.
IN WITNESS WHEREOF, the undersigned has caused this Consent and
Agreement to be duly executed and delivered by its duly authorized officer as
of---- day of --------------, 19---.
----------------------------------
By:
---------------------------------
Title:
---------------------------------
51
<PAGE>
EXHIBIT E
BILL OF SALE
TO
METROPOLITAN EDISON COMPANY
---------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, TMI-1 Fuel
Corp., a Delaware corporation (the "Seller"), whose post office address is c/o
United States Trust Company of New York, 114 West 47th Street, New York, New
York 10036, Attention: Corporate Trust and Agency Division, for and in
consideration paid to the Seller upon or before the execution and delivery of
this Bill of Sale to Metropolitan Edison Company (the "Purchaser"), a
Pennsylvania corporation, whose address is 2800 Pottsville Pike, Reading,
Pennsylvania 19640, Attention: Comptroller, hereby conveys, transfers, sells and
sets over unto the Purchaser all of its right, title and interest in all of the
personal property consisting of the assemblies of nuclear fuel or components
thereof or other nuclear material described in Annex I hereto (the "Assets"),
and by this Bill of Sale does hereby grant, bargain, sell, convey, transfer and
deliver the Assets unto the Purchaser, to have and to hold such undivided
interest in the Assets unto the Purchaser, for itself, its successors and
assigns, forever.
The Assets are transferred and conveyed by the Seller AS-IS,
WHERE-IS, WITHOUT REPRESENTATIONS OR WARRANTIES (EXPRESS OR IMPLIED) OF ANY KIND
WHATSOEVER BY THE SELLER OR ANY PERSON ACTING ON ITS BEHALF except that the
Seller represents and warrants that it has not by voluntary act or omission
created or granted any lien on the Assets, other than Permitted Liens, as
defined in that certain Second Amended and Restated Nuclear Material Lease
Agreement, dated as of---------- --, 1998 between the Seller and the Purchaser.
The Purchaser acknowledges and agrees that neither the Seller, its directors,
officers or employees, any company, person or firm controlling, controlled by,
or under common control with any of them nor any other person acting on behalf
of the Seller is a manufacturer of, or is engaged in the sale or distribution
of, nuclear material, has had at any time physical possession of any portion of
the Assets sold hereunder, or has made any inspection thereof. The Purchaser
further acknowledges and agrees that the Assets sold hereunder have been at all
times in the possession of the Purchaser and that the Purchaser has made such
inspections thereof as it deems necessary and that the Purchaser has been solely
responsible for all decisions made with respect to the choice of the suppliers
of such Assets and the enrichment, fabrication, transportation, storage and
processing of the same.
52
<PAGE>
IN WITNESS WHEREOF, the Seller has caused these presents to be
executed by one of its Vice Presidents, this -------- day of
- -----------------,19---.
TMI-1 FUEL CORP., Seller
By:
-----------------------
Vice President
Acknowledgment and Acceptance
The foregoing Bill of Sale is hereby acknowledged and accepted by
the undersigned as of the date last above written.
METROPOLITAN EDISON COMPANY,
Purchaser
By:
----------------------
Its:
----------------------
53
<PAGE>
<TABLE>
EXHIBIT F
RENT DUE
AND SCV CONFIRMATION SCHEDULE
-----------------------------
<CAPTION>
For the Basic Rent Period Ended -------
In accordance with the Second Amended and Restated Lease Agreement
dated as of --------- --, 1998, between TMI-1 Fuel Corp., as Lessor, and
Metropolitan Edison Company, as Lessee, the Lessee certifies that all amounts
set forth below are true and correct in all respects, and both Lessor and Lessee
certify that this Schedule has been prepared in accordance with the provisions
of the Lease Agreement.
I. BASIC RENT, ADDITIONAL RENT AND TERMINATION RENT
A.Basic Rent Owed
1. Calculation of Portion of Monthly Financing Charge Not Allocated
to Acquisition Cost
<S> <C>
a.Interest Payable with Respect to All Outstanding Notes (See $------------
attached summary calculation)
b.Other Amounts Included in Monthly Financing Charge $-------------
c.TOTAL MONTHLY FINANCING CHARGE NOT ALLOCATED TO ACQUISITION COST $-------------
(Total of 1(a) and 1(b))
2 Aggregate Monthly Rent Component (See attached summary $-------------
calculation)
3. BASIC RENT (total of 1(c) and 2) $-------------
=============
B. Additional Rent Owed (see attached summary calculation) $-------------
C.Termination Rent Owed (see attached summary calculation) $-------------
TOTAL RENT DUE (total of A, B and C) $-------------
==============
55
</TABLE>
<PAGE>
<TABLE>
II. CALCULATION OF STIPULATED CASUALTY VALUE
<CAPTION>
Nuclear Material
----------------
Installed for Not Installed Total
Operation In for Operation -----
the in the
Generating Generating
Facility Facility
-------- --------
<S> <C> <C> <C>
A. Stipulated Casualty Value as of ------------ $ -- $ -- $ --
--------------- --------------- ------------
B. Add: Acquisition Cost Incurred in Rent $ -- $ -- $ --
Period Covered by This Schedule (exclusive of
Monthly Financing Charges)
--------------- --------------- ------------
C. Add: Monthly Financing Charge Allocated to $ -- $ -- $ --
Acquisition Cost Incurred in Rent Period
Covered by This Schedule
--------------- --------------- ------------
D. Less: SCV of Nuclear Material Transferred $ -- $ -- $ --
to the Lessee Pursuant to Sections 8(c), 8(g)
or 14 of the Lease Agreement during the Basic
Rent Period Covered by This Schedule
--------------- --------------- ------------
STIPULATED CASUALTY VALUE AS OF -------------- $ -- $ -- $ --
=============== =============== ============
Add: Commercial Paper Discount $ --
------------
STIPULATED CASUALTY VALUE AS OF--------------- $ --
============
56
</TABLE>
Exhibit B-2(b)(3)
COUNTERPART NO.
SECOND AMENDED AND RESTATED
NUCLEAR MATERIAL LEASE AGREEMENT
Dated as of -------, 1998
between
TMI-1 FUEL CORP.,
as Lessor
and
JERSEY CENTRAL POWER & LIGHT COMPANY
as Lessee
AS OF THE DATE OF THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT, THE LESSOR
UNDER THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT (THE "LESSOR") HAS
GRANTED TO THE SECURED PARTIES, AS DEFINED HEREIN, A SECURITY INTEREST IN THIS
SECOND AMENDED AND RESTATED LEASE AGREEMENT AND IN ALL OF THE LESSOR'S RIGHTS
AND INTERESTS UNDER THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT, INCLUDING,
WITHOUT LIMITATION, ALL OF THE LESSOR'S RIGHTS TO AND INTERESTS IN NUCLEAR
MATERIAL AS DEFINED IN THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT.
THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT HAS BEEN MANUALLY EXECUTED IN
EIGHTEEN (18) COUNTERPARTS, NUMBERED CONSECUTIVELY FROM 1 TO 18. NO SECURITY
INTEREST IN THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT OR IN ANY OF THE
LESSOR'S RIGHTS AND INTERESTS UNDER THIS SECOND AMENDED AND RESTATED LEASE
AGREEMENT MAY BE PERFECTED BY THE POSSESSION OF ANY SUCH COUNTERPART OTHER THAN
COUNTERPART NO. 1.
<PAGE>
45908v3
- 4 -
TABLE OF CONTENTS
1 Definitions
2 Notices
3 Title to Remain in the Lessor; Quiet Enjoyment; Fuel Management
Location
4 Agreement for Lease of Nuclear Material
5 Orders for Nuclear Material and Services; Assigned Agreements
6 Leasing Records; Payment of Costs of Lessor
7 No Warranties or Representation by Lessor
8 Lease Term; Early Termination; Termination of Leasing Record
9 Payment of Rent; Payments with Respect to the Lessor's
Financing Costs
10 Compliance with Laws; Restricted Use of Nuclear Material;
Assignments; Permitted Liens; Spent Fuel
11 Permitted Contests
12 Insurance; Compliance with Insurance Requirements
13 Indemnity
14 Casualty and Other Events
15 Nuclear Material to Remain Personal Property
16 Events of Default
17 Rights of the Lessor Upon Default of the Lessee
18 Termination After Certain Events
19 Investment Tax Credit
20 Certificates; Information; Financial Statements
21 Obligation of the Lessee to Pay Rent
22 Miscellaneous
<PAGE>
SECOND AMENDED AND RESTATED NUCLEAR MATERIAL LEASE AGREEMENT
SECOND AMENDED AND RESTATED LEASE AGREEMENT (this "Lease Agreement")
dated as of the -- day of ---------, 1998, by and between TMI-1 FUEL CORP., a
Delaware corporation (herein called the "Lessor"), and JERSEY CENTRAL POWER &
LIGHT COMPANY, a New Jersey corporation (herein called the "Lessee").
RECITALS
A. The Lessor and Lessee entered into a Nuclear Material Lease
Agreement dated as of August 1, 1991 ("Original Lease") to provide for the lease
of Nuclear Material to the Lessee;
B. The Original Lease provided for the Lessor to enter into certain
loan agreements and ancillary documents with The Prudential Insurance Company of
America and certain affiliates thereof ("Prudential") to provide financing from
Prudential for the acquisition of Nuclear Material under the Original Lease;
C. Such loan arrangements with Prudential were terminated and Lessor
entered into a new credit agreement and related instruments pursuant to which a
bank syndicate for which Union Bank of Switzerland, New York Branch ("UBS")
acted as agent to provide financing for the acquisition of Nuclear Material
being leased hereunder;
D. Lessor and Lessee entered into an Amended and Restated Nuclear
Material Lease Agreement, dated as of November 17, 1995 ("Amended and Restated
Lease") to reflect the necessary modifications consistent with the establishment
of the credit facility with UBS;
E. Concurrent with the execution and delivery hereof, such credit
agreements with UBS are being terminated and Lessor is entering into a new
credit agreement and related instruments to which a bank syndicate for which The
First National Bank of Chicago and PNC Bank, National Association, will act as
agents to provide financing for the acquisition of the Nuclear Material being
leased hereunder;
F. Accordingly, the Lessor and the Lessee desire to enter into this
Second Amended and Restated Lease Agreement in order to reflect necessary
modifications consistent with establishment of such new credit facility and
other modifications thereof in certain other respects, which agreement shall
supercede the Original Lease and the Amended and Restated Lease;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and intending to be legally bound hereby, the parties covenant and agree
as follows:
1. Definitions. Except as otherwise provided herein, capitalized
terms used in this Lease Agreement (including the Exhibits) shall have the
respective meanings set forth in Appendix A.
2. Notices. Any notice, demand or other communication which by any
provision of this Lease Agreement is required or permitted to be given shall be
deemed to have been delivered if in writing and actually delivered by mail,
courier, telex or facsimile to the following addresses:
<PAGE>
(i) If to the Lessor, TMI-1 Fuel Corp., c/o United States
Trust Company of New York, 114 West 47th Street, New York, New York 10036,
Attention: Corporate Trust and Agency Division, telecopy number
212-852-1626, or at such other address as the Lessor may have furnished to
the Lessee and the Secured Parties in writing; or
(ii) If to the Lessee, Jersey Central Power & Light Company
c/o GPU Service, Inc., 310 Madison Avenue, Morristown, New Jersey
07962-1957, Attention: Vice President and Treasurer, telecopy number
973-644-4224, or at such other address as the Lessee may have furnished
the Lessor and the Secured Parties in writing; or
(iii) except as provided in the following sentence or as
otherwise requested in writing by any Secured Party, any notice, demand or
communication which by any provision of this Lease Agreement is required
or permitted to be given to the Secured Parties shall be deemed to have
been delivered to all the Secured Parties if a single copy thereof is
delivered to ------------------------------------------------, Attention:
-------- facsimile number (---) -----------; or at such other address as
either may have furnished the Lessor and the Lessee in writing. Any
Leasing Record or invoice of a Manufacturer or other Person performing
services covering the Nuclear Material which is required to be delivered
to the Secured Parties pursuant to Section 6(c)(ii) of this Lease
Agreement and any Rent Due and SCV Confirmation Schedule which is required
to be delivered to the Secured Parties pursuant to Sections 8(g) or 9(d)
of this Lease Agreement shall be deemed to have been delivered to all the
Secured Parties if a single copy thereof is delivered to
------------------------------------------- at the address indicated in
this Section 2(iii).
3. Title to Remain in the Lessor; Quiet Enjoyment; Fuel Management;
Location.
(a) The Lessor and the Lessee hereby acknowledge that this
Lease Agreement is a lease and is intended to provide for the obligations of the
Lessee to pay installments of Rent as the same become due; that, subject to the
provisions of Section 10(h), the Lessor has title to and is the owner of the
Nuclear Material; and that the relationship between the Lessor and the Lessee
shall always be only that of lessor and lessee.
(b) The Lessor (including its successors and assigns) agrees
and covenants that, so long as the Lessee makes timely payments of Rent and
fully performs all other obligations to be performed by the Lessee under this
Lease Agreement, the Lessor (including its successors and assigns) shall not
hinder or interfere with the Lessee's peaceable and quiet enjoyment of the
possession and use of the Nuclear Material, for the term or terms herein
provided, subject, however, to the terms of this Lease Agreement.
(c) So long as no Lease Event of Default shall have occurred
and be continuing and the Lessor shall not have elected to exercise any of its
remedies under Section 17 hereof, the Lessee shall have the right to engage in
Fuel Management. The Lessee is hereby designated the agent of the Lessor in all
dealings with Manufacturers and any regulatory agency having jurisdiction over
the ownership or possession of the Nuclear Material for so long as the Lessee
shall have the right to engage in Fuel Management. As such agent of the Lessor,
the Lessee agrees to make, or cause to be made, all filings and to obtain all
consents and permits required as a result of the Lessor's ownership and leasing
of the Nuclear Material.
(d) The Lessee covenants to the Lessor that the location of
Nuclear Material will be limited to: (w) any Manufacturer's facility, (x)
transit
2
<PAGE>
between one Manufacturer's facility and another Manufacturer's facility or the
site of the Generating Facility, (y) the site of the Generating Facility and (z)
the Generating Facility. Each assembly of the Nuclear Material will be located
during its Heat Production and "cooling-off" stage at the Generating Facility or
the site of the Generating Facility.
4. Agreement for Lease of Nuclear Material. From and after the
Closing, the Lessor shall lease to the Lessee and the Lessee shall lease from
the Lessor such Nuclear Material as may be from time to time mutually agreed
upon, provided that the total Stipulated Casualty Value of all Nuclear Material
leased under this Lease Agreement shall not exceed at any one time $25,000,000
in the aggregate or such other amount as the Lessor and the Lessee may agree to
in writing (the "Maximum Stipulated Casualty Value"). The Lessor and the Lessee
shall evidence their agreement to lease particular Nuclear Material in
accordance with the terms and provisions of this Lease Agreement by signing and
delivering to each other, from time to time, Leasing Records, substantially in
the forms of Exhibit A or Exhibit B, as applicable, prepared by the Lessee,
covering such Nuclear Material. Nothing contained herein shall be deemed to
prohibit the Lessee from leasing from other lessors or otherwise obtaining other
nuclear material for use in the Generating Facility, subject to the provisions
with respect to intermingling of fuel assemblies or sub-assemblies with other
fuel assemblies or sub-assemblies contained in Section 6 hereof.
5. Orders for Nuclear Material and Services; Assigned Agreements.
(a) The Nuclear Material Contracts listed in Exhibit C hereto,
relating, among other things, to the purchase of, and services to be performed
with respect to, Nuclear Material were entered into by the Lessee prior to the
date of this Lease Agreement, and, except as otherwise indicated on Exhibit C,
the interests of the Lessee under such Nuclear Material Contracts have been
assigned to the Lessor under an Assignment Agreement substantially in the form
of Exhibit D. Any further Nuclear Material Contracts which the Lessee deems
necessary or desirable may be negotiated by the Lessee and executed by the
Lessee in its own name or, where authorized by the Lessor, as agent for the
Lessor.
(b) So long as no Lease Event of Default shall have occurred
and be continuing, and subject to the approval of the Lessor and to the
limitation on the Maximum Stipulated Casualty Value of the Nuclear Material set
forth in Section 4, the interests of the Lessee under any further Nuclear
Material Contracts (whether executed and delivered before or after the date of
this Lease Agreement) pursuant to which the Lessee desires the Lessor to
purchase Nuclear Material or have services performed on any Nuclear Material on
behalf of the Lessee may be assigned to the Lessor under an Assignment Agreement
substantially in the form of Exhibit D, 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. The Lessee shall use its best efforts to cause the
other parties to such agreements to consent to each such assignment. Upon each
such assignment and the obtaining of such consents with respect to any Nuclear
Material Contract, the Lessor, subject to the limitation on the Maximum
Stipulated Casualty Value of the Nuclear Material set forth in Section 4, shall
make all payments which are required under such Assigned Agreements for the
purchase of Nuclear Material or for services to be performed on the Nuclear
Material in accordance with the procedures set forth in Section 6.
(c) So long as no Lease Event of Default shall have occurred
and be continuing, the Lessor hereby authorizes the Lessee, at the Lessee's own
cost and expense, to assert all rights and claims and to bring suits, actions
and
3
<PAGE>
proceedings, in its own name or in the name of the Lessor, in respect of any
Manufacturer's warranties or undertakings, express or implied, relating to any
portion of the Nuclear Material and to retain the proceeds of any such suits,
actions and proceedings.
6. Leasing Records; Payment of Costs of Lessor.
(a) Interim Leasing Records. An Interim Leasing Record shall be
prepared by the Lessee, shall be dated the date that the Lessor first makes
any payment with respect to the Acquisition Cost of any Nuclear Material and
shall set forth a full description of such Nuclear Material, the Acquisition
Cost and location thereof, and such other details with respect to such
Nuclear Material upon which the parties may agree. During the period of
preparation and processing or reprocessing of Nuclear Material subject to an
Interim Leasing Record, if the Lessor shall make any further payment or
payments or if the Lessor shall receive any payment or payments representing
a credit against the Acquisition Cost previously paid with respect to such
Nuclear Material, a supplemental Interim Leasing Record dated the date that
the Lessor makes each such further payment or the date of receipt of any such
credit shall be signed by the Lessor and the Lessee to record the revised
Acquisition Cost, after giving effect to any such payments or credits with
respect to such Nuclear Material, any change in location and such additional
details upon which the parties may agree.
(b) Final Leasing Records. For Nuclear Material previously
covered by an Interim Leasing Record, the Final Leasing Record shall be prepared
by the Lessee, shall be dated the first day of the month following the date of
installation of such Nuclear Material in the Generating Facility, unless such
date is the first day of a month, in which case the Final Leasing Record shall
be dated such date. For Nuclear Material not previously covered by an Interim
Leasing Record, the Final Leasing Record shall be dated the date that the Lessor
first makes any payment with respect to the Acquisition Cost of such Nuclear
Material. A Final Leasing Record shall set forth a full description of such
Nuclear Material, the Acquisition Cost thereof, the BTU Charge, the location,
and such other details with respect to such Nuclear Material upon which the
parties may agree.
(c) Payment of Nuclear Material Costs.
(i) On the Closing, the Lessor shall pay UBS pursuant to
Section 5.02 of the UBS Credit Agreement the principal amount of all loans
outstanding thereunder together with accrued interest thereon to the extent
not paid previously, and related costs and expenses in connection therewith.
(ii) From time to time after the Closing, invoices of
Manufacturers, or of other Persons performing services, covering Nuclear
Material shall be forwarded to the Lessor in care of the Lessee at the
Lessee's address. Upon receipt by the Lessee of an invoice covering
Nuclear Material, the Lessee shall review such invoice and, upon the
Lessee's approval thereof, the Lessee shall forward such invoice endorsed
with the Lessee's approval to the Lessor, together with a Leasing Record
completed and signed by a Lessee Representative covering such Nuclear
Material. The Lessee's invoice for any cost incurred by it and includable
in the Acquisition Cost of any Nuclear Material shall be forwarded to the
Lessor and to the Secured Parties, together with a Leasing Record
completed and signed by a Lessee Representative covering such costs. After
receipt of such invoice and Leasing Record, in form and substance
satisfactory to the Lessor, the Lessor, subject to the limitation on
Maximum Stipulated Casualty Value of the Nuclear Material set forth in
Section 4, shall pay
4
<PAGE>
such invoice as provided therein or in the related purchase agreement and
shall execute the Leasing Record and return a copy of such Leasing Record
to the Lessee and the Secured Parties. The Leasing Record shall be dated
as provided for in this Lease Agreement. In the event that the Acquisition
Cost of the Nuclear Material covered by any Leasing Record has been paid
or incurred by the Lessee, the Lessor, subject to the limitation on
Maximum Stipulated Casualty Value of the Nuclear Material set forth in
Section 4 shall promptly reimburse the Lessee for the amount of the
Acquisition Cost paid or incurred by the Lessee.
(iii) The Lessee shall: (A) pay all costs and expenses of
freight, packing, insurance, handling, storage, shipment and delivery of
the Nuclear Material to the extent that the same have not been included in
the Acquisition Cost, and (B) at its own cost and expense, furnish such
labor, equipment and other facilities and supplies, if any, as may be
required to install and erect the Nuclear Material to the extent that the
cost and expense thereof have not been included in the Acquisition Cost.
Such installation and erection shall be in accordance with the
specifications and requirements of each Manufacturer. The Lessor shall not
be liable to the Lessee for any failure or delay in obtaining Nuclear
Material or making delivery thereof.
(d) Intermingling of Fuel Assemblies. Subject to the
provisions of Section 10(h) hereof, the Nuclear Material shall be owned
exclusively by the Lessor and leased to the Lessee under this Lease Agreement.
Prior to the fabrication of Nuclear Material into a completed fuel assembly or
sub-assembly or while such Nuclear Material is being reprocessed, the Lessee
will cause or permit such Nuclear Material to be fabricated or assembled only
into fuel assemblies or sub-assemblies owned by the Lessor and leased under this
Lease Agreement. However, fuel assemblies or sub-assemblies owned by the Lessor
and leased to the Lessee hereunder may be intermingled in the Generating
Facility with fuel assemblies or sub-assemblies not owned by the Lessor and
leased to the Lessee under this Lease Agreement, provided that such assemblies
or sub-assemblies owned by the Lessor shall be readily identifiable by serial
number or other distinguishing marks.
7. No Warranties or Representation by Lessor. THE NUCLEAR MATERIAL
IS LEASED AS-IS, WHERE-IS, IN THE CONDITION THEREOF AND SUBJECT TO THE RIGHTS OF
ANY PARTIES IN POSSESSION THEREOF, THE STATE OF THE TITLE THERETO, THE RIGHTS OF
OWNERSHIP THEREIN AND TO ALL APPLICABLE LAWS, RULES, REGULATIONS, ORDERS, WRITS,
INJUNCTIONS, DECREES, CONSENTS, APPROVALS, EXEMPTIONS, AUTHORIZATIONS, LICENSES
AND WITHHOLDING OF OBJECTIONS OF ANY GOVERNMENTAL OR PUBLIC BODY OR AUTHORITY
AND ALL OTHER REQUIREMENTS HAVING THE FORCE OF LAW APPLICABLE AT ANY TIME TO ANY
OF THE NUCLEAR MATERIALS OR ANY ACT OR TRANSACTION WITH RESPECT THERETO OR
PURSUANT TO THIS LEASE AGREEMENT, IN EACH CASE AS IN EXISTENCE WHEN THE SAME
FIRST BECOMES SUBJECT TO THIS LEASE AGREEMENT, WITHOUT REPRESENTATIONS OR
WARRANTIES OF ANY KIND BY THE LESSOR OR ANY SECURED PARTY OR ANY PERSON ACTING
ON BEHALF OF THE LESSOR OR ANY SECURED PARTY. THE LESSEE ACKNOWLEDGES AND AGREES
THAT NEITHER THE LESSOR NOR ANY SECURED PARTY NOR ANY OF THEIR RESPECTIVE
DIRECTORS, OFFICERS AND EMPLOYEES, NOR ANY COMPANY, PERSON OR FIRM CONTROLLING,
CONTROLLED BY OR UNDER COMMON CONTROL WITH ANY OF THEM NOR ANY OTHER PERSON
ACTING ON BEHALF OF THE LESSOR OR ANY SECURED PARTY HAS HAD AT ANY TIME PHYSICAL
POSSESSION OF ANY PORTION OF THE NUCLEAR MATERIAL, HAS MADE ANY INSPECTION
THEREOF, HAS GIVEN ANY ADVICE TO THE LESSEE OR HAS MADE ANY RECOMMENDATION TO
THE LESSEE WITH RESPECT TO THE CHOICE OF THE SUPPLIER, VENDOR OR PROCESSOR OF
THE NUCLEAR MATERIAL OR WITH RESPECT TO THE PROCESSING, MILLING, CONVERSION,
ENRICHMENT, FABRICATION, CONTAINERIZATION, TRANSPORTATION, UTILIZATION, STORAGE
OR REPROCESSING OF THE SAME. THE LESSEE ALSO ACKNOWLEDGES AND AGREES THAT
NEITHER THE LESSOR NOR ANY SECURED PARTY NOR ANY OF THEIR
5
<PAGE>
RESPECTIVE DIRECTORS, OFFICERS AND EMPLOYEES, NOR ANY COMPANY, PERSON OR FIRM
CONTROLLING, CONTROLLED BY OR UNDER COMMON CONTROL WITH ANY OF THEM, NOR ANYONE
ACTING ON BEHALF OF THE LESSOR OR ANY SECURED PARTY HAS MADE ANY WARRANTY OR
OTHER REPRESENTATION, EXPRESS OR IMPLIED, THAT THE NUCLEAR MATERIAL LEASED OR TO
BE LEASED UNDER THIS LEASE AGREEMENT (a) WILL NOT RESULT IN INJURY OR DAMAGE TO
PERSONS OR PROPERTY, (b) WILL BE USEABLE BY THE LESSEE OR WILL ACCOMPLISH THE
RESULTS WHICH THE LESSEE INTENDS FOR SUCH NUCLEAR MATERIAL OR (c) IS SAFE IN ANY
MANNER OR RESPECT. THE LESSEE ALSO ACKNOWLEDGES AND AGREES THAT NEITHER THE
LESSOR NOR ANY SECURED PARTY NOR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS AND
EMPLOYEES, NOR ANY COMPANY, PERSON OR FIRM CONTROLLING, CONTROLLED BY OR UNDER
COMMON CONTROL WITH ANY OF THEM, AND ANYONE ACTING ON BEHALF OF ANY OF THEM IS A
MANUFACTURER OR ENGAGED IN THE SALE OR DISTRIBUTION OF NUCLEAR MATERIAL AND THAT
NONE OF THE FOREGOING PERSONS HAS MADE OR DOES HEREBY MAKE ANY REPRESENTATION,
WARRANTY OR COVENANT, EXPRESS OR IMPLIED, WITH RESPECT TO THE MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, CONDITION, QUALITY, USEABILITY, DURABILITY,
SUITABILITY OR CONSEQUENCES OF USE OR MISUSE OF THE NUCLEAR MATERIAL IN ANY
RESPECT OR IN CONNECTION WITH OR FOR THE PURPOSES OR USES OF THE LESSEE, OR ANY
OTHER REPRESENTATION OR WARRANTY OF ANY KIND OR CHARACTER WHATSOEVER, EXPRESS OR
IMPLIED.
8. Lease Term; Early Termination; Termination of Leasing Record.
(a) The Lessor hereby leases to the Lessee, and the Lessee
hereby leases from the Lessor, the Nuclear Material for the term provided in
this Lease Agreement and subject to the terms and provisions hereof.
(b) This Lease Agreement shall become effective at 12:01 A.M.,
Eastern time, on the Closing, and, unless earlier terminated as provided in
Sections 8(c), 17 or 18, the term of this Lease Agreement shall end at the close
of business on the later of (i) the date on which there is no outstanding
principal of, or interest or premium, if any, on any of the Outstandings or (ii)
the Termination Date but in each case in no event later than November 17, 2015.
(c) In the event that during the term of this Lease Agreement,
the then effective Termination Date is not extended pursuant to Section 5.01 of
the Credit Agreement, the Lessee shall have the option, exercisable at any time
beginning 180 days before such Termination Date upon written notice to the
Lessor and the Secured Parties prior to such Termination Date to purchase all
(but not less than all) of the Nuclear Material and any spent fuel related
thereto for which title has not been transferred to the Lessee for a purchase
price equal to the Stipulated Casualty Value of such Nuclear Material at the
time of such purchase plus the Termination Rent. If the Lessee exercises such
purchase option, the purchase of the Nuclear Material shall occur on such date,
on or prior to such Termination Date, as may be agreed upon by the Lessor and
the Lessee and of which the Lessee has given the Secured Parties prior written
notice. Upon receipt of payment of the purchase price, the Lessor shall deliver
to the Lessee a Lessor's Bill of Sale, substantially in the form of Exhibit E,
transferring all right, title, interest and claim of the Lessor to the Nuclear
Material and any spent fuel related thereto for which title has not already been
transferred to the Lessee, to the Lessee or the Lessee's designee, free and
clear of all Liens created by the Collateral Agreements, together with such
documents, if any, as may be required to evidence the release of such Liens. The
later of (i) the date on which there is no outstanding principal of, or interest
or premium, if any, on any of the Outstandings or (ii) the date of any sale by
the Lessor of all of the Nuclear Material as provided in this Section 8(c) shall
constitute the Termination Settlement Date, and this Lease Agreement shall
terminate as of such date.
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(d) In the event that during the term of this Lease Agreement
the then effective Termination Date is not extended pursuant to Section 5.01 of
the Credit Agreement and the Lessee shall not have exercised its option to
purchase pursuant to Section 8(c), the Lessee shall attempt to sell, or if no
sale is possible, to otherwise convey, on behalf of the Lessor, ownership of the
Nuclear Material to a third party not disqualified by any applicable statute,
law, regulation or agreement from acquiring such Nuclear Material, and, upon
prior written notice to the Lessor and the Secured Parties of the terms and date
of such sale, the Lessor shall furnish title papers as may be necessary to
effect such sale or conveyance on an as-is, where-is, non-installment, cash sale
basis, without recourse to or warranty or agreement of any kind by the Lessor.
The proceeds of such sale or conveyance shall be paid to the Lessor, and any
amount so paid shall constitute a credit against the amount of the Stipulated
Casualty Value payable by the Lessee under Section 8(e); provided, however, that
any proceeds of such sale or conveyance in excess of the amount payable by the
Lessee under Section 8(e) shall be retained by the Lessee.
(e) On the Termination Date unless the Lessee shall have
exercised its purchase option set forth in Section 8(c) and paid the Lessor the
purchase price of the Nuclear Material as provided therein, the Lessee shall pay
to the Lessor an amount equal to the sum of (i) the Stipulated Casualty Value of
all Nuclear Material leased under this Lease Agreement as of such Termination
Date and of all Nuclear Material sold or conveyed pursuant to Section 8(d) (less
any credit provided in Section 8(d)), and (ii) the Termination Rent as of such
Termination Date. Upon receipt of such payment, the Lessor shall deliver to the
Lessee or any designee of the Lessee a Lessor's Bill of Sale, substantially in
the form of Exhibit E, transferring all right, title, interest and claim of the
Lessor to the Nuclear Material and any spent fuel relating thereto for which
title has not been transferred to the Lessee to the Lessee or the Lessee's
designee, free and clear of all Liens created by the Collateral Agreements,
together with such documents, if any, as may be required to evidence the release
of such Liens.
(f) In the event that during the term of this Lease Agreement,
the then effective Termination Date is not extended pursuant to Section 5.01 of
the Credit Agreement, all obligations of the Lessor and Lessee under this Lease
Agreement with respect to the Nuclear Material, including the obligation of the
Lessee to pay Basic Rent and the obligation of the Lessor to acquire and pay for
the Nuclear Material and to lease the same to the Lessee shall terminate on the
date on which the Lessor receives the payment specified in Section 8(c) or
Section 8(e).
(g) The Lessee shall deliver to the Lessor and to the Secured
Parties a Rent Due and SCV Confirmation Schedule in the form of Exhibit F within
thirty (30) days following the date on which any Nuclear Material or spent fuel
resulting from the Nuclear Material is removed from the reactor of the
Generating Facility for purposes of "cooling-off" preliminary to reprocessing or
permanent on-site safe storage and/or off-site disposal. If the Lessee elects
within thirty (30) days following the receipt by the Lessor of such Rent Due and
SCV Confirmation Schedule to extend the lease term for the purposes of
reprocessing any such Nuclear Material, then the Lessor and the Lessee shall
enter into an Interim Leasing Record with respect to such Nuclear Material in
its then condition. In all other cases, the Final Leasing Record with respect to
any such Nuclear Material or spent fuel resulting from such Nuclear Material
shall be terminated and the Lessee shall immediately pay to the Lessor all
amounts, including the Stipulated Casualty Value, if any, with respect to such
Nuclear Material or spent fuel resulting from such Nuclear Material, and, upon
receipt thereof, the Lessor shall deliver to the Lessee or to any designee of
the Lessee a Lessor's Bill of Sale, substantially in the form of Exhibit E,
transferring all
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right, title, interest and claim of the Lessor to such Nuclear Material or spent
fuel resulting from such Nuclear Material for which title has not already been
transferred to the Lessee or the Lessee's designee, free and clear of all Liens
created by the Collateral Agreements, together with such documents, if any, as
may be required to evidence the release of such Liens.
9. Payment of Rent; Payments with Respect to the Lessor's Financing Costs.
(a) Basic Rent. The Lessee shall pay Basic Rent monthly in
arrears on the first day of the next succeeding month. If such first day of the
month is not a Business Day, then payment shall be made on the next succeeding
Business Day.
(b) Additional Rent. In addition to the Basic Rent, the Lessee
will also pay from time to time as provided in this Lease Agreement or on demand
of the Lessor, all Additional Rent on the due date thereof. In the event of any
failure by the Lessee to pay any Additional Rent, the Lessor shall have all the
rights, powers and remedies as in the case of failure to pay Basic Rent.
(c) Prepayments of Basic Rent. The Lessee may prepay Basic
Rent at any time. Such payment shall be credited against subsequent amounts owed
by the Lessee on account of Basic Rent.
(d) Wire Payment Procedure for Paying Basic Rent. All payments
of Rent and other payments to be made by the Lessee to the Lessor pursuant to
this Lease Agreement shall be paid to the Lessor (or, at the Lessor's request,
to the Secured Parties) in lawful money of the United States in Collected Funds
by wire transfer pursuant to Section 3.03 of the Credit Agreement. The Lessee
shall furnish to the Lessor and the Secured Parties each month during the term
of the Lease Agreement a summary of the rental calculations for such month
covering all outstanding Leasing Records. On each Basic Rent Payment Date, the
Lessee shall deliver to the Lessor and the Secured Parties a signed and
completed Rent Due and SCV Confirmation Schedule. The Lessee shall be
responsible for the accuracy of the matters contained in all such schedules
delivered by the Lessee pursuant to the provisions of this Lease Agreement.
10. Compliance with Laws; Restricted Use of Nuclear Material; Assignments;
Permitted Liens; Spent Fuel.
(a) Compliance with Legal Requirements. Subject to the
provisions of Section 11 hereof, the Lessee agrees to comply with all Legal
Requirements.
(b) Recording of Title. The Lessee shall promptly and duly
execute, deliver, file and record all such further counterparts of this Lease
Agreement or such certificates, Bills of Sale, financing and continuation
statements and other instruments as may be reasonably requested by the Lessor
and take such further actions as the Lessor shall from time to time reasonably
request, in order to establish, perfect and maintain the rights and remedies
created or intended to be created in favor of the Lessor and the Secured Parties
under this Lease Agreement and the Lessor's title to and interest in the Nuclear
Material as against the Lessee or any third party in any applicable
jurisdiction.
(c) Exclusive Use of Nuclear Material. So long as no Lease
Event Default shall have occurred and be continuing, the Lessee may use the
Nuclear Material in the regular course of its business or in the business of any
subsidiary or affiliate of the Lessee, and, subject to Section 3(d) and upon
thirty (30) days' prior notice in writing to the Lessor and the Secured Parties,
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or upon such shorter prior notice in writing promptly given upon the Lessee's
receipt of notice from any Manufacturer that the Nuclear Material is to be
moved, and at the Lessee's sole expense (without limiting the Lessee's rights to
request payment by the Lessor of such expense as provided in Section 6 hereof)
move such Nuclear Material to any jurisdiction approved in writing by the Lessor
in the contiguous forty-eight (48) states of the United States of America and
the District of Columbia for the purpose of having services performed on such
Nuclear Material in connection with any stage of the Nuclear Material Cycle
other than Heat Production and the "cooling off" stage, provided that (i) no
such movement of the Nuclear Material shall materially reduce the then fair
market value of such Nuclear Material, (ii) such Nuclear Material shall be and
remain the property of the Lessor, subject to this Lease Agreement, and (iii)
all Legal Requirements (including, without limitation, all necessary government
consents, permits and approvals) shall have been met or obtained by the Lessee,
on its own behalf and on behalf of the Lessor, and all necessary recordings,
filings and registrations or recordings, filings and registrations which the
Lessor shall reasonably consider advisable shall have been duly made in order to
protect the validity and effectiveness of this Lease Agreement and the security
interest created in the Security Agreement. At least once each year, or more
frequently if the Lessor reasonably so requests, the Lessee shall advise the
Lessor and the Secured Parties in writing where all Nuclear Material as of such
date is located. The Lessee shall maintain and make available to the Lessor for
examination upon reasonable notice complete and adequate records pertaining to
receipt, possession, use, location, movement, physical inventories and any other
information reasonably requested by the Lessor with respect to the Nuclear
Material.
(d) Additional Lessee Covenants. The Lessee agrees to use
every reasonable precaution to prevent loss or damage to the Nuclear Material.
All individuals handling or operating Nuclear Material in the possession of the
Lessee shall be conclusively presumed not to be agents of the Lessor. The Lessee
shall cooperate fully with the Lessor and all insurance companies and
governmental agencies providing insurance under Section 12 hereof in the
investigation and defense of any claims or suits arising from the licensing,
acquisition, storage, containerization, transportation, blending, transfer,
consumption, leasing, insuring, operating, disposing, fabricating and
reprocessing of the Nuclear Material. To the extent required by any applicable
law or regulation, the Lessee shall attach to the Nuclear Material the form of
required notice to protect or disclose the ownership of the Lessor or that the
Nuclear Material is leased. So long as no Lease Event of Default shall have
occurred and be continuing, the Lessor will assign or otherwise make available
to the Lessee all of its rights under any Manufacturer's warranty on Nuclear
Material. The Lessee shall pay all costs, expenses, fees and charges, except
Acquisition Costs, incurred by the Lessee in connection with the use and
operation of the Nuclear Material during the term of the lease of such Nuclear
Material. The Lessee hereby assumes all risks of loss or damage of Nuclear
Material however caused and shall, at its own expense, keep the Nuclear Material
in good operating condition and repair, reasonable wear and tear, obsolescence
and exhaustion excepted.
(e) Assignment by Lessor. Except as otherwise herein provided,
the Lessor may not, without the prior written consent of the Lessee, sell,
assign, transfer or convey the Nuclear Material or any interest therein or in
the Lease Agreement, or grant to any party a security interest in, or create a
lien or encumbrance upon, all or any part of its right, title and interest in
this Lease Agreement and in any Nuclear Material. After receipt by the Lessee of
written notice from the Lessor of any assignment by the Lessor of Rents or other
sums payable by the Lessee under this Lease Agreement, the Lessee shall make
such
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payments as directed in such notice of assignment, and such payments shall
discharge the obligations of the Lessee hereunder to the extent of such
payments. The Lessee hereby consents to the security interest and other rights
and interests granted to the Secured Parties under the Security Agreement, dated
as of the date first above written.
(f) Liens; Permitted Liens. The Lessee will not directly or
indirectly create or permit to be created or to remain and will discharge any
Lien with respect to the Nuclear Material or any portion thereof, or upon the
Lessee's leasehold interest therein, or upon the Basic Rent, Additional Rent, or
any other sum payable under this Lease Agreement, other than Permitted Liens.
(g) Assignment by Lessee. Notwithstanding any provision of
this Lease Agreement to the contrary, subject to applicable laws and regulations
and so long as no Lease Event of Default shall have occurred and be continuing,
the Lessee may sublease the Nuclear Material provided that (i) the Lessee has
given prior written notice of such sublease to the Lessor, (ii) such sublease is
not inconsistent with, and is expressly subject to, this Lease Agreement and
(iii) such sublease does not in any way limit or affect the Lessee's duties and
obligations under this Lease Agreement.
(h) Transfer of Title to Manufacturers. The parties recognize
that, during the processing and reprocessing of Nuclear Material before and
after its utilization in the Generating Facility for the production of power,
the Manufacturer performing services on the Nuclear Material may require that
title thereto be transferred to such Manufacturer and/or that the Nuclear
Material be commingled with other nuclear material, with an obligation for the
Manufacturer, upon completion of the services, to reconvey a specified amount of
nuclear material. The standard enrichment contracts of the Department of Energy
contain such provisions. Therefore, the parties agree that (i) Nuclear Material
may become subject to such a contract provision and that the action contemplated
by such a provision may be taken, notwithstanding any provision of this Lease
Agreement to the contrary, (ii) as between the Lessor and the Lessee, such
Nuclear Material shall be deemed to remain leased under this Lease Agreement
while title thereto is in the Manufacturer, and (iii) the nuclear material
exchanged by the Manufacturer upon completion of its services shall be
automatically leased under this Lease Agreement in substitution for the Nuclear
Material originally delivered to the Manufacturer.
(i) Substitution of Nuclear Material. The Lessee shall be
permitted to exchange Nuclear Material for other Nuclear Material of equal or
greater fair market value provided that the Lessor receives title to such
substituted Nuclear Material free and clear of any Lien other than such Liens as
may be created by the Security Agreement or permitted under Section 10(h). Any
additional costs incurred in order to effect such an exchange shall be paid by
the Lessor in accordance with the procedures set forth in Section 6(c) and shall
be added to the Acquisition Cost of the Nuclear Material. A supplemental Leasing
Record dated the date that the Lessor makes such further payment shall be signed
by the Lessor and the Lessee to record the revised Acquisition Cost and shall
include a full description of the substituted Nuclear Material, notice of any
change in location and such additional details upon which the parties may agree.
(j) Spent Fuel. Without the consent of the Lessor, the Lessee
shall not permit any Nuclear Material, which shall have been removed from a
Generating Facility for the purpose of "cooling-off," storage, repair or
reprocessing to be removed from the site of the Generating Facility unless (i)
the new site of such Nuclear Material is a facility maintaining liability
insurance and indemnification fully insuring and indemnifying the Lessor, the
Lessee and the Secured Parties under the Atomic Energy Act and any other
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applicable law, rule or regulation, and (ii) except if the lease term is
extended pursuant to the second sentence of Section 8(g), the lease of such
Nuclear Material shall, concurrently with its removal from the Generating
Facility, be terminated by the Lessee pursuant to the provisions of Section 8 or
18 hereof, as applicable, with the Lessee acquiring the ownership thereof
pursuant to Section 8(e), 8(g) or Section 18(c), as applicable.
11. Permitted Contests. The Lessee at its expense may, in its own name or,
if necessary and permitted, in the name of the Lessor (and, if necessary but not
so permitted, the Lessee may require the Lessor to) contest after prior notice
to the Lessor, by appropriate legal or administrative proceedings conducted in
good faith and with due diligence, the amount, validity or application, in whole
or in part, of any Imposition or Lien therefor, or any Legal Requirements or
Insurance Requirements, or any matter underlying Lessee's indemnity obligations
under Section 13 hereof, or any other Lien or contract or agreement referred to
in Section 10(f) hereof; provided that (i) in the case of an unpaid Imposition
or Lien therefor, such proceedings shall suspend the collection of such
Imposition or the enforcement of such Lien against the Lessor, (ii) neither the
Lessee's use of the Nuclear Material or any portion thereof nor the taking of
any step necessary or proper with respect to such Nuclear Material in any stage
of the Nuclear Material Cycle nor the performance of any other act required to
be performed by the Lessee under this Lease Agreement would be enjoined,
prevented or otherwise interfered with, (iii) the Lessor would not be subject to
any additional civil liability (other than interest which the Lessee agrees to
pay) or any criminal liability for failure to pay any such Imposition or to
comply with any such Legal Requirements or Insurance Requirements or any such
other Lien, contract or agreement, and (iv) the Lessee shall have set aside on
its books adequate reserves (in accordance with generally accepted accounting
principles) and shall have furnished such security, if any, as may be required
in the proceedings or reasonably requested by the Lessor. The Lessee will pay,
and save the Lessor, the Owner Trustee, U.S. Trust and the Secured Parties
harmless against, all losses, judgments, decrees and costs, including attorneys'
fees and expenses, in connection with any such contest and will, promptly after
the determination of such contest, pay and discharge the amounts which shall be
levied, assessed or imposed or determined to be payable, together with all
penalties, fines, interest, costs and expenses incurred in connection with such
contest. All rights and indemnification obligations under this Section 11 and
each other indemnification obligation in favor of the Lessor, the Owner Trustee,
U.S. Trust and the Secured Parties under this Lease Agreement shall survive any
termination of this Lease Agreement or of the lease of any Nuclear Material
hereunder.
12. Insurance; Compliance with Insurance Requirements. The Lessee shall
comply with all Insurance Requirements and with all Legal Requirements
pertaining to insurance. Without limiting the foregoing:
(a) Liability and Casualty Insurance. The Lessee shall, at its
own cost and expense, procure and maintain, or cause to be procured and
maintained, liability insurance and indemnification with respect to the Nuclear
Material insuring and indemnifying the Lessor, the Owner Trustee, U.S. Trust,
the Lessee, and the Secured Parties to the full extent required or available,
whichever may be greater, under the Atomic Energy Act or under any other
applicable law, rule or regulation. In the event the provisions of the Atomic
Energy Act with respect to liability insurance and the indemnification of
owners, licensees and operators of Nuclear Material or any other provisions of
the Atomic Energy Act which benefit the Lessor, the Owner Trustee, U.S. Trust or
the Secured Parties shall change, then the Lessee shall use its best efforts to
obtain equivalent insurance and indemnification agreements from the Nuclear
Regulatory Commission or from such other public and/or private sources from
which such
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coverage is available. The Lessee shall also, at its own cost and expense,
procure and maintain, or cause to be procured and maintained, physical damage
insurance with respect to the Nuclear Material insuring the Lessor, the Owner
Trustee, U.S. Trust and the Secured Parties against loss or damage to the
Nuclear Material in a manner which is consistent at all times with current
prudent utility industry practice in the United States; provided, however, that
the Lessee shall in any event maintain physical damage insurance coverage for
its Three Mile Island Unit 1 nuclear generating station site, including the
Nuclear Material, in an amount not less than $1.11 billion. Such liability and
physical damage insurance and indemnification agreements may be subject to
deductible amounts which do not exceed in the aggregate $5,000,000, and the
Lessee may self-insure with respect to such liability and physical damage
insurance and indemnification agreements to the extent of $5,000,000, provided
that such deductible amounts and such self-insurance are permitted under all
applicable law, rules and regulations.
(b) Third Parties; Insurance Requirements. The Lessee shall
use its best efforts to provide that the Nuclear Material, while in the
possession of third parties, is covered for liability insurance and
indemnification to the maximum extent available, and for physical damage
insurance in an amount not less than the Stipulated Casualty Value of such
Nuclear Material. To the extent that any such third party is maintaining such
insurance coverage for the Nuclear Material, the Lessee shall have no obligation
to do so under this Lease Agreement.
(c) Named Insureds; Loss Payees. The Lessee shall provide for
the Lessor, the Owner Trustee, U.S. Trust and the Collateral Agent to be named
additional insureds where possible, and, with respect to physical damage
coverage, named loss payees to the full extent of their interests in all
insurance policies and indemnification agreements relating to the Nuclear
Material required under this Section. All such policies and, where possible,
indemnification agreements, shall provide for at least ten (10) days' prior
written notice to the Lessor, the Owner Trustee, U.S. Trust and the Collateral
Agent of any cancellation or material alteration of such policies.
(d) Insurance Certificates. The Lessee shall, upon request of
the Lessor, the Owner Trustee, U.S. Trust or the Collateral Agent, provide the
Lessor, the Owner Trustee, U.S. Trust or the Collateral Agent, as the case may
be, with copies of the policies or insurance certificates in respect of the
insurance procured pursuant to the provisions of this Section and shall advise
the Lessor, the Owner Trustee, U.S. Trust and the Collateral Agent of all
expirations and renewals of policies and all notices issued by the insurers with
respect to such policies. Within a six-month period from the execution of this
Lease Agreement and at yearly intervals thereafter, the Lessee shall furnish to
the Lessor, the Owner Trustee, U.S. Trust and the Collateral Agent a certificate
as to the insurance coverage provided pursuant to this Section and shall further
give notice as to any material change in the nature or availability of such
coverage, including any material change whatsoever in the provisions of the
Atomic Energy Act or any other applicable law, rule or regulation with respect
to liability insurance and indemnification, or, immediately after the Lessee
becomes aware, or should reasonably be expected to become aware, of any material
change in the application, interpretation or enforcement thereof. The Lessor,
the Owner Trustee, U.S. Trust or the Collateral Agent shall be under no duty to
examine such insurance policies or indemnification agreements or to advise the
Lessee in case the Lessee is not in compliance with any Insurance Requirements.
13. Indemnity. Without limitation of any other provision of this Lease
Agreement, including Section 11, the Lessee agrees to indemnify and hold
harmless each of the Lessor, the Owner Trustee, U.S. Trust and the Secured
12
Parties and all companies, persons or firms controlling, controlled by, or under
common control with any of them and the respective shareholders, directors,
officers and employees of the foregoing against any and all claims, demands and
liabilities of whatever nature and all costs, losses, damages, obligations,
penalties, causes of action, judgments and expenses (including attorneys' fees
and expenses) directly or indirectly relating to or in any way arising out of:
(a) defects in title to Nuclear Material upon acquisition by
the Lessor or in ownership of and interest in the Nuclear Material (the term
"Nuclear Material" when used in this Section 13 shall include, in addition to
all other Nuclear Material, nuclear material the lease of which has been
terminated and which is in storage, or is being transported to storage, and
which has not been sold or disposed of by the Lessor to the Lessee or to a third
party);
(b) the ownership, licensing, ordering, rejection, use,
nonuse, misuse, possession, control, installation, acquisition, storage,
containerization, transportation, blending, transfer, consumption, leasing,
insuring, operating, disposing, fabricating, channelling, refining, milling,
enriching, conversion, cooling, processing, condition, operation, inspection,
repair and reprocessing of the Nuclear Material, or resulting from the condition
of the environment including the adjoining and/or underlying land, water,
buildings, streets or ways, except to the extent that such costs are included in
the Acquisition Cost of such Nuclear Material within the limits specified in
Section 4 (or within any change of such limits agreed to in writing by the
Lessor and the Lessee) and except for any general administrative expenses of the
Secured Parties and of their representatives;
(c) the assertion of any claim or demand based upon any
infringement or alleged infringement of any patent or other right, by or in
respect of any Nuclear Material; provided, however, that the Lessor shall have
made available to the Lessee all of the Lessor's rights under any similar
indemnification from the Manufacturer of such Nuclear Material under any Nuclear
Material Contract;
(d) all federal, state, county, municipal, foreign or other
fees and taxes of whatever nature including, but not limited to, license,
qualification, franchise, sales, use, business, gross receipts, ad valorem,
property, excise, and occupation fees and taxes and penalties and interest
thereon, whether assessed, levied against or payable by the Lessor or any
Secured Party or to which the Lessor or any Secured Party is subject with
respect to the Nuclear Material or the Lessor's or any Secured Party's ownership
thereof or interest therein or the licensing, ordering, ownership, use,
possession, control, acquisition, storage, containerization, transportation,
blending, milling, enriching, transfer, consumption, leasing, insuring,
operating, disposing, fabricating, channelling, refining, conversion, cooling
and reprocessing of Nuclear Material or measured in any way by the value thereof
or by the business of investment in, financing of or ownership by the Lessor or
any Secured Party with respect thereto; provided, however, that the Lessee shall
not be obligated to indemnify any Secured Party for any taxes, whether federal,
state or local, based on or measured by net income of any Secured Party where
taxable income is computed in substantially the same manner as taxable income is
computed under the Code;
(e) 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 involving or connected in any way with the Nuclear Material or any
portion thereof;
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(f) any violation, or alleged violation, of this Lease
Agreement by the Lessee or of any contracts or agreements to which the Lessee is
a party or by which it is bound or any laws, rules, regulations, orders, writs,
injunctions, decrees, consents, approvals, exemptions, authorizations, licenses
and withholdings of objection, of any governmental or public body or authority
and all other requirements having the force of law applicable at any time to the
Nuclear Material or any action or transaction by the Lessee with respect thereto
or pursuant to this Lease Agreement;
(g) performance of any labor or service or the furnishing of
any materials in respect of the Nuclear Material or any portion thereof, except
to the extent that such costs are included in the Acquisition Cost of such
Nuclear Material within the limits specified in Section 4 (or within any change
of such limits agreed to in writing by the Lessor and the Lessee); or
(h) liabilities based upon a theory of strict liability in
tort, negligence or willful acts to the extent that such liabilities relate to
the Nuclear Material or any action or transaction with respect thereto or
pursuant to this Lease Agreement.
The Lessee shall, upon demand, reimburse the Lessor, the Owner Trustee, U.S.
Trust, the Secured Parties or other indemnified parties, as the case may be, for
any sum or sums expended with respect to any of the foregoing or advance such
amount, upon request by the Lessor, the Owner Trustee, U.S. Trust, the Secured
Parties or such other party for payment thereof. With respect solely to the
Lessor, the amount of any payment obligation of the Lessee under this Section 13
shall be determined on a net, after-tax basis, taking into account any tax
benefit to the Lessor. Notwithstanding the foregoing, the Lessee shall not
indemnify or hold harmless the Lessor, the Owner Trustee, U.S. Trust, the
Secured Parties or other indemnified parties for (i) any claims, demands,
liabilities, costs or expenses which arise, result from or relate to obligations
of such party as an insurer under contracts or agreements of insurance or
reinsurance or (ii) any liability arising from the willful misconduct or gross
negligence of the Lessor, the Owner Trustee, U.S. Trust, the Secured Parties or
other indemnified parties; provided, however, that the Lessee shall in any event
indemnify and hold harmless the Lessor, the Owner Trustee, U.S. Trust, the
Secured Parties and other indemnified parties for that part of any such
liability to which the Lessee has contributed. Without limiting any of the
foregoing provisions of this Section 13, to the extent that the Lessee in fact
indemnifies the Lessor, the Owner Trustee, U.S. Trust, the Secured Parties or
such other party under this indemnity provision, the Lessee shall be subrogated
to the rights of the Lessor, the Owner Trustee, U.S. Trust, the Secured Parties
and such other party in the affected transaction and shall have a right to
determine the settlement of claims with respect to such transaction, provided
that any such rights to which the Lessee shall be subrogated shall be
subordinate and subject in right of payment to the prior payment in full of all
liabilities to the Lessor, the Owner Trustee, U.S. Trust, the Secured Parties or
other indemnified parties of the person or entity in respect of which such
rights exist. The Lessor shall claim, on a timely basis, any refund to which it
may be entitled with respect to any fees or taxes for which the Lessor has
sought indemnification from the Lessee under Section 13(d), shall take all steps
necessary to prosecute diligently such claim and shall pay over to the Lessee
any refund (together with any interest received thereon) recovered by the Lessor
with respect to such fees or taxes as soon as practicable following receipt
thereof, provided that the Lessee shall have previously indemnified the Lessor
with respect to such fees or taxes. The Owner Trustee, U.S. Trust and the
Secured Parties, at the expense of the Lessee, (i) shall cooperate with the
Lessee in such manner as the Lessee shall reasonably request in order to claim,
on a timely basis, any refund to which the Owner Trustee, U.S. Trust or the
Secured Parties may be entitled with respect to any
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<PAGE>
fees or taxes for which the Lessee has indemnified the Owner Trustee, U.S. Trust
or any Secured Party or for which the Lessee has an obligation to indemnify the
Owner Trustee, U.S. Trust or the Secured Parties under Section 13(d) (provided
that the Lessee is not in default of such obligation) if such cooperation is
necessary in order to claim such refund, (ii) shall take all steps which the
Lessee shall reasonably request which are necessary to prosecute such claim, and
(iii) shall pay over to the Lessee any refund (together with any interest
received thereon) recovered by the Owner Trustee, U.S. Trust or any Secured
Party with respect to such fees or taxes as soon as practicable following
receipt thereof, provided that the Lessee shall have previously indemnified the
Owner Trustee, U.S. Trust or such Secured Party with respect to such fees or
taxes. All rights and indemnification obligations under this Section 13, and
each other indemnification obligation in favor of the Lessor, the Owner Trustee,
U.S. Trust and the Secured Parties under this Agreement, shall survive any
termination of this Lease Agreement or of the lease of any Nuclear Material
hereunder.
14. Casualty and Other Events. Upon the occurrence of any one or more of
the following events:
(a) the loss, destruction or damage beyond repair of any
Nuclear Material, or
(b) the commandeering, condemnation, attachment or loss of use
to the Lessee of any Nuclear Material by reason of the act of any third party or
governmental instrumentality or the deprivation or loss of use to the Lessee of
any Nuclear Material for any other reason, other than by reason of a Lease Event
of Default, for a period exceeding ninety (90) days; or
(c) a determination by the Lessee in its sole discretion that
any Nuclear Material is no longer useful to the Lessee, provided, however, that
(i) no Lease Event of Default has occurred and is continuing, and (ii) no such
determination may be made by the Lessee with respect to any Nuclear Material
prior to ---------- --;
Then, in any such case, the Lessee promptly shall give written
notice to the Lessor and the Secured Parties of any such event, and upon the
earlier of (i) ten (10) days following receipt of any insurance or other
proceeds paid with respect to the foregoing or (ii) one hundred and twenty (120)
days after the occurrence of any such event, the Lessee shall pay to the Lessor
an amount equal to the then Stipulated Casualty Value of such Nuclear Material,
together with any Basic Rent and Additional Rent then due with respect to such
Nuclear Material. The lease of such Nuclear Material hereunder and the
obligation of the Lessee to pay Basic Rent and Additional Rent with respect to
such Nuclear Material shall continue until the day on which the Lessor receives
payment of such Stipulated Casualty Value, Basic Rent and Additional Rent. Upon
the giving of written notice of the occurrence of such an event, the Lessee
shall promptly use its best efforts to sell, or, if no sale is possible, to
otherwise convey, on behalf of the Lessor, ownership of such Nuclear Material to
a third party not disqualified by any applicable statute, law, regulation or
agreement from acquiring such Nuclear Material, and the Lessor shall furnish
title papers as may be necessary to effect such sale or conveyance on an as-is,
where-is, non-installment, cash sale basis without recourse to or warranty or
agreement of any kind by the Lessor. Any such sale or conveyance shall be
effected on or before the date one hundred and twenty (120) days after the date
of the occurrence of such event. The proceeds of such sale or conveyance shall
be paid to the Lessor, and any amount so paid shall constitute a credit against
the amount of the Stipulated Casualty Value payable by the Lessee under this
Section 14.
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<PAGE>
15. Nuclear Material to Remain Personal Property. It is expressly
understood and agreed that the Nuclear Material shall be and remain personal
property notwithstanding the manner in which it may be attached or affixed to
realty and notwithstanding any law or custom or the provisions of any lease,
mortgage or other instrument applicable to any such realty. The Lessee agrees to
indemnify the Lessor and the Secured Parties against, and to hold the Lessor and
the Secured Parties harmless from, all losses, costs and expenses (including
reasonable attorneys' fees and expenses) resulting from any of the Nuclear
Material becoming part of any realty. Upon termination of the lease of any
Nuclear Material, any costs of removal, transportation, storage and delivery of
such Nuclear Material shall be paid by the Lessee. The Lessor and the Secured
Parties shall not be liable for any physical damage caused to any realty or any
building by reason of the removal of the Nuclear Material therefrom.
16. Events of Default. Each of the following events of default by the
Lessee shall constitute a "Lease Event of Default" and give rise to the rights
on the part of the Lessor described in Section 17 hereof:
(i) Default in the payment of Basic Rent or Additional Rent,
if any, on the date on which such payment is due and the continuance of
such default for five (5) days;
(ii) Default in the payment of Termination Rent;
(iii) The Lessee shall fail to maintain liability and casualty
insurance pursuant to its obligations under Section 12(a) of this Lease
Agreement;
(iv) The Lessee shall fail to perform its obligations to
purchase Nuclear Material pursuant to Section 8(e) of this Lease
Agreement;
(v) Any representation or warranty or statement made by the
Lessee (or any of its officers) herein or in connection with this Lease
Agreement shall prove to be incorrect or misleading in any material
respect when made;
(vi) Default in the payment or performance of any other
material liability or obligation or covenant of the Lessee to the Lessor,
and the continuance of such default for thirty (30) days after written
notice to the Lessee sent by registered or certified mail;
(vii) The Lessee suspends or discontinues its business
operations or becomes insolvent (however such insolvency may be evidenced)
or admits insolvency or bankruptcy or its inability to pay its debts as
they mature, makes an assignment for the benefit of creditors or applies
for or consents to the appointment of a trustee or receiver for the Lessee
or for the major part of its property;
(viii) The institution of bankruptcy, reorganization,
liquidation or receivership proceedings for relief under any bankruptcy
law or similar law for the relief of debtors by or against the Lessee and,
if instituted against the Lessee, its consent thereto or the pendency of
such proceedings for sixty (60) days;
(ix) An event of default (the effect of which is to permit the
holder or holders of any instrument, or the trustee or agent on behalf of
such holder or holders, to cause the indebtedness evidenced by such
instrument to become due prior to its stated maturity) shall occur under
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the provisions of any instrument evidencing indebtedness for borrowed
money of the Lessee in a principal amount equal to at least $20,000,000 or
if any obligation of the Lessee for the payment of such indebtedness shall
become or be declared to be due and payable prior to its stated maturity,
or shall not be paid when due and is not paid within the applicable cure
period, if any, provided for the payment of such indebtedness under such
instrument;
(x) An event of default shall occur under the provisions of
any Basic Document and such default shall have continued beyond any
applicable cure period.
(xi) A final judgment in an amount in excess of $20,000,000 is
rendered against the Lessee, and within thirty (30) days after the entry
thereof, such judgment is not discharged or execution thereof stayed
pending appeal, or within thirty (30) days after the expiration of any
such stay, such judgment is not discharged; or
(xii) Other than pursuant to a condemnation proceeding, any
court, governmental officer or agency shall, under color of legal
authority, take and hold possession of any substantial part of the
property or assets of the Lessee.
17. Rights of the Lessor Upon Default of the Lessee. Upon the occurrence
of any Lease Event of Default, the Lessor may, in its discretion, and shall, at
the direction of the Secured Parties, do one or more of the following:
(a) Terminate the lease term of any or all Nuclear Material
upon five (5) days written notice to the Lessee sent by registered or certified
mail;
(b) Whether or not any lease of any Nuclear Material is
terminated, and, subject to any applicable law or regulation, take immediate
possession of any or all Nuclear Material or cause such Nuclear Material to be
taken from the possession of the Lessee, and/or take immediate possession of and
remove other property of the Lessor in the possession of the Lessee, wherever
situated and for such purpose enter upon any premises without liability for so
doing or require the Lessee, at the Lessee's expense, to deliver the Nuclear
Material, properly containerized and insulated for shipping to the Lessor or to
such other person as the Lessor may designate, in which case the risk of loss
shall be upon the Lessee until such delivery is made;
(c) Whether or not any action has been taken under (a) or (b)
above, and subject to any applicable law or regulation, sell any Nuclear
Material (with or without the concurrence and whether or not at the request of
the Lessee) at public or private sale, and the Lessee shall be liable for and
shall promptly pay to the Lessor all unpaid Rent to the date of receipt by the
Lessor of the proceeds of such sale plus any deficiency between the net proceeds
of such sale and the Stipulated Casualty Value of such Nuclear Material at the
time of such payment by the Lessee; provided, however, that any proceeds of such
sale in excess of the sum of such unpaid Rent, the Stipulated Casualty Value of
such Nuclear Material and all other amounts payable by the Lessee under this
Section 17 shall be received for the benefit of, and shall be paid over to the
Lessee, as soon as practicable after receipt thereof;
(d) Subject to any applicable law or regulation, sell in a
commercially reasonable manner, dispose of, hold, use, operate, remove, lease or
keep idle any Nuclear Material as the Lessor in its sole discretion may
17
<PAGE>
determine, without any obligation to account to the Lessee with respect to such
action or inaction or for any proceeds thereof, except that the net proceeds of
any such selling, disposing of, holding, using, operating or leasing shall be
credited by the Lessor against any Rent accruing after the Lessor shall have
declared this Lease Agreement as to any or all of the Nuclear Material to be in
default pursuant to this Section; provided, however, that any net proceeds of
any such selling, disposing of, holding, using, operating or leasing in excess
of the sum of any such accrued Rent and all other amounts payable by the Lessee
under this Section 17 shall be received for the benefit of, and shall be paid
over to the Lessee, as soon as practicable after receipt thereof;
(e) Terminate this Lease Agreement as to any or all of the
Nuclear Material or exercise any other right or remedy which may be available
under applicable law or proceed by appropriate court action to enforce the terms
hereof or to recover damages for the breach hereof. If the Lessee fails to
deliver, promptly after written request, the Nuclear Material pursuant to (b),
above, subject to reasonable wear and tear, obsolescence and exhaustion, in good
operating condition and repair, or converts or destroys any Nuclear Material,
the Lessee shall be liable to the Lessor for all Rent then due and payable on
the Nuclear Material, all other amounts then due and payable under this Lease
Agreement, the then Stipulated Casualty Value of such Nuclear Material, plus any
loss, damage and expense (including without limitation reasonable attorneys'
fees and expenses) sustained by the Lessor by reason of such Lease Event of
Default and the exercise of the Lessor's remedies with respect thereto,
including any costs incurred under the Credit Agreement and the Security
Agreement, and any other amounts owed to the Secured Parties with respect to the
Notes. If, upon the occurrence of a Lease Event of Default, the Lessee delivers
Nuclear Material to the Lessor or to such other person as the Lessor may
designate, or if the Lessor repossesses or causes Nuclear Material to be
repossessed on its behalf, the Lessee shall be liable for and the Lessor may
recover from the Lessee all Rent on the Nuclear Material due and payable to the
date of such delivery or repossession, all other amounts due and payable under
this Lease Agreement, plus any loss, damage and expense (including without
limitation reasonable attorneys' fees and expenses) sustained by the Lessor by
reason of such Lease Event of Default and the exercise of the Lessor's remedies
with respect thereto. No remedy referred to in this Section 17 is intended to be
exclusive, but each shall be cumulative and in addition to any other remedy
referred to above or otherwise available to the Lessor at law or in equity and
the exercise in whole or in part by the Lessor of any one or more of such
remedies shall not preclude the simultaneous or later exercise by the Lessor of
any or all such other remedies. No waiver by the Lessor of any Lease Event of
Default shall in any way be, or be construed to be, a waiver of any future or
subsequent Lease Event of Default.
18. Termination After Certain Events.
(a) This Lease Agreement may terminate as provided in Section
18(b) below prior to the expiration of its term in connection with any of the
following "Terminating Events":
(i) The Lessor shall have given notice that the Lessor
is not satisfied with any change in the insurers, coverage, amount or
terms of any insurance policy or indemnity agreement required to be
obtained and maintained by the Lessee pursuant to Section 12;
(ii) There shall occur the revocation or material
adverse modification of any authorization, consent, exemption or approval
theretofore obtained from any regulatory body or governmental authority
necessary for the carrying out of the intent and purposes of this Lease
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Agreement or the actions or transactions contemplated hereby, and the
effectiveness of any such revocation or material adverse modification
shall not be stayed pending any appeal thereof;
(iii) A Nuclear Incident involving or connected in any
way with the Nuclear Material shall have occurred, and the Lessor shall
have given notice to the Lessee that the Lessor believes such Nuclear
Incident may give rise to an aggregate liability, or to damage,
destruction or personal injury in excess of $20,000,000;
(iv) There shall have occurred a Deemed Loss Event;
(v) Any change in, or new interpretation by a
governmental authority having jurisdiction relating to, the Price-Anderson
Act, as amended, or the Atomic Energy Act, or the regulations of the
Nuclear Regulatory Commission thereunder, in each case as in effect on the
date of this Lease Agreement, shall have been adopted, and the Lessor
shall have given notice to the Lessee that, in the opinion of independent
counsel selected by the Lessor and reasonably satisfactory to the Lessee
and the Secured Parties as a result of such change or new interpretation
the Lessor is prohibited from asserting any material right, protection or
defense available under applicable law as of the date of this Lease
Agreement with respect to civil or criminal actions brought in connection
with a Nuclear Incident;
(vi) Any law or regulation or interpretation (judicial,
regulatory or otherwise) of any law or regulation shall be adopted or
enforced by any Court or governmental authority, and as a result of such
adoption or enforcement, approval of the transactions contemplated by this
Lease Agreement shall be required and shall not have been obtained within
any applicable grace period after such adoption or enforcement or as a
result of which adoption or enforcement this Lease Agreement or any
transaction contemplated hereby, including any payments to be made by the
Lessee or the ownership of the Nuclear Material by the Lessor, shall be or
become unlawful, or the performance of this Lease Agreement shall be
rendered impracticable in any material way; or
(vii) Any governmental licenses, approvals or consents
with respect to the Generating Facility, without which the Generating
Facility cannot continue to operate, shall have been revoked and the
Lessee shall not have, in good faith, within one hundred and eighty (180)
days of such revocation, represented in writing to the Lessor that the
Lessee has made a good faith determination that such Generating Facility
will return to operation within twenty-four (24) months of such
revocation, or for any other reason the Generating Facility shall cease to
be operated for a period of twenty-four (24) consecutive months.
(b) Upon the happening of any of the Terminating Events listed
in Section 18(a), Lessor and/or the Secured Parties may, at their option,
terminate this Lease Agreement, such termination to be effective upon delivery
of the Notice contemplated by paragraph (d)(ii) below, except with respect to
obligations and liabilities of the Lessee, actual or contingent, which arose
under the Lease Agreement on or prior to the date of termination and except for
the Lessee's obligations set forth in Sections 10, 12 and 13, and in this
Section 18, all of which obligations will continue until the delivery of
documentation by the Lessor and the payment by the Lessee provided for below,
and except that after such delivery and payment, the Lessee's obligations under
Section 13 shall continue as therein set forth as shall all of Lessee's
indemnification obligations set forth in other sections of this Lease Agreement.
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<PAGE>
(c) Upon any such termination, the entire interest of the
Lessor in the Nuclear Material and any spent fuel relating thereto for which
title has not been transferred to the Lessee shall automatically transfer to and
be vested in the Lessee, without the necessity of any action by either the
Lessor or the Lessee, provided, however, that if the Lessor shall have
theretofore approved in writing such Person and the terms of such transfer, the
entire interest of the Lessor in such Nuclear Material and any spent fuel
relating thereto for which title has not been transferred to the Lessee shall,
upon such termination, automatically transfer to and be vested in any Person
designated by the Lessee.
(d) (i) Promptly after either party shall learn of the
happening of any Terminating Event, such party shall give notice of the same to
the other party and to the Secured Parties.
(ii) If the Lessor and/or Secured Parties elect to
terminate the Lease Agreement, they shall give notice to the Lessee and the
Secured Parties or the Lessor, as the case may be, which notice shall (x)
acknowledge that the Lease Agreement has terminated, subject to the continuing
obligations of the Lessee mentioned above, and that title to and ownership of
such Nuclear Material and any spent fuel relating thereto for which title has
not been transferred to the Lessee has transferred to and vested in the Lessee
or such other Person, and (y) specify a Termination Settlement Date occurring
one hundred and fifty (150) days after the giving of such notice. After such
termination of this Lease Agreement and until such Termination Settlement Date,
the Lessee shall continue to pay Basic Rent and Additional Rent. On such
Termination Settlement Date, the Lessee shall be obligated to pay to the Lessor
as the purchase price for the Nuclear Material an amount equal to the sum of (x)
Stipulated Casualty Value of the Nuclear Material as of the Termination
Settlement Date and (y) the Termination Rent on the Termination Settlement Date.
The Lessor shall be obligated to deliver to the Lessee a Lessor's Bill of Sale,
substantially in the form of Exhibit E, on an as-is, where-is, non-installment,
cash sale basis, without recourse to or warranty or agreement of any kind by the
Lessor acknowledging the transfer and vesting of title and ownership of the
Nuclear Material and any spent fuel relating thereto for which title has not
been transferred to the Lessee, in accordance with paragraph (c) above and
confirming that upon payment by the Lessee of the amounts set forth in the
immediately preceding sentence, the Nuclear Material is free and clear of the
Liens created by the Collateral Agreements, together with such documents, if
any, as may be required to evidence the release of such Liens.
19. Investment Tax Credit. To the extent that the Lessee determines the
Nuclear Material is or becomes eligible for any investment or similar credit
under the Code as now or hereafter in effect, the Lessee shall request in
writing that the Lessor elect to treat the Lessee as having acquired such
Nuclear Material, and, if permitted to do so under the Code and under any other
applicable law, rule or regulation, the Lessor, pursuant to such request of the
Lessee, shall provide the Lessee with an appropriate investment credit election
and the Lessee shall consent to such election. A condition to the Lessor's
making such election will be the provision by the Lessee of a report or
statement with respect to all Nuclear Material as to which the investment credit
election is applicable. Such report or statement shall contain such information
and be in such form as may be required for Internal Revenue Service reporting
purposes. The Lessee shall indemnify and hold harmless the Lessor and any
affiliates with respect to any adverse tax consequence, other than the loss of
the credit, which may result from such election including, but not limited to,
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any increase in the Lessor's income taxes due to any required reduction of the
Lessor's tax basis below the Lessor's cost of the Nuclear Material, and the
Lessee agrees to pay to or on behalf of the Lessor, or otherwise make available
to the Lessor, funds sufficient to put the Lessor in the same after-tax position
(other than by reason of the loss of the investment credit) the Lessor would
have been in if such election had not been made.
20. Certificates; Information; Financial Statements.
(a) The Lessee will from time to time deliver to the Lessor
and the Secured Parties, promptly upon reasonable request (i) a statement
executed by any Vice President, Treasurer or Assistant Treasurer or any other
assistant officer of the Lessee, certifying the dates to which the sums payable
hereunder have been paid, that this Lease Agreement is unmodified and in full
effect (or, if there have been modifications, that this Lease Agreement is in
full effect as modified, and identifying such modifications) and that no Lease
Event of Default or Terminating Event has occurred and is continuing (or
specifying the nature and period of existence of any thereof and what action the
Lessee is taking or proposes to take with respect thereto), (ii) such
information with respect to the Nuclear Material as the Lessor or the Secured
Parties may reasonably request, and (iii) such information with respect to the
Lessee's operations, business, property, assets, financial condition or
litigation as the Lessor or any assignee of the Lessor or the Secured Parties
may reasonably request.
(b) The Lessee will deliver to the Lessor and the Secured
Parties:
(i) Quarterly Financial Statements. As soon as
practicable and in any event within ninety (90) days after the end of each
fiscal quarter (other than the last fiscal quarter in each fiscal year),
three (3) copies of a balance sheet of the Lessee (consolidated and
consolidating if the Lessee has any subsidiaries) as of the end of such
quarter and of statements of income and cash flows of the Lessee
(consolidated and consolidating if the Lessee has any subsidiaries) for
such quarter, setting forth in each case corresponding figures in
comparative form for the corresponding period of the preceding fiscal
year, each certified as true and correct by the chief accounting officer
thereof; provided, however, that delivery pursuant to clause (iii) below
of copies of the Lessee's Quarterly Report on Form 10-Q for such quarter
containing such financial statements filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirements of this
clause (i);
(ii) Annual Financial Statements. As soon as practicable
and in any event within one hundred and twenty (120) days after the end of
each fiscal year, three (3) copies of an annual report of the Lessee
consisting of its financial statements, including a balance sheet as of
the end of such fiscal year (consolidated and consolidating if the Lessee
has any subsidiaries) and statements of income and cash flows for the year
then ended (consolidated and consolidating if the Lessee has any
subsidiaries), setting forth corresponding figures in comparative form for
the preceding fiscal year, with all notes thereto, all in reasonable
detail and certified by independent public accountants of recognized
standing selected by the Lessee (only with respect to the consolidated
financial statements, if applicable); provided, however, that delivery
pursuant to clause (iii) below of copies of the Lessee's Annual Report on
Form 10-K for such fiscal year containing such financial statements filed
with the Securities and Exchange Commission shall be deemed to satisfy the
requirements of this clause (ii); and
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(iii) SEC Reports, etc. With reasonable promptness,
copies of all notices, reports or materials filed by the Lessee with the
Securities and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange Commission)
under the Securities Act of 1933, as amended, other than Registration
Statements on Form S-8 or any amendments thereto, or the Securities
Exchange Act of 1934, as amended, other than Annual Reports on Form 10-K,
and including without limitation, all Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Together with each delivery of financial statements required by clause (b)(i)
above, the Lessee will deliver to the Lessor and the Secured Parties an
Officer's Certificate stating that the Lessee is in compliance with the terms of
this Lease Agreement and stating that there exists no Lease Event of Default, or
Terminating Event or, if any Lease Event of Default, or Terminating Event
exists, specifying the nature and period of existence thereof and what action
the Lessee proposes to take with respect thereto. The Lessee also covenants that
promptly upon the obtaining of knowledge of a Lease Event of Default by the
chief executive officer, principal financial officer or principal accounting
officer of the Lessee, it will deliver to the Lessor and the Secured Parties an
Officer's Certificate specifying the nature and period of existence thereof and
what action the Lessee proposes to take with respect thereto.
21. Obligation of the Lessee to Pay Rent. The Lessee's obligation to pay,
as the same becomes due, Basic Rent, Additional Rent, Termination Rent, and all
other amounts payable hereunder shall, subject to the covenant of the Lessor
contained in Section 3 hereof, be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (i) any setoff,
counterclaim, recoupment, defense or other right which the Lessee may have
against the Lessor or anyone else for any reason whatsoever, (ii) any defect in
the title, compliance with specifications, condition, design, operation or
fitness for use of, or any damage to or loss or destruction of, any Nuclear
Material, or (iii) any interruption or cessation in the use or possession of any
Nuclear Material by the Lessee for any reason whatsoever. The Lessee hereby
waives, to the extent permitted by applicable law, any and all rights which it
may now have or which at any time hereafter may be conferred upon it, by statute
or otherwise, to terminate, cancel, quit or surrender this Lease Agreement
except in accordance with its express terms. Each payment of Rent and each other
payment made by the Lessee shall be final, and the Lessee will not seek to
recover all or any part of such payment from the Lessor for any reason
whatsoever.
22. Miscellaneous.
(a) Successors and Assigns. This Lease Agreement shall be
binding upon the Lessee and the Lessor and their respective successors and
assigns and shall inure to the benefit of the Lessee and the Lessor and their
respective successors and assigns.
(b) Waiver. Neither party shall by act, delay, omission or
otherwise be deemed to have waived any of its rights or remedies hereunder
unless such waiver is given in writing. A waiver on one occasion shall not be
construed as a waiver on any other occasion.
(c) Entire Agreement. This Lease Agreement, together with the
written instruments provided for or contemplated hereby, the other Basic
Documents and other written agreements between the parties dated as of the date
hereof, constitute the entire agreement between the parties with respect to the
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leasing of Nuclear Material, and no representations, warranties, promises,
guaranties or agreements, oral or written, express or implied, have been made by
either party or by any one else with respect to this Lease Agreement or the
Nuclear Material, except as may be expressly provided for herein or therein. Any
change or modification of this Lease Agreement must be in writing and duly
executed by the parties.
(d) Descriptive Headings. The captions in this Lease Agreement
are for convenience of reference only and shall not be deemed to affect the
meaning or construction of any of the provisions.
(e) Severability. Any provision of this Lease 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.
(f) Governing Law. This Lease Agreement and the rights and
obligations of the parties hereunder shall be construed in accordance with and
be governed by the law of the Commonwealth of Pennsylvania.
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IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease
Agreement to be executed and delivered by their duly authorized officers as of
the day and year first above written.
TMI-1 FUEL CORP.
Lessor
ATTEST
By:
- ------------------------ ---------------------------
(Assistant) Secretary Name:
---------------------------
Title:
---------------------------
JERSEY CENTRAL POWER & LIGHT
COMPANY
Lessee
ATTEST
By:
- ------------------------ ----------------------------
(Assistant) Secretary Name: T.G. Howson
----------------------------
Title: Vice President
----------------------------
24
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STATE OF )
------------------------------
COUNTY OF ) SS:
--------------
On this --- day of ----------, 1998, before me personally appeared ,
to me personally known, who, being by me duly sworn, says that he is of TMI-1
Fuel Corp. and that said instrument was signed on behalf of said corporation by
authority of its Board of Directors, and he acknowledged that the execution of
the foregoing instrument was the free act and deed of said corporation.
----------------------------------------------
Notary Public
My commission Expires:
STATE OF )
------------------------------
COUNTY OF ) SS:
--------------
On this --- day of -----------, 1998, before me personally appeared
T. G. Howson, to me personally known, who, being by me duly sworn, says that he
is a Vice President of Jersey Central Power & Light Company and that said
instrument was signed on behalf of said corporation by authority of its Board of
Directors, and he acknowledged that the execution of the foregoing instrument
was the free act and deed of said corporation.
----------------------------------------------
Notary Public
My commission Expires:
25
<PAGE>
ATTACHMENTS
Appendix A -- Definitions
Exhibit A -- Form of Interim Leasing Record
Exhibit B -- Form of Final Leasing Record
Exhibit C -- Nuclear Material Contracts
Exhibit D -- Form of Assignment Agreement and Consent
Exhibit E -- Form of Lessor's Bill of Sale
Exhibit F -- Form of Rent Due and SCV
Confirmation Schedule
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APPENDIX A
DEFINITIONS
As used in the Basic Documents (as defined below), the following
terms shall have the following meanings (such definitions to be applicable to
both singular and plural forms of the terms defined), except as otherwise
specifically defined therein:
"Acquisition Cost" means the purchase price of any Nuclear Material,
any progress payments made thereon, costs of milling, conversion, enrichment,
fabrication, installation, delivery, redelivery, containerization, storage,
reprocessing, any other costs incurred by the Company in acquiring the Nuclear
Material (less any discounts or credits actually utilized by the Company), plus
in any case (i) any allowance for funds used during construction (including any
income tax component associated with such allowance) with respect to Nuclear
Material purchased by the Company, (ii) at the option of the Lessee, any Rent
relating to costs incurred in the ordinary course of operations but excluding
Rent relating to extraordinary costs, including without limitation,
indemnification payments, payable by the lessee to the Company with respect to
any Nuclear Material prior to the installation of such Nuclear Material for
operation in the Generating Facility, (iii) any sales, excise or other taxes or
charges payable by the Company with respect to any such payment for such Nuclear
Material, (iv) at the option of the Lessee, any Monthly Financing Charge payable
by the Lessee to the Company with respect to Nuclear Material during any period
in which such Nuclear Material is subject to an Interim Leasing Record, but
excluding any interest charges or penalties for late payment by the Company of
the purchase price or any portion thereof, if such late payment results from the
negligence of the Company, (v) such other costs with respect to any Nuclear
Material as may be agreed by the Company and the Lessee and approved by the
Administrative Agent, in each case in writing, and, in the case of any Nuclear
Material removed from the Generating Facility for the purpose of "cooling off'
and repair or reprocessing, shall include the Stipulated Casualty Value thereof
at the time of such removal, if any, and (vi) at the option of the Lessee, any
Financing Costs. Any amount realized by the Company from the disposition of the
by-products (including, but not limited to, plutonium) of Nuclear Material
specified in a Leasing Record during the repair or reprocessing of such Nuclear
Material while leased hereunder shall be credited against the Acquisition Cost
of such Nuclear Material.
"Additional Rent" shall mean all legal, accounting, administrative
and other operating expenses and taxes incurred by the Company to the extent not
paid as part of Basic Rent (including, without limitation, any Cancellation Fees
and all other liabilities incurred or owed by the Company pursuant to the Basic
Documents) and all amounts (other than Basic Rent) that the Lessee agrees to pay
under the Lease Agreement (including, without limitation, indemnification
payable under the Lease Agreement, general and administrative expenses of the
Company, and, to the extent not included in Acquisition Cost, Financing Costs)
and interest at the rate incurred by the Company or any Secured Party as a
result of any delay in payment by the Lessee to meet obligations that would have
been satisfied out of prompt payment by the Lessee, and the amount of any and
all other costs, losses, damages, interest, taxes, deficiencies, liabilities,
obligations, actions, judgments, suits, claims, fees (including, without
limitation, attorneys' fees and disbursements) and expenses, of every kind,
nature, character and description, direct or indirect, that may be imposed on or
incurred by the Company as a result of, arising from or relating to, in any
manner whatsoever, one or more Basic Documents, or any other document referred
to therein, or the transactions contemplated thereby or the enforcement thereof.
For purposes of calculating the interest incurred by the Company or any Secured
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Party as a result of any such delay, it shall be assumed that the Company or any
Secured Party, as applicable, incurred interest at the Credit Agreement Default
Rate.
"Administrative Agent" shall have the meaning specified therefor in
the first paragraph of the Credit Agreement.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such Person. For purposes of this definition, the term "control," as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise.
"Aggregate Monthly Rent Component" shall mean the sum of the Monthly
Rent Components for all items of Nuclear Material which are installed in the
Generating Facility during the relevant period.
"Arranging Agent" shall have the meaning specified therefor in the
first paragraph of the Credit Agreement.
"Assigned Agreement" means a Nuclear Material Contract which has
been assigned to the Company in the manner specified in Section 5 of the Lease
Agreement pursuant to a duly executed and delivered Assignment Agreement. The
term Assigned Agreement shall include a Partially Assigned Agreement.
"Assignment Agreement" means an assignment agreement substantially
in the form of Exhibit D to the Lease Agreement.
"Atomic Energy Act" means the Atomic Energy Act of 1954, as from
time to time amended.
"Banks" shall have the meaning specified therefor in Section 1.02 of
the Credit Agreement.
"Basic Documents" means the Lease Agreement, the Credit Agreement,
the Security Agreement, the Commercial Paper, the Notes, the Letter Agreement,
the Dealer Agreements, the Assigned Agreements, the Assignment Agreements, the
Trust Agreement, the Depositary Agreement, each Bill of Sale, each Leasing
Record, each SCV Confirmation Schedule, and other agreements related or
incidental thereto which are identified in writing by the Company, the Lessee
and the Secured Parties as one of the "Basic Documents," in each case, as such
documents may be amended from time to time.
"Basic Rent" means, for any Basic Rent Period, the sum of (a) that
portion of the Monthly Financing Charge not allocated to Acquisition Cost
pursuant to the Lease Agreement plus (b) the Aggregate Monthly Rent Component as
shown on a Rent Due and SCV Confirmation Schedule for such Basic Rent Period.
"Basic Rent Payment Date" means, for any Basic Rent Period, the
first Business Day of the next succeeding calendar month following such Basic
Rent Period.
"Basic Rent Period" means each calendar month or portion thereof
commencing on, in the case of the first such period, the effective date of the
Lease Agreement, and in the case of each succeeding period, the first day
following the immediately preceding Basic Rent Period, and ending on the
earliest of (i) the last day of any calendar month or (ii) the Termination
Settlement Date.
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"BTU Charge" means the dollar amount set forth in the BTU Charge
Agreement which is used to calculate the Monthly Rent Component. The BTU Charge
initially set forth for any Nuclear Material in any Final Leasing Record shall
be the amount agreed upon by the Lessor and the Lessee as set forth in
Attachment 1 to Exhibit B to the Lease Agreement based upon the reasonably
anticipated operating life, BTU output, and utilization of such Nuclear
Material.
"BTU Charge Agreement" shall mean an agreement in the form of
Attachment 1 to Exhibit B to the Lease Agreement with respect to any Nuclear
Material executed by the Lessor and the Lessee on or prior to the date of the
Final Leasing Record covering such Nuclear Material.
"Business Day" means any day other than (i) a Saturday or Sunday or
(ii) a day on which banking institutions in New York City are authorized by law
to close.
"Capitalized Lease" means any and all lease obligations which are or
should be capitalized on the balance sheet of the Person in question in
accordance with generally accepted accounting principles and Statement No. 13 of
the Financial Accounting Standards Board or any successor to such pronouncement
regarding lease accounting, without regard for the accounting treatment
permitted or required under any applicable state or federal public utility
regulatory accounting system, unless such treatment controls the determination
of the generally accepted accounting principles applicable to such Person.
"Cash Collateral" shall have the meaning specified therefor in
Section 1.02 of the Credit Agreement.
"Closing," means ------- ----, 1998.
"Code" means the Internal Revenue Code of 1986, as from time to time
amended.
"Collateral" has the meaning set forth in the granting clauses of
the Security Agreement and includes all property of the Company described in the
Security Agreement as comprising part of the Collateral.
"Collateral Agent" shall have the meaning specified therefor in
Section 1.02 of the Credit Agreement.
"Collateral Agreements" means, collectively, the Security Agreement,
all Assignment Agreements, and any other assignment, security agreement or
instrument executed and delivered to the Secured Parties hereafter relating to
property of the Company which is security for the Notes.
"Collected Funds" means funds which are immediately available to the
Secured Parties, as the Lessor's assignees, for its use in New York, New York.
"Commercial Paper" shall have the meaning specified therefor in
Section 1.02 of the Credit Agreement.
"Commercial Paper Discount" shall mean, at any time, amounts payable
by the Company in respect of the Face Amount of Commercial Paper outstanding in
excess of the Acquisition Cost together with any Cash Collateral reduced by the
aggregate total amount, if any, of (i) the Monthly Rent Components paid by the
Lessee to the Lessor with respect to the Nuclear Material financed thereby and
(ii) any Monthly Financing Charge payable by the Lessee to the Company with
respect to Nuclear Material during any period in which such Nuclear Material is
subject to an Interim Leasing Record ("Excess Face Amount"); provided, however,
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that any such Excess Face Amount shall not exceed the additional Face Amount of
Commercial Paper necessary to be issued by the Company at a discount to face
value to purchasers thereof in the commercial paper market in order to obtain
proceeds in an amount equal to the Acquisition Cost reduced by the aggregate
total amount, if any, of (a) the Monthly Rent Components paid by the Lessee to
the Lessor with respect to the Nuclear Material financed thereby and (b) any
Monthly Financing Charge payable by the Lessee to the Company with respect to
Nuclear Material during any period in which such Nuclear Material is subject to
an Interim Lease Record, together with any Cash Collateral. Amounts payable in
respect of Commercial Paper Discount during any calendar month or portion
thereof shall be paid on the first Business Day of the next succeeding month in
which such amounts are incurred.
"Company" means the TMI-1 Fuel Corp., a Delaware corporation.
"Consents and Agreements" means the agreements, each substantially
in the form attached as Exhibit 2 to Exhibit D to the Lease Agreement, between
the Lessee and the various contractors under the Nuclear Material Contracts,
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.
"Controlled Group" means a controlled group of corporations of which
the Company is a member within the meaning of Section 414(b) of the Code, any
group of corporations or entities under common control with the Company within
the meaning of Section 414(c) of the Code or any affiliated service group of
which the Company is a member within the meaning of Section 414(m) of the Code.
"Credit Agreement" means the Credit Agreement dated as of -----,
1998 among TMI-1 Fuel Corp. The First National Bank of Chicago, as
Administrative Agent, PNC Bank, National Association, as Syndication Agent, the
Banks parties thereto, and First Chicago Capital Markets, Inc. and PNC Capital
Markets, Inc., as Arrangers.
"Credit Agreement Default" means an event which would, with the
lapse of time or the giving of notice or both, constitute a Credit Agreement
Event of Default.
"Credit Agreement Event of Default" means any one or more of the
events specified in Section 10.01 of the Credit Agreement.
"Dealer Agreements" mean ------------------------------------------.
"Deemed Loss Event" means the following event: if at any time during
the term of the Lease Agreement, (A) the Company, by reason solely of the
ownership of the Nuclear Material or any part thereof or the lease of the
Nuclear Material to the Lessee under the Lease Agreement, or the Company or any
Secured Party, by reason solely of any other transaction contemplated by the
Lease Agreement or any of the other Basic Documents, shall be deemed, by any
governmental authority having jurisdiction, to be, or to be subject to
regulation as an "electric utility" or a "public utility" or a "public utility
holding company" or similar type of entity, under any applicable law or deemed a
"public utility company" or a "subsidiary company" or a "holding company" within
the meaning of the Public Utility Holding Company Act, (B) the Public Utility
Holding Company Act shall be amended, applied, or interpreted in a manner, or
any rules or regulations shall be adopted under the Public Utility Holding
Company Act of 1935, which adversely affect the legality, validity and
enforceability of the lease obligations of the Company and the Lessee under the
Lease Agreement, or (C) either the Company or any of the Secured Parties, by
reason solely of being a party to the Basic Documents, shall be required to
obtain any consent, order or approval of, or to make any filing or registration
with, or to give any notice
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to, any governmental authority, or be subject to any liabilities, duties or
obligations under the Public Utility Holding Company Act, other than the filing
by the Company of a certificate on Form U-7D with the SEC pursuant to SEC Rule
7(d) under the Public Utility Holding Company Act (17 C.F.R. Section 250.7(d)),
except in any case if the same shall be solely the result of Nonburdensome
Regulation; provided, however, that if in compliance with applicable laws, the
Lessee, with the cooperation of the Company, shall have acted diligently and in
good faith to contest, or obtain an exemption from the application of the laws,
rules or regulations described in clauses (A), (B) or (C) to the Company, the
Secured Parties or the Lessee, as the case may be, the application of which
would otherwise constitute a Deemed Loss Event, such Deemed Loss Event shall be
deemed not to have occurred so long as (I) the Lessee shall have furnished to
the Company and the Secured Parties an opinion of counsel reasonably
satisfactory to the Company and the Secured Parties to the effect that there
exists a reasonable basis for such contest or exemption and that the application
of such laws, rules or regulations to the Company, the Secured Parties or the
Lessee, as the case may be, shall be effectively stayed during the application
for exemption or contest and such laws, rules or regulations shall not be
applied retroactively at the conclusion of such contest, (II) the Company or the
Secured Parties shall have determined in their sole discretion that such contest
or exemption shall not adversely affect their business or involve any danger of
the sale, foreclosure or loss of, or creation of a Lien upon, the Collateral,
and (III) the Lessee shall have agreed to indemnify the Company or such Secured
Parties, as the case may be, for expenses incurred in connection with such
contest or exemption; and further provided, that following notice from the
Lessee to the Company or the Secured Parties, as the case may be, that the
Lessee shall be unable to furnish the opinion described in clause (I) of the
next preceding proviso or that any such contest shall not be successful or such
exemption shall not be available, a Deemed Loss Event shall be deemed not to
have occurred for such period, not to exceed 270 days, as may be approved by any
governmental authority having jurisdiction during which application of such law,
rule or regulation to the Company, the Secured Parties or the Lessee, as the
case may be, shall be suspended to enable the Company to assign or transfer its
interest in the Collateral so long as during such period the Company shall use
reasonable efforts to assign or transfer its interest in the Collateral upon
commercially reasonable terms and conditions, provided that the Company shall
not be required to assign or transfer the Nuclear Material for a price which,
after deduction of sales tax and expenses of such sale incurred by the Company,
shall be less than the sum of (A) Stipulated Casualty Value determined as of the
date of such proposed sale, and (B) the Termination Rent determined in
accordance with Section 18 of the Lease Agreement.
"Depositary Agreement" means the Depositary Agreement, dated as of
_____, 1998, among the Company, Chase Manhattan Bank, as Depositary and The
First National Bank of Chicago, as Administrative Agent.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as from time to time amended.
"Excepted Payments" means any indemnity, expense, or other payment
which by the terms of any of the Basic Documents shall be payable to the Company
in order for the Company to satisfy its obligations pursuant to Section 7.8 of
the Trust Agreement.
"Face Amount" shall have the meaning specified therefor in Section
1.02 of the Credit Agreement.
"Federal Energy Regulatory Commission" means the independent
regulatory commission of the Department of Energy of the United States
Government
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existing under the authority of the Department of Energy Organization Act, as
amended, or any successor organization or organizations performing any identical
or substantially identical licensing and related regulatory functions.
"Federal Power Act" means the Federal Power Act, as amended.
"Final Leasing Record" means a Leasing Record which records the
leasing of Nuclear Material during any period while such Nuclear Material is
installed for operation in the Generating Facility. A Final Leasing Record shall
be in the form of Exhibit B to the Lease Agreement.
"Financing Costs" means (a) fees and other amounts owing to any
Secured Party or to the Owner Trustee under the Trust Agreement, (b) legal fees
and disbursements and other amounts referred to in Section 10(b) of the Security
Agreement, (c) legal, accounting, and other fees and expenses incurred by the
Lessee and/or the Company in connection with the preparation, execution and
delivery of Basic Documents or the issuance of the Commercial Paper and/or the
Notes, and (d) such other reasonable fees and expenses of the Owner Trustee and
the Company as they may be entitled to under the Basic Documents.
"Fuel Management" means the design of, contracting for, fixing the
price and terms of acquisition of, management, movement, removal, disengagement,
storage and other activities in connection with the acquisition, utilization,
storage and disposal of the Nuclear Material.
"Generating Facility" means the nuclear reactor located at the Three
Mile Island Unit 1 Nuclear Generating Station, located in Londonderry Township,
Pennsylvania.
"Heat Production" means the stage of the Nuclear Material Cycle
commencing with the commercial operation of a Generating Facility, during which
the Nuclear Material in question is producing thermal energy which results in
the production of net positive electrical energy transmitted within the
distribution network of any utility and during which the Nuclear Material in
question is engaged in the reactor core of such Generating Facility.
"Hereof," "herein," "hereunder" and words of similar import when
used in a Basic Document refer to such Basic Document as a whole and not to any
particular section or provision thereof.
"Imposition" means any payment required by a public or governmental
authority in respect of any property subject to the Lease Agreement or any
transaction pursuant to the Lease Agreement or any right or interest held by
virtue of the Lease Agreement; provided, however, that Imposition shall not
include any taxes, whether federal, state or local, payable by any Secured Party
based on or measured by net income of any Secured Party where taxable income is
computed in substantially the same manner as taxable income is computed under
the Code.
"Insurance Requirements" means all terms of any insurance policy or
indemnification agreement covering or applicable to (i) any Nuclear Material or
(ii) the Generating Facility or the Lessee in its capacity as licensee of the
Generating Facility, in each case insofar as any insurance policy or
indemnification agreement directly or indirectly relates to the Nuclear Material
or the performance by the Lessee of its obligations under the Basic Documents,
and all requirements of the issuer of any such policy or agreement necessary to
keep such insurance or agreements in force.
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"Interim Leasing Record" means a Leasing Record which records the
leasing of Nuclear Material (i) prior to installation for operation in the
Generating Facility, (ii) after removal from the Generating Facility during the
"cooling off" and storage period, and (iii) while being reprocessed. An Interim
Leasing Record shall be in the form of Exhibit A to the Lease Agreement.
"Investment Company Act" means the Investment Company Act of 1940,
as from time to time amended.
"Issuing Bank" shall have the meaning specified therefor in the
first paragraph of the Credit Agreement.
"Lease Agreement" means the Second Amended and Restated Nuclear
Material Lease Agreement, dated as of -------- ---, 1998 between TMI-1 Fuel
Corp., as the Lessor, and Jersey Central Power & Light Company, as the Lessee,
as the same may be modified, supplemented or amended from time to time.
"Lease Event of Default" has the meaning specified in Section 16
of the Lease Agreement.
"Leasing Record" is a form signed by the Lessor and the Lessee to
record the leasing under the Lease Agreement of the Nuclear Material specified
in such Leasing Record. A Leasing Record shall be either an Interim Leasing
Record or a Final Leasing Record.
"Legal Requirements" means all applicable provisions of the Atomic
Energy Act, all applicable orders, rules, regulations and other requirements of
the Nuclear Regulatory Commission and the Federal Energy Regulatory Commission,
and all other laws, rules, regulations and orders of any other jurisdiction or
regulatory authority relating to (i) the licensing, acquisition, storage,
containerization, transportation, blending, transfer, consumption, leasing,
insuring, using, operating, disposing, fabricating, channelling and reprocessing
of the Nuclear Material, (ii) the Generating Facility or the Lessee in its
capacity as licensee of the Generating Facility, in each case insofar as such
provisions, orders, rules, regulations, laws and other requirements directly or
indirectly relate to the Nuclear Material or the performance by the Lessee of
its obligations under the Basic Documents or (iii) the Basic Documents, insofar
as any of the foregoing directly or indirectly apply to the Lessee.
"Lessee" has the meaning specified in the introduction to the
Lease Agreement.
"Lessee Representative" means a person at the time designated to act
on behalf of the Lessee by a written instrument furnished to the Company and the
Secured Parties containing the specimen signature of such person and signed on
behalf of the Lessee by any of its officers. The certificate may designate an
alternate or alternates. A Lessee Representative may be an employee of the
Lessee or of the Owner Trustee.
"Lessor" has the meaning specified in the introduction to the
Lease Agreement, and its successors and assigns.
"Lessor's Bill of Sale" means an instrument substantially in the
form of Exhibit E to the Lease Agreement, pursuant to which title to all or any
portion of the Nuclear Material is transferred to the Lessee or any designee of
the Lessee.
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"Letter Agreement" means the Lessee's Letter Agreement Regarding
TMI-1 Fuel Corp., dated as of ---------- ---, 1998, between the Lessee, the
Company, and the Administrative Agent, as it may be amended from time to time.
"Lien" means any mortgage, pledge, lien, security interest, title
retention, charge or other encumbrance of any nature whatsoever (including any
conditional sale or other title retention agreement, any lease in the nature
thereof and the filing of or agreement to execute and deliver any financing
statement under the Uniform Commercial Code of any jurisdiction).
"Loans" shall have the meaning specified therefor in Section 1.02 of
the Credit Agreement.
"Majority Secured Parties" means at any time the Secured Parties
holding at such time more than 66% of the outstanding principal amount of all
Secured Obligations.
"Manufacturer" means any supplier of Nuclear Material or of any
service (including without limitation, enrichment, fabrication, transportation,
storage and processing) in connection therewith, or any agent or licensee of any
such supplier.
"Manufacturer's Consent" means any consent which may be given by a
Manufacturer under a Nuclear Material Contract to the assignment by the Lessee
to the Company of all or a portion of the Lessee's rights under such Nuclear
Material Contract or of all or a portion of any such rights previously assigned
by the Lessee to the Secured Parties.
"Monthly Debt Service" for any calendar month means the sum of the
Monthly Financing Charge for such calendar month.
"Monthly Financing Charge" means, for any calendar month or
portion thereof, the sum of:
(a) all Commercial Paper Discount payable by the Company with
respect to Commercial Paper outstanding during such month and/or all
interest payable by the Company during such month with respect to all
outstanding Notes and in each case, not included in Acquisition Cost; and
(b) the amounts paid or due and payable by the Company with respect
to the transactions contemplated by the Basic Documents during such
calendar month for the following other fees, costs, charges and expenses
incurred or owed by the Company under or in connection with the Lease
Agreement or the other Basic Documents: (i) legal, printing, reproduction
and closing fees and expenses, (ii) auditors', accountants' and attorneys'
fees and expenses, (iii) franchise taxes and income taxes, and (iv) any
other fees and expenses incurred by the Company under or in respect of the
Basic Documents.
Any figure used in the computation of any component of the Monthly Financing
Charge shall be stated to five decimal places.
"Monthly Rent Component" for any Nuclear Material covered by a Final
Leasing Record for each calendar month during the lease of such Nuclear Material
shall be as follows:
(i) for the first partial calendar month the Monthly Rent
Component shall be zero;
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(ii) for the first full calendar month the Monthly Rent
Component shall be zero;
(iii) for the second full calendar month the Monthly Rent
Component shall be zero;
(iv) for the third full calendar month the Monthly Rent
Component shall be an amount determined by multiplying (x) the amount of
thermal energy in millions of British Thermal Units of heat produced by
such Nuclear Material during the first calendar month while covered by the
Final Leasing Record and also during the first partial calendar month, if
any, such Nuclear Material was covered by an Interim or Final Leasing
Record and was engaged in Heat Production by (y) the BTU Charge set forth
in the Final Leasing Record covering such Nuclear Material; and
(v) for each full calendar month after the third full calendar
month, the Monthly Rent Component shall be an amount determined by
multiplying (x) the amount of thermal energy in millions of British
Thermal Units of heat produced by such Nuclear Material during the second
preceding month by (y) the BTU Charge set forth in the Final Leasing
Record covering such Nuclear Material.
The BTU Charge for any Nuclear Material may be revised by the Lessee at any time
during the lease thereof to reflect any reasonably anticipated change in its
operating life, BTU output, or utilization. Such revision shall be effected by
the Lessee's executing and forwarding to the Lessor a revised Final Leasing
Record dated the first day of the following month and setting forth such revised
BTU Charge. Upon receipt of such revised Final Leasing Record, the Lessor shall
execute and return a copy thereof to the Lessee. Such revised BTU Charge shall
be applicable to such Nuclear Material for each month thereafter beginning on
the date of the revised Final Leasing Record.
"NJBPU" means the New Jersey Board of Public Utilities or any
successor agency thereto.
"Nonburdensome Regulation" means (i) ministerial regulatory
requirements that do not impose limitations or regulatory requirements on the
business or activities of, or adversely affect, the Company or any Secured Party
and that are deemed, in the reasonable discretion of the Company or any Secured
Party, not to be burdensome, or (ii) assuming redelivery of the Nuclear Material
in accordance with the Lease Agreement, regulation resulting from any possession
of the Nuclear Material (or right thereto) on or after the termination of the
Lease Agreement.
"Notes" shall have the meaning specified therefor in Section 1.02 of
the Credit Agreement.
"Nuclear Incident" shall have the meaning specified in the Atomic
Energy Act, 42 U.S.C. Section 2014(q), as such definition may be amended from
time to time.
"Nuclear Material" means those items which have been purchased by or
on behalf of the Company for which a duly executed Leasing Record has been
delivered to the Company and which continue to be subject to the Lease Agreement
consisting of (i) the items described in such Leasing Record and each of the
components thereof in the respective forms in which such items exist during each
stage of the Nuclear Material Cycle, being substances and equipment which, when
fabricated and assembled and loaded into a nuclear reactor, are intended to
produce heat, together with all attachments, accessories, parts and additions
and
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all improvements and repairs thereto, and all replacements thereof and
substitutions therefor and (ii) the substances and materials underlying the
right, title and interest of the Lessee under any Nuclear Material Contract
assigned to the Company pursuant to the Lease Agreement; provided, however, that
the term Nuclear Material shall not include spent fuel.
"Nuclear Material Contract" means any contract, as from time to time
amended, modified or supplemented, entered into by the Lessee, either in its own
name or as agent for the Lessor, with one or more Manufacturers relating to the
acquisition of Nuclear Material or any service in connection with the Nuclear
Material.
"Nuclear Material Cycle" means the various stages in the process,
whether physical or chemical, by which the component parts of the Nuclear
Material are designed, mined, milled, processed, converted, enriched, fabricated
into assemblies utilizable for Heat Production, loaded or installed into a
reactor core, utilized, disengaged from a reactor core or stored, together with
all incidental processes with respect to the Nuclear Material at any such stage.
"Nuclear Regulatory Commission" means the independent regulatory
commission of the United States Government existing under the authority of the
Energy Reorganization Act of 1974, as amended, or any successor organization or
organizations performing any identical or substantially identical licensing and
related regulatory functions.
"Obligations" means (i) all items (including, without limitation,
Capitalized Leases but excluding shareholders' equity and minority interests)
which in accordance with generally accepted accounting principles should be
reflected on the liability side of a balance sheet as at the date as of which
such obligations are to be determined; (ii) all obligations and liabilities
(whether or not reflected upon such balance sheet) secured by any Lien existing
on the Property held subject to such Lien, whether or not the obligation or
liability secured thereby shall have been assumed; and (iii) all guarantees,
endorsements (other than for collection in the ordinary course of business) and
contingent obligations in respect of any liabilities of the type described in
clauses (i) and (ii) of this definition (whether or not reflected on such
balance sheet); provided, however, that the term 'Obligations' shall not include
deferred taxes.
"Obligations for Borrowed Money or Deferred Purchase Price" means
all Obligations in respect of borrowed money or the deferred purchase price of
property or services.
"Officer's Certificate" means, with respect to any corporation, a
certificate signed by the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Comptroller, or any Assistant Comptroller of such
corporation, and with respect to any other entity, a certificate signed by an
individual generally authorized to execute and deliver contracts on behalf of
such entity.
"Outstandings" shall have the meaning specified therefor in Section
1.02 of the Credit Agreement.
"Owner Trust Estate" means all estate, right, title and interest of
the Owner Trustee in and to the outstanding stock of the Company and in and to
all monies, securities, investments, instruments, documents, rights, claims,
contracts, and other property held by the Owner Trustee under the Trust
Agreement; provided, however, that there shall be excluded from the Owner Trust
Estate all Excepted Payments.
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"Owner Trustee" means United States Trust Company of New York, not
in its individual capacity but solely as trustee under and pursuant to the Trust
Agreement, and its permitted successors.
"Partially Assigned Agreement" means a Nuclear Material Contract
which has been assigned, in part but not in full, to the Company in the manner
specified in Section 5 of the Lease Agreement pursuant to a duly executed and
delivered Assignment Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation, created by
Section 4002(a) of ERISA and any successor thereto.
"Permitted Liens" means (i) any assignment of the Lease Agreement
permitted thereby, and by the Credit Agreement, (ii) liens for Impositions not
yet payable, or payable without the addition of any fine, penalty, interest or
cost for nonpayment, or being contested by the Lessee as permitted by Section 11
of the Lease Agreement, (iii) liens and security interests created by the
Security Agreement, (iv) the title transfer and commingling of the Nuclear
Material contemplated by paragraph (h) of Section 10 of the Lease Agreement, and
(v) liens of mechanics, laborers, materialmen, suppliers or vendors, or rights
thereto, incurred in the ordinary course of business for sums of money which
under the terms of the related contracts are not more than 30 days past due or
are being contested in good faith by the Lessee as permitted by Section 11 of
the Lease Agreement; provided, however, that, in each case, such reserve or
other appropriate provision, if any, as shall be required by generally accepted
accounting principles shall have been made in respect thereto.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization or other business entity or any
government or any political subdivision or agency thereof.
"Plan" means, with respect to any Person, any plan of a type
described in Section 4021(a) of ERISA in respect of which such Person is an
"employer" or a "substantial employer" as defined in Sections 3(5) and 4001 (a)
(2) of ERISA, respectively.
"Proceeds" shall have the meaning assigned to it under the Uniform
Commercial Code, as amended, and, in any event, shall include, but not be
limited to, (i) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to the Company from time to time with respect to the
Collateral, (ii) any and all payments (in any form whatsoever) made or due and
payable to the Company from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental body, authority, bureau or agency (or any person
acting under color of governmental authority), and (iii) any and all other
amounts from time to time paid or payable under or in connection with any of the
Collateral.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Public Utility Holding Company Act" means the Public Utility
Holding Company Act of 1935, as from time to time amended.
"Qualified Institution" means a commercial bank organized under the
laws of, and doing business in, the United States of America or in any State
thereof, which has combined capital, surplus and undivided profits of at least
$150,000,000 having trust power.
37
<PAGE>
"Related Person" means, with respect to any Person, any trade or
business, (whether or not incorporated) which, together with such Person, is
under common control as described in Section 414(c) of the Code.
"Rent" means Basic Rent, Additional Rent and Termination Rent.
"Rent Due and SCV Confirmation Schedule" means an instrument,
substantially in the form of Exhibit G to the Lease Agreement, which is to be
used by the Lessee (i) to calculate Basic Rent for each Basic Rent Period and
Other Rent and (ii) to calculate and acknowledge the SCV at the end of each
Basic Rent Period.
"Reportable Event" means any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"Responsible Officer" means a duly elected or appointed, authorized,
and acting officer, agent or representative of the Person acting.
"Secured Obligations" means each and every debt, liability and
obligation of every type and description which the Company may now or at any
time hereafter owe to any Secured Party under, pursuant to or in connection with
the Credit Agreement, any Note, the Letter of Credit or any other Basic
Document, whether such debt, liability or obligation now exists or is hereafter
created or incurred, and whether it is or may be direct or indirect, due or to
become due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or joint, several or joint and several, including, without
limitation, the principal of, interest on and any premium due with respect to
any Loan and all indemnifications, costs, expenses, fees and other compensation
of the Secured Parties provided for, and all other amounts owed to the Secured
Parties, under the Security Agreement, Credit Agreement and the other Basic
Documents.
"Secured Parties" means the Banks, any other holder from time to
time of any Note and the Issuing Bank.
"Securities Act" means the Securities Act of 1933, as from time to
time amended.
"Security Agreement" means the Security Agreement and Assignment of
Contracts, dated as of ------, 1998, by and among the Company and The First
National Bank of Chicago, as Collateral Agent in favor of the Secured Parties.
"Single Employer Plan" means any Plan which is not a
multi-employer plan as defined in Section 4001(a) (3) of ERISA
"Stipulated Casualty Value" or "SCV" for any Nuclear Material
covered by any Leasing Record means an amount equal to the Acquisition Cost for
such Nuclear Material reduced by the aggregate total amount, if any, of the
Monthly Rent Components paid by the Lessee to the Lessor with respect to such
Nuclear Material together with Commercial Paper Discount.
"Termination Date" shall have the meaning specified therefor in
Section 1.02 of the Credit Agreement.
"Termination Rent" means an amount which, when added to the
Stipulated Casualty Value and Basic Rent then payable by the Lessee, if any,
will be sufficient to enable the Company to retire, at their respective
maturities, all outstanding Notes and to pay all charges, premiums and fees owed
to the Issuing Bank and all holders of Notes under the Credit Agreement and to
pay all
38
<PAGE>
other obligations of the Company incurred in connection with the implementation
of the transactions contemplated by the Basic Documents.
"Termination Settlement Date" has the meaning specified in Section
8(c), or Section 18(c) of the Lease Agreement.
"Terminating Event" has the meaning specified in Section 18 of
the Lease Agreement.
"Trust" means the TMI-I Fuel Corp. and Oyster Creek Fuel Corp.
Trust, a trust formed pursuant to the Trust Agreement.
"Trust Agreement" means the Second Amended and Restated Trust
Agreement dated as of ----------- --, 1998 among Lord Fuel Corp., as Trustor,
the Owner Trustee, as trustee, Lord Fuel Corp., as beneficiary, and Jersey
Central Power & Light Company, Metropolitan Edison Company and Pennsylvania
Electric Company, each as lessee under certain lease agreements, as the same may
be amended, modified or supplemented from time to time.
"Trustor" means the institution designated as such in the Trust
Agreement and its permitted successors.
"UBS Credit Agreement" means the Credit Agreement dated as of
November 17, 1995 among TMI-1 Fuel Corp., Union Bank of Switzerland, New York
Branch, as Arranging Agent, Union Bank of Switzerland, New York Branch, as
Issuing Bank, the Banks Party thereto and Union Bank of Switzerland, New York
Bank, as Administrative Agent.
"UCC" means the Uniform Commercial Code as adopted and in effect in
the State of New York.
"U.S. Trust" means United States Trust Company of New York.
39
<PAGE>
EXHIBIT A
INTERIM LEASING RECORD
Record No. -----
Name of Lessee: Jersey Central Power & Light Company
Date of Record: ------------------
Date and No. of prior Interim or Final
Leasing Record (if any):
Description and location of Nuclear Material covered by this Record:
Assembly Serial Nos.:
Subassembly Serial Nos.:
Acquisition Cost of Nuclear Material
under prior Leasing Record (if any): $
-----------
Acquisition Cost added by this Record: $
-----------
Total: $
-----------
Credits to Acquisition Cost: $
-----------
Total Acquisition Cost under this Record $
-----------
Specify nature of Acquisition Cost added by this Record and to whom paid:
Specify nature of any credits received by Lessor covered by this Record and from
whom received:
40
<PAGE>
Basic Rent for the Nuclear Material covered by this Record shall be calculated
and paid as provided in Section 9 of the Second Amended and Restated Nuclear
Material Lease Agreement referred to below.
The undersigned Lessor hereby leases to the undersigned Lessee the Nuclear
Material described above in accordance with the covenants, terms and conditions
of the Second Amended and Restated Nuclear Material Lease Agreement between the
undersigned Lessor and Lessee, dated as of ___________, ___, 1998 which
covenants, terms and conditions are incorporated herein by reference.
TMI-1 FUEL CORP., Lessor JERSEY CENTRAL POWER & LIGHT
COMPANY, Lessee
By By
-------------------------- ------------------------------------
Authorized Signature Authorized Signature
41
<PAGE>
EXHIBIT B
FINAL LEASING RECORD
Record No.------
Name of Lessee: Jersey Central Power & Light Company
Date of Record: ------------------
Date and No. of prior Interim or Final
Leasing Record:
Description and location of Nuclear Material covered by this Record:
Assembly Serial Nos.:
Subassembly Serial Nos.:
Acquisition Cost of Nuclear Material
under prior Leasing Record (if any): $
-----------
Acquisition Cost added by this Record: $
-----------
Total: $
-----------
Credits (if any) to Acquisition Cost: $
-----------
Total Acquisition Cost under this Record $
-----------
BTU Charge: $----------
Specify nature of Acquisition Cost added by this Record and to whom paid:
Specify nature of any credits received by Lessor covered by this Record and from
whom received:
Basic Rent for the Nuclear Material covered by this Record shall be calculated
and paid as provided in Section 9 of the Second Amended and Restated Nuclear
Material Lease Agreement referred to below.
42
<PAGE>
The undersigned Lessor hereby leases to the undersigned Lessee the Nuclear
Material described above in accordance with the covenants, terms and conditions
of the Second Amended and Restated Nuclear Material Lease Agreement between the
undersigned Lessor and Lessee, dated as of ---------- --, 1998, which covenants,
terms and conditions are incorporated herein by reference.
TMI-1 FUEL CORP., Lessor JERSEY CENTRAL POWER & LIGHT
COMPANY, Lessee
By By
--------------------------- --------------------------------
Authorized Signature Authorized Signature
43
<PAGE>
Attachment 1 to Exhibit B
BRITISH THERMAL UNIT CHARGE AGREEMENT
Dated:------------------------
The undersigned Lessor and Lessee agree that the initial British
Thermal Unit Charge to be used to calculate the Monthly Rent Component for the
Nuclear Material pursuant to the Second Amended and Restated Nuclear Material
Lease Agreement, dated as of --------- --, 1998, between the undersigned Lessor
and Lessee shall be as follows:
Description of Nuclear Material British Thermal Unit Charge
- ------------------------------- ---------------------------
TMI-1 FUEL CORP. JERSEY CENTRAL POWER & LIGHT
COMPANY
By: By:
----------------------------- ----------------------------
Its: Its:
----------------------------- ----------------------------
44
<PAGE>
EXHIBIT C
NUCLEAR MATERIAL CONTRACTS
--------------------------
The Agreements (each as amended and restated) referred to in Section 5
of the Second Amended and Restated Nuclear Material Lease Agreement, dated as of
- ---------- --, 1998, between TMI-1 FUEL CORP. ("Lessor") and JERSEY CENTRAL
POWER & LIGHT COMPANY ("Lessee") are:
(1) Agreement, dated January 30, 1975, between Sequoyah Fuels
Corporation and GPUN, as agent for the Lessee, Met-Ed and Penelec.
(2) Agreement, dated February 12, 1996, between United States
Enrichment Corporation and GPUN, as agent for the Lessee, Met-Ed and Penelec.
(3) Agreement, dated as of June 14, 1995 between Framatome Cogema
Fuels and GPUN, as agent for the Lessee, Met-Ed and Penelec.
45
<PAGE>
EXHIBIT D
ASSIGNMENT AGREEMENT
KNOW ALL MEN BY THESE PRESENTS THAT:
Jersey Central Power & Light Company (the "Assignor"), in
consideration of one dollar and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, does hereby sell, grant,
bargain, convey and assign to TMI-1 Fuel Corp. ("Assignee"), all right, title
and interest of the Assignor in, to and under the Nuclear Material Contract (the
"Nuclear Material Contract") described in Exhibit 1 attached hereto insofar as
such Nuclear Material Contract relates to the Nuclear Material described in
Exhibit 1 (all of such property, including the items described on Exhibit 1
attached hereto as included with the Property, being herein collectively called
the "Property"). Terms not defined herein shall have the meanings given in
Exhibit 1 attached hereto.
TO HAVE AND TO HOLD the Property unto the Assignee, its successors
and assigns, to its and their own use forever.
1. The interest of the Assignor in the Property, and the interest
transferred by this Assignment Agreement, is that of absolute ownership.
2. The Assignor hereby warrants that it is the lawful owner of the
rights and interests conveyed by this Assignment Agreement and that its title to
such rights and interests is hereby conveyed to the Assignee free and clear of
all liens, charges, claims and encumbrances of every kind whatsoever, other than
(i) the amounts, if any, owing under the Nuclear Material Contract, (ii) other
claims, if any, of the Assignor and the Contractor which may exist as between
themselves and (iii) Permitted Liens (as defined in the Lease Agreement referred
to below); and that the Assignor will warrant and defend such title forever
against all claims and demands whatsoever.
3. The Assignor hereby releases and transfers to the Assignee any
right, title or interest in the Nuclear Material which may have been acquired by
the Assignor under the Nuclear Material Contract prior to the date hereof.
4. This Assignment Agreement is made in accordance with the Second
Amended and Restated Nuclear Material Lease Agreement dated as of---------- --,
1998, between the Assignor and the Assignee (said Nuclear Material Lease
Agreement, as the same may be from time to time amended, modified or
supplemented, being herein called the "Lease Agreement"). Pursuant to a Security
Agreement and Assignment of Contracts made by TMI-1 Fuel Corp. dated as of
- --------- --, 1998 (said Security Agreement and Assignment of Contracts, as the
same may from time to time be amended, modified or supplemented, being herein
called the "Security Agreement") made by Assignee in favor of the Secured
Parties, as defined therein, the Assignee is assigning and granting a security
interest in the Property and this Assignment Agreement to the Secured Parties,
as collateral security for all obligations and liabilities of the Assignee to
the Secured Parties, as such obligations are described in the Security
Agreement.
5. It is expressly agreed that, anything contained herein to the
contrary notwithstanding, (a) the Assignor shall at all times remain liable to
the Contractor to observe and perform all of its duties and obligations under
the Nuclear Material Contract to the same extent as if this Assignment Agreement
and the Security Agreement had not been executed, (b) the exercise by the
Assignee or the Secured Parties of any of the rights assigned hereunder or under
the Security
46
<PAGE>
Agreement, as the case may be, shall not release the Assignor from any of its
duties or obligations to the Contractor under the Nuclear Material Contract, and
(c) neither the Assignee nor any of the Secured Parties shall have any
obligation or liability under the Nuclear Material Contract by reason of or
arising out of this Assignment Agreement, the Lease Agreement or the Security
Agreement, or be obligated to perform or fulfill any of the duties or
obligations of the Assignor under the Nuclear Material Contract, or to make any
payment thereunder, or to make any inquiry as to the nature or sufficiency of
any Property received by it thereunder, or to present or file any claim, or to
take any action to collect or enforce the payment of any amounts or the delivery
of any Property which may have been assigned to it or to which it may be
entitled at any time or times; provided, however, the Assignee agrees, solely
for the benefit of the Assignor, and subject to the terms and conditions of the
Lease Agreement, (i) to purchase the Nuclear Material from the Contractor
pursuant to the Nuclear Material Contract, (ii) to pay to the Contractor and/or
to the Assignor or their order the respective amounts specified in the Lease
Agreement with respect to such Nuclear Material and (iii) to lease such Nuclear
Material to the Assignor in accordance with and subject to the terms and
conditions of the Lease Agreement. The provisions of the Nuclear Material
Contract limiting the liability of the Contractor and its suppliers and
subcontractors' under that Contract shall remain effective against the Assignee
and Secured Parties to the same extent that such provisions are effective
against the Assignor.
6. Notwithstanding anything contained herein to the contrary,
subject to the terms and conditions of the Lease Agreement, the Assignor may
continue to engage in Fuel Management (as such term is defined in the Lease
Agreement) with respect to the Property, including, without limitation, all
dealings with the Contractor and, subject to such terms and conditions and
effective until the occurrence of a Lease Event of Default (as defined in the
Lease Agreement), (i) the Assignee reassigns to the Assignor the Assignee's
rights under clauses (iii), (iv), (v) and (vi) of subparagraph (b) of Exhibit 1
to this Assignment Agreement (provided, however, that insurance proceeds are
reassigned to the Assignor pursuant hereto only to the extent that such proceeds
are needed and used to reimburse the Assignor for the cost of repairing damage
or destruction to Nuclear Material or are used to purchase Nuclear Material from
the Assignee in accordance with the Lease Agreement, and provided further,
however, that the Assignee's rights under clause (vi) are reassigned to the
Assignor subject in all respects to the limitations set forth in paragraph 8.
below), and (ii) the Assignee agrees that the Assignor may, to the extent set
forth in clause (i) above, to the exclusion of the Assignee, exercise and
enforce such rights.
7. The Assignor shall promptly and duly execute, deliver, file and
record all such further counterparts of this Assignment Agreement or such
certificates, financing and continuation statements and other instruments as may
be reasonably requested by the Assignee, and take such further actions as the
Assignee shall from time to time reasonably request, in order to establish,
perfect and maintain the rights and remedies created or intended to be created
in favor of the Assignee and the Secured Parties hereunder and the Assignee's
title to and interest in the Property as against the Assignor or any third party
in any applicable jurisdiction.
8. The Assignor hereby agrees that it will not enter into or consent
to or permit any cancellation, termination, amendment, supplement or
modification of or waiver with respect to the Nuclear Material Contract insofar
as it relates to the Nuclear Material except for cancellations, terminations,
amendments, supplements, modifications or waivers which do not materially
adversely affect the Assignee or the Secured Parties or their respective
interests in the Property, nor will the Assignor sell, assign, grant any
security
47
<PAGE>
interest in or otherwise transfer its rights or other interests in the Property
or any part thereof, except as permitted by the Lease Agreement.
9. The Assignor hereby represents and warrants that the Nuclear
Material Contract is in full force and effect and represents that it is the only
agreement between the Assignor and the Contractor with respect to the Nuclear
Material.
10. This Assignment Agreement shall become effective only upon
receipt of the written consent of the Contractor to the assignment of the rights
and interests conveyed hereunder, if such consent is required under the Nuclear
Material Contract. The Assignor hereby agrees to send the Contractor a copy of
this Assignment Agreement.
11. This Assignment Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Assignor has caused this Assignment
Agreement to be duly executed and delivered as of the ----- day of
- ------------,19----.
JERSEY CENTRAL POWER & LIGHT
COMPANY
By:
-----------------------
Title:
-----------------------
The foregoing Assignment Agreement is hereby accepted:
TMI-1 FUEL CORP.
-----------------------
By:
-----------------------
Title:
-----------------------
48
<PAGE>
EXHIBIT 1
to Assignment Agreement
(a) The ------------ (as the same may from time to time be amended,
modified or supplemented, being herein called the "Nuclear Material Contract"),
dated as of -------------, between Jersey Central Power & Light Company and
- -------------- (the "Contractor), insofar as, and only to the extent that, the
Contract relates to ----------------- (the "Nuclear Material"); but not insofar
as the Contract provides for the provision of other nuclear materials and
services to the Assignor; and
(b) The Property shall include, without limitation, (i) any and all
amendments and supplements to the Nuclear Material Contract from time to time
executed and delivered to the extent that any such amendment or supplement
relates to the Nuclear Material, (ii) the Nuclear Material, including the right
to receive title thereto, (iii) all rights, claims and proceeds, now or
hereafter existing, under any insurance, indemnities, warranties and guaranties
provided for in or arising out of the Nuclear Material Contract, to the extent
that such rights or claims relate to the Nuclear Material, (iv) any claim for
damages arising out of or for breach or default by the Contractor under or in
connection with the Nuclear Material Contract insofar as it relates to the
Nuclear Material, (v) any other amount, whether resulting from refunds or
otherwise, from time to time paid or payable by the Contractor under or in
connection with the Nuclear Material Contract insofar as it relates to the
Nuclear Material and (vi) the right of the Assignor to terminate the Nuclear
Material Contract or to perform or to exercise or enforce thereunder, insofar as
it or they relate to the Nuclear Material.
49
<PAGE>
EXHIBIT 2
to Assignment Agreement
CONSENT AND AGREEMENT
The undersigned, ----------------- (the "Contractor"), has entered
into a --------------- (as the same may from tune to time be amended, modified
or supplemented, being herein called the "Nuclear Material Contract"), dated as
of -------------------- with Jersey Central Power & Light Company (the
"Assignor").
The Contractor hereby acknowledges notice that (i) in accordance
with the terms of the Second Amended and Restated Nuclear Material Lease
Agreement dated as of --------- --, 1998, between the Assignor and TMI-1 Fuel
Corp. (the "Assignee"), the Assignor has assigned to the Assignee a part of the
Assignor's rights under the Nuclear Material Contract pursuant to an Assignment
Agreement, in the form of Annex A hereto (such Assignment Agreement, as the same
may from time to time be amended, modified or supplemented, being herein
collectively called the "Assignment"), and (ii) pursuant to a Security Agreement
and Assignment of Contracts made by TMI-1 Fuel Corp. dated as of -------- --,
1998 (said Security Agreement and Assignment Contracts, as the same may from
time to time be amended, modified or supplemented, being herein called the
"Security Agreement") made by the Assignee in favor of the Secured Parties as
defined therein (the "Secured Parties"), the Assignee has assigned and granted a
security interest in all rights under the Nuclear Material Contract from time to
time assigned to it by Assignor, as collateral security for all obligations and
liabilities of the Assignee to the Secured Parties.
The Contractor hereby consents to (i) the assignment by the Assignor
to the Assignee of part of the Assignor's right, title and interest in, to and
under the Nuclear Material Contract and the other Property described in the
Assignment pursuant to the Assignment and (ii) the assignment and security
interest in favor of the Secured Parties as described above. The Contractor
further consents to all of the terms and provisions of the Security Agreement.
The Contractor agrees that, if requested by either the Assignor or
the Assignee, it will acknowledge in writing the Assignment delivered by the
Assignor to the Assignee; provided, that neither the lack of notice to nor
acknowledgment by the Contractor of the Assignment shall limit or otherwise
affect the validity or effectiveness of this consent to such Assignment.
The Contractor hereby confirms to the Assignee and the Secured
Parties that:
(a) all representations, warranties and agreements of the
Contractor under the Nuclear Material Contract which relate to
the Nuclear Material described in the Assignment shall inure
to the benefit of, and shall be enforceable by, the Assignee
or any Secured. Party to the same extent as if originally
named in the Contract as the purchaser of such Nuclear
Material,
(b) the Contractor understands that, pursuant to the Lease
Agreement, the Assignee has agreed to lease the Nuclear
Material described in the Assignment to the Assignor, and
consents to the assignment to the Assignor, for so long as the
Lease Agreement shall be in effect or until otherwise notified
by the Assignee, of the Assignee's rights under clauses (iii),
50
<PAGE>
(iv), (v) and (vi) of subparagraph (b) of Exhibit 1 to the
Assignment to the extent that such rights are reassigned to
the Assignor pursuant to the Assignment,
(c) The Contractor is in the business of selling nuclear fuel and
related services of the kind described in the Assignment, and
the proposed sale of such nuclear fuel under the Nuclear
Material Contract will be in the ordinary course of business
of the Contractor, and
(d) Notwithstanding any provision to the contrary contained in
the Nuclear Material Contract, the Contractor agrees that
title to any Nuclear Material covered by the Assignment
shall pass directly to the Assignee under the Contract and
shall not pass to the Assignor; provided that the foregoing
shall not apply to any Nuclear Material for which title has
already passed from the Contractor prior to the execution
and delivery of the Assignment.
It is understood that neither the Assignment, the Security Agreement
nor this Consent and Agreement shall in any way add to the obligations of the
Contractor or the Assignor under the Nuclear Material Contract.
This Consent and. Agreement shall be governed by and construed in
accordance with the laws of the State of ------------.
IN WITNESS WHEREOF, the undersigned has caused this Consent and
Agreement to be duly executed and delivered by its duly authorized officer as of
- --- day of --------------, 19---.
---------------------------------------
By:
----------------------------------
Title:
----------------------------------
51
<PAGE>
EXHIBIT E
BILL OF SALE
TO
JERSEY CENTRAL POWER & LIGHT COMPANY
------------------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, TMI-1 Fuel
Corp., a Delaware corporation (the "Seller"), whose post office address is c/o
United States Trust Company of New York, 114 West 47th Street, New York, New
York 10036, Attention: Corporate Trust and Agency Division, for and in
consideration paid to the Seller upon or before the execution and delivery of
this Bill of Sale to Jersey Central Power & Light Company (the "Purchaser"), a
New Jersey corporation, whose address is 2800 Pottsville Pike, Reading,
Pennsylvania 19640, Attention: Comptroller, hereby conveys, transfers, sells and
sets over unto the Purchaser all of its right, title and interest in all of the
personal property consisting of the assemblies of nuclear fuel or components
thereof or other nuclear material described in Annex I hereto (the "Assets"),
and by this Bill of Sale does hereby grant, bargain, sell, convey, transfer and
deliver the Assets unto the Purchaser, to have and to hold such undivided
interest in the Assets unto the Purchaser, for itself, its successors and
assigns, forever.
The Assets are transferred and conveyed by the Seller AS-IS,
WHERE-IS, WITHOUT REPRESENTATIONS OR WARRANTIES (EXPRESS OR IMPLIED) OF ANY KIND
WHATSOEVER BY THE SELLER OR ANY PERSON ACTING ON ITS BEHALF except that the
Seller represents and warrants that it has not by voluntary act or omission
created or granted any lien on the Assets, other than Permitted Liens, as
defined in that certain Second Amended and Restated Nuclear Material Lease
Agreement, dated as of --------- --, 1998 between the Seller and the Purchaser.
The Purchaser acknowledges and agrees that neither the Seller, its directors,
officers or employees, any company, person or firm controlling, controlled by,
or under common control with any of them nor any other person acting on behalf
of the Seller is a manufacturer of, or is engaged in the sale or distribution
of, nuclear material, has had at any time physical possession of any portion of
the Assets sold hereunder, or has made any inspection thereof. The Purchaser
further acknowledges and agrees that the Assets sold hereunder have been at all
times in the possession of the Purchaser and that the Purchaser has made such
inspections thereof as it deems necessary and that the Purchaser has been solely
responsible for all decisions made with respect to the choice of the suppliers
of such Assets and the enrichment, fabrication, transportation, storage and
processing of the same.
52
<PAGE>
IN WITNESS WHEREOF, the Seller has caused these presents to be
executed by one of its Vice Presidents, this ____ day of
- ------------------,19---.
TMI-1 FUEL CORP., Seller
By:
----------------------------
Vice President
Acknowledgment and Acceptance
-----------------------------
The foregoing Bill of Sale is hereby acknowledged and accepted by
the undersigned as of the date last above written.
JERSEY CENTRAL POWER & LIGHT
COMPANY,
Purchaser
By:
----------------------------
Its:
----------------------------
53
<PAGE>
<TABLE>
EXHIBIT F
<CAPTION>
RENT DUE
AND SCV CONFIRMATION SCHEDULE
For the Basic Rent Period Ended----
In accordance with the Second Amended and Restated Lease Agreement
dated as of --------- --, 1998, between TMI-1 Fuel Corp., as Lessor, and Jersey
Central Power & Light Company, as Lessee, the Lessee certifies that all amounts
set forth below are true and correct in all respects, and both Lessor and Lessee
certify that this Schedule has been prepared in accordance with the provisions
of the Lease Agreement.
I. BASIC RENT, ADDITIONAL RENT AND TERMINATION RENT
A.Basic Rent Owed
1. Calculation of Portion of Monthly Financing Charge Not Allocated
to Acquisition Cost
<S> <C>
a.Interest Payable with Respect to All Outstanding Notes (See $ -
attached summary calculation)
--------------
b.Other Amounts Included in Monthly Financing Charge $ -
--------------
c.TOTAL MONTHLY FINANCING CHARGE NOT ALLOCATED TO ACQUISITION COST $
(Total of 1(a) and 1(b))
--------------
2. Aggregate Monthly Rent Component (See attached summary $ -
calculation)
--------------
3. BASIC RENT (total of 1(c) and 2) $ -
==============
B. Additional Rent Owed (see attached summary calculation) $ -
--------------
C.Termination Rent Owed (see attached summary calculation) $ -
--------------
TOTAL RENT DUE (total of A, B and C) $ -
==============
55
</TABLE>
<PAGE>
<TABLE>
II. CALCULATION OF STIPULATED CASUALTY VALUE
<CAPTION>
Nuclear Material
Installed for Not Installed Total
Operation In for Operation
the in the
Generating Generating
Facility Facility
<S> <C> <C> <C>
A. Stipulated Casualty Value as of ___________ $ - $ - $ -
--------------- --------------- ------------
B. Add: Acquisition Cost Incurred in Rent $ - $ $ -
Period Covered by This Schedule (exclusive of
Monthly Financing Charges) - - -
--------------- --------------- ------------
C. Add: Monthly Financing Charge Allocated to $ - $ - $ -
Acquisition Cost Incurred in Rent Period
Covered by This Schedule - - -
--------------- --------------- ------------
D. Less: SCV of Nuclear Material Transferred $ - $ $ -
to the Lessee Pursuant to Sections 8(c), 8(g)
or 14 of the Lease Agreement during the Basic
Rent Period Covered by This Schedule
--------------- --------------- ------------
STIPULATED CASUALTY VALUE AS OF -------------- $ - $ - $ -
=============== =============== ============
Add: Commercial Paper Discount $ -
------------
STIPULATED CASUALTY VALUE AS OF -------------- $ -
============
56
</TABLE>
Exhibit B-2(b)(4)
COUNTERPART NO.
SECOND AMENDED AND RESTATED
NUCLEAR MATERIAL LEASE AGREEMENT
Dated as of -------, 1998
between
OYSTER CREEK FUEL CORP.,
as Lessor
and
JERSEY CENTRAL POWER & LIGHT COMPANY
as Lessee
AS OF THE DATE OF THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT, THE LESSOR
UNDER THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT (THE "LESSOR") HAS
GRANTED TO THE SECURED PARTIES, AS DEFINED HEREIN, A SECURITY INTEREST IN THIS
SECOND AMENDED AND RESTATED LEASE AGREEMENT AND IN ALL OF THE LESSOR'S RIGHTS
AND INTERESTS UNDER THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT, INCLUDING,
WITHOUT LIMITATION, ALL OF THE LESSOR'S RIGHTS TO AND INTERESTS IN NUCLEAR
MATERIAL AS DEFINED IN THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT.
THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT HAS BEEN MANUALLY EXECUTED IN
EIGHTEEN (18) COUNTERPARTS, NUMBERED CONSECUTIVELY FROM 1 TO 18. NO SECURITY
INTEREST IN THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT OR IN ANY OF THE
LESSOR'S RIGHTS AND INTERESTS UNDER THIS SECOND AMENDED AND RESTATED LEASE
AGREEMENT MAY BE PERFECTED BY THE POSSESSION OF ANY SUCH COUNTERPART OTHER THAN
COUNTERPART NO. 1.
<PAGE>
TABLE OF CONTENTS
1 Definitions
2 Notices
3 Title to Remain in the Lessor; Quiet Enjoyment; Fuel Management
Location
4 Agreement for Lease of Nuclear Material
5 Orders for Nuclear Material and Services; Assigned Agreements
6 Leasing Records; Payment of Costs of Lessor
7 No Warranties or Representation by Lessor
8 Lease Term; Early Termination; Termination of Leasing Record
9 Payment of Rent; Payments with Respect to the Lessor's
Financing Costs
10 Compliance with Laws; Restricted Use of Nuclear Material;
Assignments; Permitted Liens; Spent Fuel
11 Permitted Contests
12 Insurance; Compliance with Insurance Requirements
13 Indemnity
14 Casualty and Other Events
15 Nuclear Material to Remain Personal Property
16 Events of Default
17 Rights of the Lessor Upon Default of the Lessee
18 Termination After Certain Events
19 Investment Tax Credit
20 Certificates; Information; Financial Statements
21 Obligation of the Lessee to Pay Rent
22 Miscellaneous
<PAGE>
SECOND AMENDED AND RESTATED NUCLEAR MATERIAL LEASE AGREEMENT
SECOND AMENDED AND RESTATED LEASE AGREEMENT (this "Lease Agreement")
dated as of the -- day of ---------, 1998, by and between OYSTER CREEK FUEL
CORP., a Delaware corporation (herein called the "Lessor"), and JERSEY CENTRAL
POWER & LIGHT COMPANY, a Pennsylvania corporation (herein called the "Lessee").
RECITALS
A. The Lessor and Lessee entered into a Nuclear Material Lease
Agreement dated as of August 1, 1991 ("Original Lease") to provide for the lease
of Nuclear Material to the Lessee;
B. The Original Lease provided for the Lessor to enter into certain
loan agreements and ancillary documents with The Prudential Insurance Company of
America and certain affiliates thereof ("Prudential") to provide financing from
Prudential for the acquisition of Nuclear Material under the Original Lease;
C. Such loan arrangements with Prudential were terminated and Lessor
entered into a new credit agreement and related instruments pursuant to which a
bank syndicate for which Union Bank of Switzerland, New York Branch ("UBS")
acted as agent to provide financing for the acquisition of Nuclear Material
being leased hereunder;
D. Lessor and Lessee entered into an Amended and Restated Nuclear
Material Lease Agreement, dated as of November 17, 1995 ("Amended and Restated
Lease") to reflect the necessary modifications consistent with the establishment
of the credit facility with UBS;
E. Concurrent with the execution and delivery hereof, such credit
agreements with UBS are being terminated and Lessor is entering into a new
credit agreement and related instruments to which a bank syndicate for which The
First National Bank of Chicago and PNC Bank, National Association, will act as
agents to provide financing for the acquisition of the Nuclear Material being
leased hereunder;
F. Accordingly, the Lessor and the Lessee desire to enter into this
Second Amended and Restated Lease Agreement in order to reflect necessary
modifications consistent with establishment of such new credit facility and
other modifications thereof in certain other respects, which agreement shall
supercede the Original Lease and the Amended and Restated Lease;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and intending to be legally bound hereby, the parties covenant and agree
as follows:
1. Definitions. Except as otherwise provided herein, capitalized
terms used in this Lease Agreement (including the Exhibits) shall have the
respective meanings set forth in Appendix A.
2. Notices. Any notice, demand or other communication which by any
provision of this Lease Agreement is required or permitted to be given shall be
deemed to have been delivered if in writing and actually delivered by mail,
courier, telex or facsimile to the following addresses:
<PAGE>
(i) If to the Lessor, Oyster Creek Fuel Corp., c/o United
States Trust Company of New York, 114 West 47th Street, New York, New York
10036, Attention: Corporate Trust and Agency Division, telecopy number
212-852-1626, or at such other address as the Lessor may have furnished to
the Lessee and the Secured Parties in writing; or
(ii) If to the Lessee, Jersey Central Power & Light Company
c/o GPU Service, Inc., 310 Madison Avenue, Morristown, New Jersey
07962-1957, Attention: Vice President and Treasurer, telecopy number
973-644-4224, or at such other address as the Lessee may have furnished
the Lessor and the Secured Parties in writing; or
(iii) except as provided in the following sentence or as
otherwise requested in writing by any Secured Party, any notice, demand or
communication which by any provision of this Lease Agreement is required
or permitted to be given to the Secured Parties shall be deemed to have
been delivered to all the Secured Parties if a single copy thereof is
delivered to ------------------------------------------------, Attention:
-------- facsimile number (---) ------------; or at such other address as
either may have furnished the Lessor and the Lessee in writing. Any
Leasing Record or invoice of a Manufacturer or other Person performing
services covering the Nuclear Material which is required to be delivered
to the Secured Parties pursuant to Section 6(c)(ii) of this Lease
Agreement and any Rent Due and SCV Confirmation Schedule which is required
to be delivered to the Secured Parties pursuant to Sections 8(g) or 9(d)
of this Lease Agreement shall be deemed to have been delivered to all the
Secured Parties if a single copy thereof is delivered to
------------------------------------------- at the address indicated in
this Section 2(iii).
3. Title to Remain in the Lessor; Quiet Enjoyment; Fuel Management;
Location.
(a) The Lessor and the Lessee hereby acknowledge that this
Lease Agreement is a lease and is intended to provide for the obligations of the
Lessee to pay installments of Rent as the same become due; that, subject to the
provisions of Section 10(h), the Lessor has title to and is the owner of the
Nuclear Material; and that the relationship between the Lessor and the Lessee
shall always be only that of lessor and lessee.
(b) The Lessor (including its successors and assigns) agrees
and covenants that, so long as the Lessee makes timely payments of Rent and
fully performs all other obligations to be performed by the Lessee under this
Lease Agreement, the Lessor (including its successors and assigns) shall not
hinder or interfere with the Lessee's peaceable and quiet enjoyment of the
possession and use of the Nuclear Material, for the term or terms herein
provided, subject, however, to the terms of this Lease Agreement.
(c) So long as no Lease Event of Default shall have occurred
and be continuing and the Lessor shall not have elected to exercise any of its
remedies under Section 17 hereof, the Lessee shall have the right to engage in
Fuel Management. The Lessee is hereby designated the agent of the Lessor in all
dealings with Manufacturers and any regulatory agency having jurisdiction over
the ownership or possession of the Nuclear Material for so long as the Lessee
shall have the right to engage in Fuel Management. As such agent of the Lessor,
the Lessee agrees to make, or cause to be made, all filings and to obtain all
consents and permits required as a result of the Lessor's ownership and leasing
of the Nuclear Material.
(d) The Lessee covenants to the Lessor that the location of
Nuclear Material will be limited to: (w) any Manufacturer's facility, (x)
transit between one Manufacturer's facility and another Manufacturer's facility
or the site
2
<PAGE>
of the Generating Facility, (y) the site of the Generating Facility and (z) the
Generating Facility. Each assembly of the Nuclear Material will be located
during its Heat Production and "cooling-off" stage at the Generating Facility or
the site of the Generating Facility.
4. Agreement for Lease of Nuclear Material. From and after the
Closing, the Lessor shall lease to the Lessee and the Lessee shall lease from
the Lessor such Nuclear Material as may be from time to time mutually agreed
upon, provided that the total Stipulated Casualty Value of all Nuclear Material
leased under this Lease Agreement shall not exceed at any one time $25,000,000
in the aggregate or such other amount as the Lessor and the Lessee may agree to
in writing (the "Maximum Stipulated Casualty Value"). The Lessor and the Lessee
shall evidence their agreement to lease particular Nuclear Material in
accordance with the terms and provisions of this Lease Agreement by signing and
delivering to each other, from time to time, Leasing Records, substantially in
the forms of Exhibit A or Exhibit B, as applicable, prepared by the Lessee,
covering such Nuclear Material. Nothing contained herein shall be deemed to
prohibit the Lessee from leasing from other lessors or otherwise obtaining other
nuclear material for use in the Generating Facility, subject to the provisions
with respect to intermingling of fuel assemblies or sub-assemblies with other
fuel assemblies or sub-assemblies contained in Section 6 hereof.
5. Orders for Nuclear Material and Services; Assigned Agreements.
(a) The Nuclear Material Contracts listed in Exhibit C hereto,
relating, among other things, to the purchase of, and services to be performed
with respect to, Nuclear Material were entered into by the Lessee prior to the
date of this Lease Agreement, and, except as otherwise indicated on Exhibit C,
the interests of the Lessee under such Nuclear Material Contracts have been
assigned to the Lessor under an Assignment Agreement substantially in the form
of Exhibit D. Any further Nuclear Material Contracts which the Lessee deems
necessary or desirable may be negotiated by the Lessee and executed by the
Lessee in its own name or, where authorized by the Lessor, as agent for the
Lessor.
(b) So long as no Lease Event of Default shall have occurred
and be continuing, and subject to the approval of the Lessor and to the
limitation on the Maximum Stipulated Casualty Value of the Nuclear Material set
forth in Section 4, the interests of the Lessee under any further Nuclear
Material Contracts (whether executed and delivered before or after the date of
this Lease Agreement) pursuant to which the Lessee desires the Lessor to
purchase Nuclear Material or have services performed on any Nuclear Material on
behalf of the Lessee may be assigned to the Lessor under an Assignment Agreement
substantially in the form of Exhibit D, 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. The Lessee shall use its best efforts to cause the
other parties to such agreements to consent to each such assignment. Upon each
such assignment and the obtaining of such consents with respect to any Nuclear
Material Contract, the Lessor, subject to the limitation on the Maximum
Stipulated Casualty Value of the Nuclear Material set forth in Section 4, shall
make all payments which are required under such Assigned Agreements for the
purchase of Nuclear Material or for services to be performed on the Nuclear
Material in accordance with the procedures set forth in Section 6.
(c) So long as no Lease Event of Default shall have occurred
and be continuing, the Lessor hereby authorizes the Lessee, at the Lessee's own
cost and expense, to assert all rights and claims and to bring suits, actions
and proceedings, in its own name or in the name of the Lessor, in respect of any
Manufacturer's warranties or undertakings, express or implied, relating to any
portion of the Nuclear Material and to retain the proceeds of any such suits,
actions and proceedings.
3
<PAGE>
6. Leasing Records; Payment of Costs of Lessor.
(a) Interim Leasing Records. An Interim Leasing Record shall be
prepared by the Lessee, shall be dated the date that the Lessor first makes
any payment with respect to the Acquisition Cost of any Nuclear Material and
shall set forth a full description of such Nuclear Material, the Acquisition
Cost and location thereof, and such other details with respect to such
Nuclear Material upon which the parties may agree. During the period of
preparation and processing or reprocessing of Nuclear Material subject to an
Interim Leasing Record, if the Lessor shall make any further payment or
payments or if the Lessor shall receive any payment or payments representing
a credit against the Acquisition Cost previously paid with respect to such
Nuclear Material, a supplemental Interim Leasing Record dated the date that
the Lessor makes each such further payment or the date of receipt of any such
credit shall be signed by the Lessor and the Lessee to record the revised
Acquisition Cost, after giving effect to any such payments or credits with
respect to such Nuclear Material, any change in location and such additional
details upon which the parties may agree.
(b) Final Leasing Records. For Nuclear Material previously
covered by an Interim Leasing Record, the Final Leasing Record shall be prepared
by the Lessee, shall be dated the first day of the month following the date of
installation of such Nuclear Material in the Generating Facility, unless such
date is the first day of a month, in which case the Final Leasing Record shall
be dated such date. For Nuclear Material not previously covered by an Interim
Leasing Record, the Final Leasing Record shall be dated the date that the Lessor
first makes any payment with respect to the Acquisition Cost of such Nuclear
Material. A Final Leasing Record shall set forth a full description of such
Nuclear Material, the Acquisition Cost thereof, the BTU Charge, the location,
and such other details with respect to such Nuclear Material upon which the
parties may agree.
(c) Payment of Nuclear Material Costs.
(i) On the Closing, the Lessor shall pay UBS pursuant to
Section 5.02 of the UBS Credit Agreement the principal amount of all loans
outstanding thereunder together with accrued interest thereon to the
extent not paid previously, and related costs and expenses in connection
therewith.
(ii) From time to time after the Closing, invoices of
Manufacturers, or of other Persons performing services, covering Nuclear
Material shall be forwarded to the Lessor in care of the Lessee at the
Lessee's address. Upon receipt by the Lessee of an invoice covering
Nuclear Material, the Lessee shall review such invoice and, upon the
Lessee's approval thereof, the Lessee shall forward such invoice endorsed
with the Lessee's approval to the Lessor, together with a Leasing Record
completed and signed by a Lessee Representative covering such Nuclear
Material. The Lessee's invoice for any cost incurred by it and includable
in the Acquisition Cost of any Nuclear Material shall be forwarded to the
Lessor and to the Secured Parties, together with a Leasing Record
completed and signed by a Lessee Representative covering such costs. After
receipt of such invoice and Leasing Record, in form and substance
satisfactory to the Lessor, the Lessor, subject to the limitation on
Maximum Stipulated Casualty Value of the Nuclear Material set forth in
Section 4, shall pay such invoice as provided therein or in the related
purchase agreement and shall execute the Leasing Record and return a copy
of such Leasing Record to the Lessee and the Secured Parties. The Leasing
Record shall be dated as provided for in this Lease Agreement. In the
event that the Acquisition Cost of the Nuclear Material covered by any
Leasing
4
<PAGE>
Record has been paid or incurred by the Lessee, the Lessor, subject to the
limitation on Maximum Stipulated Casualty Value of the Nuclear Material
set forth in Section 4 shall promptly reimburse the Lessee for the amount
of the Acquisition Cost paid or incurred by the Lessee.
(iii) The Lessee shall: (A) pay all costs and expenses of
freight, packing, insurance, handling, storage, shipment and delivery of
the Nuclear Material to the extent that the same have not been included in
the Acquisition Cost, and (B) at its own cost and expense, furnish such
labor, equipment and other facilities and supplies, if any, as may be
required to install and erect the Nuclear Material to the extent that the
cost and expense thereof have not been included in the Acquisition Cost.
Such installation and erection shall be in accordance with the
specifications and requirements of each Manufacturer. The Lessor shall not
be liable to the Lessee for any failure or delay in obtaining Nuclear
Material or making delivery thereof.
(d) Intermingling of Fuel Assemblies. Subject to the
provisions of Section 10(h) hereof, the Nuclear Material shall be owned
exclusively by the Lessor and leased to the Lessee under this Lease Agreement.
Prior to the fabrication of Nuclear Material into a completed fuel assembly or
sub-assembly or while such Nuclear Material is being reprocessed, the Lessee
will cause or permit such Nuclear Material to be fabricated or assembled only
into fuel assemblies or sub-assemblies owned by the Lessor and leased under this
Lease Agreement. However, fuel assemblies or sub-assemblies owned by the Lessor
and leased to the Lessee hereunder may be intermingled in the Generating
Facility with fuel assemblies or sub-assemblies not owned by the Lessor and
leased to the Lessee under this Lease Agreement, provided that such assemblies
or sub-assemblies owned by the Lessor shall be readily identifiable by serial
number or other distinguishing marks.
7. No Warranties or Representation by Lessor. THE NUCLEAR MATERIAL IS
LEASED AS-IS, WHERE-IS, IN THE CONDITION THEREOF AND SUBJECT TO THE RIGHTS OF
ANY PARTIES IN POSSESSION THEREOF, THE STATE OF THE TITLE THERETO, THE RIGHTS OF
OWNERSHIP THEREIN AND TO ALL APPLICABLE LAWS, RULES, REGULATIONS, ORDERS, WRITS,
INJUNCTIONS, DECREES, CONSENTS, APPROVALS, EXEMPTIONS, AUTHORIZATIONS, LICENSES
AND WITHHOLDING OF OBJECTIONS OF ANY GOVERNMENTAL OR PUBLIC BODY OR AUTHORITY
AND ALL OTHER REQUIREMENTS HAVING THE FORCE OF LAW APPLICABLE AT ANY TIME TO ANY
OF THE NUCLEAR MATERIALS OR ANY ACT OR TRANSACTION WITH RESPECT THERETO OR
PURSUANT TO THIS LEASE AGREEMENT, IN EACH CASE AS IN EXISTENCE WHEN THE SAME
FIRST BECOMES SUBJECT TO THIS LEASE AGREEMENT, WITHOUT REPRESENTATIONS OR
WARRANTIES OF ANY KIND BY THE LESSOR OR ANY SECURED PARTY OR ANY PERSON ACTING
ON BEHALF OF THE LESSOR OR ANY SECURED PARTY. THE LESSEE ACKNOWLEDGES AND AGREES
THAT NEITHER THE LESSOR NOR ANY SECURED PARTY NOR ANY OF THEIR RESPECTIVE
DIRECTORS, OFFICERS AND EMPLOYEES, NOR ANY COMPANY, PERSON OR FIRM CONTROLLING,
CONTROLLED BY OR UNDER COMMON CONTROL WITH ANY OF THEM NOR ANY OTHER PERSON
ACTING ON BEHALF OF THE LESSOR OR ANY SECURED PARTY HAS HAD AT ANY TIME PHYSICAL
POSSESSION OF ANY PORTION OF THE NUCLEAR MATERIAL, HAS MADE ANY INSPECTION
THEREOF, HAS GIVEN ANY ADVICE TO THE LESSEE OR HAS MADE ANY RECOMMENDATION TO
THE LESSEE WITH RESPECT TO THE CHOICE OF THE SUPPLIER, VENDOR OR PROCESSOR OF
THE NUCLEAR MATERIAL OR WITH RESPECT TO THE PROCESSING, MILLING, CONVERSION,
ENRICHMENT, FABRICATION, CONTAINERIZATION, TRANSPORTATION, UTILIZATION, STORAGE
OR REPROCESSING OF THE SAME. THE LESSEE ALSO ACKNOWLEDGES AND AGREES THAT
NEITHER THE LESSOR NOR ANY SECURED PARTY NOR ANY OF THEIR RESPECTIVE DIRECTORS,
OFFICERS AND EMPLOYEES, NOR ANY COMPANY, PERSON OR FIRM CONTROLLING, CONTROLLED
BY OR UNDER COMMON CONTROL WITH ANY OF THEM, NOR ANYONE ACTING ON BEHALF OF THE
LESSOR OR ANY SECURED PARTY HAS MADE ANY WARRANTY OR OTHER REPRESENTATION,
EXPRESS OR IMPLIED, THAT THE NUCLEAR MATERIAL LEASED OR TO BE LEASED UNDER THIS
LEASE AGREEMENT (a) WILL NOT RESULT IN INJURY OR DAMAGE TO PERSONS OR PROPERTY,
(b) WILL BE USEABLE BY THE LESSEE OR WILL ACCOMPLISH THE RESULTS WHICH THE
LESSEE INTENDS FOR SUCH NUCLEAR MATERIAL OR (c) IS SAFE IN ANY MANNER OR
RESPECT. THE LESSEE ALSO ACKNOWLEDGES AND AGREES THAT NEITHER THE LESSOR
5
<PAGE>
NOR ANY SECURED PARTY NOR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS AND
EMPLOYEES, NOR ANY COMPANY, PERSON OR FIRM CONTROLLING, CONTROLLED BY OR UNDER
COMMON CONTROL WITH ANY OF THEM, AND ANYONE ACTING ON BEHALF OF ANY OF THEM IS A
MANUFACTURER OR ENGAGED IN THE SALE OR DISTRIBUTION OF NUCLEAR MATERIAL AND THAT
NONE OF THE FOREGOING PERSONS HAS MADE OR DOES HEREBY MAKE ANY REPRESENTATION,
WARRANTY OR COVENANT, EXPRESS OR IMPLIED, WITH RESPECT TO THE MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, CONDITION, QUALITY, USEABILITY, DURABILITY,
SUITABILITY OR CONSEQUENCES OF USE OR MISUSE OF THE NUCLEAR MATERIAL IN ANY
RESPECT OR IN CONNECTION WITH OR FOR THE PURPOSES OR USES OF THE LESSEE, OR ANY
OTHER REPRESENTATION OR WARRANTY OF ANY KIND OR CHARACTER WHATSOEVER, EXPRESS OR
IMPLIED.
8. Lease Term; Early Termination; Termination of Leasing Record.
(a) The Lessor hereby leases to the Lessee, and the Lessee
hereby leases from the Lessor, the Nuclear Material for the term provided in
this Lease Agreement and subject to the terms and provisions hereof.
(b) This Lease Agreement shall become effective at 12:01 A.M.,
Eastern time, on the Closing, and, unless earlier terminated as provided in
Sections 8(c), 17 or 18, the term of this Lease Agreement shall end at the close
of business on the later of (i) the date on which there is no outstanding
principal of, or interest or premium, if any, on any of the Outstandings or (ii)
the Termination Date but in each case in no event later than November 17, 2015.
(c) In the event that during the term of this Lease Agreement,
the then effective Termination Date is not extended pursuant to Section 5.01 of
the Credit Agreement, the Lessee shall have the option, exercisable at any time
beginning 180 days before such Termination Date upon written notice to the
Lessor and the Secured Parties prior to such Termination Date to purchase all
(but not less than all) of the Nuclear Material and any spent fuel related
thereto for which title has not been transferred to the Lessee for a purchase
price equal to the Stipulated Casualty Value of such Nuclear Material at the
time of such purchase plus the Termination Rent. If the Lessee exercises such
purchase option, the purchase of the Nuclear Material shall occur on such date,
on or prior to such Termination Date, as may be agreed upon by the Lessor and
the Lessee and of which the Lessee has given the Secured Parties prior written
notice. Upon receipt of payment of the purchase price, the Lessor shall deliver
to the Lessee a Lessor's Bill of Sale, substantially in the form of Exhibit E,
transferring all right, title, interest and claim of the Lessor to the Nuclear
Material and any spent fuel related thereto for which title has not already been
transferred to the Lessee, to the Lessee or the Lessee's designee, free and
clear of all Liens created by the Collateral Agreements, together with such
documents, if any, as may be required to evidence the release of such Liens. The
later of (i) the date on which there is no outstanding principal of, or interest
or premium, if any, on any of the Outstandings or (ii) the date of any sale by
the Lessor of all of the Nuclear Material as provided in this Section 8(c) shall
constitute the Termination Settlement Date, and this Lease Agreement shall
terminate as of such date.
(d) In the event that during the term of this Lease Agreement
the then effective Termination Date is not extended pursuant to Section 5.01 of
the Credit Agreement and the Lessee shall not have exercised its option to
purchase pursuant to Section 8(c), the Lessee shall attempt to sell, or if no
sale is possible, to otherwise convey, on behalf of the Lessor, ownership of the
Nuclear Material to a third party not disqualified by any applicable statute,
law, regulation or agreement from acquiring such Nuclear Material, and, upon
prior written notice to the Lessor and the Secured Parties of the terms and date
of such sale, the Lessor shall furnish title papers as may be necessary to
effect such sale or conveyance on an as-is, where-is, non-installment, cash sale
basis, without recourse to or warranty
6
<PAGE>
or agreement of any kind by the Lessor. The proceeds of such sale or conveyance
shall be paid to the Lessor, and any amount so paid shall constitute a credit
against the amount of the Stipulated Casualty Value payable by the Lessee under
Section 8(e); provided, however, that any proceeds of such sale or conveyance in
excess of the amount payable by the Lessee under Section 8(e) shall be retained
by the Lessee.
(e) On the Termination Date unless the Lessee shall have
exercised its purchase option set forth in Section 8(c) and paid the Lessor the
purchase price of the Nuclear Material as provided therein, the Lessee shall pay
to the Lessor an amount equal to the sum of (i) the Stipulated Casualty Value of
all Nuclear Material leased under this Lease Agreement as of such Termination
Date and of all Nuclear Material sold or conveyed pursuant to Section 8(d) (less
any credit provided in Section 8(d)), and (ii) the Termination Rent as of such
Termination Date. Upon receipt of such payment, the Lessor shall deliver to the
Lessee or any designee of the Lessee a Lessor's Bill of Sale, substantially in
the form of Exhibit E, transferring all right, title, interest and claim of the
Lessor to the Nuclear Material and any spent fuel relating thereto for which
title has not been transferred to the Lessee to the Lessee or the Lessee's
designee, free and clear of all Liens created by the Collateral Agreements,
together with such documents, if any, as may be required to evidence the release
of such Liens.
(f) In the event that during the term of this Lease Agreement,
the then effective Termination Date is not extended pursuant to Section 5.01 of
the Credit Agreement, all obligations of the Lessor and Lessee under this Lease
Agreement with respect to the Nuclear Material, including the obligation of the
Lessee to pay Basic Rent and the obligation of the Lessor to acquire and pay for
the Nuclear Material and to lease the same to the Lessee shall terminate on the
date on which the Lessor receives the payment specified in Section 8(c) or
Section 8(e).
(g) The Lessee shall deliver to the Lessor and to the Secured
Parties a Rent Due and SCV Confirmation Schedule in the form of Exhibit F within
thirty (30) days following the date on which any Nuclear Material or spent fuel
resulting from the Nuclear Material is removed from the reactor of the
Generating Facility for purposes of "cooling-off" preliminary to reprocessing or
permanent on-site safe storage and/or off-site disposal. If the Lessee elects
within thirty (30) days following the receipt by the Lessor of such Rent Due and
SCV Confirmation Schedule to extend the lease term for the purposes of
reprocessing any such Nuclear Material, then the Lessor and the Lessee shall
enter into an Interim Leasing Record with respect to such Nuclear Material in
its then condition. In all other cases, the Final Leasing Record with respect to
any such Nuclear Material or spent fuel resulting from such Nuclear Material
shall be terminated and the Lessee shall immediately pay to the Lessor all
amounts, including the Stipulated Casualty Value, if any, with respect to such
Nuclear Material or spent fuel resulting from such Nuclear Material, and, upon
receipt thereof, the Lessor shall deliver to the Lessee or to any designee of
the Lessee a Lessor's Bill of Sale, substantially in the form of Exhibit E,
transferring all right, title, interest and claim of the Lessor to such Nuclear
Material or spent fuel resulting from such Nuclear Material for which title has
not already been transferred to the Lessee or the Lessee's designee, free and
clear of all Liens created by the Collateral Agreements, together with such
documents, if any, as may be required to evidence the release of such Liens.
9. Payment of Rent; Payments with Respect to the Lessor's Financing Costs.
(a) Basic Rent. The Lessee shall pay Basic Rent monthly in
arrears on the first day of the next succeeding month. If such first day of the
month is not a Business Day, then payment shall be made on the next succeeding
Business Day.
7
<PAGE>
(b) Additional Rent. In addition to the Basic Rent, the Lessee
will also pay from time to time as provided in this Lease Agreement or on demand
of the Lessor, all Additional Rent on the due date thereof. In the event of any
failure by the Lessee to pay any Additional Rent, the Lessor shall have all the
rights, powers and remedies as in the case of failure to pay Basic Rent.
(c) Prepayments of Basic Rent. The Lessee may prepay Basic
Rent at any time. Such payment shall be credited against subsequent amounts owed
by the Lessee on account of Basic Rent.
(d) Wire Payment Procedure for Paying Basic Rent. All payments
of Rent and other payments to be made by the Lessee to the Lessor pursuant to
this Lease Agreement shall be paid to the Lessor (or, at the Lessor's request,
to the Secured Parties) in lawful money of the United States in Collected Funds
by wire transfer pursuant to Section 3.03 of the Credit Agreement. The Lessee
shall furnish to the Lessor and the Secured Parties each month during the term
of the Lease Agreement a summary of the rental calculations for such month
covering all outstanding Leasing Records. On each Basic Rent Payment Date, the
Lessee shall deliver to the Lessor and the Secured Parties a signed and
completed Rent Due and SCV Confirmation Schedule. The Lessee shall be
responsible for the accuracy of the matters contained in all such schedules
delivered by the Lessee pursuant to the provisions of this Lease Agreement.
10. Compliance with Laws; Restricted Use of Nuclear Material; Assignments;
Permitted Liens; Spent Fuel.
(a) Compliance with Legal Requirements. Subject to the
provisions of Section 11 hereof, the Lessee agrees to comply with all Legal
Requirements.
(b) Recording of Title. The Lessee shall promptly and duly
execute, deliver, file and record all such further counterparts of this Lease
Agreement or such certificates, Bills of Sale, financing and continuation
statements and other instruments as may be reasonably requested by the Lessor
and take such further actions as the Lessor shall from time to time reasonably
request, in order to establish, perfect and maintain the rights and remedies
created or intended to be created in favor of the Lessor and the Secured Parties
under this Lease Agreement and the Lessor's title to and interest in the Nuclear
Material as against the Lessee or any third party in any applicable
jurisdiction.
(c) Exclusive Use of Nuclear Material. So long as no Lease
Event Default shall have occurred and be continuing, the Lessee may use the
Nuclear Material in the regular course of its business or in the business of any
subsidiary or affiliate of the Lessee, and, subject to Section 3(d) and upon
thirty (30) days' prior notice in writing to the Lessor and the Secured Parties,
or upon such shorter prior notice in writing promptly given upon the Lessee's
receipt of notice from any Manufacturer that the Nuclear Material is to be
moved, and at the Lessee's sole expense (without limiting the Lessee's rights to
request payment by the Lessor of such expense as provided in Section 6 hereof)
move such Nuclear Material to any jurisdiction approved in writing by the Lessor
in the contiguous forty-eight (48) states of the United States of America and
the District of Columbia for the purpose of having services performed on such
Nuclear Material in connection with any stage of the Nuclear Material Cycle
other than Heat Production and the "cooling off" stage, provided that (i) no
such movement of the Nuclear Material shall materially reduce the then fair
market value of such Nuclear Material, (ii) such Nuclear Material shall be and
remain the property of the Lessor, subject to this Lease Agreement, and (iii)
all Legal Requirements (including, without limitation, all necessary government
consents, permits and approvals) shall have been met or obtained by the Lessee,
on its own behalf and on behalf of the Lessor, and all necessary recordings,
filings and
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registrations or recordings, filings and registrations which the Lessor shall
reasonably consider advisable shall have been duly made in order to protect the
validity and effectiveness of this Lease Agreement and the security interest
created in the Security Agreement. At least once each year, or more frequently
if the Lessor reasonably so requests, the Lessee shall advise the Lessor and the
Secured Parties in writing where all Nuclear Material as of such date is
located. The Lessee shall maintain and make available to the Lessor for
examination upon reasonable notice complete and adequate records pertaining to
receipt, possession, use, location, movement, physical inventories and any other
information reasonably requested by the Lessor with respect to the Nuclear
Material.
(d) Additional Lessee Covenants. The Lessee agrees to use
every reasonable precaution to prevent loss or damage to the Nuclear Material.
All individuals handling or operating Nuclear Material in the possession of the
Lessee shall be conclusively presumed not to be agents of the Lessor. The Lessee
shall cooperate fully with the Lessor and all insurance companies and
governmental agencies providing insurance under Section 12 hereof in the
investigation and defense of any claims or suits arising from the licensing,
acquisition, storage, containerization, transportation, blending, transfer,
consumption, leasing, insuring, operating, disposing, fabricating and
reprocessing of the Nuclear Material. To the extent required by any applicable
law or regulation, the Lessee shall attach to the Nuclear Material the form of
required notice to protect or disclose the ownership of the Lessor or that the
Nuclear Material is leased. So long as no Lease Event of Default shall have
occurred and be continuing, the Lessor will assign or otherwise make available
to the Lessee all of its rights under any Manufacturer's warranty on Nuclear
Material. The Lessee shall pay all costs, expenses, fees and charges, except
Acquisition Costs, incurred by the Lessee in connection with the use and
operation of the Nuclear Material during the term of the lease of such Nuclear
Material. The Lessee hereby assumes all risks of loss or damage of Nuclear
Material however caused and shall, at its own expense, keep the Nuclear Material
in good operating condition and repair, reasonable wear and tear, obsolescence
and exhaustion excepted.
(e) Assignment by Lessor. Except as otherwise herein provided,
the Lessor may not, without the prior written consent of the Lessee, sell,
assign, transfer or convey the Nuclear Material or any interest therein or in
the Lease Agreement, or grant to any party a security interest in, or create a
lien or encumbrance upon, all or any part of its right, title and interest in
this Lease Agreement and in any Nuclear Material. After receipt by the Lessee of
written notice from the Lessor of any assignment by the Lessor of Rents or other
sums payable by the Lessee under this Lease Agreement, the Lessee shall make
such payments as directed in such notice of assignment, and such payments shall
discharge the obligations of the Lessee hereunder to the extent of such
payments. The Lessee hereby consents to the security interest and other rights
and interests granted to the Secured Parties under the Security Agreement, dated
as of the date first above written.
(f) Liens; Permitted Liens. The Lessee will not directly or
indirectly create or permit to be created or to remain and will discharge any
Lien with respect to the Nuclear Material or any portion thereof, or upon the
Lessee's leasehold interest therein, or upon the Basic Rent, Additional Rent, or
any other sum payable under this Lease Agreement, other than Permitted Liens.
(g) Assignment by Lessee. Notwithstanding any provision of
this Lease Agreement to the contrary, subject to applicable laws and regulations
and so long as no Lease Event of Default shall have occurred and be continuing,
the Lessee may sublease the Nuclear Material provided that (i) the Lessee has
given prior written notice of such sublease to the Lessor, (ii) such sublease is
not inconsistent with, and is expressly subject to, this Lease Agreement and
(iii) such sublease does not in any way limit or affect the Lessee's duties and
obligations under this Lease Agreement.
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(h) Transfer of Title to Manufacturers. The parties recognize
that, during the processing and reprocessing of Nuclear Material before and
after its utilization in the Generating Facility for the production of power,
the Manufacturer performing services on the Nuclear Material may require that
title thereto be transferred to such Manufacturer and/or that the Nuclear
Material be commingled with other nuclear material, with an obligation for the
Manufacturer, upon completion of the services, to reconvey a specified amount of
nuclear material. The standard enrichment contracts of the Department of Energy
contain such provisions. Therefore, the parties agree that (i) Nuclear Material
may become subject to such a contract provision and that the action contemplated
by such a provision may be taken, notwithstanding any provision of this Lease
Agreement to the contrary, (ii) as between the Lessor and the Lessee, such
Nuclear Material shall be deemed to remain leased under this Lease Agreement
while title thereto is in the Manufacturer, and (iii) the nuclear material
exchanged by the Manufacturer upon completion of its services shall be
automatically leased under this Lease Agreement in substitution for the Nuclear
Material originally delivered to the Manufacturer.
(i) Substitution of Nuclear Material. The Lessee shall be
permitted to exchange Nuclear Material for other Nuclear Material of equal or
greater fair market value provided that the Lessor receives title to such
substituted Nuclear Material free and clear of any Lien other than such Liens as
may be created by the Security Agreement or permitted under Section 10(h). Any
additional costs incurred in order to effect such an exchange shall be paid by
the Lessor in accordance with the procedures set forth in Section 6(c) and shall
be added to the Acquisition Cost of the Nuclear Material. A supplemental Leasing
Record dated the date that the Lessor makes such further payment shall be signed
by the Lessor and the Lessee to record the revised Acquisition Cost and shall
include a full description of the substituted Nuclear Material, notice of any
change in location and such additional details upon which the parties may agree.
(j) Spent Fuel. Without the consent of the Lessor, the Lessee
shall not permit any Nuclear Material, which shall have been removed from a
Generating Facility for the purpose of "cooling-off," storage, repair or
reprocessing to be removed from the site of the Generating Facility unless (i)
the new site of such Nuclear Material is a facility maintaining liability
insurance and indemnification fully insuring and indemnifying the Lessor, the
Lessee and the Secured Parties under the Atomic Energy Act and any other
applicable law, rule or regulation, and (ii) except if the lease term is
extended pursuant to the second sentence of Section 8(g), the lease of such
Nuclear Material shall, concurrently with its removal from the Generating
Facility, be terminated by the Lessee pursuant to the provisions of Section 8 or
18 hereof, as applicable, with the Lessee acquiring the ownership thereof
pursuant to Section 8(e), 8(g) or Section 18(c), as applicable.
11. Permitted Contests. The Lessee at its expense may, in its own name or,
if necessary and permitted, in the name of the Lessor (and, if necessary but not
so permitted, the Lessee may require the Lessor to) contest after prior notice
to the Lessor, by appropriate legal or administrative proceedings conducted in
good faith and with due diligence, the amount, validity or application, in whole
or in part, of any Imposition or Lien therefor, or any Legal Requirements or
Insurance Requirements, or any matter underlying Lessee's indemnity obligations
under Section 13 hereof, or any other Lien or contract or agreement referred to
in Section 10(f) hereof; provided that (i) in the case of an unpaid Imposition
or Lien therefor, such proceedings shall suspend the collection of such
Imposition or the enforcement of such Lien against the Lessor, (ii) neither the
Lessee's use of the Nuclear Material or any portion thereof nor the taking of
any step necessary or proper with respect to such Nuclear Material in any stage
of the Nuclear Material Cycle nor the performance of any other act required to
be performed by the Lessee under this Lease Agreement would be enjoined,
prevented or otherwise interfered with, (iii) the Lessor would not be subject to
any additional civil liability (other than interest which the Lessee
10
agrees to pay) or any criminal liability for failure to pay any such Imposition
or to comply with any such Legal Requirements or Insurance Requirements or any
such other Lien, contract or agreement, and (iv) the Lessee shall have set aside
on its books adequate reserves (in accordance with generally accepted accounting
principles) and shall have furnished such security, if any, as may be required
in the proceedings or reasonably requested by the Lessor. The Lessee will pay,
and save the Lessor, the Owner Trustee, U.S. Trust and the Secured Parties
harmless against, all losses, judgments, decrees and costs, including attorneys'
fees and expenses, in connection with any such contest and will, promptly after
the determination of such contest, pay and discharge the amounts which shall be
levied, assessed or imposed or determined to be payable, together with all
penalties, fines, interest, costs and expenses incurred in connection with such
contest. All rights and indemnification obligations under this Section 11 and
each other indemnification obligation in favor of the Lessor, the Owner Trustee,
U.S. Trust and the Secured Parties under this Lease Agreement shall survive any
termination of this Lease Agreement or of the lease of any Nuclear Material
hereunder.
12. Insurance; Compliance with Insurance Requirements. The Lessee shall
comply with all Insurance Requirements and with all Legal Requirements
pertaining to insurance. Without limiting the foregoing:
(a( Liability and Casualty Insurance. The Lessee shall, at its
own cost and expense, procure and maintain, or cause to be procured and
maintained, liability insurance and indemnification with respect to the Nuclear
Material insuring and indemnifying the Lessor, the Owner Trustee, U.S. Trust,
the Lessee, and the Secured Parties to the full extent required or available,
whichever may be greater, under the Atomic Energy Act or under any other
applicable law, rule or regulation. In the event the provisions of the Atomic
Energy Act with respect to liability insurance and the indemnification of
owners, licensees and operators of Nuclear Material or any other provisions of
the Atomic Energy Act which benefit the Lessor, the Owner Trustee, U.S. Trust or
the Secured Parties shall change, then the Lessee shall use its best efforts to
obtain equivalent insurance and indemnification agreements from the Nuclear
Regulatory Commission or from such other public and/or private sources from
which such coverage is available. The Lessee shall also, at its own cost and
expense, procure and maintain, or cause to be procured and maintained, physical
damage insurance with respect to the Nuclear Material insuring the Lessor, the
Owner Trustee, U.S. Trust and the Secured Parties against loss or damage to the
Nuclear Material in a manner which is consistent at all times with current
prudent utility industry practice in the United States; provided, however, that
the Lessee shall in any event maintain physical damage insurance coverage for
its Oyster Creek nuclear generating station site, including the Nuclear
Material, in an amount not less than $1.11 billion. Such liability and physical
damage insurance and indemnification agreements may be subject to deductible
amounts which do not exceed in the aggregate $5,000,000, and the Lessee may
self-insure with respect to such liability and physical damage insurance and
indemnification agreements to the extent of $5,000,000, provided that such
deductible amounts and such self-insurance are permitted under all applicable
law, rules and regulations.
(b) Third Parties; Insurance Requirements. The Lessee shall
use its best efforts to provide that the Nuclear Material, while in the
possession of third parties, is covered for liability insurance and
indemnification to the maximum extent available, and for physical damage
insurance in an amount not less than the Stipulated Casualty Value of such
Nuclear Material. To the extent that any such third party is maintaining such
insurance coverage for the Nuclear Material, the Lessee shall have no obligation
to do so under this Lease Agreement.
(c) Named Insureds; Loss Payees. The Lessee shall provide for
the Lessor, the Owner Trustee, U.S. Trust and the Collateral Agent to be named
additional insureds where possible, and, with respect to physical damage
coverage,
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named loss payees to the full extent of their interests in all insurance
policies and indemnification agreements relating to the Nuclear Material
required under this Section. All such policies and, where possible,
indemnification agreements, shall provide for at least ten (10) days' prior
written notice to the Lessor, the Owner Trustee, U.S. Trust and the Collateral
Agent of any cancellation or material alteration of such policies.
(d) Insurance Certificates. The Lessee shall, upon request of
the Lessor, the Owner Trustee, U.S. Trust or the Collateral Agent, provide the
Lessor, the Owner Trustee, U.S. Trust or the Collateral Agent, as the case may
be, with copies of the policies or insurance certificates in respect of the
insurance procured pursuant to the provisions of this Section and shall advise
the Lessor, the Owner Trustee, U.S. Trust and the Collateral Agent of all
expirations and renewals of policies and all notices issued by the insurers with
respect to such policies. Within a six-month period from the execution of this
Lease Agreement and at yearly intervals thereafter, the Lessee shall furnish to
the Lessor, the Owner Trustee, U.S. Trust and the Collateral Agent a certificate
as to the insurance coverage provided pursuant to this Section and shall further
give notice as to any material change in the nature or availability of such
coverage, including any material change whatsoever in the provisions of the
Atomic Energy Act or any other applicable law, rule or regulation with respect
to liability insurance and indemnification, or, immediately after the Lessee
becomes aware, or should reasonably be expected to become aware, of any material
change in the application, interpretation or enforcement thereof. The Lessor,
the Owner Trustee, U.S. Trust or the Collateral Agent shall be under no duty to
examine such insurance policies or indemnification agreements or to advise the
Lessee in case the Lessee is not in compliance with any Insurance Requirements.
13. Indemnity. Without limitation of any other provision of this Lease
Agreement, including Section 11, the Lessee agrees to indemnify and hold
harmless each of the Lessor, the Owner Trustee, U.S. Trust and the Secured
Parties and all companies, persons or firms controlling, controlled by, or under
common control with any of them and the respective shareholders, directors,
officers and employees of the foregoing against any and all claims, demands and
liabilities of whatever nature and all costs, losses, damages, obligations,
penalties, causes of action, judgments and expenses (including attorneys' fees
and expenses) directly or indirectly relating to or in any way arising out of:
(a) defects in title to Nuclear Material upon acquisition by
the Lessor or in ownership of and interest in the Nuclear Material (the term
"Nuclear Material" when used in this Section 13 shall include, in addition to
all other Nuclear Material, nuclear material the lease of which has been
terminated and which is in storage, or is being transported to storage, and
which has not been sold or disposed of by the Lessor to the Lessee or to a third
party);
(b) the ownership, licensing, ordering, rejection, use,
nonuse, misuse, possession, control, installation, acquisition, storage,
containerization, transportation, blending, transfer, consumption, leasing,
insuring, operating, disposing, fabricating, channelling, refining, milling,
enriching, conversion, cooling, processing, condition, operation, inspection,
repair and reprocessing of the Nuclear Material, or resulting from the condition
of the environment including the adjoining and/or underlying land, water,
buildings, streets or ways, except to the extent that such costs are included in
the Acquisition Cost of such Nuclear Material within the limits specified in
Section 4 (or within any change of such limits agreed to in writing by the
Lessor and the Lessee) and except for any general administrative expenses of the
Secured Parties and of their representatives;
(c) the assertion of any claim or demand based upon any
infringement or alleged infringement of any patent or other right, by or in
respect of any Nuclear Material; provided, however, that the Lessor shall have
made available
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to the Lessee all of the Lessor's rights under any similar indemnification from
the Manufacturer of such Nuclear Material under any Nuclear Material Contract;
(d) all federal, state, county, municipal, foreign or other
fees and taxes of whatever nature including, but not limited to, license,
qualification, franchise, sales, use, business, gross receipts, ad valorem,
property, excise, and occupation fees and taxes and penalties and interest
thereon, whether assessed, levied against or payable by the Lessor or any
Secured Party or to which the Lessor or any Secured Party is subject with
respect to the Nuclear Material or the Lessor's or any Secured Party's ownership
thereof or interest therein or the licensing, ordering, ownership, use,
possession, control, acquisition, storage, containerization, transportation,
blending, milling, enriching, transfer, consumption, leasing, insuring,
operating, disposing, fabricating, channelling, refining, conversion, cooling
and reprocessing of Nuclear Material or measured in any way by the value thereof
or by the business of investment in, financing of or ownership by the Lessor or
any Secured Party with respect thereto; provided, however, that the Lessee shall
not be obligated to indemnify any Secured Party for any taxes, whether federal,
state or local, based on or measured by net income of any Secured Party where
taxable income is computed in substantially the same manner as taxable income is
computed under the Code;
(e) 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 involving or connected in any way with the Nuclear Material or any
portion thereof;
(f) any violation, or alleged violation, of this Lease
Agreement by the Lessee or of any contracts or agreements to which the Lessee is
a party or by which it is bound or any laws, rules, regulations, orders, writs,
injunctions, decrees, consents, approvals, exemptions, authorizations, licenses
and withholdings of objection, of any governmental or public body or authority
and all other requirements having the force of law applicable at any time to the
Nuclear Material or any action or transaction by the Lessee with respect thereto
or pursuant to this Lease Agreement;
(g) performance of any labor or service or the furnishing of
any materials in respect of the Nuclear Material or any portion thereof, except
to the extent that such costs are included in the Acquisition Cost of such
Nuclear Material within the limits specified in Section 4 (or within any change
of such limits agreed to in writing by the Lessor and the Lessee); or
(h) liabilities based upon a theory of strict liability in
tort, negligence or willful acts to the extent that such liabilities relate to
the Nuclear Material or any action or transaction with respect thereto or
pursuant to this Lease Agreement.
The Lessee shall, upon demand, reimburse the Lessor, the Owner Trustee, U.S.
Trust, the Secured Parties or other indemnified parties, as the case may be, for
any sum or sums expended with respect to any of the foregoing or advance such
amount, upon request by the Lessor, the Owner Trustee, U.S. Trust, the Secured
Parties or such other party for payment thereof. With respect solely to the
Lessor, the amount of any payment obligation of the Lessee under this Section 13
shall be determined on a net, after-tax basis, taking into account any tax
benefit to the Lessor. Notwithstanding the foregoing, the Lessee shall not
indemnify or hold harmless the Lessor, the Owner Trustee, U.S. Trust, the
Secured Parties or other indemnified parties for (i) any claims, demands,
liabilities, costs or expenses which arise, result from or relate to obligations
of such party as an insurer under contracts or agreements of insurance or
reinsurance or (ii) any liability arising from the willful misconduct or gross
negligence of the Lessor, the Owner Trustee, U.S. Trust, the
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Secured Parties or other indemnified parties; provided, however, that the Lessee
shall in any event indemnify and hold harmless the Lessor, the Owner Trustee,
U.S. Trust, the Secured Parties and other indemnified parties for that part of
any such liability to which the Lessee has contributed. Without limiting any of
the foregoing provisions of this Section 13, to the extent that the Lessee in
fact indemnifies the Lessor, the Owner Trustee, U.S. Trust, the Secured Parties
or such other party under this indemnity provision, the Lessee shall be
subrogated to the rights of the Lessor, the Owner Trustee, U.S. Trust, the
Secured Parties and such other party in the affected transaction and shall have
a right to determine the settlement of claims with respect to such transaction,
provided that any such rights to which the Lessee shall be subrogated shall be
subordinate and subject in right of payment to the prior payment in full of all
liabilities to the Lessor, the Owner Trustee, U.S. Trust, the Secured Parties or
other indemnified parties of the person or entity in respect of which such
rights exist. The Lessor shall claim, on a timely basis, any refund to which it
may be entitled with respect to any fees or taxes for which the Lessor has
sought indemnification from the Lessee under Section 13(d), shall take all steps
necessary to prosecute diligently such claim and shall pay over to the Lessee
any refund (together with any interest received thereon) recovered by the Lessor
with respect to such fees or taxes as soon as practicable following receipt
thereof, provided that the Lessee shall have previously indemnified the Lessor
with respect to such fees or taxes. The Owner Trustee, U.S. Trust and the
Secured Parties, at the expense of the Lessee, (i) shall cooperate with the
Lessee in such manner as the Lessee shall reasonably request in order to claim,
on a timely basis, any refund to which the Owner Trustee, U.S. Trust or the
Secured Parties may be entitled with respect to any fees or taxes for which the
Lessee has indemnified the Owner Trustee, U.S. Trust or any Secured Party or for
which the Lessee has an obligation to indemnify the Owner Trustee, U.S. Trust or
the Secured Parties under Section 13(d) (provided that the Lessee is not in
default of such obligation) if such cooperation is necessary in order to claim
such refund, (ii) shall take all steps which the Lessee shall reasonably request
which are necessary to prosecute such claim, and (iii) shall pay over to the
Lessee any refund (together with any interest received thereon) recovered by the
Owner Trustee, U.S. Trust or any Secured Party with respect to such fees or
taxes as soon as practicable following receipt thereof, provided that the Lessee
shall have previously indemnified the Owner Trustee, U.S. Trust or such Secured
Party with respect to such fees or taxes. All rights and indemnification
obligations under this Section 13, and each other indemnification obligation in
favor of the Lessor, the Owner Trustee, U.S. Trust and the Secured Parties under
this Agreement, shall survive any termination of this Lease Agreement or of the
lease of any Nuclear Material hereunder.
14. Casualty and Other Events. Upon the occurrence of any one or more of
the following events:
(a) the loss, destruction or damage beyond repair of any Nuclear
Material, or
(b) the commandeering, condemnation, attachment or loss of use
to the Lessee of any Nuclear Material by reason of the act of any third party or
governmental instrumentality or the deprivation or loss of use to the Lessee of
any Nuclear Material for any other reason, other than by reason of a Lease Event
of Default, for a period exceeding ninety (90) days; or
(c) a determination by the Lessee in its sole discretion that
any Nuclear Material is no longer useful to the Lessee, provided, however, that
(i) no Lease Event of Default has occurred and is continuing, and (ii) no such
determination may be made by the Lessee with respect to any Nuclear Material
prior to ---------- --;
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Then, in any such case, the Lessee promptly shall give written
notice to the Lessor and the Secured Parties of any such event, and upon the
earlier of (i) ten (10) days following receipt of any insurance or other
proceeds paid with respect to the foregoing or (ii) one hundred and twenty (120)
days after the occurrence of any such event, the Lessee shall pay to the Lessor
an amount equal to the then Stipulated Casualty Value of such Nuclear Material,
together with any Basic Rent and Additional Rent then due with respect to such
Nuclear Material. The lease of such Nuclear Material hereunder and the
obligation of the Lessee to pay Basic Rent and Additional Rent with respect to
such Nuclear Material shall continue until the day on which the Lessor receives
payment of such Stipulated Casualty Value, Basic Rent and Additional Rent. Upon
the giving of written notice of the occurrence of such an event, the Lessee
shall promptly use its best efforts to sell, or, if no sale is possible, to
otherwise convey, on behalf of the Lessor, ownership of such Nuclear Material to
a third party not disqualified by any applicable statute, law, regulation or
agreement from acquiring such Nuclear Material, and the Lessor shall furnish
title papers as may be necessary to effect such sale or conveyance on an as-is,
where-is, non-installment, cash sale basis without recourse to or warranty or
agreement of any kind by the Lessor. Any such sale or conveyance shall be
effected on or before the date one hundred and twenty (120) days after the date
of the occurrence of such event. The proceeds of such sale or conveyance shall
be paid to the Lessor, and any amount so paid shall constitute a credit against
the amount of the Stipulated Casualty Value payable by the Lessee under this
Section 14.
15. Nuclear Material to Remain Personal Property. It is expressly
understood and agreed that the Nuclear Material shall be and remain personal
property notwithstanding the manner in which it may be attached or affixed to
realty and notwithstanding any law or custom or the provisions of any lease,
mortgage or other instrument applicable to any such realty. The Lessee agrees to
indemnify the Lessor and the Secured Parties against, and to hold the Lessor and
the Secured Parties harmless from, all losses, costs and expenses (including
reasonable attorneys' fees and expenses) resulting from any of the Nuclear
Material becoming part of any realty. Upon termination of the lease of any
Nuclear Material, any costs of removal, transportation, storage and delivery of
such Nuclear Material shall be paid by the Lessee. The Lessor and the Secured
Parties shall not be liable for any physical damage caused to any realty or any
building by reason of the removal of the Nuclear Material therefrom.
16. Events of Default. Each of the following events of default by the
Lessee shall constitute a "Lease Event of Default" and give rise to the rights
on the part of the Lessor described in Section 17 hereof:
(i) Default in the payment of Basic Rent or Additional Rent,
if any, on the date on which such payment is due and the continuance of
such default for five (5) days;
(ii) Default in the payment of Termination Rent;
(iii) The Lessee shall fail to maintain liability and casualty
insurance pursuant to its obligations under Section 12(a) of this Lease
Agreement;
(iv) The Lessee shall fail to perform its obligations to
purchase Nuclear Material pursuant to Section 8(e) of this Lease
Agreement;
(v) Any representation or warranty or statement made by the
Lessee (or any of its officers) herein or in connection with this Lease
Agreement shall prove to be incorrect or misleading in any material
respect when made;
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(vi) Default in the payment or performance of any other
material liability or obligation or covenant of the Lessee to the Lessor,
and the continuance of such default for thirty (30) days after written
notice to the Lessee sent by registered or certified mail;
(vii) The Lessee suspends or discontinues its business
operations or becomes insolvent (however such insolvency may be evidenced)
or admits insolvency or bankruptcy or its inability to pay its debts as
they mature, makes an assignment for the benefit of creditors or applies
for or consents to the appointment of a trustee or receiver for the Lessee
or for the major part of its property;
(viii) The institution of bankruptcy, reorganization,
liquidation or receivership proceedings for relief under any bankruptcy
law or similar law for the relief of debtors by or against the Lessee and,
if instituted against the Lessee, its consent thereto or the pendency of
such proceedings for sixty (60) days;
(ix) An event of default (the effect of which is to permit the
holder or holders of any instrument, or the trustee or agent on behalf of
such holder or holders, to cause the indebtedness evidenced by such
instrument to become due prior to its stated maturity) shall occur under
the provisions of any instrument evidencing indebtedness for borrowed
money of the Lessee in a principal amount equal to at least $20,000,000 or
if any obligation of the Lessee for the payment of such indebtedness shall
become or be declared to be due and payable prior to its stated maturity,
or shall not be paid when due and is not paid within the applicable cure
period, if any, provided for the payment of such indebtedness under such
instrument;
(x) An event of default shall occur under the provisions of
any Basic Document and such default shall have continued beyond any
applicable cure period.
(xi) A final judgment in an amount in excess of $20,000,000 is
rendered against the Lessee, and within thirty (30) days after the entry
thereof, such judgment is not discharged or execution thereof stayed
pending appeal, or within thirty (30) days after the expiration of any
such stay, such judgment is not discharged; or
(xii) Other than pursuant to a condemnation proceeding, any
court, governmental officer or agency shall, under color of legal
authority, take and hold possession of any substantial part of the
property or assets of the Lessee.
17. Rights of the Lessor Upon Default of the Lessee. Upon the occurrence
of any Lease Event of Default, the Lessor may, in its discretion, and shall, at
the direction of the Secured Parties, do one or more of the following:
(a) Terminate the lease term of any or all Nuclear Material
upon five (5) days written notice to the Lessee sent by registered or certified
mail;
(b) Whether or not any lease of any Nuclear Material is
terminated, and, subject to any applicable law or regulation, take immediate
possession of any or all Nuclear Material or cause such Nuclear Material to be
taken from the possession of the Lessee, and/or take immediate possession of and
remove other property of the Lessor in the possession of the Lessee, wherever
situated and for such purpose enter upon any premises without liability for so
doing or require
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the Lessee, at the Lessee's expense, to deliver the Nuclear Material, properly
containerized and insulated for shipping to the Lessor or to such other person
as the Lessor may designate, in which case the risk of loss shall be upon the
Lessee until such delivery is made;
(b) Whether or not any action has been taken under (a) or (b)
above, and subject to any applicable law or regulation, sell any Nuclear
Material (with or without the concurrence and whether or not at the request of
the Lessee) at public or private sale, and the Lessee shall be liable for and
shall promptly pay to the Lessor all unpaid Rent to the date of receipt by the
Lessor of the proceeds of such sale plus any deficiency between the net proceeds
of such sale and the Stipulated Casualty Value of such Nuclear Material at the
time of such payment by the Lessee; provided, however, that any proceeds of such
sale in excess of the sum of such unpaid Rent, the Stipulated Casualty Value of
such Nuclear Material and all other amounts payable by the Lessee under this
Section 17 shall be received for the benefit of, and shall be paid over to the
Lessee, as soon as practicable after receipt thereof;
(c) Subject to any applicable law or regulation, sell in a
commercially reasonable manner, dispose of, hold, use, operate, remove, lease or
keep idle any Nuclear Material as the Lessor in its sole discretion may
determine, without any obligation to account to the Lessee with respect to such
action or inaction or for any proceeds thereof, except that the net proceeds of
any such selling, disposing of, holding, using, operating or leasing shall be
credited by the Lessor against any Rent accruing after the Lessor shall have
declared this Lease Agreement as to any or all of the Nuclear Material to be in
default pursuant to this Section; provided, however, that any net proceeds of
any such selling, disposing of, holding, using, operating or leasing in excess
of the sum of any such accrued Rent and all other amounts payable by the Lessee
under this Section 17 shall be received for the benefit of, and shall be paid
over to the Lessee, as soon as practicable after receipt thereof;
(d) Terminate this Lease Agreement as to any or all of the
Nuclear Material or exercise any other right or remedy which may be available
under applicable law or proceed by appropriate court action to enforce the terms
hereof or to recover damages for the breach hereof. If the Lessee fails to
deliver, promptly after written request, the Nuclear Material pursuant to (b),
above, subject to reasonable wear and tear, obsolescence and exhaustion, in good
operating condition and repair, or converts or destroys any Nuclear Material,
the Lessee shall be liable to the Lessor for all Rent then due and payable on
the Nuclear Material, all other amounts then due and payable under this Lease
Agreement, the then Stipulated Casualty Value of such Nuclear Material, plus any
loss, damage and expense (including without limitation reasonable attorneys'
fees and expenses) sustained by the Lessor by reason of such Lease Event of
Default and the exercise of the Lessor's remedies with respect thereto,
including any costs incurred under the Credit Agreement and the Security
Agreement, and any other amounts owed to the Secured Parties with respect to the
Notes. If, upon the occurrence of a Lease Event of Default, the Lessee delivers
Nuclear Material to the Lessor or to such other person as the Lessor may
designate, or if the Lessor repossesses or causes Nuclear Material to be
repossessed on its behalf, the Lessee shall be liable for and the Lessor may
recover from the Lessee all Rent on the Nuclear Material due and payable to the
date of such delivery or repossession, all other amounts due and payable under
this Lease Agreement, plus any loss, damage and expense (including without
limitation reasonable attorneys' fees and expenses) sustained by the Lessor by
reason of such Lease Event of Default and the exercise of the Lessor's remedies
with respect thereto. No remedy referred to in this Section 17 is intended to be
exclusive, but each shall be cumulative and in addition to any other remedy
referred to above or otherwise available to the Lessor at law or in equity and
the exercise in whole or in part by the Lessor of any one or more of such
remedies shall not preclude the simultaneous or later exercise by the
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Lessor of any or all such other remedies. No waiver by the Lessor of any Lease
Event of Default shall in any way be, or be construed to be, a waiver of any
future or subsequent Lease Event of Default.
18. Termination After Certain Events.
(a) This Lease Agreement may terminate as provided in Section
18(b) below prior to the expiration of its term in connection with any of the
following "Terminating Events":
(i) The Lessor shall have given notice that the Lessor
is not satisfied with any change in the insurers, coverage, amount or
terms of any insurance policy or indemnity agreement required to be
obtained and maintained by the Lessee pursuant to Section 12;
(ii) There shall occur the revocation or material
adverse modification of any authorization, consent, exemption or approval
theretofore obtained from any regulatory body or governmental authority
necessary for the carrying out of the intent and purposes of this Lease
Agreement or the actions or transactions contemplated hereby, and the
effectiveness of any such revocation or material adverse modification
shall not be stayed pending any appeal thereof;
(iii) A Nuclear Incident involving or connected in any
way with the Nuclear Material shall have occurred, and the Lessor shall
have given notice to the Lessee that the Lessor believes such Nuclear
Incident may give rise to an aggregate liability, or to damage,
destruction or personal injury in excess of $20,000,000;
(iv) There shall have occurred a Deemed Loss Event;
(v) Any change in, or new interpretation by a
governmental authority having jurisdiction relating to, the Price-Anderson
Act, as amended, or the Atomic Energy Act, or the regulations of the
Nuclear Regulatory Commission thereunder, in each case as in effect on the
date of this Lease Agreement, shall have been adopted, and the Lessor
shall have given notice to the Lessee that, in the opinion of independent
counsel selected by the Lessor and reasonably satisfactory to the Lessee
and the Secured Parties as a result of such change or new interpretation
the Lessor is prohibited from asserting any material right, protection or
defense available under applicable law as of the date of this Lease
Agreement with respect to civil or criminal actions brought in connection
with a Nuclear Incident;
(vi) Any law or regulation or interpretation (judicial,
regulatory or otherwise) of any law or regulation shall be adopted or
enforced by any Court or governmental authority, and as a result of such
adoption or enforcement, approval of the transactions contemplated by this
Lease Agreement shall be required and shall not have been obtained within
any applicable grace period after such adoption or enforcement or as a
result of which adoption or enforcement this Lease Agreement or any
transaction contemplated hereby, including any payments to be made by the
Lessee or the ownership of the Nuclear Material by the Lessor, shall be or
become unlawful, or the performance of this Lease Agreement shall be
rendered impracticable in any material way; or
(vii) Any governmental licenses, approvals or consents
with respect to the Generating Facility, without which the Generating
Facility cannot continue to operate, shall have been revoked and the
Lessee shall not have, in good faith, within one hundred and eighty (180)
days of such
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<PAGE>
revocation, represented in writing to the Lessor that the Lessee has made
a good faith determination that such Generating Facility will return to
operation within twenty-four (24) months of such revocation, or for any
other reason the Generating Facility shall cease to be operated for a
period of twenty-four (24) consecutive months.
(b) Upon the happening of any of the Terminating Events listed
in Section 18(a), Lessor and/or the Secured Parties may, at their option,
terminate this Lease Agreement, such termination to be effective upon delivery
of the Notice contemplated by paragraph (d)(ii) below, except with respect to
obligations and liabilities of the Lessee, actual or contingent, which arose
under the Lease Agreement on or prior to the date of termination and except for
the Lessee's obligations set forth in Sections 10, 12 and 13, and in this
Section 18, all of which obligations will continue until the delivery of
documentation by the Lessor and the payment by the Lessee provided for below,
and except that after such delivery and payment, the Lessee's obligations under
Section 13 shall continue as therein set forth as shall all of Lessee's
indemnification obligations set forth in other sections of this Lease Agreement.
(c) Upon any such termination, the entire interest of the
Lessor in the Nuclear Material and any spent fuel relating thereto for which
title has not been transferred to the Lessee shall automatically transfer to and
be vested in the Lessee, without the necessity of any action by either the
Lessor or the Lessee, provided, however, that if the Lessor shall have
theretofore approved in writing such Person and the terms of such transfer, the
entire interest of the Lessor in such Nuclear Material and any spent fuel
relating thereto for which title has not been transferred to the Lessee shall,
upon such termination, automatically transfer to and be vested in any Person
designated by the Lessee.
(d) (i) Promptly after either party shall learn of the
happening of any Terminating Event, such party shall give notice of the same to
the other party and to the Secured Parties.
(ii) If the Lessor and/or Secured Parties elect to
terminate the Lease Agreement, they shall give notice to the Lessee and the
Secured Parties or the Lessor, as the case may be, which notice shall (x)
acknowledge that the Lease Agreement has terminated, subject to the continuing
obligations of the Lessee mentioned above, and that title to and ownership of
such Nuclear Material and any spent fuel relating thereto for which title has
not been transferred to the Lessee has transferred to and vested in the Lessee
or such other Person, and (y) specify a Termination Settlement Date occurring
one hundred and fifty (150) days after the giving of such notice. After such
termination of this Lease Agreement and until such Termination Settlement Date,
the Lessee shall continue to pay Basic Rent and Additional Rent. On such
Termination Settlement Date, the Lessee shall be obligated to pay to the Lessor
as the purchase price for the Nuclear Material an amount equal to the sum of (x)
Stipulated Casualty Value of the Nuclear Material as of the Termination
Settlement Date and (y) the Termination Rent on the Termination Settlement Date.
The Lessor shall be obligated to deliver to the Lessee a Lessor's Bill of Sale,
substantially in the form of Exhibit E, on an as-is, where-is, non-installment,
cash sale basis, without recourse to or warranty or agreement of any kind by the
Lessor acknowledging the transfer and vesting of title and ownership of the
Nuclear Material and any spent fuel relating thereto for which title has not
been transferred to the Lessee, in accordance with paragraph (c) above and
confirming that upon payment by the Lessee of the amounts set forth in the
immediately preceding sentence, the Nuclear Material is free and clear of the
Liens created by the Collateral Agreements, together with such documents, if
any, as may be required to evidence the release of such Liens.
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19. Investment Tax Credit. To the extent that the Lessee determines the
Nuclear Material is or becomes eligible for any investment or similar credit
under the Code as now or hereafter in effect, the Lessee shall request in
writing that the Lessor elect to treat the Lessee as having acquired such
Nuclear Material, and, if permitted to do so under the Code and under any other
applicable law, rule or regulation, the Lessor, pursuant to such request of the
Lessee, shall provide the Lessee with an appropriate investment credit election
and the Lessee shall consent to such election. A condition to the Lessor's
making such election will be the provision by the Lessee of a report or
statement with respect to all Nuclear Material as to which the investment credit
election is applicable. Such report or statement shall contain such information
and be in such form as may be required for Internal Revenue Service reporting
purposes. The Lessee shall indemnify and hold harmless the Lessor and any
affiliates with respect to any adverse tax consequence, other than the loss of
the credit, which may result from such election including, but not limited to,
any increase in the Lessor's income taxes due to any required reduction of the
Lessor's tax basis below the Lessor's cost of the Nuclear Material, and the
Lessee agrees to pay to or on behalf of the Lessor, or otherwise make available
to the Lessor, funds sufficient to put the Lessor in the same after-tax position
(other than by reason of the loss of the investment credit) the Lessor would
have been in if such election had not been made.
20. Certificates; Information; Financial Statements.
(a) The Lessee will from time to time deliver to the Lessor
and the Secured Parties, promptly upon reasonable request (i) a statement
executed by any Vice President, Treasurer or Assistant Treasurer or any other
assistant officer of the Lessee, certifying the dates to which the sums payable
hereunder have been paid, that this Lease Agreement is unmodified and in full
effect (or, if there have been modifications, that this Lease Agreement is in
full effect as modified, and identifying such modifications) and that no Lease
Event of Default or Terminating Event has occurred and is continuing (or
specifying the nature and period of existence of any thereof and what action the
Lessee is taking or proposes to take with respect thereto), (ii) such
information with respect to the Nuclear Material as the Lessor or the Secured
Parties may reasonably request, and (iii) such information with respect to the
Lessee's operations, business, property, assets, financial condition or
litigation as the Lessor or any assignee of the Lessor or the Secured Parties
may reasonably request.
(b) The Lessee will deliver to the Lessor and the Secured
Parties:
(i) Quarterly Financial Statements. As soon as
practicable and in any event within ninety (90) days after the end of each
fiscal quarter (other than the last fiscal quarter in each fiscal year),
three (3) copies of a balance sheet of the Lessee (consolidated and
consolidating if the Lessee has any subsidiaries) as of the end of such
quarter and of statements of income and cash flows of the Lessee
(consolidated and consolidating if the Lessee has any subsidiaries) for
such quarter, setting forth in each case corresponding figures in
comparative form for the corresponding period of the preceding fiscal
year, each certified as true and correct by the chief accounting officer
thereof; provided, however, that delivery pursuant to clause (iii) below
of copies of the Lessee's Quarterly Report on Form 10-Q for such quarter
containing such financial statements filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirements of this
clause (i);
(ii) Annual Financial Statements. As soon as practicable
and in any event within one hundred and twenty (120) days after the end of
each fiscal year, three (3) copies of an annual report of the Lessee
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<PAGE>
consisting of its financial statements, including a balance sheet as of
the end of such fiscal year (consolidated and consolidating if the Lessee
has any subsidiaries) and statements of income and cash flows for the year
then ended (consolidated and consolidating if the Lessee has any
subsidiaries), setting forth corresponding figures in comparative form for
the preceding fiscal year, with all notes thereto, all in reasonable
detail and certified by independent public accountants of recognized
standing selected by the Lessee (only with respect to the consolidated
financial statements, if applicable); provided, however, that delivery
pursuant to clause (iii) below of copies of the Lessee's Annual Report on
Form 10-K for such fiscal year containing such financial statements filed
with the Securities and Exchange Commission shall be deemed to satisfy the
requirements of this clause (ii); and
(iii) SEC Reports, etc. With reasonable promptness,
copies of all notices, reports or materials filed by the Lessee with the
Securities and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange Commission)
under the Securities Act of 1933, as amended, other than Registration
Statements on Form S-8 or any amendments thereto, or the Securities
Exchange Act of 1934, as amended, other than Annual Reports on Form 10-K,
and including without limitation, all Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Together with each delivery of financial statements required by clause (b)(i)
above, the Lessee will deliver to the Lessor and the Secured Parties an
Officer's Certificate stating that the Lessee is in compliance with the terms of
this Lease Agreement and stating that there exists no Lease Event of Default, or
Terminating Event or, if any Lease Event of Default, or Terminating Event
exists, specifying the nature and period of existence thereof and what action
the Lessee proposes to take with respect thereto. The Lessee also covenants that
promptly upon the obtaining of knowledge of a Lease Event of Default by the
chief executive officer, principal financial officer or principal accounting
officer of the Lessee, it will deliver to the Lessor and the Secured Parties an
Officer's Certificate specifying the nature and period of existence thereof and
what action the Lessee proposes to take with respect thereto.
21. Obligation of the Lessee to Pay Rent. The Lessee's obligation to pay,
as the same becomes due, Basic Rent, Additional Rent, Termination Rent, and all
other amounts payable hereunder shall, subject to the covenant of the Lessor
contained in Section 3 hereof, be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (i) any setoff,
counterclaim, recoupment, defense or other right which the Lessee may have
against the Lessor or anyone else for any reason whatsoever, (ii) any defect in
the title, compliance with specifications, condition, design, operation or
fitness for use of, or any damage to or loss or destruction of, any Nuclear
Material, or (iii) any interruption or cessation in the use or possession of any
Nuclear Material by the Lessee for any reason whatsoever. The Lessee hereby
waives, to the extent permitted by applicable law, any and all rights which it
may now have or which at any time hereafter may be conferred upon it, by statute
or otherwise, to terminate, cancel, quit or surrender this Lease Agreement
except in accordance with its express terms. Each payment of Rent and each other
payment made by the Lessee shall be final, and the Lessee will not seek to
recover all or any part of such payment from the Lessor for any reason
whatsoever.
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22. Miscellaneous.
(a) Successors and Assigns. This Lease Agreement shall be
binding upon the Lessee and the Lessor and their respective successors and
assigns and shall inure to the benefit of the Lessee and the Lessor and their
respective successors and assigns.
(b) Waiver. Neither party shall by act, delay, omission or
otherwise be deemed to have waived any of its rights or remedies hereunder
unless such waiver is given in writing. A waiver on one occasion shall not be
construed as a waiver on any other occasion.
(c) Entire Agreement. This Lease Agreement, together with the
written instruments provided for or contemplated hereby, the other Basic
Documents and other written agreements between the parties dated as of the date
hereof, constitute the entire agreement between the parties with respect to the
leasing of Nuclear Material, and no representations, warranties, promises,
guaranties or agreements, oral or written, express or implied, have been made by
either party or by any one else with respect to this Lease Agreement or the
Nuclear Material, except as may be expressly provided for herein or therein. Any
change or modification of this Lease Agreement must be in writing and duly
executed by the parties.
(d) Descriptive Headings. The captions in this Lease Agreement
are for convenience of reference only and shall not be deemed to affect the
meaning or construction of any of the provisions.
(e) Severability. Any provision of this Lease 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.
(f) Governing Law. This Lease Agreement and the rights and
obligations of the parties hereunder shall be construed in accordance with and
be governed by the law of the State of New Jersey.
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<PAGE>
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease
Agreement to be executed and delivered by their duly authorized officers as of
the day and year first above written.
OYSTER CREEK FUEL CORP.
Lessor
ATTEST
By:
- ---------------------------- --------------------------------
(Assistant) Secretary Name:
--------------------------------
Title:
--------------------------------
JERSEY CENTRAL POWER & LIGHT
COMPANY
Lessee
ATTEST
By:
- ---------------------------- --------------------------------
(Assistant) Secretary Name:T. G. Howson
--------------------------------
Title: Vice President
--------------------------------
23
<PAGE>
STATE OF )
-----------------------
COUNTY OF ) SS:
-----------------------
On this --- day of ----------, 1998, before me personally appeared ,
- -------- to me personally known, who, being by me duly sworn, says that he is
- ---------------------- of Oyster Creek Fuel Corp. and that said instrument was
signed on behalf of said corporation by authority of its Board of Directors, and
he acknowledged that the execution of the foregoing instrument was the free act
and deed of said corporation.
--------------------------------
Notary Public
My commission Expires:
STATE OF )
----------------------
COUNTY OF ) SS:
----------------------
On this --- day of -----------, 1998, before me personally appeared
T. G. Howson, to me personally known, who, being by me duly sworn, says that he
is a Vice President of Jersey Central Power & Light Company and that said
instrument was signed on behalf of said corporation by authority of its Board of
Directors, and he acknowledged that the execution of the foregoing instrument
was the free act and deed of said corporation.
--------------------------------
Notary Public
My commission Expires:
24
<PAGE>
ATTACHMENTS
Appendix A -- Definitions
Exhibit A -- Form of Interim Leasing Record
Exhibit B -- Form of Final Leasing Record
Exhibit C -- Nuclear Material Contracts
Exhibit D -- Form of Assignment Agreement and Consent
Exhibit E -- Form of Lessor's Bill of Sale
Exhibit F -- Form of Rent Due and SCV Confirmation Schedule
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APPENDIX A
DEFINITIONS
As used in the Basic Documents (as defined below), the following
terms shall have the following meanings (such definitions to be applicable to
both singular and plural forms of the terms defined), except as otherwise
specifically defined therein:
"Acquisition Cost" means the purchase price of any Nuclear Material,
any progress payments made thereon, costs of milling, conversion, enrichment,
fabrication, installation, delivery, redelivery, containerization, storage,
reprocessing, any other costs incurred by the Company in acquiring the Nuclear
Material (less any discounts or credits actually utilized by the Company), plus
in any case (i) any allowance for funds used during construction (including any
income tax component associated with such allowance) with respect to Nuclear
Material purchased by the Company, (ii) at the option of the Lessee, any Rent
relating to costs incurred in the ordinary course of operations but excluding
Rent relating to extraordinary costs, including without limitation,
indemnification payments, payable by the lessee to the Company with respect to
any Nuclear Material prior to the installation of such Nuclear Material for
operation in the Generating Facility, (iii) any sales, excise or other taxes or
charges payable by the Company with respect to any such payment for such Nuclear
Material, (iv) at the option of the Lessee, any Monthly Financing Charge payable
by the Lessee to the Company with respect to Nuclear Material during any period
in which such Nuclear Material is subject to an Interim Leasing Record, but
excluding any interest charges or penalties for late payment by the Company of
the purchase price or any portion thereof, if such late payment results from the
negligence of the Company, (v) such other costs with respect to any Nuclear
Material as may be agreed by the Company and the Lessee and approved by the
Administrative Agent, in each case in writing, and, in the case of any Nuclear
Material removed from the Generating Facility for the purpose of "cooling off'
and repair or reprocessing, shall include the Stipulated Casualty Value thereof
at the time of such removal, if any, and (vi) at the option of the Lessee, any
Financing Costs. Any amount realized by the Company from the disposition of the
by-products (including, but not limited to, plutonium) of Nuclear Material
specified in a Leasing Record during the repair or reprocessing of such Nuclear
Material while leased hereunder shall be credited against the Acquisition Cost
of such Nuclear Material.
"Additional Rent" shall mean all legal, accounting, administrative
and other operating expenses and taxes incurred by the Company to the extent not
paid as part of Basic Rent (including, without limitation, any Cancellation Fees
and all other liabilities incurred or owed by the Company pursuant to the Basic
Documents) and all amounts (other than Basic Rent) that the Lessee agrees to pay
under the Lease Agreement (including, without limitation, indemnification
payable under the Lease Agreement, general and administrative expenses of the
Company, and, to the extent not included in Acquisition Cost, Financing Costs)
and interest at the rate incurred by the Company or any Secured Party as a
result of any delay in payment by the Lessee to meet obligations that would have
been satisfied out of prompt payment by the Lessee, and the amount of any and
all other costs, losses, damages, interest, taxes, deficiencies, liabilities,
obligations, actions, judgments, suits, claims, fees (including, without
limitation, attorneys' fees and disbursements) and expenses, of every kind,
nature, character and description, direct or indirect, that may be imposed on or
incurred by the Company as a result of, arising from or relating to, in any
manner whatsoever, one or more Basic Documents, or any other document referred
to therein, or the transactions contemplated thereby or the enforcement thereof.
For purposes of calculating the interest incurred by the Company or any Secured
Party as a result of any such delay, it shall be assumed that the Company or any
Secured Party, as applicable, incurred interest at the Credit Agreement Default
Rate.
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"Administrative Agent" shall have the meaning specified therefor in
the first paragraph of the Credit Agreement.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such Person. For purposes of this definition, the term "control," as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise.
"Aggregate Monthly Rent Component" shall mean the sum of the Monthly
Rent Components for all items of Nuclear Material which are installed in the
Generating Facility during the relevant period.
"Arranging Agent" shall have the meaning specified therefor in the
first paragraph of the Credit Agreement.
"Assigned Agreement" means a Nuclear Material Contract which has
been assigned to the Company in the manner specified in Section 5 of the Lease
Agreement pursuant to a duly executed and delivered Assignment Agreement. The
term Assigned Agreement shall include a Partially Assigned Agreement.
"Assignment Agreement" means an assignment agreement substantially
in the form of Exhibit D to the Lease Agreement.
"Atomic Energy Act" means the Atomic Energy Act of 1954, as from
time to time amended.
"Bank" shall have the meaning specified therefor in Section 1.02 of
the Credit Agreement.
"Basic Documents" means the Lease Agreement, the Credit Agreement,
the Security Agreement, the Commercial Paper, the Notes, the Letter Agreement,
the Dealer Agreements, the Assigned Agreements, the Assignment Agreements, the
Trust Agreement, the Depositary Agreement, each Bill of Sale, each Leasing
Record, each SCV Confirmation Schedule, and other agreements related or
incidental thereto which are identified in writing by the Company, the Lessee
and the Secured Parties as one of the "Basic Documents," in each case, as such
documents may be amended from time to time.
"Basic Rent" means, for any Basic Rent Period, the sum of (a) that
portion of the Monthly Financing Charge not allocated to Acquisition Cost
pursuant to the Lease Agreement plus (b) the Aggregate Monthly Rent Component as
shown on a Rent Due and SCV Confirmation Schedule for such Basic Rent Period.
"Basic Rent Payment Date" means, for any Basic Rent Period, the
first Business Day of the next succeeding calendar month following such Basic
Rent Period.
"Basic Rent Period" means each calendar month or portion thereof
commencing on, in the case of the first such period, the effective date of the
Lease Agreement, and in the case of each succeeding period, the first day
following the immediately preceding Basic Rent Period, and ending on the
earliest of (i) the last day of any calendar month or (ii) the Termination
Settlement Date.
"BTU Charge" means the dollar amount set forth in the BTU Charge
Agreement which is used to calculate the Monthly Rent Component. The BTU Charge
initially set forth for any Nuclear Material in any Final Leasing Record shall
be the amount agreed upon by the Lessor and the Lessee as set forth in
Attachment 1 to Exhibit B to the Lease Agreement based upon the reasonably
anticipated operating life, BTU output, and utilization of such Nuclear
Material.
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<PAGE>
"BTU Charge Agreement" shall mean an agreement in the form of
Attachment 1 to Exhibit B to the Lease Agreement with respect to any Nuclear
Material executed by the Lessor and the Lessee on or prior to the date of the
Final Leasing Record covering such Nuclear Material.
"Business Day" means any day other than (i) a Saturday or Sunday or
(ii) a day on which banking institutions in New York City are authorized by law
to close.
"Capitalized Lease" means any and all lease obligations which are or
should be capitalized on the balance sheet of the Person in question in
accordance with generally accepted accounting principles and Statement No. 13 of
the Financial Accounting Standards Board or any successor to such pronouncement
regarding lease accounting, without regard for the accounting treatment
permitted or required under any applicable state or federal public utility
regulatory accounting system, unless such treatment controls the determination
of the generally accepted accounting principles applicable to such Person.
"Cash Collateral" shall have the meaning specified therefor in
Section 1.02 of the Credit Agreement.
"Closing," means --------- --, 1998.
"Code" means the Internal Revenue Code of 1986, as from time to time
amended.
"Collateral" has the meaning set forth in the granting clauses of
the Security Agreement and includes all property of the Company described in the
Security Agreement as comprising part of the Collateral.
"Collateral Agent" shall have the meaning specified therefor in
Section 1.02 of the Credit Agreement.
"Collateral Agreements" means, collectively, the Security Agreement,
all Assignment Agreements, and any other assignment, security agreement or
instrument executed and delivered to the Secured Parties hereafter relating to
property of the Company which is security for the Notes.
"Collected Funds" means funds which are immediately available to the
Secured Parties, as the Lessor's assignees, for its use in New York, New York.
"Commercial Paper" shall have the meaning specified therefor in
Section 1.02 of the Credit Agreement.
"Commercial Paper Discount" shall mean, at any time, amounts payable
by the Company in respect of the Face Amount of Commercial Paper outstanding in
excess of the Acquisition Cost together with any Cash Collateral reduced by the
aggregate total amount, if any, of (i) the Monthly Rent Components paid by the
Lessee to the Lessor with respect to the Nuclear Material financed thereby and
(ii) any Monthly Financing Charge payable by the Lessee to the Company with
respect to Nuclear Material during any period in which such Nuclear Material is
subject to an Interim Leasing Record ("Excess Face Amount"); provided, however,
that any such Excess Face Amount shall not exceed the additional Face Amount of
Commercial Paper necessary to be issued by the Company at a discount to face
value to purchasers thereof in the commercial paper market in order to obtain
proceeds in an amount equal to the Acquisition Cost reduced by the aggregate
total amount, if any, of (a) the Monthly Rent Components paid by the Lessee to
the Lessor with respect to the Nuclear Material financed thereby and (b) any
Monthly Financing Charge payable by the Lessee to the Company with respect to
Nuclear Material during any period in which such Nuclear
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<PAGE>
Material is subject to an Interim Lease Record, together with any Cash
Collateral. Amounts payable in respect of Commercial Paper Discount during any
calendar month or portion thereof shall be paid on the first Business Day of the
next succeeding month in which such amounts are incurred.
"Company" means the Oyster Creek Fuel Corp., a Delaware corporation.
"Consents and Agreements" means the agreements, each substantially
in the form attached as Exhibit 2 to Exhibit D to the Lease Agreement, between
the Lessee and the various contractors under the Nuclear Material Contracts,
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.
"Controlled Group" means a controlled group of corporations of which
the Company is a member within the meaning of Section 414(b) of the Code, any
group of corporations or entities under common control with the Company within
the meaning of Section 414(c) of the Code or any affiliated service group of
which the Company is a member within the meaning of Section 414(m) of the Code.
"Credit Agreement" means the Credit Agreement dated as of ------,
1998 among Oyster Creek Fuel Corp. The First National Bank of Chicago, as
Administrative Agent, PNC Bank, National Association, as Syndication Agent, the
Banks parties thereto, and First Chicago Capital Markets, Inc. and PNC Capital
Markets, Inc., as Arrangers.
"Credit Agreement Default" means an event which would, with the
lapse of time or the giving of notice or both, constitute a Credit Agreement
Event of Default.
"Credit Agreement Event of Default" means any one or more of the
events specified in Section 10.01 of the Credit Agreement.
"Dealer Agreements" mean -----------------------------------------.
"Deemed Loss Event" means the following event: if at any time during
the term of the Lease Agreement, (A) the Company, by reason solely of the
ownership of the Nuclear Material or any part thereof or the lease of the
Nuclear Material to the Lessee under the Lease Agreement, or the Company or any
Secured Party, by reason solely of any other transaction contemplated by the
Lease Agreement or any of the other Basic Documents, shall be deemed, by any
governmental authority having jurisdiction, to be, or to be subject to
regulation as an "electric utility" or a "public utility" or a "public utility
holding company" or similar type of entity, under any applicable law or deemed a
"public utility company" or a "subsidiary company" or a "holding company" within
the meaning of the Public Utility Holding Company Act, (B) the Public Utility
Holding Company Act shall be amended, applied, or interpreted in a manner, or
any rules or regulations shall be adopted under the Public Utility Holding
Company Act of 1935, which adversely affect the legality, validity and
enforceability of the lease obligations of the Company and the Lessee under the
Lease Agreement, or (C) either the Company or any of the Secured Parties, by
reason solely of being a party to the Basic Documents, shall be required to
obtain any consent, order or approval of, or to make any filing or registration
with, or to give any notice to, any governmental authority, or be subject to any
liabilities, duties or obligations under the Public Utility Holding Company Act,
other than the filing by the Company of a certificate on Form U-7D with the SEC
pursuant to SEC Rule 7(d) under the Public Utility Holding Company Act (17
C.F.R. Section 250.7(d)), except in any case if the same shall be solely the
result of Nonburdensome Regulation; provided, however, that if in compliance
with applicable laws, the Lessee, with the cooperation of the Company, shall
have acted diligently and in good faith to contest, or obtain an exemption from
the application of the laws, rules or regulations described in clauses (A), (B)
or (C) to the Company, the Secured Parties
29
<PAGE>
or the Lessee, as the case may be, the application of which would otherwise
constitute a Deemed Loss Event, such Deemed Loss Event shall be deemed not to
have occurred so long as (I) the Lessee shall have furnished to the Company and
the Secured Parties an opinion of counsel reasonably satisfactory to the Company
and the Secured Parties to the effect that there exists a reasonable basis for
such contest or exemption and that the application of such laws, rules or
regulations to the Company, the Secured Parties or the Lessee, as the case may
be, shall be effectively stayed during the application for exemption or contest
and such laws, rules or regulations shall not be applied retroactively at the
conclusion of such contest, (II) the Company or the Secured Parties shall have
determined in their sole discretion that such contest or exemption shall not
adversely affect their business or involve any danger of the sale, foreclosure
or loss of, or creation of a Lien upon, the Collateral, and (III) the Lessee
shall have agreed to indemnify the Company or such Secured Parties, as the case
may be, for expenses incurred in connection with such contest or exemption; and
further provided, that following notice from the Lessee to the Company or the
Secured Parties, as the case may be, that the Lessee shall be unable to furnish
the opinion described in clause (I) of the next preceding proviso or that any
such contest shall not be successful or such exemption shall not be available, a
Deemed Loss Event shall be deemed not to have occurred for such period, not to
exceed 270 days, as may be approved by any governmental authority having
jurisdiction during which application of such law, rule or regulation to the
Company, the Secured Parties or the Lessee, as the case may be, shall be
suspended to enable the Company to assign or transfer its interest in the
Collateral so long as during such period the Company shall use reasonable
efforts to assign or transfer its interest in the Collateral upon commercially
reasonable terms and conditions, provided that the Company shall not be required
to assign or transfer the Nuclear Material for a price which, after deduction of
sales tax and expenses of such sale incurred by the Company, shall be less than
the sum of (A) Stipulated Casualty Value determined as of the date of such
proposed sale, and (B) the Termination Rent determined in accordance with
Section 18 of the Lease Agreement.
"Depositary Agreement" means the Depositary Agreement, dated as of
_____, 1998, among the Company, Chase Manhattan Bank, as Depositary and The
First National Bank of Chicago, as Administrative Agent.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as from time to time amended.
"Excepted Payments" means any indemnity, expense, or other payment
which by the terms of any of the Basic Documents shall be payable to the Company
in order for the Company to satisfy its obligations pursuant to Section 7.8 of
the Trust Agreement.
"Face Amount" shall have the meaning specified therefor in Section
1.02 of the Credit Agreement.
"Federal Energy Regulatory Commission" means the independent
regulatory commission of the Department of Energy of the United States
Government existing under the authority of the Department of Energy Organization
Act, as amended, or any successor organization or organizations performing any
identical or substantially identical licensing and related regulatory functions.
"Federal Power Act" means the Federal Power Act, as amended.
"Final Leasing Record" means a Leasing Record which records the
leasing of Nuclear Material during any period while such Nuclear Material is
installed for operation in the Generating Facility. A Final Leasing Record shall
be in the form of Exhibit B to the Lease Agreement.
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<PAGE>
"Financing Costs" means (a) fees and other amounts owing to any
Secured Party or to the Owner Trustee under the Trust Agreement, (b) legal fees
and disbursements and other amounts referred to in Section 10(b) of the Security
Agreement, (c) legal, accounting, and other fees and expenses incurred by the
Lessee and/or the Company in connection with the preparation, execution and
delivery of Basic Documents or the issuance of the Commercial Paper and/or the
Notes, and (d) such other reasonable fees and expenses of the Owner Trustee and
the Company as they may be entitled to under the Basic Documents.
"Fuel Management" means the design of, contracting for, fixing the
price and terms of acquisition of, management, movement, removal, disengagement,
storage and other activities in connection with the acquisition, utilization,
storage and disposal of the Nuclear Material.
"Generating Facility" means the nuclear reactor located at the
Oyster Creek Nuclear Generating Station, located in Lacey Township, New Jersey.
"Heat Production" means the stage of the Nuclear Material Cycle
commencing with the commercial operation of a Generating Facility, during which
the Nuclear Material in question is producing thermal energy which results in
the production of net positive electrical energy transmitted within the
distribution network of any utility and during which the Nuclear Material in
question is engaged in the reactor core of such Generating Facility.
"Hereof," "herein," "hereunder" and words of similar import when
used in a Basic Document refer to such Basic Document as a whole and not to any
particular section or provision thereof.
"Imposition" means any payment required by a public or governmental
authority in respect of any property subject to the Lease Agreement or any
transaction pursuant to the Lease Agreement or any right or interest held by
virtue of the Lease Agreement; provided, however, that Imposition shall not
include any taxes, whether federal, state or local, payable by any Secured Party
based on or measured by net income of any Secured Party where taxable income is
computed in substantially the same manner as taxable income is computed under
the Code.
"Insurance Requirements" means all terms of any insurance policy or
indemnification agreement covering or applicable to (i) any Nuclear Material or
(ii) the Generating Facility or the Lessee in its capacity as licensee of the
Generating Facility, in each case insofar as any insurance policy or
indemnification agreement directly or indirectly relates to the Nuclear Material
or the performance by the Lessee of its obligations under the Basic Documents,
and all requirements of the issuer of any such policy or agreement necessary to
keep such insurance or agreements in force.
"Interim Leasing Record" means a Leasing Record which records the
leasing of Nuclear Material (i) prior to installation for operation in the
Generating Facility, (ii) after removal from the Generating Facility during the
"cooling off" and storage period, and (iii) while being reprocessed. An Interim
Leasing Record shall be in the form of Exhibit A to the Lease Agreement.
"Investment Company Act" means the Investment Company Act of 1940,
as from time to time amended.
"Issuing Bank" shall have the meaning specified therefor in the
first paragraph of the Credit Agreement.
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<PAGE>
"Lease Agreement" means the Second Amended and Restated Nuclear
Material Lease Agreement, dated as of -------- --, 1998 between Oyster Creek
Fuel Corp., as the Lessor, and Jersey Central Power & Light Company, as the
Lessee, as the same may be modified, supplemented or amended from time to time.
"Lease Event of Default" has the meaning specified in Section 16 of
the Lease Agreement.
"Leasing Record" is a form signed by the Lessor and the Lessee to
record the leasing under the Lease Agreement of the Nuclear Material specified
in such Leasing Record. A Leasing Record shall be either an Interim Leasing
Record or a Final Leasing Record.
"Legal Requirements" means all applicable provisions of the Atomic
Energy Act, all applicable orders, rules, regulations and other requirements of
the Nuclear Regulatory Commission and the Federal Energy Regulatory Commission,
and all other laws, rules, regulations and orders of any other jurisdiction or
regulatory authority relating to (i) the licensing, acquisition, storage,
containerization, transportation, blending, transfer, consumption, leasing,
insuring, using, operating, disposing, fabricating, channelling and reprocessing
of the Nuclear Material, (ii) the Generating Facility or the Lessee in its
capacity as licensee of the Generating Facility, in each case insofar as such
provisions, orders, rules, regulations, laws and other requirements directly or
indirectly relate to the Nuclear Material or the performance by the Lessee of
its obligations under the Basic Documents or (iii) the Basic Documents, insofar
as any of the foregoing directly or indirectly apply to the Lessee.
"Lessee" has the meaning specified in the introduction to the Lease
Agreement.
"Lessee Representative" means a person at the time designated to act
on behalf of the Lessee by a written instrument furnished to the Company and the
Secured Parties containing the specimen signature of such person and signed on
behalf of the Lessee by any of its officers. The certificate may designate an
alternate or alternates. A Lessee Representative may be an employee of the
Lessee or of the Owner Trustee.
"Lessor" has the meaning specified in the introduction to the Lease
Agreement, and its successors and assigns.
"Lessor's Bill of Sale" means an instrument substantially in the
form of Exhibit E to the Lease Agreement, pursuant to which title to all or any
portion of the Nuclear Material is transferred to the Lessee or any designee of
the Lessee.
"Letter Agreement" means the Lessee's Letter Agreement Regarding
Oyster Creek Fuel Corp., dated as of ----------- --, 1998, between the Lessee,
the Company, and the Administrative Agent, as it may be amended from time to
time.
"Lien" means any mortgage, pledge, lien, security interest, title
retention, charge or other encumbrance of any nature whatsoever (including any
conditional sale or other title retention agreement, any lease in the nature
thereof and the filing of or agreement to execute and deliver any financing
statement under the Uniform Commercial Code of any jurisdiction).
"Loans" shall have the meaning specified therefor in Section 1.02 of
the Credit Agreement.
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"Majority Secured Parties" means at any time the Secured Parties
holding at such time more than 66% of the outstanding principal amount of all
Secured Obligations.
"Manufacturer" means any supplier of Nuclear Material or of any
service (including without limitation, enrichment, fabrication, transportation,
storage and processing) in connection therewith, or any agent or licensee of any
such supplier.
"Manufacturer's Consent" means any consent which may be given by a
Manufacturer under a Nuclear Material Contract to the assignment by the Lessee
to the Company of all or a portion of the Lessee's rights under such Nuclear
Material Contract or of all or a portion of any such rights previously assigned
by the Lessee to the Secured Parties.
"Monthly Debt Service" for any calendar month means the sum of the
Monthly Financing Charge for such calendar month.
"Monthly Financing Charge" means, for any calendar month or portion
thereof, the sum of:
(a) all Commercial Paper Discount payable by the Company with
respect to Commercial Paper outstanding during such month and/or all
interest payable by the Company during such month with respect to all
outstanding Notes and in each case, not included in Acquisition Cost; and
(b) the amounts paid or due and payable by the Company with respect
to the transactions contemplated by the Basic Documents during such
calendar month for the following other fees, costs, charges and expenses
incurred or owed by the Company under or in connection with the Lease
Agreement or the other Basic Documents: (i) legal, printing, reproduction
and closing fees and expenses, (ii) auditors', accountants' and attorneys'
fees and expenses, (iii) franchise taxes and income taxes, and (iv) any
other fees and expenses incurred by the Company under or in respect of the
Basic Documents.
Any figure used in the computation of any component of the Monthly Financing
Charge shall be stated to five decimal places.
"Monthly Rent Component" for any Nuclear Material covered by a Final
Leasing Record for each calendar month during the lease of such Nuclear Material
shall be as follows:
(i) for the first partial calendar month the Monthly Rent
Component shall be zero;
(ii) for the first full calendar month the Monthly Rent
Component shall be zero;
(iii) for the second full calendar month the Monthly Rent
Component shall be zero;
(iv) for the third full calendar month the Monthly Rent
Component shall be an amount determined by multiplying (x) the amount of
thermal energy in millions of British Thermal Units of heat produced by
such Nuclear Material during the first calendar month while covered by the
Final Leasing Record and also during the first partial calendar month, if
any, such Nuclear Material was covered by an Interim or Final Leasing
Record and was engaged in Heat Production by (y) the BTU Charge set forth
in the Final Leasing Record covering such Nuclear Material; and
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<PAGE>
(v) for each full calendar month after the third full calendar
month, the Monthly Rent Component shall be an amount determined by
multiplying (x) the amount of thermal energy in millions of British
Thermal Units of heat produced by such Nuclear Material during the second
preceding month by (y) the BTU Charge set forth in the Final Leasing
Record covering such Nuclear Material.
The BTU Charge for any Nuclear Material may be revised by the Lessee at any time
during the lease thereof to reflect any reasonably anticipated change in its
operating life, BTU output, or utilization. Such revision shall be effected by
the Lessee's executing and forwarding to the Lessor a revised Final Leasing
Record dated the first day of the following month and setting forth such revised
BTU Charge. Upon receipt of such revised Final Leasing Record, the Lessor shall
execute and return a copy thereof to the Lessee. Such revised BTU Charge shall
be applicable to such Nuclear Material for each month thereafter beginning on
the date of the revised Final Leasing Record.
"NJBPU" means the New Jersey Board of Public Utilities or any
successor agency thereto.
"Nonburdensome Regulation" means (i) ministerial regulatory
requirements that do not impose limitations or regulatory requirements on the
business or activities of, or adversely affect, the Company or any Secured Party
and that are deemed, in the reasonable discretion of the Company or any Secured
Party, not to be burdensome, or (ii) assuming redelivery of the Nuclear Material
in accordance with the Lease Agreement, regulation resulting from any possession
of the Nuclear Material (or right thereto) on or after the termination of the
Lease Agreement.
"Notes" shall have the meaning specified therefor in Section 1.02 of
the Credit Agreement.
"Nuclear Incident" shall have the meaning specified in the Atomic
Energy Act, 42 U.S.C. ss.2014(q), as such definition may be amended from time to
time.
"Nuclear Material" means those items which have been purchased by or
on behalf of the Company for which a duly executed Leasing Record has been
delivered to the Company and which continue to be subject to the Lease Agreement
consisting of (i) the items described in such Leasing Record and each of the
components thereof in the respective forms in which such items exist during each
stage of the Nuclear Material Cycle, being substances and equipment which, when
fabricated and assembled and loaded into a nuclear reactor, are intended to
produce heat, together with all attachments, accessories, parts and additions
and all improvements and repairs thereto, and all replacements thereof and
substitutions therefor and (ii) the substances and materials underlying the
right, title and interest of the Lessee under any Nuclear Material Contract
assigned to the Company pursuant to the Lease Agreement; provided, however, that
the term Nuclear Material shall not include spent fuel.
"Nuclear Material Contract" means any contract, as from time to time
amended, modified or supplemented, entered into by the Lessee, either in its own
name or as agent for the Lessor, with one or more Manufacturers relating to the
acquisition of Nuclear Material or any service in connection with the Nuclear
Material.
"Nuclear Material Cycle" means the various stages in the process,
whether physical or chemical, by which the component parts of the Nuclear
Material are designed, mined, milled, processed, converted, enriched, fabricated
into assemblies utilizable for Heat Production, loaded or installed into a
reactor core, utilized, disengaged from a reactor core or stored, together with
all incidental processes with respect to the Nuclear Material at any such stage.
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"Nuclear Regulatory Commission" means the independent regulatory
commission of the United States Government existing under the authority of the
Energy Reorganization Act of 1974, as amended, or any successor organization or
organizations performing any identical or substantially identical licensing and
related regulatory functions.
"Obligations" means (i) all items (including, without limitation,
Capitalized Leases but excluding shareholders' equity and minority interests)
which in accordance with generally accepted accounting principles should be
reflected on the liability side of a balance sheet as at the date as of which
such obligations are to be determined; (ii) all obligations and liabilities
(whether or not reflected upon such balance sheet) secured by any Lien existing
on the Property held subject to such Lien, whether or not the obligation or
liability secured thereby shall have been assumed; and (iii) all guarantees,
endorsements (other than for collection in the ordinary course of business) and
contingent obligations in respect of any liabilities of the type described in
clauses (i) and (ii) of this definition (whether or not reflected on such
balance sheet); provided, however, that the term 'Obligations' shall not include
deferred taxes.
"Obligations for Borrowed Money or Deferred Purchase Price" means
all Obligations in respect of borrowed money or the deferred purchase price of
property or services.
"Officer's Certificate" means, with respect to any corporation, a
certificate signed by the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Comptroller, or any Assistant Comptroller of such
corporation, and with respect to any other entity, a certificate signed by an
individual generally authorized to execute and deliver contracts on behalf of
such entity.
"Outstandings" shall have the meaning specified therefor in Section
1.02 of the Credit Agreement.
"Owner Trust Estate" means all estate, right, title and interest of
the Owner Trustee in and to the outstanding stock of the Company and in and to
all monies, securities, investments, instruments, documents, rights, claims,
contracts, and other property held by the Owner Trustee under the Trust
Agreement; provided, however, that there shall be excluded from the Owner Trust
Estate all Excepted Payments.
"Owner Trustee" means United States Trust Company of New York, not
in its individual capacity but solely as trustee under and pursuant to the Trust
Agreement, and its permitted successors.
"Partially Assigned Agreement" means a Nuclear Material Contract
which has been assigned, in part but not in full, to the Company in the manner
specified in Section 5 of the Lease Agreement pursuant to a duly executed and
delivered Assignment Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation, created by
Section 4002(a) of ERISA and any successor thereto.
"Permitted Liens" means (i) any assignment of the Lease Agreement
permitted thereby, and by the Credit Agreement, (ii) liens for Impositions not
yet payable, or payable without the addition of any fine, penalty, interest or
cost for nonpayment, or being contested by the Lessee as permitted by Section 11
of the Lease Agreement, (iii) liens and security interests created by the
Security Agreement, (iv) the title transfer and commingling of the Nuclear
Material contemplated by paragraph (h) of Section 10 of the Lease Agreement, and
(v) liens of mechanics, laborers, materialmen, suppliers or vendors, or rights
thereto, incurred in the ordinary course
35
<PAGE>
of business for sums of money which under the terms of the related contracts are
not more than 30 days past due or are being contested in good faith by the
Lessee as permitted by Section 11 of the Lease Agreement; provided, however,
that, in each case, such reserve or other appropriate provision, if any, as
shall be required by generally accepted accounting principles shall have been
made in respect thereto.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization or other business entity or any
government or any political subdivision or agency thereof.
"Plan" means, with respect to any Person, any plan of a type
described in Section 4021(a) of ERISA in respect of which such Person is an
"employer" or a "substantial employer" as defined in Sections 3(5) and 4001 (a)
(2) of ERISA, respectively.
"Proceeds" shall have the meaning assigned to it under the Uniform
Commercial Code, as amended, and, in any event, shall include, but not be
limited to, (i) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to the Company from time to time with respect to the
Collateral, (ii) any and all payments (in any form whatsoever) made or due and
payable to the Company from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental body, authority, bureau or agency (or any person
acting under color of governmental authority), and (iii) any and all other
amounts from time to time paid or payable under or in connection with any of the
Collateral.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Public Utility Holding Company Act" means the Public Utility
Holding Company Act of 1935, as from time to time amended.
"Qualified Institution" means a commercial bank organized under the
laws of, and doing business in, the United States of America or in any State
thereof, which has combined capital, surplus and undivided profits of at least
$150,000,000 having trust power.
"Related Person" means, with respect to any Person, any trade or
business, (whether or not incorporated) which, together with such Person, is
under common control as described in Section 414(c) of the Code.
"Rent" means Basic Rent, Additional Rent and Termination Rent.
"Rent Due and SCV Confirmation Schedule" means an instrument,
substantially in the form of Exhibit G to the Lease Agreement, which is to be
used by the Lessee (i) to calculate Basic Rent for each Basic Rent Period and
Other Rent and (ii) to calculate and acknowledge the SCV at the end of each
Basic Rent Period.
"Reportable Event" means any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"Responsible Officer" means a duly elected or appointed, authorized,
and acting officer, agent or representative of the Person acting.
"Secured Obligations" means each and every debt, liability and
obligation of every type and description which the Company may now or at any
time hereafter owe to any Secured Party under, pursuant to or in connection with
the Credit Agreement, any Note, the Letter of Credit or any other Basic
Document, whether such debt, liability or obligation now exists or is hereafter
created or incurred,
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<PAGE>
and whether it is or may be direct or indirect, due or to become due, absolute
or contingent, primary or secondary, liquidated or unliquidated, or joint,
several or joint and several, including, without limitation, the principal of,
interest on and any premium due with respect to any Loan and all
indemnifications, costs, expenses, fees and other compensation of the Secured
Parties provided for, and all other amounts owed to the Secured Parties, under
the Security Agreement, Credit Agreement and the other Basic Documents.
"Secured Parties" means the Banks, any other holder from time to
time of any Note and the Issuing Bank.
"Securities Act" means the Securities Act of 1933, as from time to
time amended.
"Security Agreement" means the Security Agreement and Assignment of
Contracts, dated as of ------, 1998, by and among the Company and The First
National Bank of Chicago, as Collateral Agent in favor of the Secured Parties.
"Single Employer Plan" means any Plan which is not a multi-employer
plan as defined in Section 4001(a) (3) of ERISA
"Stipulated Casualty Value" or "SCV" for any Nuclear Material
covered by any Leasing Record means an amount equal to the Acquisition Cost for
such Nuclear Material reduced by the aggregate total amount, if any, of the
Monthly Rent Components paid by the Lessee to the Lessor with respect to such
Nuclear Material together with Commercial Paper Discount.
"Termination Date" shall have the meaning specified therefor in
Section 1.02 of the Credit Agreement.
"Termination Rent" means an amount which, when added to the
Stipulated Casualty Value and Basic Rent then payable by the Lessee, if any,
will be sufficient to enable the Company to retire, at their respective
maturities, all outstanding Notes and to pay all charges, premiums and fees owed
to the Issuing Bank and all holders of Notes under the Credit Agreement and to
pay all other obligations of the Company incurred in connection with the
implementation of the transactions contemplated by the Basic Documents.
"Termination Settlement Date" has the meaning specified in Section
8(c), or Section 18(c) of the Lease Agreement.
"Terminating Event" has the meaning specified in Section 18 of the
Lease Agreement.
"Trust" means the TMI-I Fuel Corp. and Oyster Creek Fuel Corp. Trust,
a trust formed pursuant to the Trust Agreement.
"Trust Agreement" means the Second Amended and Restated Trust
Agreement dated as of ___________ __, 1998 among Lord Fuel Corp., as Trustor,
the Owner Trustee, as trustee, Lord Fuel Corp., as beneficiary, and Jersey
Central Power & Light Company, Metropolitan Edison Company and Pennsylvania
Electric Company, each as lessee under certain lease agreements, as the same may
be amended, modified or supplemented from time to time.
"Trustor" means the institution designated as such in the Trust
Agreement and its permitted successors.
"UBS Credit Agreement" means the Credit Agreement dated as of November
17, 1995 among Oyster Creek Fuel Corp., Union Bank of Switzerland, New York
Branch,
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as Arranging Agent, Union Bank of Switzerland, New York Branch, as Issuing Bank,
the Banks Party thereto and Union Bank of Switzerland, New York Bank, as
Administrative Agent.
"UCC" means the Uniform Commercial Code as adopted and in effect in
the State of New York.
"U.S. Trust" means United States Trust Company of New York.
38
<PAGE>
EXHIBIT A
INTERIM LEASING RECORD
Record No.------
Name of Lessee: Jersey Central Power & Light Company
Date of Record: ------------------
Date and No. of prior Interim or Final
Leasing Record (if any):
Description and location of Nuclear Material covered by this Record:
Assembly Serial Nos.:
Subassembly Serial Nos.:
Acquisition Cost of Nuclear Material
under prior Leasing Record (if any): $
------------
Acquisition Cost added by this Record: $
------------
Total: $
------------
Credits to Acquisition Cost: $
------------
Total Acquisition Cost under this Record $
------------
Specify nature of Acquisition Cost added by this Record and to whom paid:
Specify nature of any credits received by Lessor covered by this Record and from
whom received:
<PAGE>
Basic Rent for the Nuclear Material covered by this Record shall be calculated
and paid as provided in Section 9 of the Second Amended and Restated Nuclear
Material Lease Agreement referred to below.
The undersigned Lessor hereby leases to the undersigned Lessee the Nuclear
Material described above in accordance with the covenants, terms and conditions
of the Second Amended and Restated Nuclear Material Lease Agreement between the
undersigned Lessor and Lessee, dated as of , , 1998 which covenants, terms and
conditions are incorporated herein by reference.
OYSTER CREEK FUEL CORP., Lessor JERSEY CENTRAL POWER & LIGHT
COMPANY, Lessee
By By
------------------------ ------------------------
Authorized Signature Authorized Signature
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EXHIBIT B
FINAL LEASING RECORD
Record No.------
Name of Lessee: Jersey Central Power & Light Company
Date of Record: ------------------
Date and No. of prior Interim or Final
Leasing Record:
Description and location of Nuclear Material covered by this Record:
Assembly Serial Nos.:
Subassembly Serial Nos.:
Acquisition Cost of Nuclear Material
under prior Leasing Record (if any): $
------------
Acquisition Cost added by this Record: $
------------
Total: $
------------
Credits (if any) to Acquisition Cost: $
------------
Total Acquisition Cost under this Record $
------------
BTU Charge: $----------
Specify nature of Acquisition Cost added by this Record and to whom paid:
Specify nature of any credits received by Lessor covered by this Record and from
whom received:
Basic Rent for the Nuclear Material covered by this Record shall be calculated
and paid as provided in Section 9 of the Second Amended and Restated Nuclear
Material Lease Agreement referred to below.
<PAGE>
The undersigned Lessor hereby leases to the undersigned Lessee the Nuclear
Material described above in accordance with the covenants, terms and conditions
of the Second Amended and Restated Nuclear Material Lease Agreement between the
undersigned Lessor and Lessee, dated as of ---------- --, 1998, which covenants,
terms and conditions are incorporated herein by reference.
OYSTER CREEK FUEL CORP., Lessor JERSEY CENTRAL POWER & LIGHT
COMPANY, Lessee
By By
-------------------------- -------------------------
Authorized Signature Authorized Signature
42
<PAGE>
Attachment 1 to Exhibit B
BRITISH THERMAL UNIT CHARGE AGREEMENT
Dated:
The undersigned Lessor and Lessee agree that the initial British
Thermal Unit Charge to be used to calculate the Monthly Rent Component for the
Nuclear Material pursuant to the Second Amended and Restated Nuclear Material
Lease Agreement, dated as of --------- --, 1998, between the undersigned Lessor
and Lessee shall be as follows:
Description of Nuclear Material British Thermal Unit Charge
- ------------------------------- ---------------------------
OYSTER CREEK FUEL CORP. JERSEY CENTRAL POWER & LIGHT
COMPANY
By: By:
- ----------------------------- ----------------------------------
Its: Its:
- ---------------------------- ----------------------------------
43
<PAGE>
EXHIBIT C
NUCLEAR MATERIAL CONTRACTS
The Agreements (each as amended and restated) referred to in Section
5 of the Second Amended and Restated Nuclear Material Lease Agreement, dated as
of ------- --, 1998, between OYSTER CREEK FUEL CORP. ("Lessor") and JERSEY
CENTRAL POWER & LIGHT COMPANY ("Lessee") are:
(1) Agreement, dated January 30, 1975, between Sequoyah Fuels
Corporation and GPUN, as agent for the Lessee, Met-Ed and Penelec.
(2) Agreement, dated February 12, 1996, between United States
Enrichment Corporation and Lessee, Met-Ed and Penelec.
(3) Agreement, dated as of November 12, 1980 between General
Electric Company and the Lessee.
44
<PAGE>
EXHIBIT D
ASSIGNMENT AGREEMENT
KNOW ALL MEN BY THESE PRESENTS THAT:
Jersey Central Power & Light Company (the "Assignor"), in
consideration of one dollar and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, does hereby sell, grant,
bargain, convey and assign to Oyster Creek Fuel Corp. ("Assignee"), all right,
title and interest of the Assignor in, to and under the Nuclear Material
Contract (the "Nuclear Material Contract") described in Exhibit 1 attached
hereto insofar as such Nuclear Material Contract relates to the Nuclear Material
described in Exhibit 1 (all of such property, including the items described on
Exhibit 1 attached hereto as included with the Property, being herein
collectively called the "Property"). Terms not defined herein shall have the
meanings given in Exhibit 1 attached hereto.
TO HAVE AND TO HOLD the Property unto the Assignee, its successors
and assigns, to its and their own use forever.
1. The interest of the Assignor in the Property, and the interest
transferred by this Assignment Agreement, is that of absolute ownership.
2. The Assignor hereby warrants that it is the lawful owner of the
rights and interests conveyed by this Assignment Agreement and that its title to
such rights and interests is hereby conveyed to the Assignee free and clear of
all liens, charges, claims and encumbrances of every kind whatsoever, other than
(i) the amounts, if any, owing under the Nuclear Material Contract, (ii) other
claims, if any, of the Assignor and the Contractor which may exist as between
themselves and (iii) Permitted Liens (as defined in the Lease Agreement referred
to below); and that the Assignor will warrant and defend such title forever
against all claims and demands whatsoever.
3. The Assignor hereby releases and transfers to the Assignee any
right, title or interest in the Nuclear Material which may have been acquired by
the Assignor under the Nuclear Material Contract prior to the date hereof.
4. This Assignment Agreement is made in accordance with the Second
Amended and Restated Nuclear Material Lease Agreement dated as of --------- --,
1998, between the Assignor and the Assignee (said Nuclear Material Lease
Agreement, as the same may be from time to time amended, modified or
supplemented, being herein called the "Lease Agreement"). Pursuant to a Security
Agreement and Assignment of Contracts made by Oyster Creek Fuel Corp. dated as
of --------- --, 1998 (said Security Agreement and Assignment of Contracts, as
the same may from time to time be amended, modified or supplemented, being
herein called the "Security Agreement") made by Assignee in favor of the Secured
Parties, as defined therein, the Assignee is assigning and granting a security
interest in the Property and this Assignment Agreement to the Secured Parties,
as collateral security for all obligations and liabilities of the Assignee to
the Secured Parties, as such obligations are described in the Security
Agreement.
5. It is expressly agreed that, anything contained herein to the
contrary notwithstanding, (a) the Assignor shall at all times remain liable to
the Contractor to observe and perform all of its duties and obligations under
the Nuclear Material Contract to the same extent as if this Assignment Agreement
and the Security Agreement had not been executed, (b) the exercise by the
Assignee or the Secured Parties of any of the rights assigned hereunder or under
the Security Agreement, as
45
<PAGE>
the case may be, shall not release the Assignor from any of its duties or
obligations to the Contractor under the Nuclear Material Contract, and (c)
neither the Assignee nor any of the Secured Parties shall have any obligation or
liability under the Nuclear Material Contract by reason of or arising out of
this Assignment Agreement, the Lease Agreement or the Security Agreement, or be
obligated to perform or fulfill any of the duties or obligations of the Assignor
under the Nuclear Material Contract, or to make any payment thereunder, or to
make any inquiry as to the nature or sufficiency of any Property received by it
thereunder, or to present or file any claim, or to take any action to collect or
enforce the payment of any amounts or the delivery of any Property which may
have been assigned to it or to which it may be entitled at any time or times;
provided, however, the Assignee agrees, solely for the benefit of the Assignor,
and subject to the terms and conditions of the Lease Agreement, (i) to purchase
the Nuclear Material from the Contractor pursuant to the Nuclear Material
Contract, (ii) to pay to the Contractor and/or to the Assignor or their order
the respective amounts specified in the Lease Agreement with respect to such
Nuclear Material and (iii) to lease such Nuclear Material to the Assignor in
accordance with and subject to the terms and conditions of the Lease Agreement.
The provisions of the Nuclear Material Contract limiting the liability of the
Contractor and its suppliers and subcontractors' under that Contract shall
remain effective against the Assignee and Secured Parties to the same extent
that such provisions are effective against the Assignor.
6. Notwithstanding anything contained herein to the contrary,
subject to the terms and conditions of the Lease Agreement, the Assignor may
continue to engage in Fuel Management (as such term is defined in the Lease
Agreement) with respect to the Property, including, without limitation, all
dealings with the Contractor and, subject to such terms and conditions and
effective until the occurrence of a Lease Event of Default (as defined in the
Lease Agreement), (i) the Assignee reassigns to the Assignor the Assignee's
rights under clauses (iii), (iv), (v) and (vi) of subparagraph (b) of Exhibit 1
to this Assignment Agreement (provided, however, that insurance proceeds are
reassigned to the Assignor pursuant hereto only to the extent that such proceeds
are needed and used to reimburse the Assignor for the cost of repairing damage
or destruction to Nuclear Material or are used to purchase Nuclear Material from
the Assignee in accordance with the Lease Agreement, and provided further,
however, that the Assignee's rights under clause (vi) are reassigned to the
Assignor subject in all respects to the limitations set forth in paragraph 8.
below), and (ii) the Assignee agrees that the Assignor may, to the extent set
forth in clause (i) above, to the exclusion of the Assignee, exercise and
enforce such rights.
7. The Assignor shall promptly and duly execute, deliver, file and
record all such further counterparts of this Assignment Agreement or such
certificates, financing and continuation statements and other instruments as may
be reasonably requested by the Assignee, and take such further actions as the
Assignee shall from time to time reasonably request, in order to establish,
perfect and maintain the rights and remedies created or intended to be created
in favor of the Assignee and the Secured Parties hereunder and the Assignee's
title to and interest in the Property as against the Assignor or any third party
in any applicable jurisdiction.
8. The Assignor hereby agrees that it will not enter into or consent
to or permit any cancellation, termination, amendment, supplement or
modification of or waiver with respect to the Nuclear Material Contract insofar
as it relates to the Nuclear Material except for cancellations, terminations,
amendments, supplements, modifications or waivers which do not materially
adversely affect the Assignee or the Secured Parties or their respective
interests in the Property, nor will the Assignor sell, assign, grant any
security interest in or otherwise transfer its rights or other interests in the
Property or any part thereof, except as permitted by the Lease Agreement.
46
<PAGE>
9. The Assignor hereby represents and warrants that the Nuclear
Material Contract is in full force and effect and represents that it is the only
agreement between the Assignor and the Contractor with respect to the Nuclear
Material.
10. This Assignment Agreement shall become effective only upon
receipt of the written consent of the Contractor to the assignment of the rights
and interests conveyed hereunder, if such consent is required under the Nuclear
Material Contract. The Assignor hereby agrees to send the Contractor a copy of
this Assignment Agreement.
11. This Assignment Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
47
<PAGE>
IN WITNESS WHEREOF, the Assignor has caused this Assignment
Agreement to be duly executed and delivered as of the ---- day of
- ------------,19----.
JERSEY CENTRAL POWER & LIGHT
COMPANY
By:
------------------------------------
Title:
------------------------------------
The foregoing Assignment Agreement is hereby accepted:
OYSTER CREEK FUEL CORP.
By:
------------------------------------
Title:
------------------------------------
48
<PAGE>
EXHIBIT 1
to Assignment Agreement
(a) The ------------- (as the same may from time to time be amended,
modified or supplemented, being herein called the "Nuclear Material Contract"),
dated as of -------------, between Jersey Central Power & Light Company and
- -------------- (the "Contractor), insofar as, and only to the extent that, the
Contract relates to ----------------- (the "Nuclear Material"); but not insofar
as the Contract provides for the provision of other nuclear materials and
services to the Assignor; and
(b) The Property shall include, without limitation, (i) any and all
amendments and supplements to the Nuclear Material Contract from time to time
executed and delivered to the extent that any such amendment or supplement
relates to the Nuclear Material, (ii) the Nuclear Material, including the right
to receive title thereto, (iii) all rights, claims and proceeds, now or
hereafter existing, under any insurance, indemnities, warranties and guaranties
provided for in or arising out of the Nuclear Material Contract, to the extent
that such rights or claims relate to the Nuclear Material, (iv) any claim for
damages arising out of or for breach or default by the Contractor under or in
connection with the Nuclear Material Contract insofar as it relates to the
Nuclear Material, (v) any other amount, whether resulting from refunds or
otherwise, from time to time paid or payable by the Contractor under or in
connection with the Nuclear Material Contract insofar as it relates to the
Nuclear Material and (vi) the right of the Assignor to terminate the Nuclear
Material Contract or to perform or to exercise or enforce thereunder, insofar as
it or they relate to the Nuclear Material.
49
<PAGE>
EXHIBIT 2
to Assignment Agreement
CONSENT AND AGREEMENT
The undersigned, ----------------- (the "Contractor"), has entered
into a --------------- (as the same may from tune to time be amended, modified
or supplemented, being herein called the "Nuclear Material Contract"), dated as
of -------------------- with Jersey Central Power & Light Company (the
"Assignor").
The Contractor hereby acknowledges notice that (i) in accordance
with the terms of the Second Amended and Restated Nuclear Material Lease
Agreement dated as of --------- --, 1998, between the Assignor and Oyster Creek
Fuel Corp. (the "Assignee"), the Assignor has assigned to the Assignee a part of
the Assignor's rights under the Nuclear Material Contract pursuant to an
Assignment Agreement, in the form of Annex A hereto (such Assignment Agreement,
as the same may from time to time be amended, modified or supplemented, being
herein collectively called the "Assignment"), and (ii) pursuant to a Security
Agreement and Assignment of Contracts made by Oyster Creek Fuel Corp. dated as
of --------- --, 1998 (said Security Agreement and Assignment Contracts, as the
same may from time to time be amended, modified or supplemented, being herein
called the "Security Agreement") made by the Assignee in favor of the Secured
Parties as defined therein (the "Secured Parties"), the Assignee has assigned
and granted a security interest in all rights under the Nuclear Material
Contract from time to time assigned to it by Assignor, as collateral security
for all obligations and liabilities of the Assignee to the Secured Parties.
The Contractor hereby consents to (i) the assignment by the Assignor
to the Assignee of part of the Assignor's right, title and interest in, to and
under the Nuclear Material Contract and the other Property described in the
Assignment pursuant to the Assignment and (ii) the assignment and security
interest in favor of the Secured Parties as described above. The Contractor
further consents to all of the terms and provisions of the Security Agreement.
The Contractor agrees that, if requested by either the Assignor or
the Assignee, it will acknowledge in writing the Assignment delivered by the
Assignor to the Assignee; provided, that neither the lack of notice to nor
acknowledgment by the Contractor of the Assignment shall limit or otherwise
affect the validity or effectiveness of this consent to such Assignment.
The Contractor hereby confirms to the Assignee and the Secured
Parties that:
(a) all representations, warranties and agreements of the
Contractor under the Nuclear Material Contract which relate to
the Nuclear Material described in the Assignment shall inure
to the benefit of, and shall be enforceable by, the Assignee
or any Secured. Party to the same extent as if originally
named in the Contract as the purchaser of such Nuclear
Material,
(b) the Contractor understands that, pursuant to the Lease
Agreement, the Assignee has agreed to lease the Nuclear
Material described in the Assignment to the Assignor, and
consents to the assignment to the Assignor, for so long as
the Lease Agreement shall be in effect or until otherwise
notified by the Assignee, of the Assignee's rights under
clauses (iii), (iv), (v) and (vi) of subparagraph (b) of
Exhibit 1 to the Assignment to the extent that
50
<PAGE>
such rights are reassigned to the Assignor pursuant to the
Assignment,
(c) The Contractor is in the business of selling nuclear fuel and
related services of the kind described in the Assignment, and
the proposed sale of such nuclear fuel under the Nuclear
Material Contract will be in the ordinary course of business
of the Contractor, and
(d) Notwithstanding any provision to the contrary contained in
the Nuclear Material Contract, the Contractor agrees that
title to any Nuclear Material covered by the Assignment
shall pass directly to the Assignee under the Contract and
shall not pass to the Assignor; provided that the foregoing
shall not apply to any Nuclear Material for which title has
already passed from the Contractor prior to the execution
and delivery of the Assignment.
It is understood that neither the Assignment, the Security Agreement
nor this Consent and Agreement shall in any way add to the obligations of the
Contractor or the Assignor under the Nuclear Material Contract.
This Consent and. Agreement shall be governed by and construed in
accordance with the laws of the State of ------------.
IN WITNESS WHEREOF, the undersigned has caused this Consent and
Agreement to be duly executed and delivered by its duly authorized officer as of
- --- day of --------------, 19---.
By:
------------------------------------
Title:
------------------------------------
51
<PAGE>
EXHIBIT E
BILL OF SALE
TO
JERSEY CENTRAL POWER & LIGHT COMPANY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, Oyster Creek
Fuel Corp., a Delaware corporation (the "Seller"), whose post office address is
c/o United States Trust Company of New York, 114 West 47th Street, New York, New
York 10036, Attention: Corporate Trust and Agency Division, for and in
consideration paid to the Seller upon or before the execution and delivery of
this Bill of Sale to Jersey Central Power & Light Company (the "Purchaser"), a
New Jersey corporation, whose address is 2800 Pottsville Pike, Reading,
Pennsylvania 19640, Attention: Comptroller, hereby conveys, transfers, sells and
sets over unto the Purchaser all of its right, title and interest in all of the
personal property consisting of the assemblies of nuclear fuel or components
thereof or other nuclear material described in Annex I hereto (the "Assets"),
and by this Bill of Sale does hereby grant, bargain, sell, convey, transfer and
deliver the Assets unto the Purchaser, to have and to hold such undivided
interest in the Assets unto the Purchaser, for itself, its successors and
assigns, forever.
The Assets are transferred and conveyed by the Seller AS-IS,
WHERE-IS, WITHOUT REPRESENTATIONS OR WARRANTIES (EXPRESS OR IMPLIED) OF ANY KIND
WHATSOEVER BY THE SELLER OR ANY PERSON ACTING ON ITS BEHALF except that the
Seller represents and warrants that it has not by voluntary act or omission
created or granted any lien on the Assets, other than Permitted Liens, as
defined in that certain Second Amended and Restated Nuclear Material Lease
Agreement, dated as of _________ __, 1998 between the Seller and the Purchaser.
The Purchaser acknowledges and agrees that neither the Seller, its directors,
officers or employees, any company, person or firm controlling, controlled by,
or under common control with any of them nor any other person acting on behalf
of the Seller is a manufacturer of, or is engaged in the sale or distribution
of, nuclear material, has had at any time physical possession of any portion of
the Assets sold hereunder, or has made any inspection thereof. The Purchaser
further acknowledges and agrees that the Assets sold hereunder have been at all
times in the possession of the Purchaser and that the Purchaser has made such
inspections thereof as it deems necessary and that the Purchaser has been solely
responsible for all decisions made with respect to the choice of the suppliers
of such Assets and the enrichment, fabrication, transportation, storage and
processing of the same.
52
<PAGE>
IN WITNESS WHEREOF, the Seller has caused these presents to be
executed by one of its Vice Presidents, this ------- day of
- ------------------,19---.
OYSTER CREEK FUEL CORP., Seller
By:
------------------------------------
Vice President
Acknowledgment and Acceptance
-----------------------------
The foregoing Bill of Sale is hereby acknowledged and accepted by
the undersigned as of the date last above written.
JERSEY CENTRAL POWER & LIGHT
COMPANY,
Purchaser
By:
------------------------------------
Its:
------------------------------------
53
<PAGE>
<TABLE>
EXHIBIT F
RENT DUE
AND SCV CONFIRMATION SCHEDULE
<CAPTION>
For the Basic Rent Period Ended ------
In accordance with the Second Amended and Restated Lease Agreement
dated as of --------- --, 1998, between Oyster Creek Fuel Corp., as Lessor, and
Jersey Central Power & Light Company, as Lessee, the Lessee certifies that all
amounts set forth below are true and correct in all respects, and both Lessor
and Lessee certify that this Schedule has been prepared in accordance with the
provisions of the Lease Agreement.
I. BASIC RENT, ADDITIONAL RENT AND TERMINATION RENT
A.Basic Rent Owed
1. Calculation of Portion of Monthly Financing Charge Not Allocated
to Acquisition Cost
<S> <C>
a.Interest Payable with Respect to All Outstanding Notes (See $ -
attached summary calculation)
--------------
b.Other Amounts Included in Monthly Financing Charge $ -
--------------
c.TOTAL MONTHLY FINANCING CHARGE NOT ALLOCATED TO ACQUISITION COST $ -
(Total of 1(a) and 1(b))
--------------
2. Aggregate Monthly Rent Component (See attached summary $ -
calculation)
--------------
3. BASIC RENT (total of 1(c) and 2) $ -
==============
B. Additional Rent Owed (see attached summary calculation) $ -
--------------
C.Termination Rent Owed (see attached summary calculation) $ -
--------------
TOTAL RENT DUE (total of A, B and C) $ -
==============
</TABLE>
54
<PAGE>
<TABLE>
II. CALCULATION OF STIPULATED CASUALTY VALUE
<CAPTION>
Nuclear Material
Installed for Not Installed Total
Operation In for Operation -----
the in the
Generating Generating
Facility Facility
-------- --------
<S> <C> <C> <C>
A. Stipulated Casualty Value as of ___________ $ - $ - $ -
--------------- --------------- ------------
B. Add: Acquisition Cost Incurred in Rent $ - $ $
Period Covered by This Schedule (exclusive of
Monthly Financing Charges) - - -
--------------- --------------- ------------
C. Add: Monthly Financing Charge Allocated to $ - $ - $ -
Acquisition Cost Incurred in Rent Period
Covered by This Schedule
--------------- --------------- ------------
D. Less: SCV of Nuclear Material Transferred $ - $ - $ -
to the Lessee Pursuant to Sections 8(c), 8(g)
or 14 of the Lease Agreement during the Basic
Rent Period Covered by This Schedule
--------------- --------------- ------------
STIPULATED CASUALTY VALUE AS OF ______________ $ - $ - $ -
=============== =============== ============
Add: Commercial Paper Discount $ -
------------
STIPULATED CASUALTY VALUE AS OF ______________ $ -
============
</TABLE>
55
Exhibit B-2(c)1)
JERSEY CENTRAL POWER & LIGHT COMPANY
LESSEE'S LETTER AGREEMENT
Regarding
OYSTER CREEK FUEL CORP.
Dated as of----------- --, 1998
<PAGE>
TABLE OF CONTENTS
Section Page
1. Definitions
2. Performance of Fuel Lease and Liens
3. Security Interest of Collateral
4. Sale of Nuclear Material and Assignment of Rights under
Nuclear Material Contracts
5. Collateral Equivalence Test; No Additional Collateral or
Covenants; Condemnation Statements; Exercise of Rights of
Secured Parties
6. Fuel Management; Quiet Enjoyment
7. Insurance
8. Representations and Warranties
9. General Covenants of the Lessee
10. GPU Events
11. Credit Agreements and Notes
12. Consent to Assignments; Direct Payment of Payments Under
the Fuel Lease
13. Severabilty
14. Indemnification
15. No Waiver; Amendments
16. Successors and Assigns
17. Notices
18. Set-Off
19. Waiver of Jury Trial
20. Governing Law
i
<PAGE>
THIS LESSEE'S LETTER AGREEMENT (the "Letter Agreement") is made as of
- ------- --, 1998, by and between Jersey Central Power & Light Company, a New
Jersey corporation (the "Lessee"), Oyster Creek Fuel Corp, a Delaware
corporation (the "Company"), and The First National Bank of Chicago, 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 Second Amended and Restated
Nuclear Material Lease Agreement, dated as of -------- --, 1998 ("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 Nuclear Material; and
WHEREAS, in order to finance the cost of such Nuclear Material, the
Company proposes to (i) sell its Commercial Paper, and (ii) obtain the
Commitment 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 -------- --, 1998, among the Company, the Banks 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 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 the Fuel Lease are absolute and
unconditional. The Lessee will not directly or indirectly create or permit to be
created or 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
effective financing statement (other than those naming the Secured Parties as a
secured party) covering all or any part of the Collateral (as defined in the
Security Agreement relating to the Lessee) 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
<PAGE>
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 7.05 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 Administrative Agent in its reasonable
discretion may consent to in writing, which consent shall not be unreasonably
withheld, with respect to such Nuclear Material Contract not later than sixty
days following 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 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, unless such cancellation, termination, amendment, supplement or
modification could not reasonably be expected to have a Material Adverse Effect
on the Company or the Company has through one or more other Assigned Agreements
or otherwise arranged for the provision of comparable goods and services on
terms not materially more burdensome to the Company.
(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 the Majority Banks
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.
2
<PAGE>
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 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
(ii) 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
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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 (ii) 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 2800 Pottsville Pike, Reading,
Pennsylvania 19605.
(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, (ii) 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 (iii) 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
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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 October 25, 1995, the filing of the
supplemental order of the SEC dated ------------, 1998, the filing of a notice
with the New Jersey Board of Public Utilities which notice was filed September
4, 1998, 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, (ii) 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 (iii) except as disclosed in the Lessee's Annual Report on Form
10-K for the year ended December 31, 1997 and Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998, copies of which have previously been delivered
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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
connection 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, (ii) 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 (iii) 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 (ii) 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,
Kentucky, Ohio, New Jersey and North Carolina, 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, 1998, 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
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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, 1997, 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, 1998 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, 1997 or Quarterly Report on Form 10-Q for the quarter ended June 30, 1998,
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.
(r) Year 2000. The Lessee has made a full and complete assessment of
its Year 2000 Issues and has a realistic and achievable Year 2000 Program. Based
on such assessment and on its Year 2000 Program, the Lessee does not reasonably
anticipate that Year 2000 Issues will have a Material Adverse Effect.
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:
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(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 an 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 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;
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(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;
(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, or of
any other development, financial or otherwise (including, without
limitation, developments with respect to Year 2000 Issues), which could
reasonably be expected to have a Material Adverse Effect, and (B) 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 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 (ii) 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
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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
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;
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(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, (ii) 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 (iii) the
senior unsecured debt of the surviving or resulting Lessee
shall be rated at least investment grade by Standard & Poor's
Ratings Group ("S&P") or Moody's Investor Service, Inc.
("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 related, except for dispositions of its fossil
and hydroelectric generating stations and associated
facilities and dispositions of its current assets in the
ordinary course of business as presently conducted, if
immediately prior to such sale, transfer, lease, assignment,
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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 this 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 GPU, Inc. (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, creates 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
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
12
<PAGE>
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. Section 2011 et seq.) involving or connected in any
way with the Nuclear Material or any portion thereof, (b) 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, (c) 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, (d) 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, (e) 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, (f) any infringement or alleged infringement of any
patent, copyright, trade secret or other similar right relating to the Nuclear
Material or any portion thereof, (g) Lessee's agreements or obligations
contained in the Fuel Lease or this Letter Agreement, (h) any claim arising out
of loss of damage to the environment, (i) any claim arising out of strict or
absolute liability in tort, or (j) the offering and sale of Commercial Paper.
The Lessee also indemnifies each indemnitee, as aforesaid,
13
<PAGE>
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 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:
14
<PAGE>
(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 11.01 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, c/o GPU
Service Inc., 310 Madison Avenue, Morristown, New Jersey 07962,
marked for the attention of the Vice President and Treasurer,
Telecopier: (973) 644-4224, or at such other address or addresses as
the Lessee may have furnished to the Administrative Agent and the
Company.
18 Set-off. (a) Lessee hereby acknowledges and agrees to set-off rights
against it as provided for in Section 11.08 of the Credit Agreement.
(b) Lessee agrees that it shall have no right of set-off, deduction
or counterclaim in respect of its obligations hereunder, and that the
obligations of the Banks hereunder and under the Credit Agreement are several
and not joint. Nothing contained herein shall constitute a relinquishment or
waiver of the Lessee's rights to any independent claim that the Lessee may have
against the Administrative Agent or any Bank for the Administrative Agent's or
such Bank's, as the case may be, gross negligence or willful misconduct, but no
Bank shall be liable for the conduct of the Administrative Agent or any Bank,
and the Administrative Agent shall not be liable for the conduct of any Bank.
19 Waiver of Jury Trial. Lessee irrevocably waives all right to trial by
jury in any action, proceeding or counterclaim arising out of or relating to
this Letter Agreement, the Credit Agreement, the other Basic Documents or any
instrument or document delivered hereunder or thereunder, except that the
foregoing shall not preclude any party hereto from submitting to a jury for
determination in any such action, proceeding or counterclaim any dispute
involving (a) the accuracy or completeness of any representation or warranty
made under the Basic Documents by Lessee, (b) the performance by Lessee of any
affirmative or negative covenant or agreement contained in the Basic Documents,
or (c) questions of materiality, or the reasonableness of, or good faith basis
for, any action taken, or determination made, by any other party hereto (other
than in respect of any calculation of principal, interest, fees, or increased
costs payable by the Lessee under the Basic Documents).
20 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.
15
<PAGE>
S-1
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
------------------------------------
THE FIRST NATIONAL BANK OF
CHICAGO,
as Administrative Agent
By
------------------------------------
Title
------------------------------------
By
------------------------------------
Title
------------------------------------
EXHIBIT B-2(c)(2)
JERSEY CENTRAL POWER & LIGHT COMPANY
LESSEE'S LETTER AGREEMENT
Regarding
TMI-1 FUEL CORP.
Dated as of -------- --, 1998
<PAGE>
TABLE OF CONTENTS
Section Page
1. Definitions
2. Performance of Fuel Lease and Liens
3. Security Interest of Collateral
4. Sale of Nuclear Material and Assignment of Rights under
Nuclear Material Contracts
5. Collateral Equivalence Test; No Additional Collateral or
Covenants; Condemnation Statements; Exercise of Rights of
Secured Parties
6. Fuel Management; Quiet Enjoyment
7. Insurance
8. Representations and Warranties
9. General Covenants of the Lessee
10. GPU Events
11. Credit Agreements and Notes
12. Consent to Assignments; Direct Payment of Payments Under
the Fuel Lease
13. Severabilty
14. Indemnification
15. No Waiver; Amendments
16. Successors and Assigns
17. Notices
18. Set-Off
19. Waiver of Jury Trial
20. Governing Law
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<PAGE>
THIS LESSEE'S LETTER AGREEMENT (the "Letter Agreement") is made as of
- -------- --, 1998, by and between Jersey Central Power & Light Company, a New
Jersey corporation (the "Lessee"), TMI-1 Fuel Corp, a Delaware corporation (the
"Company"), and The First National Bank of Chicago, 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 Second Amended and Restated
Nuclear Material Lease Agreement, dated as of -------- --, 1998 ("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 Nuclear Material; and
WHEREAS, in order to finance the cost of such Nuclear Material, the
Company proposes to (i) sell its Commercial Paper, and (ii) obtain the
Commitment 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 -------- --, 1998, among the Company, the Banks 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 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 the Fuel Lease are absolute and
unconditional. The Lessee will not directly or indirectly create or permit to be
created or 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
effective financing statement (other than those naming the Secured Parties as a
secured party) covering all or any part of the Collateral (as defined in the
Security Agreement relating to the Lessee) 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 7.05 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 Administrative Agent in its reasonable
discretion may consent to in writing, which consent shall not be unreasonably
withheld, with respect to such Nuclear Material Contract not later than sixty
days following 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 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, unless such cancellation, termination, amendment, supplement or
modification could not reasonably be expected to have a Material Adverse Effect
on the Company or the Company has through one or more other Assigned Agreements
or otherwise arranged for the provision of comparable goods and services on
terms not materially more burdensome to the Company.
(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 the Majority Banks
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.
2
<PAGE>
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
of 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.
(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 less than 25% of
the Lessor's ownership interest in any such Nuclear Material 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 (ii) 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.
3
<PAGE>
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 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 (ii) 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 2800 Pottsville Pike, Reading,
Pennsylvania 19605.
(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.
4
<PAGE>
(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, (ii) 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 (iii) 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 October 25, 1995, the filing of the
supplemental order of the SEC dated -----------, 1998, the filing of a notice
with the New Jersey Board of Public Utilities which notice was filed September
4, 1998, 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.
5
<PAGE>
(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, (ii) 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 (iii) except as disclosed in the Lessee's Annual Report on Form
10-K for the year ended December 31, 1997 and Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998, 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
connection 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, (ii) 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 (iii) 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 (ii) 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,
Kentucky, Ohio, Pennsylvania and Virginia, 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
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possession, enforceable against all third parties as security for the Secured
Obligations.
(k) No Material Adverse Change. Since June 30, 1998, 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 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, 1997, 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, 1998 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
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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, 1997 or Quarterly Report on Form 10-Q for the quarter ended June 30, 1998,
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 the Outstandings.
(r) Year 2000. The Lessee has made a full and complete assessment of
its Year 2000 Issues and has a realistic and achievable Year 2000 Program. Based
on such assessment and on its Year 2000 Program, the Lessee does not reasonably
anticipate that Year 2000 Issues will have a Material Adverse Effect.
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 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
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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 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, or of any other development, financial or
otherwise (including, without limitation, developments with respect to
Year 2000 Issues), which could reasonably be expected to have a Material
Adverse Effect, and (B) within 10 days of becoming aware of the occurrence
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<PAGE>
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 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 (ii) 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
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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, (ii) 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 (iii) the senior unsecured
debt of the surviving or resulting Lessee shall be rated at
least investment grade by Standard & Poor's Ratings Group
("S&P") or Moody's Investor Service, Inc. ("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
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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 related, except for dispositions of its fossil
and hydroelectric generating stations and associated
facilities and dispositions of its 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 this 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.
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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 GPU, Inc. (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, creates 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
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
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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. Section 2011 et seq.) involving or connected in any
way with the Nuclear Material or any portion thereof, (b) 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, (c) 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, (d) 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, (e) 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, (f) any infringement or alleged infringement of any
patent, copyright, trade secret or other similar right relating to the Nuclear
Material or any portion thereof, (g) Lessee's agreements or obligations
contained in the Fuel Lease or this Letter Agreement, (h) any claim arising out
of loss of damage to the environment, (i) any claim arising out of strict or
absolute liability in tort, or (j) 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
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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 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:
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(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 11.01 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, c/o GPU
Service Inc., 310 Madison Avenue, Morristown, New Jersey 07962,
marked for the attention of the Vice President and Treasurer,
Telecopier: (973) 644-4224, or at such other address or addresses as
the Lessee may have furnished to the Administrative Agent and the
Company.
18 Set-off. (a) Lessee hereby acknowledges and agrees to set-off rights
against it as provided for in Section 11.08 of the Credit Agreement.
(b) Lessee agrees that it shall have no right of set-off, deduction
or counterclaim in respect of its obligations hereunder, and that the
obligations of the Banks hereunder and under the Credit Agreement are several
and not joint. Nothing contained herein shall constitute a relinquishment or
waiver of the Lessee's rights to any independent claim that the Lessee may have
against the Administrative Agent or any Bank for the Administrative Agent's or
such Bank's, as the case may be, gross negligence or willful misconduct, but no
Bank shall be liable for the conduct of the Administrative Agent or any Bank,
and the Administrative Agent shall not be liable for the conduct of any Bank.
19 Waiver of Jury Trial. Lessee irrevocably waives all right to trial by
jury in any action, proceeding or counterclaim arising out of or relating to
this Letter Agreement, the Credit Agreement, the other Basic Documents or any
instrument or document delivered hereunder or thereunder, except that the
foregoing shall not preclude any party hereto from submitting to a jury for
determination in any such action, proceeding or counterclaim any dispute
involving (a) the accuracy or completeness of any representation or warranty
made under the Basic Documents by Lessee, (b) the performance by Lessee of any
affirmative or negative covenant or agreement contained in the Basic Documents,
or (c) questions of materiality, or the reasonableness of, or good faith basis
for, any action taken, or determination made, by any other party hereto (other
than in respect of any calculation of principal, interest, fees, or increased
costs payable by the Lessee under the Basic Documents).
20 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.
16
<PAGE>
S-1
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
------------------------------
THE FIRST NATIONAL BANK OF
CHICAGO,
as Administrative Agent
By
------------------------------
Title
------------------------------
By
------------------------------
Title
------------------------------
EXHIBIT B-2(c)(3)
METROPOLITAN EDISON COMPANY
s
LESSEE'S LETTER AGREEMENT
Regarding
TMI-1 FUEL CORP.
Dated as of --------- --, 1998
<PAGE>
TABLE OF CONTENTS
Section Page
1.Definitions
2.Performance of Fuel Lease and Liens
3.Security Interest of Collateral
4.Sale of Nuclear Material and Assignment of Rights under
Nuclear Material Contracts
5.Collateral Equivalence Test; No Additional Collateral or
Covenants; Condemnation Statements; Exercise of Rights of
Secured Parties
6.Fuel Management; Quiet Enjoyment
7.Insurance
8.Representations and Warranties
9.General Covenants of the Lessee
10.GPU Events
11.Credit Agreements and Notes
12.Consent to Assignments; Direct Payment of Payments Under
the Fuel Lease
13.Severabilty
14.Indemnification
15.No Waiver; Amendments
16.Successors and Assigns
17.Notices
18.Set-Off
19.Waiver of Jury Trial
20.Governing Law
i
<PAGE>
THIS LESSEE'S LETTER AGREEMENT (the "Letter Agreement") is made as of
- -------- --, 1998, by and between Metropolitan Edison Company, a Pennsylvania
corporation (the "Lessee"), TMI-1 Fuel Corp, a Delaware corporation (the
"Company"), and The First National Bank of Chicago, 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 Second Amended and Restated
Nuclear Material Lease Agreement, dated as of -------- --, 1998 ("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 Nuclear Material; and
WHEREAS, in order to finance the cost of such Nuclear Material, the
Company proposes to (i) sell its Commercial Paper, and (ii) obtain the
Commitment 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 -------- --, 1998, among the Company, the Banks 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 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 the Fuel Lease are absolute and
unconditional. The Lessee will not directly or indirectly create or permit to be
created or 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 effective
financing statement (other than those naming the Secured Parties as a secured
party) covering all or any part of the Collateral (as defined in the Security
Agreement relating to the Lessee) 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
<PAGE>
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 7.05 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 Administrative Agent in its reasonable
discretion may consent to in writing, which consent shall not be unreasonably
withheld, with respect to such Nuclear Material Contract not later than sixty
days following 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 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, unless such cancellation, termination, amendment, supplement or
modification could not reasonably be expected to have a Material Adverse Effect
on the Company or the Company has through one or more other Assigned Agreements
or otherwise arranged for the provision of comparable goods and services on
terms not materially more burdensome to the Company.
(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 the Majority Banks
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.
2
<PAGE>
(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
of 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.
(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 less than 50% of
the Lessor's ownership interest in any such Nuclear Material 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 (ii) 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
3
<PAGE>
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 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 (ii) 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 subsisting under the laws of the Commonwealth
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 19605.
(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, (ii) are not in contravention of, and will not result in a
4
<PAGE>
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 (iii) 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 October 25, 1995, the filing of the
supplemental order of the SEC dated -----------, 1998, the order of the PaPUC,
dated ------------, 1998, 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
5
<PAGE>
Company to the Nuclear Material, (ii) 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 (iii) except as disclosed in the Lessee's Annual Report on Form
10-K for the year ended December 31, 1997 and Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998, 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
connection 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, (ii) 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 (iii) 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 (ii) 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,
Kentucky, Ohio, Pennsylvania and Virginia, 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, 1998, 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.
6
<PAGE>
(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, 1997, 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, 1998 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, 1997 or Quarterly Report on Form 10-Q for the quarter ended June 30, 1998,
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 the Outstandings.
7
<PAGE>
(r) Year 2000. The Lessee has made a full and complete assessment of
its Year 2000 Issues and has a realistic and achievable Year 2000 Program. Based
on such assessment and on its Year 2000 Program, the Lessee does not reasonably
anticipate that Year 2000 Issues will have a Material Adverse Effect.
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 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
8
<PAGE>
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 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, or of any other development, financial or
otherwise (including, without limitation, developments with respect to
Year 2000 Issues), which could reasonably be expected to have a Material
Adverse Effect, and (B) 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 SEC or any governmental agency substituted
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<PAGE>
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 (ii) 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 under this Letter
Agreement or any other Basic Document to which the Lessee is a
party;
10
<PAGE>
(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, (ii) 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 (iii) the senior unsecured
debt of the surviving or resulting Lessee shall be rated at
least investment grade by Standard & Poor's Ratings Group
("S&P") or Moody's Investor Service, Inc. ("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
11
<PAGE>
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 its fossil
and hydroelectric generating stations and associated
facilities and dispositions of its 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 this 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 GPU, Inc. (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, creates 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.
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<PAGE>
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
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 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,
13
<PAGE>
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. Section 2011 et seq.) involving or connected in any
way with the Nuclear Material or any portion thereof, (b) 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, (c) 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, (d) 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, (e) 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, (f) any infringement or alleged infringement of any
patent, copyright, trade secret or other similar right relating to the Nuclear
Material or any portion thereof, (g) Lessee's agreements or obligations
contained in the Fuel Lease or this Letter Agreement, (h) any claim arising out
of loss of damage to the environment, (i) any claim arising out of strict or
absolute liability in tort, or (j) 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.
14
<PAGE>
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 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 11.01 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, c/o GPU Service
Inc., 310 Madison Avenue, Morristown, New Jersey 07962, marked for
the attention of the Vice President and Treasurer, Telecopier: (973)
644-4224, or at such other address or addresses as the Lessee may
have furnished to the Administrative Agent and the Company.
18. Set-off. (a) Lessee hereby acknowledges and agrees to set-off rights
against it as provided for in Section 11.08 of the Credit Agreement.
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<PAGE>
(b) Lessee agrees that it shall have no right of set-off, deduction
or counterclaim in respect of its obligations hereunder, and that the
obligations of the Banks hereunder and under the Credit Agreement are several
and not joint. Nothing contained herein shall constitute a relinquishment or
waiver of the Lessee's rights to any independent claim that the Lessee may have
against the Administrative Agent or any Bank for the Administrative Agent's or
such Bank's, as the case may be, gross negligence or willful misconduct, but no
Bank shall be liable for the conduct of the Administrative Agent or any Bank,
and the Administrative Agent shall not be liable for the conduct of any Bank.
19. Waiver of Jury Trial. Lessee irrevocably waives all right to trial by
jury in any action, proceeding or counterclaim arising out of or relating to
this Letter Agreement, the Credit Agreement, the other Basic Documents or any
instrument or document delivered hereunder or thereunder, except that the
foregoing shall not preclude any party hereto from submitting to a jury for
determination in any such action, proceeding or counterclaim any dispute
involving (a) the accuracy or completeness of any representation or warranty
made under the Basic Documents by Lessee, (b) the performance by Lessee of any
affirmative or negative covenant or agreement contained in the Basic Documents,
or (c) questions of materiality, or the reasonableness of, or good faith basis
for, any action taken, or determination made, by any other party hereto (other
than in respect of any calculation of principal, interest, fees, or increased
costs payable by the Lessee under the Basic Documents).
20. 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.
16
<PAGE>
S-1
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
------------------------------
THE FIRST NATIONAL BANK OF
CHICAGO,
as Administrative Agent
By
------------------------------
Title
------------------------------
By
------------------------------
Title
------------------------------
EXHIBIT B-2(c)(4)
PENNSYLVANIA ELECTRIC COMPANY
LESSEE'S LETTER AGREEMENT
Regarding
TMI-1 FUEL CORP.
Dated as of--------- --, 1998
<PAGE>
TABLE OF CONTENTS
Section
Page
1. Definitions
2. Performance of Fuel Lease and Liens
3. Security Interest of Collateral
4. Sale of Nuclear Material and Assignment of Rights under
Nuclear Material Contracts
5. Collateral Equivalence Test; No Additional Collateral or
Covenants; Condemnation Statements; Exercise of Rights of
Secured Parties
6. Fuel Management; Quiet Enjoyment
7. Insurance
8. Representations and Warranties
9. General Covenants of the Lessee
10. GPU Events
11. Credit Agreements and Notes
12. Consent to Assignments; Direct Payment of Payments Under
the Fuel Lease
13. Severabilty
14. Indemnification
15. No Waiver; Amendments
16. Successors and Assigns
17. Notices
18. Set-Off
19. Waiver of Jury Trial
20. Governing Law
i
<PAGE>
THIS LESSEE'S LETTER AGREEMENT (the "Letter Agreement") is made as of
- -------- --, 1998, by and between Pennsylvania Electric Company, a Pennsylvania
corporation (the "Lessee"), TMI-1 Fuel Corp, a Delaware corporation (the
"Company"), and The First National Bank of Chicago, 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 Second Amended and Restated
Nuclear Material Lease Agreement, dated as of -------- --, 1998 ("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 Nuclear Material; and
WHEREAS, in order to finance the cost of such Nuclear Material, the
Company proposes to (i) sell its Commercial Paper, and (ii) obtain the
Commitment 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 -------- --, 1998, among the Company, the Banks 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 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 the Fuel Lease are absolute and
unconditional. The Lessee will not directly or indirectly create or permit to be
created or 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 effective
financing statement (other than those naming the Secured Parties as a secured
party) covering all or any part of the Collateral (as defined in the Security
Agreement relating to the Lessee) 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
<PAGE>
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 7.05 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 Administrative Agent in its reasonable
discretion may consent to in writing, which consent shall not be unreasonably
withheld, with respect to such Nuclear Material Contract not later than sixty
days following 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 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, unless such cancellation, termination, amendment, supplement or
modification could not reasonably be expected to have a Material Adverse Effect
on the Company or the Company has through one or more other Assigned Agreements
or otherwise arranged for the provision of comparable goods and services on
terms not materially more burdensome to the Company.
(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 the Majority Banks
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
of Outstandings.
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(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.
(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 less than 25% of
the Lessor's ownership interest in any such Nuclear Material 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 (ii) 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,
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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 (ii) 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 subsisting under the laws of the Commonwealth
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 19605.
(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, (ii) 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 (iii) 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
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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 October 25, 1995, the filing of the
supplemental order of the SEC dated ------------, 1998, the order of the PaPUC,
dated ------------, 1998, 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, (ii) 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 (iii) except as disclosed in the Lessee's Annual Report on Form
10-K for the year ended December 31, 1997 and Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998, 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
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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
connection 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, (ii) 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 (iii) 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 (ii) 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,
Kentucky, Ohio, Pennsylvania and Virginia, 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, 1998, 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
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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, 1997, 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, 1998 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, 1997 or Quarterly Report on Form 10-Q for the quarter ended June 30, 1998,
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 the Outstandings.
(r) Year 2000. The Lessee has made a full and complete assessment of
its Year 2000 Issues and has a realistic and achievable Year 2000 Program. Based
on such assessment and on its Year 2000 Program, the Lessee does not reasonably
anticipate that Year 2000 Issues will have a Material Adverse Effect.
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
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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 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
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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, or of any other development, financial or
otherwise (including, without limitation, developments with respect to
Year 2000 Issues), which could reasonably be expected to have a Material
Adverse Effect, and (B) 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 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 (ii) 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.
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(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
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, (ii) 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 (iii) the senior unsecured
debt of the surviving or resulting Lessee shall be rated at
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least investment grade by Standard & Poor's Ratings Group
("S&P") or Moody's Investor Service, Inc. ("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 related, except for dispositions of its fossil
and hydroelectric generating stations and associated
facilities and dispositions of its 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 this 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
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(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 GPU, Inc. (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, creates 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.
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
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
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<PAGE>
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. Section 2011 et seq.) involving or connected in any
way with the Nuclear Material or any portion thereof, (b) 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, (c) 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, (d) 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, (e) 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, (f) any infringement or alleged infringement of any
patent, copyright, trade secret or other similar right relating to the Nuclear
Material or any portion thereof, (g) Lessee's agreements or obligations
contained in the Fuel Lease or this Letter Agreement, (h) any claim arising out
of loss of damage to the environment, (i) any claim arising out of strict or
absolute liability in tort, or (j) 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
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<PAGE>
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
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 11.01 of the Credit Agreement or
at such other address as either may have furnished the Company
and the Lessee in writing;
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(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, c/o GPU Service
Inc., 310 Madison Avenue, Morristown, New Jersey 07962, marked for
the attention of the Vice President and Treasurer, Telecopier: (973)
644-4224, or at such other address or addresses as the Lessee may
have furnished to the Administrative Agent and the Company.
18. Set-off. (a) Lessee hereby acknowledges and agrees to set-off rights
against it as provided for in Section 11.08 of the Credit Agreement.
(b) Lessee agrees that it shall have no right of set-off, deduction
or counterclaim in respect of its obligations hereunder, and that the
obligations of the Banks hereunder and under the Credit Agreement are several
and not joint. Nothing contained herein shall constitute a relinquishment or
waiver of the Lessee's rights to any independent claim that the Lessee may have
against the Administrative Agent or any Bank for the Administrative Agent's or
such Bank's, as the case may be, gross negligence or willful misconduct, but no
Bank shall be liable for the conduct of the Administrative Agent or any Bank,
and the Administrative Agent shall not be liable for the conduct of any Bank.
19. Waiver of Jury Trial. Lessee irrevocably waives all right to trial by
jury in any action, proceeding or counterclaim arising out of or relating to
this Letter Agreement, the Credit Agreement, the other Basic Documents or any
instrument or document delivered hereunder or thereunder, except that the
foregoing shall not preclude any party hereto from submitting to a jury for
determination in any such action, proceeding or counterclaim any dispute
involving (a) the accuracy or completeness of any representation or warranty
made under the Basic Documents by Lessee, (b) the performance by Lessee of any
affirmative or negative covenant or agreement contained in the Basic Documents,
or (c) questions of materiality, or the reasonableness of, or good faith basis
for, any action taken, or determination made, by any other party hereto (other
than in respect of any calculation of principal, interest, fees, or increased
costs payable by the Lessee under the Basic Documents).
20. 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.
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<PAGE>
S-1
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
------------------------------
THE FIRST NATIONAL BANK OF
CHICAGO,
as Administrative Agent
By
------------------------------
Title
------------------------------
By
------------------------------
Title
------------------------------
Exhibit B-3(b)
SECOND AMENDED AND RESTATED
TRUST AGREEMENT
Dated as of ----------- ---, 1998
Among
LORD FUEL CORP., as Trustor
and
UNITED STATES TRUST COMPANY OF NEW YORK, as Owner Trustee
and
JERSEY CENTRAL POWER & LIGHT COMPANY,
METROPOLITAN EDISON COMPANY AND
PENNSYLVANIA ELECTRIC COMPANY,
each as Lessees under certain lease agreements
and
LORD FUEL CORP., as Trust Beneficiary
----------------
TMI-1 FUEL CORP. AND OYSTER CREEK FUEL CORP.
TRUST
---------------
<PAGE>
TRUST AGREEMENT
TABLE OF CONTENTS
RECITALS
1 DEFINITIONS
2 AUTHORITY TO EXECUTE AND PERFORM DOCUMENTS; DECLARATION OF
TRUST
2.1 Execution of Documents and Performance of Duties
2.2 Declaration of Trust
2.3 Name of Trust
2.4 No Other Business Obligations
2.5 No Disposition of Owner Trust Estate
3 TRUSTOR'S INTEREST
3.1 Investment by Trustor
3.2 Payment from Proceeds of Owner Trust Estate Only
3.3 Manner of Payment
4 ACQUISTION AND FINANCING OF NUCLEAR MATERIAL 4.1 Authorization of
Transactions 4.2 Closing Procedures 4.3 Conditions to Effecting
Transactions
5 RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE
OWNER TRUST ESTATE
5.1 Application of Proceeds of Financings and Specific
Payments
5.2 Amounts Payable to the Banks
5.3 Other Amounts
5.4 Excepted Payments
6 DUTIES OF THE OWNER TRUSTEE 6.1 Documents 6.2 Notice of Default 6.3
Indemnification; Legal Action 6.4 No Implied Duties 6.5 No Unauthorized
Transactions
7 THE OWNER TRUSTEE 7.1 Acceptance of Trust, Etc. 7.2 Limitation of Duties
7.3 Representations and Warranties of Owner Trustee
7.4 Deposit of Funds
7.5 Reliance on Documents; Agents; Right to Consult with
Counsel and Others; Etc.
7.6 Not Acting in Individual Capacity
7.7 Interpretation of Trust Agreement
7.8 Compensation
7.9 Books, Records and Tax Returns
7.10 Effect of Sales by a Company
7.11 Exculpatory Provisions
8 INDFEMNIFICATION OF THE OWNER TRUSTEE
9 CO-TRUSTEES, SEPARATE TRUSTEES
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10 SUCCESSOR TRUSTEES
11 SUPPLEMENTS AND AMENDMENTS TO THIS TRUST AGREEMENT AND THE BASIC DOCUMENTS
11.1 Supplements Upon Request of the Lessee 11.2 Amendments and
Supplements Affecting Owner Trustee
12 TERMINATION OF TRUST, ETC.
13 MISCELLANEOUS
13.1 Legal Title to Owner Trust Estate 13.2 Validity of Sale of Owner
Trustee 13.3 Trust Agreement for Benefit of Parties thereto 13.4 Notices
13.5 Severability 13.6 Waivers, Etc. 13.7 Counterparts 13.8 Successors and
Assigns 13.9 Headings 13.10 Self-Dealing 13.11 Governing Law 13.12 No
Unauthorized Transactions 13.13 Rights and Remedies
ii
<PAGE>
SECOND AMENDED AND RESTATED TRUST AGREEMENT, dated as of
- ------------ --, 1998 (this "Trust Agreement"), among Lord Fuel Corp., a
Delaware corporation, as trustor (herein, together with its successors and
assigns hereunder, called the "Trustor"), United States Trust Company of New
York, a New York corporation, as trustee (herein, together with its successors
and assigns hereunder, called the "Owner Trustee"), and Jersey Central Power &
Light Company, a New Jersey corporation, Metropolitan Edison Company, a
Pennsylvania corporation, and Pennsylvania Electric Company, a Pennsylvania
corporation, each as lessees under the Lease Agreements as defined herein (each
a "Lessee", together with their successors and assigns hereunder, called the
"Lessees") and Lord Fuel Corp., as trust beneficiary (herein, together with its
successors and assigns hereunder, called the "Trust Beneficiary").
RECITALS
A. The Trustor, the Owner Trustee, the Lessees and the Trust
Beneficiary are parties to a certain Trust Agreement dated as of August 1, 1991
("Original Trust Agreement") under which a trust was created for the purpose of
enabling the Owner Trustee to acquire as part of the Trust Estate all of the
outstanding stock of each of TMI-1 Fuel Corp. and Oyster Creek Fuel Corp., each
Delaware corporations (each, a "Company"; together, the "Companies") and the
Owner Trustee caused the Companies to each acquire certain Nuclear Material.
B. Under the Original Trust Agreement, the Lessees have provided for
the direction of the Owner Trustee with respect to actions to be taken by the
Companies pursuant to the Basic Documents, as defined in the Original Trust
Agreement, to provide for the lease of Nuclear Material thereunder and certain
transactions related thereto.
C. The Original Trust Agreement provided that the Companies enter
into certain loan agreements and ancillary documents with The Prudential
Insurance Company of America and affiliates thereof ("Prudential") to provide
financing from Prudential for the acquisition of Nuclear Material leased under
the Lease Agreements.
D. The Companies entered into credit agreements and related
instruments pursuant to which a bank syndicate, for which Union Bank of
Switzerland, New York Branch ("UBS") acted as agent, provided financing for the
acquisition of Nuclear Material being leased under the Lease Agreements.
E. The parties to the Original Trust Agreement entered into an
Amended and Restated Trust Agreement to reflect necessary modifications
consistent with the establishment of the credit facility with UBS.
F. Concurrent with the execution and delivery hereof, The Companies
are entering into new credit agreement and related instruments pursuant to which
a bank syndicate, for which The First National Bank of Chicago and PNC Bank,
National Association, will act as agents, will provide financing for the
acquisition of the Nuclear Material being leased under the Lease Agreements.
G. The parties to the Amended and Restated Trust Agreement desire to
amend and restate such Agreement to reflect necessary modifications consistent
with the establishment of such new credit facility.
<PAGE>
H. The Owner Trustee is willing to accept the duties and obligations
imposed hereby subject to the terms and conditions as provided herein.
NOW, THEREFORE, the parties thereby agree as follows:
1. DEFINITIONS.
For all purposes of this Trust Agreement, unless the context
requires otherwise, capitalized terms used herein which are defined in Exhibit A
hereto, which is hereby incorporated by reference for all purposes, shall have
the respective meanings assigned in said Exhibit A.
2. AUTHORITY TO EXECUTE AND PERFORM DOCUMENTS; DECLARATION OF TRUST.
2.1 Execution of Documents and Performance of Duties. The Trustor
hereby authorizes and directs the Owner Trustee (without any further action,
approval, authorization or consent by Trustor), and the Owner Trustee hereby
agrees (a) to maintain its ownership of all of the authorized capital stock of
each of the Companies, (b) to cause each of the Companies, on such date(s) as
the applicable Lessees shall specify to the Owner Trustee, to execute and
deliver, or accept, as the case may be, the Basic Documents or amendments
thereto to which each of the Companies shall be a party, in such respective
forms as the applicable Lessees shall approve and as are acceptable to the Owner
Trustee, and thereafter, but only upon written instruction of the applicable
Lessees or in accordance with Section 6 hereof, to cause each of the Companies
to exercise rights, make payments and expenditures, and perform their duties
under such Basic Documents or amendments thereto, subject to the terms of this
Trust Agreement, and (c) upon written instruction of the applicable Lessees to
the Owner Trustee requesting action by the Owner Trustee, and only upon such
instructions, to do all such things, and to take all such actions, as may be
necessary, appropriate or convenient to consummate the transactions contemplated
hereby or to effect the Owner Trustee's performance of its duties and
obligations as the Owner Trustee as contemplated hereby; provided that such
actions are reasonably satisfactory to the Owner Trustee and its counsel.
2.2 Declaration of Trust. The Owner Trustee hereby declares that it
will hold the Owner Trust Estate in trust upon the terms and conditions
hereinafter set forth for the use and benefit of the Trust Beneficiary.
2.3 Name of Trust. For convenience of reference, the trust
created hereby may be referred to as the TMI-1 Fuel Corp. and Oyster Creek
Fuel Corp. Fuel Trust. This Trust is also referred to as the Trust in the
Basic Documents.
2.4 No Other Business or Obligation. The Trust shall not engage in
any business or enter in any Obligations other than the Basic Documents and the
transactions and Obligations contemplated by the Basic Documents.
2.5 No Disposition of Owner Trust Estate. Except to exercise and
carry out the rights, duties and obligations of the Owner Trustee under this
Trust Agreement, including its rights to obtain payment of compensation and
indemnification to which it may be entitled hereunder, the Owner Trustee shall
not sell, assign, transfer, convey, pledge, or otherwise dispose of or encumber
in any manner the Owner Trust Estate, including but not limited to the stock of
each of the Companies, or approve, vote for, consent to or otherwise agree to
the liquidation, dissolution, merger or consolidation of either of the Companies
2
<PAGE>
except upon the written direction of the applicable Lessees or, if at such time
there are any Outstandings, any Commitments shall not have been terminated. The
Owner Trustee shall cause each of the Companies to engage solely in the business
of acquiring the Nuclear Material and consummating the transactions contemplated
by the Basic Documents. The Owner Trustee shall not accept from or permit either
of the Companies to pay or to distribute to it as dividends, or otherwise, any
funds or property of either of the Companies except as provided in Section 5.3
hereof.
3. TRUSTOR'S INTEREST.
3.1 Investment by Trustor. Prior to the date of execution and
delivery hereof, the Trustor has made a cash conveyance to the Trust of $10.00.
3.2 Payment from Proceeds of Owner Trust Estate Only. Any and all
amounts payable by the Owner Trustee with respect to the Owner Trust Estate and
under this Trust Agreement shall be payable only from the Owner Trust Estate.
The Owner Trustee shall not be personally liable to any Person for any amounts
payable under this Trust Agreement or the Basic Documents or, except as
expressly provided in this Trust Agreement or the Basic Documents, for any
liability under this Trust Agreement and the Basic Documents.
3.3 Manner of Payment. Amounts payable to the Trust Beneficiary
pursuant to or under this Trust Agreement shall be paid by the Owner Trustee, in
funds of the type received by the Owner Trustee, in such manner and at such
place as the Trust Beneficiary shall from time to time request in writing,
subject in all events to the terms and conditions of this Trust Agreement and
the Basic Documents.
4. ACQUISITION AND FINANCING OF NUCLEAR MATERIAL.
4.1 Authorization of Transactions. Without limiting the generality
of the authorization and directions contained in Section 2.1 hereof, the Owner
Trustee is hereby authorized and directed to, and the Owner Trustee agrees that
it will, upon the written direction of the applicable Lessees or in accordance
with Section 6 hereof and subject to compliance with Section 4.3 hereof, cause
the Companies to:
(a) Accept, execute and deliver the Lease Agreements relating to
them and any modification thereof or supplement thereto and perform all of the
obligations and duties, and exercise all of the rights, of each of the Companies
thereunder (including the giving of notice of termination under Section 8(c)
thereof pursuant to written instructions of the Lessees);
(b) Accept, execute and deliver the Credit Agreements relating to
them and perform all of the obligations and duties, and exercise, pursuant to
written instructions of the Lessees, all of the rights, of each of the Companies
thereunder;
(c) Accept, execute and deliver the Basic Documents relating to them
and perform all of the obligations and duties, and exercise, pursuant to written
instructions of the Lessees, all of the rights, of each of the Companies
thereunder;
(d) Accept, execute and deliver any agreements which are entered
into in accordance with the terms of the Basic Documents relating to them, and
perform all of the obligations and duties, and exercise, pursuant to written
3
<PAGE>
instructions of the Lessees, all of the rights, of each of the Companies
thereunder;
(e) Issue, execute and deliver their Commercial Paper to the
Depositary and issue, execute and deliver their Notes to the Banks pursuant to
the Credit Agreements relating to them, and apply the proceeds thereof as
permitted by the Basic Documents to which they shall be a party;
(f) Apply the proceeds received from issuance of their Commercial
Paper and Notes as provided in the Basic Documents to which they shall be a
party;
(g) Acquire, pay for, and hold such title to and/or interest in the
Nuclear Material as shall be conveyed to them pursuant to the Basic Documents to
which they shall be a party;
(h) Lease the Nuclear Material relating to them to the Lessees
pursuant to the Lease Agreements to which they shall be a party;
(i) Grant to the Secured Parties the security interests
provided for in the Security Agreements;
(j) Execute and deliver to their Lessees such agreements, documents,
instruments, pledges, chattel mortgages, security agreements, financing
statements and certificates prepared and submitted to them by their Lessees and
perform all such other acts which (i) each of the Companies is obligated to
execute, deliver or perform, and record or file, under any of the provisions of
the Basic Documents relating to them, or (ii) are in accordance with written
instructions of the applicable Lessees are necessary or advisable in connection
with the transactions contemplated by the Basic Documents to which they shall be
a party, or are incidental to or necessary or appropriate to consummate any such
transactions;
(k) Borrow such amounts, including, without limitation, amounts in
respect of the Credit Agreements to which they shall be a party, and upon such
terms and conditions, issue such drafts, bills of exchange, promissory notes,
obligations or evidences of indebtedness as may be necessary or desirable to
perform their obligations under the Lease Agreements to which they shall be a
party, all as provided under or permitted by the terms of the Basic Documents to
which they shall be a party, and perform all of the obligations and duties of
each of the Companies thereunder;
(l) Execute and deliver from time to time, such notes, drafts,
instruments, financing statements, continuation statements, endorsements and
certificates as may be required pursuant to the terms and conditions of the
Credit Agreements, or Collateral Agreements to which they shall be a party;
(m) Perform each of the Companies' duties and, pursuant to written
instructions of the Lessees, pay each of the Companies' obligations and exercise
each of their rights under each of the aforesaid agreements and documents,
including, without limitation, from time to time, to:
(i) acquire title and dispose of title to Nuclear Material
pursuant to the terms of the Lease Agreements relating to them and accept
invoices and Bills of Sale and assignments and partial assignments of
Nuclear Material Contracts and other contracts in respect thereof;
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<PAGE>
(ii) make payments for Nuclear Material pursuant to the terms
of the Lease Agreements; and
(iii) take such action as may be reasonably requested by any
Secured Party under the Collateral Agreements to perfect or maintain the
security interests thereby created or intended to so be created;
(n) Accept, execute and deliver all other instruments, documents and
agreements presented to each of the Companies by the applicable Lessees;
provided that such instruments, documents and agreements are reasonably
satisfactory to the Owner Trustee and its counsel, and, upon the written
instructions of the applicable Lessees and only upon such instructions, do all
such things and take all such action as may be necessary, appropriate or
convenient to consummate the transactions contemplated herein and to perform
their duties and obligations as contemplated by the documents referred to
herein, provided that such doing, taking and performing shall be reasonably
satisfactory to the Owner Trustee;
(o) Execute and deliver such other agreements, accept the assignment
of such other agreements or rights, and acquire and dispose of such properties
and enter into such transactions, as the applicable Lessees may lawfully
request; provided that such agreements, assignments, acquisitions and
transactions are reasonably satisfactory to the Owner Trustee and to its
counsel; and perform all of the obligations and duties, and exercise all of the
rights, of the Companies under any such agreements, assignments, rights or
transactions;
(p) Deliver to their Lessees copies of any notices received by the
Companies under any Basic Documents or otherwise relating to the transactions
contemplated thereby; and
(q) Agree to execute and deliver amendments, modifications, and
changes in any Basic Documents when requested by the applicable Lessees or when
requested by the parties hereto other than the applicable Lessees with and only
with the written consent of the applicable Lessees.
The documents referred to in clauses (a) through (q) of this Section
4.1 shall be executed in substantially the forms delivered to the Owner Trustee
or the Companies by the applicable Lessees on or after the date hereof, with
such changes as shall be approved by the applicable Lessees.
4.2 Closing Procedures. The Owner Trustee understands and agrees
that at the direction of the applicable Lessees, it may be obligated to cause
either of the Companies from time to time to take certain action and execute the
documents and instruments to be executed by them (including Commercial Paper and
Notes) prior to the actual issuance of such Commercial Paper and Notes and
deliver such documents and instruments, some of which shall be undated, to a law
firm representing one of the Lessees or the Banks, to be held in escrow, which
law firm shall, at the time of closing of such transaction, date all undated
documents and instruments so held by it (including Commercial Paper and Notes)
and deliver them to the appropriate Persons, such delivery to constitute
delivery by the Companies or a Company, as the case may be, at such time. The
Owner Trustee also agrees that it will cause each of the Companies to take such
other action as may be reasonably requested by the applicable Lessees in order
to effect transactions contemplated by the Basic Documents.
4.3 Conditions to Effecting Transactions. The authority and
obligation of the Owner Trustee to take the action required by Section 4.1
hereof
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shall be subject to the fulfillment to the satisfaction of the Owner Trustee of
each of the conditions precedent to the action specified in the applicable Basic
Documents.
5. RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE OWNER
TRUST ESTATE.
5.1 Application of Proceeds of Financings and Specific Payments. The
Owner Trustee shall cause each of the Companies to promptly pay all amounts
received by them from the issuance of Commercial Paper and Notes as provided in
the Basic Documents to which they shall be a party and to apply all payments
received by them for which provision as to the application thereof is made in
such Basic Documents forthwith to the purpose for which such payments were made
in accordance with the terms of such Basic Documents.
5.2 Amounts Payable to the Banks. Unless and until all Outstandings
have been paid in full, the Owner Trustee shall cause the Companies to pay over
upon receipt thereof all amounts received by them pursuant to the Basic
Documents to which they shall be a party (other than Excepted Payments and
amounts received and applied pursuant to Section 5.4) to the Banks.
5.3 Other Amounts. Except as otherwise provided in Section 5.4
hereof with respect to Excepted Payments, the Owner Trustee shall cause each of
the Companies to distribute or pay over all amounts received by them pursuant to
the Basic Documents to which they shall be a party that are not applied pursuant
to Section 5.1 hereof or that are not payable to the Banks pursuant to Section
5.2 hereof in the following order of priority:
First -- such amounts as may be due and owing to the Owner
Trustee hereunder to the Owner Trustee in reimbursement therefor; and
Second -- the remainder of such amounts shall be promptly
distributed and paid over to the Trust Beneficiary.
5.4 Excepted Payments. Notwithstanding anything to the contrary
contained in this Section 5, each Excepted Payment shall be promptly distributed
to the Person to whom such Excepted Payment is owed in accordance with the Basic
Documents.
6. DUTIES OF THE OWNER TRUSTEE.
6.1 Documents. The Owner Trustee agrees, subject to the terms of
this Trust Agreement, to cause each of the Companies pursuant to Section 2.1 or
4.1 hereof to perform the duties imposed upon them by the Basic Documents to
which they shall be a party and the other agreements, documents, instruments and
certificates executed and delivered, and to be executed and delivered, by them.
6.2 Notice of Default. In the event the Owner Trustee shall have
knowledge of a default or an event of default, or any event ("potential default
event") which would, with the lapse of time or the giving of notice or both,
constitute an event of default under any Basic Document, the Owner Trustee shall
give prompt telex, telegraphic or telephonic notice thereof (followed by prompt
written notice in the manner provided in Section 13.4 hereof) to the Trustor,
the Lessees and the Secured Parties. Subject to Section 6.3, the Owner Trustee
shall cause each of the Companies to take such action, and only such action, not
inconsistent with the terms of the Basic Documents to which they shall be a
party, with respect to such default, event of default or potential default
event,
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as the Owner Trustee or the applicable Company shall be instructed in writing
pursuant to the Security Agreement to which it is a party. For all purposes of
this Trust Agreement, in the absence of actual knowledge of an officer in the
Corporate Trust Department of the Owner Trustee who is also an officer or
director of either of such Companies, the Owner Trustee shall not be deemed to
have knowledge of a default, event of default or potential default event, unless
and until notified thereof in writing by the Administrative Agent, a Secured
Party or the Lessee. The Owner Trustee shall have no duty to inquire as to
whether a default, event of default or potential default event has occurred.
6.3 Indemnification; Legal Action. The Owner Trustee shall not be
required to take any action or refrain from taking any action under Section 6.2
hereof, or any action which in its opinion may involve expense or liability to
the Owner Trustee, unless it and each of the applicable Companies, if required,
and the directors, officers, employees and agents of the Owner Trustee and each
of the applicable Companies, if required, shall have been indemnified by the
Banks, in manner and form satisfactory to the Owner Trustee, against any
liability, cost or expense (including reasonable counsel fees) which may be
incurred in connection with such action or inaction. The Owner Trustee shall not
take any action under Section 6.2 hereof, nor shall any other provision of this
Trust Agreement be deemed to impose a duty on the Owner Trustee to take any
action, if the Owner Trustee shall reasonably determine, or shall have been
advised by counsel, that such action is contrary to the provisions of this Trust
Agreement or any other Basic Document, or is contrary to law.
6.4 No Implied Duties. The Owner Trustee shall not have any duty or
obligation to cause either of the Companies to manage, control, use, sell,
dispose of or otherwise deal with the Nuclear Material or any part thereof or
any other part of its property, or, either in its individual capacity or as
trustee, otherwise to cause either of the Companies to take or refrain from
taking any action under or in connection with this Trust Agreement or any other
Basic Document to which they shall be a party, except as expressly provided by
the provisions of this Trust Agreement or any other Basic Document to which they
shall be a party, or as expressly provided in written instructions pursuant to
this Section 6 or Section 7.7 hereof and reasonably satisfactory to the Owner
Trustee and its counsel, and shall not cause either of the Companies to take or
refrain from taking any such action unless expressly so provided or instructed;
and no implied duties or obligations which are additional to the obligations and
duties contained in such Basic Documents shall be read into this Trust Agreement
or the other Basic Documents against the Owner Trustee. The United States Trust
Company of New York, in its individual capacity, nevertheless agrees that it
will, at its own cost and expense, promptly take such action as may be necessary
duly to discharge any Liens other than Permitted Liens or any part of the
property of either Company or the Owner Trust Estate (a) resulting from any
claim against the Owner Trustee in its individual capacity arising out of events
or conditions not related to or connected with the ownership of the Owner Trust
Estate, the administration of the Owner Trust Estate or any other transaction
contemplated by any of the Basic Documents or (b) resulting from any voluntary
action of the Owner Trustee which (i) is taken other than pursuant to the
instructions of either of the Lessees or the Secured Parties and (ii) is not
taken as the result of any default by any of the Lessees under any Basic
Documents or in the performance of the obligations of either of the Companies
under any Basic Document to which either of the Companies shall be a party.
Nothing in this Section 6.4 shall be construed to affect the legality, validity
or enforceability of the obligations of either of the Companies under the Basic
Documents to which they shall be a party or to restrict the rights and remedies
available against either of the Companies under such Basic Documents.
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6.5 No Unauthorized Transactions. The Owner Trustee agrees that it
will not cause or permit either of the Companies to manage, control, use, sell,
dispose of or otherwise deal with any part of the Nuclear Material or any other
part of its property except (a) as expressly permitted or required by the terms
of any Basic Document to which they shall be a party, (b) in accordance with the
powers granted to or the authority conferred on the Owner Trustee pursuant to
this Trust Agreement or (c) in accordance with written instructions pursuant to
this Section 6 or Section 7.7 hereof.
7. THE OWNER TRUSTEE.
7.1 Acceptance of Trust, Etc.
(a) The Owner Trustee accepts the trusts hereby created and agrees
to perform the same upon the terms of this Trust Agreement, and agrees to
disburse any and all moneys and property received by it constituting part of the
Owner Trust Estate in accordance with the terms of this Trust Agreement.
(b) The Owner Trustee and any of its officers, employees, agents or
representatives serving as an officer or director of either of the Companies
shall not be answerable or accountable under any circumstances except for their
or such Person's own willful misconduct or gross negligence. The Owner Trustee
shall not be liable for any loss, damage, liability, claim, cost or expense
(including reasonable counsel fees and expenses) incurred by or asserted against
the Trustor, the Trust Beneficiary, any Lessee, or either of the Companies
(whether resulting from any diminution of the Owner Trust Estate by reason of a
claim against the Owner Trust Estate or otherwise) except for such losses,
damages, liability, claims, costs, or expenses caused by (i) the willful
misconduct or gross negligence of the Owner Trustee, (ii) the Owner Trustee's
failure to discharge Liens pursuant to the penultimate sentence of Section 6.4
hereof, (iii) the inaccuracy of any of the representations or warranties
contained in Section 7.3 of this Trust Agreement, (iv) taxes, fees or other
governmental charges imposed on the Owner Trustee, based on or measured by any
fees, commissions or compensation received by it for services rendered in
connection with any of the transactions contemplated by the Basic Documents and
(v) its failure to use the degree of care of a reasonable corporate trustee to
disburse moneys actually received by it in accordance with the terms hereof.
(c) Whether or not expressly so provided, every provision of this
Trust Agreement relating to the conduct or affecting the liability of or
affording protection to the Owner Trustee shall be subject to the provisions of
Section 7.1(b) hereof.
7.2 Limitation of Duties.
The Owner Trustee shall have no duty itself and no duty to cause
either Company (i) to see to any recording or filing of this Trust Agreement or
of any Basic Document or of any other document referred to herein or therein or
with respect to any security interest or lien, or to see to the maintenance of
any such recording or filing, (ii) to see to any insurance on the Nuclear
Material or to effect or maintain any such insurance, whether or not the Lessee
shall be in default with respect thereto, other than to receive and forward to
the Collateral Agent any notices, policies, certificates or binders received by
the Owner Trustee or either of the Companies pursuant to the Lease Agreements,
(iii) except as provided in the penultimate sentence of Section 6.4 hereof, to
see to the payment or discharge of any tax, assessment or other governmental
charge or any Lien of any kind owing with respect to, assessed or levied against
any part of the Owner Trust Estate or property of
8
either Company, or any fees or charges in connection therewith, other than to
forward notice of such tax, assessment or other governmental charge or Lien
received by the Owner Trustee to the applicable Lessees, (iv) to monitor the
receipt of or confirm or verify any financial statements of a Lessee or (v) to
inspect the Nuclear Material at any time or ascertain or inquire as to the
performance or observance of any of a Lessee's covenants under the Lease
Agreement or any other Basic Documents. Notwithstanding the foregoing, the Owner
Trustee will furnish to the applicable Lessees, promptly upon receipt thereof,
duplicates of all reports, notices, requests, demands, certificates and other
instruments furnished to the Owner Trustee or either of the Companies under any
of the Basic Documents to which they shall be a party unless any such document
or accompanying documentation shall state that such document has previously been
furnished directly to such Lessees.
7.3 Representations and Warranties of Owner Trustee. THE OWNER
TRUSTEE MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE
VALUE, CONDITION, DESIGN, OPERATION, QUALITY, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF ANY PART OF THE NUCLEAR MATERIAL, OR AS TO THE OWNER
TRUSTEE'S OR A COMPANY'S TITLE THERETO, OR LEASEHOLD INTEREST THEREIN, OR ANY
OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE NUCLEAR MATERIAL
WHATSOEVER, EXCEPT that the Owner Trustee hereby represents, warrants and
covenants to the applicable Lessees that the Owner Trustee shall have caused
each of the Companies to have accepted whatever title to or leasehold interest
in the Nuclear Material as was conveyed to it.
7.4 Deposit of Funds. Moneys received by the Owner Trustee or a
Company may be deposited with the Owner Trustee under such general conditions as
may be prescribed by law in the general banking department of the Owner Trustee
and the Owner Trustee shall not be liable for any interest thereon except as may
be agreed to by it.
7.5 Reliance on Documents; Agents; Right to Consult with
Counsel and Others; Etc.
(a) The Owner Trustee shall not be liable to the Trustor, Lessees,
the Beneficiary or others who are or may be parties to agreements with the Owner
Trustee in acting upon any writing or oral notification; including but not
limited to, instructions from the Beneficiary, the applicable Lessee (pursuant
to the Lease Agreements), or such other parties and certificates of any officer
thereof, letters, facsimile transmissions, telexes, telegrams and cablegrams, in
assuming the truth and correctness of any statement, opinion or assertion of any
nature therein, provided, however, that any such writing or oral notification is
believed by the Owner Trustee to be genuine and to have been sent or
communicated by or on behalf of a party or parties to the Basic Documents.
(b) The Owner Trustee shall not incur any liability to anyone in
acting in reliance upon any signature, instrument, notice, resolution, request,
consent, telegram, order, certificate, report, opinion, bond or other document
or paper believed by it in good faith to be genuine and believed by it in good
faith to be signed by the proper party or parties. The Owner Trustee may accept
a copy of a resolution of the Board of Directors (or the Executive Committee
thereof) of any party, certified by the Secretary or an Assistant Secretary of
the same as duly adopted and in full force and effect as conclusive evidence
that such resolution has been duly adopted by said Board of Directors (or
Executive Committee thereof) and that such resolution is in full force and
effect. As to any fact or matter the manner of ascertainment of which is not
specifically prescribed herein, the Owner Trustee may for all purposes hereof
rely as to such fact or matter on an Officer's Certificate as to such fact or
matter, and such an
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Officer's Certificate shall constitute full protection to the Owner Trustee for
any action taken or omitted to be taken by it in good faith in reliance thereon.
In the administration of the trusts hereunder the Owner Trustee may execute any
of the trusts or powers hereof and perform its powers and duties hereunder
directly or through agents or attorneys and may, at the expense of the Owner
Trust Estate (unless such person is regularly in the Owner Trustee's employ),
consult with counsel, accountants and other skilled persons of generally
accepted competence to be selected and retained by it, and the Owner Trustee
shall not be liable for anything done, suffered or omitted in good faith by it
in accordance with the advice or opinion of any such counsel, accountants or
other skilled persons (unless such person is regularly in the Owner Trustee's
employ), provided such thing is not contrary to this Trust Agreement and such
advice or opinion interprets or applies to this Trust Agreement.
7.6 Not Acting in Individual Capacity. In accepting the trusts
hereby created, the Owner Trustee acts solely as trustee hereunder and not in
its individual capacity and all Persons, other than as provided in Section
7.1(b) herein, having any claim against the Owner Trustee by reason of the
transactions contemplated hereby shall look only to the Owner Trust Estate for
payment or satisfaction thereof.
7.7 Interpretation of Trust Agreement. In the event that the Owner
Trustee is uncertain as to the application of any provision of this Trust
Agreement, or such provision is ambiguous as to its application or is, or
appears to be, in conflict with any other applicable provision hereof, or in the
event that this Trust Agreement permits any determination by the Owner Trustee
or is silent or incomplete as to the course of action which the Owner Trustee is
required to take with respect to a particular set of facts, the Owner Trustee
may seek instructions from the applicable Lessees and shall not be liable to any
Person to the extent that its acts in good faith in accordance with the
instructions of such Lessees.
7.8 Compensation. The applicable Lessees shall pay to the Owner
Trustee, and the Owner Trustee shall be entitled to receive from the applicable
Lessees, reasonable compensation for its services, including without limitation,
services in causing each of the Companies to take actions hereunder, and
reimbursement for its expenses hereunder, which fees shall not be limited by any
provisions of law with respect to the trustee of an express trust. No separate
fee shall be chargeable to a Company except as provided in the Basic Documents
to which they shall be a party.
7.9 Books, Records and Tax Returns.
(a) Except for financial statements and tax returns, the Owner
Trustee shall be responsible for the keeping of all books and records relating
to the receipt and disbursement of all moneys under this Trust Agreement. The
Owner Trustee agrees to prepare, sign and/or file and to cause each of the
Companies to prepare, sign and/or file all returns and reports with respect to
taxes (including but not limited to tax returns and any information, returns or
reports for each of the Companies and the Trust, if any) as the applicable
Lessees shall direct with respect to all transactions encompassed by the Basic
Documents as provided in this Section 7.9. The Owner Trustee shall keep copies
of all returns delivered to it or filed by it. The Owner Trustee shall not be
personally liable for any tax due and payable in connection with this Trust
Agreement or any other Basic Document except for any such tax arising from its
own willful misconduct or gross negligence and except for any tax based on or
measured by amounts paid to the Owner Trustee as fees or compensation in
connection with the transactions contemplated hereby pursuant to Section 7.8
hereof or otherwise.
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(b) In addition, the Owner Trustee shall be responsible for certain
administrative activities to be performed on behalf of the Companies including
(i) receiving and causing the Company to countersign Leasing Records; (ii)
receiving invoices relating to Nuclear Material Contracts; (iii) receiving and
causing the Company to approve administrative invoices relating to the
Companies; (iv) receiving monthly rate notices from the Banks with respect to
the payment of Outstandings and causing the Company to forward copies to
Lessees; (v) receiving periodic reports from Lessee as described in Section 20
of the Lease Agreements; (vi) maintaining records of the Stipulated Casualty
Value of Nuclear Material under the Lease Agreements and the limitations on such
Stipulated Casualty Value as set forth in Section 4 of the Lease Agreements;
(vii) preparing and maintaining all books of account of the Companies; and
(viii) performing any other duties as may be agreed upon in writing with the
applicable Lessees.
(c) The Owner Trustee shall retain PricewaterhouseCoopers L.L.P. or
another firm of certified accountants of nationally recognized standing to
prepare financial statements for the Companies and to prepare and file with all
appropriate governmental authorities all returns and reports with respect to
taxes (including but not limited to tax returns and any information, returns or
reports for each of the Companies and the Trust, if any) as the applicable
Lessees shall direct with respect to all transactions encompassed by the Basic
Documents on behalf of the Companies and the Trust. The applicable Lessees shall
be responsible for payment of such firm in connection with the performance of
such services.
7.10 Effect of Sales by a Company. Any sale of all or part of the
Nuclear Material or other property owned by either of the Companies which the
Owner Trustee causes such Company to make shall bind the Trust and the Trust
Beneficiary and shall be effective for the benefit of the purchasers thereof and
their respective successors and assigns to divest and transfer all right, title
and interest in the property so sold, and no such purchasers shall be required
to inquire as to compliance by the Owner Trustee with any of the terms of this
Trust Agreement or to see to the application of any consideration paid for such
property; provided, however, that, except in the case of the security interest
in the Nuclear Material granted by either of the Companies to the Secured
Parties, the Owner Trustee shall not cause or permit such Company to make any
sale or other transfer of title to or right to possession or use of any part of
the Nuclear Material (other than pursuant to the Lease Agreements to which it
shall be a party) unless and until the Owner Trustee shall have received from
the proposed transferee an opinion of counsel, satisfactory to the Owner
Trustee, that such transferee has obtained all permits, licenses, consents,
approvals and authorizations necessary for such sale or other transfer, and that
such sale or other transfer will not otherwise violate any applicable law or
regulations; provided, further, that notice of such sale and a copy of such
opinion of counsel shall be given to the Secured Parties; and provided, further,
that, except as expressly permitted by the Collateral Agreements to which they
shall be a party, the Owner Trustee shall have no right or power itself and
shall not cause or permit either Company to sell or otherwise transfer title to
or the right to possession or use of any part of the Nuclear Material other than
to their Lessees or the designees thereof pursuant to the Lease Agreements to
which they shall be a party.
7.11 Exculpatory Provisions. Except for those set forth in Section
7.3, the Owner Trustee shall not be responsible in any manner whatsoever for the
correctness of any recitals, statements, representations or warranties contained
herein or in the Basic Documents, all of which are made solely by each of the
Companies. The Owner Trustee makes no representations as to the value or
condition of the Collateral or any part thereof, or as to the title of either
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Company to the Collateral (other than as provided in Section 7.3) or as to the
security afforded by the Collateral Agreements, or as to the validity,
execution, enforceability, legality or sufficiency hereof or of the Collateral
Agreements, and the Owner Trustee shall incur no liability or responsibility in
respect of any such matters. The Trust Agreement and any other document executed
and delivered by the Owner Trustee in connection herewith is intended to be a
corporate obligation of the Owner Trustee only. Therefore, anything contained in
the Trust Agreement, the Lease Agreements, the Credit Agreements, the Security
Agreements and any other document to the contrary notwithstanding, no recourse
may be made by the Trust Beneficiary, the Lessees, any of the Secured Parties or
any other Person against any incorporator, shareholder (direct or indirect),
Affiliate, director, officer, employee or agent of the Owner Trustee with
respect to claims against the Owner Trustee arising under or relating to this
Trust Agreement; provided, however, that nothing in this Section 7.11 shall
relieve the Owner Trustee from its corporate obligations under this Trust
Agreement.
8. INDEMNIFICATION OF THE OWNER TRUSTEE, THE TRUSTOR AND THE TRUST
BENEFICIARY.
The Lessees agree (whether or not any of the transactions
contemplated hereby are consummated) to assume liability for, and do hereby
indemnify, protect, save and keep harmless the Owner Trustee, the Trustor and
the Trust Beneficiary and each of the successors, assigns, agents,
representatives and servants, in the case of the Owner Trustee including but not
limited to the employees, agents, representatives or designees acting as
officers or directors of either of the Companies, (the Owner Trustee, the
Trustor and the Trust Beneficiary and such others being collectively referred to
as the "Indemnified Persons") from and against, any and all liabilities,
obligations, losses, damages, taxes (except as set forth below), penalties,
claims, actions, suits, costs, expenses and disbursements (including reasonable
legal fees and disbursements) of any kind and nature whatsoever (for purposes of
this Section 8, collectively referred to as "Liabilities") which may be imposed
on, incurred by or asserted at any time against the Indemnified Persons (whether
or not also indemnified against by any other Person under any other document) in
any way relating to or arising out of the administration of the Owner Trust
Estate or the action or inaction of the Indemnified Persons in connection with
the provisions hereof or (a) the manufacture, design, acquisition, construction,
installation, ownership, purchase, acceptance, nonacceptance, possession, use,
operation, condition, sale, lease, sublease or other disposition of the Nuclear
Material or Owner Trust Estate property or any part thereof, including, without
limitation, (i) latent and other defects, whether or not discoverable, (ii) any
claim, for patent, trademark or copyright infringement, (iii) loss of or damage
to any property or the environment, (iv) death of or injury to any person and
(v) tort claims of any kind; or (b) this Trust Agreement or any of the Basic
Documents or any other document referred to herein or therein pertaining to the
transactions contemplated hereby and thereby, or the enforcement of any of the
terms hereof or thereof; except only that the Lessees shall not be required to
indemnify the Indemnified Persons for: (A) Liabilities resulting solely from
willful misconduct or gross negligence on the part of the Indemnified Persons;
and (B) Liabilities resulting from matters from which the Owner Trustee is not
exculpated pursuant to the last sentence of Section 7.1(b) hereof.
Notwithstanding anything in this Trust Agreement to the contrary, the Lessees
shall have no obligation whatsoever to the Indemnified Persons for any
Liabilities with respect to, or resulting from, any taxes based on or measured
by amounts paid to the Owner Trustee as fees or compensation in connection with
the transactions contemplated hereby pursuant to Section 7.8 hereof or
otherwise. With respect to any taxes for which the
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Lessees are liable to the Indemnified Persons under this Section 8 (the
"Indemnified Taxes"), the Indemnified Persons shall be obligated to claim, on a
timely basis, any refund to which they may be entitled with respect to any
Indemnified Taxes, to take all steps necessary to diligently prosecute such
claim, and to pay over to the Lessees any refund (and any interest thereon)
recovered by them as soon as practicable after receipt thereof. The indemnities,
rights and obligations contained in this Section 8 shall survive the termination
of this Trust Agreement. The Owner Trustee shall be entitled to indemnification
from the Owner Trust Estate for any Liabilities indemnified against pursuant to
this Section 8 to the extent not reimbursed by the applicable Lessees or any
other Person; and to secure the same the Owner Trustee shall have a lien on the
Owner Trust Estate prior to any interest therein of the Trust Beneficiary but
subject and subordinate to the lien of the Collateral Documents upon the Nuclear
Material and other property of the Companies.
9. CO-TRUSTEES, SEPARATE TRUSTEES.
(a) At any time, for the purposes of conforming to the legal
requirements or restrictions of any jurisdiction in which any part of the Owner
Trust Estate (owned directly or indirectly) may at the time be located and
subject to the prior receipt of all necessary governmental approvals and
consents, the Owner Trustee shall have the power to appoint one or more Persons
approved by the Lessees either to act as a co-trustee or co-trustees, jointly
with the Owner Trustee, of all or any part of the Owner Trust Estate, or to act
as separate trustee or trustees of any property constituting part of the Owner
Trust Estate, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons, in the
capacity as aforesaid, any property, title, right or power deemed necessary or
desirable, subject to the remaining provisions of this Section 9.
(b) Every co-trustee or separate trustee shall, to the extent
permitted by law, be appointed subject to the following terms:
(i) All rights, powers, duties and obligations conferred upon
the Owner Trustee in respect of the receipt, custody and payment of
moneys shall be exercised solely by the Owner Trustee;
(ii) All other rights, powers, duties and obligations
conferred or imposed upon the Owner Trustee hereby or by any Basic
Document to which the Owner Trustee shall be a party shall be
conferred or imposed upon and exercised or performed by the Owner
Trustee or by the Owner Trustee and such co-trustee or co-trustees
or separate trustee or separate trustees jointly, as shall be
provided in the instrument appointing such co-trustee or co-trustees
or separate trustee or separate trustees, except to the extent that,
under the law of any jurisdiction in which any particular act or
acts are to be performed, the Owner Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations shall be exercised and performed by
such co-trustee or co-trustees or separate trustee or separate
trustees;
(iii) The Owner Trustee at any time, by an instrument in
writing executed by it, may accept the resignation of or remove any
co-trustee or separate trustee appointed under this Section 9, and a
successor to any co-trustee or separate trustee so resigned or
removed may be appointed in the manner provided in this Section 9;
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(iv) No trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder except, in the
case of the Owner Trustee, if a co-trustee or separate trustee is an
employee of the Owner Trustee;
(v) No power given hereby to any such co-trustee or separate
trustee shall be separately exercised hereunder by such co-trustee
or separate trustee except with the consent in writing of the Owner
Trustee, anything herein contained to the contrary notwithstanding.
The power to vote or appoint proxies to vote with respect to any
shares of the capital stock of the Company shall be exercised solely
by the Owner Trustee itself or its successor Owner Trustees
hereunder.
(c) Any notice, request or other writing delivered to the Owner
Trustee shall be deemed to have been delivered to all of the then co-trustees or
separate trustees as effectively as if delivered to each of them. Every
instrument appointing any trustee or trustees other than a successor to the
original Owner Trustee shall refer to this Section 9 and the conditions
expressed herein. Upon the acceptance in writing of such appointment by any such
co-trustee or separate trustee, he, she or it shall be vested with the estate or
property specified in the instrument of appointment jointly with the Owner
Trustee (except insofar as local law makes it necessary for any such co-trustee
or separate trustee to act alone) subject to all the provisions of this Trust
Agreement. Each such acceptance shall be filed with the Owner Trustee with
copies to the Trust Beneficiary, the Lessees and the Secured Parties. Any
co-trustee or separate trustee may, at any time by an instrument in writing,
constitute the Owner Trustee his or its agent and attorney-in-fact, with full
power and authority to do all acts and things and to exercise all discretion on
his or its behalf and in his or its name. In case any co-trustee or separate
trustee shall die or be dissolved, become incapable of acting, resign or be
removed, all the estates, properties, rights, powers, trusts, duties and
obligations of said co-trustee or separate trustee, as far as permitted by law,
shall vest in and be exercised by the Owner Trustee without the appointment of a
new trustee as successor to such co-trustee or separate trustee.
(d) Any and all exculpatory provisions, immunities and indemnities
in favor of the Owner Trustee under this Trust Agreement or under any other
agreement, document or instrument described or referred to which apply to the
Owner Trustee shall also apply to any co-trustees and separate trustees
appointed pursuant to this Section 9.
10. SUCCESSOR TRUSTEES.
(a) The Owner Trustee or any successor thereto may resign without
cause at any time by giving at least 90 days' prior written notice to the Trust
Beneficiary, the Lessees and the Secured Parties. Any such resignation shall
become effective upon acceptance of appointment by the successor Owner Trustee
under Section 10(c) hereof. In addition, the Lessees may at any time remove the
Owner Trustee with or without cause by an instrument in writing delivered to the
aforesaid Persons and to the Owner Trustee, such removal to be effective upon
the acceptance of appointment by the successor Owner Trustee under Section 10(c)
hereof; provided, however, that if an Event of Default under the Lease
Agreements has occurred and is continuing, such removal shall be effective only
with the consent of the Secured Parties. In the case of the resignation or
removal of the Owner Trustee, the Lessees may appoint, by an instrument in
writing, with copies to the Secured Parties, a successor Owner Trustee. If a
successor Owner Trustee shall not have been appointed and accepted its
appointment under Section 10(c)
14
hereof within 60 days after such written notice of such resignation or such
delivery of the notice relating to such removal, the Owner Trustee or the
Lessees may apply to any court of competent jurisdiction to appoint a successor
Owner Trustee to act until such time, if any, as a successor Owner Trustee shall
have accepted its appointment as above provided. Any successor Owner Trustee so
appointed by such court shall immediately and without further act be superseded
by any successor Owner Trustee appointed by the Lessees as above provided.
(b) Should the Person then serving as Owner Trustee hereunder (a)
cease its activities or cease doing business as a going concern (other than
pursuant to a transaction described in Section 10(e) hereof), or (b) become
incapable of acting as such, or (c) make an assignment for the benefit of
creditors, or (d) admit in writing his or its inability to pay its debts as they
become due or (e) file a voluntary petition in bankruptcy, or (f) be adjudicated
a bankrupt or insolvent or have an order for relief entered against it in any
proceeding under the Bankruptcy Reform Act of 1978, as amended, or any law with
respect to bankruptcy, insolvency or reorganization that is a successor thereto,
or (g) file a petition seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar arrangement under
any present or future statute, law or regulation, or (h) file an answer
admitting the material allegations of such a petition filed against it in any
such proceeding, or (i) consent to or acquiesce in the appointment of a trustee,
receiver or liquidator of him or it or all or any substantial part of its assets
or properties, or (j) take any action looking to its dissolution or liquidation,
or (k) be subject to any proceeding against it seeking reorganization,
arrangement, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, which proceeding is not dismissed
within forty-five (45) days after commencement thereof, or (1) be subject to the
appointment, without its consent or acquiescence, of any trustee, receiver or
liquidator of it or all or any substantial part of its assets or properties,
which appointment is not vacated within forty-five (45) days after the date
thereof, then such Person shall be deemed to have resigned as Owner Trustee
hereunder effective immediately prior to the occurrence of any matter specified
in items (a) through (j) above, or, in the event of the occurrence of any of the
matters specified in items (k) or (l) above, immediately prior to the expiration
of the 45-day period specified therein. Upon any resignation of the Owner
Trustee, the Lessees shall appoint a successor trustee hereunder.
(c) Any successor Owner Trustee, whether appointed by a court or by
the Lessees or otherwise, shall execute and deliver to the predecessor Owner
Trustee an instrument accepting such appointment, and thereupon such successor
Owner Trustee, without further act, shall become vested with all the estates,
properties, rights, powers, duties, obligations and trusts of the predecessor
Owner Trustee with like effect as if originally named as Owner Trustee herein;
but nevertheless, upon the written request of such successor Owner Trustee, such
predecessor Owner Trustee shall execute and deliver an instrument transferring
to such successor Owner Trustee, subject to its lien pursuant to Section 8 of
this Trust Agreement and payment of any amounts due the predecessor Owner
Trustee, upon the trusts herein expressed, all the estates, properties, rights,
powers and trusts of such predecessor Owner Trustee hereunder (including,
without limitation, all such instruments, in proper form for recording where
appropriate as may be necessary or appropriate to transfer the Owner Trust
Estate to such successor Owner Trustee), and such predecessor Owner Trustee
shall duly assign, transfer, deliver and pay over to such successor Owner
Trustee certificates representing all of the issued and outstanding capital
stock of each of the Companies registered in the name of the Owner Trustee and
all moneys or other property then held by such predecessor Owner Trustee upon
the trusts herein
15
<PAGE>
expressed, and shall deliver to such successor Owner Trustee any and all records
or copies thereof, in respect of the Trust or the Owner Trust Estate which it
may have.
(d) Any successor Owner Trustee, however appointed, shall be a
Qualified Institution if there be such an institution willing, able and legally
qualified to perform the duties of the Owner Trustee hereunder upon reasonable
or customary terms; provided, however, that the appointment of such Qualified
Institution as successor Owner Trustee shall not violate any provision of any
law or regulation or create a relationship which would be in violation thereof,
and that all consents and approvals of, and filings and declarations with, any
governmental authority which are necessary in connection with such appointment
shall have been obtained or made and shall be in full force and effect.
(e) Any corporation into which the Owner Trustee in its individual
capacity may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Owner Trustee in its individual capacity shall be a party, or any corporation to
which all or substantially all the corporate trust business of the Owner Trustee
in its individual capacity may be transferred, shall, subject to the terms of
Section 10(d) hereof, be Owner Trustee under this Agreement without further act.
11. SUPPLEMENTS AND AMENDMENTS TO THIS TRUST AGREEMENT AND THE BASIC
DOCUMENTS.
11.1 Supplements Upon Request of the Lessee. Subject to Section 11.2
hereof and any applicable provision of the Basic Documents (including but not
limited to the Credit Agreements), at any time and from time to time, upon the
written request of the Lessees, (a) the Owner Trustee together with the Lessees,
with the consent of the Trustor, shall execute an amendment or supplement hereto
for the purpose of adding provisions to, or changing or eliminating provisions
of, this Trust Agreement as specified in such request and (b) the Owner Trustee
shall cause either of the Companies to enter into such written amendment of or
supplement to any of the Basic Documents to which they shall be a party or other
documents referred to in any thereof as the other party or parties to any such
instrument may agree to and as may be specified in such request, or execute and
delivery such written waiver or modification of the terms of any such instrument
as may be specified in such request; provided, however, that no such amendment
or supplement shall extend the maximum term of this Trust beyond the term
provided for by Section 12 hereof. It shall not be necessary for any such
written request to specify the particular form of the proposed document to be
executed, but it shall be sufficient if such request shall indicate the
substance thereof. Except as expressly provided herein, the Owner Trustee and
the Trustor need not consent to, approve, or join in any such amendment or
supplement for it to be valid and effective; provided, however, that no such
amendment or supplement may increase any duties or responsibilities of the Owner
Trustee or affect any immunity or indemnity in its favor under this Trust
Agreement or any of the Basic Documents or increase its duties or obligations
hereunder or thereunder without the Owner Trustee's written consent.
11.2 Amendments and Supplements Affecting Owner Trustee. If in the
opinion of the Owner Trustee any document required to be executed pursuant to
the terms of Section 11.1 hereof affects any immunity or indemnity in its favor
under this Trust Agreement or any of the Basic Documents or increases its duties
or obligations hereunder or thereunder, the Owner Trustee may in its discretion
decline to execute such document.
16
<PAGE>
12. TERMINATION OF TRUST, ETC.
This Trust Agreement and the Trust created hereby shall terminate
and this Trust Agreement shall be of no further force and effect upon the
earlier of (i) the payment in full of all Outstandings under the Credit
Agreements and the expiration or termination of all Commitments, and the sale or
other final disposition by the Secured Parties and/or the Owner Trustee and each
of the Companies, as the case may be, of all property consisting of the Owner
Trust Estate and property of each of the Companies and the final distribution by
the Secured Parties and/or the Owner Trustee and each of the Companies, as the
case may be, of all moneys and other property or proceeds constituting a part of
the Owner Trust Estate and property of each of the Companies in accordance with
the terms of this Trust Agreement and/or the Collateral Agreements, as the case
may be; provided that at such time the Lessee shall have fully complied with all
of the terms of the Basic Documents, or (ii) twenty-one years less one day after
the death of the life of the last survivor of the members of the Board of
Directors of GPU, Inc. now in office and their children, living on the date
hereof. Otherwise, this Trust Agreement and the Trust created hereby shall
continue in full force and effect in accordance with the terms hereof. If the
Trust shall terminate by operation of law prior to its intended termination, the
Owner Trustee and the Trustor agree to take all reasonable actions to extend or
reform the Trust. Upon termination of the Trust, the funds held in the Owner
Trust Estate shall be distributed as provided in Section 5 of this Trust
Agreement and all other property in the Owner Trust Estate including but not
limited to all of the stock of the Companies, shall be assigned and distributed
to the Trust Beneficiary, or as otherwise then directed in writing by the Trust
Beneficiary.
13. MISCELLANEOUS.
13.1 Legal Title to Owner Trust Estate. No Person other than the
Owner Trustee shall have legal title to any part of the Owner Trust Estate. No
transfer, by operation of law or otherwise, of any right, title or interest of
any Person in and to the Owner Trust Estate or hereunder shall operate to
terminate this Trust Agreement or the trusts hereunder to entitle any successor
or transferee of such Person to an accounting or to the transfer to it of legal
title to any part of the Owner Trust Estate.
13.2 Validity of Sale of Owner Trustee. Any sale or other conveyance
of the Nuclear Material or other property of either Company or Owner Trust
Estate property or any part thereof by such Company or the Owner Trustee made
pursuant to the terms of this Trust Agreement or the Lease Agreement or any
other Basic Documents to which such Company is a party shall bind each Person
having any right, title or interest in such Nuclear Material, other property, or
Owner Trust Estate, and shall be effective to transfer or convey all right,
title and interest of either Company, the Owner Trustee and such Persons in and
to the Nuclear Material or leasehold interest or any part thereof. No purchaser
or other grantee shall be required to inquire as to the authorization,
necessity, expediency or regularity of such sale or conveyance or as to the
application of any sale or other proceeds with respect thereto by either Company
or the Owner Trustee.
13.3 Trust Agreement for Benefit of Parties thereto. Nothing in this
Trust Agreement, whether expressed or implied, shall be construed to give to any
Person, other than the Owner Trustee, the Trustor, the Lessees and the Trust
Beneficiary any legal or equitable right, remedy or claim under or in respect of
this Trust Agreement or the Owner Trust Estate, and this Trust Agreement shall
be
17
<PAGE>
for the sole and exclusive benefit of such Persons. Notwithstanding the
foregoing sentence, the Companies shall be third party beneficiaries of Section
7.1(b).
13.4 Notices. Unless otherwise expressly specified or permitted by
the terms hereof, all notices and other communications hereunder shall be in
writing, personally delivered or mailed by certified mail, postage prepaid or
telegraphed, telecopied or telexed and (a) if to the Trustor, addressed to it at
c/o Lord Securities Corporation, 2 Wall Street, 19th Floor, New York, New York
10005, Fax: (212) 316-9012, Attention: Vice President; (b) if to the Owner
Trustee, addressed to it at the principal office of the Owner Trustee at United
States Trust Company of New York, 114 West 47th Street, New York, New York
10036, Attention: Corporate Trust and Agency Division, Fax: (212) 852-1625; (c)
if to the Lessees, addressed to them at Jersey Central Power & Light Company,
Metropolitan Edison Company and Pennsylvania Electric Company, 2800 Pottsville
Pike, Reading, Pennsylvania 19640, Attention: Comptroller; with a copy to GPU
Service, Inc., 310 Madison Avenue, Morristown, New Jersey 07962-1957, Attention:
Assistant Treasurer; (d) if to the Trust Beneficiary, addressed to it at the
same address as the Trustor; and (e) if to the Secured Parties, addressed to
them as described in the Security Agreements or (f) as to any such party, at
such other address as such party shall have furnished to the other party. Each
notice shall be deemed received when personally delivered, five days after sent
by certified mail or one day after sent by telecopy.
13.5 Severability. Any provision of this Trust Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to each 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.
13.6 Waivers, Etc. No term or provision of this Trust Agreement may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and any waiver of the terms hereof shall be
effective only in the specific instance and for the specific purpose given.
13.7 Counterparts. This Trust Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
13.8 Successors and Assigns. All covenants and agreements contained
herein shall be binding upon and shall inure to the benefit of the Owner Trustee
and its successors and the Trustor and its successors, and the Lessees and Trust
Beneficiary and its successors. The Trustor and the Trust Beneficiary shall not
transfer nor assign (otherwise than by merger or consolidation or transfer by
the Trust Beneficiary otherwise permitted by the Lease Agreement with respect to
the Trust Beneficiary's interest thereunder) any or all interests hereunder.
13.9 Headings. The headings of he various Sections herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
13.10 Self-Dealing. The Owner Trustee in its individual capacity or
any corporation in or with which the Owner Trustee in its individual capacity or
its shareholders may be interested or affiliated, including but not limited to
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<PAGE>
the Companies, or any officer or director of the Owner Trustee in its individual
capacity or of any other such corporation, or any agent appointed by the Owner
Trustee, may have commercial relations and otherwise deal with the Trustor, the
Trust Beneficiary, any Secured Party, the Companies, and the Lessees or with any
other corporation having relations with the Trustor, the Trust Beneficiary, the
Banks, the Companies, or the Lessees and with any other corporation or entity,
whether or not affiliated with the Owner Trustee.
13.11 Governing Law. THIS TRUST AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, EXCEPT TO THE
EXTENT THAT THE DELAWARE GENERAL CORPORATION LAW GOVERNS THE COMPANIES'
RELATIONSHIP WITH THE TRUST AS ITS SOLE STOCKHOLDER.
13.12 No Unauthorized Transactions. The Trustor agrees that it will
not take or refrain from taking any action under this Trust Agreement or in
connection with the Owner Trust Estate except as expressly required by the terms
of this Trust Agreement.
13.13 Rights and Remedies.
(a) Pursuit of any remedy shall not be deemed a waiver of any
other remedy hereunder or at law or equity; and
(b) The rights, remedies, powers and privileges herein provided are
cumulative and not exhaustive of the rights, remedies, powers and privileges
permitted by law.
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed as of the day and year first above written in the
presence of the undersigned witnesses.
TRUSTOR AND TRUST BENEFICIARY
Witnesses: LORD FUEL CORP., AS TRUSTOR AND TRUST
BENEFICIARY
- ----------------------
- ---------------------- By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
OWNER TRUSTEE
Witnesses: UNITED STATES TRUST COMPANY OF NEW YORK,
as trustee
- ----------------------
- ----------------------- By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
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<PAGE>
LESSEES
Witnesses: JERSEY CENTRAL POWER & LIGHT COMPANY
- ----------------------
- ---------------------- By:
---------------------------------
Name: T. G. Howson
----------------------------------
Title: Vice President
---------------------------------
Witnesses: METROPOLITAN EDISON COMPANY
- ----------------------
- ----------------------- By:
---------------------------------
Name: T. G. Howson
---------------------------------
Title: Vice President
---------------------------------
Witnesses: PENNSYLVANIA ELECTRIC COMPANY
- ----------------------
- ---------------------- By:
---------------------------------
Name: T. G. Howson
---------------------------------
Title: Vice President
---------------------------------
20
<PAGE>
STATE OF )
--------------
: ss:
COUNTY OF )
-------------
On this ------ day of ---------- , 1998, before me personally
appeared --------------------, to me personally known, who, being by me duly
sworn, says that he is a --------------------- of Lord Fuel Corp. and that said
instrument was signed on behalf of said corporation by authority of its Board of
Directors, and he acknowledged that the execution of the foregoing instrument
was the free act and deed of said corporation.
--------------------------------
Notary Public
My Commission Expires:
21
<PAGE>
STATE OF )
--------------
: ss:
COUNTY OF )
--------------
On this ----- day of -----------, 1998, before me personally
appeared --------------------, to me personally known, who, being by me duly
sworn, says that he is a -------------------- of United States Trust Company of
New York and that said instrument was signed on behalf of said corporation by
authority of its Board of Directors, and he acknowledged that the execution of
the foregoing instrument was the free act and deed of said corporation.
--------------------------------
Notary Public
My Commission Expires:
22
<PAGE>
STATE OF NEW JERSEY)
: ss:
COUNTY OF MORRIS )
On this ----- day of ---------, 1998, before me personally appeared
T. G. Howson, to me personally known, who, being by me duly sworn, says that he
is a Vice President of Jersey Central Power & Light Company and that said
instrument was signed on behalf of said corporation by authority of its Board of
Directors, and he acknowledged that the execution of the foregoing instrument
was the free act and deed of said corporation.
--------------------------------
Notary Public
My Commission Expires:
23
<PAGE>
STATE OF NEW JERSEY)
: ss:
COUNTY OF MORRIS )
On this ----- day of ---------, 1998, before me personally appeared
T. G. Howson, to me personally known, who, being by me duly sworn, says that he
is a Vice President of Metropolitan Edison Company and that said instrument was
signed on behalf of said corporation by authority of its Board of Directors, and
he acknowledged that the execution of the foregoing instrument was the free act
and deed of said corporation.
--------------------------------
Notary Public
My Commission Expires:
24
<PAGE>
STATE OF NEW JERSEY)
: ss:
COUNTY OF MORRIS )
On this ----- day of ---------, 1998, before me personally appeared
T. G. Howson, to me personally known, who, being by me duly sworn, says that he
is a Vice President of Pennsylvania Electric Company and that said instrument
was signed on behalf of said corporation by authority of its Board of Directors,
and he acknowledged that the execution of the foregoing instrument was the free
act and deed of said corporation.
--------------------------------
Notary Public
My Commission Expires:
25
<PAGE>
EXHIBIT A
DEFINITIONS
-----------
As used in the Trust Agreement (as defined below) the following
terms shall have the following meanings (such definitions to be applicable to
both singular and plural forms of the terms defined), except as otherwise
specifically defined therein:
"Administrative Agent" shall have the meaning specified therefor in
the first paragraph of the Credit Agreements.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such Person. For purposes of this definition, the term "control" as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise.
"Assigned Agreement" means a Nuclear Material Contract which has
been assigned to a Company in the manner specified in Section 5 of the Lease
Agreements pursuant to a duly executed and delivered Assignment Agreement. The
term Assigned Agreement shall include a Partially Assigned Agreement.
"Assignment Agreement" means an assignment agreement substantially
in the forms of Exhibit D to the Lease Agreements.
"Bank" shall have the meaning specified therefor in Section 1.02 of
the Credit Agreements.
"Basic Documents" means the Lease Agreements, the Credit Agreements,
the Security Agreements, the Commercial Paper, the Notes, the Letter Agreements,
the Assigned Agreements, the Assignment Agreements, the Trust Agreement, the
Depositary Agreements, each Bill of Sale, each Leasing Record, each Rent Due and
SCV Confirmation Schedule, and other agreements related or incidental thereto
which are identified in writing by either Company, the Lessees and the Secured
Parties as one of the "Basic Documents", in each case, as such documents may be
amended from time to time.
"Basic Rent Period" means each calendar month or portion thereof
commencing on, in the case of the first such period, the effective date of the
Lease Agreements, and in case of each succeeding period, the first day following
the immediately preceding Basic Rent Period, and ending on the earliest of (i)
the last day of any calendar month or (ii) the Termination Settlement Date.
<PAGE>
"Bill of Sale" means a bill of sale substantially in the forms of
Exhibit E to the Lease Agreements, pursuant to which title to all or any portion
of the Nuclear Material is transferred to a Lessee or any designee of a Lessee.
"Capitalized Lease" means any and all lease obligations which are or
should be capitalized on the balance sheet of the Person in question in
accordance with generally accepted accounting principles and Statement No. 13 of
the Financial Accounting Standards Board or any successor to such pronouncement
regarding lease accounting, without regard for the accounting treatment
permitted or required under any applicable state or federal public utility
regulatory accounting system, unless such treatment controls the determination
of the generally accepted accounting principles applicable to such Person.
<PAGE>
"Closing" means ----------- --, 1998.
"Collateral" has the meaning set forth in the granting clauses of a
Security Agreement and includes all property of a Company described in a
Security Agreement as comprising part of the Collateral.
"Collateral Agent" shall have the meaning specified therefor in
Section 1.02 of the Credit Agreements.
"Collateral Agreements" means, collectively, the Security
Agreements, all Assignment Agreements, and any other assignment, security
agreement or instrument executed and delivered to the Secured Parties hereafter
relating to property of a Company which is security for the Notes.
"Commercial Paper" shall have the meaning set forth in Section 1.2
of the Credit Agreements.
"Commitment" means the commitment of the Banks to make Loans from
time to time under any Credit Agreement.
"Companies" means TMI-1 Fuel Corp. and Oyster Creek Fuel Corp.,
each Delaware corporations.
"Company" means TMI-1 Fuel Corp. or Oyster Creek Fuel Corp., each
Delaware corporations.
"Credit Agreements" means (i) the Credit Agreement, dated as of
- ------------ --, ------- between TMI-1 Fuel Corp. (ii) the Credit Agreement,
dated as of -------, 1998 between Oyster Creek Fuel Corp. and The First National
Bank of Chicago, as Administrative Agent, PNC Bank, National Association, as
Syndication Agent, the Banks parties thereto and First Chicago Capital Markets,
Inc. and PNC Capital Markets Inc., as Arrangers, and, as each may be amended
from time to time.
"Depositary Agreements" means ------.
"Excepted Payments" means (i) any indemnity, expense, or other
payment which by the terms of any of the Basic Documents shall be payable to a
Company in order for such Company to satisfy its obligations pursuant to Section
7.8 of the Trust Agreement, (ii) any payment by any Company pursuant to Section
7.8 of the Trust Agreement, or (iii) a payment by any Lessee pursuant to Section
8 of the Trust Agreement.
"Final Leasing Record" means a Leasing Record which records the
leasing of Nuclear Material during any period when such Nuclear Material is
installed for operation in a Generating Facility. A Final Leasing Record shall
be in the forms of Exhibit B to the Lease Agreements.
"Generating Facility" means each of Unit No. 1 of Three Mile
Island Nuclear Generating Station, located in Londonderry Township,
Pennsylvania and Oyster Creek Nuclear Generating Station, located in Lacey
Township, New Jersey.
"Hereof", "herein", "hereunder" and words of similar import when
used in a Basic Document refer to such Basic Document as a whole and not to any
particular section or provision thereof.
"Impositions" means all payments required by a public or
governmental authority in respect of any property subject to a Lease
Agreement or
2
<PAGE>
any transaction pursuant to a Lease Agreement or any right or interest held by
virtue of a Lease Agreement.
"Interim Leasing Record" means a Leasing Record which records the
leasing of Nuclear Material (i) prior to installation for operation in a
Generating Facility, (ii) after removal from a Generating Facility during the
"cooling off" and storage period, and (iii) while being reprocessed. An Interim
Leasing Record shall be in the form of Exhibit A to the Lease Agreements.
"Lease Agreements" means (i) the Second Amended and Restated Nuclear
Material Lease Agreements each dated as of ------, --- 1998 between TMI-1 Fuel
Corp., as Lessor, and Jersey Central Power & Light Company, Metropolitan Edison
Company and Pennsylvania Electric Company, respectively, as Lessees, in
connection with the Three Mile Island Unit 1 Nuclear Generating Facility, and
(ii) the Second Amended and Restated Nuclear Material Lease Agreement, dated as
of ----------- --, 1998 between Oyster Creek Fuel Corp. as Lessor and Jersey
Central Power & Light Company, as Lessee, in connection with the Oyster Creek
Nuclear Generating Facility, as each of the same may be modified, supplemented
or amended from time to time.
"Leasing Record" is a form signed by a Lessor and its Lessee to
record the leasing under a Lease Agreement of the Nuclear Material specified in
such Leasing Record. A Leasing Record shall be either an Interim Leasing Record
or a Final Leasing Record.
"Lessee" or "Lessees" shall have the meanings specified therefor in
the introduction to the Lease Agreements.
"Lessor" or "Lessors" shall have the meanings specified therefor in
the introduction to the Lease Agreements and its successors and assigns.
"Letter Agreements" means the Letter Agreements, each dated as of
- ---------- --, 1998 between the Lessees, the Companies and The First National
Bank of Chicago, as Administrative Agent, as the same may be amended from time
to time.
"Lien" means any mortgage, pledge, lien, security interest, title
retention, charge or other encumbrance of any nature whatsoever (including any
conditional sale or other title retention agreement, any lease in the nature
thereof and the filing of or agreement to execute and deliver any financing
statement under the Uniform Commercial Code of any jurisdiction).
"Loans" shall have the meaning specified therefor in Section 1.02 of
the Credit Agreements.
"Manufacturer" means any supplier of Nuclear Material or of any
service (including without limitation, enrichment, fabrication, transportation,
storage and processing) in connection therewith, or any agent or licensee of any
such supplier.
"Notes" shall have the meaning specified therefor in Section 1.02 of
the Credit Agreements.
"Nuclear Material" means those items which have been purchased by or
on behalf of a Company for which a duly executed Leasing Record has been
delivered to a Company and which continue to be subject to a Lease Agreement
consisting of (i) the items described in such Leasing Record and each of the
components thereof in the respective forms in which such items exist during each
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<PAGE>
stage of the Nuclear Material Cycle, being substances and equipment which, when
fabricated and assembled and loaded into a nuclear reactor, are intended to
produce heat, together with all attachments, accessories, parts and additions
and all improvements and repairs thereto, and all replacements thereof and
substitutions therefor and (ii) the substances and materials underlying the
right, title and interest of a Lessee under any Nuclear Material Contract
assigned to a Company pursuant to a Lease Agreement; provided, however, that the
term Nuclear Material shall not include spent fuel.
"Nuclear Material Contract" means any contract, as from time to time
amended, modified or supplemented, entered into by a Lessee with one or more
Manufacturers relating to the acquisition of Nuclear Material or any service in
connection with the Nuclear Material.
"Nuclear Material Cycle" means the various stages in the process,
whether physical or chemical, by which the component parts of the Nuclear
Material are designed, mined, milled, processed, converted, enriched, fabricated
into assemblies utilizable for Heat Production, loaded or installed into a
reactor core, utilized, disengaged from a reactor core or stored, together with
all incidental processes with respect to the Nuclear Material at any such stage.
"Obligations" means (i) all items (including, without limitation,
Capitalized Leases but excluding shareholders' equity and minority interests)
which in accordance with generally accepted accounting principles should be
reflected on the liability side of a balance sheet as at the date as of which
such obligations are to be determined; (ii) all obligations and liabilities
(whether or not reflected upon such balance sheet) secured by any Lien existing
on the Property held subject to such Lien, whether or not the obligation or
liability secured thereby shall have been assumed; and (iii) all guarantees,
endorsements (other than for collection in the ordinary course of business) and
contingent obligations in respect of any liabilities of the type described in
clauses (i) and (ii) of this definition (whether or not reflected on such
balance sheet); provided, however, that the term "Obligations" shall not include
deferred taxes.
"Officer's Certificate" means, with respect to any corporation, a
certificate signed by the President, any Vice President, the Treasurer or any
Assistant Treasurer, the Comptroller or any Assistant Comptroller of such
corporation, and with respect to any other entity, a certificate signed by an
individual generally authorized to execute and deliver contracts on behalf of
such entity.
"Original Trust Agreement" means the Trust Agreement dated as of
August 1, 1991, among Lord Fuel Corp., as Trustor, United States Trust Company
of New York, as Owner Trustee, Jersey Central Power & Light Company,
Metropolitan Edison Company and Pennsylvania Electric Company, as Lessees, and
Lord Fuel Corp., as Trust Beneficiary, as the same may be amended, modified or
supplemented from time to time.
"Outstandings" shall have the meaning specified therefor in Section
1.02 of the Credit Agreements.
"Owner Trust Estate" means all estate, right, title and interest of
the Owner Trustee in and to the outstanding stock of the Companies and in and to
all monies, securities, investments, instruments, documents, rights, claims,
contracts, and other property held by the Owner Trustee under the Trust
Agreement; provided, however, that there shall be excluded from the Owner Trust
Estate all Excepted Payments.
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<PAGE>
"Owner Trustee" means the United States Trust Company of New York,
not in its individual capacity but solely acting as trustee under and pursuant
to the Trust Agreement, and its permitted successors.
"Partially Assigned Agreement" means a Nuclear Material Contract
which has been assigned, in part but not in full, to a Company in the manner
specified in Section 5 of each Lease Agreement pursuant to a duly executed and
delivered Assignment Agreement.
"Permitted Liens" means (i) any assignment of a Lease Agreement
permitted thereby, by a Note Agreement and by a Credit Agreement, (ii) liens for
Impositions not yet payable, or payable without the addition of any fine,
penalty, interest or cost for nonpayment, or being contested by a Lessee as
permitted by Section 11 of the Lease Agreements, (iii) liens and security
interests created by a Security Agreement, (iv) the title transfer and
commingling of the Nuclear Material contemplated by paragraph (h) of Section 10
of the Lease Agreements and (v) liens of mechanics, laborers, materialmen,
suppliers or vendors, or rights thereto, incurred in the ordinary course of
business for sums of money which under the terms of the related contracts are
not more than 30 days past due or are being contested in good faith by a Lessee
as permitted by Section 11 of the Lease Agreements; provided, however, that, in
each case, such reserve or other appropriate provision, if any, as shall be
required by generally accepted accounting principles shall have been made in
respect thereto.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization or other business entity or any
government or any political subdivision or agency thereof.
"Proceeds" shall have the meaning assigned to it under the Uniform
Commercial Code, as amended, and, in any event, shall include, but not be
limited to, (i) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to a Company from time to time with respect to the Collateral,
(ii) any and all payments (in any form whatsoever) made or due and payable to a
Company from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or part of any part of the Collateral
by any governmental body, authority, bureau or agency (or any person acting
under color of governmental authority), and (iii) any and all other amounts from
time to time paid or payable under or in connection with any of the Collateral.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Qualified Institution" means a commercial bank organized under the
laws of, and doing business in, the United States of America or in any State
thereof, which has combined capital, surplus and undivided profits of at least
$150,000,000 having trust power.
"Rent Due and SCV Confirmation Schedule" means an instrument
substantially in the form of Exhibit F to the Lease Agreements which is to be
completed by a Lessee for the purpose of calculating and acknowledging the SCV
at the end of each Basic Rent Period.
"Secured Parties" means the Banks and any other holder from time to
time of any Note.
5
<PAGE>
"Security Agreements" means the (i) Jersey Central Power & Light
Company Security Agreement and Assignment of Contracts dated as of --------- --,
1998, (ii) Metropolitan Edison Company Security Agreement and Assignment of
Contracts dated as of --------- --, 1998 and (iii) Pennsylvania Electric Company
Security Agreement and Assignment of Contract dated as of ------------ --, 1998
between TMI-1 Fuel Corp. and the Secured Parties and (iv) the Security Agreement
and Assignment of Contracts, dated as of --------- ---, 1998, between Oyster
Creek Fuel Corp. and the Secured Parties.
"Terminating Event" shall have the meaning set forth in Section 18
of the Lease Agreements.
"Termination Settlement Date" shall have the meaning specified
therefor in Section 8(c) or 18(c) of the Lease Agreements.
"Trust" means the TMI-1 Fuel Corp. and Oyster Creek Fuel Corp.
Trust, a trust formed pursuant to the Trust Agreement.
"Trust Agreement" means the Second Amended and Restated Trust
Agreement dated as of -------- --, 1998, among Lord Fuel Corp., as Trustor,
United States Trust Company of New York, as Owner Trustee, Jersey Central Power
& Light Company, Metropolitan Edison Company and Pennsylvania Electric Company,
as Lessees, and Lord Fuel Corp., as Trust Beneficiary, as the same may be
amended, modified or supplemented from time to time.
"Trust Beneficiary" means Lord Fuel Corp., a Delaware corporation,
and its permitted successors.
"Trustor" means the institution designated as such in the Trust
Agreement and its permitted successors.
6
Exhibit D-2(b)
BEFORE THE
PENNSYLVANIA PUBLIC UTILITY COMMISSION
In re:
SECURITIES CERTIFICATE OF METROPOLITAN : SECURITIES CERTIFICATE
EDISON COMPANY IN RESPECT OF : NO.
NUCLEAR FUEL LEASE :
TO PENNSYLVANIA PUBLIC UTILITY COMMISSION:
1. The name and address of the public utility filing this
Application are Metropolitan Edison Company ("Met-Ed" or the "Company"), 2800
Pottsville Pike, Muhlenberg Township, Berks County, Pennsylvania (mailing
address: P.O. Box 16001, Reading, PA 19640-0001).
2. The names and addresses of Met-Ed's attorneys are W. Edwin
Ogden, Jeffrey A. Franklin and Ryan, Russell, Ogden & Seltzer LLP, 1100
Berkshire Boulevard, Suite 301, Reading, Pennsylvania 19610-1221.
3. The Company, a public utility as defined in the
Pennsylvania Public Utility Code, as amended, is a corporation duly organized
and existing under the laws of the Commonwealth of Pennsylvania. It is engaged
primarily in the business of generating, purchasing, transmitting, distributing
and selling electric energy to the public in fourteen Pennsylvania counties.
4. All of the outstanding Common Stock of Met-Ed is owned by
GPU, Inc. (formerly known as General Public Utilities Corporation) ("GPU"), a
Pennsylvania corporation.
5. This Securities Certificate pertains to the obligations of
Met-Ed under a lease arrangement, which is proposed by Met-Ed to be amended
and/or restated, for its share of certain nuclear fuel, fuel assemblies and
component parts ("Nuclear Material") at the Three Mile Island Unit No. 1 nuclear
generating station ("TMI-1"), which is jointly owned by Met-Ed (50%), Jersey
Central Power & Light Company (25%) and Pennsylvania Electric Company (25%)
(collectively, the "GPU Companies") and the related financing arrangements to
provide for Met-Ed's undivided interest in the acquisition costs (the
"Acquisition Costs") of the Nuclear Material. TMI-1 is operated and maintained
on behalf of the GPU Companies by GPU Nuclear, Inc., a subsidiary of GPU.
<PAGE>
Because the existing lease arrangement has an initial term in excess of one year
and certain provisions of the lease arrangement may be deemed under Section
1901(c) of the Pennsylvania Public Utility Code to constitute a contingent
liability of Met-Ed for obligations of another, in this case, TMI-1 Fuel Corp.
described below, Met-Ed filed a Securities Certificate (S-00950535) with respect
to the existing lease arrangement and received the Commission Order dated
October 13, 1995 and is filing this Securities Certificate with the Commission
with respect to the proposed amendment and/or restatement thereof. Reference is
also made to Certificate of Public Convenience (A-110401), under which the
Commission authorized Met-Ed to sell a 50% undivided interest in the Nuclear
Material for TMI-1 for the purpose of entering into a lease arrangement
therefor.
Under the existing lease arrangement, a nuclear fuel trust
("Fuel Trust") was established in accordance with a trust agreement ("Trust
Agreement") under which United States Trust Company of New York acts as trustee
(the "Trustee"). The Fuel Trust is the sole stockholder of a non-affiliated
Delaware corporation, TMI-1 Fuel Corp. (the "TMI-1 Fuel Corp."). Met-Ed entered
into a lease agreement (the "Existing Lease Agreement") by which TMI-1 Fuel
Corp. leases a 50% undivided interest in the Nuclear Material for TMI-1 to
Met-Ed, corresponding to Met-Ed's undivided ownership interest in TMI-1. In
order to finance its acquisition of the Nuclear Material, TMI-1 Fuel Corp. had
entered into a credit agreement, dated as of November 17, 1995 (the "Existing
Credit Facility"), providing for aggregate borrowings of up to $110 million ($55
million with respect to a 50% undivided interest in the Nuclear Material
corresponding to Met-Ed's ownership interest in TMI-1) and under which (i)
letters of credit have been issued by Union Bank of Switzerland, New York Branch
("UBS"), as agent, to provide credit enhancement for commercial paper issued by
TMI-1 Fuel Corp. and (ii) revolving credit loans made by the lenders under the
Existing Credit Facility to TMI-1 Fuel Corp.
-2-
<PAGE>
The financing arrangements with UBS and the Existing Credit
Facility lenders are scheduled to expire on November 17, 1998 unless renewed.
Following discussions with UBS and other potential lending sources, the GPU
Companies have determined not to renew the existing arrangements with UBS but
instead to replace these financing arrangements with an arrangement provided by
the new lenders. Such decision was made based on economic considerations. To
this end, the GPU Companies and TMI-1 Fuel Corp. have obtained a commitment from
The First National Bank of Chicago ("First Chicago") and PNC Bank, N.A.
(collectively, the "Agents") to provide a new revolving credit facility through
a syndicate of banks ("New Lenders") in the aggregate amount of $100 million
("New Credit Facility") ($50 million with respect to a 50% undivided interest in
the Nuclear Material corresponding to Met-Ed's ownership interest in TMI-1) to
replace the Existing Credit Facility which supports the issuance of commercial
paper by TMI-1 Fuel Corp. The Existing Credit Facility, related notes and
letters of credit issued by UBS would be terminated.
The Existing Lease Agreement.
-----------------------------
(1) The Existing Lease Agreement provides for an initial term
of up to 20 years, subject to early termination upon the occurrence of certain
events.
(2) (a) Under the Existing Lease Agreement, Met-Ed pays to
TMI-1 Fuel Corp. a monthly rental payment consisting of (i) a British Thermal
Unit, or so-called "burn-up," charge ("BTU Charge") and (ii) a lease rate paid
in arrears ("Lease Rate"). The BTU Charge consists of an amount based upon the
rate of consumption of the fuel in the reactor. During the term of the Existing
Lease Agreement, Met-Ed may revise the BTU Charge to reflect changes in the
anticipated operating life, energy output or utilization of the Nuclear
Material, as initially estimated. To the extent that Met-Ed makes BTU Charge
payments to TMI-1 Fuel Corp. under the Existing Lease Agreement, the amount of
outstanding Acquisition Costs is correspondingly reduced, thereby creating
-3-
<PAGE>
availability under the Existing Lease Agreement for TMI-1 Fuel Corp. to acquire
additional Nuclear Material.
(b) The Lease Rate, which is based upon the
unamortized cost of the Nuclear Material from time to time, is based on the
rates payable on outstanding commercial paper or notes issued by TMI-1 Fuel
Corp. from time to time. Met-Ed is required to make monthly Lease Rate payments
to TMI-1 Fuel Corp. and to make BTU Charge payments beginning as of the time
fuel consumption commences. At June 30, 1998, an aggregate of approximately $66
million of unrecovered Acquisition Costs were outstanding under the Existing
Lease Agreement at a current Lease Rate of 5.77% per annum, based on TMI-1 Fuel
Corp.'s outstanding commercial paper.
(3) Except as provided below, upon termination
of the Existing Lease Agreement, Met-Ed is obligated to pay to TMI-1 Fuel Corp.
the "Stipulated Casualty Value" of a 50% undivided interest in any Nuclear
Material acquired by Met-Ed, which amount is designed to reflect the then
unamortized cost of the Nuclear Material plus all other amounts which may be
owed to TMI-1 Fuel Corp. However, Met-Ed would use its best efforts to dispose
of a 50% undivided interest in such Nuclear Material on behalf of TMI-1 Fuel
Corp. to a third party; the proceeds of any such disposition in excess of the
Stipulated Casualty Value would be paid to TMI-1 Fuel Corp. If the Existing
Lease Agreement is voluntarily terminated by TMI-1 Fuel Corp., Met-Ed is
required to purchase a 50% undivided interest in the Nuclear Material but may,
at its option, do so during the five-month notice period at the higher of (i)
its then fair market value and (ii) the Stipulated Casualty Value. If Met-Ed
does not exercise such option, or in the event it elects voluntarily to
terminate the Existing Lease Agreement, it would pay TMI-1 Fuel Corp. the
Stipulated Casualty Value of a 50% undivided interest in the Nuclear Material in
the manner described above. If Met-Ed is unable to dispose of the 50% undivided
interest in the Nuclear Material to a third party upon termination of the
Existing Lease Agreement, TMI-1 Fuel Corp. may then convey the Nuclear Material
to Met-Ed.
-4-
<PAGE>
Existing Credit Facility, New Credit Facility and Proposed Lease
Amendments.
----------------------------------------------------------------
------------------------
(1) Under the Existing Credit Facility, TMI-1 Fuel Corp. issues and
sells its commercial paper from time to time to finance its 50% undivided
interest in the Acquisition Costs of Nuclear Material. TMI-1 Fuel Corp.'s
commercial paper credit is enhanced through the issuance by UBS of letters of
credit ("LCs") in an aggregate face amount of up to $110 million ($55 million
with respect to the 50% undivided interest in the Nuclear Material leased by
Met-Ed) outstanding at any time. The commercial paper is evidenced by commercial
paper notes ("CP Notes"). The CP Notes are deposited with a commercial paper
depository and sold to or through commercial paper dealers.
TMI-1 Fuel Corp. has agreed to reimburse the lenders for any
drawings made under the LCs issued for TMI-1 Fuel Corp. TMI-1 Fuel Corp. is also
entitled to borrow under the Existing Credit Facility to provide for direct
borrowings in lieu of issuing CP Notes. To evidence its obligations to repay
such direct borrowings, TMI-1 Fuel Corp. has issued to the lenders its
promissory notes ("Existing Notes"). The aggregate principal amount of Existing
Notes outstanding at any time may not exceed the lesser of (a) $110 million ($55
million with respect to the 50% undivided interest in the Nuclear Material
leased by Met-Ed) less the outstanding principal amount of CP Notes and (b) the
Stipulated Casualty Value of all Nuclear Material under lease at such time, less
the outstanding principal amount of CP Notes.
The Existing Notes are secured by the Existing Lease
Agreement, related lease payments made thereunder and Nuclear Material, and bear
interest at either an Alternative Base Rate or a Eurodollar Rate. The
Alternative Base Rate is a fluctuating annual rate equal to the higher of (i)
the UBS's publicly announced prime rate and (ii) 50 basis points above the rate
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers. Eurodollar Rate Notes bear interest at
the Eurodollar Rate plus the Applicable Margin and are fixed at TMI-1 Fuel
Corp.'s option for interest periods of 1, 2, 3 or 6 months. The Eurodollar
-5-
<PAGE>
Rate is defined as the annual interest rate for deposits in U.S. dollars as
reported in the Dow Jones Telerate system or if such rate is not reported, at
the LIBOR rate, in each case for the two business day period prior to such
interest period. The Applicable Margin ranges from 27.5 to 65 basis points
depending on Met-Ed's senior secured long term debt ratings assigned by Standard
& Poor's Ratings Group, Moody's Investors Service, Inc. or Duff & Phelps.
Under the Existing Credit Facility, TMI-1 Fuel Corp. may, upon
three business days notice, prepay Existing Notes. In addition, TMI-1 Fuel Corp.
is obligated to prepay Existing Notes in amounts equal to the sum of (a) the
cost of Nuclear Material consumed plus any associated finance charges incurred
in connection therewith which TMI-1 Fuel Corp. is unable to capitalize (Basic
Rent) in excess of the interest and principal payments due on indebtedness of
TMI-1 Fuel Corp. and other costs incurred in connection with the Existing Credit
Facility and the certain related financing documents (Monthly Debt Service) and
(b) the amount received by TMI-1 Fuel Corp. related to a sale or transfer (other
than by lease) of the Nuclear Material to Met-Ed or a third party.
Under the New Credit Facility, TMI-1 Fuel Corp. will continue
to issue its commercial paper ("New CP Notes") from time to time to finance
Met-Ed's 50% undivided interest in the Acquisition Costs for Nuclear Material.
The New Credit Facility would have a term of 364 days (or, at the option of the
New Lenders, may be extended for an additional 364 day period) and would permit
outstanding borrowings of up to an aggregate of the lesser of (a) $100 million
($50 million with respect to the 50% undivided interest in the Nuclear Material
leased by Met-Ed) less the outstanding principal amounts of New CP Notes and (b)
the Stipulated Casualty Value of all Nuclear Material then under lease, less the
outstanding principal amount of New CP Notes. TMI-1 Fuel Corp. would also be
able to borrow directly under the New Credit Facility in lieu of issuing New CP
Notes, and would issue its promissory notes to the New Lenders evidencing such
borrowings. There would, however, be no letter of credit or other credit support
for the New CP Notes.
-6-
<PAGE>
TMI-1 Fuel Corp. would pledge the Existing Lease Agreement to
the New Lenders as collateral security for such obligations.
The new promissory notes issued under the New Credit Facility
would mature no longer than 364 days from date of issuance and would bear
interest at either the Alternative Base Rate or the Eurodollar Rate plus .40%.
The Alternative Base Rate is a fluctuating annual rate equal to the greater of
(i) First Chicago's corporate base rate or (ii) the Federal funds rate plus 1/2%
per annum. The interest on Alternative Base Rate loans will be computed for
actual days elapsed on a 365-day or, when appropriate, 366-day year basis. The
Eurodollar Rate is the rate at which First Chicago offers to place deposits in
U.S. dollars with first-class banks in the London interbank market at 11:00 a.m.
(London time) two business days prior to the borrowing date in the approximate
amount of, and for a maturity corresponding to, First Chicago's (in its capacity
as a Lender) portion of the loan, adjusted for Federal Reserve Board reserve
requirements. Interest periods for Eurodollar Rate-based loans will be 1, 2, 3
or 6 months. Interest will be payable in arrears (i) with respect to Alternative
Base Rate-based loans on the last day of each quarter, (ii) with respect to
Eurodollar Rate-based loans on the last day of each interest period and, in the
case of an interest period longer than three months, quarterly and (iii) in any
event upon any prepayment (whether due to acceleration or otherwise) and at
maturity. Interest on all Eurodollar loans and fees will be calculated for
actual days elapsed-on the basis of a 360-day year.
(2) In connection with the New Credit Facility, TMI-1 Fuel
Corp. would pay the following fees in respect of Met-Ed's proportionate interest
in TMI-1: (i) an Arrangement Fee to the Agents of $10,000; (ii) an annual
Administration Fee to First Chicago of $4,000; and (iii) a Commitment Fee to the
New Lenders of .125% per annum on each lender's average daily unused commitment
under the New Credit Facility.
In addition, Met-Ed has agreed to pay certain transaction
expenses in connection with the execution of the amended and restated Existing
Lease Agreement, the establishment of the New Credit Facility and the
consummation
-7-
<PAGE>
of the transactions contemplated thereby. Met-Ed will also indemnify TMI-1 Fuel
Corp., the Trustee and the New Lenders against certain liabilities, hazards,
contingencies and risks of loss in connection with TMI-1 Fuel Corp.'s
acquisition and lease of a 50% undivided interest in Nuclear Material to Met-Ed.
Met-Ed would reimburse TMI-1 Fuel Corp. for all such fees, expenses and
indemnification costs and all such expenses would be paid as additional rent
payments under the amended and restated Existing Lease Agreement.
(3) In connection with the New Credit Facility, Met-Ed also
proposes to amend and restate the Existing Lease Agreement. (The Existing Lease
Agreement, as proposed to be amended and restated, is herein referred to as the
"Amended and Restated Lease Agreement"). The Amended and Restated Lease
Agreement would, among other things, reflect (i) a reduction in the maximum
aggregate value of Nuclear Material to be leased thereunder from $110 million to
$100 million; (ii) the establishment of the New Credit Facility with the New
Lenders; and (iii) certain other modifications to the representations, covenants
and events of default provisions. Met-Ed would continue to pay a BTU Charge and
a Lease Rate as under the Existing Lease Agreement although the new Lease Rate
would be based on the rates of the New CP Notes and/or the new promissory notes.
In addition, Met-Ed would execute a new letter of representation to the New
Lenders regarding performance under the Amended and Restated Lease Agreement and
preservation of collateral, and conforming changes would be made to the Trust
Agreement and ancillary lease and financing documents, including the Security
Agreement.
(4) Met-Ed proposes to enter into the new lease arrangement
after obtaining the requisite action of your Honorable Commission and the
Securities and Exchange Commission.
(5) The estimated initial expenses to be incurred by Met-Ed in
connection with the proposed transaction are as follows:
Legal Fees $56,250
Depositary Fees $01,875
Arrangement Fee $10,000
Trustee Fees and Expenses $02,500
Miscellaneous $03,750
Total $74,375
-8-
<PAGE>
(6) An Application on Form U-1 has been filed by the GPU
Companies with the Securities and Exchange Commission in respect of the new
lease arrangement.
(7) There are appended hereto and made part hereof the
following Exhibits:
Exhibit A - Balance sheet of Met-Ed per books as at
June 30, 1998.
Exhibit B-1 - Statement of Income of Met-Ed for the 12 months
ended June 30, 1998.
Exhibit B-2 - Statement of Retained Earnings and
Statement of Capital Surplus of Met-Ed
for the 12 months ended June 30, 1998.
Exhibit C - Statement of Utility Plant by Classified
Accounts of Met-Ed as at June 30, 1998.
Exhibit D - Statement of Securities of Other Corporations
Owned by Met-Ed as at June 30, 1998.
Exhibit E - Statement of Status of Funded Debt Outstanding
of Met-Ed as at June 30, 1998.
Exhibit F - Statement of Capital Stock Outstanding of
Met-Ed as at June 30, 1998.
Exhibit G - N/A
Exhibit H - Copy of Application on Form U-1 filed by Met-Ed
with the Securities and Exchange Commission
under the Public Utility Holding Company Act of
1935, as amended, in respect of the new lease
arrangements.*
Exhibit I - Copy of Resolutions of the Board of Directors
of Met-Ed authorizing amendment of lease
arrangements.
Exhibit J - Proposed form of Second Amended and Restated
Nuclear Material Lease Agreement. (To be filed
supplementally)
Exhibit K - Journal Entries of Met-Ed, showing all charges
and credits to be made on the books of account
of Met-Ed as a result of lease transactions
described herein.
Exhibit L - N/A
- -------------------------
* Includes consolidated financial information.
-9-
<PAGE>
WHEREFORE, Metropolitan Edison Company prays your Honorable
Commission to register this Securities Certificate pursuant to Chapter 19 of the
Public Utility Code, as amended, and to grant any other approvals your
Commission deems appropriate to further the consummation of the financing
program described herein.
Dated:
METROPOLITAN EDISON COMPANY
By: -------------------------------
Vice President
-10-
<PAGE>
STATE OF NEW JERSEY )
) ss.:
COUNTY OF MORRIS )
T.G. Howson, being duly sworn according to law, deposes and
says that he is a Vice President of Metropolitan Edison Company, that he is
authorized to and does make this affidavit for it; and that the facts set forth
above are true and correct (or are true and correct to the best of his
knowledge, information and belief) and he expects the said Metropolitan Edison
Company to be able to prove the same at any hearing hereof.
METROPOLITAN EDISON COMPANY
By:
------------------
Sworn to and subscribed before
me this ---- day of ------, 1998.
- --------------------------------
Notary Public
-11-
Exhibit D-2(c)
BEFORE THE
PENNSYLVANIA PUBLIC UTILITY COMMISSION
In re:
SECURITIES CERTIFICATE OF PENNSYLVANIA : SECURITIES CERTIFICATE
ELECTRIC COMPANY IN RESPECT OF : NO.
NUCLEAR FUEL LEASE :
TO PENNSYLVANIA PUBLIC UTILITY COMMISSION:
1. The name and address of the public utility filing
this Securities Certificate is:
Pennsylvania Electric Company ("Penelec")
2800 Pottsville Pike
Reading, Pennsylvania 19605
2. The names and addresses of the public utility's
attorneys are:
Scott L. Guibord, Esq.
Secretary
Pennsylvania Electric Company
2800 Pottsville Pike
Reading, Pennsylvania 19605
Robert C. Gerlach, Esq.
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street - 51st Flr.
Philadelphia, PA 19103-7599
3. Penelec is a public utility as defined in the Pennsylvania
Public Utility Code, as amended. Penelec was incorporated under the laws of the
Commonwealth of Pennsylvania on June 11, 1919, is governed by the Pennsylvania
Business Corporation Law of 1988 and pursuant to such law has corporate power
and authority, among other things, to render to the public electric and steam
heat service throughout Pennsylvania. Penelec renders electric service to the
public in numerous municipalities in thirty-one counties in western, northern
and south-central Pennsylvania.
4. All of the outstanding Common Stock of Penelec is owned by
GPU, Inc. (formerly known as General Public Utilities Corporation) ("GPU"), a
Pennsylvania corporation.
<PAGE>
5. This Securities Certificate pertains to the obligations of
Penelec under a lease arrangement, which is proposed by Penelec to be amended
and/or restated, for its share of certain nuclear fuel, fuel assemblies and
component parts ("Nuclear Material") at the Three Mile Island Unit No. 1 nuclear
generating station ("TMI-1"), which is jointly owned by Metropolitan Edison
Company (50%), Jersey Central Power & Light Company (25%) and Penelec (25%)
(collectively, the "GPU Companies") and the related financing arrangements to
provide for Penelec's undivided interest in the acquisition costs (the
"Acquisition Costs") of the Nuclear Material. TMI-1 is operated and maintained
on behalf of the GPU Companies by GPU Nuclear, Inc., a subsidiary of GPU.
Because the existing lease arrangement has an initial term in excess of one year
and certain provisions of the lease arrangement may be deemed under Section
1901(c) of the Pennsylvania Public Utility Code to constitute a contingent
liability of Penelec for obligations of another, in this case, TMI-1 Fuel Corp.
described below, Penelec filed a Securities Certificate (S-00950534) with
respect to the existing lease arrangement and received the Commission Order
dated October 13, 1995 and is filing this Securities Certificate with the
Commission with respect to the proposed amendment and/or restatement thereof.
Reference is also made to Certificate of Public Convenience (A-110400), under
which the Commission authorized Penelec to sell a 25% undivided interest in the
Nuclear Material for TMI-1 for the purpose of entering into a lease arrangement
therefor.
Under the existing lease arrangement, a nuclear fuel trust
("Fuel Trust") was established in accordance with a trust agreement ("Trust
Agreement") under which United States
Trust Company of New York acts as trustee (the "Trustee"). The
Fuel Trust is the sole stockholder of a non-affiliated Delaware corporation,
TMI-1 Fuel Corp. (the "TMI-1 Fuel Corp."). Penelec entered into a lease
agreement (the "Existing Lease Agreement") by which TMI-1 Fuel Corp. leases a
25% undivided interest in the Nuclear Material for TMI-1 to Penelec,
2
<PAGE>
corresponding to Penelec's undivided ownership interest in TMI-1. In order to
finance its acquisition of the Nuclear Material, TMI-1 Fuel Corp. had entered
into a credit agreement, dated as of November 17, 1995 (the "Existing Credit
Facility"), providing for aggregate borrowings of up to $110 million ($27.5
million with respect to a 25% undivided interest in the Nuclear Material
corresponding to Penelec's ownership interest in TMI-1) and under which (i)
letters of credit have been issued by Union Bank of Switzerland, New York Branch
("UBS"), as agent, to provide credit enhancement for commercial paper issued by
TMI-1 Fuel Corp. and (ii) revolving credit loans made by the lenders under the
Existing Credit Facility to TMI-1 Fuel Corp.
The financing arrangements with UBS and the Existing Credit
Facility lenders are scheduled to expire on November 17, 1998 unless renewed.
Following discussions with UBS and other potential lending sources, the GPU
Companies have determined not to renew the existing arrangements with UBS but
instead to replace these financing arrangements with an arrangement provided by
the new lenders. To this end, the GPU Companies and TMI-1 Fuel Corp. have
obtained a commitment from The First National Bank of Chicago ("First Chicago")
and PNC Bank, N.A. (collectively, the "Agents") to provide a new revolving
credit facility through a syndicate of banks ("New Lenders") in the aggregate
amount of $--- million ("New Credit Facility") ($---- million with respect to a
25% undivided interest in the Nuclear Material corresponding to Penelec's
ownership interest in TMI-1) to replace the Existing Credit Facility which
support the issuance of commercial paper by TMI-1 Fuel Corp. The Existing Credit
Facility, related notes and letters of credit issued by UBS would be terminated.
The Existing Lease Agreement.
-----------------------------
(1) The Existing Lease Agreement provides for an initial term of up to 20 years,
subject to early termination upon the occurrence of certain events.
3
<PAGE>
(2) (a) Under the Existing Lease Agreement, Penelec pays to
TMI-1 Fuel Corp. a monthly rental payment consisting of (i) a British Thermal
Unit, or so-called "burn-up," charge ("BTU Charge") and (ii) a lease rate paid
in arrears ("Lease Rate"). The BTU Charge consists of an amount based upon the
rate of consumption of the fuel in the reactor. During the term of the Existing
Lease Agreement, Penelec may revise the BTU Charge to reflect changes in the
anticipated operating life, energy output or utilization of the Nuclear
Material, as initially estimated. To the extent that Penelec makes BTU Charge
payments to TMI-1 Fuel Corp. under the Existing Lease Agreement, the amount of
outstanding Acquisition Costs is correspondingly reduced, thereby creating
availability under the Existing Lease Agreement for TMI-1 Fuel Corp. to acquire
additional Nuclear Material.
(b) The Lease Rate, which is based upon the unamortized
cost of the Nuclear Material from time to time, is based on the rates payable on
outstanding commercial paper or notes issued by TMI-1 Fuel Corp. from time to
time. Penelec is required to make monthly Lease Rate payments to TMI-1 Fuel
Corp. and to make BTU Charge payments beginning as of the time fuel consumption
commences. At May 31, 1998, an aggregate of approximately $154 million of
unrecovered Acquisition Costs were outstanding under the Existing Lease
Agreement at a current Lease Rate of 5.57% per annum, based on TMI-1 Fuel
Corp.'s outstanding commercial paper.
(3) Except as provided below, upon termination of the
Existing Lease Agreement, Penelec is obligated to pay to TMI-1 Fuel Corp. the
"Stipulated Casualty Value" of a 25% undivided interest in any Nuclear Material
acquired by Penelec, which amount is designed to reflect the then unamortized
cost of the Nuclear Material plus all other amounts which may be owed to TMI-1
Fuel Corp. However, Penelec would use its best efforts to dispose of a 25%
undivided interest in such Nuclear Material on behalf of TMI-1 Fuel Corp. to a
third party; the proceeds of any such disposition in excess of the Stipulated
Casualty Value would be paid to TMI-1 Fuel Corp. If the Existing Lease Agreement
is voluntarily terminated by TMI-1 Fuel Corp.,
4
<PAGE>
Penelec is required to purchase a 25% undivided interest in the Nuclear Material
but may, at its option, do so during the five-month notice period at the higher
of (i) its then fair market value and (ii) the Stipulated Casualty Value. If
Penelec does not exercise such option, or in the event it elects voluntarily to
terminate the Existing Lease Agreement, it would pay TMI-1 Fuel Corp. the
Stipulated Casualty Value of a 25% undivided interest in the Nuclear Material in
the manner described above. If Penelec is unable to dispose of the 25% undivided
interest in the Nuclear Material to a third party upon termination of the
Existing Lease Agreement, TMI-1 Fuel Corp. may then convey the Nuclear Material
to Penelec.
Existing Credit Facility, New Credit Facility and Proposed Lease
Amendments.
----------------------------------------------------------------
(1) Under the Existing Credit Facility, TMI-1 Fuel Corp.
issues and sells its commercial paper from time to time to finance its 25%
undivided interest in the Acquisition Costs of Nuclear Material. To reduce
borrowing costs, TMI-1 Fuel Corp.'s commercial paper credit is enhanced through
the issuance by UBS of letters of credit ("LCs") in an aggregate face amount of
up to $110,000,000 ($27.5 million with respect to the 25% undivided interest in
the Nuclear Material leased by Penelec) outstanding at any time. The commercial
paper is evidenced by commercial paper notes ("CP Notes"). The CP Notes are
deposited with a commercial paper depository and sold to or through commercial
paper dealers.
TMI-1 Fuel Corp. has agreed to reimburse the lenders
for any drawings made under the LCs issued for TMI-1 Fuel Corp. TMI-1 Fuel Corp.
is also entitled to borrow under the Existing Credit Facility to provide for
direct borrowings in lieu of issuing CP Notes. To evidence its obligations to
repay such direct borrowings, TMI-1 Fuel Corp. has issued to the lenders its
promissory notes ("Existing Notes"). The aggregate principal amount of Existing
Notes outstanding at any time may not exceed the lesser of (a) $110,000,000
($27.5 million with respect to the 25% undivided interest in the Nuclear
Material leased by Penelec) less the outstanding principal amount of
5
<PAGE>
CP Notes and (b) the Stipulated Casualty Value of all Nuclear Material under
lease at such time, less the outstanding principal amount of CP Notes.
The Existing Notes are secured by the Existing Lease
Agreement, related lease payments made thereunder and Nuclear Material, and bear
interest at either an Alternative Base Rate or a Eurodollar Rate. The
Alternative Base Rate is a fluctuating annual rate equal to the higher of (i)
the UBS's publicly announced prime rate and (ii) 50 basis points above the rate
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers. Eurodollar Rate Notes bear interest at
the Eurodollar Rate plus the Applicable Margin and are fixed at TMI-1 Fuel
Corp.'s option for interest periods of 1, 2, 3 or 6 months. The Eurodollar Rate
is defined as the annual interest rate for deposits in U.S. dollars as reported
in the Dow Jones Telerate system or if such rate is not reported, at the LIBOR
rate, in each case for the two business day period prior to such interest
period. The Applicable Margin ranges from 27.5 to 65 basis points depending on
Penelec's senior secured long term debt ratings assigned by Standard & Poor's
Ratings Group, Moody's Investors Service, Inc. or Duff & Phelps.
Under the Existing Credit Facility, TMI-1 Fuel Corp. may, upon
three business days notice, prepay Existing Notes. In addition, TMI-1 Fuel Corp.
is obligated to prepay Existing Notes in amounts equal to the sum of (a) the
cost of Nuclear Material consumed plus any associated finance charges incurred
in connection therewith which TMI-1 Fuel Corp. is unable to capitalize (Basic
Rent) in excess of the interest and principal payments due on indebtedness of
TMI-1 Fuel Corp. and other costs incurred in connection with the Existing Credit
Facility and the certain related financing documents (Monthly Debt Service) and
(b) the amount received by TMI-1 Fuel Corp. related to a sale or transfer (other
than by lease) of the Nuclear Material to Penelec or a third party.
Under the New Credit Facility, TMI-1 Fuel Corp. will continue
to issue its commercial paper ("New CP Notes") from time to time to finance its
6
<PAGE>
25% undivided interest in the Acquisition Costs for Nuclear Material. The New
Credit Facility would have a term of 364 days and would permit outstanding
borrowings of up to an aggregate of the lesser of (a) $----------- ($-------
million with respect to the 25% undivided interest in the Nuclear Material
leased by Penelec) less the outstanding principal amounts of New CP Notes and
(b) the Stipulated Casualty Value of all Nuclear Material then under lease, less
the outstanding principal amount of New CP Notes. TMI-1 Fuel Corp. would also be
able to borrow directly under the New Credit Facility in lieu of issuing New CP
Notes, and would issue its promissory notes to the New Lenders evidencing such
borrowings. There would, however, be no letter of credit or other credit support
for the New CP Notes.
TMI-1 Fuel Corp. would pledge the Existing Lease Agreement to
the New Lenders as collateral security for such obligations.
The New CP Notes issued under the New Credit Facility would
mature no longer than 364 days from date of issuance and would bear interest at
either the Alternative Base Rate or the Eurodollar Rate plus .40%. The
Alternative Base Rate is a fluctuating annual rate equal to the greater of (i)
First Chicago's corporate base rate or (ii) the Federal funds rate plus 1/2% per
annum. The Eurodollar Rate is the rate at which First Chicago offers to place
deposits in U.S. dollars with first-class banks in the London interbank market
at 11:00 a.m. (London time) two business days prior to the borrowing date in the
approximate amount of, and for a maturity corresponding to, First Chicago's (in
its capacity as a Lender) portion of the loan, adjusted for Federal Reserve
Board reserve requirements. Interest periods for Eurodollar Rate-based loans
will be 1, 2, 3 or 6 months. Interest will be payable in arrears (i) with
respect to Alternative Base Rate-based loans on the last day of each quarter,
(ii) with respect to Eurodollar Rate-based loans on the last day of each
interest period and, in the case of an interest period longer than three months,
quarterly and (iii) in any event upon any prepayment (whether due to
acceleration or otherwise) and at maturity. Interest on all loans and fees will
be calculated for actual days elapsed-on the basis of a 360-day year.
7
<PAGE>
(2) In connection with the New Credit Facility, TMI-1 Fuel
Corp. would pay the following fees in respect of Penelec's proportionate
interest in TMI-1: (i) an Arrangement Fee to the Agents of $40,000; (ii) an
annual Administration Fee to First Chicago of $16,000; and (iii) a Commitment
Fee to the New Lenders of .125% per annum on each lender's average daily unused
commitment under the New Credit Facility.
In addition, Penelec has agreed to pay certain transaction expenses in
connection with the execution of the amended and restated Existing Lease
Agreement, the establishment of the New Credit Facility and the consummation of
the transactions contemplated thereby. Penelec will also indemnify TMI-1 Fuel
Corp., the Trustee and the New Lenders against certain liability, hazards,
contingencies and risks of loss in connection with TMI-1 Fuel Corp.'s
acquisition and lease of a 25% undivided interest in Nuclear Material to
Penelec. Penelec would reimburse TMI-1 Fuel Corp. for all such fees, expenses
and indemnification costs and all such expenses would be paid as additional rent
payments under the amended and restated Existing Lease Agreement.
(3) In connection with the New Credit Facility, Penelec also
proposes to amend and restate the Existing Lease Agreement. (The Existing Lease
Agreement, as proposed to be amended and restated, is herein referred to as the
"Amended and Restated Lease Agreement"). The Amended and Restated Lease
Agreement would, among other things, reflect (i) a reduction in the maximum
aggregate value of Nuclear Material to be leased thereunder from $110,000,000 to
$-----------; (ii) the establishment of the New Credit Facility with the New
Lenders; and (iii) certain other modifications to the representations, covenants
and events of default provisions. Penelec would continue to pay a BTU Charge and
a Lease Rate ("Basic Rent") as under the Existing Lease Agreement although the
new Lease Rate would be based on the rates of the New CP Notes and/or the New
Promissory Notes. In addition, Penelec would execute a new letter of
representation to the New Lenders regarding performance under the Amended and
Restated Lease Agreement and
8
<PAGE>
preservation of collateral, and conforming changes would be made to the Trust
Agreement and ancillary lease and financing documents, including the Security
Agreement.
4. Penelec proposes to enter into the new lease arrangement
after obtaining the requisite action of your Honorable Commission and the
Securities and Exchange Commission.
5. [The estimated fees, commission and expenses to be incurred
by the GPU Companies in connection with the proposed transaction will be
supplied by a further post-effective amendment.]
6. An Application on Form U-1 has been filed by the GPU
Companies with the Securities and Exchange Commission in respect of the new
lease arrangement.
7. There are appended hereto and made part hereof the
following Exhibits:
Exhibit A - Balance sheet of Penelec per books as at
June 30, 1998.
Exhibit B-1 - Statement of Income of Penelec for the 12
months ended June 30, 1998.
Exhibit B-2 - Statement of Retained Earnings and
Statement of Capital Surplus of Penelec
for the 12 months ended June 30, 1998.
Exhibit C - Statement of Utility Plant by Classified
Accounts of Penelec as at June 30, 1998.
Exhibit D - Statement of Securities of Other Corporations
Owned by Penelec as at June 30, 1998.
Exhibit E - Statement of Status of Funded Debt Outstanding
of Penelec as at June 30, 1998.
Exhibit F - Statement of Capital Stock Outstanding of
Penelec as at June 30, 1998.
Exhibit G - N/A
Exhibit H - Copy of Application filed by Penelec on Form
U-1 with the Securities and Exchange Commission
under the Public Utility Holding Company Act of
1935, as amended, in respect of the new lease
arrangements.*
Exhibit I - Copy of Resolution of the Board of Directors of
Penelec authorizing amendment of lease
arrangements. [(To be filed supplementally)]
9
<PAGE>
Exhibit J - Proposed form of Amended and Restated Lease.
[(To be filed supplementally)]
Exhibit K - Journal Entries of Penelec, showing all charges
and credits to be made on the books of account
of Penelec as a result of lease transactions
described herein.
Exhibit L - N/A
- ---------------------------
* Includes consolidated financial information.
10
<PAGE>
WHEREFORE, Pennsylvania Electric Company prays your Honorable
Commission to register this Securities Certificate pursuant to Chapter 19 of the
Public Utility Code, as amended, and to grant any other approvals your
Commission deems appropriate to further the consummation of the financing
program described herein.
Dated:
PENNSYLVANIA ELECTRIC COMPANY
By:
--------------------------
Vice President
11
<PAGE>
STATE OF NEW JERSEY )
) ss.:
COUNTY OF MORRIS )
T.G. Howson, being duly sworn according to law, deposes and
says that he is a Vice President of Pennsylvania Electric Company, that he is
authorized to and does make this affidavit for it; and that the facts set forth
above are true and correct (or are true and correct to the best of his
knowledge, information and belief) and he expects the said Pennsylvania Electric
Company to be able to prove the same at any hearing hereof.
PENNSYLVANIA ELECTRIC COMPANY
By:
--------------------------
Sworn to and subscribed before
me this --- day of ------, 1998.
- --------------------------------
Notary Public
12
Exhibit D-3(b)
PENNSYLVANIA
PUBLIC UTILITY COMMISSION
Harrisburg, PA 17105-3265
Public Meeting held September 17, 1998
Commissioners Present:
John M. Quain, Chairman
Robert K. Bloom, Vice Chairman
David W. Rolka
Nora Mead Brownell
Aaron Wilson, Jr.
Securities Certificate of Metropolitan S-00980701
Edison Company for the assumption of
certain contingent liabilities in connection
with a nuclear fuel lease.
OPINION AND ORDER
BY THE COMMISSION:
On August 14, 1998, Metropolitan Edison Company (Met-Ed) filed for
registration pursuant to Chapter 19 of the Pennsylvania Public Utility Code, 66
Pa. C.S. Section 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 (Nuclear Material)
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 registered 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. This lease
agreement was amended in 1995. The arrangement was the subject of a securities
certificate which we registered at S-00950535 on October 13, 1995.
<PAGE>
TMI-1 Fuel is now proposing to enter into a new credit arrangement (New
Credit Facility) with the First National Bank of Chicago (First Chicago) and
other lenders which would provide for borrowings by TMI-1 Fuel Corp. from First
Chicago for the value of fuel under lease to Met-Ed not to exceed $50 million.
The New Credit Facility will have an initial term of 364 days, renewable for an
additional 364 day period. Debt service for the new facility will be provided by
the lease payments to be made by Met-Ed to TMI-1 Fuel Corp. Such commercial
paper or other debt of TMI-1 fuel Corp. will be guaranteed by Met-Ed in
proportion to its ownership interest in TMI-1. Such guarantee is a conditional
obligation that, within the meaning of Section 1901(c) of the Pennsylvania
Public Utility Code, constitutes the issuance of debt by Met-Ed.
Lease payments made by Met-Ed pursuant to the new leasing arrangement
consist of a British Thermal Unit charge that is proportional to the rate of
consumption of the fuel at TMI-1 and a Lease Rate based upon the rates of new
commercial paper and/or the new promissory notes. The New Credit Facility will
continue to allow TMI-1 Fuel Corporation to issue its commercial paper from time
to time finance Met-Ed's undivided interest in the acquisition costs for Nuclear
Material. TMI-1-Fuel Corp. would be able to borrow directly under the New Credit
Agreement in lieu of issuing new commercial paper and would issue its promissory
notes to the new lenders evidencing such borrowings. Met-Ed estimates that the
New Credit Facility will produce annual savings of approximately $39,500.
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
2
<PAGE>
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-00980700 for the assumption of certain contingent liabilities in
connection with a nuclear fuel lease is hereby registered.
BY THE COMMISSION,
James J. McNulty
Secretary
(SEAL)
ORDER ADOPTED: September 17, 1998
ORDER ENTERED: September 17, 1998
3
Exhibit D-3(C)
PENNSYLVANIA
PUBLIC UTILITY COMMISSION
Harrisburg, PA 17105-3265
Public Meeting held September 17, 1998
Commissioners Present:
John M. Quain, Chairman
Robert K. Bloom, Vice Chairman
David W. Rolka
Nora Mead Brownell
Aaron Wilson, Jr.
Securities Certificate of Pennsylvania S-00980701
Electric Company for the assumption of
certain contingent liabilities in connection
with a nuclear fuel lease.
OPINION AND ORDER
BY THE COMMISSION:
On August 21, 1998, Pennsylvania Electric Company (Penelec) filed for
registration pursuant to Chapter 19 of the Pennsylvania Public Utility Code, 66
Pa. C.S. Section 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 (Nuclear Material)
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 registered 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. This lease
agreement was amended in 1995. The arrangement was the subject of a securities
certificate which we registered at S-00950534 on October 13, 1995.
<PAGE>
TMI-1 Fuel is now proposing to enter into a new credit arrangement (New
Credit Facility) with the First National Bank of Chicago (First Chicago) and
other lenders which would provide for borrowings by TMI-1 Fuel Corp. from First
Chicago for the value of fuel under lease to Penelec not to exceed $25 million.
The New Credit Facility will have an initial term of 364 days, renewable for an
additional 364 day period. Debt service for the new facility will be provided by
the lease payments to be made by Penelec to TMI-1 Fuel Corp. Such commercial
paper or other debt of TMI-1 Fuel Corp. will be guaranteed by Penelec in
proportion to its ownership interest in TMI-1. Such guarantee is a conditional
obligation that, within the meaning of Section 1901(c) of the Pennsylvania
Public Utility Code, constitutes the issuance of debt by Penelec.
Lease payments made by Penelec pursuant to the new leasing arrangement
consist of a British Thermal Unit charge that is proportional to the rate of
consumption of the fuel at TMI-1 and a Lease Rate based upon the rates of new
commercial paper and/or the new promissory notes. The New Credit Facility will
continue to allow TMI-1 Fuel Corporation to issue its commercial paper from time
to time finance Penelec's undivided interest in the acquisition costs for
Nuclear Material. TMI-1-Fuel Corp. would be able to borrow directly under the
New Credit Agreement in lieu of issuing new commercial paper and would issue its
promissory notes to the new lenders evidencing such borrowings. Penelec
estimates that the New Credit Facility will produce annual savings of
approximately $19,500.
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
2
<PAGE>
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-00980701 for the assumption of certain contingent liabilities in
connection with a nuclear fuel lease is hereby registered.
BY THE COMMISSION,
James J. McNulty
Secretary
(SEAL)
ORDER ADOPTED: September 17, 1998
ORDER ENTERED: September 17, 1998
3
Exhibit F-1(a)
October 14, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Jersey Central Power & Light Company
Metropolitan Edison Company
Pennsylvania Electric Company
SEC File No.70-7862
-------------------
Ladies and Gentlemen:
We have examined Post-Effective Amendment No. 4 to the
Application on Form U-1, dated July 13, 1998, under the Public Utility Holding
Company Act of 1935 (the "Act"), filed with the Securities and Exchange
Commission ("Commission") by Jersey Central Power & Light Company ("JCP&L"),
Metropolitan Edison Company ("Met-Ed") and Pennsylvania Electric Company
("Penelec") (collectively, the "GPU Companies"), subsidiaries of GPU, Inc.
("GPU"), which has been docketed in SEC File No. 70-7862, as about to be amended
by Post-Effective Amendment No. 5 thereto, dated this date, of which this
opinion is to be a part. (The Application, as amended and as thus to be amended,
is hereinafter referred to as the "Application".)
The Application contemplates, among other things, that the GPU
Companies would amend and/or restate their existing lease agreements with lessor
fuel corporations (as so amended, the "Lease Agreements") to provide for the
future acquisition and leasing of nuclear fuel, assemblies and component parts
("Nuclear Material") for use at Oyster Creek nuclear generating station ("Oyster
Creek") and the Three Mile Island Unit 1 nuclear generating station ("TMI-1").
JCP&L owns 100% of Oyster Creek and the GPU Companies jointly own TMI-l in the
following percentages: JCP&L - 25%; Met-Ed - 50%; and Penelec - 25%. The initial
terms of the Oyster Creek and TMI-1 Lease Agreements will be for 364 days,
subject to annual renewal upon the satisfaction of certain conditions. The total
amount of acquisition costs for Nuclear Material which may be outstanding at any
one time under the Lease Agreements may not exceed $90 million in the case of
the Oyster Creek Lease Agreement and $100 million in the case of the TMI-l Lease
Agreements. The fuel lessors would establish new credit facilities with The
First Bank of Chicago, and PNC Bank, National Association, to provide financing
for the acquisition of Nuclear Material for Oyster Creek and TMI-l.
<PAGE>
Securities and Exchange Commission
October 14, 1998
Page 2
We have been counsel to GPU, a Pennsylvania corporation, for
many years. In such capacity, and as counsel to GPU's subsidiaries, we have
participated in various proceedings relating to GPU and we are familiar with the
terms of the outstanding securities of the General Public Utilities holding
company system.
We have examined, among other things, the Lease Agreements,
the Articles of Incorporation and By-laws of each of the GPU Companies each as
amended to date. We have also examined the Securities Certificates ("Securities
Certificates") of Met-Ed and Penelec filed with the Pennsylvania Public Utility
Commission ("PaPUC"). In addition, we have examined such other instruments,
agreements and documents and made such other investigation as we have deemed
necessary as a basis for this opinion.
With respect to certain matters of Pennsylvania law, insofar
as it applies to the transactions contemplated by Met-Ed, we have relied upon
the opinion of Ryan, Russell, Ogden & Seltzer LLP which is being filed as
Exhibit F-2(b) to the Application. As to all other matters of Pennsylvania law,
we have relied upon the opinion of Ballard Spahr Andrews & Ingersoll, LLP which
is being filed as Exhibit F-3(b) to the Application.
Based upon the foregoing, and assuming that the PaPUC issues
orders registering the Securities Certificates filed by Met-Ed and Penelec and
that the transactions proposed in the Application are carried out in accordance
therewith, we are of the opinion that when the Commission shall have entered an
order forthwith granting the Application,
(a) all State laws applicable to the proposed
transactions will have been complied with;
(b) the Lease Agreements will be valid and binding
obligations of the GPU Companies which are parties thereto in
accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other laws affecting creditors' rights
generally and the Atomic Energy Act of 1954, as amended, and
the regulations thereunder and general principles of equity;
(c) the GPU Companies will legally acquire any
Nuclear Material which they may acquire under and pursuant to
their respective Lease Agreements; and
(d) the consummation of the transactions proposed in
the Application will not violate the legal rights of the
holders of any securities issued by any of the GPU Companies
or any "associate company" thereof, as defined in the Act.
<PAGE>
Securities and Exchange Commission
October 14, 1998
Page 3
We hereby consent to the filing of this opinion as an exhibit
to the Application and in any proceedings before the Commission that may be held
in connection therewith.
Very truly yours,
BERLACK, ISRAELS & LIBERMAN LLP
Exhibit F-2(b)
October 14, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Jersey Central Power & Light Company
Metropolitan Edison Company
Pennsylvania Electric Company
SEC File No.70-7862
-------------------
Ladies and Gentlemen:
We have examined Post-Effective Amendment No. 4 to the
Application on Form U-1, dated July 13, 1998, under the Public Utility Holding
Company Act of 1935 (the "Act"), filed with the Securities and Exchange
Commission ("Commission") by Jersey Central Power & Light Company ("JCP&L"),
Metropolitan Edison Company ("Met-Ed") and Pennsylvania Electric Company
("Penelec") (collectively, the "GPU Companies"), subsidiaries of GPU, Inc.
("GPU"), which has been docketed in SEC File No. 70-7862, as about to be amended
by Post-Effective Amendment No. 5 thereto, dated this date, of which this
opinion is to be a part. (The Application, as amended and as thus to be amended,
is hereinafter referred to as the "Application".)
The Application contemplates, among other things, that the GPU
Companies would amend and/or restate their existing lease agreements with lessor
fuel corporations (as so amended, the "Lease Agreements") to provide for the
future acquisition and leasing of nuclear fuel, assemblies and component parts
("Nuclear Material") for use at Oyster Creek nuclear generating station ("Oyster
Creek") and the Three Mile Island Unit 1 nuclear generating station ("TMI-1").
JCP&L owns 100% of Oyster Creek and the GPU Companies jointly own TMI-l in the
following percentages: JCP&L - 25%; Met-Ed - 50%; and Penelec - 25%. The initial
terms of the Oyster Creek and TMI-1 Lease Agreements will be for 364 days,
subject to annual renewal upon the satisfaction of certain conditions. The total
amount of acquisition costs for Nuclear Material which may be outstanding at any
one time under the Lease Agreements may not exceed $90 million in the case of
the Oyster Creek Lease Agreement and $100 million in the case of the TMI-l Lease
Agreements. The fuel lessors would establish new credit facilities with The
First National Bank of Chicago, and PNC Bank, National Association, to provide
financing for the acquisition of Nuclear Material for Oyster Creek and TMI-l.
<PAGE>
Securities and Exchange Commission
October 14, 1998
Page 2
We have been counsel to Met-Ed, a Pennsylvania corporation,
for many years. In such capacity, we have participated in various proceedings
relating to Met-Ed and we are familiar with the terms of the outstanding
securities of Met-Ed.
We have examined, among other things, the Lease Agreements,
the Articles of Incorporation and By-laws of Met-Ed as amended to date. We have
also examined the Securities Certificate ("Securities Certificate") of Met-Ed
filed with the Pennsylvania Public Utility Commission ("PaPUC"). In addition, we
have examined such other instruments, agreements and documents and made such
other investigation as we have deemed necessary as a basis for this opinion.
Based upon the foregoing, and assuming that the PaPUC issues
orders registering the Securities Certificate filed by Met-Ed and that the
transactions proposed in the Application are carried out in accordance
therewith, we are of the opinion that when the Commission shall have entered an
order forthwith granting the Application,
(a) all Pennsylvania state laws applicable to
Met-Ed's participation in the proposed transaction will have
been complied with; and
(b) the Lease Agreement will be valid and binding
obligations of Met-Ed which is a party thereto in accordance
with its respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance
and other laws affecting creditors' rights generally and the
Atomic Energy Act of 1954, as amended, and the regulations
thereunder and general principles of equity.
We hereby consent to the filing of this opinion as an exhibit
to the Application and in any proceedings before the Commission that may be held
in connection therewith.
Very truly yours,
RYAN, RUSSELL, OGDEN & SELTZER LLP
Exhibit F-3(b)
October 14, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Jersey Central Power & Light Company
Metropolitan Edison Company
Pennsylvania Electric Company
SEC File No. 70-7862
--------------------
Ladies and Gentlemen:
We have examined the Post-Effective Amendment No. 4 to the
Application on Form U-1, dated July 13, 1998, under the Public Utility Holding
Company Act of 1935, as amended, filed with the Securities and Exchange
Commission (the "Commission") by Jersey Central Power & Light Company ("JCP&L"),
Metropolitan Edison Company ("Met-Ed") and Pennsylvania Electric Company
("Penelec" and, together with JCP&L and Met-Ed, the "GPU Companies"),
subsidiaries of GPU, Inc., and docketed in SEC File No. 70-7862, as proposed to
be amended by Post-Effective Amendment No. 5 thereto, dated this date, of which
this opinion is to be a part. (The Application, as so amended and as proposed to
be amended, is hereinafter referred to as the "Application".)
The Application contemplates, among other things, that the GPU
Companies would amend and/or restate their existing lease agreements with lessor
fuel corporations (as so amended, the "Lease Agreements") to provide for the
future acquisition and leasing of nuclear fuel, fuel assemblies and component
parts (the "Nuclear Material") for use at Oyster Creek nuclear generating
station and the Three Mile Island Unit 1 nuclear generating station ("TMI-1").
The GPU Companies jointly own TMI-1 in the following percentages: JCP&L - 25%;
Met-Ed - 50%; and Penelec - 25%. The initial term of the TMI-1 Lease Agreement
is up to 20 years, subject to early termination upon the occurrence of certain
events. The total amount of acquisition costs for the Nuclear Material which may
be outstanding at any one time under the TMI-1 Lease Agreement may not exceed
$100 million. The fuel lessors would establish a new credit facility with First
Chicago Capital Markets, Inc. and PNC Capital Markets, Inc., as Arrangers, the
banks parties thereto, PNC Bank, National Association, as Syndication Agent, and
The First National Bank of Chicago, as Administrative Agent, to provide
financing for the acquisition of the Nuclear Material for TMI-1.
We have been counsel to Penelec, a Pennsylvania corporation,
for many years and are familiar with the terms of its outstanding securities. We
have examined copies, signed, certified or otherwise proven to our satisfaction,
of the Restated Articles of Incorporation and By-Laws of Penelec. We have also
participated in the preparation of the Securities Certificate of Penelec filed
with the Pennsylvania Public Utility Commission. In addition, we have examined
such other instruments, agreements and documents and made such further
investigation as we have deemed necessary as a basis for this opinion
<PAGE>
Securities and Exchange Commission
October 14, 1998
Page 2
Based upon the foregoing, and assuming that the transactions
proposed in the Application are carried out in accordance therewith, we are of
the opinion, insofar as matters of Pennsylvania law are concerned, that when the
Commission shall have entered an order forthwith granting the Application,
(a) all Pennsylvania laws applicable to the proposed
transactions to be undertaken by Penelec will have been complied with;
(b) the Lease Agreement, to which Penelec is a party, will be
a valid and binding obligation of Penelec in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization,
moritorium, fraudulent conveyance and other laws affecting creditors'
rights generally, the Atomic Energy Act of 1954, as amended, and the
regulations thereunder and general principles of equity;
(c) Penelec will legally acquire any Nuclear Material which it
may acquire under and pursuant to its Lease Agreement; and
(d) the consummation of the transactions proposed to be
undertaken by Penelec in the Application will not violate the legal
rights of the holders of any securities issued by Penelec or its
subsidiaries, Ninevah Water Company, Penelec Capital, L.P. and Penelec
Capital II, L.P.
We hereby consent to the filing of this opinion as an exhibit
to the Application and in any proceedings before the Commission that may be held
in connection therewith.
Very truly yours,
BALLARD SPAHR ANDREWS & INGERSOLL, LLP
