SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 33-46795
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OLD DOMINION ELECTRIC COOPERATIVE
(Exact name of Registrant as specified in its charter)
VIRGINIA 23-7048405
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
4201 Dominion Boulevard, Glen Allen, Virginia 23060
(Address of principal executive offices) (Zip code)
(804) 747-0592
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant. NONE
Indicate the number of shares outstanding of each of the Registrant's classes of
Common Stock, as of the latest practicable date. The Registrant is a membership
corporation and has no authorized or outstanding equity securities.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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OLD DOMINION ELECTRIC COOPERATIVE
1996 ANNUAL REPORT ON FORM 10-K
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Item Page
Number Number
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PART I
<S> <C>
1. Business....................................................................... 1
2. Properties..................................................................... 11
3. Legal Proceedings.............................................................. 11
4. Submission of Matters to a Vote of Security Holders............................ 11
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters.......... 11
6. Selected Financial Data........................................................ 12
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................. 14
8. Financial Statements and Supplementary Data.................................... 22
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.................................................................. 45
PART III
10. Directors and Executive Officers of the Registrant............................. 45
11. Executive Compensation......................................................... 49
12. Security Ownership of Certain Beneficial Owners and Management................. 51
13. Certain Relationships and Related Transactions................................. 51
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............... 52
Signatures..................................................................... 59
Exhibit Index.................................................................. 62
</TABLE>
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PART I
ITEM 1. BUSINESS.
OLD DOMINION ELECTRIC COOPERATIVE
GENERAL
Old Dominion Electric Cooperative ("Old Dominion"), which was
incorporated under the laws of the Commonwealth of Virginia in 1948, is a
not-for-profit wholesale power supply cooperative engaged in the business of
providing wholesale electric service to its 12 member distribution cooperatives
(the "Members") which, in turn, are engaged in the retail sale of power to
Member consumers located in 70 counties throughout Virginia, Delaware, Maryland
and parts of West Virginia. As of December 31, 1996, Old Dominion and its
Members served more than 385,000 retail electric consumers (meters) within Old
Dominion's and the Members' service territory, representing a total population
of approximately 1.1 million people. Old Dominion's principal executive offices
are located at Innsbrook Corporate Center, 4201 Dominion Boulevard, Glen Allen,
Virginia 23060 (telephone 804-747-0592).
Old Dominion is owned entirely by the Members which are the purchasers of
the power sold by Old Dominion. The Members, in turn, are local consumer-owned
distribution cooperatives providing electric service on a retail basis. The
membership of each distribution cooperative consists of residential, commercial
and industrial consumers within an exclusive certificated service territory
granted by the respective state's public utility commission. See "The Members --
Territorial Integrity." The Members purchase substantially all of their power
from Old Dominion pursuant to long-term wholesale power contracts with Old
Dominion (the "Wholesale Power Contracts"). See "Wholesale Power Contracts." Old
Dominion has no legal interest in, or obligation with respect to, any of the
assets, liabilities, equity, revenues or margins of such Members, other than its
rights under such contracts to receive payment for power supplied.
The service territory of Old Dominion and its Members is primarily
suburban, rural and recreational areas; does not have any significant
concentration of power purchases by any single employer or industry; and
predominantly reflects a residential load both in terms of power sales and
number of consumers.
Old Dominion was organized for the purpose of securing adequate sources
of power for the Members at the lowest possible cost. Prior to December 1983,
Old Dominion acted solely as a central negotiating agent for the power purchased
by the Members. In December 1983, Old Dominion purchased from Virginia Electric
and Power Company ("Virginia Power") an 11.6% undivided ownership interest in
the North Anna Power Station, a two-unit 1,790 megawatt ("MW") (net capacity
rating) nuclear power facility located in Louisa County, Virginia, approximately
60 miles northwest of Richmond, Virginia ("North Anna"). With the North Anna
purchase, Old Dominion became an operating utility. See "System Assets--Power
Supply--North Anna."
Old Dominion also holds a 50% undivided interest in a two-unit 882 MW
(net capacity rating) coal-fired electric generating facility near Clover,
Virginia, approximately 100 miles southwest of Richmond, Virginia ("Clover").
Clover Unit 1 went into commercial operation on October 7, 1995, and Unit 2 went
into commercial operation on March 28, 1996. See "System Assets--Power
Supply--Clover."
Old Dominion also purchases power under agreements with Virginia Power,
Delmarva Power & Light Company ("Delmarva Power"), Public Service Electric &
Gas Company ("PSE&G"), American Electric Power-Virginia ("American
Electric Power"), formerly Appalachian Power Company and Allegheny Power
System ("Allegheny Power"), formerly Potomac Edison Company. See "System
Assets--Purchased Power."
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As a not-for-profit electric cooperative, Old Dominion is currently
exempt from Federal income taxation under Section 501(c)(12) of the Internal
Revenue Code of 1986, as amended.
Old Dominion is not a party to any collective bargaining agreement.
Old Dominion had 59 employees as of March 1, 1997, and believes that its
relations with its employees are good.
WHOLESALE POWER CONTRACTS
Old Dominion has entered into a long-term Wholesale Power Contract with
each of its Members. Each such contract provides that Old Dominion shall sell
and deliver to the Member, and the Member shall purchase and receive from Old
Dominion, all power that the Member requires for the operation of the Member's
system to the extent that Old Dominion has the power and facilities available.
The obligations of certain Members are subject to their right to purchase power
allocated to them from the Southeastern Power Administration ("SEPA"). See "The
Members--Contracts with SEPA." Each Wholesale Power Contract provides that if a
Member is required by law to purchase electric power from cogeneration
facilities or other qualifying facilities ("QF"), Old Dominion may at its
option, purchase such power from the Member at a rate not to exceed Old
Dominion's avoided cost. See "The Members--Power Purchases under PURPA."
Revenues from the following Members equaled or exceeded 10% of Old
Dominion's total revenues in 1996:
Percentage of
Old Dominion's
Members Revenues Total Revenues
- - ------- ------------- --------------
(in millions)
Northern Virginia Electric Cooperative...... $98.4 26.8%
Rappahannock Electric Cooperative........... 78.4 21.4
Delaware Electric Cooperative............... 38.2 10.4
REGULATION
GENERAL
Old Dominion is subject to regulation by the Federal Energy Regulatory
Commission ("FERC"). Certain of Old Dominion's operations are also subject to
regulation by the Department of Environmental Quality (the "DEQ"), the
Department of Energy (the "DOE"), the Nuclear Regulatory Commission (the "NRC")
and other federal, state and local authorities. Compliance with future laws or
regulations may increase Old Dominion's operating and capital costs by
requiring, among other things, changes in the design and operation of its
generation facilities.
The rates and charges made, demanded or received by Old Dominion for the
transmission and wholesale sale of power in interstate commerce, are regulated
by FERC. Old Dominion's rates and charges for power furnished to its Members are
established by Old Dominion pursuant to a comprehensive rate formula filed with
FERC. The formula provides for periodic adjustments of rates to recover actual
costs without further application to FERC. FERC may also review Old Dominion's
rates upon its own initiative or upon complaints and may order a reduction of
any rates determined to be unjust, unreasonable or otherwise unlawful and may
order a refund for amounts collected during such proceedings in excess of the
just, reasonable and lawful rates.
In addition to its jurisdiction over rates, FERC regulates the issuance
of securities and assumption of liabilities by Old Dominion, as well as the
acquisition of securities of other utilities and disposition of property other
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than generating facilities. Under FERC regulations, Old Dominion is also
prohibited from selling, leasing or otherwise disposing of the whole of its
facilities (other than generating facilities), or any part of such facilities
having a value in excess of $50,000, without FERC approval. Mergers,
consolidations and the acquisition of the securities of any other public utility
by Old Dominion also are subject to FERC approval.
Since Old Dominion is regulated by FERC, the Virginia State Corporation
Commission (the "VSCC") does not have jurisdiction over Old Dominion's rates and
services. The VSCC does, however, have oversight over the siting of Old
Dominion's utility facilities.
On behalf of its Members, Old Dominion has developed and published a
Competitive Bidding Program for use in purchasing electric capacity and energy
from other power suppliers. This program represents a system-wide election to
use a centrally administered competitive bidding process for all Members to
satisfy the requirements of the Public Utility Regulatory Policies Act ("PURPA")
and the rules of the respective state commissions having regulatory authority
over the Members.
ENVIRONMENTAL
Old Dominion is currently subject to regulation by the Environmental
Protection Agency ("EPA") and other federal, state and local authorities with
respect to the emission, discharge or release of certain materials into the
environment. As with all electric utilities, the operation of Old Dominion's
generating units could be affected by any environmental regulations promulgated
in the future. Capital expenditures and increased operating costs required to
comply with any such future regulations could be significant. Expenditures
necessary to ensure compliance with environmental standards or deadlines will
continue to be reflected in Old Dominion's capital and operating costs.
Old Dominion is subject to certain requirements of the Clean Air Act (the
"CAA") which provides for environmental air quality standards. The CAA requires
utilities owning fossil fuel fired power stations to, among other things, limit
emissions of sulfur dioxide or obtain allowances for such emissions, or both,
and limit emissions of oxides of nitrogen. Clover is designed and licensed to
operate at full capacity below the permitted sulfur dioxide emissions levels and
utilizes equipment which operates at a level which is at or below the
limitations for emission of oxides of nitrogen.
On December 19, 1996, the EPA published its final rule for the Acid
Rain/Nitrogen Oxide Emission Reduction Program. In accordance with the new
standard, Clover's two tangentially fired boilers must meet an emission rate of
.40 lbs/MMBTU. However, through its construction and operating permit, Clover is
required to meet a nitrogen oxide emission rate of .32 lbs/MMBTU on a 30-day
rolling average. Clover Units 1 and 2 currently operate in compliance with the
EPA regulation.
Old Dominion is also subject to permit limitations for surface water
discharges and for the operation of a combustion waste landfill. Surface water
discharges are covered under the Virginia Pollutant Discharge Elimination System
permit which contains limits required by the Clean Water Act and the State Water
Quality Standards. The Solid Waste Permit for the combustion waste landfill
contains operational and monitoring standards required by the Resource
Conservation and Recovery Act and the state's Solid Waste Management
Regulations. Clover is designed and licensed to operate within these permit
limitations.
In connection with Clover, Old Dominion's direct capital expenditures for
environmental control facilities, excluding capitalized interest, were
approximately $1.0 million in 1996. Direct capital expenditures for
environmental control facilities at North Anna, excluding capitalized interest,
were approximately $.2 million in 1996. Based on information provided by
Virginia Power, Old Dominion's portion of direct capital expenditures for
environmental control facilities planned for North Anna and Clover in the next
five years is estimated to be approximately $.7 million and $6.2 million,
respectively. These expenditures are included in Old Dominion's estimated
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capital expenditures. See Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
for Old Dominion's estimates of total capital expenditures for the years 1997
through 2001.
The scientific community, regulatory agencies and the electric utility
industry are examining the issues of global warming, acidic deposition,
visibility and regional haze, and the possible health effects of electric and
magnetic fields. While no definitive scientific conclusions have been reached
regarding these issues, it is possible that new regulations pertaining to these
matters could further increase the capital and operating costs of electric
utilities.
Old Dominion and its Members have entered into an agreement with the DOE
to participate in the voluntary Climate Challenge Program under the United
States Climate Challenge Action Plan. This voluntary program tracks reductions
in carbon dioxide emissions from efficiency programs. A report was submitted to
the DOE on December 14, 1996, summarizing various carbon dioxide reductions as a
result of efficiency programs and distribution system upgrades.
NUCLEAR
North Anna is subject to regulation by the NRC. Operating licenses issued
by the NRC are subject to revocation, suspension or modification, and the
operation of a nuclear unit may be suspended if the NRC determines that the
public interest, health or safety so requires. From time to time, new NRC
regulations require changes in the design, operation and maintenance of existing
nuclear reactors. Virginia Power has advised Old Dominion that it intends to
work with industry groups on license renewal programs, and apply for renewal of
the current 40-year licenses for Units 1 and 2, which expire in 2018 and 2020,
respectively. See Notes 1 and 12 to the Consolidated Financial Statements for a
discussion of other laws and regulations affecting Old Dominion as a result of
its ownership interest in North Anna.
Under the Nuclear Waste Policy Act (the "NWPA"), the DOE is to provide
for the permanent disposal of spent nuclear fuel produced by North Anna;
however, it is uncertain when these services will begin. Virginia Power
estimates that an interim spent nuclear fuel storage facility will be required
at North Anna in the late 1990's and submitted a license application to the NRC
in May 1995, for such a facility at North Anna. The VSCC began an investigation
of certain spent fuel storage and disposal issues on July 18, 1995. The VSCC
directed its staff to file a report setting forth its findings, recommendations
and proposed policy statements regarding spent nuclear fuel disposal. On
February 27, 1996, the staff issued its report suggesting a definitive policy be
delayed until (1) a ruling is forthcoming on pending litigation which seeks to
impose on the federal government the obligation to begin acceptance of spent
nuclear fuel no later than January 31, 1998, (2) the outcome of proposed
legislation which would amend the nuclear waste policy act to require the
development of a centralized interim storage facility has been determined, and
(3) a vision of the electric utility industry restructuring efforts has been
more fully conceptualized. The staff also suggested a definitive policy be
delayed until the restructuring of the utility industry is more fully
conceptualized.
On January 31, 1997, Virginia Power joined 33 other utilities in filing a
lawsuit against the DOE in the U.S. Court of Appeals for the District of
Columbia, asking the court to authorize suspension of payments to the Nuclear
Waste Fund and to authorize payment of those fees into escrow until the DOE
begins accepting used fuel.
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COMPETITION
The electric utility industry is becoming increasingly competitive as a
result of deregulation, competing energy suppliers, new technology and other
factors. The Energy Policy Act amended the Federal Power Act and the Public
Utilities Holding Company Act to allow for increased competition among wholesale
electricity suppliers and increased access to transmission services by such
suppliers. A number of other significant factors have affected the operations of
electric utilities including the availability and cost of fuel for the
generation of electric energy; the use of alternative fuel sources for space and
water heating and household appliances; fluctuating rates of load growth;
compliance with environmental and other governmental regulations; licensing and
other delays affecting the construction, operation and cost of new and existing
facilities; and the effects of conservation, energy management and other
governmental regulations on the use of electric energy. All these factors
present an increasing challenge to companies in the electric utility industry,
including Old Dominion and its Members, to reduce costs, to increase efficiency
and innovation, and to improve management of resources.
In an effort to achieve an orderly transition of the industry to a
competitive wholesale power market, FERC issued its final rules providing for
comparable transmission service for all users of the transmission system. Such
rules, which were issued on April 24, 1996, (Orders 888 and 889) are intended to
promote wholesale competition through open access, non-discriminatory
transmission service and will become the catalyst for moving the industry into a
competitive marketplace.
The 1997 Session of the Virginia General Assembly passed a resolution
continuing its study of the effects on the Commonwealth of the electric utility
industry restructuring and the need for legislative changes in order to promote
the public interest. The VSCC, in response to the study resolution, established
five working groups to examine several issues surrounding restructuring: System
Reliability, Environment, Cost/Benefit of Restructuring, Stranded Costs and
Models in a Restructured Environment. Representatives from the member systems,
Old Dominion and the Virginia, Maryland and Delaware Association of Electric
Cooperatives ("VMDA") are serving in these five working groups. In addition, the
VSCC issued a series of orders requiring utilities to file sample unbundled
rates by March 31, 1997, and to report on restructuring contracts with
independent power producers by June 1, 1997. The staff of the VSCC is also
required to submit a report on retail wheeling in other states by September 1,
1997. Both the Virginia General Assembly study (particularly the Models in a
Restructured Environment report) and the VSCC report will be used to craft
restructuring legislation to be considered in the 1998 Session of the Virginia
General Assembly.
The Maryland Public Service Commission (the "Maryland Commission") has,
via PSC Order No. 72938, reopened its study of electric utility restructuring
and retail competition. In an earlier study, reported in a final order dated
August 18, 1995, in Case No. 8678, the Maryland Commission adopted a "go slow"
approach with a commitment to allow the savings available in a mature wholesale
market to be explored. Following up on their acknowledgment of the potential
benefits of retail wheeling noted in Case No. 8678, the Maryland Commission is
examining changes that will be needed to move the state toward utility
restructuring and retail wheeling.
During 1996, the Delaware Public Service Commission (the "Delaware
Commission") convened a docket in mid-year in which the issues surrounding a
restructuring of Delmarva Power and deregulation could be discussed by all
interested parties. In late December 1996, a report of those meetings was
presented to the Delaware Commission by an administrative law judge. Many issues
have not been settled and negotiations continue with the various parties. It is
expected that a compromise will be negotiated and a proposal made to the
Delaware Commission for approval.
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CONSERVATION AND LOAD MANAGEMENT
ENERGY SERVICES
Old Dominion seeks to encourage and promote, through its Members and
their consumers, effective load reduction and energy efficiency programs. Load
management programs, combined with interruptible customers, provide Old Dominion
the peak load reduction capability of approximately 200 MW. Other programs
encourage the construction of efficient and affordable housing, the use of
energy efficient lighting and the purchase of energy efficient heating,
ventilation and air conditioning equipment. Member cooperatives also support
energy conservation efforts by providing home energy audits and educational
materials.
SEASONAL VARIATIONS
Old Dominion's system is geographically divided into two separate and
distinctive power supply area systems -- the mainland Virginia area system and
the Delmarva peninsula system. The two systems have similar customer usage
characteristics and distribution of sales by consumer classification.
Historically, the mainland Virginia area system's peak electric demand is in the
winter months, while the Delmarva peninsula system's peak electric demand is in
the summer months. While there is little variance between its summer and winter
peak electric demands, Old Dominion, representing both areas, typically has
experienced a slightly higher peak demand for power in the winter months. This
peak is due to the winter heating load which reflects the large residential
component of Old Dominion's total load. The mainland Virginia area represented
80.6% of Old Dominion's 1996 peak demand.
THE MEMBERS
TERRITORIAL INTEGRITY
The service territory of Old Dominion's Members range from the suburban
Washington D.C. area in Northern Virginia to the Atlantic shore of Delaware, the
Appalachian Mountains and the North Carolina border. Pursuant to statutes in
Virginia and Delaware and an order of the public service commission in Maryland,
each of the Members operating in those states has been granted an exclusive
service territory, certificated by its respective state commission. Generally, a
Member's certificated service territory cannot be changed, nor can customers in
such territories change electric suppliers, unless the applicable state
commission determines that the service provided by the certificated Member is
inadequate.
Subject to statutory limitations, a municipality operating an electric
system can expand into a Member's service territory by annexing a portion
thereof. The small number of municipally-owned electric systems in close
proximity to the Members' service territories and the statutory limitations on
annexation limit the threat to Old Dominion's Members. Moreover, Old Dominion's
Members would be entitled to compensation in the event their territory is
annexed. Virginia currently has a statutory moratorium on non-consensual
annexation by a city which is scheduled to expire on July 1, 1997.
CONTRACTS WITH SEPA
In addition to power received from Old Dominion under the Wholesale Power
Contracts, certain Members receive a power allocation from SEPA. The SEPA
allocation to such Members is 76 MW plus associated energy, representing
approximately 4.4% of total Member peak demand and approximately 4.2% of total
Member energy requirements in 1996. Such Members' contracts with SEPA were
renewed during 1996 and will expire in 1998. Old Dominion anticipates that it
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will have adequate sources of energy in the event the SEPA contracts are not
renewed in 1998. Each Member which purchases power from SEPA receives its
allotment directly from SEPA and pays SEPA directly for such power.
POWER PURCHASES UNDER PURPA
In addition to purchases from Old Dominion and SEPA, the Members are also
required to purchase power from QFs under PURPA. Purchases of power generated by
QFs constituted less than 1.0% of Old Dominion's energy requirements in 1996.
Pursuant to FERC regulations, purchases from QFs must be made at avoided costs.
Although the Members are required to purchase power from QFs, such power is
currently being resold to Old Dominion, at a rate not to exceed Old Dominion's
avoided costs. The costs are blended into Old Dominion's overall rates charged
to all Members. Under the Wholesale Power Contracts, Old Dominion may, at its
option, but is not obligated to, purchase this power. No determination has been
made as to whether the current arrangement will apply to power that Members may
be required to purchase from QFs in the future.
COOPERATIVE STRUCTURE
Old Dominion is a membership corporation, and the Members are not
subsidiaries of Old Dominion. The Members operate their independent systems on a
not-for-profit basis. Accumulated margins remaining after payment of expenses
and provision for depreciation constitute patronage capital of the Members'
consumers. Refunds of accumulated patronage capital to the individual consumers
are made from time to time on a patronage basis subject to Member policies and
in conformity with limitations contained in the Members' Rural Utilities
Services mortgages.
SYSTEM ASSETS
POWER SUPPLY
NORTH ANNA. Old Dominion has an 11.6% undivided ownership interest in
North Anna, including nuclear fuel and common facilities at the power station,
and a portion of spare parts inventory and other support facilities. This
undivided ownership interest was acquired in 1983 more than five years after the
commencement of commercial operation of Unit 1 (June 1978) and more than three
years after the commencement of commercial operation of Unit 2 (December 1980).
Old Dominion is responsible for 11.6% of all post-acquisition date additions and
operating costs associated with North Anna, as well as a pro-rata portion of
Virginia Power's administrative and general expenses directly attributable to
North Anna, and must provide its own financing for these items. In addition, Old
Dominion separately provides for its portion of the decommissioning costs of
North Anna; see Note 1 to the Consolidated Financial Statements.
Like other nuclear plants, North Anna is subject to unanticipated or
extended outages for repairs, replacements or modifications of equipment or to
comply with regulatory requirements. Such outages may involve significant
expenditures not previously budgeted, including replacement energy costs. Stress
corrosion cracking has occurred in steam generators of a certain design,
including those at North Anna Units 1 and 2. The steam generators on Unit 1 were
replaced in 1993 and the steam generators on Unit 2 were replaced in 1995.
During the year ended December 31, 1996, unscheduled maintenance outages for
Units 1 and 2 were three days and 45 days, respectively.
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During 1996, North Anna provided approximately 19.8% of the energy
requirements of Old Dominion. For statistics regarding North Anna's
performance for the three year period ended December 31, 1996, see Item
7. "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Operating Expenses."
CLOVER. In 1992, construction began on the Clover Power Station, a joint
project between Old Dominion and Virginia Power in which each owned a 50%
undivided interest. Old Dominion has entered into a sale and lease-back of its
undivided interest in certain pollution control assets at Clover and separate
leases and lease-backs of its undivided interest in each unit and related common
facilities, including the pollution control assets. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources". Old Dominion is responsible for 50% of all post-construction
additions and operating costs associated with Clover, as well as a pro-rata
portion of Virginia Power's administrative and general expenses for Clover, and
must provide its own financing for these items. The net capacity rating of each
Clover unit is 441 MW.
During 1996, Clover provided approximately 29.3% of the energy
requirements of Old Dominion. For statistics regarding Clover's performance
for the year ended December 31, 1996, see Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Operating Expenses."
PURCHASED POWER
In 1996, Old Dominion purchased approximately 50.9% of its total energy
requirements pursuant to agreements with five suppliers: Virginia Power,
Delmarva Power, PSE&G, American Electric Power and Allegheny Power. These
purchases are system purchases that do not depend on the performance of any
single unit in a seller's system. Generally, under these arrangements, Old
Dominion's purchases expand and contract to fill the incremental requirements of
the Members over that provided by Old Dominion's owned generation, thereby
minimizing any risk of excess generating resources.
VIRGINIA POWER. Under the terms of the Interconnection and Operating
Agreement with Virginia Power (the "I&O Agreement"), Old Dominion agreed to
purchase from Virginia Power reserve power for North Anna and its entire monthly
requirements for supplemental power to meet the needs of its Virginia Members
(except A&N Electric Cooperative) not met from Old Dominion's portion of North
Anna and Clover generation. Old Dominion's obligations to purchase supplemental
power may be reduced by any amount with nine years notice or through the
construction of jointly owned facilities, or by 4% each year if notice is given
three months prior to year end. Amendment No. 1 to the I&O Agreement (the
"Amendment") allows Old Dominion to accumulate its 4% per year reduction for the
life of the Agreement. Under the terms of the Amendment, for the first four
years Old Dominion will purchase the 4% per year reduction from Virginia Power.
The Amendment has an effective date coincident with commercial operation of
Clover Unit 2 and expires in eight years. The I&O Agreement expires on the
earlier of the date on which all facilities at North Anna have been retired or
decommissioned and the date upon which Old Dominion's interest in North Anna is
reduced to zero.
In 1996, Old Dominion entered into discussions with Virginia Power to
develop a new relationship reflective of the competitive marketplace. To date,
the parties have entered into a Principles of Agreement which is expected to
result in a final contract replacing the I&O Agreement effective January 1,
1998.
Virginia Power supplied approximately 27.9% of Old Dominion's total
energy requirements in 1996.
DELMARVA POWER. Old Dominion has a partial requirements agreement with
Delmarva Power which obligates Delmarva Power to provide the balance of Old
Dominion's power requirements for A&N Electric Cooperative, Choptank Electric
Cooperative and Delaware Electric Cooperative in excess of the 150 MW purchased
from PSE&G or, within certain limits, any other capacity secured by Old Dominion
with proper notice to Delmarva Power. For the first five years charges for
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service are based on a rate formula. The agreement continues through 2004 with
automatic extensions for one year periods unless either party gives five years
notice, or Old Dominion exercises it option to reduce its load by up to 30% with
two years notice or 30% or more with five years notice.
In August 1996, Old Dominion exercised its option under the partial
requirements agreement with Delmarva Power to reduce its power purchases by 30%
beginning in 1998. The notice was given based on a review of the wholesale power
bids that Old Dominion received in response to its request for proposals for
power purchase contracts. Contracts to cover power purchases with a new supplier
beginning in 1998 are currently being finalized, subject to regulatory approval.
In addition to its notice to reduce power purchases by 30%, Old Dominion has
given Delmarva Power the required five years notice to terminate all purchases
under the partial requirements agreement by 2001.
Delmarva Power supplied approximately 6.9% of Old Dominion's total energy
requirements in 1996.
PSE&G. Old Dominion has an agreement with PSE&G (the "PSE&G Agreement")
to purchase 150 MW of capacity, consisting of 75 MW intermediate and/or peaking
capacity and 75 MW base load capacity, and associated energy, through 2005. The
PSE&G Agreement contains fixed capacity charges for the base, intermediate and
peaking capacity to be provided under the agreement. However, either party can
(within certain limits) apply to FERC to recover changes in certain costs of
providing services. In the event of a change in rate the PSE&G Agreement may be
terminated, with one year notice, by the party adversely affected. Old Dominion
may purchase the energy associated with the PSE&G capacity from PSE&G or other
power suppliers. If purchased from PSE&G, the energy cost is based on PSE&G's
incremental cost above its native load, taking into account the Pennsylvania-New
Jersey-Maryland Interconnection economy energy transactions. If purchased from
other power suppliers, Old Dominion would pay the negotiated energy rate. Old
Dominion purchases a large part of the energy at a fixed price from a third
party. Additionally, Old Dominion has entered into agreements with several power
suppliers and, to date, has elected to purchase a portion of the energy through
annual energy contracts with the remainder supplied through economy energy
decisions made on a daily basis.
Approximately 13.9% of Old Dominion's total energy requirements in 1996
was supplied under the PSE&G Agreement.
ALLEGHENY POWER. Under a contract that renews annually, Old Dominion
purchases power from Allegheny Power to serve consumers in the far western
portion of its service area, extending into West Virginia. Charges for service
under this contract are based on Allegheny Power's wholesale rate tariff filed
with FERC. The contract allows for purchases of up to 19.8 MW a year.
Old Dominion has entered into negotiation for a new agreement with
Allegheny Power to supply service to its existing delivery points on the Potomac
Edison system. On December 19, 1996, the parties executed a Principles of
Agreement which is expected to result in a new five year power purchase
agreement in 1997.
Allegheny Power supplied approximately .8% of Old Dominion's total
energy requirements in 1996.
AMERICAN ELECTRIC POWER. Old Dominion purchases power from American
Electric Power pursuant to two agreements, which expire in 2001. Combined, the
agreements allow for purchases of up to 100 MW a year. A third agreement, which
became effective April 1, 1996, provides for an additional eight MW. Charges for
power are assessed according to American Electric Power's wholesale rate tariff
filed with FERC.
American Electric Power supplied approximately 1.4% of Old Dominion's
total energy requirements in 1996.
9
<PAGE>
TRANSMISSION
VIRGINIA POWER SYSTEM. Under the operating agreements for both North Anna
and Clover, Virginia Power has agreed to make available to Old Dominion its
transmission and distribution systems, as needed, to transmit Old Dominion's
power from North Anna and Clover, as well as power purchased from other
suppliers, to the Members' delivery points. The rates charged by Virginia Power
for transmission services are set according to the principles outlined in the
I&O Agreement and are approved by FERC. Under the I&O Agreement, Old Dominion
consults with Virginia Power and exchanges information concerning the parties'
respective needs for additional transmission facilities. The I&O Agreement also
establishes a planning committee to, among other things ensure future
interconnection points are established in accordance with prudent utility
practices. In establishing future interconnection points, Old Dominion's Members
bear the cost of facilities necessary to effect interconnection at a point where
Virginia Power's facilities exist, and Virginia Power bears the cost of those
facilities on the supply side of the interconnection point, including the
necessary switching and protective equipment.
In December 1996, FERC approved a Virginia Power filed Rate Schedule
TFC-1, entitled Clover Transmission Interconnection Facilities Charges. The Rate
Schedule sets forth the terms and conditions under which Old Dominion will
compensate Virginia Power for 50% of the cost of the transmission facilities
required to interconnect Clover and the Virginia Power electric system. Those
facilities include two new 230 kV transmission lines, a new 500 kV transmission
line between Clover and the Carson substation, and related facilities.
DELMARVA POWER SYSTEM. The power purchase contract with Delmarva Power
provides that Delmarva Power will transmit power to delivery points in the
service territories of A&N Electric Cooperative, Choptank Electric Cooperative
and Delaware Electric Cooperative. Delmarva Power and Old Dominion currently
have a tariff and a settlement agreement filed with FERC concerning power
transmission. The power delivered under the contract with PSE&G is transmitted
by Delmarva Power under the terms of a transmission service agreement dated
October 31, 1994.
OTHER TRANSMISSION SYSTEMS. Allegheny Power, in its power sales contract
with Old Dominion, has agreed to transmit power to one delivery point in the
service territory of BARC Electric Cooperative, two delivery points in the
service territory of Rappahannock Electric Cooperative and three delivery points
in the service territory of Shenandoah Valley Electric Cooperative. In addition,
the power purchase contracts between American Electric Power and Old Dominion
require American Electric Power to transmit power to three delivery points in
the service territory of Southside Electric Cooperative.
FUEL SUPPLY
NUCLEAR FUEL. Under the Purchase, Construction and Ownership Agreement,
the I&O Agreement and the Nuclear Fuel Agreement, between Old Dominion and
Virginia Power, each dated as of December 28, 1982, amended and restated October
17, 1983, Virginia Power has the authority and responsibility to procure nuclear
fuel for North Anna. Virginia Power employs both spot purchases and long-term
contracts to satisfy nuclear fuel requirements. The nuclear fuel supply and
related services are expected to be adequate to satisfy current and future
nuclear generation requirements. Virginia Power reports that current agreements,
inventories and market conditions will support planned fuel cycles throughout
the remainder of the 1990's.
COAL SUPPLY. Under the Clover Operating Agreement between Old Dominion
and Virginia Power, dated as of May 31, 1990, Virginia Power has the authority
and responsibility to procure coal for Clover. As with nuclear fuel Virginia
Power employs both spot purchases and long-term contracts to support its needs
for coal. Virginia Power anticipates that sufficient coal supplies at reasonable
prices will be available for the remainder of the 1990's.
10
<PAGE>
ITEM 2. PROPERTIES.
Information with respect to Old Dominion's properties is set forth under
the caption "System Assets" included in Item 1 and is incorporated herein by
reference.
ITEM 3. LEGAL PROCEEDINGS.
Other than certain legal proceedings arising out of the ordinary course
of business, which management believes will not have a material adverse impact
on the results of operations or financial condition of Old Dominion, there is no
other litigation pending or threatened against Old Dominion. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" for a discussion of certain
disputes relating to Old Dominion's investment in Seacoast and the assertion by
the staff of the VSCC that gross receipts tax is payable in connection with
certain lease-leaseback transactions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Not Applicable
11
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following table presents selected historical information relating to the
financial condition and results of operations of Old Dominion over the past five
years:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- ---------
(in thousands, except ratios)
<S> <C>
Statement of Operations Data:
Operating Revenues.................... $366,909 $357,322 $ 336,541 $332,827 $ 306,746
-------- -------- --------- -------- ---------
Operating Expenses:
Operation:
Purchased power................. 180,338 234,295 233,916 238,532 223,230
Fuel and other.................. 62,274 29,175 12,165 11,740 11,993
-------- -------- --------- -------- ---------
242,612 263,470 246,081 250,272 235,223
Maintenance........................ 8,949 5,907 6,523 8,386 7,487
Administrative and general......... 15,421 15,159 13,628 12,061 11,913
Depreciation and amortization...... 26,724 11,989 8,868 8,937 7,791
Amortization of lease gains........ (1,596) - - - -
Decommissioning cost............... 681 681 681 681 681
Taxes other than income taxes...... 6,338 4,106 3,943 3,562 4,624
-------- -------- --------- -------- ---------
Total Operating Expenses.............. 299,129 301,312 279,724 283,899 267,719
-------- -------- --------- -------- ---------
Operating Margin...................... 67,780 56,010 56,817 48,928 39,027
-------- -------- --------- -------- ---------
Other Expense, net.................... (4,848) - - - -
--------
Investment Income..................... 6,475 8,330 4,724 2,211 2,735
-------- --------- --------- -------- ---------
Interest Charges:
Interest on long-term debt......... 60,865 64,748 64,601 57,569 37,543
Other ............................. 328 221 230 321 282
Allowance for borrowed funds used
during construction............. (4,026) (34,657) (40,984) (35,967) (17,521)
-------- --------- --------- -------- ---------
Net Interest Charges............... 57,167 30,312 23,847 21,923 20,304
-------- --------- --------- -------- ---------
Net Margin............................ $ 12,240 $ 34,028 $ 37,694 $ 29,216 $ 21,458
======== ========= ========= ======== =========
Margins for Interest Ratio(1)......... 1.20 1.53 1.59 1.51 1.58
==== ==== ==== ==== ====
</TABLE>
- - -------------------
(1) Under the Indenture (as hereinafter defined), Old Dominion is required,
subject to regulatory approval, to establish and collect rates reasonably
expected to yield Margins for Interest ("MFI") for the 12-month period
commencing with the effective date of such rates equal to at least 1.20
times total interest charges during such 12-month period on all
indebtedness secured under the Indenture or by a lien equal or prior to
the lien of the Indenture (the "MFI Ratio"). The MFI Ratio is determined
by dividing Old Dominion's MFI by its Interest Charges (as hereinafter
defined) where: MFI is defined as the sum of (i) net margins for the
period plus (ii) Interest Charges and accruals for Federal and other
taxes imposed on income, minus (iii) the amount, if any, by which certain
non-operating margins otherwise includable in net margins exceed 60% of
such net margins. Interest Charges are defined as the total interest
charges (whether capitalized or expensed) of Old Dominion on all
indebtedness secured under the Indenture or by a lien equal or prior to
the lien of the Indenture, including amortization of debt discount and
expense or premium. The MFI Ratio decreased from 1995 to 1996 primarily
due to the discontinuance of the Equity Development Plan (as hereinafter
defined) as of December 31, 1995.
12
<PAGE>
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(in thousands, except ratios)
<S> <C>
Balance Sheet Data:
Electric Plant:
In service, net................ $ 824,455 $ 552,784 $ 206,202 $ 210,393 $ 198,123
Construction work in progress 11,106 269,554 551,042 438,283 326,795
---------- ---------- ---------- ---------- ---------
Net Electric Plant............. 835,561 822,338 757,244 648,676 524,918
Other Assets...................... 320,785 256,608 316,657 422,122 277,704
---------- ---------- ---------- ---------- ---------
Total Assets...................... $1,156,346 $1,078,946 $1,073,901 $1,070,798 $ 802,622
========== ========== ========== ========== =========
Capitalization:
Patronage capital (1).......... $ 184,753 $ 172,513 $ 138,485 $ 100,791 $ 71,575
Long-term debt................. 664,490 738,974 793,070 861,702 614,886
---------- ---------- ---------- ---------- ---------
Total capitalization........... $ 849,243 $ 911,487 $ 931,555 $ 962,493 $ 686,461
========== ========== ========== ========== =========
Property Additions................ $ 34,655 $ 84,397 $ 177,245 $ 136,332 $ 159,666
========== ========== ========== ========== =========
Equity Ratio(2)................... 21.8% 18.9% 14.9% 10.5% 10.4%
====== ==== ==== ==== ====
</TABLE>
- - -------------------
(1) Since its incorporation, Old Dominion has not distributed patronage
capital to its Members.
(2) Equity ratio equals patronage capital divided by total capitalization. The
equity ratio increased from 1995 to 1996 due to the purchase of $83.1
million of debt, $18.4 million of debt service payments and the addition
of $12.2 million of equity. The equity ratio increased from 1994 to 1995
due to the purchase and retirement of $6.5 million of debt, the additional
purchase of $30.0 million of debt, $18.5 million of debt service payments
and the addition of $34.0 million of equity.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
Old Dominion operates on a not-for-profit basis and, accordingly, seeks
only to generate revenues sufficient to recover Old Dominion's cost of service
and to generate margins sufficient to establish reasonable reserves and meet
financial coverage requirements. Revenues in excess of expenses in any year are
designated as net margins in Old Dominion's Consolidated Statements of Revenues,
Expenses and Patronage Capital. Retained net margins are designated in Old
Dominion's Consolidated Statements of Revenues, Expenses and Patronage Capital
and Consolidated Balance Sheets as patronage capital, which is assigned to each
Member on the basis of patronage. Patronage capital currently constitutes all of
Old Dominion's equity. Since its incorporation, Old Dominion has not distributed
patronage capital to its Members. Any distributions in the future are subject to
the discretion of the Board of Directors of Old Dominion and to certain
restrictions contained in the Indenture of Mortgage and Deed of Trust, dated as
of May 1, 1992, between Old Dominion and Crestar Bank, as trustee, (as
supplemented by five supplemental indentures thereto, is hereinafter
collectively referred to as the "Indenture").
Prior to June 1992, Old Dominion was required by the terms of its
mortgage then in effect with the RUS (the "RUS Mortgage") to design its rates to
maintain certain ratios. As a result of the prepayment of its RUS-guaranteed
indebtedness in June 1992, Old Dominion is not subject to the requirements of
the RUS Mortgage.
Under a rate formula accepted for filing by FERC in 1992, the rates
charged by Old Dominion are developed using a rate methodology under which all
categories of costs are specifically separated as components of the formula to
determine Old Dominion's revenue requirements. The rate methodology uses
traditional techniques to allocate costs to capacity and energy in establishing
rates to the Members. The formula is intended to permit collection of revenues
which, together with revenues from all other sources, are equal to all costs and
expenses recorded on Old Dominion's books, plus an additional 20% of total
interest charges plus additional equity contributions as approved by Old
Dominion's Board of Directors. It also provides for the periodic adjustment of
rates to recover actual prudently incurred costs, whether they increase or
decrease, without further application to and acceptance by FERC.
In order to minimize the power costs to Members and to provide for
uncertainties connected with the establishment of prospective rates, in 1984 Old
Dominion's Board of Directors established a plan (the "Margin Stabilization
Plan") which allows Old Dominion to review actual cost of service and power
sales as of year end and to adjust revenues from the Members to take into
account actual results and financial coverages. Old Dominion's FERC rate formula
allows Old Dominion to recover and refund amounts under the Margin Stabilization
Plan. All adjustments, whether increases or decreases, are recorded in the year
affected and allocated to Members based on power sales during that year. Such
increases or decreases are collected from Members, or offset against amounts
owed by the Members, in the succeeding year.
Under the Indenture, Old Dominion is required, subject to regulatory
approval, to establish and collect rates which are reasonably expected to yield
Margins for Interest ("MFI") for the 12-month period commencing with the
effective date of such rates equal to at least 1.20 times total interest charges
during such 12-month period on all indebtedness secured under the Indenture or
by a lien equal or prior to the lien of the Indenture (the "MFI Ratio"). The
Indenture limits the amount of certain non-operating margins that may be taken
into account in calculating MFI to 60% of net margins. Since 1984, Old
Dominion's first full year as an operating utility, Old Dominion's non-operating
margins have not equaled or exceeded 60% of net margins. The management of Old
Dominion does not anticipate that non-operating margins will equal or exceed 60%
of net margins in the foreseeable future. The management of Old Dominion also
believes that the rate formula described above and the rates and charges
established under the Wholesale Power Contracts will enable Old Dominion to
achieve such MFI.
14
<PAGE>
Old Dominion achieved an MFI Ratio of 1.20 in 1996, 1.53 in 1995 and 1.59
in 1994. The MFI Ratio decreased from 1995 to 1996 due to the discontinuance of
the Equity Development Plan (as hereinafter defined) as of December 31, 1995.
The MFI Ratio decreased from 1994 to 1995 because the margins generated under
the Equity Development Plan increased at a lesser rate than the rate at which
the margin requirement on interest charges increased due to the decrease in
interest income on bond proceeds.
Under the Margin Stabilization Plan, Old Dominion reduced revenues and
related receivables from Members for 1996, 1995 and 1994 power sales in the
amount of $3.5 million, $3.5 million and $3.0 million, respectively.
RESULTS OF OPERATIONS
OPERATING REVENUES. Old Dominion's operating revenues are derived from
power sales to its Members and to non-members. Revenues from sales to Members
are a function of the requirement for power by the Members' consumers and Old
Dominion's cost of service in meeting that requirement. The major factors
affecting the Members' consumers' demand for power are the growth in the number
of consumers and seasonal weather fluctuations.
Old Dominion's energy sales to its members, operating revenues and
average power cost for the past three years were as follows:
Total Average
Operating Power
Year Ended December 31, Sales Revenues Cost
----------------------- --------- ------------- -------
(MWh) (in millions) ($/MWh)
1996................................. 7,482,482 $366.5 $48.98
1995................................. 7,258,301 357.3 49.23
1994................................. 6,899,602 336.5 48.78
The average power cost to Members is based on the blended cost of power
from all Old Dominion resources. Old Dominion's average cost per MWh fluctuates
inversely with the level of generation from North Anna and Clover, as measured
by their respective capacity factors. Accordingly, in years in which North Anna
and Clover perform at a high capacity factor, Old Dominion's average cost per
MWh decreases because the cost of energy generated from North Anna and Clover is
less than replacement supplemental energy purchased under the I&O Agreement.
Changes (increase/(decrease)) in operating revenues by component for the
past three years were as follows:
Year Ended December 31,
----------------------------------
1996 1995 1994
--------- --------- -------
(in thousands)
Sales to Members:
Power sales volume...................... $ 21,378 $ 25,897 $ 2,346
Blended rates........................... (1,982) (2,898) 1,859
Fuel adjustment revenues................ (10,175) (1,768) 964
Margin Stabilization Plan adjustments... (15) (463) (1,455)
--------- --------- -------
9,206 20,768 3,714
Sales to Non-members....................... 381 13 -
--------- --------- -------
$ 9,587 $ 20,781 $ 3,714
========= ========= =======
15
<PAGE>
Operating revenues increased from 1995 to 1996 primarily due to a 7.4%
increase in demand sales and a 3.1% increase in energy sales. The increases in
demand and energy sales were caused by an increase in the Members' consumers and
extremely cold temperatures in February and extremely hot temperatures in May
combined with colder than normal temperatures in March and April. Operating
revenues increased from 1994 to 1995 primarily due to a 9.0% increase in demand
sales and a 5.2% increase energy sales caused by the extreme temperatures in the
second and third quarters of 1995 and an increase in Members' consumers.
Based on projected purchased power costs and other operating expenses
for 1997, Old Dominion plans no increase in base rates for the 1997 rate year.
The Board of Directors approved a 1.0% reduction in the base demand rate to the
members effective April 1, 1997.
OPERATING EXPENSES. Prior to October 7, 1995, North Anna was the only
completed generating plant in which Old Dominion had an ownership interest.
While nuclear power plants, such as North Anna, generally have relatively high
fixed costs, such facilities operate with relatively low variable costs due to
lower fuel costs and technological efficiencies. Owners of nuclear power plants,
including Old Dominion, incur the embedded fixed costs of these nuclear
facilities whether or not the units operate.
Old Dominion also holds a 50% undivided interest in Clover. Unit 1
went into commercial operation on October 7, 1995, and Unit 2 went into
commercial operation on March 28, 1996.
When either North Anna or Clover is off-line, Old Dominion must purchase
replacement power under the I&O Agreement that is more costly. Any change in the
amount of Old Dominion's energy output from North Anna or Clover displaces or is
replaced by higher cost supplemental energy purchases from Virginia Power. As a
result, Old Dominion's operating expenses, and therefore its rates to the
Members, are significantly impacted by the operation of North Anna and Clover.
North Anna and Clover capacity factors for the past three years were as
follows:
North Anna Clover
------------------------ -----------------------
Year Ended December 31, Year Ended December 31,
------------------------ -----------------------
1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
Unit 1........ 88.5% 99.8% 86.2% 57.1% - -
Unit 2........ 77.7 76.3 94.1 70.9 - -
Combined...... 83.1 88.0 90.2 64.0 - -
North Anna Unit 1 was off-line 32 days in 1996, one day in 1995 and 31
days in 1994 and Unit 2 was off-line 79 days in 1996, 69 days in 1995 and 10
days in 1994. During 1996, Unit 1 was off-line 29 days for scheduled maintenance
and refueling and three days for unscheduled maintenance. Unit 2 was off-line 34
days for scheduled refueling and 45 days for equipment failure caused by foreign
material blocking the cooling flow. The 1995 Unit 2 outage was the result of the
Unit 2 steam generator replacement and refueling project, which began on March
25, 1995 and was completed in 69 days, 15 days ahead of schedule and 28 days
better than the 1993 Unit 1 replacement project. The 1994 Unit 1 outage was due
to scheduled maintenance and refueling and the Unit 2 outage was due to
unscheduled maintenance.
During the year ended December 31, 1996, Clover Unit 1 capacity factors
were lower than anticipated due to unscheduled maintenance, primarily due to
chronic failure of the titanium chimney liner system.
In February 1997, it was determined that the chimney liners on both
Clover Units 1 and 2 would be replaced by the Clover Consortium at no cost to
the joint owners except in lost generation and minimal overhead costs. See Item
16
<PAGE>
1. "Business--System Assets" in Old Dominion's 1995 Form 10-K for a discussion
of the Clover Consortium. The chimney liner replacement on Unit 1 is scheduled
to begin on September 1, 1997, and the chimney liner replacement on Unit 2 is
scheduled to begin March 1, 1998. It is estimated that it will take
approximately 90 to 110 days to complete the replacement on each unit.
Old Dominion's energy supply for the past three years was as follows:
Year Ended December 31,
-------------------------------------
1996 1995 1994
--------- --------- ---------
(MWh)
North Anna .............................. 1,515,777 1,608,983 1,657,172
Clover (1) .............................. 2,246,920 318,504 -
Purchased power:
Virginia Power.................... 2,137,318 3,862,619 3,824,450
Delmarva Power.................... 528,368 605,691 1,434,139
PSE&G............................. 1,066,678 954,690 -
Other............................. 173,806 118,518 113,020
--------- --------- ---------
Subtotal...................... 3,906,170 5,541,518 5,371,609
--------- --------- ---------
Total Available Energy.... 7,668,867 7,469,005 7,028,781
========= ========= =========
- - -------------------------------------------
(1) Clover Unit 1 went into commercial operation on October 7, 1995; Unit 2
went into commercial operation on March 28, 1996.
Purchased power costs decreased in 1996 as compared to 1995 primarily as
a result of Clover operations, since Unit 1 was in service for the whole year
and Unit 2 came on-line in March 1996. Purchased power costs decreased in 1995
as compared to 1994 due to the lower cost PSE&G contract which became effective
January 1, 1995. Additionally, Clover Unit 1 came on-line in October 1995.
Actual 1994 purchased power costs were $239.1 million which was off-set by a
$5.2 million adjustment ($2.4 million relating to 1994 and $2.8 million relating
to 1993) to the Virginia Power 300 MW power purchase contract.
Fuel costs increased in 1995 and again in 1996 as a result of Clover
operations.
Maintenance costs in 1996 were greater than in 1995 due to Clover
operations in 1996. Maintenance costs decreased in 1995 as compared to 1994
due to changes in estimates of the annual maintenance expense at North Anna.
Administrative and general expenses increased in 1995 as compared to 1994
primarily due to an increase in legal and consulting fees and Clover Unit 1
beginning commercial operation in October 1995.
Depreciation and amortization increased in 1996 as a result of Clover
operations. Depreciation and amortization increased in 1995 due to a change in
estimate of the lives of certain nuclear facilities. The increase is also
attributable to Clover Unit 1 coming on-line in October 1995.
Amortization of lease gains represents the recognition of the portion of
the gains attributable to 1996 on the two long-term lease transactions completed
in 1996. The gains are being amortized ratably into income over the operating
lease terms of 22 years and 23.4 years for Clover Units 1 and 2, respectively.
17
<PAGE>
Periodically, a site-specific study is performed to determine the
decommissioning cost estimate for North Anna. Decommissioning costs were $.7
million in 1996. Virginia Power's 1994 Decommissioning Cost Study for the North
Anna Power Station supports the amount currently being accrued and recovered
through rates.
Taxes other than income taxes increased in 1996 due to an increase in
property taxes on Clover and an increase in gross receipts taxes resulting from
increased revenues and decreased power purchases.
Other expenses (net) increased in 1996 as compared to 1995 due to the
recording of a reserve against Old Dominion's interest in Seacoast, Inc. The
increase was off-set by an additional billing to Virginia Power for direct
overhead costs related to Clover for the period 1990 through 1995 and also by
the recognition of the gain on the cross-border lease transaction.
Investment income decreased in 1996 as compared to 1995 primarily due to
lower interest rates and the decrease in the Equity Development Fund balance.
Investment income was greater in 1995 than in 1994 primarily due to higher
interest rates and higher investment balances during the year.
Interest on long-term debt (net) decreased in 1996 as compared to
1995 due to the purchase of $83.1 million of debt and $18.4 million of debt
service payments in 1996.
Allowance for borrowed funds used during construction decreased in 1996
and 1995 because interest capitalization on the Clover construction project
ceased as the units went into commercial operation.
EQUITY DEVELOPMENT PLAN. In the years 1988 through 1995, Old Dominion
charged its Members rates based on the cost of purchased power that would have
been incurred had Old Dominion not entered into a lower-cost, 300 MW, five-year
power purchase contract with Allegheny Power (1988 through 1992) and
subsequently with Virginia Power (1993 through 1995). This rate treatment was
designed and approved by Old Dominion's Board of Directors as an equity
development plan (the "Equity Development Plan") to provide capital resources
for Clover by allowing Members rates to remain at the level that would have
existed in the absence of the lower-cost power purchase contract. As a result of
this rate treatment, net margins for the years 1995 and 1994 were $19.0 million
and $24.7 million higher, respectively, than they would have been absent the
Equity Development Plan. Old Dominion discontinued the Equity Development Plan
effective December 31, 1995.
EQUITY CONTRIBUTION. Old Dominion continues to increase equity through
the collection of margins sufficient to meet a 1.20 MFI Ratio and through equity
development programs as approved by the Board of Directors from time to time. In
1995, the Board of Directors of Old Dominion approved the retention of $2.0
million of additional margins in excess of the 1.20 MFI Ratio and the Equity
Development Plan. There were no additional margins retained in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Old Dominion's cash flows from operating activities are affected
principally by the level of Old Dominion's net margins. The lower margins in
1996 resulted from the discontinuance of the Equity Development Plan effective
December 31, 1995, and a decrease in the margin requirement associated with the
purchase of $83.1 million of debt. Cash flows from operating activities also
were affected by the increase in depreciation expense resulting from the
completion of Clover Unit 2 and by the deferred gains on the two Clover
long-term lease transactions. The higher level of net margins in 1995 and 1994
resulted primarily from additional margins retained under the Equity Development
Plan and the additional margin requirements associated with the incurrence of
additional indebtedness principally related to Clover.
18
<PAGE>
In 1995, Old Dominion and 10 of its 12 member distribution systems
established an affiliate, CSC Services, Inc. ("CSC"), to explore alternative
business opportunities on behalf of the cooperatives. During 1996, CSC invested
in an approximate one-half interest in Seacoast Power LLC, whose wholly-owned
subsidiary, Seacoast, Inc. ("Seacoast"), executed a six-month power sales
contract with INECEL, the state-owned electric utility in Ecuador. CSC and the
other participants in Seacoast Power LLC also formed Power Ventures LLC ("Power
Ventures"). Through loans of approximately $17.5 million to Seacoast, Old
Dominion and CSC funded approximately one-half the cost to construct and operate
the generating assets necessary to fulfill the power sales contract with INECEL.
Because of contract disputes, INECEL did not pay invoices rendered by
Seacoast for energy made available under the terms of the power sales contract.
Accordingly, in July 1996, Seacoast filed a $26.0 million lawsuit in Ecuador
against INECEL seeking to recover approximately $16.3 million in amounts owed
under the power sales contract, plus damages and fees. Management of Seacoast
plans to vigorously pursue this matter; however, a trial date has not been set.
During the third quarter of 1996, Old Dominion's Board of Directors
decided to explore divestiture of the interest held by Old Dominion and its
affiliates in Seacoast. Based on negotiations with several potential buyers,
management provided a reserve of approximately $11.5 million against Old
Dominion's interest in Seacoast.
In December 1996, Old Dominion obtained from Seacoast an interest in
approximately one-half of the remaining accounts receivable due from INECEL in
exchange for approximately $4.4 million of principal owed by Seacoast pursuant
to a note payable to Old Dominion. The transaction transferred to Old Dominion
an approximate one-half interest in the claim Seacoast has in litigation against
INECEL.
Additionally, in December 1996, Seacoast transferred the generating
assets and the corresponding debt to Power Services Ecuador Ecuapower Cia. Ltda.
("Ecuapower"), an Ecuadorian entity wholly-owned by Power Ventures.
Concurrently, Old Dominion transferred its remaining notes receivable from
Seacoast to CSC in exchange for a note receivable from CSC of $8.5 million,
which was outstanding at December 31, 1996.
On January 27, 1997, Power Ventures sold its interest in Ecuapower to an
unaffiliated party for approximately $17.1 million. Old Dominion was entitled to
approximately $7.0 million after expenses paid at closing. One-half of the sales
price, or $8.6 million, of which Old Dominion received $3.2 million after
expenses, was paid in cash at closing. The other half of the sales price was
evidenced by a note, which was paid on March 6, 1997, of which Old Dominion
received $3.8 million.
On May 24, 1996, a default judgment of approximately $27.0 million was
rendered against Seacoast pursuant to a claim filed in the District Court of
Travis County, Texas, by an entity seeking damages for breach of an oral
contract by the former owners of Seacoast. Seacoast's registered agent in Texas
failed to notify the current owners of Seacoast of the claim in a timely manner.
On appeal, the judgment was remanded back to the District Court in December
1996; however, in January 1997, the appellate court reversed its decision and
agreed to hear the appeal. No rehearing date has been scheduled. Management of
Seacoast expects to prevail in having the judgment overturned.
In December 1994, Old Dominion entered into a cross-border tax benefit
lease with Esbelto BV ("Esbelto"), a Netherlands limited liability company and
an affiliate of Internationale Nederlanden Group ("ING"). Under the terms of the
transaction, Old Dominion transferred nominal title to certain qualifying
pollution control equipment (the "Qualifying Equipment") located at Clover to
Esbelto for a cash payment of $104.8 million, and concurrently entered into an
agreement to lease the Qualifying Equipment back from Esbelto. The lease
agreement has an 18-year term, requires Old Dominion to provide for all repair
and maintenance costs (including insurance and taxes), and provides Old Dominion
with a repurchase option exercisable at the end of the 10th year of the term and
other purchase options in specified circumstances. The Qualifying Equipment was
19
<PAGE>
transferred subject to the lien of the Indenture, and title will revert to Old
Dominion upon exercise of any repurchase option. To fully defease its basic
obligations under the lease, including the 10th year repurchase option, Old
Dominion irrevocably deposited $99.0 million of the proceeds with another ING
affiliate. In return, Esbelto released Old Dominion from its direct obligations
under the lease agreement. The lease agreement required Old Dominion to ensure
that Clover Units 1 and 2 were placed into service; accordingly, Old Dominion
had included the gain in other liabilities at December 31, 1995. Old Dominion
recognized the gain of $5.8 million in March 1996, after Clover Unit 2 was
placed into commercial operation and Old Dominion's obligations in connection
with the lease were fulfilled. Accordingly, Old Dominion has recorded the
equipment as an asset on its consolidated financial statements. However, since
Old Dominion's basic obligations under the lease agreement are fully defeased,
the lease obligations are not reflected on the consolidated financial
statements.
On March 1, 1996, Old Dominion finalized a long-term lease transaction
with an owner trust for the benefit of an equity investor. Under the terms of
the transaction, Old Dominion entered into a 49-year lease of its interest in
Clover Unit 1 (valued at $315.0 million) to such owner trustee, and
simultaneously entered into a 22-year lease of the interest back from such owner
trustee. As a result of the transaction, Old Dominion recorded a deferred gain
of $23.6 million, which is being amortized into income ratably over the 22-year
operating lease term. A portion of the proceeds from the transaction, $23.9
million, was used to retire a portion of Old Dominion's 8.76% First Mortgage
Bonds, Series 1992 A. Concurrent with the retirement of its Series 1992 A Bonds,
Old Dominion issued a like amount of zero coupon First Mortgage Bonds, Series
1996 A, with an effective interest rate of 7.06%. The lease transaction
increased other non-current liabilities and restricted investments and funds by
$51.5 million and $50.5 million, respectively.
On July 31, 1996, Old Dominion finalized a long-term lease transaction
with a business trust created for the benefit of another equity investor. Under
the terms of the transaction, Old Dominion entered into a 53.4-year lease of its
interest in Clover Unit 2 (valued at $320.0 million) to such business trust, and
simultaneously entered into a 23.4-year lease of the interest back from such
business trust. As a result of the transaction, Old Dominion recorded a deferred
gain of $39.3 million, which is being amortized into income ratably over the
23.4-year operating lease term. The lease transaction increased other
non-current liabilities and restricted investments and funds by $56.1 million
and $53.9 million, respectively.
After the above mentioned transactions closed, the VSCC staff asserted
that a 2.1% gross receipts tax is applicable to the approximately $635.0 million
base value of the lease-back transaction. Proceedings have not yet begun to
enforce the tax. Old Dominion estimates that an adverse determination on the
gross receipts tax issue would result in a maximum tax liability of $13.3
million. Old Dominion is vigorously contesting the anticipated assessment.
During 1996, Old Dominion purchased approximately $83.1 million of its
First Mortgage Bonds, Series 1992 A and 1993 A. The transactions resulted in a
net loss of approximately $2.2 million, including a write-off of original
issuance costs, which has been deferred.
In December 1995, Old Dominion purchased $30.0 million of its First
Mortgage Bonds, Series 1992 A. The transaction resulted in a loss of $4.9
million, including a write-off of original issuance costs, which has been
deferred. The bonds were retired on March 1, 1996.
In April 1995, Old Dominion purchased and retired $6.5 million of its
First Mortgage Bonds, Series 1992 A, due to a reduced estimate of capital
requirements for future generating facilities. The transaction resulted in a net
loss of approximately $.1 million, including a write-off of original issuance
costs, which has been deferred.
Gains and losses on the purchase of long-term debt are deferred and
amortized over the life of the remaining bonds.
20
<PAGE>
Old Dominion's capital improvement requirements are projected based on
long-range plans and supporting studies. The following projections are a product
of Old Dominion's most recently updated plans, and are subject to continuing
review and periodic revision. The table below summarizes Old Dominion's
historical and projected capital expenditures for 1994 through 2001 (in
millions):
<TABLE>
<CAPTION>
Historical Projected
----------------------- -------------------------------------
1994 1995 1996 1997 1998 1999 2000 2001
------ ----- ----- ---- ---- ---- ---- ----
<S> <C>
Clover....... $107.9 $70.6 $20.7 $4.2 $2.7 $2.0 $1.9 $ .9
North Anna... 69.1 13.3 12.8 2.4 1.8 1.4 1.0 1.1
Other........ .2 .5 1.2 .5 .3 .3 .3 .3
------ ----- ----- ---- ---- ---- ---- ----
Total... $177.2 $84.4 $34.7 $7.1 $4.8 $3.7 $3.2 $2.3
====== ===== ===== ==== ==== ==== ==== ====
</TABLE>
Old Dominion's share of the costs to construct Clover is expected to be
approximately $634.6 million, including capitalized interest.
Virginia Power replaced the steam generators at North Anna Unit 2 during
the second quarter of 1995. Old Dominion's portion of the Unit 2 steam generator
replacement cost, including capitalized interest, was approximately $13.8
million.
Old Dominion expects to satisfy the approximately $21.1 million of
capital expenditure requirements through 2001 with internally generated funds.
Old Dominion has established unsecured short-term lines of credit to
provide additional sources of financing. Old Dominion has a $30.0 million
committed line of credit with NationsBank which expires on September 30, 1997,
and is expected to be renewed. Additionally, Old Dominion has a $20.0 million
committed line of credit with National Rural Utilities Cooperative Finance
Corporation, a $20.0 million committed line of credit with CoBank, ACB and a
$15.0 million committed line of credit with First Union National Bank of North
Carolina, all of which expire on December 31, 1997, and are expected to be
renewed. Old Dominion also has arranged a number of uncommitted short-term
borrowing arrangements aggregating $60.0 million. Due to limitations contained
in certain of these uncommitted facilities, no more than $105.0 million in total
can be outstanding at any time under Old Dominion's committed and uncommitted
short-term borrowing arrangements. At December 31, 1996, Old Dominion had no
short-term borrowing outstanding under any of these arrangements. At December
31, 1995, $8.7 million was outstanding under these borrowing arrangements.
ACCOUNTING STANDARDS. Old Dominion has determined that the impact of
recently issued accounting pronouncements is not material to its consolidated
results of operations and financial position.
21
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
CONSOLIDATED FINANCIAL STATEMENTS
INDEX
Page
Number
------
Report of Independent Accountants..................................... 23
Consolidated Balance Sheets........................................... 24
Consolidated Statements of Revenues, Expenses and Patronage Capital... 25
Consolidated Statements of Cash Flows................................. 26
Notes to Consolidated Financial Statements............................ 27
22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors
Old Dominion Electric Cooperative
We have audited the accompanying consolidated balance sheets of Old Dominion
Electric Cooperative and its subsidiary (the "Cooperative") as of December 31,
1996 and 1995, and the related consolidated statements of revenues, expenses and
patronage capital and cash flows for each of the three years ended December 31,
1996. These financial statements are the responsibility of the Cooperative's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Old Dominion
Electric Cooperative and its subsidiary as of December 31, 1996 and 1995, and
the consolidated results of their operations and their cash flows for each of
the three years ended December 31, 1996 in conformity with generally accepted
accounting principles.
/s/ Coopers & Lybrand L.L.P.
Richmond, Virginia
February 26, 1997, except for Note 16,
for which the date is March 6, 1997
23
<PAGE>
OLD DOMINION ELECTRIC COOPERATIVE
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
(IN THOUSANDS) 1996 1995
- - -----------------------------------------------------------------------------------------------
ASSETS
- - ---------------------------------------------------------------
<S> <C>
Electric Plant:
In service $ 882,879 $ 588,636
Less accumulated depreciation (91,525) (68,738)
------------- --------------
791,354 519,898
Nuclear fuel, at amortized cost 8,311 6,026
Plant acquisition adjustment, at amortized cost 24,790 26,860
Construction work in progress 11,106 269,554
------------- --------------
Net Electric Plant 835,561 822,338
------------- --------------
Decommissioning Fund 39,298 36,118
Other Investments and Funds, Available for Sale 35,112 58,809
Restricted Investments and Funds 109,019 -
Current Assets:
Cash and cash equivalents 46,217 63,670
Note receivable, net of allowance of $1.6 million in 1996 6,992 13,793
Receivables, net of allowance of $5.1 million in 1996 36,084 35,255
Fuel stock 3,052 3,189
Materials and supplies, at average cost 5,186 4,971
Prepayments 1,187 1,069
Deferred energy - 463
------------- --------------
Total Current Assets 98,718 122,410
------------- --------------
Deferred Charges 27,412 29,575
Other Assets 11,226 9,696
------------- --------------
Total Assets $ 1,156,346 $ 1,078,946
============= ==============
CAPITALIZATION AND LIABILITIES
- - ---------------------------------------------------------------
Capitalization:
Patronage capital $ 184,753 $ 172,513
Long-term debt 664,490 738,974
------------- --------------
Total Capitalization 849,243 911,487
------------- --------------
Current Liabilities:
Long-term debt due within one year 17,928 18,385
Notes payable - 8,700
Accounts payable 45,717 62,954
Construction contract payable 15,283 22,541
Deferred energy 1,771 -
Accrued interest 4,445 5,020
Accrued taxes 497 113
Other 4,342 3,856
------------- --------------
Total Current Liabilities 89,983 121,569
------------- --------------
Decommissioning Reserve 39,298 36,118
Deferred Credits 64,868 3,804
Obligations Under Long-Term Leases 112,202 -
Other Liabilities 752 5,968
Commitments and Contingencies (Notes 1, 2, 3, 11, 12 and 15)
------------- --------------
Total Capitalization and Liabilities $ 1,156,346 $ 1,078,946
============= ==============
- - -----------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
24
<PAGE>
OLD DOMINION ELECTRIC COOPERATIVE
CONSOLIDATED STATEMENTS OF REVENUES,
EXPENSES AND PATRONAGE CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
(IN THOUSANDS) 1996 1995 1994
- - --------------------------------------------------------------------------------------------------------------
<S> <C>
Operating Revenues
Sales to Members $ 366,515 $ 357,309 $ 336,541
Sales to non-member 394 13 -
------------ ------------- ---------------
366,909 357,322 336,541
------------ ------------- ---------------
Operating Expenses:
Operation:
Fuel 38,093 11,559 6,970
Purchased power 180,338 234,295 233,916
Other 24,181 17,616 5,195
------------ ------------- ---------------
242,612 263,470 246,081
Maintenance 8,949 5,907 6,523
Administrative and general 15,421 15,159 13,628
Depreciation and amortization 26,724 11,989 8,868
Amortization of Lease Gains (1,596) - -
Decommissioning cost 681 681 681
Taxes other than income taxes 6,338 4,106 3,943
------------ ------------- ---------------
Total Operating Expenses 299,129 301,312 279,724
------------ ------------- ---------------
Operating Margin 67,780 56,010 56,817
------------ ------------- ---------------
Other Expense, net (4,848) - -
------------ ------------- ---------------
Investment Income:
Interest 5,082 8,018 4,437
Other 1,393 312 287
------------ ------------- ---------------
Total Investment Income 6,475 8,330 4,724
------------ ------------- ---------------
Interest Charges:
Interest on long-term debt, net 60,865 64,748 64,601
Other 328 221 230
Allowance for borrowed funds used during construction (4,026) (34,657) (40,984)
------------ ------------- ---------------
Net Interest Charges 57,167 30,312 23,847
------------ ------------- ---------------
Net Margin 12,240 34,028 37,694
Patronage Capital-beginning of year 172,513 138,485 100,791
------------ ------------- ---------------
Patronage Capital-end of year $ 184,753 $ 172,513 $ 138,485
============ ============= ===============
- - --------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
25
<PAGE>
OLD DOMINION ELECTRIC COOPERATIVE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
(IN THOUSANDS) 1996 1995 1994
- - --------------------------------------------------------------------------------------------------------------
<S> <C>
Cash Provided By Operating Activities:
Net margin $ 12,240 $ 34,028 $ 37,694
Adjustments to reconcile net margin to net cash provided
by operating activities:
Depreciation 24,534 9,812 6,719
Amortization of plant acquisition adjustment 2,070 2,070 2,067
Amortization of nuclear fuel (59) 4,638 5,309
Decommissioning cost 681 681 681
Amortization of debt discount 1,817 434 419
Amortization of other debt costs 1,235 1,249 1,243
Amortization of deferred charges and other assets 339 395 713
Amortization of lease obligations 4,636 - -
Reserve for interest in Seacoast 11,512 - -
Provision for contingent liability 630 - -
Gain from lease transactions (7,361) - -
Changes in Current Assets and Current Liabilities:
Change in current assets (6,113) 731 2,445
Change in current liabilities (15,970) 16,810 2,423
Decrease in deferred charges 807 424 257
Increase in other assets (1,756) (4,890) (821)
Increase (decrease) in deferred credits 61,064 - (613)
Increase(Decrease) in other liabilities 2,464 (556) 577
------------- ----------- -------------
Net Cash Provided By Operating Activities 92,770 65,826 59,113
------------- ----------- -------------
Cash Provided By (Used For) By Financing Activities:
Additions to long-term debt 23,884 - -
Obligations under long-term lease 112,201 - -
Borrowings under lines of credit (8,700) 8,700 -
Reductions of long-term debt (105,277) (54,381) (52,201)
Proceeds from tax lease transaction - - 5,765
------------- ----------- -------------
Net Cash Provided By (Used For) Financing Activities 22,108 (45,681) (46,436)
------------- ----------- -------------
Cash (Used For) Provided By Investing Activities:
Additions to electric plant (47,049) (87,970) (118,573)
Decommissioning fund deposits (681) (681) (681)
Reduction of other investments and funds, net 23,697 87,699 120,584
(Additions to) restricted investments and funds (109,019) - -
Note Receivable 698 (13,793) -
Retirement work in progress 23 580 (167)
------------- ----------- -------------
Net Cash (Used For) Provided By Investing Activities (132,331) (14,165) 1,163
------------- ----------- -------------
Net (Decrease)Increase in Cash and Cash Equivalents (17,453) 5,980 13,840
Beginning of Year Cash and Cash Equivalents 63,670 61,181 45,124
------------- ----------- -------------
End of Year Cash and Cash Equivalents $ 46,217 $ 67,161 $ 58,964
============= =========== =============
- - --------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
26
<PAGE>
OLD DOMINION ELECTRIC COOPERATIVE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL:
Old Dominion Electric Cooperative ("Old Dominion") is a not-for-profit wholesale
power supply cooperative incorporated under the laws of the Commonwealth of
Virginia in 1948. It provides wholesale electric service to 12 member
distribution cooperatives (the "Members") engaged in the retail sale of power to
member consumers located in Virginia, Delaware, Maryland and parts of West
Virginia. Old Dominion's Board of Directors is composed of two representatives
from each of the Members. Old Dominion's rates are not regulated by the
respective states' public service commissions, but are set periodically by a
formula that was accepted for filing by the Federal Energy Regulatory Commission
("FERC") on May 18, 1992.
Old Dominion complies with the Uniform System of Accounts prescribed by FERC. In
conformity with generally accepted accounting principles ("GAAP"), the
accounting policies and practices applied by Old Dominion in the determination
of rates are also employed for financial reporting purposes.
The preparation of the consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the amounts
reported therein. Actual results could differ from those estimates.
The accompanying financial statements reflect the consolidated accounts of Old
Dominion and Dominion Power Control, Ltd. ("DPC"), a wholly-owned subsidiary of
Old Dominion which provides financing for a load management system used by Old
Dominion and its Members. All intercompany balances and transactions have been
eliminated in consolidation. Old Dominion's 50% ownership interest in Regional
Headquarters, Inc. ("RHI") (Note 13) is recorded under the equity method of
accounting.
ELECTRIC PLANT:
Electric plant is stated at original cost when first placed in service. Such
cost includes contract work, direct labor and material, allocable overhead and
an allowance for funds used during construction. Upon the partial sale or
retirement of plant assets, the original asset cost and current disposal costs
less sale proceeds, if any, are charged or credited to accumulated depreciation.
In accordance with industry practice, no profit or loss is recognized in
connection with normal sales and retirements of property units. The plant
acquisition adjustment represents the excess of the cost of the plant to Old
Dominion over the original cost less accumulated depreciation at the time of
acquisition.
Maintenance and repair costs are expensed as incurred. Replacements and renewals
of items considered to be units of property are capitalized to the property
accounts.
DEPRECIATION, AMORTIZATION AND DECOMMISSIONING:
Depreciation is based on the straight-line method at rates which are designed to
amortize the original cost of properties over their service lives. Depreciation
rates for jointly-owned depreciable plant balances at the North Anna Nuclear
Power Station ("North Anna") were approximately 2.9% in 1996, 2.9% in 1995 and
2.6% in 1994. The depreciation rate for jointly-owned depreciable plant balances
at the Clover Power Station ("Clover") was approximately 2.5% in 1996 and 1995.
The North Anna plant acquisition adjustment is being amortized for rate-making
27
<PAGE>
and accounting purposes over a 40-year period using the straight-line method. In
1996, approximately $2.5 million of accelerated depreciation was recorded on the
assets of DPC to adjust the balances to the net realizable value.
Old Dominion accrues decommissioning cost over the expected service life of
North Anna and makes periodic deposits in a trust fund, such that the fund
balance will equal Old Dominion's estimated cost at the time of decommissioning.
The present value of the future decommissioning cost is credited to the
decommissioning reserve; increases are charged to Members through their rates.
The estimated cost to decommission North Anna is based on Virginia Power's 1994
Decommissioning Cost Study for the North Anna Power Station. The cost estimate
is based on the DECON alternative in which the equipment, structure, and
portions of the facility and site containing radioactive contaminants are
removed or decontaminated to a level that permits the property to be released
for unrestricted use shortly after cessation of operations. Virginia Power
updates the decommissioning study approximately every four years. Old Dominion's
portion of the estimated cost of decommissioning North Anna is expected to be
approximately $58.1 million in 1994 dollars. The decommissioning of North Anna
is expected to begin at the expiration date of each unit's operating license,
which is 2018 and 2020 for North Anna Units 1 and 2, respectively. In the event
the assumed return on the trust fund is not earned, the management of Old
Dominion believes that any additional cost incurred will be recoverable through
rates.
Amounts held in the decommissioning trust fund, which equals the decommissioning
reserve, at December 31, 1996 and 1995, were $39.3 million and $36.1 million,
respectively. Annual decommissioning expense, net of earnings on funds was $.7
million in 1996, 1995 and 1994.
NUCLEAR FUEL:
Owned nuclear fuel is amortized on a unit-of-production basis sufficient to
fully amortize, over the estimated service life, the cost of fuel plus future
storage and disposal costs.
Under the Nuclear Waste Policy Act of 1982 ("NWPA"), the Federal government has
the responsibility for the permanent disposal of spent nuclear fuel. In
accordance with the provisions of the NWPA, contracts with the Department of
Energy ("DOE") have been executed to provide for the permanent disposal of spent
nuclear fuel produced by North Anna, however, it is uncertain when these
services will begin. Virginia Power estimates that an interim spent nuclear fuel
storage facility will be required at North Anna in the late 1990's and submitted
a license application to the Nuclear Regulatory Commission ("NRC") in May 1995,
for such a facility at North Anna. Old Dominion is making quarterly payments
based on net electricity generated and sold by each reactor as its share of the
disposal costs. These costs are recovered in current rates.
Under the Energy Policy Act of 1992, all domestic utilities which purchased
enriched uranium from the DOE during the years 1969 through 1991 are required to
make payments to the DOE in the aggregate, a maximum of $150.0 million (adjusted
annually for inflation) each year for a new uranium enrichment decontamination
and decommissioning fund. Such payments, which commenced in 1993, are required
to continue for a period of 15 years. At December 31, 1996 and 1995, the total
accrued liability was $3.8 million and $4.1 million, respectively, which
represents Old Dominion's pro-rata share. This amount has been recorded as a
deferred charge and will be amortized and recovered by Old Dominion through
rates over the 15-year funding period.
ALLOWANCE FOR BORROWED FUNDS USED DURING CONSTRUCTION:
Old Dominion capitalizes interest on borrowings for significant construction
projects. Income earned on trusteed construction funds is netted against the
amount of interest charges capitalized. Interest capitalized in 1996, 1995 and
1994 was $4.0 million, $34.7 million and $41.0 million, respectively.
28
<PAGE>
INCOME TAXES:
As a not-for-profit electric cooperative, Old Dominion is currently exempt from
Federal income taxation under Section 501(c)(12) of the Internal Revenue Code of
1986, as amended. Accordingly, provisions for income taxes have not been
reflected in the accompanying consolidated financial statements.
OPERATING REVENUES:
Sales to Members consist of power sales pursuant to long-term wholesale power
contracts ("Wholesale Power Contracts") which Old Dominion maintains with each
of its Members. These Wholesale Power Contracts obligate each Member to pay Old
Dominion for power furnished in accordance with rates established by Old
Dominion. Power furnished is determined based on month-end meter readings.
Sales to non-members consist of sales of excess energy from Clover to Virginia
Power, a related party, under the terms of the contracts between Old Dominion
and Virginia Power relating to the construction and operation of Clover ("Clover
Agreements").
DEFERRED CHARGES AND OTHER ASSETS:
Certain costs have been deferred based on rate action by Old Dominion's Board of
Directors and approval by FERC. These costs will be recognized as expense
concurrent with their recovery through rates.
Other Assets include costs associated with the issuance of debt. These costs are
being amortized using the effective interest method over the life of the
respective debt issues.
DEFERRED ENERGY:
A deferral method of accounting is used to recognize differences between Old
Dominion's actual energy and fuel expenses and the energy and fuel revenues
collected from its Members. The deferred credit at December 31, 1996, of $1.8
million will be returned to the Members during 1997 in accordance with the
tariffs then in effect. The deferred debit at December 31, 1995, of $.5 million
was collected from the Members during 1996 in accordance with the tariffs then
in effect.
INVESTMENTS:
Financial instruments included in the decommissioning fund and other investments
and funds are classified as available-for-sale, and accordingly, are carried at
fair value. Unrealized gains and losses on investments held in the
decommissioning fund are deferred as an adjustment to the decommissioning
reserve until realized. Unrealized gains or losses on other investments, if
material, are reflected as a component of capitalization. Substantially all debt
securities presently held mature in less than one year.
RESTRICTED INVESTMENTS:
Restricted investments include amounts received from two long-term lease
transactions which are restricted for payment of lease obligations.
NON-CASH ACTIVITY:
Unrealized deferred gains on the decommissioning fund of $.5 million and
$1.7 million in 1996 and 1995, respectively, have been credited to the
decommissioning reserve.
29
<PAGE>
PATRONAGE CAPITAL:
Old Dominion is organized and operates as a cooperative. Patronage capital is
the retained net margins of Old Dominion which have been allocated to its
Members based upon their respective power purchases in accordance with Old
Dominion's bylaws. Since its incorporation, Old Dominion has not distributed
patronage capital to its Members. Any distributions in the future are subject to
the discretion of the Board of Directors of Old Dominion and the restrictions
contained in the Indenture of Mortgage and Deed of Trust, dated as of May 1,
1992, between Old Dominion and Crestar Bank, as trustee (as supplemented by five
supplemental indentures thereto, is hereinafter referred to as the "Indenture").
OUTAGE PROVISION:
The normal maintenance and refueling cycle for each of the North Anna nuclear
units is 18 months. During outage periods, approximately 35 days per unit, Old
Dominion incurs higher operation and maintenance costs and supplemental energy
purchases. Although the supplemental energy purchases are deferred and collected
in accordance with the deferred energy policy, the other outage costs are
charged to expense as incurred and have a direct impact on net margins. Old
Dominion has a policy of accruing a portion of incremental outage expenses that
are scheduled for the succeeding year. Operating expenses in 1996, 1995 and 1994
include $1.2 million, $1.3 million and $2.0 million, respectively, accrued under
this policy.
CONCENTRATIONS OF CREDIT RISK:
Financial instruments which potentially subject Old Dominion to concentrations
of credit risk consist of cash equivalents, investments, and receivables arising
from energy sales to Members and from Virginia Power related to Clover and other
transactions. Old Dominion places its temporary cash investments with high
credit quality financial institutions and invests in debt securities with high
credit standards as required by the Indenture and the Board of Directors. Cash
and cash investment balances may exceed FDIC insurance limits. Concentrations of
credit risk with respect to receivables arising from energy sales to Members are
limited due to the large member consumer base that represents Old Dominion's
cooperative Members' accounts receivable.
IMPAIRMENT OF LONG-LIVED ASSETS:
During 1996, Old Dominion adopted Statement of Financial Accounting Standards
No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" ("FASB 121"). FASB 121 requires that long-lived assets
and certain identifiable intangibles held and used by Old Dominion be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Old Dominion reviews all
required assets for potential impairment on an ongoing basis.
CASH EQUIVALENTS:
For purposes of the Consolidated Statements of Cash Flows, Old Dominion
considers all unrestricted highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
RECLASSIFICATIONS:
Certain reclassifications have been made to the accompanying prior years'
consolidated financial statements to conform with the current year presentation.
30
<PAGE>
NOTE 2 - JOINTLY OWNED PLANT
On December 21, 1983, Old Dominion purchased from Virginia Power an 11.6%
undivided ownership interest in North Anna, a two-unit, 1,790 MW (net capacity
rating) nuclear generating facility, as well as nuclear fuel and common
facilities at the power station, and a portion of spare parts, inventory and
other support facilities. Old Dominion is responsible for 11.6% of all
post-acquisition date additions and operating costs associated with the plant,
as well as a pro-rata portion of Virginia Power's administrative and general
expenses for North Anna, and must provide its own financing for these items. Old
Dominion's portion of assets, liabilities and operating expenses associated with
North Anna are included in the consolidated financial statements. As of December
31, 1996 and 1995, Old Dominion had outstanding accounts receivable balances of
$.1 million and $.7 million, respectively, due from Virginia Power for
operation, maintenance and capital investment at the facility.
In 1992, construction began on Clover, an 882 MW (net capacity rating)
coal-fired generating facility. Clover is a joint project between Old Dominion
and Virginia Power in which each holds a 50% undivided interest. Unit 1
commenced commercial operation on October 7, 1995, and Unit 2 commenced
commercial operation on March 28, 1996. Old Dominion is responsible for 50% of
all post-construction additions and operating costs associated with Clover, as
well as a pro-rata portion of Virginia Power's administrative and general
expenses for Clover, and must provide its own financing for these items. Old
Dominion's portion of assets, liabilities and operating expense associated with
Clover are included in the consolidated financial statements. Old Dominion's
share of the costs to construct Clover is expected to be approximately $634.6
million, including capitalized interest. In connection with its duties as
construction agent for Clover, Old Dominion had an outstanding accounts
receivable balance of $.1 million and $2.3 million, respectively, at December
31, 1996 and 1995.
Old Dominion's investment in jointly-owned plants at December 31, 1996, was as
follows:
North Anna Clover
---------- ------
(in millions, except percentages)
Ownership interest 11.6% 50.0%
Electric plant $349.3 $632.5
Accumulated depreciation
and amortization 141.9 16.9
Construction work in progress 10.6 .5
Projected capital expenditures for North Anna for 1997 through 2001 are $2.4
million, $1.8 million, $1.4 million, $1.0 million and $1.1 million,
respectively. Projected capital expenditures for Clover for 1997 through 2001
are $4.2 million, $2.7 million, $2.0 million, $1.9 million and $.9 million,
respectively.
NOTE 3 - POWER PURCHASE AGREEMENTS
In 1996 and 1995, North Anna and Clover furnished approximately 49.1% and 25.8%,
respectively, of the energy requirements of Old Dominion. In 1994, North Anna
furnished approximately 24.0% of the energy requirements of Old Dominion. The
remaining needs were satisfied through purchases of supplemental power from
Virginia Power and other power companies. Under the terms of the Interconnection
and Operating Agreement with Virginia Power ("I&O Agreement"), executed in
connection with Old Dominion's purchase of its 11.6% interest in North Anna, Old
Dominion agreed to purchase from Virginia Power reserve power for North Anna and
its entire monthly requirements for supplemental power to meet the needs of its
Virginia Members (except A&N Electric Cooperative) not met from Old Dominion's
portion of North Anna and Clover generation. The I&O Agreement provides that Old
31
<PAGE>
Dominion may reduce its obligations to purchase supplemental power by any amount
with nine years advance notice or through the construction of jointly-owned
facilities, or by up to 4% each year, if notice is given at least three months
prior to calendar year end. Amendment No. 1 to the I&O Agreement ("Amendment")
allows Old Dominion to accumulate its 4% per year reduction for the life of the
I&O Agreement. Under the terms of the Amendment, for the first four years Old
Dominion will purchase the 4% per year reduction from Virginia Power. The
Amendment has an effective date coincident with commercial operation of Clover
Unit 2 and expires in eight years. The I&O Agreement expires on the earlier of
the date on which all facilities at North Anna have been retired or
decommissioned and the date upon which Old Dominion's interest in North Anna is
reduced to zero.
In 1996, Old Dominion entered into discussions with Virginia Power to develop a
new relationship reflective of the competitive marketplace. To date, the parties
have entered into a Principles of Agreement which is expected to result in a
final contract replacing the I&O Agreement effective January 1, 1998.
Beginning January 1, 1995, Old Dominion's partial requirements agreement with
Delmarva Power & Light Company ("Delmarva Power") became effective obligating
Delmarva Power to provide Old Dominion's power requirements for its three
Members east of the Chesapeake Bay in excess of the 150 MW purchased from Public
Service Electric & Gas ("PSE&G") or, within certain limits, any other capacity
secured by Old Dominion with proper notice to Delmarva Power. For the first five
years charges for service are based on a rate formula. The agreement continues
through 2004 with automatic extensions for one year periods unless either party
gives five years notice, or Old Dominion exercises its option to reduce its load
by up to 30% with two years notice or 30% or more with five years notice.
In August 1996, Old Dominion exercised its option under the partial requirements
agreement with Delmarva Power to reduce its power purchases by 30% beginning in
1998. The notice was given based on a review of the wholesale power bids that
Old Dominion received in response to its request for proposals for power
purchase contracts. Contracts to cover power purchases with a new supplier
beginning in 1998 are currently being finalized, subject to regulatory approval.
In addition to its notice to reduce power purchases by 30%, Old Dominion has
given Delmarva Power the required five years notice to terminate all purchases
under the partial requirements agreement by 2001.
Old Dominion's purchased power costs for the past three years were as follow:
Year Ended December 31,
--------------------------
1996 1995 1994
---- ---- ----
(in millions)
Virginia Power $100.7 $159.6 $155.2
Delmarva Power 34.1 32.8 71.6
PSE&G 37.6 36.9 -
Other 7.9 5.0 7.1
------ ------ ------
$180.3 $234.3 $233.9
====== ====== ======
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<PAGE>
Old Dominion's power purchase agreements contain certain firm capacity and
minimum energy requirements. As of December 31, 1996, Old Dominion's minimum
purchase commitments under the various agreements, without regard to capacity
reductions or cost adjustments, were as follows:
Firm Minimum
Capacity Energy
Year Ending December 31, Requirements Requirements Total
------------------------ ------------ ------------ -----
(in millions)
1997 $15.3 $15.3 $30.6
1998 14.4 - 14.4
1999 16.4 - 16.4
2000 16.4 - 16.4
2001 16.4 - 16.4
Thereafter 45.1 45.1
------ ----- ------
$124.0 $15.3 $139.3
====== ===== ======
NOTE 4 - WHOLESALE POWER CONTRACTS
Old Dominion has Wholesale Power Contracts with all of its Members whereby each
Member is obligated to purchase substantially all of its power requirements from
Old Dominion through the year 2028. Each such contract provides that Old
Dominion shall sell and deliver to the Member, and the Member shall purchase and
receive from Old Dominion, all power that the Member requires for the operation
of the Member's system to the extent that Old Dominion has the power and
facilities available. Each Member is required to pay Old Dominion monthly for
power furnished under its Wholesale Power Contract in accordance with rates and
charges established by Old Dominion pursuant to a rate formula filed with FERC.
Under the accepted rate formula, the rates charged by Old Dominion are developed
using a rate methodology under which all categories of costs are specifically
separated as components of the formula to determine Old Dominion's revenue
requirements. The rate formula method uses traditional techniques to allocate
costs to capacity and energy in establishing rates to the Members. The formula
is intended to permit collection of revenues, which, together with revenues from
all other sources, are equal to all costs and expenses recorded on Old
Dominion's books, plus an additional 20% of total interest charges plus
additional equity contributions as approved by Old Dominion's Board of
Directors. It also provides for the periodic adjustment of rates to recover
actual prudently incurred costs, whether they increase or decrease, without
further application to and acceptance by FERC. Old Dominion's rate formula
allows Old Dominion to recover and refund amounts under the Margin Stabilization
Plan (as hereinafter defined).
In order to ensure that only actual cost of power service plus necessary margins
are billed to the Members each year and to provide for uncertainties connected
with the establishment of prospective rates, in 1984 Old Dominion's Board of
Directors established a plan (the "Margin Stabilization Plan") which allows Old
Dominion to review actual cost of service and power sales as of year end and to
adjust revenues from the Members to take into account actual results and
financial coverages. All adjustments, whether increases or decreases, are
recorded in the year affected and allocated to Members based on power sales
during that year. Such increases or decreases are either collected from Members,
or off-set against amounts owed by the Members, in the succeeding year. Under
the Margin Stabilization Plan, Old Dominion reduced revenues and related
receivables from Members for 1996, 1995 and 1994 power sales in the amount of
$3.5 million, $3.5 million and $3.0 million, respectively.
In 1994 and 1995, Old Dominion charged its Members rates based on the cost of
purchased power that would have been incurred had Old Dominion not entered into
the lower-cost, 300 MW power purchase contract with Virginia Power. This rate
treatment was designed and approved by Old Dominion's Board of Directors as an
equity development plan (the "Equity Development Plan") to provide capital
resources for Clover by allowing Member rates to remain at the level that would
have existed in the absence of the lower-cost power purchase contract with
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<PAGE>
Virginia Power. As a result of this rate treatment, net margins for the years
1995 and 1994 were $19.0 million and $24.7 million higher, respectively, than
they would have been absent the Equity Development Plan. Old Dominion
discontinued the Equity Development Plan effective December 31, 1995; however,
Old Dominion will continue to increase equity through the collection of margins
sufficient to meet the 1.20 margins for interest requirement of the Indenture
and through equity development programs as approved by the Board of Directors
from time to time. The cash equivalent of the cumulative additional net margins
earned under the Equity Development Plan is $15.0 million and $46.0 million at
December 31, 1996 and 1995, respectively, and has been set aside in a separate
fund and such amounts are included in other investments and funds in the
accompanying consolidated financial statements.
Revenues from the following Members equaled or exceeded 10% of Old Dominion's
total revenues for the past three years:
Year Ended December 31,
-----------------------
1996 1995 1994
---- ---- ----
(in millions)
Northern Virginia Electric Cooperative $98.4 $95.1 $92.6
Rappahannock Electric Cooperative 78.4 77.0 73.3
Delaware Electric Cooperative 38.2 37.6 34.3
NOTE 5 - NOTE RECEIVABLE
In 1995, Old Dominion and 10 of its 12 member distribution systems established
an affiliate, CSC Services, Inc. ("CSC"), to explore alternative business
opportunities on behalf of the cooperatives. During 1996, CSC invested in an
approximate one-half interest in Seacoast Power LLC, whose wholly-owned
subsidiary, Seacoast, Inc. ("Seacoast"), executed a six-month power sales
contract with INECEL, the state-owned electric utility in Ecuador. CSC and the
other participants in Seacoast Power LLC also formed Power Ventures LLC ("Power
Ventures"). Through loans of approximately $17.5 million to Seacoast, Old
Dominion and CSC funded approximately one-half the cost to construct and operate
the generating assets necessary to fulfill the power sales contract with INECEL.
During the third quarter of 1996, Old Dominion's Board of Directors decided to
explore divestiture of the interest held by Old Dominion and its affiliates in
Seacoast. Based on negotiations with several potential buyers, management
provided a reserve of approximately $11.5 million against Old Dominion's
interest in Seacoast.
In December 1996, Old Dominion obtained from Seacoast an interest in
approximately one-half of the remaining accounts receivable due from INECEL in
exchange for approximately $4.4 million of principal owed by Seacoast pursuant
to a note payable to Old Dominion. The transaction transferred to Old Dominion
an approximate one-half interest in the claim Seacoast has in litigation against
INECEL.
Additionally, in December 1996, Seacoast transferred the generating assets and
the corresponding debt to Power Services Ecuador Ecuapower Cia. Ltda.
("Ecuapower"), an Ecuadorian entity wholly-owned by Power Ventures.
Concurrently, Old Dominion transferred its remaining notes receivable from
Seacoast to CSC in exchange for a note receivable from CSC of $8.5 million,
which was outstanding at December 31, 1996.
34
<PAGE>
NOTE 6 - LONG-TERM LEASE TRANSACTIONS
On March 1, 1996, Old Dominion finalized a long-term lease transaction with an
owner trust for the benefit of an equity investor. Under the terms of the
transaction, Old Dominion entered into a 49-year lease of its interest in Clover
Unit 1 (valued at $315.0 million) to such owner trustee, and simultaneously
entered into a 22-year lease of the interest back from such owner trustee. As a
result of the transaction, Old Dominion recorded a deferred gain of $23.6
million, which is being amortized into income ratably over the 22-year operating
lease term. A portion of the proceeds from the transaction, $23.9 million, was
used to retire a portion of Old Dominion's 8.76% First Mortgage Bonds, Series
1992 A. Concurrent with the retirement of its Series 1992 A bonds, Old Dominion
issued a like amount of zero coupon First Mortgage Bonds, Series 1996 A with an
effective interest rate of 7.06%. The lease transaction increased other
non-current liabilities and restricted investments and funds by $51.5 million
and $50.5 million, respectively.
On July 31, 1996, Old Dominion finalized a long-term lease transaction with a
business trust created for the benefit of another equity investor. Under the
terms of the transaction, Old Dominion entered into a 53.4-year lease of its
interest in Clover Unit 2 (valued at $320.0 million) to such business trust and
simultaneously entered into a 23.4-year lease of the interest back from such
business trust. As a result of the transaction, Old Dominion recorded a deferred
gain of $39.3 million, which is being amortized into income ratably over the
23.4-year operating lease term. The lease transaction increased other
non-current liabilities and restricted investments and funds by $56.1 million
and $53.9 million, respectively.
35
<PAGE>
NOTE 7 - INVESTMENTS AND FUNDS-RESTRICTED AND UNRESTRICTED
Investments and funds consist of the following (at fair market value):
December 31,
----------------------
1996 1995
-------- --------
(in thousands)
Decommissioning Fund (trusteed) $ 39,298 $ 36,118
-------- --------
Other Investments and Funds:
Patronage Capital and Capital Term Certificates of CFC 914 923
Regional Headquarters, Inc.
Common stock (Note 13) 455 455
CSC Services, Inc. (Note 5)
Common stock 65 -
Preferred stock 196 -
Equity Development Plan Fund (Note 4) 15,001 46,045
Equity Reinvestment Fund 14,926 -
Other 3,555 11,386
-------- --------
Subtotal 35,112 58,809
-------- --------
Restricted cash and investments:
Lease Deposits 109,019 -
-------- --------
Total Investments and Funds $183,429 $ 94,927
======== ========
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<PAGE>
The preceding amounts were invested as follows:
December 31,
--------------------------
1996 1995
---- ----
(in thousands)
U.S. Government securities $ 53,619 $ 5,109
Corporate obligations 27,335 68
Corporate common stock 10,331 7,821
Corporate preferred stock 196 -
Corporate commercial paper 27,931 37,044
Money market mutual funds - 11,239
Cash and cash equivalents 62,721 31,979
Other 1,296 1,667
-------- --------
Total Investments and Funds $183,429 $94, 927
======== ========
There was no patronage capital allocation from CFC in 1996 or 1995.
At December 31, 1996 and 1995, the aggregate market value, based on quoted
market prices and prices obtained from independent sources, of the above
investments approximated cost.
37
<PAGE>
NOTE 8 - LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consists of the following:
December 31,
---------------------
1996 1995
---- ----
(in thousands)
<S> <C>
$25,565,962 principal amount of First Mortgage Bonds,
1996 Series A, due 1997 at an effective rate of 7.06% $ 25,566 -
$130,000,000 principal amount of First Mortgage Bonds,
1993 Series A, due 2013 at an interest rate of 7.48% 128,300 $129,000
$120,000,000 principal amount of First Mortgage Bonds,
1993 Series A, due 2023 at an interest rate of 7.78% 66,500 120,000
$350,000,000 principal amount of First Mortgage Bonds,
1992 Series A, due 2022 at an interest rate of 8.76% 243,665 271,200
$150,000,000 principal amount of First Mortgage Bonds,
1992 Series A, due 2002 at an interest rate of 7.97% 140,800 142,000
$50,000,000 principal amount of First Mortgage Bonds,
1992 Series A, due 1997 at an interest rate of 7.27% 16,603 33,334
$11,930,335 non-interest bearing First Mortgage Bonds,
1992 Series B, discounted at 10.84%, due quarterly
through December 15, 1996 - 1,570
$60,210,000 principal amount of First Mortgage Bonds,
1992 Series C, due 1997 through 2022 at interest rates
ranging from 4.9% to 6.5% 60,210 60,210
Louisa County Pollution Control Revenue Bonds (North Anna),
due December 1, 2008, with variable interest rates
(averaging 4.23% in 1996 and 4.03% in 1995) 6,750 6,750
Non-recourse debt of DPC due in monthly installments
through 2001, with variable interest rates (averaging
4.97% in 1996 and 4.52% in 1995) 2,322 2,572
-------- --------
690,716 766,636
Less unamortized discounts (8,298) (9,277)
Less current maturities (17,928) (18,385)
-------- --------
Total Long-Term Debt $664,490 $738,974
======== ========
</TABLE>
Substantially all assets of Old Dominion are pledged as collateral under the
Indenture.
The non-recourse debt of DPC is collateralized by a $2.6 million letter of
credit.
Gains and losses on the purchase of long-term debt are deferred and amortized
over the life of the remaining bonds.
38
<PAGE>
On October 4, 1994, Old Dominion's Board of Directors approved the purchase and
retirement of $50.3 million of the 1992 Series A Bonds and $1.0 million of the
1993 Series A Bonds. The bonds were purchased in October 1994 for approximately
$51.2 million and were retired. The transaction resulted in a net loss of $.6
million, which included the write-off of original issuance costs. Management's
decision to retire the bonds was based on a reduced estimate of capital
requirements for future generating facilities through 1997.
In April 1995, Old Dominion purchased and retired $6.5 million of its First
Mortgage Bonds, Series 1992 A. Based on a reduced estimate of capital
requirements for future generating facilities, the transaction resulted in a net
loss of approximately $.1 million, including the write-off of original issuance
costs.
On December 8, 1995, Old Dominion purchased $30.0 million of its First Mortgage
Bonds, Series 1992 A. The transaction resulted in a loss of $4.9 million,
including a write-off of original issuance costs. The bonds were retired March
1, 1996.
During 1996, Old Dominion purchased approximately $83.1 million of its First
Mortgage Bonds, Series 1992 A and 1993 A. The transaction resulted in a net
loss of approximately $2.2 million, including the write-off of original issuance
costs.
On February 13, 1997, Old Dominion refinanced its First Mortgage Bonds, 1996
Series A. The refinanced bonds have an effective interest rate of 7.06% and are
due in 2018, except for approximately $.6 million which is due January 1998.
Estimated maturities of long-term debt for the next five years are as follows:
Years Ending December 31, (in thousands)
------------------------- --------------
1997 $17,928
1998 29,535
1999 29,590
2000 29,700
2001 30,487
The aggregate fair value of long-term debt was $734.3 million and $859.2 million
at December 31, 1996 and 1995, respectively, based on current market prices. For
debt issues that are not quoted on an exchange, interest rates currently
available to Old Dominion for issuance of debt with similar terms and remaining
maturities are used to estimate fair value. Old Dominion believes that the
carrying amount of debt issues with variable rates that are refinanced at
current market rates is a reasonable estimate of their fair value.
NOTE 9 - SHORT-TERM BORROWING ARRANGEMENTS
Old Dominion has unsecured short-term lines of credit to provide additional
sources of financing. Old Dominion has a $30.0 million committed line of credit
with NationsBank which expires on September 30, 1997, and is expected to be
renewed. Additionally, Old Dominion has a $20.0 million committed line of credit
with National Rural Utilities Cooperative Finance Corporation, a $20.0 million
committed line of credit with CoBank, ACB and a $15.0 million committed line of
credit with First Union National Bank of North Carolina, all of which expire on
December 31, 1997 and are expected to be renewed. In addition, Old Dominion also
has arranged a number of uncommitted short-term borrowing arrangements
aggregating $60.0 million. Due to limitations contained in certain of these
uncommitted facilities, no more than $105.0 million in total can be outstanding
at any time under Old Dominion's committed and uncommitted short-term borrowing
arrangements. At December 31, 1996, Old Dominion had no short-term borrowing
outstanding under any of these arrangements. At December 31, 1995, $8.7 million
was outstanding under these borrowing arrangements and is reflected as notes
payable in the accompanying consolidated financial statements.
39
<PAGE>
Old Dominion maintains a policy which allows Members to pay power bills before
their final due date. Under this policy, Old Dominion will pay interest on early
payment balances at its weighted-average investment rate, if in a net investor
position, or at a blended investment and outside short-term borrowing rate, if
in a net borrower position. The policy has no effect on Old Dominion's net
margins. Amounts advanced by Members are included in accounts payable and
totaled $19.2 million and $20.8 million at December 31, 1996 and 1995,
respectively.
NOTE 10 - CROSS-BORDER TAX BENEFIT LEASE
In December 1994, Old Dominion entered into a cross-border tax benefit lease
with Esbelto BV ("Esbelto"), a Netherlands limited liability company and an
affiliate of Internationale Nederlanden Group ("ING"). Under the terms of the
transaction, Old Dominion transferred nominal title to certain qualifying
pollution control equipment (the "Qualifying Equipment") located at Clover to
Esbelto for a cash payment of $104.8 million, and concurrently entered into an
agreement to lease the Qualifying Equipment back from Esbelto. The lease
agreement has an 18-year term, requires Old Dominion to provide for all repair
and maintenance costs (including insurance and taxes), and provides Old Dominion
with a repurchase option exercisable at the end of the 10th year of the term and
other purchase options in specified circumstances. The Qualifying Equipment was
transferred subject to the lien of the Indenture, and title will revert to Old
Dominion upon exercise of any repurchase option. To fully defease its basic
obligations under the lease, including the 10th year repurchase option, Old
Dominion irrevocably deposited $99.0 million of the proceeds with another ING
affiliate. In return, Esbelto released Old Dominion from its direct obligations
under the lease agreement. The lease agreement required Old Dominion to ensure
that Clover Units 1 and 2 were placed into service; accordingly, Old Dominion
had included the gain in other liabilities at December 31, 1995. Old Dominion
recognized the gain of $5.8 million in March 1996, after Clover Unit 2 was
placed into commercial operation and Old Dominion's obligations in connection
with the lease were fulfilled. Accordingly, Old Dominion has recorded the
equipment as an asset on its consolidated financial statements. However, since
Old Dominion's basic obligations under the lease agreement are fully defeased,
the lease obligations are not reflected on the consolidated financial
statements.
NOTE 11 - EMPLOYEE BENEFITS
Substantially all Old Dominion employees participate in the National Rural
Electric Cooperative Association ("NRECA") Retirement and Security Program, a
noncontributory, defined benefit multi-employer master pension plan. The cost of
the plan is funded annually by payments to NRECA to ensure that annuities in
amounts established by the plan will be available to individual participants
upon their retirement. Accumulated benefits and plan assets are not determined
or allocated separately by individual employer. Pension expense for 1996, 1995
and 1994 was $104,000, $150,000 and $67,000, respectively.
Old Dominion has also elected to participate in the SelectRe Pension Plan, a
defined contribution multi-employer retirement plan administered by the NRECA.
Under the plan, employees may elect to have up to 16% of their salary withheld
on a pre-tax basis, subject to Internal Revenue Service limitations, and
invested on their behalf. As an additional incentive, Old Dominion matches up to
the first 2% of each employee's contribution to the plan. Old Dominion's
matching contributions were $62,000, $63,000 and $65,000 in 1996, 1995 and 1994,
respectively.
Certain executive officers of Old Dominion also participate in an unfunded
salary continuation plan. The plan provides for post employment compensation for
these officers and Old Dominion is accruing the expected present values of the
future benefits over the estimated remaining working lives of these individuals.
Old Dominion's expense under this plan was $11,000 in 1996, $18,000 in 1995 and
$17,000 in 1994.
40
<PAGE>
Old Dominion and the Virginia, Maryland and Delaware Association of Electric
Cooperatives (the "VMDA") entered into an agreement with the President and Chief
Executive Officer of the organizations to jointly fund a supplemental retirement
package on his behalf with an annual fixed contribution of $60,000. Old
Dominion's expense under this agreement was $60,000 and $45,000 in 1996 and
1995, respectively.
Old Dominion provides no other significant postretirement benefits to its
employees. However, in conjunction with the I&O Agreement, Old Dominion is
required to pay 11.6% of the operating costs associated with North Anna and 50%
of the operating costs associated with Clover including postretirement benefits.
These postretirement benefits other than pensions resulted in an increase in
expense to Old Dominion of approximately $812,000 in 1996, $483,000 in 1995 and
$453,000 in 1994. Old Dominion is recovering the increased expense as it is
billed by Virginia Power.
NOTE 12 - INSURANCE
As a joint owner of North Anna, Old Dominion is a party to the insurance
policies which Virginia Power procures to limit the risk of loss associated with
a possible nuclear incident at the station, as well as policies regarding
general liability and property coverage. All policies are administered by
Virginia Power, which charges Old Dominion for its proportionate share of the
costs.
The Price-Anderson Act limits the public liability of an owner of a nuclear
power plant to $8.9 billion for a single nuclear incident. The Price-Anderson
Amendments Act of 1988 allows for an inflationary provision adjustment every
five years. Virginia Power has purchased $200 million of coverage from the
commercial insurance pools with the remainder provided through a mandatory
industry risk sharing program. In the event of a nuclear incident at any
licensed nuclear reactor in the United States, Virginia Power and Old Dominion,
jointly, could be assessed up to $81.7 million (including a 3% insurance premium
tax for Virginia) for each licensed reactor not to exceed $10.3 million
(including a 3% insurance premium tax for Virginia) per year per reactor. There
is no limit to the number of incidents for which this retrospective premium can
be assessed.
Nuclear liability coverage for claims made by nuclear workers first hired on or
after January 1, 1988, except those arising out of an extraordinary nuclear
occurrence, is provided under the Master Worker insurance program. (Those first
hired into the nuclear industry prior to January 1, 1988, are covered by the
policy discussed above.) The aggregate limit of coverage for the industry is
$400 million ($200 million policy limit with automatic reinstatements of an
additional $200 million). Virginia Power and Old Dominion, jointly, are
contingently liable for a maximum retrospective assessment of approximately
$12.5 million (including a 3% insurance premium tax for Virginia).
Virginia Power's current level of property insurance coverage, $2.55 billion for
North Anna, exceeds the NRC's minimum requirement for nuclear power plant
licensees of $1.06 billion per reactor site and includes coverage for premature
decommissioning and functional total loss. The NRC requires that the proceeds
from this insurance be used first to return the reactor to and maintain it in a
safe and stable condition and second, to decontaminate the reactor and station
site in accordance with a plan approved by the NRC. The property insurance
coverage provided to Virginia Power and Old Dominion, jointly, is provided by
Nuclear Mutual Limited ("NML") and Nuclear Electric Insurance Limited ("NEIL"),
two mutual insurance companies, and is subject to retrospective premium
assessments, in any policy year in which losses exceed the funds available to
these insurance companies. The maximum assessment for the current policy period
is $44.8 million. Based on the severity of the incident, the Boards of Directors
of the nuclear insurers have the discretion to lower the maximum retrospective
premium assessment or eliminate either or both completely. Virginia Power and
Old Dominion, jointly, have the financial responsibility for any losses that
exceed the limits or for which insurance proceeds are not available, because
they must first be used for stabilization and decontamination.
41
<PAGE>
Virginia Power purchases insurance from NEIL to cover the cost of replacement
power during a prolonged outage of a nuclear unit due to direct physical damage
of the unit. Under this program, Virginia Power and Old Dominion, jointly, are
subject to a retrospective premium assessment for any policy year in which
losses exceed funds available to NEIL. The current policy period's maximum
assessment is $9.0 million.
Old Dominion's share of the contingent liability for the coverage assessments
described above is a maximum of $26.6 million at December 31, 1996.
NOTE 13 - REGIONAL HEADQUARTERS, INC.
Old Dominion and the VMDA are equal joint owners of RHI. Old Dominion's Members
are represented on both the VMDA's and Old Dominion's Boards of Directors. RHI
holds title to the office building that is being leased to Old Dominion, the
VMDA and third party lessees. As a 50% owner, Old Dominion is obligated to make
lease payments equal to one-half of RHI's annual operating expenses, net of
rental income from third party lessees, through the year 2016. Old Dominion is
presently paying approximately 74.2% of the net costs based on its relative
occupancy. During 1996, 1995 and 1994, Old Dominion paid $248,000, $293,000 and
$276,000, respectively, to RHI for rent. At December 31, 1996, Old Dominion had
outstanding accounts receivable of $41,000 due from RHI. At December 31, 1995,
Old Dominion had accounts payable of $1,000 due to RHI.
Estimated future lease payments, without regard to changes in square footage,
third party occupancy rates, operating costs and inflation are as follows:
Year Ending December 31, (in thousands)
------------------------ --------------
1997 $293
1998 293
1999 293
2000 293
2001 293
2002 and thereafter 4,395
-----
$5,860
The assets and liabilities of RHI at December 31, 1996, were $5.7 million
(primarily the book value of the office building) and $4.7 million (primarily an
industrial development bond payable), respectively. Old Dominion records its
investment in RHI under the equity method.
NOTE 14 - SUPPLEMENTAL CASH FLOWS INFORMATION
Cash paid for interest, net of allowance for funds used during construction,
in 1996, 1995 and 1994 was $57.7 million, $30.8 million and $24.2 million,
respectively.
Changes in construction work in progress in 1995 and 1994 included a non-cash
(decrease) increase in construction contract payable and retainage of
approximately ($8.3) million and $3.9 million, respectively.
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NOTE 15 - COMMITMENTS AND CONTINGENCIES
LEGAL - Old Dominion is subject to legal proceedings and claims which arise from
the ordinary course of business. In the opinion of management, the amount of
ultimate liability with respect to the actions will not materially affect the
consolidated financial position of Old Dominion.
Because of contract disputes associated with the Seacoast project, INECEL did
not pay invoices rendered by Seacoast for energy made available under the terms
of the power sales contract. Accordingly, in July 1996, Seacoast filed a $26.0
million lawsuit in Ecuador against INECEL seeking to recover approximately $16.3
million in amounts owed under the power sales contract, plus damages and fees.
Management of Seacoast plans to vigorously pursue this matter; however, a trial
date has not been set.
On May 24, 1996, a default judgment of approximately $27.0 million was rendered
against Seacoast pursuant to a claim filed in the District Court of Travis
County, Texas, by an entity seeking damages for breach of an oral contract by
the former owners of Seacoast. Seacoast's registered agent in Texas failed to
notify the current owners of Seacoast of the claim in a timely manner. On
appeal, the judgment was remanded back to the District Court in December 1996;
however, in January 1997, the appellate court reversed its decision and agreed
to hear the appeal. No rehearing date has been scheduled. Management of Seacoast
expects to prevail in having the judgment overturned.
In 1996, Old Dominion entered into two long-term lease and lease-back
transactions. The net benefit to Old Dominion of these transactions was
approximately $63.0 million. After the transactions closed, the VSCC staff
asserted that a 2.1% gross receipts tax is applicable to the approximately
$635.0 million base value of the lease-back transaction. Proceedings have not
yet begun to enforce the tax. Old Dominion estimates that an adverse
determination on the gross receipts tax issue would result in a maximum tax
liability of $13.3 million. Old Dominion is vigorously contesting the
anticipated assessment.
On February 27, 1997, Southside Electric Cooperative ("Southside"), one of two
member distribution systems that did not participate in forming CSC, raised a
dispute as to whether the loss, with respect to Old Dominion's interest in
Seacoast, should be borne totally by Old Dominion, thus resulting in a greater
financial burden on Southside. Southside asserts that their share of the loss
should be limited to the amount of Old Dominion's 30% participation in CSC,
which may be less than their proportionate share as an Old Dominion member.
Management believes that this dispute will be resolved.
ENVIRONMENTAL - Old Dominion is currently subject to regulation by the
Environmental Protection Agency ("EPA") and other federal, state and local
authorities with respect to the emission, discharge or release of certain
materials into the environment. As with all electric utilities, the operation of
Old Dominion's generating units could be affected by any environmental
regulations promulgated in the future. Capital expenditures and increased
operating costs required to comply with any such future regulations could be
significant. Expenditures necessary to ensure compliance with environmental
standards or deadlines will continue to be reflected in Old Dominion's capital
and operating costs.
Old Dominion is subject to certain requirements of the Clean Air Act (the "CAA")
which provides for environmental air quality standards. The CAA requires
utilities owning fossil fuel fired power stations to, among other things, limit
emissions of sulfur dioxide or obtain allowances for such emissions, or both,
and limit emissions of oxides of nitrogen. Clover is designed and licensed to
operate at full capacity within its allocated allowances for sulfur dioxide and
utilizes equipment which operates at a level significantly below the limitations
for emission of oxides of nitrogen.
On December 19, 1996, the EPA published its final rule for the Acid
Rain/Nitrogen Oxide Emission Reduction Program. In accordance with the new
standard, Clover's two tangentially fired boilers must meet an emission rate of
.40 lbs/MMBTU. However, through its construction and operating permit Clover is
required to meet a nitrogen oxide emission rate of .32 lbs/MMBTU. Clover Units 1
and 2 currently operate in compliance with the EPA regulation.
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Old Dominion is also subject to permit limitations for surface water discharge
and for the operation of a combustion waste landfill. Surface water discharge is
covered under the Virginia Pollutant Discharge Elimination System permit which
contains limits required by the Clean Water Act and the State Water Quality
Standards. The Solid Waste Permit for the combustion waste landfill contains
operational and monitoring standards required by the Resource Conservation and
Recovery Act and the state's Solid Waste Management Regulations. Clover is
designed and licensed to operate within these permit limitations.
NOTE 16 - SUBSEQUENT EVENTS
On January 27, 1997, Power Ventures sold its interest in Ecuapower to an
unaffiliated party for approximately $17.1 million. Old Dominion was entitled to
approximately $7.0 million after expenses paid at closing. One-half of the sales
price, or $8.6 million, of which Old Dominion received $3.2 million after
expenses, was paid in cash at closing. The other half of the sales price was
evidenced by a note, which was paid on March 6, 1997, of which Old Dominion
received $3.8 million.
In February 1997, it was determined that the chimney liners on both Clover Units
1 and 2 would be replaced by the Clover Consortium (Westinghouse Electric
Corporation, Combustion Engineering, Inc., Black and Veatch Engineers-Architects
and H.B. Zachry Company) at no cost to the joint owners except in lost
generation and minimal overhead costs. The chimney liner replacement on Unit 1
is scheduled to begin on September 1, 1997 and the chimney liner replacement on
Unit 2 is scheduled to begin on in March 1, 1998. It is estimated that it will
take approximately 90 to 110 days to complete the replacement on each unit.
44
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Old Dominion is governed by a Board of 24 Directors, consisting of two
representatives from each Member. Each of the 12 Members nominates two Directors
who must be either a Director or an employee of the Member in good standing. The
candidates for Director are then elected to Old Dominion's Board of Directors by
voting delegates from each Member elected by each Member's local Board of
Directors and authorized to represent such Member at the annual meeting. Old
Dominion's Board of Directors sets policy and provides direction to Old
Dominion's President. The Board of Directors generally meets monthly. The
Members do not have a right to vote on any matters other than the election of
Directors.
The day-to-day business and affairs of Old Dominion are administered by
Old Dominion's President. The following table sets forth certain information
with respect to the executive officers of Old Dominion.
Executive Officers of Old Dominion
The executive officers of Old Dominion, as of March 1, 1997, their
respective ages and their respective positions with Old Dominion are listed
below. Each executive officer of Old Dominion serves at the discretion of the
Board of Directors.
Name Age Positions Held
---- --- --------------
Ronald W. Watkins 55 President and Chief Executive Officer
Daniel M. Walker 51 Vice President of Accounting and Finance
Konstantinos N. Kappatos 54 Vice President of Engineering and Operations
RONALD W. WATKINS has served as President and Chief Executive Officer of
Old Dominion since April 1, 1995; President of the VMDA (an electric cooperative
association which provides services to the Members and certain other electric
cooperatives) since April 1, 1995; a Director and President of CSC since June
1996; and President and Chief Executive Officer of the Nebraska Public Power
District from May 1989 until March 1995.
DANIEL M. WALKER has been Vice President of Accounting and Finance of
Old Dominion since January 1984; Assistant Treasurer of Dominion Power Control,
Ltd. ("DPC") since December 1986; Assistant Treasurer of RHI since December
1986; and was Director of Accounting and Finance for the Utility Division of the
VSCC from June 1981 until December 1983.
KONSTANTINOS N. KAPPATOS has been Vice President of Engineering and
Operations of Old Dominion since January 1984.
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DIRECTORS OF OLD DOMINION
The directors of Old Dominion, as of March 1, 1997, their respective
ages, their respective positions with Old Dominion, if any, their respective
principal occupations and employment during the past five years and other
directorships held by each director are listed below.
WILLIAM M. ALPHIN (Age 66) has been a Director of Old Dominion since
September 1980; a Director of CSC since June 1996; Treasurer of RHI since May
1987; a Director of DPC since July 1988; a Director of Rappahannock Electric
Cooperative since January 1980; a Director of the VMDA since July 1987; and an
insurance advisor with Virginia Farm Bureau Insurance Company since October
1975.
JOHN C. ANDERSON (Age 59) has been a Director of Old Dominion since
October 1982; President and Chief Executive Officer of Southside Electric
Cooperative since September 1982; and a Director of CFC from February 1991 until
March 1996.
E. PAUL BIENVENUE (Age 57) has been Chairman of Old Dominion's Board of
Directors since July 1995; President of DPC since July 1995; Vice Chairman of
Old Dominion's Board of Directors from January 1984 until July 1995; a
Director of Old Dominion since September 1981; Vice President of DPC from
December 1990 until July 1995; General Manager of Delaware Electric
Cooperative since September 1981; a Director of Seaford Golf and Country Club
since January 1996: a Director of United Utility Supply Cooperative
Corporation since June 1985; and Executive Vice President and General
Manager of Rural Electric TV, Inc. since May 1989; and a Director of Nanticoke
Health Services, Inc. Since November 1995.
FRANK W. BLAKE (Age 78) has been a Director of Old Dominion since July
1977; a Director of A&N Electric Cooperative since September 1963; a Director of
the VMDA since July 1987; a self-employed buyer and seller of real estate since
October 1943; a Methodist Minister; and was co-owner of Maxine's Jewelry & Gifts
from August 1962 until December 1993.
JOHN E. BONFADINI (Age 58) has been a Director of Old Dominion since
July 1977; a Director of DPC since July 1994; a Director of Northern Virginia
Electric Cooperative since September 1975; a Director of National Cooperative
Services Corporation, a private cooperative providing lease financing, since
February 1988; and a professor at George Mason University since July 1980.
M. JOHN BOWMAN (Age 51) has been a Director of Old Dominion since July
1974; a Director of CSC since June 1996; Executive Vice President and General
Manager of Mecklenburg Electric Cooperative since January 1980; and a Director
of NRECA since February 1993.
DICK D. BOWMAN (Age 68) has been a Director of Old Dominion since July
1993; a Director of DPC since October 1996; a Director of Shenandoah Valley
Electric Cooperative since November 1970: President of Bowman Brothers, Inc., a
farm equipment retailer, since November 1976; a Director of Rockingham Mutual
Insurance Co. since December 1977; a Director of Shenandoah Telecommunication
Co. since December 1980; Vice President of Shenandoah Valley Electric
Cooperative from June 1989 until June 1991 and from June 1993 until June 1994;
and President of Shenandoah Valley Electric Cooperative from June 1991 until
June 1993.
M. DALE BRADSHAW (Age 43) has been a Director of Old Dominion since
January 1995; Manager of Prince George Electric Cooperative since January 1995;
and District Manager of Davidson Electric Membership Corporation from September
1988 until December 1994.
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VERNON N. BRINKLEY (Age 50) has been Secretary/Treasurer of Old
Dominion's Board of Directors since July 1992; a Director of Old Dominion since
October 1982; a Director of CSC since June 1996; Secretary/Treasurer of DPC
since July 1992; a Director of Central Area Data Processing since May 1991;
President and General Manager of A&N Electric Cooperative since October 1995;
and Executive Vice President and General Manager of A&N Electric Cooperative
from September 1982 until October 1995.
CALVIN P. CARTER (Age 72) has been a Director of Old Dominion since May
1991; a Director of Southside Electric Cooperative since June 1972; self
employed as the owner of Carter's Store, a retail store, since April 1960; the
owner of Carter Stone Co., a stone quarry, since June 1965; and a member of the
Campbell County Board of Supervisors since November 1979.
GLENN F. CHAPPELL (Age 53) has been a Director of Old Dominion since
December 1995; a Director of Prince George Electric Cooperative since February
1985; a Director of the VMDA since December 1995; and a self-employed farmer
since 1962.
STANLEY C. FEUERBERG (Age 45) has been a Director of Old Dominion since
July 1992; a Director of CSC since June 1996; President and Chief Executive
Officer of Northern Virginia Electric Cooperative since January 1992; and was
Vice President and Chief Operating Officer of Vermont Electric Power Company,
Inc. from July 1985 until January 1992.
HUNTER R. GREENLAW, JR. (Age 51) has been a Director of Old Dominion
since November 1991; a Director of CSC since June 1996; a Director of Northern
Neck Electric Cooperative since May 1979; and the President of Greenlaw
Properties, Ltd., a real estate development and general contracting company,
since August 1974.
BRUCE A. HENRY (Age 51) has been a Director of Old Dominion since
November 1993; a Director of Delaware Electric Cooperative since August 1978;
and the owner and Secretary/Treasurer of Delmarva Builders, Inc. since January
1981.
FREDERICK L. HUBBARD (Age 56) has been a Director of Old Dominion since
November 1991; Executive Vice President and General Manager of Choptank Electric
Cooperative since May 1991; a Director of Peoples Bank of Maryland since June
1996; and was Manager of Electric Operations for Choptank Electric Cooperative
from June 1982 until May 1991.
DAVID J. JONES (Age 48) has been a Director of Old Dominion since July
1986; a Director of Mecklenburg Electric Cooperative since June 1982; a Director
of DPC since August 1990; Vice President of Exchange Warehouse, Inc. since April
1996; the owner and operator of Big Fork Farms since April 1970; and was a
member of the Virginia Polytechnic Institute Extension Advisory Board, a
farmers' advisory board, from January 1985 until October 1992.
HUGH M. LANDES (Age 59) has been a Director of Old Dominion since
January 1978; General Manager of BARC Electric Cooperative since March 1978; and
a Director of United Utility Supply Cooperative Corporation since June 1981.
WILLIAM M. LEECH, JR. (Age 69) has been a Director of Old Dominion since
August 1977; a Director of DPC since July 1995; a Director of BARC Electric
Cooperative since October 1970; a Director of CSC since June 1996; and was
engaged in farming from September 1955 until December 1988 at which point he
retired.
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JAMES M. REYNOLDS (Age 49) was Chairman of Old Dominion's Board of
Directors from July 1992 until July 1995; a Director of Old Dominion since May
1977; President of DPC from July 1992 until July 1995; General Manager of
Community Electric Cooperative since April 1977; was Secretary/Treasurer of Old
Dominion's Board of Directors from March 1981 until July 1992; was Secretary of
DPC from December 1986 until July 1988; was Secretary/Treasurer of DPC from July
1988 until July 1992; and was a Director of CFC from February 1983 until
February 1989.
CHARLES R. RICE, JR. (Age 55) has been a Director of Old Dominion
since August 1986; and General Manager of Northern Neck Electric Cooperative
since August 1986.
CECIL E. VIVERETTE, JR. (Age 55) has been a Director of Old Dominion
since March 1988; President of RHI since July 1990; President of Rappahannock
Electric Cooperative since March 1988; and was Assistant Manager of Rappahannock
Electric Cooperative from October 1978 until March 1988.
GWALTNEY W. WHITE, JR. (Age 69) has been a Director of Old Dominion
since June 1989; Vice President of RHI since July 1990; a Director of Community
Electric Cooperative since March 1983; Chairman of the Board of Directors of CSC
since June 1996; a Director of Prescription Fertilizer and Chemical Company,
Inc. since January 1968; was a farmer and peanut buyer from January 1948 until
January 1990; and was the Vice President of Prescription Fertilizer and Chemical
Company, Inc. from January 1968 until January 1994.
CARL R. WIDDOWSON (Age 58) has been a Director of Old Dominion since
February 1987; a Director of Choptank Electric Cooperative since February 1980;
a Director of DPC since July 1988; and a farmer since December 1956.
C. DOUGLAS WINE (Age 54) has been a Director of Old Dominion since April
1991; President and Chief Executive Officer of Shenandoah Valley Electric
Cooperative since July 1995; Secretary of RHI since April 1991; Executive Vice
President of Shenandoah Valley Electric Cooperative from April 1991 until July
1995; a Director of an advisory board to the Board of Directors of First
Virginia Bank - Blue Ridge since April 1991; Manager of North River Telephone
Cooperative since January 1994; and was the Operations Manager of Shenandoah
Valley Electric Cooperative from January 1984 until March 1991.
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ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth information concerning compensation
awarded to, earned by or paid to any person serving as Old Dominion's President
and Chief Executive Officer or acting in a similar capacity during the last
completed fiscal year and Old Dominion's two executive officers (collectively
the "Named Executives") for services rendered to Old Dominion in all capacities
during each of the last three fiscal years. The table also identifies the
principal capacity in which each of the Named Executives served Old Dominion at
the end of fiscal year 1996.
SUMMARY COMPENSATION TABLE
Annual Compensation
-------------------
Other
Annual All Other
Compen- Compen-
Name and Salary Bonus sation sation
Principal Position Year (2)(3) (4) (5)
- - --------------------------------------------------------------------------------
Ronald W. Watkins(1) 1996 $362,081 - $ 1,181 $12,559
President and Chief 1995 190,137 - 37,613 945
Executive Officer
Daniel M. Walker 1996 139,323 - - 15,693
Vice President of Accounting 1995 133,952 - - 16,287
and Finance 1994 128,074 - - 12,570
Konstantinos N. Kappatos 1996 139,323 - - 17,297
Vice President of Engineering 1995 133,952 - - 17,827
and Operations 1994 128,544 - - 14,104
- - -------------------
(1) In 1991, Old Dominion and the VMDA entered into an agreement pursuant to
which the VMDA agreed to contribute to the President and Chief Executive
Officer's annual compensation. In 1996, VMDA contributed $50,000 toward
Mr. Watkins' compensation. In 1995, VMDA contributed $30,000 to Mr.
Watkins' annual compensation.
(2) Includes amounts deferred by the Named Executives under the provisions of
the SelectRe Pension Plan (the "401(k) Plan") a multi-employer tax
qualified retirement plan administered by the National Rural Electric
Cooperative Association. All employees of Old Dominion are eligible to
become participants on the first day of the month following completion of
one year of eligible service.
(3) In March 1995, Old Dominion and the VMDA entered into an agreement with
Mr. Watkins pursuant to which Old Dominion and the VMDA agreed to fund a
supplemental retirement package for Mr. Watkins with an annual fixed
contribution of $60,000. The amount paid in 1996 by Old Dominion was
$108,300 for 1996 and 1995.
(4) Perquisites and other personal benefits paid to Mr. Watkins in 1996
included expenses for a company automobile. Perquisites and other
personal benefits paid to Mr. Watkins in 1995 included $36,926 of moving
and temporary living expenses. Neither Mr. Walker nor Mr. Kappatos
received any perquisites or other personal benefits in any of the fiscal
years covered by the table.
(5) The amount reflected in this column for 1996 is composed of contributions
made by Old Dominion under the Retirement and Security Plan, the 401(k)
Plan, payments made by Old Dominion for life insurance coverage and
amounts accrued by Old Dominion under the Salary Continuation Plan .
Specifically these amounts for fiscal year 1996 were $7,369, $3,750,
$1,440 and $0 for Mr. Watkins; $3,988, $2,760, $783 and $8,162 for Mr.
Walker; and $3,988, $2,760, $783 and $9,766 for Mr. Kappatos,
respectively.
Effective August 1, 1994, Old Dominion pays the 12 Directors who are not
employees of its Members an $800 per month retainer plus $200 for any specially
called meetings and reimburses all Directors for out-of-pocket expenses incurred
in attending meetings.
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CONTRACT WITH EXECUTIVE OFFICER
On March 9, 1995, Old Dominion and the VMDA entered into an agreement
with Ronald W. Watkins in which the companies agreed to pay Mr. Watkins $250,000
per year when carrying out the responsibilities as President and Chief Executive
Officer. The agreement also provides for an automobile and all benefits
available to other employees. Additionally, Old Dominion and the VMDA entered
into an agreement effective April 1, 1995, to jointly fund a supplemental
retirement package for Mr. Watkins with an annual fixed contribution of $60,000.
DEFINED BENEFIT PLAN
Old Dominion has elected to participate in the NRECA Retirement and
Security Program (the "Plan"), a noncontributory, defined benefit multi-employer
master pension plan maintained and administered by the NRECA for the benefit of
its member systems and their employees. The Plan is a qualified pension plan
under Section 401(a) of the Internal Revenue Code of 1986. The following table
lists the estimated current annual pension benefit payable at "normal retirement
age," age 65, for participants in the specified final average salary and years
of benefit service categories for the given current multiplier of 1.7%. Benefits
which accrue under the Plan are based upon the base annual salary as of November
of the previous year. As a result of changes in Internal Revenue Service
regulations, the base annual salary used in determining benefits is limited to
$150,000 effective January 1, 1994.
Years of Benefit Service
-----------------------------------------------------
Final Average Salary 15 20 25 30 35
-------------------- ------- ------- ------- -------- --------
$ 75,000 $19,125 $25,500 $31,875 $ 38,250 $ 44,625
100,000 25,500 34,000 42,500 51,000 59,500
125,000 31,875 42,500 53,125 63,750 74,375
150,000 38,250 51,000 63,750 76,500 89,250
The pension benefits indicated above are the estimated annual straight
life as well as the joint and surviving spouse life annuity amounts payable by
the Plan, and they are not subject to any deduction for Social Security or other
offset amounts. The participant's annual pension at his normal retirement date
is equal to the product of his years of benefit service times final average
salary times the multiplier in effect during years of benefit service. The
multiplier was 1.7% commencing January 1, 1992.
As of December 31, 1996, years of credited service under the Plan at
"normal retirement age" for each of the Named Executives was: Mr. Watkins,
1.75 years; Mr. Walker, 11.92 years; and Mr. Kappatos, 11.92 years.
SALARY CONTINUATION PLAN
Certain executive officers of Old Dominion also participate in a salary
continuation plan. Pursuant to this plan, Old Dominion has entered into
agreements with each of the Named Executives, providing in part, that if the
Named Executive has attained the age of 50 or older on the date his employment
is terminated for any reason whatsoever, absent malfeasance in office, Old
Dominion will pay certain compensation for a period of 15 years, beginning at
age 65. The amount of such compensation increases under a formula which
considers the Named Executive's age and years of service on the date of
termination of employment, with a maximum compensation of $35,000 per year
payable if the Named Executive's employment is terminated at age 65 or older.
Each agreement provides for payment of similar benefits to the Named Executive's
beneficiaries in the event of his death or permanent disability. Old Dominion
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maintains life insurance coverage on each of the Named Executives to recover
from the insurance proceeds a sum approximately sufficient to offset the
aggregate benefits payable under each agreement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Not Applicable
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not Applicable
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Form 10-K.
1. Financial Statements
See Index on page 22.
2. Financial Statement Schedules
None to be included.
3. Exhibits
*3(i) Articles of Incorporation of Old Dominion Electric
Cooperative (filed as exhibit 3.1 to the Registrant's
Form S-1 Registration Statement, File No. 33-46795, filed
on March 27, 1992).
*3(ii) Bylaws of Old Dominion Electric Cooperative, as amended and
restated, October 6, 1992 (filed as exhibit 3.2 to the
Registrant's Form 10-K for the year ended December 31, 1992,
File No. 33-46795, filed on March 30, 1993).
*4.1 Indenture of Mortgage and Deed of Trust, dated as of May 1,
1992, between Old Dominion Electric Cooperative and Crestar
Bank, as Trustee (filed as exhibit 4.1 to the Registrant's
Form 10-K for the year ended December 31, 1992, File No.
33-46795, filed on March 30, 1993).
*4.2 First Supplemental Indenture, dated as of August 1, 1992, to
the Indenture of Mortgage and Deed of Trust, dated as of May
1, 1992, between Old Dominion Electric Cooperative and
Crestar Bank, as Trustee (filed as exhibit 4.22 to the
Registrant's Form 10-K for the year ended December 31, 1992,
File No. 33-46795, filed on March 30, 1993).
*4.3 Second Supplemental Indenture, dated as of December 1, 1992,
to the Indenture of Mortgage and Deed of Trust, dated as of
May 1, 1992, between Old Dominion Electric Cooperative and
Crestar Bank, as Trustee (filed as exhibit 4.24 to the
Registrant's Form 10-K for the year ended December 31, 1992,
File No. 33-46795, filed on March 30, 1993).
*4.4 Third Supplemental Indenture, dated as of May 1, 1993, to
the Indenture of Mortgage and Deed of Trust, dated as of May
1, 1992, between Old Dominion Electric Cooperative and
Crestar Bank, as Trustee (filed as exhibit 4.1 to the
Registrant's Form 10-Q for the quarter ended June 30, 1993,
File No. 33-46795, filed on August 10, 1993).
4.5 Fourth Supplemental Indenture, dated as of December 15,
1994, to the Indenture of Mortgage and Deed of Trust dated
as of May 1, 1992, between Old Dominion Electric Cooperative
and Crestar Bank, as Trustee.
4.6 Fifth Supplemental Indenture, dated as of February 29,
1996, to the Indenture of Mortgage and Deed of Trust dated
as of May 1, 1992, between Old Dominion Electric Cooperative
and Crestar Bank, as Trustee.
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*4.7 Form of Bonds, 1992 Series A (filed as exhibit 4.2 to
Amendment No. 1 to the Registrant's Form S-1 Registration
Statement, File No. 33-46795, filed on May 6, 1992).
*4.8 Form of Bonds, 1992 Series C (filed as exhibit 4.23 to the
Registrant's Form 10-K for the year ended December 31,
1992, File No. 33-46795, filed on March 30, 1993).
*4.9 Form of Bonds, 1993 Series A (filed as exhibit 4.2 to the
Registrant's Form S-1 Registration Statement, File No.
33-61326, filed on April 19, 1993).
*10.1 Nuclear Fuel Agreement between Virginia Electric and Power
Company and Old Dominion Electric Cooperative, dated as of
December 28, 1982, amended and restated October 17, 1983
(filed as exhibit 10.1 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on March
27, 1992).
*10.2 Purchase, Construction and Ownership Agreement between
Virginia Electric and Power Company and Old Dominion
Electric Cooperative, dated as of December 28, 1982, amended
and restated October 17, 1983 (filed as exhibit 10.2 to the
Registrant's Form S-1 Registration Statement, File No.
33-46795, filed on March 27, 1992).
*10.3 Interconnection and Operating Agreement between Virginia
Electric and Power Company and Old Dominion Electric
Cooperative, dated as of December 28, 1982, amended and
restated October 17, 1983 (filed as exhibit 10.3 to the
Registrant's Form S-1 Registration Statement, File No.
33-46795, filed on March 27, 1992).
*10.4 Amendment No. 1 to the Interconnection and Operating
Agreement between Virginia Electric and Power Company and
Old Dominion Electric Cooperative, effective on the date of
commercial operation for Clover Unit 2 or December 31, 1996,
whichever occurs first (filed as exhibit 10.4 to the
Registrant's Form 10-K for the year ended December 31, 1994,
File No. 33-46795, filed on March 15, 1995).
*10.5 Clover Purchase, Construction and Ownership Agreement
between Old Dominion Electric Cooperative and Virginia
Electric and Power Company, dated as of May 31, 1990 (filed
as exhibit 10.4 to the Registrant's Form S-1 Registration
Statement, File No. 33-46795, filed on March 27, 1992).
*10.6 Amendment No. 1 to the Clover Purchase, Construction and
Ownership Agreement between Old Dominion Electric
Cooperative and Virginia Electric and Power Company,
effective March 12, 1993 (filed as exhibit 10.34 to the
Registrant's Form S-1 Registration Statement, File No.
33-61326, filed on April 19, 1993).
*10.7 Clover Operating Agreement between Virginia Electric and
Power Company and Old Dominion Electric Cooperative, dated
as of May 31, 1990 (filed as exhibit 10.6 to the
Registrant's Form S-1 Registration Statement, File No.
33-46795, filed on March 27, 1992).
*10.8 Amendment to the Clover Operating Agreement between Virginia
Electric and Power Company and Old Dominion Electric
Cooperative, effective January 17, 1995 (filed as exhibit
10.8 to the Registrant's Form 10-K for the year ended
December 31, 1994, File No. 33-46795, on March 15, 1995).
53
<PAGE>
*10.9 Coal-Fired Unit Turnkey Contract (Volume 1), dated April 6,
1989, and the Unit 2 Amendment (Volume 1), dated May 31,
1990, between Virginia Electric and Power Company and Old
Dominion Electric Cooperative, Westinghouse Electric
Corporation, Black & Veatch Engineers-Architects, Combustion
Engineering, Inc. and H.B. Zachry Company (Volumes 2 - 11
contain technical specifications only) (filed as exhibit
10.7 to the Registrant's Form S-1 Registration Statement,
File No. 33-46795, filed on March 27, 1992).
*10.10 Electric Service Agreement between Old Dominion Electric
Cooperative and Appalachian Power Company, dated July 2,
1990 (filed as exhibit 10.8 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on March
27, 1992).
*10.11 Electric Service Agreement between Old Dominion Electric
Cooperative and Appalachian Power Company, dated March 6,
1991 (filed as exhibit 10.9 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on March
27, 1992).
*10.12 Electric Service Agreement between The Potomac Edison
Company and Old Dominion Electric Cooperative, dated October
4, 1991 (filed as exhibit 10.11 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on March
27, 1992).
*10.13 Amendment to Electric Service Agreement between The Potomac
Edison Company and Old Dominion Electric Cooperative, dated
October 4, 1991 (filed as exhibit 10.36 to Amendment No. 2
to the Registrant's Form S-1 Registration Statement,
File No. 33-61326, filed on May 26, 1993).
*10.14 Lease Agreement between Old Dominion Electric Cooperative
and Regional Headquarters, Inc., dated July 29, 1986
(filed as exhibit 10.27 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on March
27, 1992).
*10.15 Credit Agreement between Virginia Electric and Power Company
and Old Dominion Electric Cooperative, dated as of December
1, 1985 (filed as exhibit 10.28 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on March
27, 1992).
*10.16 Nuclear Decommissioning Trust Agreement between Old Dominion
Electric Cooperative and Bankers Trust Company, dated March
1, 1991 (filed as exhibit 10.29 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on March
27, 1992).
*10.17 Form of Salary Continuation Plan (filed as exhibit 10.31 to
the Registrant's Form S-1 Registration Statement, File No.
33-46795, filed on March 27, 1992).
*10.18 Amended and Restated Wholesale Power Contract between Old
Dominion Electric Cooperative and A&N Electric
Cooperative, dated April 24, 1992 (filed as exhibit 10.34
to Amendment No. 2 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on May
27, 1992).
*10.19 Amended and Restated Wholesale Power Contract between Old
Dominion Electric Cooperative and BARC Electric
Cooperative, dated April 22, 1992 (filed as exhibit 10.35
to Amendment No. 1 to the Registrant's Form S-1 Registration
Statement, File No. 33-46795, filed on May 6, 1992).
*10.20 Amended and Restated Wholesale Power Contract between Old
Dominion Electric Cooperative and Choptank Electric
Cooperative, dated April 20, 1992 (filed as exhibit 10.36
to Amendment No. 1 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on May
6, 1992).
54
<PAGE>
*10.21 Amended and Restated Wholesale Power Contract between Old
Dominion Electric Cooperative and Community Electric
Cooperative, dated April 28, 1992 (filed as exhibit 10.37
to Amendment No. 1 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on May
6, 1992).
*10.22 Amended and Restated Wholesale Power Contract between Old
Dominion Electric Cooperative and Delaware Electric
Cooperative, dated April 22, 1992 (filed as exhibit 10.38
to Amendment No. 1 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on May
6, 1992).
*10.23 Amended and Restated Wholesale Power Contract between Old
Dominion Electric Cooperative and Mecklenburg Electric
Cooperative, dated April 15, 1992 (filed as exhibit 10.39
to Amendment No. 1 to the Registrant's Form S-1 Registration
Statement, File No. 33-46795, filed on May 6, 1992).
*10.24 Amended and Restated Wholesale Power Contract between Old
Dominion Electric Cooperative and Northern Neck Electric
Cooperative, dated April 21, 1992 (filed as exhibit 10.40
to Amendment No. 1 to the Registrant's Form S-1 Registration
Statement, File No. 33-46795, filed on May 6, 1992).
*10.25 Amended and Restated Wholesale Power Contract between Old
Dominion Electric Cooperative and Northern Virginia
Electric Cooperative, dated April 17, 1992 (filed as
exhibit 10.41 to Amendment No. 1 to the Registrant's Form
S-1 Registration Statement, File No. 33-46795, filed on May
6, 1992).
*10.26 Amended and Restated Wholesale Power Contract between Old
Dominion Electric Cooperative and Prince George Electric
Cooperative, dated May 6, 1992 (filed as exhibit 10.42 to
Amendment No. 2 to the Registrant's Form S-1 Registration
Statement, File No. 33-46795, filed on May 27, 1992).
*10.27 Amended and Restated Wholesale Power Contract between Old
Dominion Electric Cooperative and Rappahannock Electric
Cooperative, dated April 17, 1992 (filed as exhibit 10.43
to Amendment No. 1 to the Registrant's Form S-1 Registration
Statement, File No. 33-46795, filed on May 6, 1992).
*10.28 Amended and Restated Wholesale Power Contract between Old
Dominion Electric Cooperative and Shenandoah Valley
Electric Cooperative, dated April 23, 1992 (filed as
exhibit 10.44 to Amendment No. 1 to the Registrant's Form
S-1 Registration Statement, File No. 33-46795, filed on May
6, 1992).
*10.29 Amended and Restated Wholesale Power Contract between Old
Dominion Electric Cooperative and Southside Electric
Cooperative, dated April 22, 1992 (filed as exhibit 10.45
to Amendment No. 1 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on May
6, 1992).
*10.30 Capacity and Energy Sales Agreement between Old Dominion
Electric Cooperative and Public Service Electric and Gas,
dated December 17, 1992, effective January 1, 1995 (filed as
exhibit 10.30 to the Registrant's Form 10-K for the year
ended December 31, 1992, File No. 33-46795, filed on March
30, 1993).
*10.31 First Supplement to Capacity and Energy Sales Agreement
between Old Dominion Electric Cooperative and Public Service
Electric & Gas, dated March 26, 1993 (filed as exhibit 10.32
to the Registrant's Form S-1 Registration Statement, File
No. 33-61326, filed on April 19, 1993).
*10.32 Letter Agreement between Old Dominion Electric Cooperative
and Delmarva Power & Light Company, dated March 2, 1993
(filed as exhibit 10.35 to the Registrant's Form S-1
Registration Statement, File No. 33-61326, filed on April
19, 1993).
55
<PAGE>
*10.33 Wholesale Partial Requirements Service Agreement between
Delmarva Power & Light Company and Old Dominion Electric
Cooperative, effective January 1, 1995 (filed as exhibit
10.38 to Registrant's Form 10-K for the year ended December
31, 1994, File No. 33-46795, on March 15, 1995).
*10.34 Transmission Service Agreement between Delmarva Power &
Light Company and Old Dominion Electric Cooperative,
effective January 1, 1995 (filed as exhibit 10.39 to
Registrant's Form 10-K for the year ended December 31, 1994,
File No. 33-46795, on March 15, 1995).
10.35 Participation Agreement, dated as of February 29, 1996,
among Old Dominion Electric Cooperative, State Street Bank
and Trust Company, the Owner Participant named therein and
Utrecht-America Finance Co.
10.36 Clover Unit 1 Equipment Interest Lease Agreement, dated as
of February 29, 1996, between Old Dominion Electric
Cooperative, as Equipment Head Lessor, and State Street Bank
and Trust Company, as Equipment Head Lessee.
** 10.37 Equipment Operating Lease Agreement, dated as of February
29, 1996, between State Street Bank and Trust Company, as
Lessor, and Old Dominion Electric Cooperative, as Lessee.
** 10.38 Corrected Option Agreement to Lease, dated as of February
29, 1996, among Old Dominion Electric Cooperative and
State Street Bank and Trust Company.
10.39 Clover Agreements Assignment and Assumption Agreement, dated
as of February 29, 1996, between Old Dominion Electric
Cooperative, as Assignor, and State Street Bank and Trust
Company, as Assignee.
10.40 Deposit Agreement, dated as of February 29, 1996, between
Old Dominion Electric Cooperative, as Depositor, and
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.,
"Rabobank Nederland", New York Branch, as Issuer.
10.41 Deposit Pledge Agreement, dated as of February 29, 1996,
between Old Dominion Electric Cooperative, as Pledgor, and
State Street Bank and Trust Company, as Pledgee.
10.42 Payment Undertaking Agreement, dated as of February 29,
1996, between Old Dominion Electric Cooperative and
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.,
"Rabobank Nederland", New York Branch.
10.43 Payment Undertaking Pledge Agreement, dated as of February
29, 1996, between Old Dominion Electric Cooperative, as
Payment Undertaking Pledgor, and State Street Bank and Trust
Company, as Payment Undertaking Pledgee.
10.44 Pledge Agreement, dated as of February 29, 1996, between Old
Dominion Electric Cooperative, as Pledgor, and State Street
Bank and Trust Company, as Pledgee.
10.45 Tax Indemnity Agreement, dated as of February 29, 1996,
among Old Dominion Electric Cooperative, State Street Bank
and Trust Company, the Owner Participant named therein and
Utrecht-America Finance Co.
56
<PAGE>
10.46 Participation Agreement, dated as of July 1, 1996, among
Old Dominion Electric Cooperative, Clover Unit 2 Generating
Trust, Wilmington Trust Company, the Owner Participant named
therein and Utrecht-America Finance Co.
** 10.47 Clover Unit 2 Equipment Interest Agreement, dated as of
July 1, 1996, between Old Dominion Electric Cooperative
and Clover Unit 2 Generating Trust.
** 10.48 Operating Equipment Agreement, dated as of July 1, 1996,
between Clover Unit 2 Generating Trust and Old Dominion
Electric Cooperative.
10.49 Clover Agreements Assignment and Assumption Agreement, dated
as of July 1, 1996, between Old Dominion Electric
Cooperative, as Assignor, and Clover Unit 2 Generating
Trust, as Assignee.
10.50 Deed of Ground Lease and Sublease Agreement, dated as of
July 1, 1996, between Old Dominion Electric Cooperative, as
Ground Lessor, and Clover Unit 2 Generating Trust, as Ground
Lessee.
10.51 Guaranty Agreement, dated as of July 1, 1996, between Old
Dominion Electric Cooperative and AMBAC Indemnity
Corporation.
10.52 Investment Agreement, dated as of July 31, 1996, among
AMBAC Capital Funding, Inc., Old Dominion Electric
Cooperative and AMBAC Indemnity Corporation.
10.53 Investment Agreement Pledge Agreement, dated as of July 1,
1996, among Old Dominion Electric Cooperative, as Investment
Agreement Pledgor, AMBAC Indemnity Corporation, the Owner
Participant named therein and Clover Unit 2 Generating
Trust.
10.54 Equity Security Pledge Agreement, dated as of July 1, 1996,
between Old Dominion Electric Cooperative, as Pledgor, and
Wilmington Trust Company, as Collateral Agent.
10.55 Payment Undertaking Agreement, dated as of July 1, 1996,
between Old Dominion Electric Cooperative and Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank
Nederland", New York Branch.
10.56 Payment Undertaking Pledge Agreement, dated as of July 1,
1996, between Old Dominion Electric Cooperative, as Payment
Undertaking Pledgor, and Clover Unit 2 Generating Trust, as
Payment Undertaking Pledgee.
10.57 Subordinated Deed of Trust and Security Agreement, dated
as of July 1, 1996, among Old Dominion Electric
Cooperative, Richard W. Gregory, Trustee, and Michael P.
Drzal, Trustee.
10.58 Subordinated Security Agreement, dated as of July 1, 1996,
among Old Dominion Electric Cooperative, the Owner
Participant named therein, AMBAC Indemnity Corporation and
Clover Unit 2 Generating Trust.
10.59 Tax Indemnity Agreement, dated as of July 1 1996, between
Old Dominion Electric Cooperative and the Owner Participant
named therein.
57
<PAGE>
21 Subsidiaries of Old Dominion Electric Cooperative (not
included because Old Dominion Electric Cooperative's
subsidiaries, considered in the aggregate as a single
subsidiary, would not constitute a "significant subsidiary"
under Rule 1-02(w) of Regulation S-X).
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter of 1996.
- - ----------------------
* Incorporated herein by reference.
** These leases relate to Old Dominion Electric Cooperative's interest in all
of Clover Unit 1 and Clover Unit 2, as applicable, other than the
foundations. At the time these leases were executed, Old Dominion had
entered into identical leases with respect to the foundations as part of
the same transactions. Old Dominion Electric Cooperative agrees to furnish
to the Commission, upon request, a copy of the leases of its interest in
the foundations for Clover Unit 1 and Clover Unit 2, as applicable.
58
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
OLD DOMINION ELECTRIC COOPERATIVE
Registrant
Date: March 21, 1997 By: /s/ RONALD W. WATKINS
-----------------------------------
Ronald W. Watkins
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the following capacities on March 21, 1997.
Signature Title
----------- -------
/s/ RONALD W. WATKINS President (principal executive officer)
- - ------------------------------
Ronald W. Watkins
/s/ DANIEL M. WALKER Vice President of Accounting & Finance
- - ------------------------------ (principal financial officer)
Daniel M. Walker
/s/ ROBERT L. KEES Controller (principal accounting officer)
- - ------------------------------
Robert L. Kees
/s/ WILLIAM M. ALPHIN Director
- - ------------------------------
William M. Alphin
/s/ JOHN C. ANDERSON Director
- - ------------------------------
John C. Anderson
/s/ E. PAUL BIENVENUE Director
- - ------------------------------
E. Paul Bienvenue
/s/ FRANK W. BLAKE Director
- - ------------------------------
Frank W. Blake
/s/ JOHN E. BONFADINI Director
- - ------------------------------
John E. Bonfadini
59
<PAGE>
Signature Title
----------- -------
/s/ M. JOHN BOWMAN Director
- - --------------------------------
M. John Bowman
/s/ DICK D. BOWMAN Director
- - --------------------------------
Dick D. Bowman
/s/ M. DALE BRADSHAW Director
- - --------------------------------
M. Dale Bradshaw
/s/ VERNON N. BRINKLEY Director
- - --------------------------------
Vernon N. Brinkley
/s/ CALVIN P. CARTER Director
- - --------------------------------
Calvin P. Carter
/s/ GLENN F. CHAPPELL Director
- - --------------------------------
Glenn F. Chappell
/s/ STANLEY C. FEUERBERG Director
- - --------------------------------
Stanley C. Feuerberg
/s/ HUNTER R. GREENLAW, JR. Director
- - --------------------------------
Hunter R. Greenlaw, Jr.
/s/ BRUCE A. HENRY Director
- - --------------------------------
Bruce A. Henry
/s/ FREDERICK L. HUBBARD Director
- - --------------------------------
Frederick L. Hubbard
/s/ DAVID J. JONES Director
- - --------------------------------
David J. Jones
/s/ HUGH M. LANDES Director
- - --------------------------------
Hugh M. Landes
/s/ WILLIAM M. LEECH, JR. Director
- - --------------------------------
William M. Leech, Jr.
/s/ JAMES M. REYNOLDS Director
- - --------------------------------
James M. Reynolds
/s/ CHARLES R. RICE, JR. Director
- - --------------------------------
Charles R. Rice, Jr.
60
<PAGE>
Signature Title
----------- -------
/s/ CECIL E. VIVERETTE, JR. Director
- - --------------------------------
Cecil E. Viverette, Jr.
/s/ GWALTNEY W. WHITE, JR. Director
- - --------------------------------
Gwaltney W. White, Jr.
/s/ CARL R. WIDDOWSON Director
- - --------------------------------
Carl R. Widdowson
/s/ C. DOUGLAS WINE Director
- - --------------------------------
C. Douglas Wine
- - ----------------------
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.
As of the date this annual report on Form 10-K was filed with the
Securities and Exchange Commission, Old Dominion had not yet furnished to its
security holders copies of its annual report for fiscal year 1996. Old Dominion
undertakes that it will file four copies of such annual report with the
Securities and Exchange Commission when such report is sent to security holders.
61
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit Page
Number Description of Exhibit Number
<S> <C>
*3(i) Articles of Incorporation of Old Dominion Electric
Cooperative (filed as exhibit 3.1 to the Registrant's Form
S-1 Registration Statement, File No. 33-46795, filed on
March 27, 1992).
*3(ii) Bylaws of Old Dominion Electric Cooperative, as amended and
restated, October 6, 1992 (filed as exhibit 3.2 to the
Registrant's Form 10-K for the fiscal year ended December
31, 1992, File No. 33-46795, filed on March 30, 1993).
*4.1 Indenture of Mortgage and Deed of Trust, dated as of May 1,
1992, between Old Dominion Electric Cooperative and Crestar
Bank, as Trustee (filed as exhibit 4.1 to the Registrant's
Form 10-K for the fiscal year ended December 31, 1992, File
No. 33-46795, filed on March 30, 1993).
*4.2 First Supplemental Indenture, dated as of August 1, 1992, to
the Indenture of Mortgage and Deed of Trust, dated as of May
1, 1992, between Old Dominion Electric Cooperative and
Crestar Bank, as Trustee (filed as exhibit 4.22 to the
Registrant's Form 10-K for the fiscal year ended December
31, 1992, File No. 33-46795, filed on March 30, 1993).
*4.3 Second Supplemental Indenture, dated as of December 1, 1992,
to the Indenture of Mortgage and Deed of Trust, dated as of
May 1, 1992, between Old Dominion Electric Cooperative and
Crestar Bank, as Trustee (filed as exhibit 4.24 to the
Registrant's Form 10-K for the fiscal year ended December
31, 1992, File No. 33-46795, filed on March 30, 1993).
*4.4 Third Supplemental Indenture, dated as of May 1, 1993, to
the Indenture of Mortgage and Deed of Trust, dated as of May
1, 1992, between Old Dominion Electric Cooperative and
Crestar Bank, as Trustee (filed as exhibit 4.1 to the
Registrant's Form 10-Q for the fiscal quarter ended June 30,
1993, File No. 33-46795, filed on August 10, 1993).
4.5 Fourth Supplemental Indenture, dated as of December 15,
1994, to the Indenture of Mortgage and Deed of Trust dated
as of May 1, 1992, between Old Dominion Electric Cooperative
and Crestar Bank, as Trustee.
4.6 Fifth Supplemental Indenture, dated as of February 29,
1996, to the Indenture of Mortgage and Deed of Trust dated
as of May 1, 1992, between Old Dominion Electric Cooperative
and Crestar Bank, as Trustee.
*4.7 Form of Bonds, 1992 Series A (filed as exhibit 4.2 to
Amendment No. 1 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on May 6,
1992).
62
<PAGE>
Exhibit Page
Number Description of Exhibit Number
*4.8 Form of Bonds, 1992 Series C (filed as exhibit 4.23 to the
Registrant's Form 10-K for the fiscal year ended December
31, 1992, File No. 33-46795, filed on March 30, 1993).
*4.9 Form of Bonds, 1993 Series A (filed as exhibit 4.2 to the
Registrant's Form S-1 Registration Statement, File No.
33-61326, filed on April 19, 1993).
*10.1 Nuclear Fuel Agreement between Virginia Electric and Power
Company and Old Dominion Electric Cooperative, dated as of
December 28, 1982, amended and restated October 17, 1983
(filed as exhibit 10.1 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on March
27, 1992).
*10.2 Purchase, Construction and Ownership Agreement between
Virginia Electric and Power Company and Old Dominion
Electric Cooperative, dated as of December 28, 1982, amended
and restated October 17, 1983 (filed as exhibit 10.2 to the
Registrant's Form S-1 Registration Statement, File No.
33-46795, filed on March 27, 1992).
*10.3 Interconnection and Operating Agreement between Virginia
Electric and Power Company and Old Dominion Electric
Cooperative, dated as of December 28, 1982, amended and
restated October 17, 1983 (filed as exhibit 10.3 to the
Registrant's Form S-1 Registration Statement, File No.
33-46795, filed on March 27, 1992).
*10.4 Amendment No. 1 to the Interconnection and Operating
Agreement between Virginia Electric and Power Company and
Old Dominion Electric Cooperative, effective on the date of
commercial operation for Clover Unit 2 or December 31, 1996,
whichever occurs first (filed as exhibit 10.4 to the
Registrant's Form 10-K for the year ended December 31, 1994,
File No. 33-46795, filed on March 15, 1995).
*10.5 Clover Purchase, Construction and Ownership Agreement
between Old Dominion Electric Cooperative and Virginia
Electric and Power Company, dated as of May 31, 1990 (filed
as exhibit 10.4 to the Registrant's Form S-1 Registration
Statement, File No. 33-46795, filed on March 27, 1992).
*10.6 Amendment No. 1 to the Clover Purchase, Construction
and Ownership Agreement between Old Dominion Electric
Cooperative and Virginia Electric and Power Company,
effective March 12, 1993 (filed as exhibit 10.34 to the
Registrant's Form S-1 Registration Statement, File No.
33-61326, filed on April 19, 1993).
*10.7 Clover Operating Agreement between Virginia Electric and
Power Company and Old Dominion Electric Cooperative, dated
as of May 31, 1990 (filed as exhibit 10.6 to the
Registrant's Form S-1 Registration Statement, File No.
33-46795, filed on March 27, 1992).
*10.8 Amendment to the Clover Operating Agreement between Virginia
Electric and Power Company and Old Dominion Electric
Cooperative, effective January 17, 1995 (filed as exhibit
10.8 to the Registrant's Form 10-K for the year ended
December 31, 1994, File No. 33-46795, on March 15, 1995).
Exhibit Page Number Description of Exhibit Number
<PAGE>
63
Exhibit Page
Number Description of Exhibit Number
*10.9 Coal-Fired Unit Turnkey Contract (Volume 1), dated April 6,
1989, and the Unit 2 Amendment (Volume 1), dated May 31,
1990, between Virginia Electric and Power Company and Old
Dominion Electric Cooperative, Westinghouse Electric
Corporation, Black & Veatch Engineers-Architects, Combustion
Engineering, Inc. and H.B. Zachry Company (Volumes 2 - 11
contain technical specifications only) (filed as exhibit
10.7 to the Registrant's Form S-1 Registration Statement,
File No. 33-46795, filed on March 27, 1992).
*10.10 Electric Service Agreement between Old Dominion Electric
Cooperative and Appalachian Power Company, dated July 2,
1990 (filed as exhibit 10.8 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on March
27, 1992).
*10.11 Electric Service Agreement between Old Dominion Electric
Cooperative and Appalachian Power Company, dated March 6,
1991 (filed as exhibit 10.9 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on March
27, 1992).
*10.12 Electric Service Agreement between The Potomac Edison
Company and Old Dominion Electric Cooperative, dated October
4, 1991 (filed as exhibit 10.11 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on March
27, 1992).
*10.13 Amendment to Electric Service Agreement between The
Potomac Edison Company and Old Dominion Electric
Cooperative, dated October 4, 1991 (filed as exhibit
10.36 to Amendment No. 2 to the Registrant's Form S-1
Registration Statement, File No. 33-61326, filed on May 26,
1993).
*10.14 Lease Agreement between Old Dominion Electric Cooperative
and Regional Headquarters, Inc., dated July 29, 1986 (filed
as exhibit 10.27 to the Registrant's Form S-1 Registration
Statement, File No. 33-46795, filed on March 27, 1992).
*10.15 Credit Agreement between Virginia Electric and Power Company
and Old Dominion Electric Cooperative, dated as of December
1, 1985 (filed as exhibit 10.28 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on March
27, 1992).
*10.16 Nuclear Decommissioning Trust Agreement between Old Dominion
Electric Cooperative and Bankers Trust Company, dated March
1, 1991 (filed as exhibit 10.29 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on March
27, 1992).
*10.17 Form of Salary Continuation Plan (filed as exhibit 10.31 to
the Registrant's Form S-1 Registration Statement, File No.
33-46795, filed on March 27, 1992).
64
<PAGE>
Exhibit Page
Number Description of Exhibit Number
*10.18 Amended and Restated Wholesale Power Contract between
Old Dominion Electric Cooperative and A&N Electric
Cooperative, dated April 24, 1992 (filed as exhibit
10.34 to Amendment No. 2 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on May 27,
1992).
*10.19 Amended and Restated Wholesale Power Contract between
Old Dominion Electric Cooperative and BARC Electric
Cooperative, dated April 22, 1992 (filed as exhibit
10.35 to Amendment No. 1 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on May 6,
1992).
*10.20 Amended and Restated Wholesale Power Contract between
Old Dominion Electric Cooperative and Choptank Electric
Cooperative, dated April 20, 1992 (filed as exhibit
10.36 to Amendment No. 1 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on May 6,
1992).
*10.21 Amended and Restated Wholesale Power Contract between Old
Dominion Electric Cooperative and Community Electric
Cooperative, dated April 28, 1992 (filed as exhibit
10.37 to Amendment No. 1 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on May 6,
1992).
*10.22 Amended and Restated Wholesale Power Contract between
Old Dominion Electric Cooperative and Delaware Electric
Cooperative, dated April 22, 1992 (filed as exhibit
10.38 to Amendment No. 1 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on May 6,
1992).
*10.23 Amended and Restated Wholesale Power Contract between Old
Dominion Electric Cooperative and Mecklenburg Electric
Cooperative, dated April 15, 1992 (filed as exhibit
10.39 to Amendment No. 1 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on May 6,
1992).
*10.24 Amended and Restated Wholesale Power Contract between Old
Dominion Electric Cooperative and Northern Neck Electric
Cooperative, dated April 21, 1992 (filed as exhibit
10.40 to Amendment No. 1 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on May 6,
1992).
*10.25 Amended and Restated Wholesale Power Contract between
Old Dominion Electric Cooperative and Northern Virginia
Electric Cooperative, dated April 17, 1992 (filed as
exhibit 10.41 to Amendment No. 1 to the Registrant's Form
S-1 Registration Statement, File No. 33-46795, filed on May
6, 1992).
*10.26 Amended and Restated Wholesale Power Contract between Old
Dominion Electric Cooperative and Prince George Electric
Cooperative, dated May 6, 1992 (filed as exhibit 10.42 to
Amendment No. 2 to the Registrant's Form S-1 Registration
Statement, File No. 33-46795, filed on May 27, 1992).
65
<PAGE>
Exhibit Page
Number Description of Exhibit Number
*10.27 Amended and Restated Wholesale Power Contract between Old
Dominion Electric Cooperative and Rappahannock Electric
Cooperative, dated April 17, 1992 (filed as exhibit
10.43 to Amendment No. 1 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on May 6,
1992).
*10.28 Amended and Restated Wholesale Power Contract between Old
Dominion Electric Cooperative and Shenandoah Valley
Electric Cooperative, dated April 23, 1992 (filed as
exhibit 10.44 to Amendment No. 1 to the Registrant's Form
S-1 Registration Statement, File No. 33-46795, filed on May
6, 1992).
*10.29 Amended and Restated Wholesale Power Contract between Old
Dominion Electric Cooperative and Southside Electric
Cooperative, dated April 22, 1992 (filed as exhibit
10.45 to Amendment No. 1 to the Registrant's Form S-1
Registration Statement, File No. 33-46795, filed on May 6,
1992).
*10.30 Capacity and Energy Sales Agreement between Old Dominion
Electric Cooperative and Public Service Electric and Gas,
dated December 17, 1992, effective January 1, 1995 (filed as
exhibit 10.30 to the Registrant's Form 10-K for the fiscal
year ended December 31, 1992, File No. 33-46795, filed on
March 30, 1993).
*10.31 First Supplement to Capacity and Energy Sales Agreement
between Old Dominion Electric Cooperative and Public Service
Electric & Gas, dated March 26, 1993 (filed as exhibit 10.32
to the Registrant's Form S-1 Registration Statement, File
No. 33-61326, filed on April 19, 1993).
*10.32 Letter Agreement between Old Dominion Electric Cooperative
and Delmarva Power & Light Company, dated March 2, 1993
(filed as exhibit 10.35 to the Registrant's Form S-1
Registration Statement, File No. 33-61326, filed on April
19, 1993).
*10.33 Wholesale Partial Requirements Service Agreement between
Delmarva Power & Light Company and Old Dominion Electric
Cooperative, effective January 1, 1995 (filed as exhibit
10.38 to the Registrant's Form 10-K for the year ended
December 31, 1994, File No. 33-46795, on March 15, 1995).
*10.34 Transmission Service Agreement between Delmarva Power &
Light Company and Old Dominion Electric Cooperative,
effective January 1, 1995 (filed as exhibit 10.39 to the
Registrant's Form 10-K for the year ended December 31, 1994,
File No. 33-46795, on March 15, 1995).
10.35 Participation Agreement, dated as of February 29, 1996,
among Old Dominion Electric Cooperative, State Street Bank
and Trust Company, the Owner Participant named therein and
Utrecht-America Finance Co.
10.36 Clover Unit 1 Equipment Interest Lease Agreement, dated as
of February 29, 1996, between Old Dominion Electric
Cooperative, as Equipment Head Lessor, and State Street Bank
and Trust Company, as Equipment Head Lessee.
66
<PAGE>
Exhibit Page
Number Description of Exhibit Number
**10.37 Equipment Operating Lease Agreement, dated as of February
29, 1996, between State Street Bank and Trust Company, as
Lessor, and Old Dominion Electric Cooperative, as Lessee.
**10.38 Corrected Option Agreement to Lease, dated as of February
29, 1996, among Old Dominion Electric Cooperative and
State Street Bank and Trust Company.
10.39 Clover Agreements Assignment and Assumption Agreement,
dated as of February 29, 1996, between Old Dominion Electric
Cooperative, as Assignor, and State Street Bank and Trust
Company, as Assignee.
10.40 Deposit Agreement, dated as of February 29, 1996, between
Old Dominion Electric Cooperative, as Depositor, and
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.,
"Rabobank Nederland," New York Branch, as Issuer.
10.41 Deposit Pledge Agreement, dated as of February 29, 1996,
between Old Dominion Electric Cooperative, as Pledgor, and
State Street Bank and Trust Company, as Pledgee.
10.42 Payment Undertaking Agreement, dated as of February 29,
1996, between Old Dominion Electric Cooperative and
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.,
"Rabobank Nederland," New York Branch.
10.43 Payment Undertaking Pledge Agreement, dated as of February
29, 1996, between Old Dominion Electric Cooperative, as
Payment Undertaking Pledgor, and State Street Bank and Trust
Company, as Payment Undertaking Pledgee.
10.44 Pledge Agreement, dated as of February 29, 1996, between
Old Dominion Electric Cooperative, as Pledgor, and State
Street Bank and Trust Company, as Pledgee.
10.45 Tax Indemnity Agreement, dated as of February 29, 1996,
among Old Dominion Electric Cooperative, State Street Bank
and Trust Company, the Owner Participant named therein and
Utrecht-America Finance Co.
10.46 Participation Agreement, dated as of July 1, 1996, among Old
Dominion Electric Cooperative, Clover Unit 2 Generating
Trust, Wilmington Trust Company, the Owner Participant named
therein and Utrecht-America Finance Co.
**10.47 Clover Unit Equipment Interest Agreement, dated as of July
1, 1996, between Old Dominion Electric Cooperative and
Clover Unit 2 Generating Trust.
**10.48 Operating Equipment Agreement, dated as of July 1, 1996,
between Clover Unit 2 Generating Trust and Old Dominion
Electric Cooperative.
10.49 Clover Agreements Assignment and Assumption Agreement,
dated as of July 1, 1996, between Old Dominion Electric
Cooperative, as Assignor, and Clover Unit 2 Generating
Trust, as Assignee.
67
<PAGE>
Exhibit Page
Number Description of Exhibit Number
10.50 Deed of Ground Lease and Sublease Agreement, dated as of
July 1, 1996, between Old Dominion Electric Cooperative, as
Ground Lessor, and Clover Unit 2 Generating Trust, as Ground
Lessee.
10.51 Guaranty Agreement, dated as of July 1, 1996, between
Old Dominion Electric Cooperative and AMBAC Indemnity
Corporation.
10.52 Investment Agreement, dated as of July 1, 1996, among AMBAC
Capital Funding, Inc., Old Dominion Electric Cooperative and
AMBAC Indemnity Corporation.
10.53 Investment Agreement Pledge Agreement, dated as of July
1, 1996, among Old Dominion Electric Cooperative, as
Investment Agreement Pledgor, AMBAC Indemnity
Corporation, the Owner Participant named therein and Clover
Unit 2 Generating Trust.
10.54 Equity Security Pledge Agreement, dated as of July 1, 1996,
between Old Dominion Electric Cooperative, as Pledgor, and
Wilmington Trust Company, as Collateral Agent.
10.55 Payment Undertaking Agreement, dated as of July 1, 1996,
between Old Dominion Electric Cooperative and Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank
Nederland," New York Branch.
10.56 Payment Undertaking Pledge Agreement, dated as of July
1, 1996, between Old Dominion Electric Cooperative, as
Payment Undertaking Pledgor, and Clover Unit 2 Generating
Trust, as Payment Undertaking Pledgee.
10.57 Subordinated Deed of Trust and Security Agreement,
dated as of July 1, 1996, among Old Dominion Electric
Cooperative, Richard W. Gregory, Trustee, and Michael P.
Drzal, Trustee.
10.58 Subordinated Security Agreement, dated as of July 1,
1996, among Old Dominion Electric Cooperative, the
Owner Participant named therein, AMBAC Indemnity Corporation
and Clover Unit 2 Generating Trust.
10.59 Tax Indemnity Agreement, dated as of July 1, 1996,
between Old Dominion Electric Cooperative and the
Owner Participant named therein.
68
<PAGE>
Exhibit Page
Number Description of Exhibit Number
21 Subsidiaries of Old Dominion Electric Cooperative (not
included because Old Dominion Electric Cooperative's
subsidiaries, considered in the aggregate as a single
subsidiary, would not constitute a "significant
subsidiary" under Rule 1-02(W) of Regulation S-X).
27 Financial Data Schedule.
</TABLE>
- - -----------------------------------
* Incorporated herein by reference.
** These leases relate to Old Dominion Electric Cooperative's interest in all
of Clover Unit 1 and Clover Unit 2, as applicable, other than the
foundations. At the time these leases were executed, Old Dominion had
entered into identical leases with respect to the foundations as part of
the same transactions. Old Dominion Electric Cooperative agrees to furnish
the Commission, upon request, a copy of the leases of its interest in the
foundations for Clover Unit 1 and Clover Unit 2, as applicable.
69
THIS INSTRUMENT GRANTS A SECURITY INTEREST BY A UTILITY
THIS INSTRUMENT CONTAINS AFTER ACQUIRED PROPERTY PROVISIONS
- - --------------------------------------------------------------------------------
OLD DOMINION ELECTRIC COOPERATIVE,
GRANTOR
to
CRESTAR BANK,
TRUSTEE
----------------------------------
FOURTH SUPPLEMENTAL INDENTURE
Dated as of December 15, 1994
----------------------------------
Supplemental to the Indenture of Mortgage and Deed of Trust
dated as of May 1, 1992
- - --------------------------------------------------------------------------------
A Mortgage of Both Real and Personal Property
<PAGE>
FOURTH SUPPLEMENTAL INDENTURE
THIS FOURTH SUPPLEMENTAL INDENTURE, dated as of December 15,
1994 (the "Fourth Supplemental Indenture"), between OLD DOMINION ELECTRIC
COOPERATIVE, a not-for-profit wholesale power supply cooperative incorporated
under the laws of the Commonwealth of Virginia (the "Company"), having its chief
executive office at Innsbrook Corporate Center, 4201 Dominion Boulevard, Glen
Allen, Virginia 23060, and CRESTAR BANK, a Virginia banking corporation, as
trustee (the "Trustee"), having its principal corporate trust office at 919 East
Main Street, Richmond, Virginia 23219.
WHEREAS, the Company has heretofore executed and delivered an
Indenture of Mortgage and Deed of Trust, dated as of May 1, 1992 (herein
sometimes called the "Original Indenture", and together with any indentures
supplemental thereto, hereinafter sometimes called the "Indenture"), to secure,
as provided therein, its bonds (in the Original Indenture and herein called the
"Bonds"), to be designated generally as its "First Mortgage Bonds", and to be
issued in one or more series as provided in the Original Indenture; and
WHEREAS, the Original Indenture was recorded among the land
records in the Counties of Halifax, Louisa, Spotsylvania and Orange, Virginia,
and a UCC Form 1 concerning the Original Indenture was recorded among the
financing statement records at the Virginia State Corporation Commission and the
Counties of Henrico, Halifax, Louisa, Spotsylvania and Orange, Virginia; and
WHEREAS, the Company has heretofore executed and delivered to
the Trustee its First Supplemental Indenture, dated as of August 1, 1992
(hereinafter called the "First Supplemental Indenture"), its Second Supplemental
Indenture, dated as of December 1, 1992 (hereinafter called the "Second
Supplemental Indenture"), and its Third Supplemental Indenture, dated as of May
1, 1993 (hereinafter caused the "Third Supplemental Indenture"), each of which
provided for the creation of a new series of First Mortgage Bonds, and, with
respect to the First Supplemental Indenture, which subjected to the lien of the
Indenture certain property described therein; and
WHEREAS, the First Supplemental Indenture, the Second
Supplemental Indenture and the Third Supplemental Indenture were recorded among
the land records for the Counties of Halifax, Louisa, Spotsylvania and Orange,
Virginia and among the financing statement records at the Virginia State
Corporation Commission and the Counties of Henrico, Halifax, Louisa,
Spotsylvania and Orange, Virginia, which recording offices include all recording
offices in which this Fourth Supplemental Indenture will be recorded; and
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
First Mortgage Bonds, $392,375 0
1992 Series B, Due
March 15, 1994
First Mortgage Bonds $392,376 0
1992 Series B, Due
June 15, 1994
First Mortgage Bonds, $392,376 0
1992 Series B, Due
September 15, 1994
First Mortgage Bonds, $392,376 0
1992 Series B, Due
December 15, 1994
First Mortgage Bonds, $392,375 $392,375
1992 Series B, Due
March 15, 1995
First Mortgage Bonds, $392,376 $392,376
1992 Series B, Due
June 15, 1995
First Mortgage Bonds, $392,376 $392,376
1992 Series B, Due
September 15, 1995
First Mortgage Bonds, $392,376 $392,376
1992 Series B, Due
December 15, 1995
First Mortgage Bonds, $392,375 $392,375
1992 Series B, Due
March 15, 1996
First Mortgage Bonds, $392,376 $392,376
1992 Series B, Due
June 15, 1996
First Mortgage Bonds, $392,376 $392,376
1992 Series B, Due
September 15, 1996
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
First Mortgage Bonds, $392,376 $392,376
1992 Series B, Due
December 15, 1996
4.90% First Mortgage $1,025,000 $1,025,000
Bonds, 1992 Series C,
Due December 1, 1997
5.20% First Mortgage $1,075,000 $1,075,000
Bonds, 1992 Series C,
Due December 1, 1998
5.40% First Mortgage $1,130,000 $1,130,000
Bonds, 1992 Series C,
Due December 1, 1999
5.50% First Mortgage $1,190,000 $1,190,000
Bonds, 1992 Series C,
Due December 1, 2000
5.70% First Mortgage $1,255,000 $1,255,000
Bonds, 1992 Series C,
Due December 1, 2001
5.90% First Mortgage $1,330,000 $1,330,000
Bonds, 1992 Series C,
Due December 1, 2002
6.00% First Mortgage $1,405,000 $1,405,000
Bonds, 1992 Series C,
Due December 1, 2003
6.10 % First Mortgage $1,495,000 $1,495,000
Bonds, 1992 Series C,
Due December 1, 2004
6.35% First Mortgage $5,060,00 $5,060,000
Bonds, 1992 Series C,
Due December 1, 2007
3
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
6.50% First Mortgage $10,845,000 $10,845,000
Bonds, 1992 Series C,
Due December 1, 2012
6.00% First Mortgage $34,400,000 $34,400,000
Bonds, 1992 Series C,
Due December 1, 2022
7.48% First Mortgage $130,000,000 $130,000,000
Bonds, 1993 Series A,
Due December 1, 2013
7.78% First Mortgage $120,000,000 $120,000,000
Bonds, 1993 Series A,
Due December 1, 2023
</TABLE>
WHEREAS, the Company, as seller, entered into an Asset
Purchase Agreement dated November 28, 1994 (the "Asset Purchase Agreement") with
Esbelto B.V., a limited liability company organized under the laws of The
Netherlands, as purchaser, with respect to certain pollution control facilities
constituting a part of the System subject to the lien and security interest of
the Indenture, which Asset Purchase Agreement provides, subject to the
conditions set forth therein, for the purchase of the pollution control
facilities by Esbelto B.V., subject to the lien and security interest of the
Indenture, and the lease of the pollution control facilities by the Esbelto B.V.
to the Company under a net lease agreement; and
WHEREAS, the obligation of the Company to pay basic rent under
such lease agreement, as well as all of the purchase price to the Company to
reacquire title to the pollution control facilities upon the exercise of a
purchase option at the end of the tenth year of the lease term and all, or a
substantial part, of the purchase price to reacquire title upon early
termination of the lease agreement pursuant to various circumstances set forth
in the lease agreement, will be defeased; and
WHEREAS, the obligation of Esbelto B.V. to reconvey title free
and clear of its interest or those claiming an interest in the pollution control
facilities through Esbelto B.V., or to pay damages in an amount equal to the
cost to the Company of having good and valid title free of such encumbrances
reconveyed to it, will be secured by the execution and delivery of (i) a
security agreement between Esbelto B.V. and the Company and (ii) a lessor deed
of pledge between Esbelto B.V. and the Company; and
WHEREAS, all of the Company's right, title and interest in (i)
the lease agreement of such pollution control facilities, (ii) the security
agreement between Esbelto B.V. and the Company and (iii) the lessor deed of
pledge between Esbelto B.V. and the Company is
4
<PAGE>
being assigned to the Trustee as part of the Trust Estate pursuant to this
Fourth Supplemental Indenture; and
WHEREAS, the Company desires to execute and deliver this
Fourth Supplemental Indenture, in accordance with the provisions of the Original
Indenture, for the purposes, among others, of (a) further assuring, conveying,
mortgaging and assigning unto the Trustee certain additional property acquired
by the Company, and (b) providing for the sale of such pollution control
facilities to Esbelto E.V., subject to the lien and security interest of the
Indenture, and their lease back to the Company; and
WHEREAS, Section 13.01 of the Original Indenture provides
that, without the consent of the Holders of any of the Bonds at the time
Outstanding, the Company, when authorized by a Board Resolution, and the Trustee
may enter into Supplemental Indentures for the purposes and subject to the
conditions set forth in said Section 13.01, including to make any change in the
Indenture that, in the reasonable judgement of the Trustee, will not materially
and adversely affect the rights of the Holders; and
WHEREAS, all acts and proceedings required by law and by the
Restated Articles of Incorporation and Amended and Restated Bylaws of the
Company necessary to constitute the Indenture a valid and binding mortgage and
deed of trust and security agreement and contract for the security of all of the
Bonds, in accordance with its and their terms, have been done and taken; and the
execution and delivery of this Fourth Supplemental Indenture has been in all
respects duly authorized;
NOW, THEREFORE, THIS FOURTH SUPPLEMENTAL INDENTURE WITNESSETH,
that, to secure the payment of the principal of (and premium, if any) and
interest on the outstanding Secured Bonds, to confirm the lien of the Indenture
upon the Trust Estate mentioned therein including all property purchased,
constructed or otherwise acquired by the Company since the date of execution of
the Original Indenture, to secure performance of the covenants therein and
herein contained and to declare the terms and conditions on which the
Outstanding Secured Bonds are secured, and in consideration of the premises
thereof and hereof, the Company by these presents does grant, bargain, sell,
alienate, remise, release, convey, assign, transfer, mortgage, hypothecate,
pledge, set over and confirm to the Trustee, in trust, and hereby grants a
security interest in all property, rights, privileges and franchises (other than
Excepted Property) of the Company of the character described in the Granting
Clauses of the original Indenture, including all such property, rights,
privileges and franchises acquired since the date of execution of the Original
Indenture, including, without limitation, the Pollution Control Assets Lease,
the Security Agreement and the Deed of Pledge and all of those fee and leasehold
interests in real property, if any, which may hereafter be constructed or
acquired by the Company, but subject to all exceptions, reservations and matters
of the character referred to in the Original Indenture, and expressly excepting
and excluding from the lien and operation of the Indenture all properties of the
character specifically excepted by Subdivisions A through K of "Excepted
Property" in the Original Indenture to the extent contemplated thereby, and all
5
<PAGE>
property heretofore released or otherwise disposed of pursuant to the provisions
of the Original Indenture.
PROVIDED, HOWEVER, that (i) if, upon the occurrence of an
Event of Default, the Trustee, or any separate trustee or co-trustee appointed
under Section 10.14 of the Original Indenture or any receiver appointed pursuant
to statutory provision or order of court, shall have entered into possession of
all or substantially all of the Trust Estate, all the Excepted Property
described or referred to in Subdivisions A through G, inclusive, of "Excepted
Property" in the Original Indenture then owned or thereafter acquired by the
Company shall immediately, and, in the case of any Excepted Property described
or referred to in Subdivisions H through J, inclusive, of "Excepted Property" in
the Original Indenture, upon demand of the Trustee or such other trustee or
receiver, become subject to the lien of the Indenture to the extent permitted by
law, and the Trustee or such other trustee or receiver may, to the extent
permitted by law, at the same time likewise take possession thereof, and (ii)
whenever all Events of Default shall have been cured and the possession of all
or substantially all of the Trust Estate shall have been restored to the
Company, such Excepted Property shall again be excepted and excluded from the
lien of the Indenture to the extent and otherwise as hereinabove set forth and
as set forth in the Indenture.
The Company may, however, pursuant to Granting Clause Third of
the Original Indenture, subject to the lien of the Indenture any Excepted
Property, whereupon the same shall cease to be Excepted Property.
TO HAVE AND TO HOLD all said property, rights, privileges and
franchises of every kind and description, real, personal or mixed, hereby and
hereafter (by Supplemental Indenture or otherwise) granted, bargained, sold,
alienated, remised, released, conveyed, assigned, transferred, mortgaged,
hypothecated, pledged, set over or confirmed as aforesaid, or intended, agreed
or covenanted so to be, together with all the appurtenances thereto appertaining
unto the Trustee and its successors and assigns forever.
SUBJECT, HOWEVER, to (i) Permitted Encumbrances (as defined in
Section 1.01 of the Original Indenture), (ii) to the extent permitted by Section
14.06 of the Original Indenture, as to property acquired since the date of
execution of the Original Indenture, (a) any duly recorded or perfected prior
mortgage or other lien that may exist thereon at the date of acquisition thereof
by the Company, and (b) purchase money mortgages created by the Company at the
time of acquisition thereof, and (iii) defects of title to and encumbrances on
property as shown on Exhibit A of the Original Indenture or as described in
Article IV of the First Supplemental Indenture.
BUT IN TRUST, NEVERTHELESS, with power of sale, for the equal
and proportionate benefit and security of the Holders from time to time of all
the Outstanding Secured Bonds without any priority of any such Bond over any
other such Bond and for the enforcement of the payment of such Bonds in
accordance with their terms.
6
<PAGE>
UPON CONDITION that, until the happening of an Event of
Default (as defined in Section 1.01 of the Original Indenture) and subject to
the provisions of Article Six of the Original Indenture, the Company shall be
permitted to possess and use the Trust Estate, except cash, securities and other
personal property deposited, or required to be deposited, with the Trustee and
to explore for, mine, extract and dispose of coal, ore, gas, oil and other
minerals, to harvest standing timber and to receive and use the rents, issues,
profits, revenues and other income, products and proceeds of the Trust Estate.
AND IT IS HEREBY COVENANTS AND DECLARED that the Trust Estate
is to be held and applied by the Trustee, subject to the further covenants,
conditions and trusts set forth in the Original Indenture, and the Company does
hereby covenant and agree to and with the Trustee, for the equal and
proportionate benefit of all Holders of the Bonds as follows:
ARTICLE ONE
AMENDMENTS TO ARTICLE ONE OF THE INDENTURE
SECTION 1.01. AMENDMENTS TO EXISTING DEFINITIONS IN SECTION 1.01.
Section 1.01 of the Indenture is amended by amending the
definition of "Permitted Encumbrances" set forth therein by deleting the word
"or" where it appears at the end of clause (25); replacing the period at the end
of clause (26) with "; or"; and by adding the following at the end thereof:
"(27) the interest of the Pollution Control Assets Lessor
under the Pollution Control Assets Lease Documents and the
interests of the Company under the Security Agreement and the
interests of the Company in the Deed of Pledge."
SECTION 1.02. ADDITIONS TO SECTION 1.01.
Section 1.01 of the Indenture is hereby amended by adding
thereto the following definitions:
"Deed of Pledge" means the Lessor Deed of Pledge dated as of
December 30, 1994, between the Pollution Control Assets Lessor and the Company.
"Fourth Supplemental Indenture" means the Fourth Supplemental
Indenture dated as of December 15, 1994 to the Indenture.
"Pollution Control Assets" means those assets described on
Exhibit A to the Fourth Supplemental Indenture.
7
<PAGE>
"Pollution Control Assets Bill of Sale" means the Limited
Warranty Bill of Sale and Personal Property Agreement dated the date of the sale
of the Pollution Control Assets by the Company to the Pollution Control Lessor
pursuant to the Pollution Control Assets Purchase Agreement between the Company
and the Pollution Control Assets Lessor.
"Pollution Control Assets Event of Default" has the meaning
stated in Section 9.01.
"Pollution Control Assets Guarantor" means Internationale
Nederlander Bank, a banking institution organized under the laws of The
Netherlands.
"Pollution Control Assets Lease" means the Lease Agreement
dated as of December 15, 1994 between the Company and the Pollution Control
Assets Lessor.
"Pollution Control Assets Lease Documents" means the Pollution
Control Assets Bill of Sale, the Pollution Control Assets Lease, the Pollution
Control Assets Purchase Agreement, the Security Agreement and the Deed of
Pledge.
"Pollution Control Assets Lessor" means Esbelto B.V., a
limited liability company organized under the laws of The Netherlands, and any
successor or assignee thereof under the Pollution Control Assets Lease
Documents.
"Pollution Control Assets Purchase Agreement" means the Asset
Purchase Agreement dated November 28, 1994 between the Company and the Pollution
Control Assets Lessor.
"Security Agreement" means the Security Agreement dated as of
December 15, 1994 between the Pollution Control Assets Lessor and the Company.
ARTICLE TWO
AMENDMENT TO SECTION 6.01 OF THE INDENTURE
SECTION 2.01. The second paragraph of section 6.01 of the
Indenture is hereby amended by deleting the word "and" where it appears in
paragraph F thereof; replacing the period at the end of paragraph G thereof with
"; and"; and by adding at the end of such section a paragraph H reading as
follows:
"H. notwithstanding any other provision of this Indenture, to
sell the Pollution Control Assets to the Pollution Control
Assets Lessor pursuant to the Pollution Control Assets
Purchase Agreement and lease such Pollution Control Assets
back from the Pollution Control Assets Lessor pursuant to the
Pollution Control Assets Lease; and in such case the Pollution
Control Assets shall, for all purposes of this
8
<PAGE>
Indenture, continue to be treated as if they continued to be
owned by the Company, and therefore, among other things, the
Pollution Control Assets shall continue to constitute Bondable
Property, shall not be considered "Retired" solely by reason
of such transaction, and no cash need be deposited with the
Trustee in respect of such transaction."
ARTICLE THREE
AMENDMENT TO SECTION SEVEN OF THE INDENTURE
SECTION 3.01. Article Seven of the Indenture is hereby amended
by adding at the end thereof an additional Section 7.05A reading as follows:
"To the extent that any Trust Moneys consist
of proceeds of insurance upon, or payable in
consequence of destruction damage to, that portion of
the Trust Estate consisting of the Pollution Control
Assets, they may be withdrawn by the Company and
shall be paid by the Trustee upon Company Request to
the Pollution Control Assets Lessor or its designee,
upon receipt by the Trustee of the following:
A. An Officers' Certificate, dated not more than
30 days prior to the date of the Application
for the withdrawal and payment of such Trust
Moneys and signed also in the case of the
following clauses (2), (3), and (4) by an
Engineer or Appraiser, setting forth in
substance as follows:
(1) an amount is, or with an election
which shall be made by the Company,
will be, due and payable to the
Pollution Control Assets Lessor
under the Pollution Control Assets
Lease in respect of such destruction
of or
9
<PAGE>
damage to the Pollution Control
Assets and the amount of the request
for withdrawal of Trust Moneys to
which such Officer's Certificate
relates does not exceed such amount;
(2) the amount of Trust Moneys
to be withdrawn pursuant to such
Company Request is not more than the
difference of (a) the amount of
proceeds of insurance received in
consequence of such destruction of
or damage to the Pollution Control
Assets which has theretofore been
deposited with the Trustee, minus
either (b) if the Pollution Control
Assets are not to be repaired or
replaced, the difference between (i)
the fair value in the opinion of
said Engineer or Appraiser of the
Pollution Control Assets immediately
prior to the destruction or damage
giving rise to the receipt of the
proceeds of insurance, minus (ii)
the fair value in the opinion of
10
<PAGE>
said Engineer or Appraiser of the
Pollution Control Assets at the date
of such Officers' Certificate or (c)
if the Pollution Control Assets are
to be repaired or replaced, the cost
of repair or replacement as
estimated by such Engineer or
Appraiser;
(3) whether (a) the aggregate of the
amount of Trust Moneys to be
withdrawn in accordance with such
Application and the fair value of
all Trust Moneys, withdrawn pursuant
to this third paragraph of this
Section 7.05 or securities or other
property released pursuant to
Section 6.02 since the commencement
of the then current calendar year
(as previously certified to the
Trustee in connection with
withdrawals or releases) is 10% or
more of the aggregate principal
amount of all Bonds at the time
Outstanding, and whether said amount
of Trust Moneys to be withdrawn is
at least
11
<PAGE>
$25,000 and at least 1% of the
aggregate principal amount of all
Bonds at the time Outstanding, or
(b) the amount of the Trust Moneys
to be withdrawn in accordance with
such Application's is more than
$1,000,000;
(4) that, in the opinion of the signers,
the proposed withdrawal will not
impair the security under this
Indenture in contravention of the
provisions hereof;
(5) that no Event of Default exists; and
(6) that all conditions precedent herein
provided for relating to such
withdrawal and payment have been
complied with.
If the facts specified in either subclause (a) or (b) of
clause (3) above are present, such Officer's Certificate
sh&U be accompanied by a certificate of an Independent
Engineer or Independent Appraisal, dated not more than 30
days prior to the date of the Application for withdrawal
and payment of Trust Moneys, to the effect set forth in
clauses (2) and (4) above. Upon compliance with the
foregoing provisions of this Section, the Trustee shall
pay on Company Request an amount of Trust Moneys of the
12
<PAGE>
character aforesaid equal to the amount stated in such
Officer's Certificate."
ARTICLE FOUR
AMENDMENTS TO ARTICLE NINE OF THE INDENTURE
SECTION 4.01. Section 9.01 of the Indenture is hereby amended
by adding at the end thereof a new paragraph reading as follows:
"POLLUTION CONTROL ASSETS EVENT OF DEFAULT" wherever used
herein shall mean:
(1) the assets and equipment subject to the Pollution Control
Assets shall not be conveyed to the Company in accordance with Section 19.7 of
the Pollution Control Assets Lease by February 1, 2005 (whatever the reason for
such event and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decrees or regulation of any
administrative or governmental body); or
(2) (i) The Pollution Control Assets Lessor or the Pollution
Control Assets Guarantor shall (A) commence a voluntary case or other proceeding
seeking bankruptcy (in the Netherlands, "Faillisement") moratorium of debts (in
The Netherlands, "Surseance van Betaling") liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect, or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or (B) consent to any such relief or to the
appointment of or taking Possession by any such official in any voluntary case
or other proceeding commenced against it, or (C) admit in writing its inability
to pay its debts generally as they come due, or (D) make a general assignment
for the benefit of creditors, or (E) take any corporate action to authorize any
of the foregoing; or
(ii) An involuntary case or other proceeding shall be
commenced against and/or a petition to that effect has been filed against the
Pollution Control Assets Lessor or the Pollution Control Assets Guarantor with a
court of competent jurisdiction seeking liquidation, reorganization, bankruptcy
(in The Netherlands, "Faillisement") or moratorium of debt (in The Netherlands,
"Surseance van Betaling") or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect, or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official and such involuntary case of other proceeding shall remain
undismissed and unstayed for a period of 10 days if such filing shall be made in
The Netherlands, or 60 days if such filing shall be made other than in The
Netherlands.
13
<PAGE>
SECTION 4.02. Section 9.04. of the Indenture is hereby
amended by adding at the end thereof a new paragraph reading as follows:
"In case a Pollution Control Assets Event of Default shall
occur and be continuing, the Trustee, in its discretion, may, subject to the
provisions of Section 9.16, exercise any of the remedies provided in clauses A
or B of the preceding paragraph of this Section 9.04 in order to cause title to
the assets and equipment subject to the Pollution Control Assets Lease to be
vested in the Company, free of all Lessor's Liens (as defined in the Pollution
Control Assets Lease). The exercise of such remedies set forth in the first
paragraph of this Section 9.04 shall be the exclusive remedies of the Trustee
for the occurrence of a Pollution Control Assets Event of Default.
SECTION 4.03. Section 9.05 of the Indenture is hereby amended
by adding at the end thereof a new paragraph reading as follows:
"Notwithstanding the preceding provisions of this Section
9.05, upon any sale of any of the Trust Estate constituting assets or equipment
then subject to the Pollution Control Assets Lease solely in consequence of a
Pollution Control Assets Event of Default, whether made under the power of sale
hereby given or pursuant to judicial proceeding, to the extent permitted by law,
the provisions of clause A of the first paragraph of this Section 9.05 shall not
apply."
SECTION 4.04. Section 9.07 of the Indenture is hereby amended
by adding at the end thereof a new paragraph reading as follows:
"Notwithstanding the preceding provisions of this Section
9.07, any proceeds of any sale conducted pursuant to the last paragraph of
Section 9.04 in consequence of a Pollution Control Assets Event of Default
(after deducting the costs and expenses of such sale, including a reasonable
compensation to the Trustee, its agents and counsel, and any taxes, assessments
or dens prior to the lien of this Indenture, except any thereof subject to which
such sale shall have been made), whether made under any power of sale herein
granted or pursuant to judicial proceedings, shall be applied:
A. FIRST: to the payment of all undeducted amounts due
the Trustee under Section 10.07; and
B. SECOND: to the Company if it shall be the purchaser
of the assets and equipment subject to the Pollution
Control Assets Lease in such sale, and otherwise to
the Trustee to be held as Trust Moneys."
ARTICLE FIVE
PURCHASE OPTION UNDER
14
<PAGE>
POLLUTION CONTROL ASSETS LEASE
SECTION 5.01. The Company hereby covenants that, if it shall
not have previously acquired all of the Pollution Control Assets Lessor's right,
title and interest in the Pollution Control Assets pursuant to any of the
options set forth in the Pollution Control Assets Lease, it will exercise its
purchase option set forth in Section 19.2 of the Pollution Control Assets Lease
to acquire all of the Pollution Control Assets Lessor's right, title and
interest in the Pollution Control Assets on the tenth anniversary of the
commencement of the term of such Lease.
ARTICLE SIX
POWER OF ATTORNEY
SECTION 6.01. The Company does hereby irrevocably constitute
and appoint the Trustee as the true and lawful attorney-in-fact, coupled with an
interest, of the Company to exercise the Company's options set forth in Section
19 of the Pollution Control Assets Lease to purchase the Pollution Control
Assets as permitted thereby, and to perform any obligations of the Company
related to such exercise of such purchase options; PROVIDED, HOWEVER, that the
Trustee shall have no obligation whatsoever to exercise any of such powers
hereby conferred. The Company agrees that any amounts expended by the Trustee
pursuant to the Limited power of attorney made pursuant to this Section, shall
be considered expenses, disbursements and advances by the Trustee under Section
10.07 of the Indenture.
ARTICLE SEVEN
MISCELLANEOUS
SECTION 7.01. This Fourth Supplemental Indenture is executed
and shall be construed as an indenture supplemental to the Original Indenture,
and shall form a part thereof, and the Original Indenture, as heretofore
supplemented and as hereby supplemented, is hereby confirmed. All capitalized
terms used in this Fourth Supplemental Indenture, unless otherwise defined
herein, shall be taken to have the same meanings as in the Original Indenture.
SECTION 7.02. All recitals in this Fourth Supplemental
Indenture are made by the Company only and not by the Trustee; and all of the
provisions contained in the Original Indenture, in respect of the rights,
privileges, immunities, powers and duties of the Trustee shall be applicable in
respect hereof as fully and with like effect as if set forth herein in full.
SECTION 7.03. Whenever in this Fourth Supplemental Indenture
any of the parties hereto is named or referred to, this shall, subject to the
provisions of Articles Ten and Twelve of the Original Indenture, be deemed to
include the successors and assigns of such party, and all the covenants and
agreements in this Fourth Supplemental Indenture contained by or on behalf of
the Company, or by or on behalf of the Trustee shall, subject as aforesaid, bind
and
15
<PAGE>
inure to the respective benefits of the respective successors and assigns of
such parties, whether so expressed or not.
SECTION 7.04. Nothing in this Fourth Supplemental Indenture,
express or implied, shall give to any Person, other than the parties hereto and
their successors hereunder, any separate trustee or co-trustee appointed under
Section 10.14 of the Original Indenture and the Holders of Outstanding Secured
Bonds, any benefit or any legal or equitable right, remedy or claim under this
Fourth Supplemental Indenture.
SECTION 7.05. This Fourth Supplemental Indenture may be
executed in several counterparts, each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts, or as many of
them as the Company and the Trustee shall preserve undestroyed, shall together
constitute but one and the same instrument.
SECTION 7.06. Although this Fourth Supplemental Indenture is
dated for convenience and for the purpose of reference as of December 15, 1994,
the actual date or dates of execution by the Company and by the Trustee are as
indicated by their respective acknowledgements hereto annexed.
SECTION 7.07. To the extent permitted by applicable law, this
Fourth Supplemental Indenture shall be deemed to be a Security Agreement and
Financing Statement whereby the Company grants to the Trustee a security
interest in all of the Trust Estate that is personal property or fixtures under
the Uniform Commercial Code, as adopted or hereafter adopted in one or more of
the states in which any part of the properties of the Company are all situated.
The mailing address of the Company, as debtor, is Post Office Box 2310, Glen
Allen, Virginia, 23058-2310, and the mailing address of the Trustee, as secured
party, is Crestar Bank, Post Office Box 2665, Richmond, Virginia 23261-6665.
SECTION 7.08. By its execution and delivery of this Fourth
Supplemental Indenture, the Trustee sets forth its determination that in the
Trustee's reasonable judgment, the changes to the Indenture made by this Fourth
Supplemental Indenture will not materially and adversely affect the rights of
the Holders.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereby have caused this Third
supplemental Indenture to be duly executed as of the day and year first above
written.
Company: OLD DOMINION ELECTRIC COOPERATIVE,
Innsbrook Corporate Center a Virginia power supply cooperative
4201 Dominion Boulevard
Glen Allen, Virginia 23060
By: /s/ Robert N. Cleveland
--------------------------------
Name:
Title:
Trustee: CRESTAR BANK,
919 East Main Street a Virginia banking corporation
Corporate Trust Department
Richmond, Virginia 23219
By: /s/ Catherine S. Boyle
--------------------------------
Name: Catherine S. Boyle
Title: Vice President
17
<PAGE>
STATE NEW YORK )
) ss.
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this 30th day of
December 1994, by Robert N. Cleveland , President & CEO of Old Dominion Electric
Cooperative, a Virginia power supply cooperative, in behalf of said association.
/s/ Christine Dionne
---------------------
Notary Public
(Notarial Seal)
18
<PAGE>
ACKNOWLEDGEMENT
STATE OF VIRGINIA )
) TO-WIT:
CITY OF RICHMOND )
The foregoing instrument was acknowledged before me this 30th day of
December, 1994 by Catherine S. Boyle , a Vice President of CRESTAR BANK, a
Virginia banking corporation, on behalf of said corporation.
/s/ Bonnie McNeal
------------------
Notary Public
My Commission expires: 8/31/98
19
<PAGE>
THIS INSTRUMENT GRANTS A SECURITY INTEREST BY A UTILITY
THIS INSTRUMENT CONTAINS AFTER ACQUIRED PROPERTY PROVISIONS
OLD DOMINION ELECTRIC COOPERATIVE,
GRANTOR
TO
CRESTAR BANK,
TRUSTEE
--------------------
FIFTH SUPPLEMENTAL INDENTURE
Dated as of February 29, 1996
--------------------
Supplemental to the Indenture of Mortgage and Deed of Trust
dated as of May 1, 1992
A Mortgage of Both Real and Personal Property
THIS INSTRUMENT IS EXEMPT FROM RECORDATION TAX
PURSUANT TO VIRGINIA CODE SECTION 58.1 - 803.D.
<PAGE>
FIFTH SUPPLEMENTAL INDENTURE
This FIFTH SUPPLEMENTAL INDENTURE, dated as of February 29,
1996 (the "Fifth Supplemental Indenture"), between OLD DOMINION ELECTRIC
COOPERATIVE, a not-for-profit wholesale power supply cooperative incorporated
under the laws of the Commonwealth of Virginia (the "Company"), as grantor,
having its chief executive office at Innsbrook Corporate Center, 4201 Dominion
Boulevard, Glen Allen, Virginia 23060, and CRESTAR BANK, a Virginia banking
corporation, as trustee (the "Trustee"), as grantee, having its principal
corporate trust office at 919 East Main Street, Richmond, Virginia 23219.
WHEREAS, BY EXECUTION HEREOF, THE COMPANY CERTIFIES THAT THIS
FIFTH SUPPLEMENTAL INDENTURE IS EXEMPT FROM RECORDATION TAX PURSUANT TO VIRGINIA
CODE SECTION 58.1 - 803. D. SINCE (A) THE 1996 SERIES A INITIAL VALUE
(HEREINAFTER DEFINED) OF THE 1996 SERIES A BONDS HEREIN AUTHORIZED IS TO BE
ISSUED UPON THE BASIS OF THE RETIREMENT OF, AND IN REPLACEMENT OF, CERTAIN BONDS
HERETOFORE ISSUED BY THE COMPANY UNDER THE INDENTURE (AS HEREINAFTER DEFINED)
AND (B) THE 1996 SERIES B INITIAL VALUE (HEREINAFTER DEFINED) OF THE 1996 SERIES
B BONDS HEREIN AUTHORIZED IS TO BE ISSUED UPON THE BASIS OF THE RETIREMENT OF,
AND IN REPLACEMENT OF, SAID 1996 SERIES A BONDS AND CERTAIN OTHER BONDS
HERETOFORE ISSUED BY THE COMPANY UNDER THE INDENTURE; AND
WHEREAS, the Company has heretofore executed and delivered an
Indenture of Mortgage and Deed of Trust, dated as of May 1, 1992 (herein
sometimes called the "Original Indenture", and together with any indentures
supplemental thereto, hereinafter sometimes called the "Indenture"), to secure,
as provided therein, its bonds (in the Original Indenture and herein called the
"Bonds"), to be designated generally as its "First Mortgage Bonds," and to be
issued in one or more series as provided in the Original Indenture; and
WHEREAS, the Original Indenture was recorded among the land
records in the Counties of Halifax, Louisa, Spotsylvania and Orange, Virginia,
and a UCC Form 1 concerning the Original Indenture was recorded among the
financing statement records at the Virginia State Corporation Commission and the
Counties of Henrico, Halifax, Louisa, Spotsylvania and Orange, Virginia; and
WHEREAS, the Company has heretofore executed and delivered to
the Trustee its First Supplemental Indenture, dated as of August 1, 1992
(hereinafter called the "First Supplemental Indenture"), its Second Supplemental
Indenture, dated as of December 1, 1992 (hereinafter called the "Second
Supplemental Indenture"), its Third Supplemental Indenture, dated as of May 1,
1993 (hereinafter called the "Third Supplemental Indenture"), and its Fourth
Supplemental Indenture, dated as of December 15, 1994 (hereinafter called the
"Fourth Supplemental Indenture"), each of which, with the exception of the
Fourth Supplemental Indenture, provided for the creation of a new series of
First Mortgage Bonds; and
WHEREAS, the First Supplemental Indenture, the Second
Supplemental Indenture, the Third Supplemental Indenture, and the Fourth
Supplemental Indenture were recorded among the land records in the Counties of
Halifax, Louisa, Spotsylvania and Orange,
<PAGE>
Virginia and UCC Forms 1 concerning each thereof were recorded among the
financing statement records at the Virginia State Corporation Commission and the
Counties of Henrico, Halifax, Louisa, Spotsylvania and Orange, Virginia, which
recording offices include all recording offices in which this Fifth Supplemental
Indenture will be recorded; and
WHEREAS, pursuant to the Original Indenture, the First
Supplemental Indenture, the Second Supplemental Indenture and the Third
Supplemental Indenture, there have been executed, authenticated, delivered and
issued and there are now outstanding First Mortgage Bonds of the series and in
the principal amount as follows:
PRINCIPAL PRINCIPAL
AMOUNT AMOUNT
SERIES ISSUED OUTSTANDING
7.27% First Mortgage $ 50,000,000 $ 33,334,000
Bonds, 1992 Series A,
Due December 1, 1997
7.97% First Mortgage 150,000,000 142,000,000
Bonds, 1992 Series A,
Due December 1, 2002
8.76% First Mortgage 350,000,000 301,200,000
Bonds, 1992 Series A,
Due December 1, 2022
First Mortgage Bonds, 1,203,638 0
1992 Series B, Due
September 15, 1992
First Mortgage Bonds, 1,203,637 0
1992 Series B, Due
December 15, 1992
First Mortgage Bonds, 1,203,637 0
1992 Series B, Due
March 15, 1993
First Mortgage Bonds, 1,203,638 0
1992 Series B, Due
June 15, 1993
First Mortgage Bonds, 1,203,638 0
1992 Series B, Due
September 15, 1993
2
<PAGE>
First Mortgage Bonds, 1,203,637 0
1992 Series B, Due
December 15, 1993
First Mortgage Bonds, 392,375 0
1992 Series B, Due
March 15, 1994
First Mortgage Bonds, 392,376 0
1992 Series B, Due
June 15, 1994
First Mortgage Bonds, 392,376 0
1992 Series B, Due
September 15, 1994
First Mortgage Bonds, 392,376 0
1992 Series B, Due
December 15, 1994
First Mortgage Bonds, 392,375 0
1992 Series B, Due
March 15, 1995
First Mortgage Bonds, 392,376 0
1992 Series B, Due
June 15, 1995
First Mortgage Bonds, 392,376 0
1992 Series B, Due
September 15, 1995
First Mortgage Bonds, 392,376 0
1992 Series B, Due
December 15, 1995
First Mortgage Bonds, 392,375 392,375
1992 Series B, Due
March 15, 1996
First Mortgage Bonds, 392,376 392,376
1992 Series B, Due
June 15, 1996
3
<PAGE>
First Mortgage Bonds, 392,376 392,376
1992 Series B, Due
September 15, 1996
First Mortgage Bonds, 392,376 392,376
1992 Series B, Due
December 15, 1996
4.90% First Mortgage 1,025,000 1,025,000
Bonds, 1992 Series C,
Due December 1, 1997
5.20% First Mortgage 1,075,000 1,075,000
Bonds, 1992 Series C,
Due December 1, 1998
5.40% First Mortgage 1,130,000 1,130,000
Bonds, 1992 Series C,
Due December 1, 1999
5.50% First Mortgage 1,190,000 1,190,000
Bonds, 1992 Series C,
Due December 1, 2000
5.70% First Mortgage 1,255,000 1,255,000
Bonds, 1992 Series C,
Due December 1, 2001
5.90% First Mortgage 1,330,000 1,330,000
Bonds, 1992 Series C,
Due December 1, 2002
6.00% First Mortgage 1,405,000 1,405,000
Bonds, 1992 Series C,
Due December 1, 2003
6.10% First Mortgage 1,495,000 1,495,000
Bonds, 1992 Series C,
Due December 1, 2004
6.35% First Mortgage 5,060,000 5,060,000
Bonds, 1992 Series C,
Due December 1, 2007
4
<PAGE>
6.50% First Mortgage 10,845,000 10,845,000
Bonds, 1992 Series C,
Due December 1, 2012
6.00% First Mortgage 34,400,000 34,400,000
Bonds, 1992 Series C,
Due December 1, 2022
7.48% First Mortgage 130,000,000 129,000,000
Bonds, 1993 Series A,
Due December 1, 2013
7.78% First Mortgage 120,000,000 120,000,000
Bonds, 1993 Series A,
Due December 1, 2023
WHEREAS, on December 1, 1995, the Company entered into that
certain Summary of Terms and Conditions for Lease of Clover Unit No. 1 and
Common Facilities to the Company pursuant to which the Company agreed to proceed
with the negotiation of a lease-leaseback transaction with respect to
the Company's undivided interest in Clover Unit 1 and certain Common Facilities
(the "Transaction"), with the object of availing itself of some of the tax
benefits associated with owning depreciable property; and
WHEREAS, in connection with the Transaction, the Company
anticipates entering into a Participation Agreement, dated as of February 29,
1996 (the "Participation Agreement"), among itself, State Street Bank and Trust
Company, a state-chartered trust company organized and existing under the laws
of the Commonwealth of Massachusetts, as Owner Trustee, First Union National
Bank of Florida, a national banking association, as Owner Participant and
Utrecht-America Finance Co., a Delaware corporation, as Agent and Lender, which
Participation Agreement contemplates, among other things, that the Company will
enter into and satisfy the obligations created by the Operative Documents as
such term is defined in Appendix A thereto (all capitalized terms utilized
herein and not otherwise defined herein having the meanings assigned in the
Indenture or if not defined in the Indenture, having the meanings assigned in
said Appendix A); and
WHEREAS, pursuant to the Participation Agreement, the Company
is required to place a deposit with a financial institution or purchase bonds of
institutions having a certain minimum financial rating, the payments under which
are sufficient to pay certain obligations of the Company pursuant to the
Equipment Operating Lease and the Foundation Operating Lease; and
WHEREAS, the Owner Participant has agreed to allow the Company
to issue and pledge Bonds in satisfaction of its obligations pursuant to the
Participation Agreement and the Pledge Agreement; and
5
<PAGE>
WHEREAS, prior to the date hereof, the Company has repurchased
and is holding Thirty Million Dollars ($30,000,000) of the Company's 8.76% First
Mortgage Bonds, 1992 Series A, due December 1, 2022 (the "8.76% Bonds"), to be
used for the purpose of accommodating a refinancing of its debt; and
WHEREAS, the Board of Directors of the Company has established
a new series of Bonds to be designated First Mortgage Bonds, 1996 Series A (the
"1996 Series A Bonds"), which Bonds are to be issued to the Company and pledged
to, and held by, the Owner Trustee solely as security for the Company's
obligation to pay Basic Rent, Termination Value and the Purchase Option Price
under the Equipment Operating Lease as contemplated by the Participation
Agreement and the Pledge Agreement (such amounts being referred to hereinafter
as the "Secured Claims"), and for which purpose the Board of Directors of the
Company has authorized an issue of twenty-five million five hundred sixty-five
thousand nine hundred sixty-one and 82/100 Dollars ($25,565,961.82) in principal
amount thereof, and the Company has complied or will comply with all provisions
required to issue additional Bonds provided for in the Original Indenture; and
WHEREAS, the 1996 Series A Bonds are to be authenticated and
delivered upon the basis of the retirement of, and in replacement of, a portion
of the 8.76% Bonds, in accordance with Section 5.03 of the Original Indenture;
and
WHEREAS, the Board of Directors of the Company has established
a new series of Bonds to be designated First Mortgage Bonds, 1996 Series B (the
"1996 Series B Bonds"), which Bonds are to be issued to the Company, on or prior
to the Stated Maturity of the 1996 Series A Bonds and upon the basis of the
retirement thereof, and in replacement thereof, to be pledged to, and held by,
the Owner Trustee solely as security for the Company's obligation to pay the
Secured Claims and for which purpose the Board of Directors of the Company has
authorized such issue in a principal amount equal to the aggregate of the
amounts to be paid by the Company to or on behalf of the Owner Participant
pursuant to the Operative Documents in respect of the Basic Rent, the Basic
Foundation Rent, the Purchase Option Price and the Foundation Purchase Option
Price, and maturing on the respective due dates of such amounts, and the Company
has complied or will comply with all provisions required to issue additional
Bonds provided for in the Original Indenture; and
WHEREAS, the 1996 Series B Bonds are to be authenticated and
delivered (i) in part, upon the basis of the retirement of, and in replacement
of, the 1996 Series A Bonds, in accordance with Section 5.03 of the Original
Indenture and (ii) in part, upon the basis of the retirement of, and in
replacement of, a portion of the 8.76% Bonds in accordance with Section 5.03 of
the Original Indenture; and
WHEREAS, the Company desires to execute and deliver this Fifth
Supplemental Indenture, in accordance with the provisions of the Original
Indenture, for the purposes, among others, of providing for the creation of two
new series of Bonds, designating the series to be created and specifying the
form and provisions of the bonds of such series; and
6
<PAGE>
WHEREAS, all acts and proceedings required by law and by the
Articles of Incorporation and Bylaws of the Company necessary to secure the
payment of the principal of and interest on the 1996 Series A Bonds and the 1996
Series B Bonds, to make the 1996 Series A Bonds and the 1996 Series B Bonds to
be issued hereunder, when executed by the Company, authenticated and delivered
by the Trustee and duly issued, the valid, binding and legal obligations of the
Company, and to constitute the Indenture a valid and binding mortgage for the
security of all of the Bonds, in accordance with its and their terms, have been
done and taken; and the execution and delivery of this Fifth Supplemental
Indenture has been in all respects duly authorized;
NOW, THEREFORE, THIS FIFTH SUPPLEMENTAL INDENTURE WITNESSETH,
that, to secure the payment of the principal of (and premium, if any) and
interest on the Outstanding Secured Bonds, to confirm the lien of the Original
Indenture upon the Trust Estate mentioned therein including all property
purchased, constructed or otherwise acquired by the Company since the date of
execution of the Original Indenture and to secure performance of the covenants
therein and herein contained and to declare the terms and conditions on which
the Outstanding Secured Bonds are secured, and in consideration of the premises
thereof and hereof, the Company by these presents does grant, bargain, sell,
alienate, remise, release, convey, assign, transfer, mortgage, hypothecate,
pledge, set over and confirm to the Trustee, in trust, all property, rights,
privileges and franchises (other than Excepted Property) of the Company of the
character described in the Granting Clauses of the Original Indenture, including
all such property, rights, privileges and franchises acquired since the date of
execution of the Original Indenture, including, without limitation, all of those
fee and leasehold interests in real property, if any, which may hereafter be
constructed or acquired by it, but subject to all exceptions, reservations and
matters of the character therein referred to, and expressly excepting and
excluding from the lien and operation of the Indenture all properties of the
character specifically excepted by Subdivisions A through K of "Excepted
Property" in the Original Indenture to the extent contemplated thereby, and all
property heretofore released or otherwise disposed of pursuant to the provisions
of the Original Indenture.
PROVIDED, HOWEVER, that (i) if, upon the occurrence of an
Event of Default (as defined in Section 1.01 of the Original Indenture), the
Trustee, or any separate trustee or co-trustee appointed under Section 10.14 of
the Original Indenture or any receiver appointed pursuant to statutory provision
or order of court, shall have entered into possession of all or substantially
all of the Trust Estate, all the Excepted Property described or referred to in
Subdivisions A through G, inclusive, of "Excepted Property" in the Original
Indenture then owned or thereafter acquired by the Company shall immediately,
and, in the case of any Excepted Property described or referred to in
Subdivisions H through J, inclusive, of "Excepted Property" in the Original
Indenture, upon demand of the Trustee or such other trustee or receiver, become
subject to the lien of the Original Indenture to the extent permitted by law,
and the Trustee or such other trustee or receiver may, to the extent permitted
by law, at the same time likewise take possession thereof, and (ii) whenever all
Events of Default shall have been cured and the possession of all or
substantially all of the Trust Estate shall have been restored to the Company,
such Excepted Property shall again be excepted and excluded from the lien of the
Original Indenture to the extent and otherwise as hereinabove set forth and as
set forth in the Original Indenture.
7
<PAGE>
The Company may, however, pursuant to Granting Clause Third of
the Original Indenture, subject to the lien of the Original Indenture any
Excepted Property, whereupon the same shall cease to be Excepted Property.
TO HAVE AND TO HOLD all said property, rights, privileges and
franchises of every kind and description, real, personal or mixed, hereby and
hereafter (by Supplemental Indenture or otherwise) granted, bargained, sold,
alienated, remised, released, conveyed, assigned, transferred, mortgaged,
hypothecated, pledged, set over or confirmed as aforesaid, or intended, agreed
or covenanted so to be, together with all the appurtenances thereto appertaining
unto the Trustee and its successors and assigns forever.
SUBJECT, HOWEVER, to (i) Permitted Encumbrances (as defined in
Section 1.01 of the Original Indenture), (ii) to the extent permitted by Section
14.06 of the Original Indenture, as to property acquired since the date of
execution of the Original Indenture, (a) any duly recorded or perfected prior
mortgage or other lien that may exist thereon at the date of the acquisition
thereof by the Company, and (b) purchase money mortgages created by the Company
at the time of acquisition thereof, and (iii) defects of title to and
encumbrances on property existing on the date hereof.
BUT IN TRUST, NEVERTHELESS, for the equal and proportionate
benefit and security of the Holders from time to time of all the Outstanding
Secured Bonds without any priority of any such Bond over and other such Bond and
for the enforcement of the payment of such Bonds in accordance with their terms.
UPON CONDITION that, until the happening of an Event of
Default and subject to the provisions of Article Six of the Original Indenture,
the Company shall be permitted to possess and use the Trust Estate, except cash,
securities and other personal property deposited, or required to be deposited,
with the Trustee and to explore for, mine, extract and dispose of coal, ore,
gas, oil and other minerals, to harvest standing timber and to receive and use
the rents, issues, profits, revenues and other income, products and proceeds of
the Trust Estate.
AND IT IS HEREBY COVENANTED AND DECLARED that all the Bonds
are to be authenticated and delivered and the Trust Estate is to be held and
applied by the Trustee, subject to the further covenants, conditions and trusts
set forth in the Original Indenture, and the Company does hereby covenant and
agree to and with the Trustee, for the equal and proportionate benefit of all
Holders of the Bonds as follows:
ARTICLE ONE
BONDS OF THE 1996 SERIES A AND CERTAIN
PROVISIONS RELATING THERETO
SECTION 1.01. TERMS OF THE 1996 SERIES A BONDS. There shall be
hereby established a series of Bonds, known as and entitled "First Mortgage
Bonds, 1996 Series A" (herein referred to as the "1996 Series A Bonds") and the
form thereof shall be substantially as
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<PAGE>
set forth in Section 3.01. The aggregate principal amount of the 1996 Series A
Bonds which may be authenticated and delivered and Outstanding at any one time
is limited to twenty-five million five hundred sixty-five thousand nine hundred
sixty-one and 82/100 Dollars ($25,565,961.82). The Trustee is hereby appointed
as Authenticating Agent for the 1996 Series A Bonds. The 1996 Series A Bonds are
hereby declared to be "Original Issue Discount Bonds", as such term is defined
in Section 1.01 of the Original Indenture.
The 1996 Series A Bonds shall be issuable in fully registered
form without coupons and in denominations necessary to issue Bonds in the
required principal amounts. Each 1996 Series A Bond shall be dated the date of
its authentication. The 1996 Series A Bonds shall mature on February 28, 1997.
Except in the event that the principal of the 1996 Series A
Bonds shall not be paid at maturity or shall be declared due and payable in the
manner and with the effect provided in Section 9.02 of the Indenture, the 1996
Series A Bonds shall not bear interest. In the event that the principal of the
1996 Series A Bonds shall not be paid at maturity or shall be declared due and
payable in the manner and with the effect provided in Section 9.02 of the
Indenture, the 1996 Series A Bonds shall bear interest on the amount of the 1996
Series A Accreted Value (hereinafter defined) thereof as of their Stated
Maturity or the date of such declaration, as the case may be, at the rate per
annum of 7.06%, compounded on February 28, 1997 and annually on the 5th day of
January of each year thereafter, computed on the basis of a year consisting of
twelve 30-day months. Any such interest shall be payable concurrently with the
payment of the principal of such Bonds.
The 1996 Series A Bonds shall be issued to and registered in
the name of the Company and, upon their issuance, shall be pledged to, and held
by, the Owner Trustee pursuant to the Pledge Agreement, solely as security for
the Company's obligation to pay the Secured Claims.
The 1996 Series A Bonds shall be lettered "A" and numbered
from 1 consecutively upwards in order of issuance hereunder.
All payments and prepayments under the 1996 Series A Bonds
shall be made in lawful money of the United States of America to such address or
account as the Holders thereof shall direct, from time to time, by written
notice to the Company and the Trustee.
The 1996 Series A Bonds are redeemable prior to their Stated
Maturity at any time in whole or in part at the option of the Company without
the payment of any penalty or premium. Upon the optional redemption of any 1996
Series A Bond (or portion thereof), the Company shall pay to the Holder thereof
the 1996 Series A Accreted Value of such Bond or portion thereof being redeemed,
determined as provided below.
In the event of an optional redemption of the 1996 Series A
Bonds, the Company shall cause notice of such redemption to be given to the
Holders of the Bonds to be redeemed at their addresses as the same shall last
appear upon the Bond Register at least one day prior to the date fixed for
redemption.
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In the event of a partial optional redemption of the 1996
Series A Bonds, a new Bond for the unredeemed portion will be issued in the name
of the applicable Holder upon cancellation of such partially redeemed Bond.
Except as provided in the next sentence, for purposes of
Section 9.22 of the Original Indenture and for all other purposes under the
Indenture, the "principal amount" of any 1996 Series A Bond shall be its then
current 1996 Series A Accreted Value. Notwithstanding the foregoing, for the
purpose of serving as the basis for authenticating and delivering additional
Bonds under Section 5.03 of the Original Indenture, the "principal amount" of
any 1996 Series A Bond shall be the 1996 Series A Initial Value (hereinafter
defined).
"1996 Series A Accreted Value" shall mean, as of any date of
computation with respect to any 1996 Series A Bond, an amount equal to the sum
of (a) the 1996 Series A Initial Value thereof and (b) the portion of the
difference (hereinafter referred to as the "1996 Series A Original Issue
Discount") between the principal amount of such Bond and such 1996 Series A
Initial Value accrued on such Bond from the date of original issuance of the
1996 Series A Bonds to February 28, 1997 and on the 5th day of January
(hereinafter, an "Annual Compounding Date") next preceding the date of
computation or the date of computation if an Annual Compounding Date, such 1996
Series A Original Issue Discount to accrue at the rate per annum of 7.06%,
compounded annually on each Annual Compounding Date, plus, if such date of
computation shall not be an Annual Compounding Date, a portion of the difference
between the 1996 Series A Accreted Value of such 1996 Series A Bond as of the
immediately preceding Annual Compounding Date (or the date of original issuance
of the 1996 Series A Bonds if the date of computation is prior to the first
Annual Compounding Date succeeding such date of original issuance) and the 1996
Series A Accreted Value of such 1996 Series A Bond as of the immediately
succeeding Annual Compounding Date, calculated based upon an assumption that
1996 Series A Original Issue Discount accrues in equal daily amounts on the
basis of a year consisting of twelve 30-day months.
"1996 Series A Initial Value" shall mean $23,884,406.70, which
shall equal approximately $934.23 for each $1,000 of the principal amount
thereof.
SECTION 1.02. AUTHENTICATION AND DELIVERY OF 1996 SERIES A
BONDS. The 1996 Series A Bonds shall be authenticated and delivered upon the
basis of the retirement of, and in replacement of, a portion of the 8.76% Bonds,
in accordance with Section 5.03 of the Original Indenture. Accordingly, the
Trustee shall authenticate and deliver the 1996 Series A Bonds if, and only if,
in addition to the other terms and conditions set forth in Article V of the
Original Indenture, there shall be surrendered to the Trustee for retirement in
accordance with the terms of the Indenture $23,885,000.00 in aggregate principal
amount of 8.76% Bonds.
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<PAGE>
ARTICLE TWO
BONDS OF THE 1996 SERIES B AND CERTAIN
PROVISIONS RELATING THERETO
SECTION 2.01. TERMS OF THE 1996 SERIES B BONDS. There shall be
hereby established a series of Bonds, known as and entitled "First Mortgage
Bonds, 1996 Series B" (herein referred to as the "1996 Series B Bonds") and the
form thereof shall be substantially as set forth in Section 3.01. The aggregate
principal amount of the 1996 Series B Bonds which may be authenticated and
delivered and Outstanding at any one time is limited to one hundred nine
million, one hundred eighty-two thousand nine hundred thirty-seven and 38/100
Dollars ($109,182,937.38). The Trustee is hereby appointed as Authenticating
Agent for the 1996 Series B Bonds. The 1996 Series B Bonds are hereby declared
to be "Original Issue Discount Bonds", as such term is defined in Section 1.01
of the Original Indenture.
The 1996 Series B Bonds shall be issuable in fully registered
form without coupons and in denominations necessary to issue Bonds in the
required principal amounts. Each 1996 Series B Bond shall be dated the date of
its authentication. The 1996 Series B Bonds shall mature on the dates and in the
respective principal amounts shown below:
Maturity Date Amount
January 5, 1998 $ 581,031.85
April 15, 2018 10,649,541.31
June 15, 2018 32,650,788.06
September 15, 2018 32,650,788.06
December 15, 2018 32,650,788.10
Except in the event that the principal of the 1996 Series B
Bonds shall not be paid at maturity or shall be declared due and payable in the
manner and with the effect provided in Section 9.02 of the Indenture, the 1996
Series B Bonds shall not bear interest. In the event that the principal of the
1996 Series B Bonds shall not be paid at maturity or shall be declared due and
payable in the manner and with the effect provided in Section 9.02 of the
Indenture, the 1996 Series B Bonds shall bear interest on the amount of the 1996
Series B Accreted Value (hereinafter defined) thereof as of their Stated
Maturity or the date of such declaration, as the case may be, at the rate per
annum of 7.06%, compounded on February 28, 1997 and annually on the 5th day of
January of each year thereafter, computed on the basis of a year consisting of
twelve 30-day months. Any such interest shall be payable concurrently with the
payment of the principal of such Bonds.
The 1996 Series B Bonds shall be issued to and registered in
the name of the Company and, upon their issuance, shall be pledged to, and held
by, the Owner Trustee pursuant to the Pledge Agreement, solely as security for
the Company's obligation to pay the Secured Claims.
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The 1996 Series B Bonds shall be lettered "B" and numbered
from 1 consecutively upwards in order of maturity on original issuance (with
1996 Series B Bonds having the same date of maturity being numbered
consecutively upward in order of issuance) and in order of issuance thereafter.
All payments and prepayments under the 1996 Series B Bonds
shall be made in lawful money of the United States of America to such address or
account as the Holders thereof shall direct, from time to time, by written
notice to the Company and the Trustee.
The 1996 Series B Bonds are redeemable prior to their Stated
Maturity at any time in whole or in part at the option of the Company without
the payment of any penalty or premium. Upon the optional redemption of any 1996
Series B Bond (or portion thereof), the Company shall pay to the Holder thereof
the 1996 Series B Accreted Value of such Bond or portion thereof being redeemed,
determined as provided below.
In the event of an optional redemption of the 1996 Series B
Bonds, the Company shall cause notice of such redemption to be given to the
Holders of the Bonds to be redeemed at their addresses as the same shall last
appear upon the Bond Register at least one day prior to the date fixed for
redemption.
In the event of a partial optional redemption of the 1996
Series B Bonds, a new Bond for the unredeemed portion will be issued in the name
of the applicable Holder upon cancellation of such partially redeemed Bond.
Except as provided in the next sentence, for purposes of
Section 9.22 of the Original Indenture and for all other purposes under the
Indenture, the "principal amount" of any 1996 Series B Bond shall be its then
current 1996 Series B Accreted Value. Notwithstanding the foregoing, for the
purpose of serving as the basis for authenticating and delivering additional
Bonds under Section 5.03 of the Original Indenture, the "principal amount" of
any 1996 Series B Bond shall be the 1996 Series B Initial Value (hereinafter
defined).
"1996 Series B Accreted Value" shall mean, as of any date of
computation with respect to any 1996 Series B Bond, an amount equal to the sum
of (a) the 1996 Series B Initial Value thereof and (b) the portion of the
difference (hereinafter referred to as the "1996 Series B Original Issue
Discount") between the principal amount of such Bond and such 1996 Series B
Initial Value accrued on such Bond from the date of original issuance of the
1996 Series B Bonds to the Annual Compounding Date next preceding the date of
computation or the date of computation if an Annual Compounding Date, such 1996
Series B Original Issue Discount to accrue at the rate per annum of 7.06%,
compounded on February 28, 1997 and annually thereafter on each Annual
Compounding Date, plus, if such date of computation shall not be an Annual
Compounding Date, a portion of the difference between the 1996 Series B Accreted
Value of such 1996 Series B Bond as of the immediately preceding Annual
Compounding Date (or the date of original issuance of the 1996 Series B Bonds if
the date of computation is prior to the first Annual Compounding Date succeeding
such date of original issuance) and the 1996 Series B Accreted Value of such
1996 Series B Bond as of the immediately succeeding Annual Compounding Date,
calculated based upon an assumption that 1996 Series B Original Issue
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<PAGE>
Discount accrues in equal daily amounts on the basis of a year consisting of
twelve 30-day months.
"1996 Series B Initial Value" shall mean the 1996 Series A
Accreted Value for all of the 1996 Series A Bonds as of the date of original
issuance of the 1996 Series B Bonds, as certified to the Trustee by the Company,
which certification shall contain a dollar value for each $1,000 of principal
amount thereof.
SECTION 2.02. AUTHENTICATION AND DELIVERY OF 1996 SERIES B
BONDS. The 1996 Series B Bonds shall be authenticated and delivered (i) in part,
upon the basis of the retirement of, and in replacement of, the 1996 Series A
Bonds, in accordance with Section 5.03 of the Original Indenture and (ii) in
part, upon the basis of the retirement of, and in replacement of, a portion of
the 8.76% Bonds, in accordance with Section 5.03 of the Original Indenture. The
Company shall deliver a Company Order to the Trustee with respect to the
authentication and delivery of the 1996 Series B Bonds only upon receipt by the
Company of an order by the Federal Energy Regulatory Commission pursuant to
Section 204(a) of the Federal Power Act (hereinafter referred to as the "Section
204(a) order") authorizing the issuance of the 1996 Series B Bonds, and the
Company hereby covenants and agrees that it shall deliver such Company Order to
the Trustee as promptly as practicable following receipt by the Company of such
Section 204(a) order. Accordingly, the Trustee shall authenticate and deliver
the 1996 Series B Bonds if, and only if, in addition to the other terms and
conditions set forth in Article V of the Original Indenture, the following
conditions shall be satisfied:
(a) there shall be surrendered to the Trustee for retirement
in accordance with the terms of the Indenture the 1996 Series A Bonds;
and
(b) there shall be, or will have been previously, surrendered
to the Trustee for retirement in accordance with the terms of the
Indenture 8.76% Bonds in a principal amount equal to the difference
between (1) the 1996 Series A Accreted Value with respect to all of the
1996 Series A Bonds (calculated as of the date of original issuance of
the 1996 Series B Bonds) and (2) the 1996 Series A Initial Value with
respect to all of the 1996 Series A Bonds.
ARTICLE THREE
ADDITIONAL PROVISIONS RELATING TO THE 1996 SERIES A
AND 1996 SERIES B BONDS
SECTION 3.01. FORM OF 1996 SERIES A AND 1996 SERIES B BONDS.
The 1996 Series A Bonds and the 1996 Series B Bonds and the Trustee's
authentication certificate to be executed on the Bonds of said series shall be
substantially in the following form, with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
the Original Indenture, and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules
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<PAGE>
of any securities exchange or as may, consistently herewith, be determined by
the Officers executing such Bonds, as evidenced by their execution of such
Bonds:
FORM OF 1996 SERIES A AND
1996 SERIES B BONDS
FINANCIAL GUARANTY INSURANCE POLICY NO. __________ (THE "POLICY") WITH
RESPECT TO PAYMENTS DUE FOR PRINCIPAL OF AND INTEREST ON THIS BOND HAS
BEEN ISSUED BY AMBAC INDEMNITY CORPORATION ("AMBAC INDEMNITY"). THE
POLICY HAS BEEN DELIVERED TO THE UNITED STATES TRUST COMPANY OF NEW
YORK, NEW YORK, NEW YORK, AS THE INSURANCE TRUSTEE UNDER SAID POLICY
AND WILL BE HELD BY SUCH INSURANCE TRUSTEE OR ANY SUCCESSOR INSURANCE
TRUSTEE. THE POLICY IS ON FILE AND AVAILABLE FOR INSPECTION AT THE
PRINCIPAL OFFICE OF THE INSURANCE TRUSTEE AND A COPY THEREOF MAY BE
SECURED FROM AMBAC INDEMNITY OR THE INSURANCE TRUSTEE. ALL PAYMENTS
REQUIRED TO BE MADE UNDER THE POLICY SHALL BE MADE IN ACCORDANCE WITH
THE PROVISIONS THEREOF. THE OWNER OF THIS BOND ACKNOWLEDGES AND
CONSENTS TO THE SUBROGATION RIGHTS OF AMBAC INDEMNITY AS MORE FULLY SET
FORTH IN THE POLICY.
THIS FIRST MORTGAGE BOND, [1996 SERIES A/1996 SERIES B] HAS NOT BEEN
AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED
WITHOUT REGISTRATION UNDER SUCH ACT OR IN RELIANCE UPON AN APPLICABLE
EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE UNITED STATES INTERNAL
REVENUE CODE, THE ISSUE PRICE OF THIS BOND IS % OF ITS PRINCIPAL
AMOUNT, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THIS BOND IS % OF ITS
PRINCIPAL AMOUNT, THE ISSUE DATE IS _________________, AND THE YIELD TO
MATURITY IS ___________ FOR UNITED STATES FEDERAL INCOME TAX PURPOSES.
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<PAGE>
OLD DOMINION ELECTRIC COOPERATIVE
FIRST MORTGAGE BOND, [1996 SERIES A/1996 SERIES B]
No. __ $__________
Stated Maturity: ______ __, ____
Old Dominion Electric Cooperative, a Virginia power supply
cooperative (herein called the "Company", which term includes any successor
corporation under the Indenture hereinafter referred to), for value received,
hereby promises to pay to ____________________, or registered assigns, the
principal amount of __________ DOLLARS ($__________) on___________, ____.
Except in the event that the principal of this Bond shall not be paid at
the Stated Maturity or shall be declared due and payable in the manner and with
the effect provided in the Indenture, the principal amount of this Bond shall
not bear interest. In the event that the principal of this Bond shall not be
paid at Stated Maturity or shall be declared due and payable in the manner and
with the effect provided in the Indenture, this Bond shall bear interest on the
amount of the [1996 Series A Accreted Value/1996 Series B Accreted Value]
(hereinafter referred to) hereof as of the date of the Stated Maturity or the
date of such declaration, as the case may be, at the rate per annum of ____%,
compounded on February 28, 1997 and annually on the 5th day of January of each
year thereafter, computed on the basis of a year consisting of twelve 30-day
months. Any such interest shall be payable concurrently with the payment of the
principal of this Bond.
Payments on this Bond will be made as set forth on the reverse hereof.
Reference is hereby made to the further provisions of this Bond set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed
by the Trustee referred to on the reverse hereof by manual signature, this
Bond shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Bond to be duly
executed.
Dated:
OLD DOMINION ELECTRIC COOPERATIVE
By_________________________________
Name:
Title:
ATTEST:
- - ------------------------------
Name:
Title:
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<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Bonds of the series designated therein
referred to in the within-mentioned Indenture.
CRESTAR BANK, a Virginia banking corporation,
as Trustee
By_________________________________________
Authorized Signatory
[Reverse of Bond]
This Bond is one of a duly authorized issue of Bonds of the
Company designated as its "First Mortgage Bonds" (herein called the "Bonds"),
issued and to be issued in one or more series (which may have varying terms)
under, and all equally and ratably secured by, an Indenture of Mortgage and Deed
of Trust, dated as of May 1, 1992 (herein called the "Indenture"), between the
Company and Crestar Bank, as trustee (herein called the "Trustee", which term
includes any successor trustee under the Indenture), to which Indenture and all
Indentures supplemental thereto reference is hereby made for a statement of the
description of the properties thereby mortgaged, pledged and assigned, the
nature and extent of the security and the respective rights, limitations of
rights, duties and immunities thereunder of the Company, the Trustee and the
Holders of the Bonds and of the terms upon which the Bonds are, and are to be,
authenticated and delivered. This Bond is one of the series and has the Stated
Maturity designated on the face hereof, limited in aggregate principal amount to
$__________.
All payments and prepayments hereunder (except a payment or
prepayment that discharges all indebtedness of the Company under this Bond)
shall be made without presentment, demand, protest or notice of dishonor, all of
which are expressly waived, to such address or account as the Holder hereof
shall direct, from time to time, by written notice to the Company and the
Trustee. All payments and prepayments hereunder shall be in lawful money of the
United States of America.
This Bond is redeemable prior to its Stated Maturity at any
time in whole or in part at the option of the Company without the payment of any
penalty or premium. Upon the optional redemption of this Bond (or a portion
hereof), the Company shall pay to the Holder the [1996 Series A Accreted
Value/1996 Series B Accreted Value] (as such term is defined in the Fifth
Supplemental Indenture between the Company and the Trustee dated as of February
29, 1996 (the "Fifth Supplemental Indenture")) of this Bond or the portion
hereof being redeemed.
In the event of an optional redemption of the Bonds of this
series, the Company shall cause notice of such redemption to be given to the
Holder of such Bonds to be redeemed at its address as the same shall last appear
upon the Bond Register at least one day prior to the date fixed for redemption.
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<PAGE>
In the event of redemption of this Bond in part only, a new
Bond or Bonds of this series for the unredeemed portion hereof will be issued in
the name of the Holder hereof upon the cancellation hereof.
Except as provided in the next sentence, for purposes of
Section 9.22 of the Indenture and for all other purposes under the Indenture,
the "principal amount" of any Bonds of this series shall be its then current
[1996 Series A Accreted Value/1996 Series B Accreted Value]. Notwithstanding the
foregoing, for the purpose of serving as the basis for authenticating and
delivering additional Bonds under Section 5.03 of the Indenture, the "principal
amount" of any Bonds of this series shall be the [1996 Series A Initial
Value/1996 Series B Initial Value] (as such term is defined in the Fifth
Supplemental Indenture) thereof, which shall be equal to approximately
$__________ per $1,000 principal amount of such Bond.
If an Event of Default with respect to Bonds of this series
shall occur and be continuing, an amount of principal of Bonds of this series
may be declared due and payable in the manner and with the effect provided in
the Indenture. Such amount shall be equal to the [1996 Series A Accreted
Value/1996 Series B Accreted Value] of this Bond as of the date of such
declaration. Upon payment (i) of the amount of principal so declared due and
payable and (ii) of interest on any principal so declared due and payable and
overdue at the rate per annum of ____%, compounded on February 28, 1997 and
annually on the 5th day of January of each year thereafter, computed on the
basis of a year consisting of twelve 30-day months (to the extent that the
payment of such interest shall be legally enforceable), all of the Company's
obligations in respect of the payment of the principal of Bonds of this series
shall terminate.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of Bonds under the
Indenture at any time by the Company with the consent of the Holders of a
majority in aggregate principal amount of Bonds of all series at the time
outstanding affected by such modification. The Indenture also contains
provisions permitting the Holders of a majority in principal amount of Bonds at
the time outstanding, on behalf of the Holders of all Bonds, to waive compliance
by the Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Bond shall be conclusive and binding upon such Holder and
upon all future Holders of this Bond and of any Bond issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Bond.
Notwithstanding the foregoing, if not in default in respect of
any of its obligations with respect to Credit Enhancement for the Bonds of a
series, or a maturity within a series, the Credit Enhancer for, and not the
actual Holders of, such Bonds, shall be deemed to be the Holder of such Bonds at
all times for the purpose of (i) giving any approval or consent to the
effectiveness of any Supplemental Indenture or any amendment, change or
modification of the Indenture which requires the written approval or consent of
Holders; PROVIDED, HOWEVER, that the provisions of this Clause (i) shall not
apply to any change which could not be made pursuant to Section 13.02 of the
Indenture without the consent of each Holder affected thereby, or shall change
or modify any of the rights or obligations of the Trustee or any Paying Agent
without
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its written assent thereto, and (ii) giving any approval or consent, effecting
any waiver or authorization, exercising any remedies or taking any other action
in accordance with the provisions of Article Nine of the Indenture. In
accordance with the provisions of the Indenture, AMBAC Indemnity Corporation has
been designated as the Credit Enhancer for the Bonds of this series.
No reference herein to the Indenture and no provision of this
Bond or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of and interest on
this Bond at the times, places and rates, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Bond is registrable in the
Bond Register, upon surrender of this Bond for registration of transfer at the
office or agency maintained by the Bond Registrar in Richmond, Virginia, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Bond Registrar duly executed by, the Holder
hereof or his attorney duly authorized in writing, and thereupon one or more new
Bonds of this series, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
The Bonds of this series are issuable only in registered form
without coupons and in denominations necessary to issue Bonds of this series in
the required principal amounts. As provided in the Indenture and subject to
certain limitations therein set forth, Bonds of this series are exchangeable for
a like aggregate principal amount of Bonds of this series of a different
authorized denomination, but of the same Stated Maturity, as requested by the
Holder surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Bond for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Bond is registered as the owner hereof
for all purposes, whether or not this Bond be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Bond which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
(Form of Assignment)
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s)
and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or type Name and Address, including postal zip code of Transferee)
the within Bond and all rights thereunder, hereby irrevocably constituting and
appointing _____________________________________________________________________
________________________________________________________________________________
Attorney to transfer said Bond on the books kept for the registration thereof,
with full power of substitution in the premises.
Dated: _____________________________
------------------------------------
Registered Owner
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NOTICE: The signature above must correspond
with the name of the Registered Owner as it
appears on the front of this Bond in every
particular, without alteration or enlargement
or any change whatsoever.
SIGNATURE GUARANTEE
(The signature of the transferor of this
Bond must be guaranteed by an institution
participating in the Securities Transfer Agent
Medallion Program ("STAMP") or similar
program.)
(End of Form of Assignment)
SECTION 3.02. DESIGNATION OF AMBAC INDEMNITY CORPORATION AS
CREDIT ENHANCER FOR THE 1996 SERIES A AND 1996 SERIES B BONDS. In accordance
with the provisions of the Original Indenture, AMBAC Indemnity Corporation is
hereby designated as the "Credit Enhancer" for the 1996 Series A Bonds and the
1996 Series B Bonds, as such term is defined in Section 1.01 of the Original
Indenture.
ARTICLE FOUR
MISCELLANEOUS
SECTION 4.01. This Fifth Supplemental Indenture is executed
and shall be construed as an indenture supplemental to the Original Indenture,
and shall form a part thereof, and the Original Indenture, as heretofore
supplemented and as hereby supplemented, is hereby confirmed.
SECTION 4.02. All recitals in this Fifth Supplemental
Indenture are made by the Company only and not by the Trustee; and all of the
provisions contained in the Original Indenture, in respect of the rights,
privileges, immunities, powers and duties of the Trustee shall be applicable in
respect hereof as fully and with like effect as if set forth herein in full.
SECTION 4.03. Whenever in this Fifth Supplemental Indenture
any of the parties hereto is named or referred to, this shall, subject to the
provisions of Articles Ten and Twelve of the Original Indenture, be deemed to
include the successors and assigns of such party, and all the covenants and
agreements in this Fifth Supplemental Indenture contained by or on behalf of the
Company, or by or on behalf of the Trustee, shall, subject as aforesaid, bind
and inure to the respective benefits of the respective successors and assigns of
such parties, whether so expressed or not.
SECTION 4.04. Nothing in this Fifth Supplemental Indenture,
express or implied, shall give to any Person, other than the parties hereto and
their successors hereunder, any separate trustee or co-trustee appointed under
Section 10.14 of the Original Indenture and the Holders of Outstanding Secured
Bonds, any benefit or any legal or equitable right, remedy or claim under this
Fifth Supplemental Indenture.
SECTION 4.05. This Fifth Supplemental Indenture may be
executed in several counterparts, each of such counterparts shall for all
purposes be deemed an original, and all such counterparts, or as many of them as
the Company and the Trustee shall preserve undestroyed, shall together
constitute but one and the same instrument.
SECTION 4.06. Although this Fifth Supplemental Indenture is
dated for convenience and for the purpose of reference as of February 29, 1996,
the actual date or dates of execution by the Company and by the Trustee are as
indicated by their respective acknowledgements hereto annexed.
19
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SECTION 4.07. To the extent permitted by applicable law, this
Fifth Supplemental Indenture shall be deemed to be a Security Agreement and
Financing Statement whereby the Company grants to the Trustee a security
interest in all of the Trust Estate that is personal property or fixtures under
the Uniform Commercial Code, as adopted or hereafter adopted in one or more of
the states in which any part of the properties of the Company are situated. The
mailing address of the Company, as debtor, is Post Office Box 2310, Glen Allen,
Virginia 23058-2310, and the mailing address of the Trustee, as secured party,
is Crestar Bank, Post Office Box 26665, Richmond, Virginia 23261-6665.
SECTION 4.08. By its execution and delivery of this Fifth
Supplemental Indenture, the Trustee acknowledges (a) that, upon their issuance,
based upon the Pledge Agreement, the 1996 Series A Bonds and the 1996 Series B
Bonds will have been pledged in good faith to the Owner Trustee and (b) that
there has been established to its satisfaction, in accordance with the proviso
to the definition of the term "Outstanding" set forth in Section 1.01 of the
Original Indenture (1) the right of the Owner Trustee, as pledgee of the 1996
Series A Bonds and the 1996 Series B Bonds, to give any request, demand,
authorization, direction, notice, consent or waiver under the Indenture with
respect to such Bonds and (2) that the Owner Trustee is not the Company or any
other obligor upon the Bonds or any Affiliate of the Company or of such other
obligor.
20
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IN WITNESS WHEREOF, the parties hereby have caused this Fifth
Supplemental Indenture to be duly executed as of the day and year first above
written.
COMPANY: OLD DOMINION ELECTRIC COOPERATIVE,
Innsbrook Corporate Center a Virginia power supply cooperative
4201 Dominion Boulevard
Glen Allen, Virginia 23060
By:/s/ DANIEL M. WALKER
----------------------------------------
Daniel M. Walker
Vice President of Accounting and Finance
Attest:
- - -----------------------------------
Authorized Officer
TRUSTEE: CRESTAR BANK,
919 East Main Street a Virginia banking corporation
Corporate Trust Department
Richmond, Virginia 23219
By:/s/ SARAH A. MCMAHON
----------------------------------------
Name: Sarah A. McMahon
Title: Vice President
Attest:
- - ------------------------------------
Authorized Officer
<PAGE>
ACKNOWLEDGEMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this _____
day of ___________, ____, by Daniel M. Walker, the Vice President of Old
Dominion Electric Cooperative, a Virginia power supply cooperative, on behalf of
the cooperative.
/s/ MILAGROS COLON-PADILLA
--------------------------------
Milagros Colon-Padilla
Notary Public
My Commission expires:
ACKNOWLEDGEMENT
STATE OF )
) ss.:
COUNTY OF )
The foregoing instrument was acknowledged before me this _____
day of ________, 1996 by _______________, the _______________ of Crestar Bank, a
Virginia banking corporation, on behalf of the bank.
-------------------------
Notary Public
Commission expires:
<PAGE>
PARTICIPATION AGREEMENT
Dated as of February 29, 1996
among
OLD DOMINION ELECTRIC COOPERATIVE,
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity except
as expressly provided herein, but
solely as Owner Trustee
FIRST UNION NATIONAL BANK OF FLORIDA
and
UTRECHT-AMERICA FINANCE CO.
Clover Unit 1 Generating Facility
and
Common Facilities
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION
AGREEMENT..................................................................................... 1
SECTION 1.1. DEFINITIONS................................................................ 1
SECTION 1.2. DIRECTLY OR INDIRECTLY..................................................... 2
SECTION 2. PARTICIPATION; CLOSING DATE; TRANSACTION COSTS................................................ 2
SECTION 2.1. AGREEMENTS TO PARTICIPATE.................................................. 2
SECTION 2.2. CLOSING DATE; PROCEDURE FOR PARTICIPATION.................................. 3
SECTION 2.3. OWNER PARTICIPANT'S INSTRUCTIONS TO THE OWNER TRUSTEE...................... 4
SECTION 2.4. TRANSACTION COSTS.......................................................... 5
SECTION 3. REPRESENTATIONS, WARRANTIES AND CERTAIN
AGREEMENTS.................................................................................... 5
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE OWNER TRUSTEE AND
THE TRUST COMPANY.......................................................... 5
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF THE OWNER
PARTICIPANT................................................................ 7
SECTION 3.3. REPRESENTATIONS AND WARRANTIES OF OLD DOMINION............................. 8
SECTION 3.4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF EACH
LENDER..................................................................... 13
SECTION 3.5. REPRESENTATIONS AND WARRANTIES OF THE AGENT................................ 14
SECTION 4. CLOSING CONDITIONS............................................................................ 14
SECTION 4.1. OPERATIVE DOCUMENTS........................................................ 14
SECTION 4.2. EQUITY INVESTMENT; LOANS................................................... 15
SECTION 4.3. PLEDGED COLLATERAL......................................................... 15
SECTION 4.4. DEPOSIT.................................................................... 15
SECTION 4.5. RESERVED................................................................... 15
SECTION 4.6. RESERVED................................................................... 15
SECTION 4.7. CERTIFIED COPIES........................................................... 15
SECTION 4.8. CORPORATE DOCUMENTS........................................................ 15
SECTION 4.9. NO DEFAULTS................................................................ 15
SECTION 4.10. NO THREATENED PROCEEDINGS.................................................. 15
SECTION 4.11. CONSENTS................................................................... 16
SECTION 4.12. GOVERNMENTAL ACTIONS....................................................... 16
SECTION 4.13. INSURANCE.................................................................. 16
SECTION 4.14. ENGINEERING REPORT......................................................... 16
SECTION 4.15. SURVEY..................................................................... 16
SECTION 4.16. APPRAISAL.................................................................. 17
SECTION 4.17. INVESTMENT BANKING OPINION................................................. 17
SECTION 4.18. OPINION WITH RESPECT TO CERTAIN TAX ASPECTS................................ 17
</TABLE>
i
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<TABLE>
<S> <C>
SECTION 4.19. OPINION OF COUNSEL......................................................... 17
SECTION 4.20. RECORDINGS AND FILINGS..................................................... 17
SECTION 4.21. LETTER AS TO OFFEREES...................................................... 17
SECTION 5. CERTAIN COVENANTS OF THE OWNER PARTICIPANT.................................................... 18
SECTION 5.1. RESTRICTIONS ON TRANSFER OF BENEFICIAL INTEREST............................ 18
SECTION 5.2. OWNER PARTICIPANT'S LIENS.................................................. 19
SECTION 5.3. AMENDMENTS OR REVOCATION OF TRUST AGREEMENT................................ 19
SECTION 5.4. TRUST ESTATE............................................................... 19
SECTION 5.5. APPOINTMENT OF SUCCESSOR OWNER TRUSTEE OR CO-TRUSTEES...................... 19
SECTION 6. COVENANTS OF THE TRUST COMPANY AND THE OWNER
TRUSTEE....................................................................................... 20
SECTION 6.1. COMPLIANCE WITH THE TRUST AGREEMENT........................................ 20
SECTION 6.2. LESSOR'S LIENS............................................................. 20
SECTION 6.3. AMENDMENTS TO OPERATIVE DOCUMENTS.......................................... 20
SECTION 6.4. TRANSFER OF THE LESSOR'S UNIT 1 INTEREST................................... 20
SECTION 6.5. TRUST ESTATE............................................................... 20
SECTION 6.6. LIMITATION ON INDEBTEDNESS AND ACTIONS..................................... 20
SECTION 6.7. CHANGE OF LOCATION......................................................... 21
SECTION 7. COVENANTS OF OLD DOMINION..................................................................... 21
SECTION 7.1. MAINTENANCE OF CORPORATE EXISTENCE......................................... 21
SECTION 7.2. MERGER, CONSOLIDATION, SALE OF ASSETS...................................... 21
SECTION 7.3. NOTICE OF CHANGE IN ADDRESS OR NAME........................................ 22
SECTION 7.4. EXERCISE OF EARLY PURCHASE OPTION UNDER POLLUTION
CONTROL ASSETS LEASE....................................................... 22
SECTION 7.5. DELIVERY OF FINANCIAL STATEMENTS AND NO DEFAULT
CERTIFICATE................................................................ 22
SECTION 7.6. QUALIFYING SECURITY. ...................................................... 23
SECTION 7.7. QUALIFYING LETTER OF CREDIT................................................ 23
SECTION 7.8. INFORMATION CONCERNING CLOVER UNIT 1. .................................... 24
SECTION 7.9. FURTHER ASSURANCES......................................................... 24
SECTION 7.10. POLLUTION CONTROL ASSETS LEASE............................................. 24
SECTION 7.11. LOAN CERTIFICATES.......................................................... 24
SECTION 7.12. TAX TREATMENT OF BASIC RENT AND FOUNDATION BASIC RENT...................... 25
SECTION 8. OLD DOMINION'S INDEMNIFICATIONS............................................................... 25
SECTION 8.1. GENERAL INDEMNITY.......................................................... 25
SECTION 8.2. GENERAL TAX INDEMNITY...................................................... 30
SECTION 8.3. SURVIVAL................................................................... 39
SECTION 9. OLD DOMINION'S RIGHT OF QUIET ENJOYMENT....................................................... 39
</TABLE>
ii
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<TABLE>
<S> <C>
SECTION 10. SUPPLEMENTAL FINANCING; LOAN PREPAYMENTS AND
REFINANCINGS......................................................................... 39
SECTION 10.1. FINANCING NONSEVERABLE MODIFICATIONS....................................... 39
SECTION 10.2. MANDATORY PREPAYMENT OF SERIES B LOAN CERTIFICATE;
ADDITIONAL LOAN CERTIFICATES TO REFINANCE MANDATORY
PREPAYMENT OF SERIES B LOAN CERTIFICATE.................................... 41
SECTION 10.3. OPTIONAL REFINANCING....................................................... 43
SECTION 10.4. REFINANCING COSTS.......................................................... 43
SECTION 11. CONVEYANCE OF TITLE TO RETAINED ASSETS........................................................ 43
SECTION 11A. SUBSTITUTE SECURITY FOR PAYMENT UNDERTAKING
AGREEMENT..................................................................................... 45
SECTION 12. MISCELLANEOUS................................................................................. 46
SECTION 12.1. CONSENTS................................................................... 46
SECTION 12.2. BANKRUPTCY OF TRUST ESTATE................................................. 46
SECTION 12.3. AMENDMENTS AND WAIVERS..................................................... 46
SECTION 12.4. NOTICES.................................................................... 46
SECTION 12.5. SURVIVAL................................................................... 48
SECTION 12.6. SUCCESSORS AND ASSIGNS..................................................... 48
SECTION 12.7. BUSINESS DAY............................................................... 48
SECTION 12.8. GOVERNING LAW.............................................................. 48
SECTION 12.9. SEVERABILITY............................................................... 49
SECTION 12.10. COUNTERPARTS............................................................... 49
SECTION 12.11. HEADINGS AND TABLE OF CONTENTS............................................. 49
SECTION 12.12. LIMITATIONS OF LIABILITY................................................... 49
SECTION 12.13. CONSENT TO JURISDICTION.................................................... 50
SECTION 12.14. FURTHER ASSURANCES......................................................... 50
</TABLE>
iii
<PAGE>
Attachments to Participation Agreement:
Appendix A - Definitions
Schedule 1 - Transaction Costs
Schedule 2 - Recordings and Filings
Exhibit A - Form of Trust Agreement
Exhibit B - Form of Equipment Head Lease
Exhibit C - Form of Foundation Head Lease
Exhibit D - Form of Option Agreement
Exhibit E - Form of Clover Agreements Assignment
Exhibit F - Form of Equipment Operating Lease
Exhibit G - Form of Foundation Operating Lease
Exhibit H - Form of Loan Agreement
Exhibit I - Form of Leasehold Mortgage
Exhibit J - Form of Pledge Agreement
Exhibit K - Form of Deposit Agreement
Exhibit L - Form of Deposit Pledge Agreement
Exhibit M - Form of Tax Indemnity Agreement
Exhibit N - Form of Second Severance Agreement
Exhibit O - Form of Assumption Agreement
Exhibit P - Form of Guaranty
Exhibit Q - Form of Payment Undertaking Agreement
Exhibit R - Form of Payment Undertaking Pledge Agreement
iv
<PAGE>
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT, dated as of February 29, 1996 (this
"Participation Agreement" or this "Agreement"), among (i) OLD DOMINION ELECTRIC
COOPERATIVE, a wholesale power supply cooperative organized under the laws of
the Commonwealth of Virginia (herein together with its successors and assigns,
called "Old Dominion"), (ii) STATE STREET BANK AND TRUST COMPANY, a
state-chartered trust company organized and existing under the laws of the
Commonwealth of Massachusetts, not in its individual capacity, except as
expressly provided herein, but solely as trustee under the Trust Agreement (as
hereinafter defined) (herein in such capacity, together with its successors and
assigns, called the "Owner Trustee" and herein in its individual capacity,
together with its successors and assigns, called the "Trust Company"), (iii)
FIRST UNION NATIONAL BANK OF FLORIDA, a national banking association, as Owner
Participant (herein in such capacity, together with its successors and assigns,
called the "Owner Participant"), and (iv) UTRECHT-AMERICA FINANCE CO., a
Delaware corporation, as Lender (herein in such capacity, together with its
successors and assigns, called the "Original Lenders") and as Agent for the
Lenders (herein in such capacity, together with its successors and assigns,
called the "Agent").
WITNESSETH:
WHEREAS, concurrently with the execution and delivery of this
Participation Agreement, the Owner Participant has entered into the Trust
Agreement pursuant to which the Owner Trustee agrees, among other things, to
hold the Trust Estate for the benefit of the Owner Participant thereunder on the
terms specified in the Trust Agreement and, subject to the terms and conditions
hereof, to lease the Equipment Interest and the Foundation Interest from Old
Dominion under the Equipment Head Lease and the Foundation Head Lease,
respectively, and concurrently therewith lease such Equipment Interest and
Foundation Interest to Old Dominion under the Equipment Operating Lease and the
Foundation Operating Lease, respectively.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION
AGREEMENT
SECTION 1.1. DEFINITIONS. The capitalized terms used in this
Participation Agreement (including the foregoing recitals) and not otherwise
defined herein shall have the respective meanings specified in Appendix A
hereto. All references to sections, schedules and exhibits herein are to
sections, schedules and exhibits of this Participation Agreement unless
otherwise indicated and the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Participation Agreement as a whole and not
to any particular section or other subdivision.
<PAGE>
SECTION 1.2. DIRECTLY OR INDIRECTLY. Where any provision in this
Participation Agreement refers to action to be taken by any Person, or which
such Person is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Person.
SECTION 2. PARTICIPATION; CLOSING DATE; TRANSACTION COSTS
SECTION 2.1. AGREEMENTS TO PARTICIPATE. Subject to the terms and
conditions of this Agreement, and in reliance on the agreements, representations
and warranties made herein, the parties agree to participate in the transactions
described in this Section 2.1 on the Closing Date as follows:
(1) The Owner Participant agrees to make an Equity Investment
in the Owner Trust in an amount equal to (a) the Owner Participant's
Commitment and (b) an amount sufficient to pay the Transaction Costs
which the Owner Trustee is responsible to pay pursuant to Section
2.4(a) hereof.
(2) Subject to the rights of Virginia Power pursuant to the
Clover Agreements, Old Dominion agrees to lease the Equipment Interest
and Foundation Interest to the Owner Trustee, the Owner Trustee agrees
to lease the Equipment Interest and the Foundation Interest from Old
Dominion, and each agrees to execute and deliver the Equipment Head
Lease, the Foundation Head Lease and the Clover Agreements Assignment.
(3) The Owner Trustee agrees to lease the Equipment Interest
and the Foundation Interest to Old Dominion, Old Dominion agrees to
lease the Equipment Interest and the Foundation Interest from the Owner
Trustee and each agrees to execute and deliver the Equipment Operating
Lease and the Foundation Operating Lease.
(4) Subject to the rights of Virginia Power under the Clover
Agreements, Old Dominion agrees to grant an option to lease the Ground
Interest to the Owner Trustee pursuant to the Option Agreement.
(5) The Original Lenders agree to enter into the Loan
Agreement and make non-recourse secured loans to the Owner Trustee in
an aggregate principal amount equal to the Original Lenders' Loan
Commitments.
(6) The Owner Trustee agrees to enter into the Loan Agreement
and issue Loan Certificates to the Original Lenders in the aggregate
principal amount equal to their Loan Commitments.
(7) The Owner Trustee agrees to use the funds received from
the Owner Participant and the Original Lenders pursuant to clauses
(1)(a) and (5), respectively, of this Section 2.1 to pay on the Closing
Date all Equipment Head Lease Basic Rent and
2
<PAGE>
Foundation Head Lease Basic Rent, which are amounts equal to the
Equipment Interest Cost and Foundation Interest Cost, due under the
Equipment Head Lease and the Foundation Head Lease, respectively.
(8) Old Dominion agrees to pledge certain obligations,
deposits and bonds to the Owner Trustee to secure its obligations under
the Equipment Operating Lease and the Foundation Operating Lease.
(9) The Owner Participant and Old Dominion agree to enter
into the Tax Indemnity Agreement.
(10) The Owner Trustee agrees to use the funds received from
the Owner Participant pursuant to clause (1)(b) of this Section 2.1 to
pay all Transaction Costs which the Owner Trustee is responsible to pay
pursuant to Section 2.4(a) hereof.
SECTION 2.2. CLOSING DATE; PROCEDURE FOR PARTICIPATION.
(a) CLOSING DATE. The closing of the transactions contemplated
hereby (the "Closing") shall take place at 10:00 a.m., New York
City time, on the Scheduled Closing Date or such other date as the
parties hereto shall mutually agree (the "Closing Date"), at the
offices of Orrick, Herrington & Sutcliffe, 666 Fifth Avenue, New York,
New York 10103.
(b) PROCEDURES FOR FUNDING. Unless the Closing Date shall
have been postponed pursuant to Section 2.2(c), the Owner
Participant and the Original Lenders shall make the amount of their
Commitments available to the Owner Trustee not later than 10:00 a.m.,
New York City time, on the Scheduled Closing Date, by transferring or
delivering such amount, in funds immediately available on the Closing
Date, to:
Bank of New York
ABA #: 021-0000-18
For further credit to
Rabobank Nederland, New York Branch
ABA #: 802-6002-533
For further credit to
State Street Bank and Trust Company
Boston, Massachusetts
ABA #: 011-0000-28
For credit to account No. 9900-314-7
Attention: Raeann Trocchi
For further credit to Old Dominion/First Union Account
(c) POSTPONEMENT OF THE CLOSING. The Scheduled Closing Date
may be postponed from time to time for any reason if Old Dominion gives
the Owner Participant, the Owner Trustee, the Original Lenders and the
Agent telex, telegraphic, facsimile or telephonic (confirmed in
3
<PAGE>
writing) notice of such postponement and notice of the date to which the Closing
has been postponed, such notice of postponement to be received by each party no
later than 10:00 a.m., New York City time, on the originally Scheduled Closing
Date. If, prior to receipt of a postponement notice under this Section 2.2(c),
any Participant shall have provided funds in accordance with Section 2.2(b),
such funds shall be returned to such Participant, as soon as reasonably
practicable but in no event later than the second Business Day following the
Scheduled Closing Date, unless such Participant shall have otherwise directed.
All funds made available pursuant to Section 2.2(b) will be held by the Owner
Trustee in trust for the Participant who provided such funds and shall not be
part of the Collateral or the Trust Estate, shall be invested by the Owner
Trustee in accordance with clause (d) below and such funds shall remain the sole
property of such Participant unless and until applied to pay the Equipment Head
Lease Basic Rent and Foundation Head Lease Basic Rent or returned to the
applicable Participant, as provided in this Agreement.
(d) INVESTMENT OF FUNDS. If on the Scheduled Closing Date a Participant
has made its Commitment available to the Owner Trustee in accordance with
Section 2.2(b), the Closing does not occur on such date and the Owner Trustee is
unable to return such funds to the Participants who made them available, the
Owner Trustee shall, subject to Section 2.2(c) above, use reasonable efforts to
invest such funds from time to time at Old Dominion's expense and risk in
interest bearing deposit accounts at the Trust Company or repurchase agreements
backed by U.S. government securities until such funds can be returned to the
Participants. Subject to payment for the account of the relevant Participant of
any reimbursement for loss of use of funds due to it at the Applicable Rate, any
net gain realized on the investment of such funds (including interest) shall be
paid to Old Dominion by the Owner Trustee on the earlier of (i) the date such
funds are returned to the Participants pursuant to Section 2.2(c) and (ii) the
Closing Date. The Owner Trustee shall not be liable for any interest on or loss
resulting from such investments and, if such funds are utilized to pay Equipment
Head Lease Basic Rent and Foundation Head Lease Basic Rent on the Closing Date,
Old Dominion shall reimburse the Owner Trustee for any net loss realized on the
investment of such funds. Old Dominion shall reimburse the Participants on the
Closing Date for any net loss realized on the investments of such funds. In
order to obtain funds for payment of the Equipment Head Lease Basic Rent and
Foundation Head Lease Basic Rent or to return funds made available to the Owner
Trustee by any Participant, the Owner Trustee is authorized to sell any
investments or obligations purchased as aforesaid.
(e) EXPIRATION OF COMMITMENTs. The obligation of the Owner Participant
to make its Equity Investment and the obligations of the Original Lenders to
make the Loans shall expire at 11:59 p.m., New York City time, on March 31,
1996. If the Closing Date has not occurred on or before March 31, 1996, the
parties hereto shall have no obligation under this Agreement.
SECTION 2.3. OWNER PARTICIPANT'S INSTRUCTIONS TO THE OWNER TRUSTEE. (a)
The Owner Participant agrees that the making available to the Owner Trustee of
the amount of its Commitment in accordance with the terms of Section 2.2 shall
constitute, without further act, authorization and direction by the Owner
Participant to the Owner Trustee, subject, on the Closing Date, to the
conditions set forth in Section 4 having been fulfilled to the satisfaction of
4
<PAGE>
the Owner Participant or waived by the Owner Participant, to take the actions
specified in Section 3.01 of the Trust Agreement.
(b) The Owner Participant agrees that the authorization by the Owner
Participant or its counsel to release to Old Dominion the Owner Participant's
Commitment shall constitute, without further act, notice and confirmation that
all conditions set forth in Section 4 were either met to the satisfaction of the
Owner Participant or, if not so met, were waived by the Owner Participant.
SECTION 2.4. TRANSACTION COSTS.
(a) If the transactions contemplated by this Participation Agreement
are consummated, (x) the Owner Trustee will promptly pay, with funds provided by
the Owner Participant, all Transaction Costs identified by the Closing Date and
reflected on Schedule 1 hereto and all Transaction Costs referred to in clauses
(ii), (ix) and (xii) of the definition of Transaction Costs identified following
the Closing Date and (y) Old Dominion will pay all other Transaction Costs,
whether identified before or after the Closing Date and whether or not reflected
on Schedule 1 hereto.
(b) Following the Closing Date, Old Dominion will be responsible for
the annual administration fees and expenses of the Owner Trustee under the Trust
Agreement.
SECTION 3. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE OWNER TRUSTEE AND
THE TRUST COMPANY. Except as set forth in the last sentence of this Section 3.1,
the Trust Company, in its individual capacity, represents and warrants that, as
of the Closing Date:
(a) the Trust Company is a state-chartered trust company duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts, has the corporate power and authority, as Owner
Trustee and/or in its individual capacity to the extent expressly provided
herein or in the Trust Agreement, to enter into and perform its obligations
under the Trust Agreement and assuming due authorization, execution and delivery
of the Trust Agreement by the Owner Participant, this Agreement and each of the
other Operative Documents to which it is a party;
(b) (i) the Trust Agreement has been duly authorized, executed and
delivered by the Trust Company and (ii) assuming the due authorization,
execution and delivery of the Trust Agreement by the Owner Participant, the
Trust Agreement constitutes a legal, valid and binding obligation of the Owner
Trustee, enforceable against it in its individual capacity or as Owner Trustee,
as the case may be, in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
arrangement, moratorium or other laws relating to or affecting the rights of
creditors generally and by general principles of equity;
5
<PAGE>
(c) (i) this Agreement and each of the other Operative Documents to
which the Owner Trustee is a party (other than the Trust Agreement and the Loan
Certificates) have been duly authorized, executed and delivered by the Trust
Company, and (ii) assuming the due authorization, execution and delivery of this
Agreement and each of the other Operative Documents by each party hereto and
thereto other than the Owner Trustee, this Agreement and each of the other
Operative Documents (other than the Trust Agreement and the Loan Certificates)
to which the Owner Trustee is a party constitute a legal, valid and binding
obligation of the Owner Trustee, enforceable against the Trust Company in its
individual capacity or as Owner Trustee, as the case may be, in accordance with
its terms, except as the same may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, arrangement, moratorium or other laws
relating to or affecting the rights of creditors generally and by general
principles of equity;
(d) upon the execution and delivery of the Loan Certificates by the
Owner Trustee in accordance with the Loan Agreement and payment therefor in
accordance with the terms of this Agreement, the Loan Certificates will
constitute the legal, valid and binding obligations of the Owner Trustee,
enforceable against the Owner Trustee in accordance with their terms, except as
the same may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, arrangement, moratorium or other laws relating to or affecting
the rights of creditors generally and by general principles of equity;
(e) the execution and delivery by the Trust Company, in its individual
capacity or as Owner Trustee, as the case may be, of this Agreement and the
other Operative Documents to which it is a party, the consummation by the Trust
Company, in its individual capacity or as Owner Trustee, as the case may be, of
the transactions contemplated hereby and thereby, and the compliance by the
Trust Company, in its individual capacity or as Owner Trustee, as the case may
be, with the terms and provisions hereof and thereof, do not and will not
contravene any Applicable Law of the United States of America or the
Commonwealth of Massachusetts governing the Trust Company or the banking or
trust powers of the Trust Company, or the Trust Agreement, or its organizational
documents or by-laws, or contravene the provisions of, or constitute a default
by the Trust Company under, or result in the creation of any Lessor's Lien upon
the Trust Estate or any indenture, mortgage or other material contract,
agreement or instrument to which the Trust Company is a party or by which the
Trust Company or its property is bound; PROVIDED, HOWEVER, that no
representation is made with respect to the right, power or authority of the
Trust Company or the Owner Trustee to act as operator of Clover Unit 1 following
an Event of Default;
(f) no authorization or approval or other action by, and no notice to
or filing with, any Governmental Entity is required for the due execution,
delivery or performance by the Trust Company of this Agreement or the other
Operative Documents to which it is a party, other than any such authorization or
approval or other action or notice or filing as has been duly obtained, taken or
given;
(g) there is no pending or, to the knowledge of the Trust Company,
threatened action, suit, investigation or proceeding against the Trust Company
either in its individual capacity or
6
<PAGE>
as Owner Trustee, before any Governmental Entity which, if determined adversely
to it, would materially adversely affect the ability of the Trust Company, in
its individual capacity or as Owner Trustee, as the case may be, to perform its
obligations under the Trust Agreement, this Agreement or the other Operative
Documents to which it is a party;
(h) the Owner Trustee's right, title and interest in and to the Trust
Estate is free of any Lessor's Liens attributable to the Trust Company in its
individual capacity; and
(i) its chief executive office is located at 225 Franklin Street,
Boston, Massachusetts, and the place where its records concerning the Equipment
Head Lease Interest, the Foundation Head Lease Interest and all its interest in,
to and under all documents relating to the Trust Estate, is located at Two
International Place, Boston, Massachusetts.
Notwithstanding anything to the contrary contained herein, the representations
and warranties (or portion thereof as indicated) contained in clauses (c)(ii)
and (d) of this Section 3.1 (to the extent they relate to the Owner Trustee) are
made by the Owner Trustee in its trust capacity. Notwithstanding any provision
of any Operative Document, any representation or warranty by the Owner Trustee
in the Operative Documents as to the absence of Owner Participant's Liens has
been made by the Owner Trustee only in its trust capacity.
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF THE OWNER
PARTICIPANT. The Owner Participant represents and warrants that, as of the
Closing Date:
(a) the Owner Participant is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States of America and has the corporate power and authority to enter into and
perform its obligations under this Agreement, the Trust Agreement and the Tax
Indemnity Agreement;
(b) this Agreement, the Trust Agreement and the Tax Indemnity Agreement
have been duly authorized, executed and delivered by the Owner Participant and
assuming the due authorization, execution and delivery by each other party
thereto, constitute the legal, valid and binding obligations of the Owner
Participant, enforceable against the Owner Participant in accordance with their
respective terms, except as the same may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, arrangement, moratorium or other laws
relating to or affecting the rights of creditors generally and by general
principles of equity;
(c) the execution and delivery by the Owner Participant of this
Agreement, the Trust Agreement and the Tax Indemnity Agreement, the consummation
by the Owner Participant of the transactions contemplated hereby and thereby,
and compliance by the Owner Participant with the terms and provisions hereof and
thereof, do not and will not contravene any federal or Florida Applicable Law
binding on the Owner Participant, or its articles of incorporation or by-laws,
or contravene the provisions of, or constitute a default under, or result in the
creation of any Lien (other than any Lien created under any Operative Document)
upon the Trust Estate under any indenture, mortgage or other material contract,
agreement or instrument to which the Owner Participant is a party or by which
the Owner Participant or its property is bound (it being
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understood that no representation or warranty is being made as to any Applicable
Laws relating to Clover Unit 1 or the Clover Real Estate);
(d) no authorization or approval or other action by, and no notice to
or filing with, any federal or Florida Governmental Entity is required for the
due execution, delivery or performance by the Owner Participant of this
Agreement, the Trust Agreement or the Tax Indemnity Agreement, other than any
authorization or approval or other action or notice or filing as has been duly
obtained, taken or given (it being understood that no representation or warranty
is being made as to any Applicable Laws relating to Clover Unit 1 or the Clover
Real Estate);
(e) there is no pending or, to the knowledge of the Owner Participant,
threatened action, suit, investigation or proceedings against the Owner
Participant before any Governmental Entity which, if determined adversely to it,
would materially adversely affect the Owner Participant's ability to perform its
obligations under this Agreement, the Trust Agreement or the Tax Indemnity
Agreement;
(f) the Trust Estate is free of any Owner Participant's Liens;
(g) no part of the funds to be used by the Owner Participant to make
its investment pursuant to this Agreement, directly or indirectly, constitutes
or is deemed to constitute assets of any Plan; and
(h) the Owner Participant is purchasing the Beneficial Interest to be
acquired by it for its own account with no present intention of distributing
such Beneficial Interest or any part thereof in any manner which would require
registration under the Securities Act, but without prejudice, however, to the
right of the Owner Participant at all times to sell or otherwise dispose of all
or any part of such Beneficial Interest under a registration statement under the
Securities Act or under an exemption from such registration available under such
Act.
SECTION 3.3. REPRESENTATIONS AND WARRANTIES OF OLD DOMINION. Old
Dominion represents and warrants that, as of the Closing Date:
(a) Old Dominion is a wholesale power supply cooperative duly
organized, validly existing, and in good standing under the laws of the
Commonwealth of Virginia, is duly licensed or qualified and in good standing in
each jurisdiction in which the failure so to qualify would have a material
adverse effect on its financial condition, business or operations or its ability
to enter into and perform its obligations under this Agreement or any of the
other Operative Documents to which it is a party, and has the corporate power
and authority to carry on its business as now conducted and to enter into and
perform its obligations under this Agreement and each of the other Operative
Documents to which it is a party;
(b) this Agreement and each of the other Operative Documents to which
it is a party have been duly authorized, executed and delivered by Old Dominion
and, assuming the due authorization, execution and delivery by each other party
thereto, constitute the legal, valid and binding obligations of Old Dominion,
enforceable against Old Dominion in accordance with their
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respective terms, except as the same may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, arrangement, moratorium or other laws
relating to or affecting the rights of creditors generally and by general
principles of equity;
(c) the execution, delivery and performance by Old Dominion of this
Agreement and each of the other Operative Documents to which it is a party, the
consummation by Old Dominion of the transactions contemplated hereby and
thereby, and compliance by Old Dominion with the terms and provisions hereof and
thereof, do not and will not contravene any Applicable Law binding on Old
Dominion or its property, or its certificate of incorporation or by-laws, or
contravene the provisions of, or constitute a default by Old Dominion under, or
result in the creation of any Lien (except for Permitted Liens) upon the
property of Old Dominion or any indenture, mortgage or other material contract,
agreement or instrument to which Old Dominion is a party (including, without
limitation, the Clover Agreements, the Old Dominion Indenture, the Pollution
Control Assets Lease and the Conveyance and Security Agreement, dated as of
December 15, 1994, between the Pollution Control Assets Lessor and Old Dominion)
or by which Old Dominion or any of its property is bound;
(d) no authorization or approval or other action by, and no notice to
or filing with, any Governmental Entity is required (A) for the due execution,
delivery or performance by Old Dominion of this Agreement or the other Operative
Documents to which it is a party or (B) to be obtained by Old Dominion, the
Owner Trustee, or the Owner Participant with respect to the use, occupancy,
possession, operation, maintenance, ownership, lease, alteration or repair of
Clover Unit 1 prior to termination of the Term of the Equipment Operating Lease
or the Foundation Operating Lease in accordance with the Operative Documents,
or, without regard to any other transactions of the Owner Participant and the
Owner Trustee and assuming that neither the Owner Participant or the Owner
Trustee or any Affiliate of any of them is an "electric utility" or a "public
utility" or a "public utility holding company" under any Applicable Law
immediately prior to the Closing, with respect to the participation by Owner
Trustee or the Owner Participant in the transactions contemplated by this
Agreement and the other Operative Documents, other than those which have already
been duly obtained and other than (i) the FERC Order and the Virginia Commission
Order which have been obtained, (ii) any action of the FERC or the Virginia
Commission which may be required in connection with the substitution of
Qualifying Security pursuant to Section 7.6 hereof or a Qualifying Letter of
Credit, (iii) the filing by the Owner Participant and the Owner Trustee of a
Form U-7D with the Securities and Exchange Commission under Rule 7(d) of the
Holding Company Act, (iv) as may be required in connection with any refinancing
of the Loan Certificates or the issuance of Additional Loan Certificates, (v) as
may be required under Applicable Law providing for the supervision or regulation
of the Owner Participant or the Owner Trustee, (vi) as may be required with
respect to the Owner Participant or the Owner Trustee as a result of investing,
lending or other commercial activity in which the Owner Trustee or the Owner
Participant is or may be engaged other than the transactions contemplated hereby
or by any of the other Operative Documents, (vii) as may be required under
existing Applicable Laws to be obtained, given, accomplished or renewed from
time to time in connection with the maintenance or operation of Clover Unit 1
and which are routine in nature or which cannot be obtained, or are not normally
applied for, prior to the time they are required, and which Old Dominion has no
reason to believe will not be
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timely obtained, (viii) as may be required in consequence of any transfer of
ownership of the Trust Estate by the Owner Trustee or any relinquishment of use
or operation of Clover Unit 1 by Old Dominion or (ix) as may be required under
any Applicable Law enacted or adopted after the date hereof;
(e) no approval or consent of Virginia Power (except as have been
obtained), the Pollution Control Assets Lessor, the Indenture Trustee or any
holders of Old Dominion's Bonds is required in connection with the transactions
contemplated by the Operative Documents;
(f) neither (i) consummation of the transactions to be consummated on
the Closing Date, (ii) except as provided in Section 6.2 and 6.3 of the
Equipment Head Lease and Section 6.2 and 6.3 of the Foundation Head Lease, the
exercise by Old Dominion of the Purchase Option and the Foundation Purchase
Option or the Service Contract Option on the Expiration Date or (iii) any
transfer of the Beneficial Interest in accordance with Section 5.1 prior to
termination of the Equipment Operating Lease or the Foundation Operating Lease,
gives rise, or will give rise, to a right by Virginia Power of first refusal, or
right to consent, under Section 15.02 or 15.03 of the Clover Operating Agreement
or Section 17.02 or 17.03 of the Clover Ownership Agreement;
(g) there is no pending or, to the knowledge of Old Dominion,
threatened action, suit, investigation or proceeding against Old Dominion before
any Governmental Entity which, if determined adversely to it, would materially
adversely affect Old Dominion's financial condition, business or operations or
its ability to perform its obligations hereunder or under the other Operative
Documents to which it is a party;
(h) the insurance (including all related endorsements) required by
Section 11 of the Equipment Operating Lease and the Foundation Operating Lease
is in full force and effect and all premiums thereon are current;
(i) the chief executive office and principal place of business of Old
Dominion and the office where Old Dominion will keep its corporate records
concerning the Clover Unit 1, the Clover Real Estate and the Operative Documents
is located at Glen Allen, Virginia;
(j) no Event of Default, Event of Loss (other than a Regulatory Event
of Loss) or event that with the passage of time or giving of notice or both
would constitute an Event of Default or Event of Loss (other than a Regulatory
Event of Loss) has occurred and is continuing;
(k) no event of default or event of loss has occurred and is continuing
under the Pollution Control Assets Lease;
(l) no event of default has occurred and is continuing under the Old
Dominion Indenture;
(m) Old Dominion is not an "investment company" or an "affiliated
person" of an "investment company" within the meaning of the Investment Company
Act of 1940;
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(n) neither Old Dominion nor anyone authorized by it has directly or
indirectly offered or sold any interest in the Beneficial Interest or the Loans
or any part thereof, or in any similar security or lease, or in any security or
lease the offering of which for the purposes of the Securities Act would be
deemed to be part of the same offering as the offering of the Beneficial
Interest or the Loans or any part thereof or solicited any offer to acquire any
of the same in violation of the registration requirements of Section 5 of the
Securities Act. The representation and warranty in the preceding sentence is
made by Old Dominion in reliance upon, and is subject to the accuracy of, the
representation and warranty made by the Owner Participant in Section 3.2(h)
hereof;
(o) Old Dominion is not in default in any respect, and no condition
exists that with notice or lapse of time or both would constitute a default in
any respect, under the Clover Agreements or any mortgage, indenture or other
material contract, agreement or instrument to which Old Dominion is a party or
by which Old Dominion or its property is bound, in any such case where any such
default, individually or in the aggregate, could reasonably be expected to have
a material adverse effect on (i) its financial condition, business or operations
or (ii) its ability to enter into and perform its obligations under this
Agreement or any other Operative Document;
(p) the Unit 1 Equipment and the Unit 1 Foundation are located on the
Real Property;
(q) Old Dominion has (i) good and valid title, as a tenant-in-common
with Virginia Power to the Retained Assets free and clear of all Liens other
than Permitted Liens, (ii) a valid leasehold interest, to the extent of a 50%
undivided interest, in the Pollution Control Assets free and clear of all Liens
other than Permitted Liens, and (iii) good and marketable title as a
tenant-in-common with Virginia Power in the Clover Real Estate;
(r) the Equipment Head Lease and the Foundation Head Lease create valid
leasehold interests in favor of the Owner Trustee in the Equipment Interest and
the Foundation Interest, respectively, under the laws of the Commonwealth of
Virginia;
(s) assuming that the Owner Trustee maintains possession and control
over the Collateral (as defined in the Pledge Agreement) in accordance with the
applicable provisions of the Uniform Commercial Code, the Pledge Agreement
creates a valid and perfected security interest in such Collateral as
contemplated thereby subject to the provisions of Section 9-306 of the Uniform
Commercial Code;
(t) assuming that the Owner Trustee maintains possession and control
over the Deposit in accordance with the provisions of the Deposit Agreement, the
Deposit Pledge Agreement creates a valid and enforceable pledge of the Deposit
as contemplated thereby;
(u) assuming that the Loan Agreement has been duly authorized, executed
and delivered by each party thereto, the Loan Agreement creates a valid (subject
to the rights of quiet enjoyment of Old Dominion under Section 9 hereof and
Section 4.2 of the Equipment Operating Lease) security interest in favor of the
Agent in the Equipment Interest. No filing,
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recording, registration or notice with any federal or state Governmental Entity
is necessary to establish or, except for such filing and recording as have been
made pursuant to Section 4.20 hereof and for the performance of the terms of the
Loan Agreement, to perfect the Agent's security interest in the Equipment
Interest;
(v) assuming that the Leasehold Mortgage has been duly authorized,
executed and delivered by each of the parties thereto, the Leasehold Mortgage
creates a valid (subject to the rights of quiet enjoyment of Old Dominion under
Section 9 hereof and Section 4.2 of the Foundation Operating Lease) lien in
favor of the Agent for the benefit of the Original Lenders in the Foundation
Interest. No filing, recording, registration or notice with any federal or state
Governmental Entity is necessary to establish or, except for such filings and
recordings as have been made pursuant to Section 4.20 and for the performance of
the terms of the Leasehold Mortgage, to perfect the Agent's security interest in
the Foundation Interest;
(w) Old Dominion's audited financial statements for the fiscal year
ended December 31, 1994, including the footnotes thereto, present fairly the
consolidated financial position, results of operations and cash flow for Old
Dominion as of and for the periods stated and have been prepared in conformity
with GAAP on a consistent basis; and since December 31, 1994 no material adverse
change has occurred in the financial condition, business or operations of Old
Dominion and no event has occurred since December 31, 1994 which would
materially adversely affect the ability of Old Dominion to perform its
obligations under this Agreement or any other Operative Document to which it is
a party;
(x) Old Dominion owns or possesses or has obtained all material
governmental franchises, licenses and permits necessary to lease or own, as the
case may be, and to operate, its properties and to carry on its business as
presently conducted where its ownership or lease of substantial properties or
the conduct of its business requires such franchises, licenses or permits and
where the failure to do so would materially adversely affect its financial
condition, business or operations;
(y) Old Dominion has filed all federal, state and local tax returns
which are required to be filed by it and has paid (prior to their delinquency
dates) any taxes which have become due pursuant to such returns or pursuant to
any assessment received by it (other than taxes and assessments the payment of
which is being contested in good faith by Old Dominion, with adequate reserves,
in the aggregate, for the payment of which having been set aside on the books of
Old Dominion), and Old Dominion has no Actual Knowledge of any actual or
proposed deficiency or additional assessment in connection therewith which,
either in any case or in the aggregate, would materially adversely affect Old
Dominion's financial condition, business or operations; and any charges,
accruals and reserves on the books of Old Dominion with respect to federal,
state and local taxes for all open years, and for the current fiscal year, make
adequate provision for any unpaid tax liabilities for such periods;
(z) the qualification of any of the Agent, the Original Lenders, the
Owner Trustee, the Trust Company or the Owner Participant for admission to do
business under the laws of the Commonwealth of Virginia or any political
subdivision thereof is not required in connection with
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the execution and delivery of the Operative Documents, the making of the Equity
Investment or the Loans or, prior to termination of the Equipment Operating
Lease or the Foundation Operating Lease, the performance by the Agent, any
Lender, the Owner Trustee or the Owner Participant of this Agreement or any
other Operative Document to which it is a party;
(aa) Old Dominion has validly submitted to the jurisdiction of the
Supreme Court of the State of New York, New York County and the United States
District Court for the Southern District of New York;
(ab) the choice by Old Dominion of the laws of the State of New York to
govern this Agreement and the other Operative Documents to which Old Dominion is
a party and which are expressed to be governed by the laws of the State of New
York is valid and binding under the Applicable Laws of the Commonwealth of
Virginia, and a court in the Commonwealth of Virginia would uphold such choice
of law in a legal proceeding to enforce this Agreement and such other Operative
Documents to which Old Dominion is a party brought in such court, subject to the
enforceability of security documents being subject to the laws applicable to or
affecting the collateral provided in respect thereof;
(ac) the use by Old Dominion of the proceeds of the Loan Certificates
and the Equity Investment will not violate or result in a violation of Section 7
of the Exchange Act, or any regulations issued pursuant thereto, including,
without limitation, Regulations G, T, U and X of the regulations of the Federal
Reserve System;
(ad) performance by any of the Agent, any Lender, the Owner Trustee, or
the Owner Participant of any action required under the Operative Documents will
not violate any Applicable Law of the Commonwealth of Virginia or any political
subdivision thereof;
(ae) Clover Unit 1 was declared commercial by the Construction
Management Committee under the Clover Ownership Agreement on October 6, 1995;
and
(af) Old Dominion is an "electric utility company," but is not a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company" within the meaning of the Holding Company
Act.
SECTION 3.4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF EACH LENDER.
(a) Each Lender represents and warrants that, as of the Closing Date:
(i) no part of the funds to be used by such Lender to make its
Loan and acquire its Loan Certificate pursuant to this Agreement or the Loan
Agreement constitutes or is deemed to constitute assets (within the meaning of
ERISA and any applicable rules or regulations thereunder) of any Plan; and
(ii) such Lender is making the Loans and acquiring the Loan
Certificates for investment and not with a view towards any resale or
distribution thereof, and neither it nor anyone authorized by it to act on its
behalf has directly or indirectly offered any Loan Certificate
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or any interest in the Trust Estate, the Collateral, or any similar security for
sale to, or solicited any offer to acquire any of the same from, anyone, it
being understood that such Lender makes no representations as to actions taken
by the Owner Participant, the Owner Trustee or Old Dominion or anyone acting on
behalf of such Persons.
(b) Each Lender represents, warrants and agrees that it will not
transfer the Loan Certificates it holds except in a transaction constituting an
exempt transaction under the Securities Act.
SECTION 3.5. REPRESENTATIONS AND WARRANTIES OF THE AGENT. The Agent
represents and warrants that, as of the Closing Date:
(a) the Agent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, has the corporate power
and authority to enter into and perform its obligations, as Agent, under this
Agreement and the other Operative Documents to which it is a party;
(b) this Agreement and the other Operative Documents to which it is a
party have been duly authorized, executed and delivered by the Agent and
assuming the due authorization, execution and delivery by each other party
thereto, constitute the legal, valid and binding obligations of the Agent
enforceable against the Agent in accordance with their respective terms, except
as the same may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, arrangement, moratorium or other laws relating to or affecting
the rights of creditors generally and by general principles of equity; and
(c) the execution, delivery and performance by the Agent of this
Agreement and each of the other Operative Documents to which it is a party, the
consummation by the Agent of the transactions contemplated hereby or thereby,
and compliance by the Agent with the provisions hereof and thereof do not
contravene any Applicable Laws binding on the Agent or its organizational
documents or by-laws, or contravene the provisions of, or constitute a default
by the Agent under any indenture, mortgage or other material contract, agreement
or instrument to which the Agent is a party or by which the Agent or its
property is bound.
SECTION 4. CLOSING CONDITIONS
The obligations of the Owner Participant, the Owner Trustee, the Agent,
the Original Lender and Old Dominion to consummate the transactions contemplated
hereby on the Closing Date shall be subject to the following conditions, except
that the obligations of any Person shall not be subject to such Person's own
performance or compliance.
SECTION 4.1. OPERATIVE DOCUMENTS. On or before the Closing Date, each
of the Operative Documents to be delivered at the Closing shall have been duly
authorized, executed and delivered by the parties thereto in substantially the
form attached as an Exhibit hereto, shall
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each be in full force and effect, and executed counterparts of each shall have
been delivered to each of the parties hereto.
SECTION 4.2. EQUITY INVESTMENT; LOANS. The Owner Participant shall have
made the Equity Investment and the Original Lender shall have made its
respective Loans available to the Owner Trustee at the place and in the manner
contemplated by Section 2.
SECTION 4.3. PLEDGED COLLATERAL. Old Dominion shall have issued the
1996 Series A Bonds and deposited the 1996 Series A Bonds and a copy of the the
Bond Insurance Policy with the Owner Trustee pursuant to the Pledge Agreement.
SECTION 4.4. DEPOSIT. Old Dominion shall have deposited funds
with the Issuer in an amount sufficient to create the Deposit.
SECTION 4.5. RESERVED.
SECTION 4.6. RESERVED.
SECTION 4.7. CERTIFIED COPIES. The Owner Participant, the Owner
Trustee, the Agent and the Original Lender shall have received copies certified
by the Secretary of Old Dominion of the Clover Operating Agreement, the Clover
Ownership Agreement, the Old Dominion Indenture and the Pollution Control Assets
Lease, and all amendments to each thereof.
SECTION 4.8. CORPORATE DOCUMENTS. Each of the parties hereto shall have
received certified copies of the by-laws and organizational documents of each of
the other parties hereto (other than from the Agent and the Original Lenders),
resolutions of the Board of Directors of each such other party duly authorizing
the transaction and such documents and such evidence as it may reasonably
request in order to establish the authority of each such other party to
consummate the transactions contemplated by this Agreement, the taking of all
corporate and other proceedings in connection therewith and compliance with the
conditions herein or therein set forth and the incumbency of all officers
signing any of the Operative Documents; the foregoing documents shall be
reasonably satisfactory to the recipient.
SECTION 4.9. NO DEFAULTS. No Event of Default, Event of Loss or event
that with the passage of time or giving of notice or both would constitute an
Event of Default or an Event of Loss shall have occurred and be continuing; no
event of default or event of loss or event that with the passage of time or
giving of notice or both would constitute an event of default or event of loss
under the Pollution Control Assets Lease shall have occurred and be continuing;
and no event of default or event that with the passage of time or giving of
notice or both would constitute an event of default under the Old Dominion
Indenture shall have occurred and be continuing.
SECTION 4.10. NO THREATENED PROCEEDINGS. No action, suit,
investigation or proceeding shall have been instituted nor shall governmental
action be threatened before any Governmental Entity, nor shall any order,
judgment or decree have been issued or proposed to be issued by
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any Governmental Entity at the time of the Closing Date, to set aside, restrain,
enjoin or prevent the consummation of the transactions contemplated by the
Operative Documents.
SECTION 4.11. CONSENTS. All approvals and consents, if any, of (a) any
trustees or holders of any indebtedness or obligations of the Transaction
Parties, (b) Virginia Power and (c) the Pollution Control Assets Lessor, which
are required in connection with the transactions contemplated by the Operative
Documents, shall have been duly obtained and be in full force and effect and
shall be in the form and substance satisfactory to the Owner Participant, the
Original Lender and the Agent; and the Owner Participant, the Owner Trustee, Old
Dominion, the Agent and the Original Lender shall have received a copy of such
approval or consent certified by the applicable Transaction Party in the case of
clause (a) or by the Secretary of Old Dominion in the case of clauses (b) or
(c).
SECTION 4.12. GOVERNMENTAL ACTIONS. All actions, if any, required to
have been taken by any Governmental Entity on or prior to the Closing Date in
connection with the transactions contemplated by any Operative Documents on the
Closing Date shall have been taken and all orders, permits, waivers, exemptions,
authorizations and approvals of such Governmental Entities required to be in
effect on the Closing Date in connection with the transactions (other than in
connection with the substitution of the Qualifying Security pursuant to Section
7.6(b) or the providing of a Qualifying Letter of Credit, if required)
contemplated by the Operative Documents on the Closing Date shall have been
issued; and all such orders, permits, waivers, exemptions, authorizations and
approvals shall be in full force and effect on the Closing Date; and the Owner
Participant, the Owner Trustee, the Agent and the Original Lender shall have
received a copy of any such order, permit, waiver, exemption, authorization or
approval certified by the appropriate official of the Governmental Entity
issuing, granting or giving such order, permit, waiver, exemption, authorization
or approval.
SECTION 4.13. INSURANCE. Insurance (including all related endorsements)
complying with the requirements of Section 11 of the Equipment Operating Lease
and Section 11 of the Foundation Operating Lease shall be in full force and
effect and all premiums thereon shall be current. The Owner Participant, the
Owner Trustee, the Original Lender and the Agent shall have received a
certificate or certificates dated the Closing Date of an independent insurance
broker or carrier reasonably satisfactory to such Persons specifying the types
and amounts of insurance maintained pursuant to Section 11 of the Equipment
Operating Lease and Section 11 of the Foundation Operating Lease, and stating
that such insurance is in full force and effect, and that no notice of
cancellation, non-renewal or material change in provisions has been issued.
SECTION 4.14. ENGINEERING REPORT. Each such Person shall have received,
on or before the Closing Date, a final copy of the Engineering Report prepared
by the Engineer reasonably acceptable in form and substance by Owner
Participant.
SECTION 4.15. SURVEY. The Owner Participant, the Owner Trustee,
the Original Lender and the Agent shall have received a current survey of the
Real Property in form reasonably satisfactory to each of them.
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SECTION 4.16. APPRAISAL. The Owner Participant shall have received the
Appraisal prepared by the Appraiser, reasonably satisfactory in form and
substance to the Owner Participant; and the Agent shall receive a letter from
the Appraiser as to the fair market value of the Lessor's Unit 1 Interest on the
Closing Date.
SECTION 4.17. INVESTMENT BANKING OPINION. The Owner Participant shall
have received a satisfactory opinion of BOT or another investment banking firm
reasonably acceptable to the Owner Participant to the effect that the terms and
conditions for a New Loan set forth on Schedule 3 to the Equipment Operating
Lease are commercially reasonable and the possibility that the New Loan at a
market rate of interest will fail to be made on the Expiration Date to an
independent third party lender in the event the Service Contract Option is
elected, is remote.
SECTION 4.18. OPINION WITH RESPECT TO CERTAIN TAX ASPECTS. The Owner
Participant shall have received the opinion, dated the Closing Date, of
Chadbourne & Parke LLP addressed to the Owner Participant, in form and substance
satisfactory to the Owner Participant, containing such counsel's favorable
opinion with respect to the federal income tax aspects of the transaction
contemplated hereby.
SECTION 4.19. OPINION OF COUNSEL. Each such Person shall have received
an opinion, dated the Closing Date, of Orrick, Herrington & Sutcliffe, New York
counsel to Old Dominion, LeClair Ryan, Virginia counsel to Old Dominion, Keith
Lembo, Esq., counsel to the Owner Participant, Chadbourne & Parke LLP, New York
counsel to the Owner Participant, Mays & Valentine, Virginia counsel to the
Owner Participant and the Original Lender, Day, Berry & Howard, Massachusetts,
counsel to the Owner Trustee, Davis Polk & Wardwell, New York, counsel to
Utrecht-America, Guillermo G. Bilbao, General Counsel for the Issuer and
UtrechtAmerica, DeBrauw, Blackstone & Westbroek, Dutch counsel to the Issuer,
and in-house legal counsel to AMBAC, addressed to and in form and substance
reasonably acceptable to such Person. Each such Person expressly consents to the
rendering by its counsel of the opinion referred to in this Section 4.19 and
acknowledges that such opinion shall be deemed to be rendered at the request and
upon the instructions of such Person, each of whom has consulted with and has
been advised by its counsel as to the consequences of such request, instructions
and consent.
SECTION 4.20. RECORDINGS AND FILINGS. All filings and recordings listed
on Schedule 2 hereto shall have been duly made and all filing, recordation and
other fees payable in connection therewith shall have been paid; and the filing
of all precautionary financing statements under the Uniform Commercial Code of
Virginia and any other mortgages, security agreements or other documents as may
be reasonably requested by counsel to the Owner Participant, the Original Lender
or the Agent to perfect the right, title and interest of the Owner Trustee in
the Lessor's Unit 1 Interest or any part thereof or interest therein and the
Liens of the Loan Agreement and the Leasehold Mortgage thereon, shall have been
made.
SECTION 4.21. LETTER AS TO OFFEREES. The Owner Participant, the Owner
Trustee, Old Dominion, the Original Lender and the Agent shall have received a
letter from the Advisor to the Lessee in form and substance reasonably
satisfactory to each such Person with respect to the
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number of offerees of interests in the Beneficial Interest and the Loan
Certificates and the manner of the offering of each thereof.
SECTION 5. CERTAIN COVENANTS OF THE OWNER PARTICIPANT
SECTION 5.1. RESTRICTIONS ON TRANSFER OF BENEFICIAL INTEREST. (a) The
Owner Participant covenants and agrees that it shall not directly or indirectly
assign, convey or transfer any of its right, title or interest in the Beneficial
Interest without the prior written consent of Old Dominion, so long as no Event
of Default has occurred and is continuing, and, so long as the Loans are
outstanding, the Agent; PROVIDED, HOWEVER, that the Owner Participant may
assign, convey or transfer all of its interest in the Beneficial Interest
without such consent to a Person (the "Transferee") which shall assume the
duties and obligations of the Owner Participant under the Operative Documents
pursuant to an assumption agreement substantially in the form of Exhibit O
hereto, which Transferee shall be either (i) an Affiliate of the Owner
Participant which does not otherwise qualify under clause (ii) below, provided
that all of the payment and performance obligations of the Transferee under the
Operative Documents shall be guaranteed by the Owner Participant pursuant to a
guaranty substantially in the form of Exhibit P hereto or (ii) a Person which
meets, or the payment and performance obligations of which under the Operative
Documents are guaranteed (pursuant to a guaranty substantially in the form of
Exhibit P hereto) by a Person which meets, the following criteria: (A) the
tangible net worth of the Transferee or guarantor, if any, is at least equal to
$100 million; (B) the Transferee and the guarantor, if any, is a financial
institution, corporation or business trust; (C) the Transferee will be a "United
States person" within the meaning of 7701(a)(30) of the Code; (D) so long as no
Event of Default has occurred and is continuing and except at the end of the
Term of the Equipment Operating Lease if Old Dominion has not elected to
exercise the Purchase Option, such Transferee is not a direct competitor of Old
Dominion. Notwithstanding the foregoing, the Owner Participant covenants and
agrees for the benefit of Virginia Power that it shall not directly or
indirectly assign, convey or transfer any of its right, title or interest in the
Beneficial Interest to a direct competitor (or an Affiliate thereof) of Virginia
Power without the prior written consent of Virginia Power.
(b) The Owner Participant shall give Old Dominion and the Agent 30 days
prior written notice of such transfer, or 10 days in the case of a transfer to
an Affiliate of the Owner Participant, specifying the name and address of any
proposed Transferee and such additional information as shall be necessary to
determine whether the proposed transfer satisfies the requirements of this
Section 5.1. All reasonable fees, expenses and charges of the Agent and Old
Dominion (including reasonable attorneys' fees) in connection with any such
transfer (or proposed transfer), including any of the foregoing relating to any
amendments to the Operative Documents required in connection therewith, shall be
paid by the Owner Participant, without any right of indemnification from Old
Dominion or any other Person; PROVIDED, HOWEVER, that the Owner Participant
shall have no obligation to pay such fees, expenses or charges as a result of
any transfer occasioned by an Event of Default, in which case Old Dominion shall
be obligated to pay such costs.
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(c) Upon any such transfer in compliance with this Section 5.1, (i)
such Transferee shall be deemed the "Owner Participant" for all purposes, and
shall enjoy the rights and privileges and perform the obligations of the Owner
Participant hereunder and under each other Operative Document to which such
Owner Participant is a party, and each reference in this Agreement and each
other Operative Document to the "Owner Participant" shall thereafter be deemed
to include such Transferee for all purposes and (ii) the transferor Owner
Participant and the guarantor, if any, of such transferor Owner Participant's
obligations shall be released from all obligations hereunder and under each
other Operative Document to which such transferor or guarantor is a party or by
which such transferor Owner Participant or guarantor is bound to the extent such
obligations are expressly assumed by a Transferee; PROVIDED, HOWEVER, that in no
event shall any such transfer waive or release the transferor from any liability
existing immediately prior to or occurring simultaneously with such transfer.
SECTION 5.2. OWNER PARTICIPANT'S LIENS. The Owner Participant covenants
that it will not directly or indirectly create, incur, assume or suffer to exist
any Owner Participant's Lien and the Owner Participant shall promptly notify Old
Dominion and the Agent of the imposition of any such Lien of which the Owner
Participant has Actual Knowledge and shall promptly, at its own expense, take
such action as may be necessary to duly discharge such Owner Participant's Lien.
SECTION 5.3. AMENDMENTS OR REVOCATION OF TRUST AGREEMENT. The Owner
Participant covenants that it will not (i) amend, supplement, or otherwise
modify Section 9.01, Section 10.01 or Section 11.02 of the Trust Agreement
without the prior written consent of Old Dominion so long as no Event of Default
has occurred and is continuing or the Agent so long as the Loans are
outstanding, which consent shall not be unreasonably withheld, or (ii) revoke
the Trust Agreement without the prior written consent of Old Dominion so long as
no Event of Default has occurred and is continuing and the Agent so long as the
Loans are outstanding.
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SECTION 5.4. TRUST ESTATE. The Owner Participant covenants that
it will not voluntarily take any action to subject the Trust Estate to the
provisions of any applicable bankruptcy or insolvency law (as now or hereafter
in effect).
SECTION 5.5. APPOINTMENT OF SUCCESSOR OWNER TRUSTEE OR CO-TRUSTEES.
Notwithstanding any other provision of this Agreement, a successor Owner Trustee
or co-trustee shall not be appointed without the consent of Old Dominion and the
Agent unless such successor Owner Trustee or co-trustee (a) meets the
requirements of Section 9.03 of the Trust Agreement, and (b) is either (i)
incorporated in Massachusetts or (ii) incorporated, or has its principal place
of business, in a state other than Massachusetts and in the case of this clause
(ii) Old Dominion, the Agent and the Lenders shall have received opinions of
counsel in such state (x) in substantially the form of the opinions to be
delivered by counsel to Owner Trustee on the Closing Date at the expense of the
Owner Participant and (y) as to such other matters of the law of such state as
Old Dominion or the Agent may reasonably request, such additional matters to be
addressed at the expense of Old Dominion or the Agent, as the case may be;
PROVIDED, HOWEVER, that if the Owner Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of the Owner Trustee or
its properties shall be appointed or any public officer shall take charge or
control of the Owner Trustee or its property or affairs for the purpose of
rehabilitation, conservation or liquidation, the opinion required by clause
(y) shall be at the expense of Old Dominion.
SECTION 6. COVENANTS OF THE TRUST COMPANY AND THE OWNER TRUSTEE
SECTION 6.1. COMPLIANCE WITH THE TRUST AGREEMENT. The Trust Company,
in its individual capacity, hereby covenants and agrees as follows:
(a) the Trust Company will comply with all of the terms of the Trust
Agreement applicable to it; and
(b) the Trust Company will not amend, supplement, or otherwise modify
Section 9.01, Section 10.01 or Section 11.02 of the Trust Agreement without the
prior written consent of Old Dominion so long as no Event of Default has
occurred and is continuing and the Agent so long so the Loans are outstanding,
which consent shall not be unreasonably withheld.
SECTION 6.2. LESSOR'S LIENS. The Trust Company, in its individual
capacity, covenants that it will not directly or indirectly create, incur,
assume or suffer to exist any Lessor's Lien and will promptly notify Old
Dominion and the Agent of the imposition of any such Lien of which the Trust
Company has Actual Knowledge and shall promptly, at its own expense, take such
action as may be necessary to duly discharge such Lessor's Lien.
SECTION 6.3. AMENDMENTS TO OPERATIVE DOCUMENTS. The Owner Trustee
covenants that it will not, except in accordance with the Operative Documents in
effect on the date hereof (as may be amended, modified or supplemented from time
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to time in accordance with the terms hereof and of the Operative Documents), (i)
through its own action terminate any Operative Document to which it is a party,
or (ii) amend, supplement, waive or modify such Operative Documents in any
manner or take any action to prepay or refund any Loan Certificate or amend any
of the payment terms of any of the Loan Certificates without, in each case, the
prior written consent of Old Dominion so long as no Event of Default shall have
occurred and be continuing and the Agent so long as the Loans are outstanding.
SECTION 6.4. TRANSFER OF THE LESSOR'S UNIT 1 INTEREST. The Owner
Trustee covenants that it will not assign, convey or transfer any of its then
existing right, title or interest in and to the Lessor's Unit 1 Interest, the
Trust Estate or the other Operative Documents except to a successor trustee or
Co-trustee meeting the criteria of Section 9.03 of the Trust Agreement.
SECTION 6.5. TRUST ESTATE. The Owner Trustee covenants that it
will not voluntarily take any action to subject the Trust Estate to the
provisions of any applicable bankruptcy or insolvency law (as now or hereafter
in effect).
SECTION 6.6. LIMITATION ON INDEBTEDNESS AND ACTIONS. The Owner
Trustee covenants that, so long as the Loans are outstanding, it will not incur
any indebtedness nor enter into any business or activity except as required or
expressly permitted or contemplated by any Operative Document.
SECTION 6.7. CHANGE OF LOCATION. The Trust Company, in its individual
capacity, agrees to give the Owner Participant, Old Dominion, the Lender and the
Agent written notice of any relocation of its chief executive office or the
place where documents and records relating to the Trust Estate are kept from the
location set forth in Section 3.1(i) and of any change in its name.
SECTION 7. COVENANTS OF OLD DOMINION
SECTION 7.1. MAINTENANCE OF CORPORATE EXISTENCE. Except as permitted by
Section 7.2, Old Dominion will at all times maintain its existence as a
cooperative in good standing under the laws of the Commonwealth of Virginia and
Old Dominion will remain qualified to do business in any state in which the
conduct of its business or the ownership or leasing of assets used in its
business requires such qualification and where the failure to be so qualified
would have a material adverse effect on the operations, business, properties,
assets or condition of Old Dominion and its subsidiaries taken as a whole.
SECTION 7.2. MERGER, CONSOLIDATION, SALE OF ASSETS.
Old Dominion covenants and agrees as follows:
(a) Old Dominion will not consolidate with or merge into any other
Person, or convey or transfer all or substantially all of its assets to any
Person, unless immediately after giving effect to such transaction:
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(i) the entity resulting from such consolidation, surviving in
such merger or succeeding to such assets, if other than Old Dominion,
shall be organized under the laws of the United States, any state
thereof or the District of Columbia; and
(ii) such resulting, surviving or succeeding entity, if other
than Old Dominion, shall execute and deliver to the Owner Trustee, the
Owner Participant, the Agent and the Lenders an agreement in form and
substance reasonably satisfactory to each of such parties containing an
assumption by such entity of Old Dominion's obligations under this
Participation Agreement and each other Operative Document to which Old
Dominion is then a party; no Event of Default shall have occurred and
be continuing under the Equipment Operating Lease or Foundation
Operating Lease; and Old Dominion shall have delivered to the Owner
Trustee, the Owner Participant, the Agent and the Lender an Officer's
Certificate and an opinion of counsel stating that such transaction and
such assumption agreement comply with this Section 7.2 and that all
conditions precedent to the consummation of such transaction set forth
herein have been complied with.
(b) Upon the consummation of such transaction, the surviving entity, if
other than Old Dominion, shall succeed to, and be substituted for, and may
exercise every right and power of, Old Dominion under this Participation
Agreement and each other Operative Document to which Old Dominion was a party
immediately prior to such transaction, with the same effect as if such entity
had been named herein and therein. Nothing contained herein shall permit any
sublease, assignment or other arrangement for the use, operation or possession
of the Equipment Interest or Foundation Interest except in compliance with the
applicable provisions of the Equipment Operating Lease or Foundation Operating
Lease, as the case may be.
SECTION 7.3. NOTICE OF CHANGE IN ADDRESS OR NAME. Old Dominion will
promptly provide the Owner Trustee, the Owner Participant, the Agent and the
Lender with written notice of any change in its chief executive office, its
principal place of business, its name or the place where Old Dominion maintains
its business records.
SECTION 7.4. EXERCISE OF EARLY PURCHASE OPTION UNDER POLLUTION CONTROL
ASSETS LEASE. If Old Dominion shall not have previously acquired legal title to
all of the Pollution Control Assets from the Pollution Control Assets Lessor, it
will exercise its purchase option set forth in Section 19.2 of the Pollution
Control Assets Lease to acquire all of such lessor's right, title and interest
in the Pollution Control Assets on December 30, 2004.
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SECTION 7.5. DELIVERY OF FINANCIAL STATEMENTS AND NO DEFAULT
CERTIFICATE. (a) Old Dominion will deliver to the Owner Participant, the Owner
Trustee, and, so long as the Loans are outstanding, the Agent and the Lenders,
as soon as practicable and in any event within 120 days after the end of each
fiscal year, an audited balance sheet of Old Dominion as at the end of such
fiscal year and the related statements of revenue, expenses and patronage
capital and cash flows for the year then ended, together with the report with
respect thereto of Coopers & Lybrand LLP or other independent public accountants
reasonably acceptable to the Owner Trustee, the Owner Participant and the Agent,
all in reasonable detail and prepared in accordance with GAAP on a consistent
basis, and an Officer's Certificate of Old Dominion stating that (1) the signers
have made, or caused to be made under their supervision, a review of this
Agreement and the other Operative Documents to which it is then a party and (2)
such review has not disclosed the existence during such fiscal year (and the
signers do not have knowledge of the existence as of the date of such
certificate) of any condition or event constituting an Event of Default or Event
of Loss or, if any such condition or event existed or exists, specifying the
nature thereof, the period of existence thereof and what action Old Dominion has
taken or proposes to take with respect thereto.
(b) Old Dominion will deliver to the Owner Participant, the
Owner Trustee and, so long as the Loans are outstanding, the Agent and the
Lenders, (i) as soon as reasonably practicable, and in any event within 60 days
after the end of each fiscal quarter, a copy of the Form 10-Q filed by Old
Dominion with the Securities and Exchange Commission or if not so filed, such
other quarterly report as Old Dominion shall prepare, and (ii) from time to time
such other information concerning Old Dominion as such parties may reasonably
request, to the extent such information is made available to the holders of Old
Dominion's publicly traded first mortgage bonds or is filed by Old Dominion with
the Securities and Exchange Commission or any other regulatory authority having
jurisdiction over Old Dominion, other than information which is subject to a
confidentiality, or similar, request.
SECTION 7.6. QUALIFYING SECURITY. (a) At all times during the Term of
the Equipment Operating Lease Old Dominion shall, subject to the terms of this
Section 7.6, maintain for the benefit of the Owner Participant a first priority
security interest in a Qualifying Security. Old Dominion shall be permitted,
from time to time, to replace any Qualifying Security with a replacement
Qualifying Security so long as there shall be no interruption in such first
priority security interest provided by the Qualified Security in consequence of
any such optional replacement; PROVIDED that it delivers a favorable opinion of
counsel, such counsel and such opinion, in form and substance reasonably
satisfactory to the Owner Participant, regarding the validity and perfection of
the security interest. If any Qualifying Security maintained pursuant to this
Section 7.6 shall cease to be a Qualifying Security, Old Dominion shall, within
90 days of the earlier of (i) having Actual Knowledge of such fact or (ii)
receiving notice from the Owner Participant of such fact, provide (A) a first
priority security interest in a substitute Qualifying Security and (B) a
favorable opinion of counsel, such counsel and such opinion, in form and
substance reasonably satisfactory to the Owner Participant, regarding the
validity and perfection of such security interest.
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(b) Initially the Qualifying Security shall consist of the 1996 Series
A Bonds, which 1996 Series A Bonds shall be insured under the Bond Insurance
Policy issued by AMBAC. Old Dominion represents that it intends to replace the
1996 Series A Bonds with a new series of Old Dominion's Bonds insured by AMBAC
and otherwise meeting the criteria for a Qualifying Security. If Old Dominion
shall not effect such a replacement, it shall, nonetheless be obligated to
remain in full compliance with this Section 7.6. If Old Dominion shall effect
such a replacement of the Qualifying Security with a new series of Old Dominion
Bonds insured by AMBAC as contemplated by this paragraph (b), Old Dominion
agrees it will not effect an optional substitution of such replacement
Qualifying Security in accordance with the second sentence of paragraph (a) of
Section 7.6 unless such AMBAC-insured Old Dominion Bonds cease to meet the
criteria for a Qualifying Security or Old Dominion shall determine, in good
faith, that a significant possibility exists that such AMBAC-insured Old
Dominion Bonds may cease to constitute a Qualifying Security.
SECTION 7.7. QUALIFYING LETTER OF CREDIT. If at any time during the
Term of the Equipment Operating Lease or the Foundation Operating Lease Old
Dominion's Bonds are not rated (i) at least A- by S&P and A3 by Moody's or (ii)
at least A by S&P and Baa1 by Moody's and, in the case of this clause (ii), if
rated A by S&P then S&P has not, and if rated Baa1 by Moody's then Moody's has
not, made any public announcement that any such organization has the rating of
the Old Dominion's Bonds under surveillance or review with negative implications
(such credit ratings under clause (i) or (ii) above are herein called the
"Minimum Credit Ratings"), Old Dominion shall, within 90 days of the date on
which the Old Dominion's Bonds are rated below the Minimum Credit Ratings,
obtain for the benefit of the Owner Participant a Qualifying Letter of Credit.
If at any time subsequent to such date, Old Dominion's Bonds satisfy the
criteria in either clause (i) or (ii) of the preceding sentence, Old Dominion
shall not be required to maintain a Qualifying Letter of Credit in accordance
with this Section 7.7. If, at any time Old Dominion is required to maintain a
Qualifying Letter of Credit pursuant to this Section 7.7, the bank issuing such
Qualifying Letter of Credit shall cease to be a Qualifying Letter of Credit
Bank, Old Dominion shall, within 90 days of the earlier of (i) having Actual
Knowledge of such fact or (ii) receiving notice from the Owner Participant of
such fact, replace such letter of credit with a Qualifying Letter of Credit.
SECTION 7.8. INFORMATION CONCERNING CLOVER UNIT 1. Old Dominion shall
furnish the Owner Trustee and the Owner Participant and their respective
authorized representatives from time to time such information as such party
shall reasonably request concerning Clover Unit 1 and the Clover Real Estate,
including information concerning the condition, operation, maintenance and use
of Clover Unit 1, to the extent Old Dominion possesses such information or can
obtain such information under the Clover Agreements. To the extent such
information consists of information contained in records kept by Old Dominion or
Virginia Power, it shall be furnished without cost to the Owner Trustee.
Notwithstanding the foregoing, neither the Owner Trustee nor the Owner
Participant shall have any duty to make any inquiry permitted by this Section
7.8, nor shall either the Owner Trustee or the Owner Participant incur any
obligation or liability by reason of not making such inquiry.
SECTION 7.9. FURTHER ASSURANCES. Old Dominion, at its own cost, expense
and liability, will cause to be promptly and duly taken, executed, acknowledged
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and delivered all such further acts, documents and assurances as may be
necessary in order to carry out the intent and purposes of this Participation
Agreement and the other Operative Documents, and the transactions contemplated
hereby and thereby. Old Dominion, at its own cost, expense and liability, will
cause such financing statements and fixture filings (and continuation statements
with respect thereto) and such other documents as the Owner Participant, the
Owner Trustee or the Agent shall reasonably request to be recorded or filed at
such places and times in such manner, and will take all such other reasonable
actions or cause such actions to be taken, as may be necessary in order to
establish, preserve, protect and perfect the right, title and interest of the
Owner Trustee in and to (i) the Equipment Head Lease Interest, the Foundation
Head Lease Interest, the Clover Real Estate or any part thereof or interest
therein and the Liens of the Leasehold Mortgage and Loan Agreement thereon and
(ii) the Deposit and the Qualifying Security and the Liens of the Security
Agreements thereon. Old Dominion shall promptly from time to time furnish to the
Owner Participant or the Owner Trustee such information as may be required to
enable the Owner Participant or the Owner Trustee, as the case may be, to timely
file with any Governmental Entity any reports and obtain any licenses or permits
required to be filed or obtained by the Owner Trustee under any Operative
Document or the Owner Participant as the owner of the Beneficial Interest.
SECTION 7.10. POLLUTION CONTROL ASSETS LEASE. Old Dominion agrees that
it will not supplement or amend the Pollution Control Assets Lease in any manner
which adversely affects the rights or interest of the Owner Trustee, the Owner
Participant, the Agent or any Lender;
SECTION 7.11. LOAN CERTIFICATES. Old Dominion covenants that it will
not purchase or own any Loan Certificates.
SECTION 7.12. TAX TREATMENT OF BASIC RENT AND FOUNDATION BASIC RENT.
Old Dominion covenants that for federal income tax purposes it will report as
income the payments by the Bank under Section 3.1 of the Payment Undertaking
Agreement other than amounts representing a return of capital and will report as
a rental expense Old Dominion's obligations for Basic Rent and Foundation Basic
Rent under Section 3.2 of the Equipment Operating Lease and Section 3.2 of the
Foundation Operating Lease, provided there is no change in Applicable Law
affecting the federal income tax treatment of these items.
SECTION 8. OLD DOMINION'S INDEMNIFICATIONS
SECTION 8.1. GENERAL INDEMNITY
(a) CLAIMS INDEMNIFIED. Subject to the exclusions stated in paragraph
(b) below, Old Dominion agrees to indemnify, protect, defend and hold harmless,
and does hereby indemnify the Owner Trustee, the Trust Company in its individual
capacity, the Trust Estate, the Owner Participant, any Lender and the Agent and
their respective Affiliates successors, assigns, agents, directors, officers or
employees (each an "Indemnitee") against any and all Claims imposed on, incurred
by or asserted against any Indemnitee in any way relating to or resulting from
or arising out of or attributable to:
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(i) the construction, financing, refinancing, acquisition,
operation, warranty, ownership, possession, maintenance, repair, lease,
condition, alteration, modification, restoration, refurbishing, return,
decommissioning, sale or other disposition, insuring, sublease, or
other use or non-use of Clover Unit 1, the Real Property, the Equipment
Interest, the Foundation Interest, the Ground Interest (if applicable),
or the Lessor's Unit 1 Interest, or any portion or Component thereof or
any interest therein;
(ii) the conduct of the business or affairs of Old Dominion or
Clover Unit 1;
(iii) the manufacture, design, purchase, acceptance,
rejection, delivery or condition of, or improvement to, Clover Unit 1,
the Equipment Interest or the Foundation Interest, Ground Interest (if
applicable), or any portion or Component thereof or any interest
therein;
(iv) the Equipment Head Lease, the Equipment Operating Lease,
the Foundation Head Lease, the Foundation Operating Lease, the
Pollution Control Assets Lease, the Clover Agreements (including,
without limitation, any claims arising out of any consent by, or right
of first refusal of, Virginia Power or supplements or amendments to the
Clover Agreements made without the consent of the Owner Trustee), the
Old Dominion Indenture or any other Operative Document, the execution
or delivery thereof or the performance, enforcement or amendment of any
terms thereof;
(v) the sale of the Loan Certificates or any refinancing
thereof pursuant to Section 10 hereof;
(vi) the establishment or maintenance of the Qualifying
Security, the Qualifying Letter of Credit or the Deposit;
(vii) the reasonable costs and expenses of the Transaction
Parties in connection with amendments to the Operative Documents;
(viii) the non-performance or breach by Old Dominion of any
obligation or warranty contained in this Agreement or any other
Operative Document or the falsity of any representation of Old Dominion
contained in the Agreement or any other Operative Document;
(ix) the continuing fees and expenses of the Owner Trustee
(including the reasonable compensation and expenses of its counsel,
accountants and other professional persons) arising out of the Owner
Trustee's discharge of its duty under the Operative Documents;
(x) for the benefit of any Lender and the Agent only, a breach
of Section 5.1 or 6.4 hereof resulting from the transfer of the
Beneficial Interest or the Trust Estate to a Person that is not a
"United States person" within the meaning of section 7701(a)(30) of the
Code;
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(xi) for the benefit of the Owner Participant and the Owner
Trustee only, any breach by a Lender of Section 3.4(a)(i) hereof,
resulting in the occurrence of a non-exempt "prohibited transaction"
(within the meaning of Section 406 of ERISA or Section 4975 of the
Code) in connection with the acquisition or holding of any Loan
Certificate by any such Lender;
(xii) the payment of all amounts provided for in Section
15.3(c) of the Equipment Operating Lease; and
(xiii) the payment of any Break Costs occasioned by the
replacement of the Payment Undertaking Agreement pursuant to Section
11(A) of the Participation Agreement.
(b) CLAIMS EXCLUDED. The following are excluded from Old Dominion's
agreement to indemnify any Indemnitee under this Section 8.1:
(i) any Claim attributable to acts, omissions or events
occurring after the earlier of (x) the return of the Lessor's Unit 1
Interest in full compliance of Section 5 of the Equipment Operating
Lease and Section 5 of the Foundation Operating Lease, if applicable,
or (y) the expiration or earlier termination of the Equipment Operating
Lease and the Foundation Operating Lease in compliance with the terms
thereof under circumstances not requiring the return of the Lessor's
Unit 1 Interest, unless and to the extent such Claim is attributable to
actions, omissions or events occurring in connection with the exercise
of remedies pursuant to Section 17 of the Equipment Operating Lease or
Section 17 of the Foundation Operating Lease, as the case may be,
following the occurrence, and during the continuance, of an Event of
Default thereunder;
(ii) any Claim that is a Tax, or is a cost of contesting a Tax
(other than amounts payable under this Section which are required to be
paid on an After Tax Basis), or (subject to paragraph (d) below)
otherwise arises from a Tax, whether or not Old Dominion is required to
indemnify therefor under Section 8.2 hereof or the Tax Indemnity
Agreement (other than an indemnity payable to the Lender or the Agent
under Section 8.1(a)(x) hereof);
(iii) with respect to any Indemnitee, any Claim attributable
to the gross negligence or wilful misconduct of such Indemnitee or any
Affiliate thereof or any of their respective successors, assigns,
agents, directors, officers or employees unless attributable to (a) any
breach by Old Dominion or its Affiliates of any covenant,
representation or warranty contained in any Operative Document or (b)
any breach by any other Transaction Party or its Affiliates of any
covenant, representation or warranty contained in any Operative
Document;
(iv) as to any Indemnitee, any Claim attributable to the
noncompliance of such Indemnitee or any of its Affiliates or any of
their respective directors, officers or employees, with any of the
terms of, or any misrepresentation or breach of warranty by such
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Indemnitee or any of its Affiliates or any of their respective
directors, officers or employees contained in any Operative Document by
which such Indemnitee is bound or any breach by such Indemnitee or any
of its Affiliates or any of their respective successors, assigns,
agents, directors, officers or employees of any covenant contained in
any Operative Document by which such Indemnitee is bound unless
attributable to (a) any breach by Old Dominion or its Affiliates of any
covenant, representation or warranty contained in any Operative
Document or (b) any breach by any other Transaction Party or its
Affiliates of any covenant, representation or warranty contained in any
Operative Document;
(v) as to any Indemnitee or its Affiliates or their respective
successors, assigns, agents, directors, officers or employees, any
Claim attributable to the offer, sale, assignment, transfer or other
disposition (voluntary or involuntary) by or on behalf of such
Indemnitee of its interest (whether direct or beneficial) in any
Operative Document or in the Lessor's Unit 1 Interest or the Trust
Estate, other than a transfer by such Indemnitee required by the terms
of an Operative Document or any transfer during the continuance of an
Event of Default;
(vi) except in the case of the Lender or the Agent, any Claim
constituting or arising from a Lessor's Lien;
(vii) except in the case of the Trust Company (in its
individual capacity), any Lender or the Agent, any claim constituting
or arising from an Owner Participant's Lien;
(viii) as to any Indemnitee or its Affiliates or their
respective successors, assigns, agents, directors, officers or
employees, any Claim attributable to the authorization or giving, or
withholding, by such Indemnitee of any amendment, supplement, waiver or
consent with respect to any Operative Document, except as a result of
any misrepresentation of Old Dominion or as expressly requested by Old
Dominion or required by Applicable Laws or the Clover Agreements or
required to effectuate the terms of the Operative Documents (but not if
such required action results from any breach by such Indemnitee or any
of its Affiliates or any of their respective successors, assigns,
agents, directors, officers or employees of its obligations
thereunder);
(ix) any Claim relating to the payment of any amount which
constitutes Transaction Costs which Owner Trustee or Owner Participant
is obligated to pay pursuant to Section 2.4(a) hereof or any other
amount to the extent such Indemnitee or any of its Affiliates or any of
their respective successors, assigns, agents, directors, officers or
employees has expressly agreed in any Operative Document to pay such
amount without express right of reimbursement; and
(x) in the case of the Owner Trustee and the Owner
Participant, any failure on the part of the Owner Trustee to distribute
in accordance with the Trust Agreement any amounts received and
distributable by it thereunder.
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(c) INSURED CLAIMS. In the case of any Claim indemnified by Old
Dominion hereunder which is covered by a policy of insurance maintained by Old
Dominion, Owner Trustee agrees to cooperate, at the sole cost and expense of Old
Dominion, with insurers in exercise of their rights, to investigate, defend or
compromise such Claim.
(d) AFTER-TAX BASIS. Old Dominion agrees that any payment or indemnity
pursuant to this Section 8.1 in respect of any Claim shall be made to the
Indemnitee of such payment or indemnity on an After-Tax Basis.
(e) CLAIMS PROCEDURE. Each Indemnitee shall promptly after such
Indemnitee shall have Actual Knowledge thereof notify Old Dominion of any Claim
as to which indemnification is sought; PROVIDED, that the failure so to notify
Old Dominion shall not reduce or affect Old Dominion's liability which it may
have to such Indemnitee under this Section 8.1, except to the extent that Old
Dominion shall be prejudiced in defending any such Claim as a result of such
failure but only to the extent of such increase caused by such failure. Any
amount payable to any Indemnitee pursuant to this Section 8.1 shall be paid
within thirty (30) days after receipt of such written demand therefor from such
Indemnitee, accompanied by a certificate of such Indemnitee stating in
reasonable detail the basis for the indemnification thereby sought and (if such
Indemnitee is not a party hereto) an agreement to be bound by the terms hereof
as if such Indemnitee were such a party. Promptly after Old Dominion receives
notification of such Claim accompanied by a written statement describing in
reasonable detail the Claims which are the subject of and basis for such
indemnity and the computation of the amount so payable, Old Dominion shall
notify such Indemnitee whether it intends to pay, object to, compromise or
defend any matter involving the asserted liability of such Indemnitee. Old
Dominion shall have the right to investigate and so long as no Event of Default
shall have occurred and be continuing, Old Dominion shall have the right (so
long as it has acknowledged in writing its obligation to indemnify pursuant to
this Section 8.1; PROVIDED, HOWEVER, Old Dominion shall not be bound by its
acknowledgement of liability if and to the extent that a court shall determine
in writing with reference to such Claim that Old Dominion is not otherwise
liable under this Section 8.1 with respect to such Claim) in its sole
discretion, to defend or compromise any Claim for which indemnification is
sought under this Section 8.1; PROVIDED that no such defense or compromise shall
involve any danger of (i) foreclosure, sale, forfeiture or loss of, or
imposition of a Lien on any part of the Equipment Interest, the Foundation
Interest or the Trust Estate or the impairment of Clover Unit 1 in any material
respect or (ii) any criminal liability being incurred or any material adverse
effect on such Indemnitee. If Old Dominion elects, subject to the foregoing, to
compromise or defend any such asserted liability, it may do so at its own
expense and by counsel selected by it. Upon Old Dominion's election to
compromise or defend such asserted liability and prompt notification to such
Indemnitee of its intent to do so, such Indemnitee shall cooperate at Old
Dominion's expense with all reasonable requests of Old Dominion in connection
therewith and will provide Old Dominion with all information not within the
control of Old Dominion as is reasonably available to such Indemnitee which Old
Dominion may reasonably request. Where Old Dominion, or the insurers under a
policy of insurance maintained by Old Dominion, undertake the defense of such
Indemnitee with respect to a Claim, no additional legal fees or expenses of such
Indemnitee in connection with the defense of such Claim shall be indemnified
hereunder unless such fees or expenses were incurred at the request of Old
Dominion or such insurers. Notwithstanding the foregoing, an Indemnitee may
participate at its own expense in any judicial proceeding controlled by Old
Dominion pursuant to the preceding provisions; PROVIDED, HOWEVER, that such
party's participation does not in the reasonable opinion of independent counsel
to Old Dominion interfere with such control; PROVIDED, FURTHER, that if and to
the extent that (i) such Indemnitee is advised by counsel that an actual or
potential material conflict of interest exists where it is advisable for such
Indemnitee to be represented by separate counsel or (ii) there is a risk that
such Indemnitee may be indicted or otherwise charged in a criminal complaint and
such Indemnitee informs Old Dominion that such Indemnitee desires to be
represented by separate counsel, such Indemnitee shall have the right to control
its own defense of such Claim and the reasonable fees and expenses of such
separate counsel shall be borne by Old Dominion. No Indemnitee shall enter into
any settlement or other compromise with respect to any Claim without the prior
written consent of Old Dominion, but only insofar as the Owner Trustee shall not
have commenced the exercise of remedies pursuant to Section 17 of the Equipment
Operating Lease or Section 17 of the Foundation Operating Lease, as the case may
be, following which such Indemnitee may enter into such settlement or compromise
without such consent.
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(f) SUBROGATION. To the extent that a Claim indemnified by Old Dominion
under this Section 8.1 is in fact paid by Old Dominion or an insurer under an
insurance policy maintained by Old Dominion, Old Dominion or such insurer shall
be subrogated to the rights and remedies of the Indemnitee on whose behalf such
Claim was paid to the extent of such payment (other than rights of such
Indemnitee under insurance policies maintained at its own expense) with respect
to the transaction or event giving rise to such Claim. Should an Indemnitee
receive any refund, in whole or in part, with respect to any Claim paid by
Old Dominion hereunder, it shall promptly pay the amount refunded (but
not an amount in excess of the amount Old Dominion or any of its insurers has
paid in respect of such Claim) over to Old Dominion.
(g) MINIMIZE CLAIMS. The Owner Participant, the Owner Trustee and the
Lenders will use their respective reasonable efforts to minimize Claims
indemnifiable by Old Dominion under this Section 8.1, including by complying
with reasonable requests by Old Dominion to do or to refrain from doing any act
if such compliance is, in the good faith opinion of the Owner Participant or a
Lender, as the case may be, of a purely ministerial nature or otherwise has no
unindemnified adverse impact on the Owner Participant, Owner Trustee or a
Lender, as the case may be, or any Affiliate of either thereof or on the
business or operations of any of the foregoing.
SECTION 8.2. GENERAL TAX INDEMNITY
(a) INDEMNITY. Except as provided in paragraph (b), Old Dominion agrees
to indemnify, on an After-Tax Basis, each of the Owner Trustee, the Trust
Company in its individual capacity, the Trust Estate, the Owner Participant, the
Agent and the Lender, their respective successors and assigns, and the
Affiliates of each of the foregoing (each a "Tax Indemnitee") for and to hold
each Tax Indemnitee harmless from and against all Taxes that are imposed upon
any Tax Indemnitee, Clover Unit 1 or the Lessor's Unit 1 Interest, or any
portion or Component thereof or any interest therein, or upon any Operative
Document or interest therein, arising out of, in connection with or relating to,
any of the following:
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(i) the construction, financing, refinancing, acquisition,
operation, warranty, ownership, possession, maintenance, repair, lease,
condition, alteration, modification, restoration, refurbishing, return,
sale or other disposition, insuring, sublease, or other use of Clover
Unit 1 or any portion or Component thereof or any interest therein;
(ii) the manufacture, design, purchase, acceptance,
rejection, delivery or condition of, or improvement to, Clover Unit 1,
or any portion or Component thereof or any interest therein;
(iii) the conduct of the business or affairs of Old
Dominion or Clover Unit 1;
(iv) the Equipment Operating Lease, the Foundation Operating
Lease, the Pollution Control Assets Lease, the Clover Agreements
(including without limitations, any claim arising out of any consent
by, or right of first refusal of, Virginia Power), the Old Dominion
Indenture, the Loan Certificates or any other Operative Document, the
execution or delivery thereof, or the performance, enforcement or
amendment of the terms thereof; or
(v) the payment or receipt of Basic Rent, Foundation Basic
Rent, Supplemental Rent, Foundation Supplemental Rent or any other
amount paid or payable by or to any Person pursuant to the Operative
Documents.
(b) EXCLUDED TAXES. The indemnity provided for in paragraph (a) above
shall not extend to any of the following Taxes (the "Excluded Taxes"):
(i) Taxes (other than any sales, use, value added, property or
transfer Taxes or Taxes in the nature thereof) imposed by any
government or taxing authority which are imposed on, based on or
measured by (I) net income (including any minimum taxes or taxes on
items of tax preference), or (II) gross income, net or gross receipts,
net or gross rent, capital or net worth;
(ii) Capital gain, accumulated earnings, withholding, personal
holding company, excess profits, succession or estate, minimum,
alternative minimum, preference, franchise, conduct of business, other
similar Taxes and Taxes in the nature thereof (other than any sales,
use, value added, property or transfer Taxes or Taxes in the nature
thereof ) imposed by any government or taxing authority;
(iii) Taxes attributable to any period after the expiration or
earlier termination of the Equipment Operating Lease and the Foundation
Operating Lease and return of the Equipment Interest and the Foundation
Interest to the Owner Trustee not attributable to an Event of Default;
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(iv) Taxes imposed with respect to a Tax Indemnitee or any
transferee or assignee of any such Tax Indemnitee that result from the
breach by such Tax Indemnitee or such transferee or assignee, as the
case may be, or any Affiliate thereof of any of its representations,
warranties or covenants in any of the Operative Documents or the gross
negligence, willful misconduct or fraud of such Tax Indemnitee or such
transferee or assignee, as the case may be, or any Affiliate;
(v) Taxes imposed on the Owner Participant, the Owner Trustee
or the Trust Estate arising out of, or caused by, any assignment, sale,
transfer or other disposition (i) by the Owner Participant of its
Beneficial Interest or a portion thereof or any interest in any
Operative Document, (ii) by the Owner Trustee of the Lessor's Unit 1
Interest or any portion or Component thereof or interest therein, any
Operative Document, or any interest in or arising under any of the
foregoing or (iii) of any interest in a Owner Participant, other than a
disposition (x) in connection with the exercise of remedies upon an
Event of Default under the Equipment Operating Lease or the Foundation
Operating Lease or (y) pursuant to the terms of the Operative Documents
(other than a disposition of any Severable Modification purchased by
Owner Trustee pursuant to Section 8.3 of the Equipment Operating Lease
or Section 8.3 of the Foundation Operating Lease or a disposition to a
Person other than Old Dominion unless pursuant to Section 14 of the
Equipment Operating Lease and Section 14 of the Foundation Operating
Lease);
(vi) Taxes, imposed on the Owner Participant, the Owner
Trustee or the Trust Estate arising in connection with, or as a result
of, Lessor's Liens or Owner Participant's Liens;
(vii) Taxes, imposed on the Owner Participant, the Owner
Trustee or the Trust Estate arising in connection with a Regulatory
Event of Loss caused by the action, inaction or status (unless caused
by a change of law) of the Owner Trustee, the Owner Participant or an
Affiliate thereof;
(viii) Otherwise indemnifiable Taxes imposed against a
transferee or assignee of any Tax Indemnitee to the extent of the
excess of such otherwise indemnifiable Taxes over the amount of such
Taxes that would have been imposed on such Tax Indemnitee;
(ix) Taxes that are included in the Equipment Interest
Cost, the Foundation Interest Cost or the Transaction Costs;
(x) Taxes imposed on the Owner Trustee with respect to
any fees or other compensation received by the Owner Trustee in its
capacity as such;
(xi) Taxes that would not have been imposed but for the
failure of a Tax Indemnitee to comply with certification, information,
documentation, reporting or other similar requirements concerning the
nationality, residence, identity, connection with the jurisdiction
imposing such Taxes or other similar matters; PROVIDED that the
foregoing exclusion shall only apply if (i) such Tax Indemnitee shall
have been given timely written notice of such requirement by Old
Dominion, and (ii) such Tax Indemnitee shall have determined that
compliance with such requirement will not have, or create any material
risk of having, any adverse consequence to such Tax Indemnitee or any
Affiliate thereof that is not indemnified against by Old Dominion to
the reasonable satisfaction of the Tax Indemnitee;
(xii) Taxes that would not have been imposed but for the
failure of the Tax Indemnitee to comply with the contest provisions of
paragraph (g) below, to the extent Old Dominion is actually prejudiced
in defending any such claim as a result of such failure;
(xiii) Taxes imposed by any government or taxing authority,
other than any government or taxing authority of or in the United
States, which are not imposed as a result of (A) the location, use,
operation or Clover Unit 1 or any portion or Component thereof in the
relevant jurisdiction, (B) the organization or presence of Old Dominion
or any Lessee Person in the relevant jurisdiction, (C) the making or
receipt of any payment by Old Dominion or any Lessee Person in the
relevant jurisdiction or (D) the Pollution Control Assets Lease;
(xiv) Taxes imposed on any Tax Indemnitee that would not have
been imposed but for an amendment to any Operative Document authorized,
executed or otherwise consented to by such Tax Indemnitee that was not
consented to by Old Dominion where such consent was required by the
Operative Documents;
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(xv) Taxes in the nature of an intangibles tax imposed by any
United States federal, state or local government or taxing authority
upon or with respect to the interest of the Owner Participant in the
trust created under the Trust Agreement or the Trust Estate;
(xvi) Taxes imposed on the Owner Participant that would not
have been imposed but for the trust created under the Trust Agreement
or the Owner Participant being (A) organized under the laws of a
jurisdiction other than the United States or any state thereof, (B)
treated as a person that is not a United States person under section
7701 of the Code, or (C) in the case of the trust created under the
Trust Agreement, taxed as other than a grantor trust;
(xvii) Taxes based on or measured by the value of the interest
of a Lender in any Loan Certificate (other than Taxes imposed by the
Commonwealth of Virginia); and
(xviii) Taxes that are expressly by their terms in
substitution of any of the foregoing Excluded Taxes.
The Owner Participant and Owner Trustee will use their respective reasonable
efforts to minimize Taxes indemnifiable by Old Dominion under this Section 8.2,
including by complying with reasonable requests by Old Dominion to do or to
refrain from doing any act if such compliance is, in the good faith opinion of
the Owner Participant, of a purely ministerial nature or otherwise has no
unindemnified adverse impact on the Owner Participant or Owner Trustee or any
Affiliate of either thereof or on the business or operations of any of the
foregoing.
(c) PAYMENT. Each payment required to be made by Old Dominion to a Tax
Indemnitee pursuant to paragraph (a) shall be paid in immediately available
funds by the later of (A) 10 Business Days following Old Dominion's receipt of
the Tax Indemnitee's written demand for the payment (which demand shall be
accompanied by an Officer's Certificate of the Tax Indemnitee describing in
reasonable detail the Taxes for which the Tax Indemnitee is demanding indemnity
and the computation of such Taxes), (B) the date which is five Business Days
prior to the date on which such Taxes are required to be paid to the applicable
taxing authority, (C) subject to paragraph (g) below, in the case of amounts
which are being contested pursuant to such paragraph (g), at the time and in
accordance with a final determination of such contest (including all appeals
permitted hereby and by law; PROVIDED that no Tax Indemnitee shall be required
to pursue any appeal to the United States Supreme Court), or (D) in the case of
any indemnity demand for which Old Dominion has requested review and
determination pursuant to paragraph (d) below, the completion of such review and
determination. Any amount payable to Old Dominion pursuant to paragraph (e) or
(f) below shall be paid promptly after the Tax Indemnitee realizes a Tax Benefit
(determined using the same assumptions set forth in the second sentence under
the definition of After-Tax Basis) giving rise to a payment under paragraph (e)
or receives a refund or credit giving rise to a payment under paragraph (f), as
the case may be, and shall be accompanied by an Officer's Certificate of the Tax
Indemnitee computing in reasonable detail the amount of such payment. Upon the
final determination of any contest pursuant to paragraph (g) below in respect of
any Taxes for which Old Dominion has made a
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Tax Advance, the amount of Old Dominion's obligation under paragraph (a) above
shall be determined as if such Tax Advance had not been made. Any obligation of
Old Dominion under this Section 8.2 and the Tax Indemnitee's obligation to repay
the Tax Advance will be satisfied first by set off against each other, and any
difference owing by either party will be paid within 10 days of such final
determination, but not prior to the date determined in accordance with the first
sentence of this paragraph (c).
(d) INDEPENDENT EXAMINATION. Within 15 days after Old Dominion receives
any computation from the Tax Indemnitee, Old Dominion may request in writing
that an independent public accounting firm selected by the Tax Indemnitee and
reasonably acceptable to Old Dominion review and determine on a confidential
basis the amount of any indemnity payment by Old Dominion to the Tax Indemnitee
pursuant to paragraph (a) above or any payment by a Tax Indemnitee to Old
Dominion pursuant to paragraph (e) or (f) below. The Tax Indemnitee shall
cooperate with such accounting firm and supply it with all documentation and
records necessary for the accounting firm to conduct such review and
determination (including relevant data from the Indemnitee's income tax returns
but not such returns themselves), PROVIDED that such accounting firm shall agree
in writing in a manner satisfactory to the Tax Indemnitee to maintain the
confidentiality of such information. The parties hereto agree that the
independent public accounting firm's sole responsibility shall be to verify the
computation of any payment pursuant to this Section 8.2 and that matters of
interpretation of this Participation Agreement or any other Operative Document
are not within the scope of the independent accountant's responsibility. The
fees and disbursements of such accounting firm will be paid by Old Dominion,
PROVIDED that such fees and disbursements will be paid by the Tax Indemnitee if
the verification results in an adjustment in Old Dominion's favor of ten percent
or more of the net present value (using a discount rate equal to the rate of
interest on underpayments of federal income tax for the period in question and
calculating such value as of the date such payment becomes due and payable under
this Agreement) of the indemnity payment or payments computed by the Tax
Indemnitee.
(e) TAX BENEFIT. If, as the result of any Taxes paid or indemnified
against by Old Dominion under this Section 8.2, the aggregate Taxes paid by the
Tax Indemnitee for any taxable year are less (whether by reason of a deduction,
credit, allocation or apportionment of income or otherwise) than the amount of
such Taxes that otherwise would have been payable by such Tax Indemnitee (a "Tax
Benefit"), then to the extent such Tax Benefit was not taken into account in
determining the amount of indemnification payable by Old Dominion under
paragraph (a) above, such Tax Indemnitee shall pay to Old Dominion (y) the
amount of such Tax Benefit, plus (z) an amount equal to any United States
federal, state or local income tax benefit resulting from the payment under
clause (y) above (determined using the same assumptions as set forth in the
second sentence under the definition of After-Tax Basis). If it is subsequently
determined that the Tax Indemnitee was not entitled to such Tax Benefit, the
portion of such Tax Benefit that is repaid or recaptured will be treated as
Taxes for which Old Dominion must indemnify the Tax Indemnitee pursuant to this
Section 8.2 without regard to paragraph (b) hereof.
(f) REFUND. If a Tax Indemnitee obtains a refund or credit of all or
part of any Taxes paid, reimbursed or advanced by Old Dominion pursuant to this
Section 8.2, the Tax Indemnitee
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promptly shall pay to Old Dominion the amount of such refund or credit plus or
minus any net tax benefit or detriment realized by such Tax Indemnitee as a
result of any payment by such Tax Indemnitee made pursuant to this sentence
(taking into account any Taxes incurred by such Tax Indemnitee by reason of the
receipt or accrual of such refund or credit as well as any Tax benefits or
credits by reason of such payment to Old Dominion (determined using the same
assumptions as set forth in the second sentence under the definition of
After-Tax Basis)), PROVIDED that (A) if at the time such payment is due to Old
Dominion a Payment Default or an Event of Default under the Equipment Operating
Lease or the Foundation Operating Lease shall have occurred and be continuing,
such amount shall not be payable until such Payment Default or Event of Default
under the Equipment Operating Lease or the Foundation Operating Lease has been
cured, and (B) the amount payable to Old Dominion pursuant to this sentence (net
of any amount in respect of any tax benefit realized by reason of the payment
hereunder) shall not exceed the amount of the indemnity payment in respect of
such refunded or credited Taxes that was made by Old Dominion (net of any amount
that was necessary to make such payment on an After-Tax Basis). If, in
connection with a refund or credit of all or part of any Taxes paid, reimbursed
or advanced by Old Dominion pursuant to this Section 8.2, a Tax Indemnitee
receives an amount representing interest on such refund or credit, the Tax
Indemnitee promptly shall pay to Old Dominion the amount of such interest that
shall be fairly attributable to such Taxes paid, reimbursed or advanced by Old
Dominion prior to the receipt of such refund or credit net of Taxes payable in
respect of such receipt. If it is subsequently determined that the Tax
Indemnitee was not entitled to such refund or credit, the portion of such refund
or credit that is repaid or recaptured will be treated as Taxes for which Old
Dominion must indemnify the Tax Indemnitee pursuant to this Section 8.2 without
regard to paragraph (b) hereof.
(g) CONTEST.
(1) Notice of Contest. If a written claim for payment is made
by any taxing authority against a Tax Indemnitee for any Taxes with
respect to which Old Dominion may be liable for indemnity hereunder (a
"Tax Claim"), such Tax Indemnitee shall give Old Dominion written
notice of such Tax Claim as soon as practicable, and in no event more
than 30 days after its receipt, and shall furnish Old Dominion with
copies of such Tax Claim and all other writings received from the
taxing authority relating to such claim, PROVIDED that failure so to
notify Old Dominion within such 30-day period shall not relieve Old
Dominion of any obligation to indemnify the Tax Indemnitee hereunder
except to the extent Old Dominion is actually prejudiced in defending
such Tax Claim as a result of such failure. The Tax Indemnitee shall
not pay such Tax Claim until at least 30 days after providing Old
Dominion with such written notice, unless required to do so by law or
regulation.
(2) Control of Contest. Subject to Subsection (g)(3) below,
Old Dominion will be entitled to contest, and control the contest of,
any Tax Claim if such Tax Claim may be and is segregated procedurally
from tax claims for which Old Dominion is not obligated to indemnify
the Tax Indemnitee, PROVIDED that Old Dominion shall use its best
efforts to contest such Tax Claim in its own name and if it is
contesting the Tax Claim in the Tax Indemnitee's name, it shall consult
with such Tax Indemnitee with respect to
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the contest of such Tax Claim. In the case of a Tax Claim that Old
Dominion is not entitled to contest, or that Old Dominion and the Tax
Indemnitee otherwise agree that the Tax Indemnitee shall contest:
(i) the Tax Indemnitee will contest and control such
Tax Claim in good faith,
(ii) at Old Dominion's written request, if payment is
made to the applicable taxing authority, the Tax Indemnitee
shall use reasonable efforts to obtain a refund thereof in
appropriate administrative or (subject to the proviso in the
parenthetical clause in subparagraph (C) of paragraph (c)
above) judicial proceedings,
(iii) the Tax Indemnitee shall consult with and keep
reasonably informed Old Dominion and its designated counsel
with respect to such Tax Claim, shall timely provide Old
Dominion with copies of the relevant portions of all documents
relating to such Tax Claim, and shall consider and consult
with Old Dominion concerning any request by Old Dominion to
(a) resist payment of Taxes demanded by the taxing authority
in connection with such Tax Claim if practical and (b) not pay
such Taxes except under protest if protest is necessary and
proper,
(iv) the Tax Indemnitee will not, without Old
Dominion's prior written consent (not unreasonably to be
withheld), forego any administrative appeal, proceeding,
hearing or conference if doing so would preclude as a matter
of law initiating or contesting further such Tax Claim, and
(v) the Tax Indemnitee shall not otherwise settle,
compromise or abandon such contest without Old Dominion's
prior written consent (not unreasonably to be withheld) except
as provided in paragraph (g)(4) below.
(3) Conditions of Contest. Notwithstanding the foregoing, no
contest with respect to a Tax Claim will be required pursuant to this
Section 8.2, and Old Dominion shall be required to pay the applicable
Taxes without contest, unless:
(i) within 30 days after notice by the Tax Indemnitee
to Old Dominion of such Tax Claim, Old Dominion shall request
in writing that such Tax Claim be contested, PROVIDED that if
a shorter period is required for taking action with respect to
such Tax Claim and the Tax Indemnitee notifies Old Dominion of
such requirement, Old Dominion shall use reasonable best
efforts to request such contest within such shorter period,
(ii) no Payment Default or Event of Default under
the Equipment Operating Lease or the Foundation Operating
Lease has occurred and is continuing,
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(iii) there is no risk of sale, forfeiture or loss
of, or the creation of a Lien on Clover Unit 1 or any
Component thereof as a result of such Tax Claim, PROVIDED that
this clause (iii) shall not apply so long as the long term
unsecured debt of the guarantor shall be rated at least Baa3
by Moody's or BBB- by S&P, or if either of such entities no
longer rates the guarantor's long term, unsecured debt, a
comparable "investment grade" rating by a successor national
rating agency rating the guarantor's long term unsecured debt;
and PROVIDED, FURTHER, that if at any time the foregoing
credit standard is not met, Old Dominion shall no longer be
entitled to contest or to continue any existing contest of any
matter unless Old Dominion shall post security satisfactory to
the Tax Indemnitee,
(iv) if such contest involves payment of such Tax,
Old Dominion will either advance to the Tax Indemnitee on an
interest-free basis (without reduction for any Tax savings
that the Tax Indemnitee may realize as a result of the payment
of such Tax) and without after-tax cost to such Tax Indemnitee
or the Owner Participant, which advance will be repaid in full
by the Tax Indemnitee upon the conclusion of the contest (a
"Tax Advance") or pay such Tax Indemnitee the amount payable
by Old Dominion pursuant to paragraph (a) above with respect
to such Tax,
(v) Old Dominion agrees to pay (and pays on demand)
and without after-tax cost to such Tax Indemnitee or the Owner
Participant all reasonable costs and expenses incurred by the
Tax Indemnitee in connection with the contest of such claim
(including, without limitation, reasonable fees and
disbursements of counsel),
(vi) the Tax Indemnitee has been provided at Old
Dominion's sole expense with an opinion, reasonably acceptable
to such Tax Indemnitee, of independent tax counsel of
recognized standing selected by Old Dominion and reasonably
acceptable to the Tax Indemnitee to the effect that there is a
reasonable basis for contesting such Tax Claim, and
(vii) the amount of Taxes in controversy, taking into
account the amount of all similar and logically related Taxes
with respect to the transactions contemplated by Operative
Documents that could be raised in any other year (including
any future year) not barred by the statute of limitations,
exceeds $75,000.
(4) Waiver of Indemnification. Notwithstanding anything to the
contrary contained in this Section 8.2, the Tax Indemnitee at any time
may elect to decline to take any action or any further action with
respect to a Tax Claim and may in its sole discretion settle or
compromise any contest with respect to such Tax Claim without Old
Dominion's consent if the Tax Indemnitee:
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(i) waives its right to any indemnity payment by
Old Dominion pursuant to this Section 8.2 in respect of such
Tax Claim, and
(ii) promptly repays to Old Dominion any Tax Advance
and any amount paid to such Tax Indemnitee under paragraph (a)
above in respect of such Taxes, plus interest on such Tax
Advance or other amounts at the IRS rate for refunds (or other
applicable state or local interest rate for refunds), payable
from the date of payment of such amounts by Old Dominion to
the Tax Indemnitee to (but excluding) the date of repayment of
such amounts by the Tax Indemnitee to Old Dominion.
If the Tax Indemnitee settles a Tax Claim in respect of which the
consent of Old Dominion to such settlement is required and has
reasonably been withheld and if Old Dominion is thereby precluded as a
matter of law from initiating or continuing a contest hereunder of any
Tax Claim for any other taxable period, the Tax Indemnitee shall be
deemed to have waived the payment by Old Dominion under this Section
8.2 of any indemnity amounts in respect of any such other Tax Claim.
(h) REPORTS.
(1) If any report, statement or return is required to be filed
by a Tax Indemnitee with respect to any Tax that is subject to
indemnification under this Section 8.2, Old Dominion will (1) notify
the Tax Indemnitee in writing of such requirement not later than 30
days prior to the date such report, statement or return is required to
be filed (determined without regard to extensions) and (2) either (x)
if permitted by applicable law, prepare such report, statement or
return for filing by Old Dominion in such manner as will show the
ownership of Clover Unit 1 by the Owner Trustee for United States
federal, state and local income tax purposes (if applicable), send a
copy of such report, statement or return to the Tax Indemnitee and
timely file such report, statement or return with the appropriate
taxing authority, or (y) if so directed by the Tax Indemnitee or in any
event if practicable and if the return to be filed reflects only
information in respect of the transactions contemplated by the
Operative Documents, prepare and furnish to such Tax Indemnitee not
later than 30 days prior to the date such report, statement or return
is required to be filed (determined without regard to extensions) a
proposed form of such report, statement or return for filing by the Tax
Indemnitee. If no report, statement or return is required to be filed
with respect to a Tax subject to indemnification under this Section
8.2, Old Dominion will notify the Tax Indemnitee of such Tax in writing
not later than 30 days prior to the due date for payment of such Tax.
(2) Subject to paragraph (c) above, not later than the date
which is five Business Days prior to the date any Tax described in the
preceding clause (1) is required to be paid by the Tax Indemnitee, Old
Dominion will either (y) if permitted by applicable law, pay such Tax
directly to the appropriate taxing authority or (z) pay the Tax
Indemnitee the amount of such Tax in immediately available funds.
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(3) Each of the Tax Indemnitee or Old Dominion, as the case
may be, will timely provide the other, at Old Dominion's expense, with
all information in its possession that the other party may reasonably
require and request to satisfy its obligations under this paragraph
(h). Old Dominion shall hold each Tax Indemnitee harmless on an
After-Tax Basis from and against all liabilities arising out of any
insufficiency or inaccuracy of any report, statement or return if such
insufficiency or inaccuracy results from the insufficiency or
inaccuracy of any information required to be supplied by Old Dominion
pursuant to this paragraph (h) in preparing and filing such report,
statement or return.
(i) NON-PARTIES. If a Tax Indemnitee is not a party to this Agreement,
Old Dominion may require such Tax Indemnitee to agree in writing, in a form
reasonably acceptable to Old Dominion, to the terms of this Section 8 prior to
making any payment to such Tax Indemnitee under this Section.
SECTION 8.3. SURVIVAL. All the rights, privileges and obligations
arising from this Section 8 shall survive the termination of this Agreement.
SECTION 9. OLD DOMINION'S RIGHT OF QUIET ENJOYMENT
Each party to this Agreement acknowledges notice of, and consents in
all respects to, the terms of the Equipment Operating Lease and the Foundation
Operating Lease, and expressly, severally and as to its own actions only, agrees
that, so long as no Event of Default under the Equipment Operating Lease or the
Foundation Operating Lease has occurred and is continuing, it shall not take or
cause to be taken any action contrary to Old Dominion's rights under the
Equipment Operating Lease and the Foundation Operating Lease, including, without
limitation, the right to possession, use and quiet enjoyment by Old Dominion.
SECTION 10. SUPPLEMENTAL FINANCING; LOAN PREPAYMENTS AND
REFINANCINGS.
SECTION 10.1. FINANCING NONSEVERABLE MODIFICATIONS. Upon the request of
Old Dominion delivered at least 90 days prior to financing the Lessor's
Percentage of the cost of any Nonseverable Modification, the Owner Trustee, the
Agent and the Lenders agree to cooperate with Old Dominion to (i) issue
Additional Loan Certificates under the Loan Agreement to finance such
Nonseverable Modifications which will rank PARI PASSU with the Loan Certificates
then outstanding as to the Collateral, other than the Deposit, the Deposit
Agreement (including the Certificate of Deposit) and the Deposit Pledge
Agreement (with respect to which such Additional Loan Certificates will be
subordinated) and which will not be secured by the Payment Undertaking
Agreement, the Payment Undertaking Pledge Agreement and the Payment Undertaking
Collateral; (ii) execute and deliver one or more supplements to the Loan
Agreement and, if applicable, the Leasehold Mortgage for purposes of subjecting
any such Nonseverable Modifications to the Liens thereof; and (iii) execute and
deliver an amendment to the Equipment
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Operating Lease or the Foundation Operating Lease, as the case may be, to
reflect the adjustments required by clause (vi) below; PROVIDED, HOWEVER, that
(A) the Owner Participant shall have been given the opportunity to, but shall
have no obligation to, provide all or part of the funds required to finance any
such Nonseverable Modification by making an Additional Equity Investment in such
amount, if any, as it may determine in its sole and absolute discretion, but Old
Dominion shall have no obligation to accept such Additional Equity Investment;
and (B) the conditions set forth below and in Section 2.11 of the Loan Agreement
shall have been satisfied. The obligation to finance such Nonseverable
Modifications through the issuance of Additional Loan Certificates (which Old
Dominion may not purchase) under Section 2.11 of the Loan Agreement (any
financing of Nonseverable Modifications through the issuance of such Additional
Loan Certificates under the Loan Agreement being called a "Supplemental
Financing") is subject to the following additional conditions:
(i) no Payment Default, Credit Default or Event of Default under
the Equipment Operating Lease or the Foundation Operating
Lease shall have occurred and be continuing unless, in the
case of an Event of Default under the Equipment Operating
Lease or the Foundation Operating Lease, the installation or
construction of the Nonseverable Modification to be financed
in such Supplemental Financing shall effect the cure of such
Event of Default;
(ii) there shall be no more than one Supplemental Financing in any
calendar year, and no more than three (3) Supplemental
Financings during the Term of the Equipment Operating Lease
and the Foundation Operating Lease;
(iii) each Supplemental Financing shall be for an amount not less
than $20 million and the aggregate principal amount of the
Loan Certificates issued in connection with any Supplemental
Financing shall not be greater than 87% of the cost of such
Nonseverable Modifications;
(iv) the aggregate principal amount of the Loan Certificates at any
time outstanding (including the Additional Loan Certificates
issued in connection with such Supplemental Financing) shall
not exceed 90% of the Fair Market Sales Value of the Lessor's
Unit 1 Interest at any time during the Term of the Equipment
Operating Lease and the Foundation Operating Lease, taking
into account the proposed and all prior Nonseverable
Modifications to Clover Unit 1;
(v) each Additional Loan Certificate issued in connection with
such Supplemental Financing shall be prepayable without
premium or penalty of any kind and shall have a final maturity
date of no later than the Loan Maturity Date;
(vi) appropriate adjustments pursuant to Sections 3.4 of the
Equipment Operating Lease and/or the Foundation Operating
Lease, as the case may be, shall be made to Basic Rent or
Foundation Basic Rent, Walk Away Payment, Foundation Walk Away
Payment, the applicable Termination Values and the Purchase
Option Price or Foundation Purchase Option Price (determined
without regard to any tax
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benefits associated with such Nonseverable Modifications) for
purposes of providing the Owner Trustee with sufficient funds
to pay the principal and interest on such Additional Loan
Certificate;
(vii) the Owner Participant shall have received a favorable tax
opinion of Chadbourne & Parke LLP, satisfactory to the Owner
Participant, to the effect that the Supplemental Financing
creates no material incremental tax risk to the Owner
Participant;
(viii) the Owner Participant (determined in its sole judgment acting
in good faith) shall suffer no adverse accounting effects from
such Supplemental Financing;
(ix) Old Dominion shall have made or delivered such
representations, warranties, covenants, opinions or
certificates as the Owner Trustee, the Owner Participant, the
Agent or any Lender may reasonably request; and
(x) Old Dominion shall (x) pay to the Owner Trustee a financing
fee of $25,000 for each Supplemental Financing and (y) pay to
the Trust Company a financing fee of $2,500 for each
Supplemental Financing.
SECTION 10.2. MANDATORY PREPAYMENT OF SERIES B LOAN CERTIFICATE;
ADDITIONAL LOAN CERTIFICATES TO REFINANCE MANDATORY PREPAYMENT OF SERIES B LOAN
CERTIFICATE.
(a) The Holder of the Series B Loan Certificate shall have the
right to cause the Series B Loan Certificate to be prepaid on any Mandatory
Prepayment Date occurring on or after the third anniversary of the Closing Date,
provided that the Agent, the Owner Trustee, the Owner Participant and Old
Dominion shall have received a written notice from all Holders of the Series B
Loan Certificate at least 365 days prior to the date of such prepayment
specifying the Mandatory Prepayment Date on which the Series B Loan Certificate
shall be prepaid.
(b) If the Holders of the Series B Loan Certificate elect to
have the Series B Loan Certificate prepaid pursuant to paragraph (a) of this
Section 10.2, the Owner Trustee agrees, subject to satisfaction of the terms and
conditions of this paragraph (b) of this Section 10.2, to issue Additional Loan
Certificates on or before the Mandatory Prepayment Date to refinance the Series
B Loan Certificate or any Loan Certificate previously issued pursuant to this
paragraph (b) of this Section 10.2. The obligations of the Owner Trustee to
issue such Additional Loan Certificates shall be subject, in addition to
satisfaction of all conditions of Section 2.11 of the Loan Agreement to the
issuance of Additional Loan Certificate, to the satisfaction of the following
conditions:
(i) no Payment Default or Event of Default under the Equipment
Operating Lease or the Foundation Operating Lease shall have occurred
and be continuing;
(ii) the principal amount of such Additional Loan Certificate
shall be equal to the outstanding principal amount of the Series B Loan
Certificate on the date such Loan
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Certificates are refinanced (the "Loan Refinancing Date") (after taking
into account any amortization of principal, if any, occurring on such
Loan Refinancing Date);
(iii) each Additional Loan Certificate shall be prepayable
without premium or penalty of any kind and shall have a final maturity
date of no later than the Loan Maturity Date;
(iv) appropriate adjustments pursuant to Section 3.4 of the
Equipment Operating Lease and Section 3.4 of the Foundation Operating
Lease shall be made to Basic Rent and Foundation Basic Rent and the
applicable Termination Values in order to preserve the Owner
Participant's Net Economic Return and reflect the interest rate on the
Additional Loan Certificate and the revised interest rate on the Series
A Loan Certificate pursuant to Section 2.12 of the Loan Agreement;
(v) the Series A Loan Certificates are restructured pursuant
to Section 2.12 of the Loan Agreement and the Payment Undertaking
Agreement is appropriately adjusted pursuant to Section 3.3 thereof;
(vi) such refinancing shall not, in and of itself, result in a
violation of Applicable Law not attributable to a default in or a
breach of the obligations of any such Person hereunder or under the
other Operative Documents;
(vii) the representations and warranties of Old Dominion set
forth in clause (n) of Section 3.3 of this Agreement shall be true and
correct in all material respects on and as of the Loan Refinancing Date
with the same force and effect as though made on and as of such Loan
Refinancing Date and the Owner Participant, the Owner Trustee and the
Agent shall have received an Officer's Certificate from Old Dominion to
such effect;
(viii) any authorization or approval or other action by, or
notice to or filing with, any Governmental Entity required for such
issuance of Additional Loan Certificates has been duly obtained, taken
or given and the Owner Participant, the Owner Trustee and the Agent
shall have received one or more opinions of counsel for Old Dominion
(such opinions and such counsel to be reasonably acceptable to the
Owner Participant, the Owner Trustee and the Agent) to such effect;
(ix) such Additional Loan Certificates provide for the same
principal amortization, interest accrual periods and "interest roll-up"
provisions applicable to the Series B Loan Certificates; and
(x) the representations and warranties set forth in Section
3.4 of this Agreement shall be true and correct in all material
respects on and as of the Loan Refinancing Date with the same force and
effect with respect to the new Lenders as of such Loan Refinancing Date
and the Owner Participant, the Owner Trustee and the Agent shall have
received an Officer's Certificate from the new Lenders to such effect.
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SECTION 10.3. OPTIONAL REFINANCING. (a) Unless a Payment Default,
Credit Default or an Event of Default shall have occurred and be continuing, at
the request of Old Dominion, the Owner Participant, the Owner Trustee and the
Agent agree to cooperate with Old Dominion to refinance the Loan Certificates in
whole but not in part, through the issuance of Additional Loan Certificates. The
obligation of the Owner Participant and the Owner Trustee to effect such a
refinancing shall be subject to the satisfaction of all conditions to the
issuance of Additional Loan Certificates under Section 10.2 (other than
paragraph (viii)) and Section 2.11 of the Loan Agreement and, in addition, to
the satisfaction of the following conditions:
(i) all documentation in connection with such refinancing
shall be satisfactory to the Owner Trustee and the Owner Participant;
(ii) the Owner Participant shall at the expense of Old
Dominion have obtained a favorable tax opinion from the Owner
Participant's Tax Counsel to the effect that the exercise of such
refinancing right (as opposed to the existence of such right) will not
result in a material incremental risk of any unindemnified adverse tax
consequence to Owner Participant or the Owner Trustee, or, if such
opinion cannot be obtained from such counsel, the Owner Participant
shall be indemnified by Old Dominion to the reasonable satisfaction of
Owner Participant;
(iii) the Owner Participant shall not suffer any adverse
accounting effects as a result of such refinancing, including but not
limited to, the loss of leveraged lease accounting; and
(iv) such additional representations, warranties, indemnities
and opinions of counsel as the Owner Participant or the Owner Trustee
shall reasonably request.
SECTION 10.4. REFINANCING COSTS. Old Dominion hereby agrees to pay all
reasonable costs and expenses of the Transaction Parties, including the
reasonable fees and expenses of counsel to the Owner Participant, the Owner
Trustee, the Lenders and the Agent, in each case to the extent incurred in
connection with any refinancing pursuant to this Section 10 whether or not the
refinancing is consummated.
SECTION 11. CONVEYANCE OF TITLE TO RETAINED ASSETS
Notwithstanding the provisions of any Operative Document, including,
but not limited to Section 6 of the Equipment Operating Lease and Section 6 of
the Foundation Operating Lease, Old Dominion shall have the right to convey
legal title to any or all Retained Assets to a Person in a transaction
characterized as a sale and leaseback for United States commercial law purposes,
but in which ownership is conveyed for tax purposes of the domicile of such
Person, but only for purposes of the domicile of such Person, PROVIDED THAT such
transaction satisfies the following conditions:
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(a) such conveyance and related leaseback does not affect the
status of the Equipment Head Lease and the Foundation Head
Lease as conveying ownership for United States income tax
purposes to the Owner Participant;
(b) the interest of any purchaser of legal title to Retained
Assets or any portion thereof is subject and subordinate to
the interest of the Owner Trustee under the Equipment Head
Lease and the Foundation Head Lease; and
(c) such conveyance and leaseback does not otherwise adversely
affect any right or interest of the Owner Trustee under the
Equipment Operating Lease, the Foundation Operating Lease, the
Equipment Head Lease, the Foundation Head Lease or any other
Operative Document, the Owner Participant under any Operative
Document or of the Lenders or the Agent under the Loan
Agreement, the Leasehold Mortgage, the Payment Undertaking
Agreement or the Deposit Pledge Agreement or the existence of
the Deposit and the Owner Trustee, the Owner Participant, the
Lenders and the Agent shall have received an opinion of
counsel, in form and substance reasonably satisfactory to each
such party, to such effect.
Not later than 30 days prior to the date of consummation of a
transaction contemplated by this Section 11, Old Dominion will give the Owner
Trustee, the Owner Participant and the Agent written notice of its intention to
consummate such a transaction along with a written description of the
transaction contemplated. In connection with the negotiation of such proposed
transaction Old Dominion will make available to the Owner Participant, the Agent
and their counsel drafts of transaction documents in connection with such
proposed transaction at such times as to permit sufficient review to determine
compliance with this Section 11 and to determine whether the opinion of counsel
contemplated by the succeeding sentence can be delivered. Old Dominion's right
to consummate such transaction shall be subject to receipt by the Owner
Participant of either (i) a tax opinion of Chadbourne & Parke LLP or other tax
counsel to the Owner Participant reasonably satisfactory to the Owner
Participant to the effect that the proposed transaction creates no material
incremental tax risk to the Owner Participant, the Owner Trustee or any
Affiliate, or (ii) if Old Dominion's Bonds are rated at least the Minimum Credit
Ratings, (A) a tax opinion of counsel to Old Dominion, such counsel and such
opinion to be reasonably satisfactory to the Owner Participant, to the effect
that it is more likely than not that the proposed transaction will not adversely
affect the U.S. federal income tax consequences of the transactions contemplated
by the Operative Documents to the Owner Participant, the Owner Trustee, or any
Affiliate, and (B) an indemnity in form and substance satisfactory to the Owner
Participant against any adverse tax consequences resulting in whole or in part
from the proposed transaction. Old Dominion will reimburse the Owner Trustee,
the Owner Participant, the Agent and the Lender for all their costs and expenses
in connection with their review of the proposed transaction. In addition, if the
transaction contemplated by this Section 11 shall be closed, Old Dominion shall
pay the Owner Participant a $25,000 fee.
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SECTION 11A. SUBSTITUTE SECURITY FOR PAYMENT UNDERTAKING AGREEMENT
Old Dominion may at any time and for any reason (x) replace the obligor
under the Payment Undertaking Agreement with a substitute Bank selected by Old
Dominion in its sole discretion and in such event Old Dominion shall make any
additional payment to such new Bank so that such Bank will agree in a successor
Payment Undertaking Agreement to make payment at the same time and in the same
amounts as provided in the initial Payment Undertaking Agreement and Old
Dominion may retain any funds which such new Bank does not need so to agree, or
(y) replace the Payment Undertaking Agreement with Acceptable Substitute
Security (as hereinafter defined). Any successor Payment Undertaking Agreement,
new Bank and Acceptable Substitute Security must be acceptable to the Owner
Trustee and the Holder of any Series A Loan Certificate. It shall be a condition
to the ability of Old Dominion to replace the Payment Undertaking Agreement with
Acceptable Substitute Security that the Owner Trustee and the Lessee shall agree
to the adjustment of the interest rate on the Series A Loan Certificate required
by the Holder of any Series A Loan Certificate pursuant to paragraph (c) of
Section 2.1 of the Loan Agreement. In connection with any replacement of the
Payment Undertaking Agreement with a successor Payment Undertaking Agreement (i)
the Transaction Parties agree to execute such documents as are necessary to
effect the pledge and repledge of such successor Payment Undertaking Agreement
on terms identical to those of the Payment Undertaking Pledge Agreement and the
Loan Agreement and (ii) the Owner Trustee, the Owner Participant, the Lender and
the Agent shall be provided with such certificates and opinions of counsel as
were provided to the Bank on the Closing Date and opinions of counsel concerning
the pledge and repledge of the successor Payment Undertaking Agreement to the
same effect as those rendered on the Closing Date in respect of the original
Payment Undertaking Agreement, the Payment Undertaking Pledge Agreement and the
Loan Agreement. In the event that Old Dominion has replaced the Payment
Undertaking Agreement with Acceptable Substitute Security, the parties hereto
agree to execute such documents as are necessary to (x) reflect the release of
the Payment Undertaking Agreement from the Liens of the Payment Undertaking
Pledge Agreement and (y) create a first priority perfected security interest in
such Acceptable Substitute Security in favor of the Holder of any Series A Loan
Certificate. As used in this Section 11A, the term "successor Payment
Undertaking Agreement" shall mean the Payment Undertaking Agreement as in effect
after the replacement of the Bank pursuant hereto. For purposes of this Section
11A, the phrase "Acceptable Substitute Security" shall mean one or more letters
of credit, guarantees, collateral deposits or other equivalent undertaking in
favor of the Owner Trustee and the Holder of any Series A Loan Certificate from
an Acceptable Credit Bank (or in the case of collateral, deposits issued or
guaranteed by an Acceptable Credit Bank or other issuer with an equivalent
credit rating) in form and substance reasonably acceptable to Old Dominion, the
Owner Participant and the Owner Trustee and the Holder of any Series A Loan
Certificate which shall remain in full force and effect at all times until the
Expiration Date (provided that a letter of credit may have an earlier expiry
date so long as suitable arrangements are agreed to among Old Dominion, the
Owner Participant and the Holder of any Series A Loan Certificate respecting
substitution of new letters of credit or cash therefor during such period) and
shall be payable in at least the same amounts and on the same dates as payments
are required under the Payment Undertaking Agreement, together with such
certificates, opinions and other documents as Old
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Dominion, the Owner Participant or the Holder of any Series A Loan Certificate
may reasonably request to evidence the enforceability of such undertaking. For
purposes of this Section 11A, an "Acceptable Credit Bank" shall mean a bank or
other financial institution the long-term, senior, unsecured obligations of
which are rated AA or better by S&P or Aa2 or better by Moody's, or are
guaranteed by a bank or other financial institution the long-term, senior,
unsecured obligations of which are so rated.
SECTION 12. MISCELLANEOUS
SECTION 12.1. CONSENTS. The Owner Participant covenants and agrees that
it shall not unreasonably withhold its consent to any consent requested of the
Owner Trustee under the terms of the Operative Documents that by its terms is
not to be unreasonably withheld by the Owner Trustee.
SECTION 12.2. BANKRUPTCY OF TRUST ESTATE. If (i) all or any part of the
Trust Estate becomes the property of a debtor subject to the reorganization
provisions of Title 11 of the United States Code, as amended from time to time,
(ii) pursuant to such reorganization provisions the Owner Participant is
required, by reason of the Owner Participant being held to have recourse
liability to the debtor or the trustee of the debtor directly or indirectly, to
make payment on account of any amount payable as principal or interest on the
Loan Certificates, and (iii) the Lender actually receives any Excess Amount, as
defined below, which reflects any payment by the Owner Participant on account of
clause (ii) above, the Lender shall promptly refund to the Owner Participant
such Excess Amount. For purposes of this Section 12.2, "Excess Amount" means the
amount by which such payment exceeds the amount which would have been received
by the Lender if the Owner Participant had not become subject to the recourse
liability referred to in clause (ii) above. Nothing contained in this Section
12.2 shall prevent the Lender from enforcing any personal recourse obligations
(and retaining the proceeds thereof) of the Owner Participant as contemplated by
this Participation Agreement (other than referred to in clause (ii)).
SECTION 12.3. AMENDMENTS AND WAIVERS. No term, covenant, agreement or
condition of this Agreement may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto.
SECTION 12.4. NOTICES. Unless otherwise expressly specified or
permitted by the terms hereof, all communications and notices provided for
herein shall be in writing or by a telecommunications device capable of creating
a written record, and any such notice shall become effective (a) upon personal
delivery thereof, including, without limitation, by overnight mail or courier
service, (b) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt thereof, or
(c) in the case of notice by such a telecommunications device, upon transmission
thereof, provided such transmission is promptly confirmed by either of the
methods set forth in clauses (a) or (b) above, in each case addressed to each
party hereto at its address set forth below or, in the case of any such party
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hereto, at such other address as such party may from time to time designate by
written notice to the other parties hereto:
If to Old Dominion:
Old Dominion Electric Cooperative
4201 Dominion Boulevard
Glen Allen, Virginia 23060
Facsimile No.: (804) 747-3742
Telephone No.: (804) 747-0592
Attention: Vice President of Accounting and Finance
If to the Owner Trustee:
State Street Bank and Trust Company
Two International Place
Fourth Floor
Boston, Massachusetts 02110
Facsimile No.: (617) 664-5318
Telephone No.: (617) 664-5610
Attention: Manager - Corporate Trust
with a copy to:
the Owner Participant at the address set forth below.
If to the Owner Participant:
First Union National Bank of Florida
301 South College Street
20th Floor
Charlotte, North Carolina 28288-0658
Facsimile No.: (704) 374-4724
Telephone No.: (704) 374-3241
Attention: Michael L. Taylor
Vice-President
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If to the Agent:
Utrecht-America Finance Co.,
c/o Rabobank Nederland, New York Branch
245 Park Avenue
New York, New York 10167-0062
Facsimile No.: (212) 916-7880
Telephone No.: (212) 916-7864
Attention: General Counsel's Office
A copy of all communications and notices provided for herein shall be sent by
the party giving such communication or notice to Virginia Power at:
Virginia Electric and Power Company
P.O. Box 26666
Richmond, Virginia 23261
Attention: President
SECTION 12.5. SURVIVAL. All warranties, representations, indemnities
and covenants made by any party hereto, herein or in any certificate or other
instrument delivered by any such party or on the behalf of any such party under
this Agreement shall be considered to have been relied upon by each other party
hereto and shall survive the consummation of the transactions contemplated
hereby on the Closing Date regardless of any investigation made by any such
party or on behalf of any such party.
SECTION 12.6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of, and shall be enforceable by, the parties
hereto and their respective successors and assigns as permitted by and in
accordance with the terms hereof, including each successive holder of the
Beneficial Interest permitted under Section 5.1. Except as expressly provided
herein or in the other Operative Documents, no party hereto may assign its
interests herein without the consent of the other parties hereto.
SECTION 12.7. BUSINESS DAY. Notwithstanding anything herein or in any
other Operative Document to the contrary, if the date on which any payment is to
be made pursuant to this Agreement or any other Operative Document is not a
Business Day, the payment otherwise payable on such date shall be payable on the
next succeeding Business Day with the same force and effect as if made on such
scheduled date and (PROVIDED such payment is made on such succeeding Business
Day) no interest shall accrue on the amount of such payment from and after such
scheduled date to the time of such payment on such next succeeding Business Day.
SECTION 12.8. GOVERNING LAW. THIS AGREEMENT SHALL BE IN ALL
RESPECTS GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
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SECTION 12.9. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Agreement shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
SECTION 12.10. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together only one Agreement.
SECTION 12.11. HEADINGS AND TABLE OF CONTENTS. The headings of the
sections of this Agreement and the Table of Contents are inserted for purposes
of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
SECTION 12.12. LIMITATIONS OF LIABILITY.
(a) LIABILITIES OF THE PARTICIPANTS. Neither the Owner Trustee, the
Trust Company nor the Owner Participant shall have any obligation or duty to Old
Dominion or to others with respect to the transactions contemplated hereby,
except those obligations or duties expressly set forth in this Agreement and the
other Operative Documents, and neither the Owner Trustee, the Trust Company nor
the Owner Participant shall be liable for performance by any other party hereto
of such other party's obligations or duties hereunder. Without limitation of the
generality of the foregoing, under no circumstances whatsoever shall the Owner
Participant be liable to Old Dominion for any action or inaction on the part of
the Owner Trustee in connection with the transactions contemplated herein,
whether or not such action or inaction is caused by willful misconduct or gross
negligence of the Owner Trustee, unless such action or inaction is at the
direction of the Owner Participant, and such direction is expressly permitted
hereby.
(b) NO RECOURSE TO THE OWNER TRUSTEE. Anything in this Participation
Agreement or the Loan Certificates to the contrary notwithstanding, except as
otherwise provided in Sections 3.1, 6.1, 6.2 and 6.7 and except with respect to
Lessor's Liens, it is understood and agreed that (irrespective of any breach of
any representation, covenant, agreement or undertaking of any nature whatsoever
made in this Participation Agreement or the Loan Certificates by the Owner
Trustee), no recourse shall be had under any rule of law, statute or
constitution or by the enforcement of any assessments or penalties or otherwise
for the payment of any amounts due on the Loan Certificates or due under the
Operative Documents or for any claim based thereon or otherwise in respect
thereof against (i) except as a result of its gross negligence, fraud or willful
misconduct, the Owner Trustee or any past, present or future Affiliate, partner,
officer, director, any owner, shareholder, agent or employee of or in any
thereof or director or shareholder of any partner thereof or their legal
representatives, successors or assigns, (ii) except as a result of its gross
negligence, fraud or willful misconduct, any successor Owner Trustee or (iii)
any Person for whom the Owner Trustee was acting as an agent for the account and
benefit of such Person in entering into the transactions evidenced by this
Participation Agreement and the Loan Certificates, and that such Person was or
was alleged to be the principal of the Owner Trustee. Furthermore, it is
expressly understood that, except as expressly set forth in this
49
<PAGE>
Section 12.12(b), all such liability (a) of the Owner Trustee or any past,
present or future Affiliate, partner, officer, director, any owner, shareholder,
agent or employee of or in any thereof or director or shareholder of any partner
thereof or any of their respective legal representatives, successors or assigns,
(b) any successor Owner Trustee or (c) such other Person, is and is being
expressly waived and released as consideration for the execution of this
Participation Agreement by Owner Trustee and all Persons having any claim
against the Owner Trustee by reason of the transactions contemplated by this
Participation Agreement and the other Operative Documents agree to look solely
to the Trust Estate and to the sums due or to become due under the Trust Estate
(other than Excluded Payments) for the payment of any such sums.
(c) In addition to and not in limitation of the foregoing, it is
understood and agreed that (i) this Participation Agreement is executed and
delivered by the Trust Company, not in its individual capacity but solely as
trustee under the Participation Agreement in the exercise of the power and
authority conferred and vested in it as such trustee, (ii) except as to Lessor's
Liens applicable to the Trust Company and Sections 3.1, 6.1, 6.2 and 6.7 each of
the representations, undertakings and agreements made herein by the Owner
Trustee are not personal representations, undertakings and agreements of the
Trust Company, but are binding only on the Owner Trustee, as trustee, and (iii)
actions to be taken by the Owner Trustee pursuant to its obligations hereunder
and under the Loan Certificates may be taken by the Owner Trustee only upon
specific authority of the Owner Participant as provided in the Trust Agreement.
SECTION 12.13. CONSENT TO JURISDICTION. To the extent permitted by
applicable law, each of the parties hereto (i) hereby irrevocably submits to the
nonexclusive jurisdiction of the Supreme Court of the State of New York, New
York County (without prejudice to the right of any party to remove to the United
States District Court for the Southern District of New York) and to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York for the purposes of any suit, action or other proceeding
arising out of this Agreement, the other Operative Documents, or the subject
matter hereof or thereof or any of the transactions contemplated hereby or
thereby brought by any of the parties hereto or their successors or assigns,
(ii) hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such New York State court, or in such
federal court, and (iii) to the extent permitted by Applicable Law, hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding any claim that it is not
personally subject to the jurisdiction of the above-named courts, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Agreement, the other
Operative Documents, or the subject matter hereof or thereof may not be enforced
in or by such court.
SECTION 12.14. FURTHER ASSURANCES. Each party hereto will promptly and
duly execute and deliver such further documents to make such further assurances
for and take such further action reasonably requested by any party to whom such
first party is obligated, all as may be reasonably necessary to carry out more
effectively the intent and purpose of this Participation Agreement and the other
Operative Documents.
50
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Participation
Agreement to be executed and delivered by their respective officers thereunto
duly authorized as of the day and year first above written.
OLD DOMINION ELECTRIC COOPERATIVE
By:/s/ DANIEL M. WALKER
---------------------------------------
Daniel M. Walker
Vice President
Date: March 1, 1996
STATE STREET BANK AND
TRUST COMPANY, not in its
individual capacity except
as expressly provided
herein, but solely as
Owner Trustee under the
Trust Agreement
By:/s/ E. DECKER ADAMS
---------------------------------------
E. Decker Adams
Vice President of Accounting
and Finance
Date: March 1, 1996
FIRST UNION NATIONAL BANK OF FLORIDA
By:/s/ DAVID G. TAYLOR
---------------------------------------
Name: David G. Taylor
Title: Senior Vice President
Date: March 1, 1996
UTRECHT-AMERICA FINANCE CO.
By:/s/ MICHEL DE KONKOLY THEGE
--------------------------------------
Name: Michel De Konkoly Thege
Title: Vice President
Date: March 1, 1996
<PAGE>
APPENDIX A
TO
PARTICIPATION
AGREEMENT
DEFINITIONS
A-1
<PAGE>
SCHEDULE 1
TO
PARTICIPATION
AGREEMENT
TRANSACTION COSTS
<TABLE>
<CAPTION>
Funded Funded
Invoice Prior at
Received to Closing Closing
-------- ---------- -------
<S> <C>
x/ Orrick, Herrington & Sutcliffe, special $700,000 $700,000
counsel for ODEC
x/ LeClair Ryan, general Virginia counsel for 0 238,065
ODEC
x/ Virginia Recording Costs (Reimburse 0 87,000
LeClair, Ryan)
x/ Chadbourne & Parke LLP, special counsel 200,000 750,000
for First Union
x/ Mays & Vallentine, special Virginia 50,000 99,000
counsel for First Union and Rabobank
x/ Davis, Polk & Wardwell and DeBrauw, 0 150,187
Blackstone & Westbroek, U.S. and Dutch
counsel for Rabobank Nederland and
Utrecht America
x/ Rabobank Up Front Fee 0 600,000
x/ Day, Berry & Howard, special counsel to 0 30,600
Owner Trustee
x/ State Street Bank & Trust Company as 0 40,500
Owner Trustees (Lump payment for 23
years)
x/ Deloitte & Touche Valuation Group 0 103,095
x/ Johnson & Higgins 0 5,000
x/ Burns & McDonald 0 37,279
x/ Bond Insurance for Equity Deposit 0 518,619
AMBAC Indemnity Corporation
(47.5 Basis Points on Gross Debt
Service = ($109,182,937)
x/ Coopers & Lybrand 0 22,796
x/ First Union Leasing Corporation (Facility 0 250,000
Fee)
x/ Crestar Bank as Indenture Trustee counsel, 0 11,359
Williams, Mullen, Christian & Robbins
SUBTOTAL $950,000 $3,243,500
</TABLE>
S1-1
<PAGE>
<TABLE>
<CAPTION>
Funded
Invoice Prior Funded
Received to Closing At Closing
-------- ---------- ----------
<S> <C>
(%) 1.03%
BOT Financial Services, Inc., as Advisor 0 2,075,000
to ODEC -------- ---------
TOTAL TRANSACTION EXPENSES $950,000 $5,318,500
(%) 0.30% 1.69%
</TABLE>
S1-2
<PAGE>
SCHEDULE 2
OF
PARTICIPATION
AGREEMENT
RECORDATION AND UCC FILINGS
I. RECORDATION:
1) Personal Property Agreement, Leasehold Mortgage, Foundation
Head Lease, Foundation Operating Lease, and Option Agreement
to Lease to be filed in the land records office in:
Halifax County, Virginia
2) Fifth Supplemental Indenture to be filed in the land records
offices in:
Henrico County, Virginia (U.C.C. records)
Louisa County, Virginia (Land and U.C.C. records)
Orange County, Virginia (Land and U.C.C. records)
Spottsylvania County, Virginia (Land and U.C.C. records)
Virginia State Corporation Commission
II. UCC FINANCING STATEMENTS:
1) Precautionary - Non-fixture.
Debtor: State Street Bank and Trust Company
Creditor: Utrecht-America Finance Co.
Places Filed: Clerk of Circuit Court, Halifax County,
Commonwealth of Virginia
Boston City Clerk, Massachusetts
Secretary of State, Massachusetts
Virginia State Corporation Commission
2) Precautionary - Non-fixture.
Debtor: Old Dominion Electric Cooperative
Creditor: State Street Bank and Trust Company
Places Filed: Virginia State Corporation Commission
Clerk of Circuit Court, Henrico County,
Commonwealth of Virginia
Clerk of Circuit Court, Halifax County,
Commonwealth of Virginia
S2-1
<PAGE>
3) Precautionary - Fixture Filing.
Debtor: Old Dominion Electric Cooperative
Creditor: State Street Bank and Trust Company
Places Filed: Clerk of Circuit Court, Halifax County,
Commonwealth of Virginia
4) Precautionary - Fixture Filing.
Debtor: State Street Bank and Trust Company
Creditor: Old Dominion Electric Cooperative
Places Filed: Clerk of Circuit Court,
Halifax County,
Commonwealth of Virginia
5) Precautionary - Fixture Filing.
Debtor: State Street Bank and Trust Company
Creditor: Utrecht-America Finance Co.
Places Filed: Clerk of Circuit Court,
Halifax County,
Commonwealth of Virginia
6) Rental Obligation Security for Equipment and Foundation
Operating Leases.
Debtor: Old Dominion Electric Cooperative
Creditor: State Street Bank and Trust Company
Assignee: Utrecht-America Finance Co.
Places Filed: Virginia State Corporation Commission
Clerk of Circuit Court, Henrico County,
Commonwealth of Virginia
S2-2
<PAGE>
EXHIBIT A
TO
PARTICIPATION
AGREEMENT
FORM OF TRUST AGREEMENT
<PAGE>
EXHIBIT B
TO
PARTICIPATION
AGREEMENT
FORM OF EQUIPMENT HEAD LEASE
<PAGE>
EXHIBIT C
TO
PARTICIPATION
AGREEMENT
FORM OF FOUNDATION HEAD LEASE
<PAGE>
EXHIBIT D
TO
PARTICIPATION
AGREEMENT
FORM OF OPTION AGREEMENT
<PAGE>
EXHIBIT E
TO
PARTICIPATION
AGREEMENT
FORM OF CLOVER AGREEMENTS ASSIGNMENT
<PAGE>
EXHIBIT F
TO
PARTICIPATION
AGREEMENT
FORM OF EQUIPMENT OPERATING LEASE
<PAGE>
EXHIBIT G
TO
PARTICIPATION
AGREEMENT
FORM OF FOUNDATION OPERATING LEASE
<PAGE>
EXHIBIT H
TO
PARTICIPATION
AGREEMENT
FORM OF LOAN AGREEMENT
<PAGE>
EXHIBIT I
TO
PARTICIPATION
AGREEMENT
FORM OF LEASEHOLD MORTGAGE
<PAGE>
EXHIBIT J
TO
PARTICIPATION
AGREEMENT
FORM OF PLEDGE AGREEMENT
<PAGE>
EXHIBIT K
TO
PARTICIPATION
AGREEMENT
FORM OF DEPOSIT AGREEMENT
<PAGE>
EXHIBIT L
TO
PARTICIPATION
AGREEMENT
FORM OF DEPOSIT PLEDGE AGREEMENT
<PAGE>
EXHIBIT M
TO
PARTICIPATION
AGREEMENT
FORM OF TAX INDEMNITY AGREEMENT
<PAGE>
EXHIBIT N
TO
PARTICIPATION
AGREEMENT
FORM OF SECOND SEVERANCE AGREEMENT
<PAGE>
EXHIBIT O
TO
PARTICIPATION
AGREEMENT
FORM OF ASSUMPTION AGREEMENT
<PAGE>
EXHIBIT P
TO
PARTICIPATION
AGREEMENT
FORM OF GUARANTY
<PAGE>
EXHIBIT Q
TO
PARTICIPATION
AGREEMENT
FORM OF PAYMENT UNDERTAKING AGREEMENT
<PAGE>
EXHIBIT R
TO
PARTICIPATION
AGREEMENT
FORM OF PAYMENT UNDERTAKING PLEDGE AGREEMENT
<PAGE>
APPENDIX A - DEFINITIONS
GENERAL PROVISIONS
The following terms shall have the following meanings for all purposes
of the Operative Documents referred to below, unless otherwise defined in an
Operative Document or the context thereof shall otherwise require, and such
meanings shall be equally applicable to both the singular and the plural forms
of the terms herein defined. In the case of any conflict between the provisions
of this Appendix A and the provisions of the main body of any Operative
Document, the provisions of the main body of such Operative Document shall
control the construction of such Operative Document.
Unless the context otherwise requires, (i) references to agreements
shall be deemed to mean and include such agreements as the same may be amended,
supplemented and otherwise modified from time to time, and (ii) references to
parties to agreements shall be deemed to include the permitted successors and
assigns of such parties.
DEFINED TERMS
"ACCEPTABLE POWER PURCHASER" shall mean a Person that meets the following
criteria as of the Expiration Date based upon its most recent audited financial
statements:
(i) such Person has a net worth of at least $500 million;
(ii) the unsecured senior debt obligations of such Person have a
credit rating of not less than A3 by Moody's and A- by S&P,
unless such Person has provided credit enhancement
(including the possible provision of collateral supporting
its obligations under any Power Sales Agreement) in an
amount and manner and on conditions satisfactory in all
respects to the Owner Participant;
(iii) such Person will not violate the Owner Participant's credit
restrictions or guidelines applicable from time to time for
the extension of credit in general; and
(iv) such Person is not Old Dominion, any cooperative member of
Old Dominion, Virginia Power or an Affiliate of the
foregoing.
"ACCEPTABLE SUBSTITUTE SECURITY" shall have the meaning specified in Section 11A
of the Participation Agreement.
<PAGE>
"ACKNOWLEDGMENT" shall mean the Acknowledgment executed by the Bank in
connection with the Payment Instruction.
"ACTUAL KNOWLEDGE" shall mean, with respect to any Transaction Party, actual
knowledge of, or receipt of written notice by, an officer of such a Transaction
Party having responsibility for the administration of the Overall Transaction.
"ADDITIONAL EQUITY INVESTMENT" shall mean the amount, if any, the Owner
Participant shall provide (in its sole and absolute discretion) to finance all
or a portion of Lessor's Percentage of the cost of any Nonseverable Modification
financed pursuant to Section 10.1 of the Participation Agreement.
"ADDITIONAL LOAN CERTIFICATES" shall mean any Loan Certificates issued pursuant
to Section 2.11 of the Loan Agreement.
"ADR CLASS LIFE" shall mean the class life of an asset determined pursuant to
the class life asset depreciation system under Section 167 of the Code.
"ADVISOR TO THE LESSEE" shall mean BOT.
"AFFILIATE" of a particular Person shall mean any Person (i) directly or
indirectly controlling, controlled by or under common control with the
particular Person, (ii) that beneficially owns or holds (directly or through a
subsidiary) more than 50% of the voting power of any class of voting securities
of the particular Person or (iii) more than 50% of the voting securities (or in
the case of a Person which is not a corporation, more than 50% of the equity
interest) of which is beneficially owned or held by the particular Person or a
subsidiary thereof. For purposes of this definition, "control" when used with
respect to any particular Person shall mean the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"AFTER-TAX BASIS", in the context of determining the amount of a payment to be
made on such basis, shall mean the payment of an amount which, after reduction
by the net increase in income tax liability of the recipient of such payment and
its Affiliates (or any consolidated or combined group of which it is a member)
which net increase shall be calculated by taking into account any reduction in
such taxes resulting from any tax benefits realized or (except in the case of
the Agent or any Lender) reasonably expected to be realized by the recipient and
its Affiliates (or any consolidated or combined group of which it is a member)
as a result of such payment, shall be equal to the amount required to be paid.
In calculating the amount payable by reason of this provision, all income taxes
payable and tax benefits realized or to be realized shall be determined on the
assumptions that (i) the recipient shall be (x) subject to the applicable income
taxes at the highest marginal tax rates then applicable to corporate taxpayers
taxed on the same basis as the recipient that are in effect in the applicable
jurisdictions at the time such amount is received or properly accrued and (y)
that all tax benefits are utilized at the highest marginal rates then applicable
to corporate taxpayers taxed on the same basis as the recipient that are then in
2
<PAGE>
effect in the applicable jurisdictions, and (ii) tax benefits to be realized in
any taxable year other than the year of payment are determined on a present
value basis using a discount rate equal to the rate of interest on underpayments
of federal income tax in effect at the time of the determination.
"AGENT" shall mean Utrecht-America, as agent for the Lenders under the Loan
Agreement, together with its successors and permitted assigns.
"AGENT'S ACCOUNT" shall mean the account (No. 13679) maintained by the Agent
with Rabobank Nederland, New York Branch or such other account of the Agent in
New York, New York, as the Agent may from time to time specify in a notice to
the other parties to the Participation Agreement.
"AMBAC" AND "AMBAC INDEMNITY" shall mean AMBAC Indemnity Corporation, a
Wisconsin-domiciled stock insurance corporation regulated by the Office of the
Commissioner of Insurance of the State of Wisconsin.
"AMORTIZATION DEDUCTIONS" shall have the meaning specified in Section 2(f) of
the Tax Indemnity Agreement.
"APPLICABLE LAW" shall mean, without limitation, all applicable laws and
treaties, judgments, decrees, injunctions, writs and orders of any court,
arbitration board or Governmental Entity and rules, regulations, orders,
licenses and permits of any Governmental Entity.
"APPLICABLE RATE" shall mean, the Debt Rate, in the case of the Lenders, and
6.75% per annum in the case of the Owner Participant.
"APPRAISAL" shall mean the appraisal prepared by the Appraiser with respect to
the Lessor's Unit 1 Interest referred to in Section 4.16 of the Participation
Agreement.
"APPRAISER" shall mean Deloitte & Touche LLP Valuation Group.
"ASSIGNED CLOVER INTERESTS" shall mean all of Old Dominion's rights, obligations
and liabilities under the Clover Agreements attributable to (a) the Unit 1 Site,
the Unit 1 Foundation and the Unit 1 Equipment, (b) the Common Facilities Site,
the Common Facilities Foundation and the Common Facilities Equipment, and (c)
the Unit 2 Site as defined in the Ground Lease and Sublease, and which are
necessary for the use and operation of the Unit 1 Site, the Unit 1 Foundation
and the Unit 1 Equipment.
"ASSIGNEE" shall mean the Owner Trustee, as assignee under the Clover Agreements
Assignment, together with its successors and permitted assigns.
"ASSIGNOR" shall mean Old Dominion, as assignor under the Clover Agreements
Assignment, together with its successors and permitted assigns.
3
<PAGE>
"AVAILABLE CAPACITY" shall have the meaning specified in Section 1.04 of the
Clover Operating Agreement.
"BANK" shall mean Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.,
"Rabobank Nederland", New York Branch and its successors and permitted assigns.
"BANKRUPTCY CODE" shall mean the United States Bankruptcy Reform Act of 1978, as
amended from time to time, 11 U.S.C. ss.101 ET SEQ.
"BASIC GROUND LEASE TERM" shall have the meaning specified in Section 2.2 of the
Ground Lease.
"BASIC RENT" shall mean all rent payable by the Lessee to the Lessor pursuant to
Section 3.2 of the Equipment Operating Lease, as the same may be adjusted from
time to time pursuant to Section 3.4 of the Equipment Operating Lease.
"BASIC TERM" shall mean the period commencing on the Basic Term Commencement
Date and ending at 11:59 P.M. (New York City time) on the Expiration Date.
"BASIC TERM COMMENCEMENT DATE" shall mean February 28, 1997.
"BENEFICIAL INTEREST" shall mean the interest of the Owner Participant under the
Trust Agreement.
"BOND INSURANCE POLICY" shall mean the bond insurance policy (No. FG0207BE)
issued by AMBAC relating to the 1996 Series A Bonds and the 1996 Series B Bonds.
"BOT" shall mean BOT Financial Services, Inc.
"BREAK COSTS" shall mean the actual amount reasonably determined by the Bank in
good faith to be the amount (if any) (x) required fully to compensate the Bank
for any costs, expenses, liabilities or losses suffered or incurred (including,
without limitation, any legal fees, out-of-pocket expenses and administration
costs) or (y) which represents a gain to the Bank, in each case, as a
consequence of breaking or unwinding or funding from other sources any
arrangements it may have made for investing the proceeds of the Specified Sum or
for hedging or funding its obligations under the Payment Undertaking Agreement,
in each case, as a result of the Bank being required to make a payment of Early
Termination Amount under the Payment Undertaking Agreement pursuant to clause
(ix) of paragraph (a) of Section 3.2 thereof.
"BURDENSOME TAX LAW CHANGE" shall mean a Proposed Tax Law Change that shall have
occurred on within two Business Day prior to the Closing Date and Old Dominion
shall have received notice of such Proposed Tax Law Change from the Owner
Participant within four Business Days after the Closing Date.
4
<PAGE>
"BURDENSOME TAX LAW CHANGE VALUE" shall mean an amount equal to the sum of (a)
the outstanding principal balance of the Loan Certificates as of the date of
termination of the Equipment Operating Lease and the Foundation Operating Lease
pursuant to Section 13 of each in consequence of a Burdensome Tax Law Change
plus any and all interest accrued and unpaid thereon as of such date; (b) the
amount of the Equity Investment, and (c) interest on the amount specified in
clause (b) hereof, calculated at the rate of 6.75% per annum on the basis of a
year of 360 days and the number of days actually elapsed from the Closing Date
to such date of payment.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or other day on
which commercial banking institutions are authorized or required by law,
regulation or executive order to be closed in (i) Glen Allen, Virginia, (ii) the
city and state in which the principal corporate trust office of the Owner
Trustee is located, (iii) the city and state in which the principal office of
the Agent is located or (iv) Amsterdam, The Netherlands.
"CERTIFICATE OF DEPOSIT" shall mean the "Certificate of Deposit" as in the form
attached as Exhibit C to the Deposit Agreement.
"CFC" shall mean National Rural Utilities Cooperative Finance Corporation, a
District of Columbia cooperative association, or any successor thereto.
"CLAIM" shall mean any liability (including, without limitation, in respect of
negligence (whether passive or active or other torts), strict or absolute
liability in tort or otherwise, warranty, latent or other defects, statutory
liability, bodily injury or death), obligation, loss, settlement, damage,
penalty, claim, action, suit, proceeding (whether civil or criminal), judgment,
penalty, fine and other legal or administrative sanction, judicial or
administrative proceeding, cost, expense or disbursement, including reasonable
legal fees, expenses and reasonable related charges, of whatsoever kind and
nature.
"CLOSING" shall have the meaning specified in Section 2.2(a) of the
Participation Agreement.
"CLOSING DATE" shall mean the Scheduled Closing Date or such later date on which
the Closing of the transactions contemplated by the Participation Agreement
shall occur.
"CLOVER AGREEMENTS" shall mean the Clover Ownership Agreement and the Clover
Operating Agreement as amended from time to time.
"CLOVER AGREEMENTS ASSIGNMENT" shall mean the Clover Agreements Assignment and
Assumption Agreement, dated as of February 29, 1996, in substantially the form
of Exhibit E to the Participation Agreement, between the Assignee and the
Assignor.
"CLOVER FACILITY ASSETS" shall have the meaning specified in the first Recital
in the Second Severance Agreement.
5
<PAGE>
"CLOVER OPERATING AGREEMENT" shall mean that certain Clover Operating Agreement,
dated as of May 31, 1990, between Old Dominion and Virginia Power, as the same
may have been or may be amended.
"CLOVER OWNERSHIP AGREEMENT" shall mean that certain Clover Purchase,
Construction and Ownership Agreement, dated as of May 31, 1990, between Old
Dominion and Virginia Power, as the same may have been or may be amended.
"CLOVER POWER STATION" shall mean the two 391 MW coal-fired generating units,
and related facilities constructed by Old Dominion and Virginia Power, as
tenants-in-common, near Clover, Virginia. The Clover Power Station consists of
Clover Unit 1 and Clover Unit 2.
"CLOVER POWER STATION PLAT" shall mean the plat (consisting of 5 sheets) dated
February 22, 1996, prepared by Hurt & Proffitt, Inc., styled "Composite Map of
the Property of Old Dominion Electric Cooperative and Virginia Electric & Power
Company," marked Exhibit B and recorded with the Option Agreement, as such plat
was corrected by a re-recording in the Halifax Clerk's Office.
"CLOVER REAL ESTATE" shall mean certain parcels of land and appurtenances
thereto located in Halifax County, Virginia, which are more particularly
described in Exhibit A attached to the Foundation Head Lease and the Foundation
Operating Lease, as part thereof and recorded therewith.
"CLOVER UNIT 1" shall mean the 391 MW coal-fired electric generating unit known
as "Clover Unit No. 1", located in Clover, Virginia and those facilities which
are common to the operation of Clover Unit No. 1 and Clover Unit 2, located in
Clover, Virginia. Clover Unit 1 consists of the Unit 1 Equipment, the Common
Facilities Equipment, the Unit 1 Foundation and the Common Facilities
Foundation, but does not include the Unit 1 Site or the Common Facilities Site.
"CLOVER UNIT 1 GENERATING FACILITY" shall mean the Unit 1 Equipment and the Unit
1 Foundation.
"CLOVER UNIT 1 OPERATOR" shall mean Virginia Power or any successor operating
agent appointed pursuant to Section 2.03 of the Clover Operating Agreement.
"CLOVER UNIT 2" shall mean the 391 MW coal-fired electric generating unit known
as "Clover Unit No. 2", located in Clover, Virginia and those facilities which
are common to the operation of Clover Unit 1 and Clover Unit 2. Clover Unit 2
consists of the Unit 2 Equipment, the Common Facilities Equipment, the Unit 2
Foundations and the Common Facilities Foundation but does not include the Unit 2
Site or the Common Facilities Site.
"COBANK" shall mean CoBank ACB, an instrumentality of the United States, or any
successor thereto.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
6
<PAGE>
"COLLATERAL" shall have the meaning specified in the Granting Clause of the Loan
Agreement.
"COMMITMENT", with respect to the Owner Participant, shall mean the Owner
Participant's Commitment and, with respect to the Lenders, shall mean the
Lenders' Loan Commitments.
"COMMON FACILITIES" shall mean Common Facilities Equipment and Common Facilities
Foundation.
"COMMON FACILITIES EQUIPMENT" shall mean those assets described on Exhibit A-2
to the Equipment Head Lease and Exhibit A-2 to the Equipment Operating Lease.
The Common Facilities Equipment are those assets which are part of the
facilities to be used or useful in connection with the operation or maintenance
of both of Clover Unit 1 Generating Facility and the Unit 2 Foundation and the
Unit 2 Equipment. The Common Facilities Equipment consists of the Retained
Assets and Pollution Control Assets which are located on the Common Facilities
Site.
"COMMON FACILITIES FOUNDATION" shall mean all foundations, supports, structures
and other improvements situated on the Common Facilities Site, including those
on which the Common Facilities Equipment is situated.
"COMMON FACILITIES SITE" shall mean the land and appurtenances thereunto
belonging described on Schedule 4 to the Ground Lease and Sublease.
"COMPONENT" shall mean any appliance, part, instrument, appurtenance, accessory,
furnishing, equipment and other property of whatever nature that may from time
to time be incorporated in Clover Unit 1 except to the extent constituting
Modifications.
"CO-OWNERS" shall mean Old Dominion and Virginia Power, their successors or
permitted assigns, as tenants-in-common of the Clover Power Station.
"CO-TRUSTEE" shall mean any co-trustee appointed pursuant to Section 6.09 of the
Trust Agreement.
"CREDIT DEFAULT" shall mean an event which, with the passage of time or the
giving of notice, or both, would constitute an Event of Default under Section
16(i) of the Equipment Operating Lease or Section 16(i) of the Foundation
Operating Lease.
"DEBT RATE" shall mean 7.50 percent (7.50%) per annum.
"DEPOSIT" shall have the meaning specified in Section 1.1 of the Deposit
Agreement.
"DEPOSIT AGREEMENT" shall mean the Deposit Agreement, dated as of February 29,
1996, in substantially the form of Exhibit K to the Participation Agreement,
between Old Dominion and the Issuer.
7
<PAGE>
"DEPOSIT PLEDGE AGREEMENT" shall mean the Deposit Pledge Agreement, dated as of
February 29, 1996, in substantially the form of Exhibit L to the Participation
Agreement, between Old Dominion, as pledgor, and the Owner Trustee, as pledgee.
"DEPRECIATION DEDUCTIONS" shall have the meaning specified in Section 2(e) of
the Tax Indemnity Agreement.
"DIRECTIVE" shall mean any instrument in writing executed in accordance with the
Loan Agreement by the Holders, or their duly authorized agent or
attorney-in-fact, representing the Required Lenders, directing the Agent to take
or refrain from taking any actions specified in such instrument or otherwise
advising the Agent.
"DOLLARS" OR THE SIGN "$" shall mean United States dollars or other lawful
currency of the United States.
"EARLY TERMINATION AMOUNT" shall mean, in relation to a Payment Undertaking
Payment Date, the amount determined in accordance with Sections 3.2 of the
Payment Undertaking Agreement with respect to such Payment Undertaking Payment
Date.
"EFFECTIVE RATE" shall have the meaning specified in Section 2(g) of the Tax
Indemnity Agreement.
"ELECTION DATE" shall mean July 5, 2014.
"ENFORCEMENT NOTICE" shall have the meaning set forth in Section 4.4 of the Loan
Agreement.
"ENGINEER" shall mean Burns and McDonnell.
"ENGINEERING REPORT" shall mean the engineering report prepared by the Engineer
with respect to Clover Unit 1 pursuant to Section 4.14 of the Participation
Agreement, which shall be in form and substance reasonably satisfactory to the
Owner Participant and shall address and report on such matters as the Owner
Participant shall reasonably request.
"EQUIPMENT HEAD LEASE" shall mean Clover Unit 1 Equipment Interest Lease
Agreement, dated as of February 29, 1996, in substantially the form of Exhibit B
to the Participation Agreement, between the Equipment Head Lessor and the
Equipment Head Lessee.
"EQUIPMENT HEAD LEASE BASIC RENT" shall have the meaning specified in Section
3.3 of the Equipment Head Lease.
"EQUIPMENT HEAD LEASE BASIC TERM" shall have the meaning specified in Section
3.1 of the Equipment Head Lease.
"EQUIPMENT HEAD LEASE INTEREST" shall mean the Equipment Head Lessee's leasehold
interest in the Equipment Interest under the Equipment Head Lease.
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"EQUIPMENT HEAD LEASE RENEWAL TERM" shall have the meaning specified in Section
3.2 of the Equipment Head Lease.
"EQUIPMENT HEAD LEASE TERM" shall have the meaning specified in Section 3.2 of
the Equipment Head Lease.
"EQUIPMENT HEAD LESSEE" shall mean the Owner Trustee, as lessee under the
Equipment Head Lease, together with its successors and permitted assigns.
"EQUIPMENT HEAD LESSOR" shall mean Old Dominion, as lessor under the Equipment
Head Lease, together with its successors and permitted assigns.
"EQUIPMENT INTEREST" shall mean (a) the right as tenant-in-common with Virginia
Power and, in the case of the Common Facilities Equipment, the Unit 2 Parties,
to nonexclusive possession of (i) the Unit 1 Equipment, subject to Virginia
Power's 50% undivided interest therein and the terms and conditions of the
Clover Agreements, and as to the portion of the Unit 1 Equipment which is
comprised of Pollution Control Assets, the rights of the Pollution Control
Assets Lessor as tenant-in-common with Virginia Power of the Pollution Control
Assets, and as lessor under the Pollution Control Assets Lease, (ii) the Common
Facilities Equipment, subject to Virginia Power's 50% undivided interest
therein, the terms and conditions of the Clover Agreements, and the reservation
by Old Dominion of the right to, and the right to lease, convey, transfer or
otherwise dispose of to the Unit 2 Parties the right to, nonexclusive possession
of the Common Facilities Equipment as is necessary for the use and operation of
Clover Unit 2, which reservation shall after the Closing Date be subject to (1)
Virginia Power's 50% undivided interest therein, (2) the Owner Trustee's right
to nonexclusive possession thereof, (3) Old Dominion's rights under the
Equipment Operating Lease, (4) the terms and conditions of the Clover
Agreements, (5) Permitted Liens, and as to the portion of the Common Facilities
Equipment which is comprised of Pollution Control Assets, the rights of the
Pollution Control Assets Lessor as tenant-in-common with Virginia Power of the
Pollution Control Assets and as lessor under the Pollution Control Assets Lease,
(b) all rights and obligations as tenant-in-common with Virginia Power in the
Retained Assets and as lessee under the Pollution Control Assets Lease which are
attributable to the Unit 1 Equipment by Virginia law as modified by the Clover
Agreements, and (c) 50% of the rights and obligations as tenant-in-common with
Virginia Power in the Retained Assets and as Lessee under the Pollution Control
Assets Lease which are attributable to the Common Facilities Equipment by
Virginia law as modified by the Clover Agreements.
"EQUIPMENT INTEREST COST" shall mean $301,800,000, which is the fair market
value of the Equipment Interest on the Closing Date as set forth in the
Appraisal.
"EQUIPMENT OPERATING LEASE" shall mean the Equipment Operating Lease Agreement,
dated as of February 29, 1996, in substantially the form of Exhibit F to the
Participation Agreement, between the Lessor and the Lessee.
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"EQUITY INVESTMENT" shall mean the Owner Participant's investment in the Owner
Trust contemplated by Section 2.1 of the Participation Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor law.
"EVENT OF DEFAULT" shall have the meaning specified in Section 16 of the
Equipment Operating Lease or in Section 16 of the Foundation Operating Lease, as
the case may be.
"EVENT OF LOSS" shall mean, and shall be deemed to have occurred upon the
occurrence of, any of the following events:
(i) loss of Clover Unit 1 or use thereof due to destruction or
damage to Clover Unit 1 that renders repair uneconomic or that
renders Clover Unit 1 permanently unfit for normal use;
(ii) any damage to Clover Unit 1 that results in an insurance
settlement with respect to such damage on the basis of a total
loss or an agreed constructive or compromised total loss;
(iii) the condemnation, seizure of, expropriation or requisition of
title to Clover Unit 1 or the Real Property by any
Governmental Entity which shall have resulted in loss of title
to Clover Unit 1 or Real Property or the loss by the Owner
Trustee of the Equipment Head Lease Interest or the Foundation
Head Lease Interest, in either case for a period of the lesser
of three years or the remaining portion of the Term, or,
unless waived by the Owner Trustee, the requisition or taking
of the use but not title of Clover Unit 1 or the Real Property
by any Governmental Entity under the power of eminent domain
or otherwise, if such loss of possession shall be for an
indefinite period or a stated period which extends beyond the
Expiration Date;
(iv) unless waived in writing by the Owner Participant and only in
circumstances where the termination of the Equipment Head
Lease, the Foundation Head Lease, the Equipment Operating
Lease or Foundation Operating Lease shall remove the basis of
the regulation described below, subjection of the Owner
Participant or the Owner Trustee to any public utility
regulation of any Governmental Entity which in the opinion of
the Owner Participant is burdensome, or the subjection of the
Owner Participant's or the Owner Trustee's interest in the
Equipment Head Lease, the Foundation Head Lease, the
Foundation Operating Lease or the Equipment Operating Lease to
any rate of return regulation by any Governmental Entity, in
either case by reason of the participation of the Owner
Trustee or the Owner Participant in the transactions
contemplated by the Operative Documents which cannot be
avoided by transfer of the Beneficial Interest or the Lessor's
Unit 1 Interest to another Person without detriment to the
Owner Participant and not, in any event, as a result of (a)
investments, loans or other business activities of
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the Owner Participant or its Affiliates in respect of
equipment or facilities similar in nature to Clover Unit 1 or
any part thereof or in any other electrical, steam,
cogeneration or other energy or utility related equipment or
facilities or the general business or other activities of the
Owner Participant or Affiliates or the nature of any of the
properties or assets from time to time owned, leased,
operated, managed or otherwise used or made available for use
by the Owner Participant or its Affiliates or (b) a failure of
the Owner Participant to perform routine, administrative or
ministerial actions the performance of which would not subject
the Owner Participant to any adverse consequence (as
determined by the Owner Participant, in its sole discretion
acting in good faith); or
(v) the Holders of the Series B Loan Certificates shall have
elected to cause the Series B Loan Certificates to be prepaid
pursuant to Section 10.2(a) of the Participation Agreement and
such Series B Loan Certificates shall not have been refinanced
on or before the Mandatory Prepayment Date specified in such
notice.
The date of occurrence of an Event of Loss described in clauses (i) or (ii)
shall be the date of the destruction or damage to Clover Unit 1. The date of
occurrence of an Event of Loss described in clause (iii) shall be the date of
the expiration of the applicable period in the case of a taking of title or loss
of Clover Unit 1 or the Real Property or in the case of a taking of use, the
date of such taking. The date of occurrence of an Event of Loss described in
clause (iv) shall be the date of imposition of such regulation following the
exhaustion of all appeals, if any, initiated by the Owner Trustee or the Owner
Participant in its sole and absolute discretion. The date of occurrence of an
Event of Loss described in clause (v) shall be the Mandatory Prepayment Date
(which shall be a Termination Date).
"EXCEPTED PAYMENTS" shall mean and include (i)(A) any indemnity (whether or not
constituting Supplemental Rent or Foundation Supplemental Rent and whether or
not an Event of Default exists) payable to the Trust Company, the Owner Trustee
or the Owner Participant or to their respective Affiliates, directors, officers,
employees, agents, servants, successors and permitted assigns (other than the
Agent) pursuant to Section 2.4, 8.1 or 8.2 of the Participation Agreement,
Section 7.01 of the Trust Agreement, (and any payments of indemnity under the
Tax Indemnity Agreement reflected as an adjustment of Basic Rent or Foundation
Basic Rent) or (B) any amount payable by Old Dominion to the Owner Trustee or to
the Owner Participant to reimburse any such Person for its costs and expenses in
exercising its rights under the Operative Documents, (ii) (A) insurance
proceeds, if any, payable to the Owner Trustee or the Owner Participant under
insurance separately maintained by the Owner Trustee or the Owner Participant
with respect to Clover Unit 1 as permitted by Section 11 of the Equipment
Operating Lease or Section 11 of the Foundation Operating Lease or (B) proceeds
of personal injury or property damage liability insurance maintained under any
Operative Document for the benefit of the Owner Trustee or the Owner
Participant, (iii) any amounts payable under any Operative Documents to
reimburse the Owner Trustee or the Owner Participant (including the reasonable
expenses of the Owner Trustee or the Owner Participant incurred in connection
with any such payment) in performing or complying with any of the obligations of
Old Dominion under and as permitted by any Operative Document, (iv) any amount
payable to the Owner Participant as
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the purchase price of the Owner Participant's right and interest in the
Collateral, (v) any payments, insurance proceeds or other amounts with respect
to any portion of the Equipment Head Lease Interest or the Foundation Head Lease
Interest which has been released from the Liens of the Loan Agreement and the
Leasehold Mortgage, (vi) any payments or distributions to the Owner Trustee or
the Owner Participant attributable to any Qualifying Security, the Pledge
Agreement, or any Qualifying Letter of Credit, and (vii) any payments in respect
of interest, or any payments made on an After-Tax Basis, to the extent
attributable to payments referred to in clause (i) through (vi) above that
constitute Excepted Payments.
"EXCEPTED RIGHTS" shall have the meaning specified in Section 5.2 of the Loan
Agreement.
"EXCHANGE ACT" shall mean Securities Exchange Act of 1934, as amended.
"EXCLUDED PROPERTY" shall mean Excepted Payments and Excepted Rights,
collectively.
"EXCLUDED TAXES" shall have the meaning specified in Section 8.2 of the
Participation Agreement.
"EXPIRATION DATE" shall mean January 5, 2018.
"FAIR MARKET SALES VALUE", with respect to the Lessor's Unit 1 Interest, shall
mean the cash price obtainable for the Lessor's Unit 1 Interest, in an arm's
length sale between an informed and willing purchaser under no compulsion to
purchase and an informed and willing seller under no compulsion to sell, without
regard to the rights of Virginia Power set forth in Section 6.3 of the Equipment
Head Lease and Section 6.3 of the Foundation Head Lease, assuming that (i) the
conditions contained in Sections 7 and 8 of the Equipment Operating Lease and
the Foundation Operating Lease shall have been complied with in all respects and
the Lessor's Unit 1 Interest is free and clear of all Liens (other than Lessor's
Liens and Owner Participant's Liens) (except for purposes of Section 17 of the
Equipment Operating Lease or the Foundation Operating Lease, as to which the
Lessor's Unit 1 Interest, shall be valued on an "as-is", "where-is" basis and
shall take into account all Liens (other than Lessor's Liens or Owner
Participant's Liens). If the Fair Market Sales Value of the Lessor's Unit 1
Interest is to be determined during the continuance of an Event of Default or in
connection with the exercise of remedies by the Owner Trustee pursuant to
Section 17 of the Equipment Operating Lease or the Foundation Operating Lease,
such value shall be determined by an appraiser appointed solely by the Owner
Trustee; PROVIDED, HOWEVER, in any such case where the Owner Trustee shall be
unable to obtain constructive possession sufficient to realize the economic
benefit of the Lessor's Unit 1 Interest, Fair Market Sales Value of the Lessor's
Unit 1 Interest shall be deemed equal to $0. Upon any determination of Fair
Market Sales Value of the Lessor's Unit 1 Interest, such Fair Market Sales Value
shall be allocated to the Equipment Interest and the Foundation Interest
proportionally to the value the Equipment Interest Cost or the Foundation
Interest Cost bears to the aggregate value of such costs. If the parties are
unable to agree upon a Fair Market Sales Value within 30 days after a request
therefor has been made, the Fair Market Sales Value of the Lessor's Unit 1
Interest shall be determined by appraisal. The Owner Participant and Old
Dominion will consult with the intent of selecting a mutually acceptable
Independent Appraiser. If a mutually
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acceptable Independent Appraiser is selected, the Fair Market Sales Value shall
be determined by such Independent Appraiser. If Old Dominion and the Owner
Participant are unable to agree upon a single Independent Appraiser within such
15-day period, the Owner Participant will retain an Independent Appraiser.
Within 15 days after the Owner Participant's selection of an Independent
Appraiser, Old Dominion shall select an Independent Appraiser. If Old Dominion
fails to retain an Independent Appraiser within such period, the Fair Market
Sales Value shall be determined by the Independent Appraiser retained by the
Owner Participant. The Independent Appraiser selected by Old Dominion and the
Independent Appraiser selected by the Owner Participant shall select a consensus
Independent Appraiser within 10 days. If the Independent Appraisers cannot agree
on a consensus Independent Appraiser within 10 days, the consensus Independent
Appraiser shall be selected by the American Arbitration Association. If the
parties are able to agree upon a single Independent Appraiser or the two
Independent Appraisers are able to agree upon a consensus Independent Appraiser,
the single Independent Appraiser or the three Independent Appraisers, as the
case may be, shall within 30 days make a determination of such Fair Market Sales
Value. If there shall be a panel of three Independent Appraisers, the appraisal
which differs most from the other two appraisals with respect to the Lessor's
Unit 1 Interest, shall be excluded and the remaining two appraisals shall be
averaged and such average shall constitute Fair Market Sales Value of the
Lessor's Unit 1 Interest. Fees and expenses relating to all appraisals shall be
payable by Old Dominion.
"FEDERAL POWER ACT" shall mean the Federal Power Act, as amended.
"FERC" shall mean the Federal Energy Regulatory Commission of the United States
or any successor agency thereto.
"FERC ORDER" shall mean the order issued by FERC on November 20, 1995 (Docket
No. ES96-1-000) under Section 204 of the Federal Power Act as amended on
February 26, 1996.
"FINAL DETERMINATION" with respect to a Loss shall mean (1) a decision,
judgment, decree or other order by any court of competent jurisdiction, which
decision, judgment, decree or other order has become final (i.e., when all
allowable appeals have been exhausted by either party to the action); PROVIDED,
HOWEVER, that in no event shall the Owner Participant be required to appeal to
the United States Supreme Court, (2) a closing agreement entered into under
Section 7121 of the Code or any other settlement agreement entered into in
connection with an administrative or judicial proceeding, or (3) the expiration
of the time for instituting a claim for refund, or if such a claim was filed,
the expiration of the time for instituting suit with respect thereto.
"FINAL UNDERTAKING PAYMENT DATE" shall mean January 5, 2018.
"FIRST SEVERANCE AGREEMENT" shall mean the Personal Property Agreement, dated as
of December 13, 1994, between Old Dominion and Virginia Power.
"FORCE MAJEURE" shall have the meaning specified in Section 1.36 of the Clover
Operating Agreement.
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"FORM U-7D" shall mean the certificate to be filed pursuant to Rule 7(d) of the
Holding Company Act for the purpose of exempting the Owner Participant and the
Owner Trustee from registration under the Holding Company Act.
"FOUNDATION BASIC RENT" shall mean all rent payable by the Foundation Lessee to
the Foundation Lessor pursuant to Section 3.2 of the Foundation Operating Lease,
as the same may be adjusted from time to time pursuant to Section 3.4 of the
Foundation Operating Lease.
"FOUNDATION HEAD LEASE" shall mean the Clover Unit 1 Foundation Interest Lease
Agreement, dated as of February 29, 1996, in substantially the form of Exhibit C
to the Participation Agreement, between the Foundation Head Lessor and the
Foundation Head Lessee.
"FOUNDATION HEAD LEASE BASIC RENT" shall have the meaning specified in Section
3.3 of the Foundation Head Lease.
"FOUNDATION HEAD LEASE BASIC TERM" shall have the meaning specified in Section
3.1 of the Foundation Head Lease.
"FOUNDATION HEAD LEASE INTEREST" shall mean the Foundation Head Lessee's
leasehold interest in the Foundation Interest under the Foundation Head Lease.
"FOUNDATION HEAD LEASE RENEWAL TERM" shall have the meaning specified in Section
3.2 of the Foundation Head Lease.
"FOUNDATION HEAD LEASE TERM" shall have the meaning specified in Section 3.2 of
the Foundation Head Lease.
"FOUNDATION HEAD LESSEE" shall mean the Owner Trustee, as lessee under the
Foundation Head Lease, together with its successors and permitted assigns.
"FOUNDATION HEAD LESSOR" shall mean Old Dominion, as lessor under the Foundation
Head Lease, together with its successors and permitted assigns.
"FOUNDATION INTEREST" shall mean (a) the right as tenant-in-common with Virginia
Power and, in the case of the Common Facility Foundation, the Unit 2 Parties, to
non exclusive possession of (i) the Unit 1 Foundation, subject to Virginia
Power's 50% undivided interest therein, a reservation for the Unit 2 Parties of
rights to the extent necessary to support Common Facilities Equipment located in
the scrubber building situated on the Unit 1 site and the terms and conditions
of the Clover Agreements, and (ii) the Common Facilities Foundation, subject to
Virginia Power's 50% undivided interest therein, the terms and conditions of the
Clover Agreements and the reservation by Old Dominion of the right to, and the
right to lease, convey, transfer or otherwise dispose of to the Unit 2 Parties
the right to, nonexclusive possession of the Common Facilities Foundation as is
necessary for the use and operation of Clover Unit 2, which reservation shall
after the Closing Date be subject to (1) Virginia Power's 50% undivided interest
therein, (2) Owner Trustee's right to nonexclusive possession thereof, (3) Old
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Dominion's rights under the Foundation Operating Lease, and (4) the terms and
conditions of the Clover Agreements, (b) all of the rights and obligations as
tenant-in-common with Virginia Power which are attributable to the Unit 1
Foundation by Virginia law as modified by the Clover Agreements and (c) 50% of
the rights and obligations as tenant-in-common with Virginia Power which are
attributable to the Common Facilities Foundation by Virginia law as modified by
the Clover Agreements.
"FOUNDATION INTEREST COST" shall mean $13,200,000, which is the fair market
value of the Foundation Interest on the Closing Date as set forth in the
Appraisal.
"FOUNDATION LESSEE" shall mean Old Dominion, as lessee under the Foundation
Operating Lease, together with its successors and permitted assigns.
"FOUNDATION LESSOR" shall mean the Owner Trustee, as lessor under the Foundation
Operating Lease, together with its successors and permitted assigns.
"FOUNDATION OPERATING LEASE" shall mean the Foundation Operating Lease
Agreement, dated as of February 29, 1996, in substantially the form of Exhibit G
to the Participation Agreement, between the Foundation Lessor and the Foundation
Lessee.
"FOUNDATION PURCHASE OPTION" shall have the meaning specified in paragraph (a)
of Section 15.1 of the Foundation Operating Lease.
"FOUNDATION PURCHASE OPTION PRICE" shall mean $18,049,884.
"FOUNDATION RENT" shall mean all Foundation Basic Rent and Foundation
Supplemental Rent.
"FOUNDATION RETURN OPTION" shall have the meaning specified in paragraph (c) of
Section 15.1 of the Foundation Operating Lease.
"FOUNDATION SUPPLEMENTAL RENT" shall mean any and all amounts, liabilities and
obligations (other than Foundation Basic Rent) which the Foundation Lessee
assumes or agrees to pay under the Foundation Operating Lease to the Foundation
Lessor or any other Person, including, but not limited to, Termination Value and
if and to the extent applicable, the Foundation Purchase Option Price or the
Foundation Walk Away Payment.
"FOUNDATION WALK AWAY PAYMENT" shall mean an amount equal to the excess (if any)
of Termination Value with respect to the Foundation Interest over the Fair
Market Sales Value of the Foundation Interest, both determined as of the
Expiration Date (minus a reasonable allowance for hypothetical disposition
costs), such excess not to exceed such Termination Value minus 20% of the
Foundation Interest Cost; PROVIDED that under all circumstances the Foundation
Walk Away Payment when combined with the Walk Away Payment, the Basic Rent and
Foundation Basic Rent payable on the Expiration Date, shall be at least equal to
the outstanding principal amount of and accrued interest on the Loan
Certificates on the Expiration Date.
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"GAAP" shall mean generally accepted accounting principles.
"GOVERNMENTAL ENTITY" shall mean and include any national government, any
political subdivision of a national government or of any state, country or local
jurisdiction therein or any board, commission, department, division, organ,
instrumentality, court or agency of any thereof.
"GRANTING CLAUSE DOCUMENTS" shall have the meaning specified in the Granting
Clause of the Loan Agreement.
"GROUND INTEREST" shall mean (a) the right as tenant-in-common with Virginia
Power and, in the case of the Common Facilities Site, the Unit 2 Parties, to
nonexclusive possession of (i) the Unit 1 Site, subject to Virginia Power's 50%
undivided interest therein, a reservation for the Unit 2 Parties of rights to
the extent necessary to support for the benefit of the Common Facilities
Equipment and the Common Facilities Foundation located in and under the scrubber
building situated on the Unit 1 site, and the terms and conditions of the Clover
Agreements, and (ii) the Common Facilities Site, subject to Virginia Power's 50%
undivided interest therein, the terms and conditions of the Clover Agreements,
and the reservation by Old Dominion of the right to lease, convey, transfer or
otherwise dispose of to the Unit 2 Parties the right to, nonexclusive possession
of the Common Facilities Site as is necessary for the use and operation of
Clover Unit 2, subject to (1) Virginia Power's 50% undivided interest therein,
(2) the Owner Trustee's right to nonexclusive possession thereof, (3) the terms
and conditions of the Clover Agreements, and (4) Permitted Liens, (b) all of Old
Dominion's rights and obligations as tenant-in-common of the Unit 1 Site which
are attributable to the Unit 1 Site by Virginia law as modified by the Clover
Agreements and (c) 50% of Old Dominion's rights and obligations as
tenant-in-common of the Common Facilities Site which are attributable to the
Common Facilities Site by Virginia law as modified by the Clover Agreements.
"GROUND LEASE AND SUBLEASE" shall mean a Deed of Ground Lease and Sublease
Agreement, in substantially the form of Exhibit A to the Option Agreement.
"GROUND LEASE INTEREST" shall mean the Ground Lessee's leasehold interest in the
Ground Interest.
"GROUND LEASE TERM" shall mean the Basic Ground Lease Term and any Renewal
Ground Lease Term or Terms elected by the Ground Lessee pursuant to Section 2.1
of the Ground Lease and Sublease.
"GROUND LESSEE" shall mean the Owner Trustee, as lessee under the Ground Lease
and Sublease, together with its successors and permitted assigns.
"GROUND LESSOR" shall mean Old Dominion, as lessor under the Ground Lease and
Sublease, together with its successors and permitted assigns.
"GROUND SUBLEASE TERM" shall mean the Ground Sublease Term described in Section
4.2 of the Ground Lease and Sublease.
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"GUARANTOR" shall mean any Person guaranteeing the obligations of any Transferee
pursuant to Section 5.1 of the Participation Agreement.
"HALIFAX CLERK'S OFFICE" shall mean the Clerk's Office of the Circuit Court of
Halifax County, Virginia.
"HIGHEST RATE" shall have the meaning specified in Section 4(b) of the Tax
Indemnity Agreement.
"HOLDERS" and "HOLDERS OF LOAN CERTIFICATES" shall have the meaning specified in
Section 2.7 of the Loan Agreement.
"HOLDING COMPANY ACT" shall mean the Public Utility Holding Company Act of 1935,
as amended.
"INCOME INCLUSION" shall have the meaning specified in Section 4(a) of the Tax
Indemnity Agreement.
"INDEMNITEE" shall have the meaning specified in Section 8.1(a) of the
Participation Agreement.
"INDENTURE TRUSTEE" shall mean Crestar Bank, as the trustee under the Old
Dominion Indenture or any successor thereto.
"INDEPENDENT APPRAISER" shall mean a Person independent of the Owner Participant
and Old Dominion having experience in the business of evaluating facilities
similar to Clover Unit 1.
"INDEPENDENT ENGINEER" shall mean an independent engineer selected by the Owner
Participant and, so long as no Event of Default shall have occurred and be
continuing, reasonably acceptable to Old Dominion.
"INDEPENDENT PUBLIC ACCOUNTANTS" shall have the meaning specified in Section
4(d) of the Tax Indemnity Agreement.
"INDEPENDENT TAX COUNSEL" shall mean independent tax counsel reasonably
acceptable to Old Dominion and the Owner Participant.
"INTEREST DEDUCTIONS" shall have the meaning specified in Section 2(c) of the
Tax Indemnity Agreement.
"INTERIM TERM" shall mean the period commencing on the Closing Date and ending
on (but excluding) the Basic Term Commencement Date.
"INTERMEDIARY" shall have the meaning specified in Section 3.4(c) of the
Equipment Operating Lease or the Foundation Operating Lease, as the case may be.
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"IRS" shall mean the Internal Revenue Service of the United States Department of
Treasury or any successor agency.
"ISSUER" shall mean Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.,
"Rabobank Nederland", New York Branch, as issuer of the Deposit pursuant to the
Deposit Agreement, together with its successors and permitted assigns.
"LEASEHOLD MORTGAGE" shall mean the Leasehold Deed of Trust, Assignment of
Leases and Rents and Security Agreement, dated as of February 29, 1996, in
substantially the form of Exhibit I to the Participation Agreement, made by the
Owner Trustee, as Grantor, David S. Cohn and C. Cotesworth Pinckney, as
Trustees, and Utrecht-America, as beneficiary thereunder and as Agent.
"LENDERS" shall mean the Lenders under the Loan Agreement.
"LESSEE" shall mean Old Dominion, as lessee under the Equipment Operating Lease,
together with its successors and permitted assigns.
"LESSEE GROUP" shall have the meaning specified in Section 3(b) of the Tax
Indemnity Agreement.
"LESSEE PERSON" shall have the meaning specified in Section 3(b) of the Tax
Indemnity Agreement.
"LESSEE'S UNIT 1 INTEREST" shall mean Old Dominion's leasehold interest in the
Equipment Interest under the Equipment Operating Lease, Old Dominion's leasehold
interest in the Foundation Interest under the Foundation Operating Lease and Old
Dominion's rights in the Assigned Clover Interests reassigned to it by the Owner
Trustee under the Clover Agreements Assignment.
"LESSOR" shall mean the Owner Trustee, acting as lessor under the Equipment
Operating Lease, together with its successors and permitted assigns.
"LESSOR EVENT OF DEFAULT" shall mean the occurrence of any of the following
events (whether any such event shall be voluntary or involuntary or come about
or be effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation of any
Governmental Entity):
(a) a breach of the covenant of the Old Dominion's right of
quiet enjoyment under Section 4.2 of the Equipment Operating Lease or
the Foundation Operating Lease by the Owner Participant which, if
capable of remedy, remains unremedied for twenty Business Days after
receipt by the Owner Participant of notice from Old Dominion; or
(b) the Trust Agreement shall have been revoked by the Owner
Participant in violation of the terms of the Operative Documents and,
if capable of remedy, such
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violation remains unremedied for ten Business Days after receipt by the
Owner Participant of notice from Old Dominion; or
(c) the Owner Participant shall fail to observe or perform its
covenant in Section 5.2 of the Participation Agreement in respect of a
Owner Participant's Lien that poses a material risk of loss, sale or
forfeiture of the Equipment Interest or the Foundation Interest or
constitutes an impermissible encumbrance under Section 14.06 of the Old
Dominion Indenture and remains unremedied in excess of 30 days after
receipt by the Owner Participant of notice from Old Dominion; or
(d) the Owner Participant shall (i) commence a voluntary case
or other proceeding seeking relief under Title 11 of the Bankruptcy
Code or liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect, or apply for or consent to the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or (ii)
consent to, or fail to controvert in a timely manner, any such relief
or to the appointment of or taking possession by any such official in
any such voluntary case or such other proceeding, or (iii) admit in
writing its inability to pay its debts generally as they come due, or
(iv) make a general assignment for the benefit of creditors, or (v)
take any corporate action to authorize any of the foregoing; or
(e) an involuntary case or other proceeding shall be commenced
against the Owner Participant seeking (i) liquidation, reorganization
or other relief with respect to it or its debts under Title 11 of the
Bankruptcy Code or any bankruptcy, insolvency or other similar law now
or hereafter in effect, or (ii) seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official, or (iii) the
winding-up or liquidation of the Owner Participant, and such
involuntary case of other proceeding shall remain undismissed and
unstayed for a period of 60 days; or
(f) the Owner Participant shall fail to observe or perform its
covenant in Section 5.1 of the Participation Agreement and such failure
remains unremedied for ten Business Days after receipt by the Owner
Participant of notice from Old Dominion.
"LESSOR GROUP" shall have the meaning specified in Section 4(e) of the Tax
Indemnity Agreement.
"LESSOR'S AVAILABLE CAPACITY" shall mean a portion of the Available Capacity to
the extent, but only to the extent, derived from Clover Unit 1.
"LESSOR'S LIEN" shall mean any Lien on the Trust Estate arising as a result of
(i) claims against or affecting the Trust Company, in its individual capacity,
or any Affiliate thereof not related to any Operative Document or the
transactions contemplated thereby, (ii) any act or omission of the Trust
Company, in its individual capacity, or any Affiliate thereof that is not
related to any Operative Document or the transactions contemplated thereby or
that is in breach of any
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covenant or agreement of the Trust Company, in its individual capacity,
specified therein, (iii) Taxes imposed upon, or Claims against, the Trust
Company, in its individual capacity, or any Affiliate thereof which are not
indemnified against by Old Dominion pursuant to any Operative Documents or (iv)
Claims against or affecting the Trust Company, in its individual capacity, or
any Affiliate thereof arising out of the voluntary or involuntary transfer by
the Trust Company of any portion of the interest of the Trust Company in the
Lessor's Unit 1 Interest (other than a transfer contemplated by the Operative
Documents or any transfer during the continuance of an Event of Default);
PROVIDED, HOWEVER, that any such Lien shall not constitute a Lessor's Lien so
long as (i) any such Lien is being diligently contested in good faith by
appropriate proceedings and neither such Lien nor such proceedings involves a
material danger of the sale, forfeiture or loss of the Trust Estate and (ii) any
such Lien shall not constitute an impermissible encumbrance under Section 14.06
of the Old Dominion Indenture.
"LESSOR'S PERCENTAGE" shall mean 50% with respect to any Component or other
assets (including any repaired or replaced facilities constituting a part of
Clover Unit 1 in accordance with Section 10.3 of the Equipment Operating Lease
and the Foundation Operating Lease) constituting a part of the Unit 1 Equipment
or the Unit 1 Foundation and 25% with respect to any Component or other assets
(including any repaired or replaced facilities constituting a part of Clover
Unit 1 in accordance with Section 10.3 of the Equipment Operating Lease and the
Foundation Operating Lease) constituting Common Facilities Equipment or Common
Facilities Foundation.
"LESSOR'S UNIT 1 INTEREST" shall mean the Equipment Head Lease Interest, the
Foundation Head Lease Interest, the Option Interest and the Assignee's interest
in the Assigned Clover Interests.
"LIEN" shall mean any mortgage, pledge, lien, charge, encumbrance, lease,
exercise of rights, security interest, title retention or claim.
"LOAN AGREEMENT" shall mean the Loan and Security Agreement, dated as of
February 29, 1996, in substantially the form of Exhibit H to the Participation
Agreement, between the Owner Trustee and Utrecht-America, as Lender and as
Agent.
"LOAN BANKRUPTCY DEFAULT" shall mean an event that is, or in the case of Section
4.2(f) of the Loan Agreement with the passage of time would become, a Loan Event
of Default under Section 4.2(e) or (f) of the Loan Agreement.
"LOAN CERTIFICATE REGISTER" shall have the meaning specified in Section 2.7 of
the Loan Agreement.
"LOAN CERTIFICATES" shall have the meaning specified in Section 2.1 of the Loan
Agreement.
"LOAN COMMITMENTS" shall mean the Series A Loan Commitment and the Series B Loan
Commitment.
"LOAN EVENT OF DEFAULT" shall have the meaning specified in Section 4.2 of the
Loan Agreement.
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"LOAN MATURITY DATE" shall mean January 5, 2018.
"LOAN PAYMENT DEFAULT" shall mean failure of the Owner Trustee to make any
payment in respect of the principal of, or interest on, any Loan Certificates
when the same shall have become due.
"LOAN REFINANCING DATE" shall mean any date (which shall be a Termination Date)
on which the Loan Certificates of a Series are refinanced pursuant to Section
10.2 or 10.3 of the Participation Agreement.
"LOANS" shall mean the loans evidenced by the Series A Loan Certificates and the
Series B Loan Certificates.
"LOSS" shall have the meaning specified in Section 4(a) of the Tax Indemnity
Agreement.
"LOSS OF DEDUCTIONS" shall have the meaning specified in Section 4(a) of the Tax
Indemnity Agreement.
"MANAGEMENT AGREEMENT" shall mean a Management Agreement between the Lessor and
Owner Trustee, substantially in the form of Exhibit C to the Equipment Operating
Lease.
"MANDATORY PREPAYMENT DATE" shall mean any January 5, April 5, July 5 or October
5 occurring after January 5, 1999, established by the Holders of the Series B
Loan Certificates as the date on which the Series B Loan Certificates must be
prepaid pursuant to Section 2.10 of the Loan Agreement.
"MEMBER OF THE LESSOR GROUP" shall have the meaning specified in Section 4(e) of
the Tax Indemnity Agreement.
"MINIMUM CREDIT RATINGS" shall have the meaning specified in Section 7.7 of the
Participation Agreement.
"MODIFICATION" shall mean either a Required Modification or an Optional
Modification.
"MOODY'S" shall mean Moody's Investors Service, Inc. and any successor thereto.
"MORTGAGEE" shall mean the beneficiary of the Leasehold Mortgage.
"MORTGAGOR" shall mean the Owner Trustee, as grantor under the Leasehold
Mortgage, together with its successors and permitted assigns.
"NET ECONOMIC RETURN" shall mean the Owner Participant's anticipated (i) net
after-tax economic yield (computed using the multiple investment sinking fund
method) and (ii) net after-tax cash flow, based upon the same assumptions used
by the Owner Participant in making the original computations implicit in (i) the
schedule of Basic Rent attached as Schedule 1 to
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Equipment Operating Lease and (ii) the schedule of Foundation Basic Rent
attached as Schedule 1 to the Foundation Operating Lease.
"NEW LOAN" shall mean a loan having a principal amount, interest rate, maturity,
amortization and such other terms as set forth in Schedule 3 to the Equipment
Operating Lease arranged by the Lessee in accordance with Section 15.3 of the
Equipment Operating Lease.
"1996 SERIES A BONDS" shall mean the First Mortgage Bond, 1996 Series A in the
face amount of $25,565,961.82 issued under the Old Dominion Indenture.
"1996 SERIES B BONDS" shall mean the First Mortgage Bond, 1996 Series B, issued
under the Old Dominion Indenture to refund the 1996 Series A Bonds.
"NONSEVERABLE MODIFICATION" shall mean any Modification that is not readily
removable without causing material damage to Clover Unit 1.
"OBSOLESCENCE TERMINATION DATE" shall have the meaning specified in Section 14.1
of the Equipment Operating Lease.
"OFFICER'S CERTIFICATE" shall mean with respect to any Person, a certificate
signed by the Chairman of the Board, the President, or a Vice President of such
Person or any person authorized by or pursuant to the organizational documents,
the by-laws or any resolution of the Board of Directors or Executive Committee
of such Person (whether general or specific) to execute, deliver and take
actions on behalf of such Person in respect of any of the Operative Documents.
"OLD DOMINION" shall mean Old Dominion Electric Cooperative, a wholesale power
supply cooperative organized under the laws of the Commonwealth of Virginia,
together with its successors.
"OLD DOMINION INDENTURE" shall mean the Indenture of Mortgage and Deed of Trust,
dated as of May 1, 1992, made by Old Dominion to the Indenture Trustee, as
supplemented by the First Supplemental Indenture dated as of August 1, 1992, the
Second Supplemental Indenture dated as of December 1, 1992, the Third
Supplemental Indenture dated as of May 1, 1993, the Fourth Supplemental
Indenture dated as of December 15, 1994, the Fifth Supplemental Indenture dated
as of February 29, 1996 and as hereinafter amended and supplemented from time to
time.
"OLD DOMINION'S BONDS" shall mean the First Mortgage Bonds issued by Old
Dominion under the Old Dominion Indenture.
"OPERATIVE DOCUMENTS" shall mean the Participation Agreement, the Severance
Agreements, the Equipment Head Lease, the Foundation Head Lease, the Equipment
Operating Lease, the Foundation Operating Lease, the Clover Agreements
Assignment, the Option Agreement, the Ground Lease and Sublease (if and when
executed), the Loan Agreement, the Leasehold Mortgage, the Loan Certificates,
the Trust Agreement, the Tax Indemnity Agreement, the
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Deposit Agreement, the Certificate of Deposit, the Deposit Pledge Agreement, the
Payment Undertaking Agreement, the Payment Undertaking Pledge Agreement and the
Pledge Agreement.
"OPTION AGREEMENT" shall mean the Option Agreement to Lease dated as of February
29, 1996, in substantially the form of Exhibit D to the Participation Agreement
between Old Dominion and the Owner Trustee.
"OPTION INTEREST" shall mean the Owner Trustee's right and option to enter into
the Ground Lease and Sublease.
"OPTIONAL MODIFICATION" shall have the meaning specified in Section 8.2 of the
Equipment Operating Lease or the Foundation Operating Lease, as the case may be.
"ORIGINAL LENDERS" shall mean Utrecht-America, as purchaser of the Series A Loan
Certificates and the Series B Loan Certificates.
"OVERALL TRANSACTION" shall mean the transactions contemplated by the Operative
Documents.
"OVERDUE RATE" shall mean 1.0% per annum over the rate of interest publicly
announced from time to time by First Union National Bank of Florida at its
principal office as its prime lending rate for domestic commercial loans, such
rate to change as and when such prime lending rate changes. For purpose of this
definition, "prime lending rate" shall mean that rate announced by the First
Union National Bank of Florida from time to time as its prime rate as that rate
may change from time to time with changes to occur on the date such Bank's prime
rate changes. Such Bank's prime rate is one of several interest rate bases used
by the Bank. The Bank lends at rates both above and below the Bank's prime rate,
and Old Dominion acknowledges and agrees that the prime rate is not represented
or not intended to be the lowest or most favorable rate of interest offered by
the Bank.
"OWNER PARTICIPANT" shall mean First Union National Bank of Florida, a national
banking association.
"OWNER PARTICIPANT'S COMMITMENT" shall mean $54,755,411.
"OWNER PARTICIPANT'S LIEN" shall mean any Lien on the Trust Estate arising as a
result of (i) claims against or affecting the Owner Participant or any Affiliate
thereof not related to any Operative Document or the transactions contemplated
thereby, (ii) any act or omission of the Owner Participant or any Affiliate
thereof that is not related to any Operative Document or the transactions
contemplated thereby or that is in breach of any covenant or agreement of the
Owner Participant specified therein, (iii) Taxes or claims against the Owner
Participant or any Affiliate thereof which are not indemnified against by Old
Dominion pursuant to the Operative Documents or (iv) Claims against or affecting
the Owner Participant or any Affiliate thereof arising out of the voluntary or
involuntary transfer by the Owner Participant of any portion of the interest of
the Owner Participant in the Beneficial Interest (other than a transfer
contemplated by the Operative Documents or any transfer during the continuance
of an Event of Default);
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PROVIDED, HOWEVER, that any such Lien shall not constitute an Owner
Participant's Lien hereunder so long as (i) any such Lien is being diligently
contested in good faith by appropriate proceedings and neither such Lien nor
such proceedings involves a material danger of the sale, forfeiture or loss of
the Trust Estate and (ii) any such Lien shall not constitute an impermissible
encumbrance under Section 14.06 of the Old Dominion Indenture.
"OWNER PARTICIPANT'S TAX COUNSEL" shall mean Chadbourne & Parke LLP, or such
other tax counsel as may be selected by the Owner Participant and reasonably
acceptable to Old Dominion.
"OWNER TRUST" shall mean the grantor trust created by the Trust Agreement.
"OWNER TRUSTEE" shall mean State Street Bank and Trust Company, a state
chartered trust company organized and existing under the laws of the
Commonwealth of Massachusetts, not in its individual capacity except as
expressly provided in the relevant Operative Document to which it is a party,
but solely as owner trustee under the Trust Agreement, and each other Person
which may from time to time be acting as the Owner Trustee in accordance with
the provisions of the Trust Agreement.
"PARTICIPANTS" shall mean the Owner Participant and the Lenders.
"PARTICIPATION AGREEMENT" shall mean the Participation Agreement, dated as of
February 29, 1996, among Old Dominion, the Owner Trustee, the Owner Participant
and Utrecht-America.
"PAYMENT DATE" shall mean January 5, 1998 and each succeeding January 5
thereafter.
"PAYMENT DEFAULT" shall mean any non-payment of Basic Rent, Foundation Basic
Rent, Foundation Supplemental Rent or Supplemental Rent when due.
"PAYMENT INSTRUCTION" shall mean any Payment Instruction in the form of Schedule
C to the Payment Undertaking Agreement and shall include the Acknowledgment of
the Bank attached to the Payment Undertaking Agreement.
"PAYMENT UNDERTAKING AGREEMENT" shall mean the Payment Undertaking Agreement,
dated as of February 29, 1996, in substantially the form of Exhibit Q to the
Participation Agreement, between Old Dominion and the Bank.
"PAYMENT UNDERTAKING COLLATERAL" shall have the meaning specified in the
Granting Clause of the Loan Agreement.
"PAYMENT UNDERTAKING PAYMENT AMOUNT" shall mean in relation to a Payment
Undertaking Payment Date, the amount determined in accordance with Section 3.1
of the Payment Undertaking Agreement with respect to such Payment Undertaking
Payment Date.
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"PAYMENT UNDERTAKING PAYMENT DATE" shall mean, with respect to any Payment
Undertaking Payment Amount, any date listed on Schedule A of the Payment
Undertaking Agreement and with respect to any Early Termination Amount, any date
listed on Schedule B of the Payment Undertaking Agreement.
"PAYMENT UNDERTAKING PLEDGE AGREEMENT" shall mean the Payment Undertaking Pledge
Agreement, dated as of February 29, 1996, in substantially the form of Exhibit R
to the Participation Agreement, between the Payment Undertaking Pledgee and the
Payment Undertaking Pledgor.
"PAYMENT UNDERTAKING PLEDGEE" shall mean the Owner Trustee, as pledgee under the
Payment Undertaking Pledge Agreement.
"PAYMENT UNDERTAKING PLEDGOR" shall mean Old Dominion, as pledgor under the
Payment Undertaking Pledge Agreement.
"PERMITTED ENCUMBRANCES" shall mean "Permitted Encumbrances" as defined in the
Old Dominion Indenture.
"PERMITTED INVESTMENTS" shall mean investments in (a) overnight loans to or
other customary overnight investments in commercial banks of the type referred
to in paragraph (d) below, (b) obligations of, or guaranteed as to interest and
principal by, the United States maturing within one year after such investment,
(c) open market commercial paper of any corporation incorporated under the laws
of the United States or any State thereof which is rated not less than "prime-1"
or its equivalent by Moody's and "A-1" or its equivalent by S&P maturing within
one year after such investment, and (d) certificates of deposit maturing within
one year after such investment and issued by commercial banks organized under
the laws of the United States or any State thereof or a domestic branch of a
foreign bank (i) having a combined capital and surplus in excess of $500,000,000
and (ii) which are rated "AA" (or "Aa") or better by S&P and/or Moody's;
PROVIDED that no more than $20,000,000 may be invested in such deposits at any
one such bank.
"PERMITTED LIENS" shall mean (i) the interests of Old Dominion and the Owner
Trustee under any of the Operative Documents; (ii) the Lien of the Old Dominion
Indenture; (iii) all Permitted Encumbrances; (iv) the interest of the Co-Owners;
(v) the terms and conditions of the Clover Agreements; (vi) all Lessor's Liens
and Owner Participant's Liens; (vii) the Liens of the Loan Agreement and the
Leasehold Mortgage; (viii) the interest of the holder of legal title as
contemplated by Section 11 of the Participation Agreement; (ix) the Pollution
Control Assets Lease; (x) the interests of Unit 2 Parties; and (xi) the Lien of
the Conveyance and Security Agreement, dated as of December 15, 1994, between
the Pollution Control Assets Lessor and Old Dominion.
"PERMITTED POST-TERM ENCUMBRANCES" shall mean these encumbrances specified in
clauses (6), (7), (8), (13), (14), (15), and (19) of the definition of
"Permitted Encumbrances" in the Old Dominion Indenture on the Closing Date.
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"PERSON" shall mean any individual, corporation, cooperative, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"PLAN" shall mean any "employee benefit plan" (as defined in Section 3(3) of
ERISA) that is subject to ERISA, any "plan" (as defined in Section 4975(e)(1) of
the Code) that is subject to Section 4975 of the Code, any trust created under
any such plan or any "governmental plan" (as defined in Section 3(32) of ERISA
or Section 414(d) of the Code) that is organized in a jurisdiction having
prohibitions on transactions with government plans similar to those contained in
Section 406 of ERISA or Section 4975 of the Code.
"PLANT OPERATOR" shall mean Virginia Power as operator of the Clover Power
Station pursuant to the Clover Agreements and any successor thereto.
"PLEDGE AGREEMENT" shall mean the Pledge Agreement, dated as of February 29,
1996, in substantially the form of Exhibit J to the Participation Agreement,
between Old Dominion, as pledgor, and the Owner Trustee, as pledgee.
"PLEDGED COLLATERAL" shall have the meaning set forth in Section 2 of the
Deposit Pledge Agreement.
"PLEDGEE" shall mean the Owner Trustee, as pledgee under the Deposit Pledge
Agreement and under the Pledge Agreement, together with its successors and
permitted assigns.
"PLEDGOR" shall mean Old Dominion, as pledgor under the Deposit Pledge Agreement
and the Pledge Agreement, together with its successors and permitted assigns.
"POLLUTION CONTROL ASSETS" shall mean assets constituting Unit 1 Equipment and
Common Facility Equipment which were leased to the Pollution Control Assets
Lessor under the Pollution Control Assets Lease. The Pollution Control Assets
are those assets listed on Exhibit A-4 to the Equipment Head Lease and Exhibit
A-4 to the Equipment Operating Lease.
"POLLUTION CONTROL ASSETS LEASE" shall mean the Lease Agreement, dated as of
December 15, 1994, between the Pollution Control Assets Lessor and Old Dominion,
as amended from time to time, including, without limitation, as amended by the
Assignment, Assumption and Release Agreement, dated as of February 29, 1995,
among Esbelto B.V., Green Assets B.V. and Old Dominion.
"POLLUTION CONTROL ASSETS LESSOR" shall mean Green Assets B.V., a limited
liability company organized under the laws of The Netherlands, as lessor under
the Pollution Control Assets Lease, together with its successors and permitted
assigns.
"POWER PURCHASER" shall mean a Person becoming a purchaser of power under a
Power Sales Agreement pursuant to Section 15.3 of the Equipment Operating Lease.
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"POWER SALES AGREEMENT" shall mean a wholesale power purchase agreement
substantially in the form of Exhibit B to the Equipment Operating Lease.
"PROPERTY" shall have the meaning specified in the Leasehold Mortgage.
"PROPOSED TAX LAW CHANGE" shall mean any proposed amendment, modification,
addition or change in or to the provisions of, or the official interpretation
of, section 467 of the Code that is proposed through amendment to the Code or by
final or proposed regulation thereunder promulgated by the U.S. Treasury
Department on the Closing Date.
"PRUDENT UTILITY PRACTICES" shall have the meaning specified in, and as
interpreted for purposes of, Section 1.67 of the Clover Operating Agreement as
in effect on the Closing Date.
"PURCHASE OPTION" shall have the meaning specified in paragraph (a) of Section
15.1 of the Equipment Operating Lease.
"PURCHASE OPTION PRICE" shall mean $412,685,984.
"QUALIFYING LETTER OF CREDIT" shall mean an irrevocable transferable letter of
credit issued for the benefit of the Owner Participant by a Qualifying Letter of
Credit Bank securing Old Dominion's obligation to pay all amounts of Basic Rent,
Supplemental Rent, Foundation Basic Rent and Foundation Supplemental Rent,
having a stated expiration date of not earlier than one year after the date of
original issuance and a drawing amount, (a) as of the date of issuance of such
Qualifying Letter of Credit and (b) as of each annual anniversary of the date of
issuance of such Qualifying Letter of Credit, equal to the sum of:
(x) the highest Termination Value under the Equipment Operating Lease
in the twelve month period following such date of issuance or annual
anniversary, and
(y) the highest Termination Value under the Foundation Operating Lease
in the twelve month period following such date of issuance or annual
anniversary;
MINUS, the sum of:
(A) the Qualifying Security Value as of such date of issuance or annual
anniversary, and
(B) the outstanding principal amount of the Loan Certificates on the
date of such highest Termination Values.
"QUALIFYING LETTER OF CREDIT BANK" shall mean (i) Nationsbank, N.A., provided
its senior unsecured debt obligations are rated at least "A+" by S&P and at
least "A1" by Moody's, or (ii) a United States branch of any bank, the senior
unsecured debt obligations (or long-term deposits) of which are rated by at
least one Rating Agency and are rated at least "AA" (or the
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equivalent thereof) by each Rating Agency providing a rating in respect of such
obligations (or deposits) as of the date of the issuance of a Qualifying Letter
of Credit.
"QUALIFYING SECURITY" shall mean:
(a) (i) a note, bond, certificate of deposit, guaranteed
investment contract or other unqualified obligation of a bank,
investment bank or Affiliates of either, insurance company, savings and
loan association, CFC or CoBank ACB, the senior unsecured debt
obligations of which (or long-term deposits of which) are rated by at
least one Rating Agency and are rated at least "AA-" (or the equivalent
thereof) by each Rating Agency providing a rating in respect of such
obligations (or deposits); or
(ii) securities which are rated by at least one
Rating Agency and are rated at least "AA-" (or the equivalent thereof)
by each Rating Agency providing a rating in respect of such obligations
(not including a rating reflecting that of any bond insurer); or
(iii) securities which are insured under a bond
insurance policy issued by a bond insurer whose claim paying ability
has been rated by at least one Rating Agency and has been rated "AAA"
(or the equivalent thereof) by each Rating Agency providing a rating in
respect of such claim paying ability; or
(iv) a Qualifying Letter of Credit; or
(v) a combination of the obligations set forth
in clauses (i), (ii), (iii) and (iv);
(b) securities which are pledged by Old Dominion to the Owner
Trustee under the Pledge Agreement as security for Old Dominion's
obligations under the Equipment Operating Lease to pay all amounts of
Basic Rent, Termination Value and amounts sized by reference to
Termination Value thereunder; and
(c) securities which provide for the payment of interest and
principal or provide for redemption at the option of the holders
thereof, at such times and in such amounts as shall, on and after the
first anniversary of the Closing Date, be sufficient to pay all amounts
of (x) Basic Rent and Foundation Basic Rent in excess of principal and
interest due and payable on the Loan Certificates outstanding on each
Rent Payment Date and (y) the Purchase Option Price and the Foundation
Purchase Option Price in excess of the principal and interest due and
payable on the Loan Certificates outstanding on the Expiration Date.
"QUALIFYING SECURITY VALUE", with respect to any Qualifying Security, shall
mean, as of any date, the market value of the note, bond, certificate of
deposit, guaranteed investment contract or other unqualified obligation,
security, or insured Old Dominion Bonds, or the maximum drawing amount in such
twelve month period under a letter of credit. The market value of any
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note, bond, certificate of deposit, guaranteed investment contract or other
unqualified obligation, security or insured Old Dominion Bonds not publicly
traded as of any date of determination constituting a Qualifying Security shall
be computed by an investment banking firm appointed by the Owner Participant and
reasonably acceptable to Owner Participant.
"RATING AGENCIES" shall mean S&P and Moody's.
"REAL PROPERTY" shall mean the Unit 1 Site and the Common Facilities Site.
"REASONABLE BASIS" for a position shall exist if tax counsel may properly advise
reporting such position on a tax return in accordance with Formal Opinion 85-352
issued by the Standing Committee on Ethics and Professional Responsibility of
the American Bar Association (or any successor to such Opinion).
"REGULATORY EVENT OF LOSS" shall mean an Event of Loss of the type described in
clause (iv) of the definition thereof.
"RENEWAL GROUND LEASE TERM" shall have the meaning specified in Section 2.3 of
the Ground Lease and Sublease.
"RENT" shall mean all Basic Rent and all Supplemental Rent.
"RENT PAYMENT DATE" shall mean January 5, 1998, and each succeeding January 5
thereafter, to and including the Expiration Date.
"REPLACEMENT CLOSING DATE" shall have the meaning specified in paragraph (c) of
Section 10.3 of the Equipment Operating Lease.
"REPLACEMENT COMPONENT" shall have the meaning specified in Section 7.2 of the
Equipment Operating Lease or the Foundation Operating Lease, as the case may be.
"REQUIRED LENDERS" shall mean Lenders holding more than 50% of the aggregate
principal amount of outstanding Loan Certificates.
"REQUIRED MODIFICATION" shall have the meaning specified in Section 8.1 of the
Equipment Operating Lease or the Foundation Operating Lease, as the case may be.
"RESET RATE" shall have the meaning specified in Section 2.12 of the Loan
Agreement.
"RESPONSIBLE OFFICER" shall mean, with respect to any Person, its Chairman of
the Board, its President, any Senior Vice President, the Chief Financial
Officer, any Vice President, the Treasurer or any other management employee (a)
that has the power to take the action in question and has been authorized,
directly or indirectly, by the Board of Directors of such Person, (b) working
under the direct supervision of such Chairman of the Board, President, Senior
Vice President, Chief Financial Officer, Vice President or Treasurer and (c)
whose
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responsibilities include the administration of the transactions and agreements
contemplated by the Operative Documents.
"RETAINED ASSETS" shall mean (i) all assets constituting the Unit 1 Equipment
which are not Pollution Control Assets and (ii) all assets constituting the
Common Facility Equipment which are not Pollution Control Assets. The Retained
Assets are those assets listed on Exhibit A-3 to the Equipment Head Lease and
Exhibit A-3 to the Equipment Operating Lease.
"RETURN OPTION" shall have the meaning specified in paragraph (c) of Section
15.1 of the Equipment Operating Lease.
"S&P" shall mean Standard & Poor's Rating Group, a division of McGraw-Hill, Inc.
or any successor thereto.
"SCHEDULED CLOSING DATE" shall mean February 29, 1996 and any date set for
Closing in a notice of postponement pursuant to Section 2.2(c) of the
Participation Agreement.
"SECOND SEVERANCE AGREEMENT" shall mean the Personal Property Agreement, dated
as of February 29, 1996, in substantially the form of Exhibit N to the
Participation Agreement, between Old Dominion and Virginia Power.
"SECURED CLAIMS" shall have the meaning specified in Section 3 of the Pledge
Agreement.
"SECURED DEPOSIT CLAIMS" shall have the meaning specified in Section 3 of the
Deposit Pledge Agreement.
"SECURED INDEBTEDNESS" shall have the meaning specified in the Granting Clause
of the Loan Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECURITY" shall have the same meaning as in Section 2(1) of the Securities Act.
"SECURITY AGREEMENTS" shall mean, collectively, the Deposit Pledge Agreement,
the Payment Undertaking Pledge Agreement and the Pledge Agreement.
"SERIES A LOAN CERTIFICATES" shall mean Series A Loan Certificates, dated the
Closing Date, in substantially the form of Exhibit A to the Loan Agreement, in
an initial principal amount equal to the Series A Loan Commitment, issued by the
Owner Trustee to the Lenders pursuant to the Loan Agreement.
"SERIES A LOAN COMMITMENT" shall mean $239,861,780.
"SERIES B LOAN CERTIFICATES" shall mean Series B Loan Certificates, dated the
Closing Date, in substantially the form of Exhibit B to the Loan Agreement, in
an initial principal amount
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equal to the Series B Loan Commitment, issued by the Owner Trustee to the
Lenders pursuant to the Loan Agreement.
"SERIES B LOAN COMMITMENT" shall mean $26,654,309.
"SERIES 1996 LOAN CERTIFICATES" shall mean the Series A Loan Certificates and
the Series B Loan Certificates.
"SERVICE CONTRACT OPTION" shall have the meaning specified in paragraph (b) of
Section 15.1 of the Equipment Operating Lease.
"SEVERABLE MODIFICATION" shall mean any Modification that is readily removable
without causing material damage to Clover Unit 1.
"SEVERANCE AGREEMENTS" shall mean the First Severance Agreement and the Second
Severance Agreement.
"SIGNIFICANT DAMAGE EVENT" shall mean any event (a) which causes damage to
Clover Unit 1 for which Old Dominion's share under the Clover Operating
Agreement of the cost of repair which is not covered by the proceeds of property
damage insurance is reasonably estimated to exceed $10,000,000, or (b) which is
reasonably estimated to result in Clover Unit 1 being removed from commercial
operation for a period of 60 days or more; PROVIDED, HOWEVER, that, damage or
interruption of the type specified in clause (a) or (b) above shall not be a
Significant Damage Event if at the time such damage or interruption occurs, (i)
Old Dominion shall have wholesale power contracts with its cooperative members
providing for a formulary rate or such other rate mechanism which permits Old
Dominion to recover, to the extent not covered by insurance, Old Dominion's
share of the costs of repair of such damage to Clover Unit 1 and any additional
costs (less any savings in fuel or maintenance cost as a result of Clover Unit 1
not being operational) incurred by Old Dominion in connection with the purchase
of replacement power during any such interruption in commercial operation of
Clover Unit 1, (ii) such formulary rate or such rate mechanism has been filed
with or approved by the appropriate regulatory authorities having jurisdiction
over the rates charged to member cooperatives by Old Dominion if and to the
extent such filing or approval is required by Applicable Law and (iii) is
supplying energy to its member cooperatives in accordance with such wholesale
power contracts.
"SPECIFIED SUM" shall mean $239,861,780, the amount paid by Old Dominion to the
Bank in consideration of the obligations of the Bank under the Payment
Undertaking Agreement.
"SUBSIDIARY" of any Person shall mean any corporation, association, or other
business entity of which more than 50% (by number of votes) of the voting stock
at the time outstanding shall at the time be owned, directly or indirectly, by
such Person or by any other corporation, association or trust which is itself a
Subsidiary within the meaning of this definition, or collectively by such Person
and any one or more such Subsidiaries.
31
<PAGE>
"SUPPLEMENTAL FINANCING" shall have the meaning specified in Section 10.1 of the
Participation Agreement.
"SUPPLEMENTAL RENT" shall mean any and all amounts, liabilities and obligations
(other than Basic Rent) which Old Dominion assumes or agrees to pay under the
Operative Documents (other than the Foundation Operating Lease) to the Owner
Trustee or any other Person, including, but not limited to, Termination Value
and if and to the extent applicable, the Purchase Option Price or the Walk Away
Payment.
"TAX" or "TAXES" shall mean all sales taxes, use taxes, transfer taxes,
value-added taxes, ad valorem taxes, property taxes (personal and real, tangible
and intangible), income taxes, gross receipts taxes, withholding taxes and stamp
taxes, levies, assessments, withholdings and other charges and impositions of
any nature, plus all related penalties, fines and additions to tax, imposed by
any federal, state or local government or other taxing authority.
"TAX ADVANCE" shall have the meaning specified in Section 8.2(g) of the
Participation Agreement.
"TAX ASSUMPTIONS" shall have the meaning specified in Section 2 of the Tax
Indemnity Agreement.
"TAX BENEFIT" shall have the meaning specified in Section 8.2(e) of the
Participation Agreement.
"TAX CHANGE" shall have the meaning specified in Section 4(e) of the Tax
Indemnity Agreement.
"TAX CLAIM" shall have the meaning specified in Section 8.2(g) of the
Participation Agreement.
"TAX INDEMNITEE" shall have the meaning specified in Section 8.2(a) of the
Participation Agreement.
"TAX INDEMNITY AGREEMENT" shall mean the Tax Indemnity Agreement, dated as of
February 29, 1996, in substantially the form of Exhibit M to the Participation
Agreement, between Old Dominion and the Owner Participant.
"TERM", with respect to the Equipment Operating Lease and the Foundation
Operating Lease, shall mean the Interim Term and the Basic Term.
"TERMINATION DATE" shall mean each of the monthly dates during the Term
identified as a "Termination Date" on Schedule 2 of the Equipment Operating
Lease or Schedule 2 of the Foundation Operating Lease, as the case may be.
"TERMINATION VALUE" for any Termination Date shall mean (a) with respect to the
Equipment Interest, the product of the Equipment Interest Cost and the
appropriate percentage as determined in accordance with Schedule 2 of the
Equipment Operating Lease and (b) with respect to the
32
<PAGE>
Foundation Interest, the product of the Foundation Interest Cost and the
appropriate percentage as determined in accordance with Schedule 2 of the
Foundation Operating Lease.
"TRANSACTION COSTS" shall mean the following:
(i) the cost of reproducing and printing the Operative
Documents and all costs and fees in connection with the initial filing
and recording of the Foundation Head Lease, the Foundation Operating
Lease, the Option Agreement and the Leasehold Mortgage and any other
document required to be filed or recorded pursuant to the provisions
hereof or of any other Operative Document and any Uniform Commercial
Code filing fees in respect of the perfection of any security interests
created by any of the Operative Documents or as otherwise reasonably
required by the Owner Participant;
(ii) the reasonable fees and expenses of Chadbourne & Parke
LLP, special counsel for the Owner Participant (up to the amount
separately agreed to by the Owner Participant and Old Dominion) and of
Mays & Valentine, special Virginia counsel to the Owner Participant,
for their services rendered in connection with the negotiation,
execution and delivery of the Operative Documents;
(iii) the reasonable fees and expenses of Orrick, Herrington &
Sutcliffe, special counsel for Old Dominion (up to the amount
separately agreed to by Old Dominion), for their services rendered in
connection with the negotiation, execution and delivery of the
Participation Agreement and the other Operative Documents;
(iv) the reasonable fees and expenses of LeClair Ryan, general
Virginia counsel for Old Dominion (up to the amount separately agreed
to by Old Dominion), for their services rendered in connection with the
negotiation, execution and delivery of the Participation Agreement and
the other Operative Documents;
(v) the reasonable fees and expenses of Day, Berry & Howard,
special counsel for the Owner Trustee (up to the amount separately
agreed to by the Owner Trustee and Old Dominion), for their services
rendered in connection with the negotiation, execution and delivery of
the Participation Agreement and the other Operative Documents;
(vi) the reasonable fees and expenses of Davis Polk &
Wardwell, special counsel for the Agent and the Lenders (up to the
amount separately agreed to by the Agent and Old Dominion), for their
services rendered in connection with the negotiation, execution and
delivery of the Participation Agreement and the other Operative
Documents;
(vii) the reasonable fees and expenses of Williams, Mullen,
Christian & Dobbins, special counsel to the Owner Trustee, for their
services rendered in connection with the negotiation, execution and
delivery of the Participation Agreement and the other Operative
Documents to which it is a party;
33
<PAGE>
(viii) the initial fees and expenses of the Owner Trustee in
connection with the execution and delivery of the Participation
Agreement and the other Operative Documents to which it is or will be a
party;
(ix) the fees of the Engineer (up to the amount separately
agreed to by the Engineer and Old Dominion), for its services rendered
in connection with delivering the Engineering Report required by
Section 4.14 of the Participation Agreement;
(x) the fees of the Appraiser (up to the amount separately
agreed to by the Appraiser and Old Dominion), for its services rendered
in connection with delivering the Appraisal required by Section 4.16 of
the Participation Agreement;
(xi) the fee of the Advisor to the Lessee (up to the amount
separately agreed to by BOT and Old Dominion), for its services
rendered in connection with the transactions contemplated by the
Participation Agreement;
(xii) the premium for the bond insurance issued by AMBAC;
(xiii) travel expenses incurred by the Owner Participant and
the Owner Trustee in connection with the transactions contemplated by
the Participation Agreement; and
(xiv) the facility fee payable to First Union Leasing
Corporation (in the amount agreed to by said Corporation and Old
Dominion).
Notwithstanding the foregoing, Transaction Costs shall not include internal
costs and expenses such as salaries and overhead of whatsoever kind or nature
nor costs incurred by the parties to the Participation Agreement pursuant to
arrangements with third parties for services (other than those expressly
referred to above or listed on Schedule 1 to the Participation Agreement), such
as computer time procurement, financial analysis and consulting, advisory
services, and costs of a similar nature.
"TRANSACTION PARTY" shall mean, individually or collectively as the context
shall require, all or any of the parties to the Operative Documents (including
the Trust Company).
"TRANSFEREE" shall have the meaning specified in Section 5.1(a) of the
Participation Agreement.
"TRANSFEREE GUARANTY" shall mean a guaranty of the obligations of a Transferee
executed pursuant to Section 5.1 of, and in substantially the form of Exhibit P
to, the Participation Agreement.
"TRANSFEREE'S GUARANTOR" shall mean any Person which shall guaranty the
obligations of a Transferee under the Operative Documents in accordance with
Section 5.1 of the Participation Agreement.
34
<PAGE>
"TRANSMISSION AND INTERCONNECTION AGREEMENT" shall mean a transmission and
interconnection agreement to be entered into by the Owner Trustee and Old
Dominion in connection with Old Dominion's exercise of the Service Contract
Option under the Equipment Operating Lease;
"TREASURY REGULATIONS" shall mean regulations, including temporary regulations,
promulgated under the Code.
"TRUST AGREEMENT" shall mean the Trust Agreement, dated as of February 29, 1996,
substantially in the form of Exhibit A to the Participation Agreement, between
the Owner Participant and the Owner Trustee in its individual capacity to the
extent expressly stated therein and otherwise not in its individual capacity but
solely as trustee thereunder.
"TRUST COMPANY" shall mean State Street Bank and Trust Company, a
state-chartered trust company organized and existing under the laws of the
Commonwealth of Massachusetts.
"TRUST ESTATE" shall mean all the estate, right, title and interest of the Owner
Trustee in, to and under the Lessor's Unit 1 Interest and the Operative
Documents, including, without limitation, all funds advanced to the Owner
Trustee by the Owner Participant, all installments and other payments of Basic
Rent, Foundation Basic Rent, Supplemental Rent, Foundation Supplemental Rent,
Termination Value under the Equipment Operating Lease and the Foundation
Operating Lease, condemnation awards, purchase price, sale proceeds, and all
other proceeds of any kind for or with respect to the Lessor's Unit 1 Interest
and the Operative Documents, but shall not include Excluded Property.
"TRUSTEES" shall mean David S. Cohn and C. Cotesworth Pinckney as trustees under
the Leasehold Mortgage, and their successors and persons or entities substituted
for them.
"UNIT 1 EQUIPMENT" shall mean those assets listed on Exhibit A-1 to the
Equipment Head Lease and Exhibit A-1 to the Equipment Operating Lease. The Unit
1 Equipment includes Retained Assets and Pollution Control Assets which are
located on the Unit 1 Site, but does not include the Common Facilities
Equipment, the Unit 1 Foundation, the Common Facilities Foundation or the Clover
Real Estate.
"UNIT 1 FOUNDATION" shall mean all foundations, supports, structures and other
improvements situated on the Unit 1 Site, including those upon which the Unit 1
Equipment is situated.
"UNIT 1 SITE" shall mean the land on which the Clover Unit 1 Generating Facility
is situated, which land is described in Schedule 2 to Exhibit A to the Option
Agreement.
"UNIT 2 EQUIPMENT" shall mean those assets used in connection with Clover Unit
2, but does not include the Common Facilities Equipment, the Unit 2 Foundation,
the Common Facilities Foundation or the Clover Real Estate.
"UNIT 2 FOUNDATION" shall mean all foundations, supports, structures and other
improvements situated on the Unit 2 Site, including those upon which the Unit 2
Equipment is situated.
35
<PAGE>
"UNIT 2 PARTIES" shall mean at any time all of the parties (other than Virginia
Power or any successor thereto) which are then tenants or grantees of all or any
portion of interest in Clover Unit 2.
"UNIT 2 SITE" shall mean the land on which the Clover Unit 2 Generating Facility
is situated, which land is described in Schedule 3 to Exhibit A to the Option
Agreement.
"UNITED STATES" shall mean the United States of America.
"UTRECHT-AMERICA" shall mean Utrecht-America Finance Co., a corporation
organized and existing under the laws of the State of Delaware and any successor
thereto.
"VIRGINIA COMMISSION" shall mean the State Corporation Commission of Virginia,
including any successor governmental agency.
"VIRGINIA COMMISSION ORDER" shall mean the order issued by the Virginia
Commission with respect to the Overall Transaction (Case No. PUA950049) on
December 5, 1995.
"VIRGINIA POWER" shall mean Virginia Electric and Power Company, a corporation
organized under the laws of the Commonwealth of Virginia and any successor
thereto.
"WALK AWAY PAYMENT" shall mean an amount equal to the excess (if any) of
Termination Value with respect to the Equipment Interest over the Fair Market
Sales Value of the Equipment Interest both determined as of the Expiration Date
(minus a reasonable allowance for hypothetical disposition costs), such excess
not to exceed such Termination Value minus 20% of the Equipment Interest Cost;
PROVIDED that under all circumstances the Walk Away Payment when combined with
the Foundation Walk Away Payment, the Basic Rent and Foundation Basic Rent
payable on the Expiration Date, shall be at least equal to the outstanding
principal amount of and accrued interest on the Loan Certificates on the
Expiration Date.
36
CLOVER UNIT 1
EQUIPMENT INTEREST LEASE AGREEMENT
Dated as of February 29, 1996
between
OLD DOMINION ELECTRIC COOPERATIVE,
as Equipment Head Lessor
and
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity, but
solely as Owner Trustee,
as Equipment Head Lessee
CLOVER UNIT 1 GENERATING FACILITY
AND
COMMON FACILITIES
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S><C>
SECTION 1. DEFINITIONS......................................................... 3
SECTION 2. LEASING OF THE EQUIPMENT INTEREST................................... 3
SECTION 3. TERM AND RENT....................................................... 3
Section 3.1 Basic Term............................................ 3
Section 3.2 Renewal Term.......................................... 4
Section 3.3 Equipment Head Lease Rent............................. 4
Section 3.4 Nonterminability...................................... 4
SECTION 4. DISCLAIMER OF WARRANTIES............................................ 5
SECTION 5. RIGHT OF QUIET ENJOYMENT............................................ 6
SECTION 6. RETURN OF EQUIPMENT INTEREST........................................ 6
Section 6.1 Return of Equipment Interest.......................... 6
Section 6.2 Right of First Refusal in Virginia Power.............. 6
Section 6.3 Right of Virginia Power to Exercise Purchase Option... 7
SECTION 7. LIENS............................................................... 8
SECTION 8. OPERATION AND MAINTENANCE; REPLACEMENT
COMPONENTS.......................................................... 8
Section 8.1 Operation and Maintenance............................. 8
Section 8.2 Replacement Components................................ 8
SECTION 9. MODIFICATIONS....................................................... 8
SECTION 10. EARLY TERMINATION OF EQUIPMENT HEAD LEASE
TERM................................................................ 9
Section 10.1 Early Termination during the Equipment Operating
Lease Term.......................................................... 9
Section 10.2 Early Termination After the Equipment Operating
Lease Term.......................................................... 9
SECTION 11. INSPECTION.......................................................... 9
SECTION 12. SECURITY FOR EQUIPMENT HEAD LESSEE'S
OBLIGATION TO THE LENDERS........................................... 9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
<S><C>
SECTION 13. MISCELLANEOUS....................................................... 10
Section 13.1 Agreement Regarding Equipment......................... 10
Section 13.2 Amendments and Waivers................................ 10
Section 13.3 Notices............................................... 10
Section 13.4 Survival.............................................. 11
Section 13.5 Successors and Assigns................................ 11
Section 13.6 Business Day.......................................... 12
Section 13.7 Governing Law......................................... 12
Section 13.8 Severability.......................................... 12
Section 13.9 Counterparts.......................................... 12
Section 13.10 Headings and Table of Contents........................ 12
Section 13.11 Limitations of Liability.............................. 12
Section 13.12 Further Assurances.................................... 13
Section 13.13 Effectiveness of Equipment Head Lease................. 13
Exhibit A-1 - Description of Unit 1 Equipment
Schedule 1-A - Description of Transmission Assets
Exhibit A-2 - Description of Common Facilities Equipment
Exhibit A-3 - Description of Retained Assets
Exhibit A-4 - Description of Pollution Control Assets
</TABLE>
ii
<PAGE>
CLOVER UNIT 1
EQUIPMENT INTEREST LEASE AGREEMENT
This CLOVER UNIT 1 EQUIPMENT INTEREST LEASE AGREEMENT, dated as of
February 29, 1996 (this "Equipment Head Lease"), between OLD DOMINION ELECTRIC
COOPERATIVE, a wholesale power supply cooperative organized under the laws of
the Commonwealth of Virginia, as lessor (the "Equipment Head Lessor"), and STATE
STREET BANK AND TRUST COMPANY, a state-chartered trust company organized and
operating under the laws of the Commonwealth of Massachusetts, not in its
individual capacity, but solely as Owner Trustee under the Trust Agreement, as
lessee (the "Equipment Owner Trustee").
WHEREAS, the Clover Real Estate is more particularly described in
Schedule 1 and comprised of the Unit 1 Site described in Schedule 2, the Unit 2
Site described in Schedule 3, and the Common Facilities Site described in
Schedule 4, and certain other property, each such Schedule 1, Schedule 2,
Schedule 3, and Schedule 4 being attached to the Ground Lease and Sublease as
part thereof, the form of which Ground Lease and Sublease is marked Exhibit A
and is attached to, and recorded in the Halifax Clerk's Office with, the Option
Agreement of even date herewith;
WHEREAS, a copy of the Clover Power Station Plat is marked Exhibit B
and is attached to, and recorded in the Halifax Clerk's Office with, the Option
Agreement as a part thereof;
WHEREAS, Old Dominion and Virginia Power own the Clover Real Estate as
tenants-in-common;
WHEREAS, by the Clover Agreements, Old Dominion and Virginia Power
established their respective rights and obligations as tenants-in-common of the
Clover Real Estate and of all improvements thereafter to be constructed, and all
personal property thereafter to be situated, on the Clover Real Estate. Such
improvements and personal property owned by Old Dominion and Virginia Power as
tenants-in-common include, but are not limited to, (a) the Unit 1 Foundation
constructed on the Unit 1 Site, (b) the Unit 2 Foundation being constructed on
the Unit 2 Site, (c) the Common Facilities Foundation constructed on the Common
Facilities Site, (d) the Unit 1 Equipment situated on the Unit 1 Site, (e) the
Unit 2 Equipment being situated on the Unit 2 Site, and (f) the Common
Facilities Equipment situated on the Common Facilities Site;
WHEREAS, as tenants-in-common of such real and personal property, each
of Old Dominion and Virginia Power owns a 50% undivided interest in such real
and personal property, including the right to nonexclusive possession of all
such real and personal property, subject to (a)
<PAGE>
the rights of the other to nonexclusive possession of all such real and
personal property, (b) the terms and conditions of the Clover Agreements and (c)
in the case of the Pollution Control Assets, the rights of the Pollution Control
Assets Lessor;
WHEREAS, by the Option Agreement which is recorded in the Halifax
Clerk's Office, Old Dominion granted and conveyed to the Owner Trustee, its
successors and assigns, the right and option to lease the Ground Interest from
Old Dominion, subject to the Owner Trustee's agreement to sublease the Ground
Interest simultaneously back to Old Dominion upon the terms and conditions of
the Option Agreement if the Owner Trustee exercises such option;
WHEREAS, Old Dominion has leased to the Owner Trustee the Foundation
Interest by the Foundation Head Lease;
WHEREAS, by the Foundation Operating Lease, the Owner Trustee will
lease the Foundation Interest back to Old Dominion upon a term which shall end
prior to the expiration of the term of the Foundation Head Lease;
WHEREAS, by the Equipment Operating Lease, the Owner Trustee will lease
the Equipment Interest back to Old Dominion upon a term which shall end prior to
the expiration of the term of this Equipment Head Lease;
WHEREAS, although Old Dominion and the Owner Trustee intend that the
Foundation Interest at all times and in all respects be and remain personal
property under Virginia law, they will record the Foundation Head Lease and the
Foundation Operating Lease in the Halifax Clerk's Office, in order to satisfy
the conditions of Section 55-96 of the Code of Virginia 1950, as amended, in the
event that the Foundation Interest is deemed to be real estate or an interest in
real estate for purposes of such Section 55-96. The Equipment Head Lease and the
Equipment Operating Lease are not to be recorded; and
WHEREAS, upon the leasing or other conveyance by Old Dominion to the
Unit 2 Parties of the foundation and the equipment in connection with Clover
Unit 2, each of Owner Trustee (on the one hand) and the Unit 2 Parties (on the
other hand) shall share equally all of those rights, and shall be subject
equally to having all of those responsibilities undertaken, which are imposed
upon Old Dominion with respect to the Common Facilities Site, the Common
Facilities Foundation, and the Common Facilities Equipment, as (a)
tenant-in-common with Virginia Power of such property, and (b) a party to the
Clover Agreements.
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
2
<PAGE>
SECTION 1. DEFINITIONS.
Capitalized terms used in this Equipment Head Lease and not otherwise
defined herein shall have the respective meanings set forth in Appendix A to the
Participation Agreement, dated as of February 29, 1996, among Old Dominion,
State Street Bank and Trust Company, First Union National Bank of Florida and
Utrecht-America Finance Co. All references to sections, paragraphs, clauses and
exhibits are to sections, paragraphs, clauses and exhibits in this Equipment
Head Lease unless otherwise indicated and the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Equipment Head Lease
as a whole and not to any particular section or other subdivision.
Where any provision in this Equipment Head Lease refers to action to be
taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
SECTION 2. LEASING OF THE EQUIPMENT INTEREST.
The Equipment Head Lessor hereby leases the Equipment Interest to the
Equipment Head Lessee, and the Equipment Head Lessee hereby leases the Equipment
Interest from the Equipment Head Lessor. The Equipment Head Lessor and the
Equipment Head Lessee understand and acknowledge that (a) legal title to all
assets in the Equipment Interest constituting Retained Assets remains vested in
Old Dominion and Virginia Power as tenants-in-common and (b) such Retained
Assets are subject to the Lien of the Old Dominion Indenture, Permitted
Encumbrances and the rights of Virginia Power under the Clover Agreements. The
Equipment Head Lessor and the Equipment Head Lessee understand and acknowledge
that (x) legal title to all assets in the Equipment Interest constituting
Pollution Control Assets is vested in the Pollution Control Assets Lessor and
Virginia Power as tenants-in-common, (y) such Pollution Control Assets are
subject to the Lien of the Old Dominion Indenture, Permitted Encumbrances, and
the rights of Virginia Power under the Clover Agreements and (z) all right,
title and interest of Old Dominion in and to such Pollution Control Assets have
been leased to the Pollution Control Assets Lessor and leased back to Old
Dominion pursuant to the Pollution Control Assets Lease.
Descriptions of the Unit 1 Equipment and the Common Facilities
Equipment are set forth on Exhibits A-1 and A-2, respectively, to this Equipment
Head Lease. Descriptions of the Retained Assets and the Pollution Control Assets
are set forth on Exhibits A-3 and A-4, respectively, to this Equipment Head
Lease.
3
<PAGE>
SECTION 3. TERM AND RENT.
SECTION 3.1 BASIC TERM. The term of this Equipment Head Lease shall
commence on the Closing Date and shall terminate at 11:59 p.m. (New York City
time) on January 5, 2045 (the "Equipment Head Lease Basic Term"), unless earlier
terminated pursuant to the provisions of Section 10 hereof.
SECTION 3.2 RENEWAL TERM. At the expiration of the Equipment Head Lease
Basic Term or any Equipment Head Lease Renewal Term, the Equipment Head Lessee
may renew this Equipment Head Lease for an additional term or terms of not less
than 1 year each (each an "Equipment Head Lease Renewal Term" and, together with
the Equipment Head Lease Basic Term, the "Equipment Head Lease Term") by giving
to the Equipment Head Lessor 180 days prior written notice; PROVIDED that the
Equipment Head Lessee shall be permitted to renew the term of this Equipment
Head Lease for a Equipment Head Lease Renewal Term only if (a) concurrently with
such renewal, the Foundation Head Lease Term is renewed for a period equal to
the Equipment Head Lease Renewal Term and (b) on the date that notice of such
renewal is given and at the commencement of such Equipment Head Lease Renewal
Term, (i) the Clover Unit 1 Generating Facility continues to be used for the
production of electric capacity and energy and (ii) no determination has been
made in accordance with Section 11.01(a) the Clover Operating Agreement to
retire the Clover Unit 1 Generating Facility.
SECTION 3.3 EQUIPMENT HEAD LEASE RENT. The Equipment Head Lessee hereby
agrees to pay the Equipment Head Lessor rent for the Equipment Head Lease Basic
Term in a single installment in the amount of $301,800,000 (the "Equipment Head
Lease Basic Rent"), which amount will be paid on the Closing Date. The Equipment
Head Lessor acknowledges receipt of such amount in full satisfaction of the
Equipment Head Lessee's obligation to pay rent during the Equipment Head Lease
Basic Term. If the Equipment Head Lessee elects to renew the term of the
Equipment Head Lease for a Equipment Head Lease Renewal Term or Terms, pursuant
to Section 3.2 hereof, the Equipment Head Lessee agrees to pay to the Equipment
Head Lessor annual rent during each Equipment Head Lease Renewal Term of $100,
which amount shall be due and payable in advance on each January 5 of each year
during such Equipment Head Lease Renewal Term.
SECTION 3.4 NONTERMINABILITY. Subject to Section 10 hereof, this
Equipment Head Lease shall not terminate, nor shall any of the rights granted
and conveyed hereunder to the Equipment Head Lessee be extinguished, lost or
otherwise impaired, in whole or in part, by any circumstances of any character
or for any reason whatsoever, including, without limitation, the following: (a)
any damage to or loss or destruction of all or any part of Clover Unit 1 for any
reason whatsoever and of whatever duration, (b) the condemnation, requisition
(by eminent domain or otherwise), seizure or other taking of title or use of
Clover Unit 1 by any Governmental Entity or otherwise, (c) any prohibition,
limitation or restriction on the use by any Person of all or any part of its
4
<PAGE>
property or the interference with such use by any Person, or any eviction by
paramount title or otherwise, (d) any inadequacy, incorrectness or failure of
the description of Clover Unit 1 or any part thereof or any rights or property
in which an interest is intended to be granted or conveyed by this Equipment
Head Lease, (e) the insolvency, bankruptcy, reorganization or similar
proceedings by or against the Equipment Head Lessor or the Equipment Head Lessee
or any other Person, (f) failure by the Equipment Head Lessee to comply with
Section 6, 7 or 8 hereof or (g) any other reason whatsoever, whether similar
or dissimilar to any of the foregoing.
5
<PAGE>
SECTION 4. DISCLAIMER OF WARRANTIES.
WITHOUT WAIVING ANY CLAIM THE EQUIPMENT HEAD LESSEE MAY HAVE AGAINST
ANY MANUFACTURER, VENDOR OR CONTRACTOR UNDER THE CLOVER OWNERSHIP AGREEMENT, THE
EQUIPMENT HEAD LESSEE ACKNOWLEDGES AND AGREES SOLELY FOR THE BENEFIT OF THE
EQUIPMENT HEAD LESSOR THAT (a) CLOVER UNIT 1 AND EACH COMPONENT THEREOF ARE OF A
SIZE, DESIGN, CAPACITY AND MANUFACTURE ACCEPTABLE TO THE EQUIPMENT HEAD LESSEE,
(b) THE EQUIPMENT HEAD LESSEE IS SATISFIED THAT CLOVER UNIT 1 AND EACH COMPONENT
THEREOF ARE SUITABLE FOR THEIR RESPECTIVE PURPOSES, (c) THE EQUIPMENT HEAD
LESSOR IS NOT A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, (d) CLOVER
UNIT 1 AND EACH COMPONENT THEREOF ARE LEASED HEREUNDER SUBJECT TO ALL APPLICABLE
LAWS NOW IN EFFECT OR HEREAFTER ADOPTED AND IN THE STATE AND CONDITION OF EVERY
PART THEREOF WHEN THE SAME FIRST BECAME SUBJECT TO THIS LEASE WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND BY THE EQUIPMENT HEAD LESSOR AND (e) THE
EQUIPMENT HEAD LESSOR LEASES AND THE EQUIPMENT HEAD LESSEE TAKES THE EQUIPMENT
INTEREST UNDER THIS EQUIPMENT HEAD LEASE "AS-IS", "WHERE-IS" AND "WITH ALL
FAULTS", AND THE EQUIPMENT HEAD LESSEE ACKNOWLEDGES THAT THE EQUIPMENT HEAD
LESSOR MAKES NO, NOR SHALL BE DEEMED TO HAVE MADE, AND EXPRESSLY DISCLAIMS, ANY
AND ALL RIGHTS, CLAIMS, WARRANTIES OR REPRESENTATIONS, EITHER EXPRESS OR
IMPLIED, AS TO THE VALUE, CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN,
OPERATION, OR MERCHANTABILITY THEREOF OR AS TO THE QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM FROM
PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR OTHER
DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY OBLIGATIONS
BASED ON STRICT LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED REPRESENTATION
OR WARRANTY WHATSOEVER WITH RESPECT THERETO, except that the Equipment Head
Lessor represents and warrants to the Equipment Head Lessee that the
Equipment Head Lessor has (1) good and valid title, as a tenant-in-common with
Virginia Power, to the Retained Assets free and clear of all Liens other than
Permitted Liens and (2) a valid leasehold interest, to the extent of a 50%
undivided interest, in the Pollution Control Assets free and clear of all Liens
other than Permitted Liens.
6
<PAGE>
SECTION 5. RIGHT OF QUIET ENJOYMENT.
The Equipment Head Lessor agrees that, notwithstanding any other
provision of any of the Operative Documents, so long as this Equipment Head
Lease has not been terminated pursuant to the express provisions of Section 10
hereof, it shall not through its own actions or inactions interfere with or
interrupt the quiet enjoyment of the use, operation and possession by the
Equipment Head Lessee of the Equipment Head Lease Interest subject to the terms
hereof.
SECTION 6. RETURN OF EQUIPMENT INTEREST.
SECTION 6.1 RETURN OF EQUIPMENT INTEREST. Upon termination of this
Equipment Head Lease pursuant to Section 10.2 or, subject to Section 10.1, on
the last day of the Equipment Head Lease Term, the Equipment Head Lessee shall
return the Equipment Interest by delivering constructive possession of the same
to the Equipment Head Lessor at the location of Clover Unit 1 in Clover,
Virginia, without representation or warranty other than that the Equipment
Interest is free and clear of all Lessor's Liens and Owner Participant's Liens,
without any other liability or cost to the Equipment Head Lessee. The
obligations of the Equipment Head Lessee under this Section 6.1 shall survive
termination of this Equipment Head Lease.
SECTION 6.2 RIGHT OF FIRST REFUSAL IN VIRGINIA POWER. If (a) at any
time during the Equipment Head Lease Term the Equipment Head Lessee shall seek
to sell, lease or otherwise transfer its interest in the Equipment Head Lease
Interest or any part thereof to any Person other than Old Dominion pursuant to
any provision of the Equipment Operating Lease, or (b) on or after the
expiration or termination of the Term of the Equipment Operating Lease, the
Owner Participant seeks to sell the Beneficial Interest or any part thereof,
such Equipment Head Lease Interest or Beneficial Interest, as the case may be,
shall be subject to Virginia Power's right of first refusal on the terms and
conditions set forth in this Section 6.2. The Equipment Head Lessee will give
Virginia Power prompt written notice of all bona fide offers received from any
other Person to purchase or acquire such other interest in the Equipment Head
Lease Interest or Owner Participant's Beneficial Interest or any part of either
which are subject to this Section 6.2, together with a full and complete
statement of the price and all of the terms, conditions and provisions contained
in such offers. Virginia Power will thereafter have the right within a period of
forty-five (45) Business Days from and after the giving of such notice to notify
the Equipment Head Lessee of its intent to exercise its rights of first refusal.
If Virginia Power elects to exercise the right provided in the preceding
sentence, it will within 180 days of such notice execute a contract on the same
terms and conditions as the offer giving rise to such right. If Virginia Power
does not give such notice to the Equipment Head Lessee within the forty-five
(45) Business Day period and execute such a contract, the Equipment Head Lessee
will be free to proceed under the terms and conditions as set forth in its
notice to Virginia Power. In the event that such terms or conditions are revised
in any way that materially changes the agreement for sale, lease or transfer
7
<PAGE>
(including any reduction in price or the terms of payment thereof), the
Equipment Head Lessee must again comply with the notice and acceptance
provisions of this Section 6.2. Virginia Power shall be deemed a third party
beneficiary with respect to this Section 6.2. The right of first refusal in
favor of Virginia Power set forth in this Section 6.2 shall be exercised
only in connection with its simultaneous exercise of the right of first
refusal set forth in Section 6.2 of the Foundation Head Lease.
Notwithstanding any provision to the contrary, it is agreed and understood that
any transfer of the Equipment Head Lease Interest by the Owner Trustee to any
successor Owner Trustee pursuant to Section 9 of the Trust Agreement shall not
be subject to the provisions of this Section 6.2.
SECTION 6.3 RIGHT OF VIRGINIA POWER TO EXERCISE PURCHASE OPTION. If the
Lessee shall elect the Service Contract Option or the Return Option pursuant to
Section 15.1 of the Equipment Operating Lease (including if it shall be deemed
to have elected the Return Option in accordance with the second sentence of such
Section 15.1), Virginia Power shall have the right to purchase the Equipment
Interest on the Expiration Date on the terms and conditions set forth in this
Section 6.3. Virginia Power shall give the Equipment Head Lessor and the
Equipment Head Lessee written notice of its irrevocable election by the date no
later than two months following the earlier of (i) the Lessee's election notice
contemplated by Section 15.1 of the Equipment Operating Lease and (ii) a date
sixteen months prior to the Expiration Date. If Virginia Power shall not give
the notice contemplated by the preceding sentence, it will be deemed to have
elected not to purchase and it will have no right to purchase the Equipment
Interest pursuant to this Section 6.3. If Virginia Power shall give notice of
its election to purchase the Equipment Interest pursuant to this Section 6.3, it
shall become unconditionally obligated to pay all amounts of the Purchase Option
Price at the times and in the amounts set forth in clause (a)(i) and (b) of
Section 15.2 of the Equipment Operating Lease and, without duplication of its
covenant set forth in the succeeding sentence, the Equipment Head Lessor shall
be obligated to pay on the Expiration Date the amounts set forth in (a)(ii) and
(a)(iii) of Section 15.2 of the Equipment Operating Lease. If Virginia Power
elects to purchase the Equipment Interest in accordance with this Section 6.3,
the Equipment Head Lessor and the Equipment Head Lessee each agree to comply
with their respective covenants set forth in Section 15.2 of the Equipment
Operating Lease (other than, in the case of the Equipment Head Lessor, the
covenant to pay any amounts of the Purchase Option Price) in order to permit
Virginia Power to purchase the Equipment Interest in accordance with such
Section 15.2 of the Equipment Operating Lease. Other than as set forth in the
preceding sentence, the Equipment Head Lessor shall have no obligations in
connection with Virginia Power's exercise of the election set forth in this
Section 6.3. Virginia Power shall be deemed a third party beneficiary with
respect to this Section 6.3. The election of Virginia Power to purchase the
Equipment Interest set forth in this Section 6.3 shall be exercised only in
connection with its simultaneous exercise of its election to purchase the
Foundation Interest set forth in Section 6.3 of the Foundation Head Lease.
8
<PAGE>
SECTION 7. LIENS.
The Equipment Head Lessee agrees that it will not, directly or
indirectly create, incur, assume or suffer to exist any Lessor's Liens or Owner
Participant's Liens on or with respect to the Equipment Interest or its
Equipment Head Lease Interest, and the Equipment Head Lessee shall promptly
notify the Equipment Head Lessor of the imposition of any such Lien of which the
Equipment Head Lessee is aware and shall promptly, at its own expense, take such
action as may be necessary to discharge any such Lien.
SECTION 8. OPERATION AND MAINTENANCE; REPLACEMENT COMPONENTS.
SECTION 8.1 OPERATION AND MAINTENANCE. The Equipment Head Lessee
covenants and agrees to operate, maintain and insure the Equipment Interest, or
cause the Equipment Interest to be operated, maintained and insured, in
accordance with the Clover Agreements. Simultaneously with the execution and
delivery by the parties of this Equipment Head Lease, the Equipment Head Lessee
and the Equipment Head Lessor have entered into the Clover Agreements Assignment
pursuant to which the Equipment Head Lessee has assumed all of the Equipment
Head Lessor's obligations under the Clover Agreements, to the extent, but only
to the extent, they relate to the Equipment Interest and the Foundation Interest
(and to the Ground Interest if the option under the Option Agreement is
exercised). The Equipment Head Lessee covenants and agrees that it will perform
all of its obligations under the Clover Agreements Assignment. The execution and
delivery of the Equipment Operating Lease shall be deemed compliance by the
Equipment Head Lessee with its covenants set forth in this Section 8.1 during
the Term of the Equipment Operating Lease without any further action by the
Equipment Head Lessee, whether or not the Lessee shall comply with the
corresponding obligations under the Equipment Operating Lease.
SECTION 8.2 REPLACEMENT COMPONENTS. An undivided interest equal to the
Lessor's Percentage in all Replacement Components incorporated in the Unit 1
Equipment and the Common Facilities Equipment included in Clover Unit 1 during
the Equipment Head Lease Term in accordance with the Equipment Operating Lease,
the Clover Operating Agreement or the Management Agreement shall automatically
become subject to this Equipment Head Lease without any action by any Person
whatsoever and shall be deemed to be a part of Clover Unit 1 and the Equipment
Interest for all purposes of this Equipment Head Lease.
9
<PAGE>
SECTION 9. MODIFICATIONS.
An undivided interest equal to the Lessor's Percentage in all
Modifications to the Unit 1 Equipment and Common Facilities Equipment included
in Clover Unit 1 during the Equipment Head Lease Term in accordance with the
Equipment Operating Lease, the Clover Operating Agreement or the Management
Agreement shall automatically become subject to this Equipment Head Lease
without any action by any Person whatsoever and shall be deemed to be a part of
Clover Unit 1 and the Equipment Interest for all purposes of this Equipment Head
Lease.
SECTION 10. EARLY TERMINATION OF EQUIPMENT HEAD LEASE TERM.
SECTION 10.1 EARLY TERMINATION DURING THE EQUIPMENT OPERATING LEASE
TERM. The Equipment Head Lease Term shall terminate prior to the scheduled
expiration date of the Equipment Head Lease Basic Term if the Equipment
Operating Lease is terminated pursuant to Section 10, 13 or 18 thereof or if the
Lessee purchases the Equipment Interest on the Expiration Date pursuant to
Section 15.2 of the Equipment Operating Lease. Upon satisfaction of the
requirements of the relevant section of the Equipment Operating Lease, the
Equipment Head Lease Term shall terminate without any action of any Person
whatsoever and the Equipment Head Lessor and the Equipment Head Lessee agree to
comply with the provisions of the applicable section of the Equipment Operating
Lease in connection with such termination.
SECTION 10.2 EARLY TERMINATION AFTER THE EQUIPMENT OPERATING LEASE
TERM. At any time following the expiration or termination of the Term of the
Equipment Operating Lease, the Equipment Head Lessee shall have the right to
terminate the Equipment Head Lease and return the Equipment Interest to the
Equipment Head Lessor by delivering constructive possession thereof to the
Equipment Head Lessor in accordance with Section 6.1.
SECTION 11. INSPECTION.
During the Term of the Equipment Operating Lease, the rights of the
Equipment Head Lessee, the Owner Participant, the Agent and their
representatives to inspect Clover Unit 1 shall be governed by Section 12 of the
Equipment Operating Lease.
10
<PAGE>
SECTION 12. SECURITY FOR EQUIPMENT HEAD LESSEE'S OBLIGATION TO
THE LENDERS.
In order to secure all amounts payable by, and all obligations to be
performed by, the Equipment Head Lessee under the Loan Agreement, the Equipment
Head Lessee has assigned in the Loan Agreement to the Agent for its benefit and
the ratable benefit of the Lenders its rights under this Equipment Head Lease
and granted security interests in favor of the Agent in all of the Equipment
Head Lessee's right, title and interest in and to the Equipment Interest,
including its interest in this Equipment Head Lease (other than Excepted
Payments and Excepted Rights). The Equipment Head Lessor hereby consents to such
grant and assignment and to the creation of such security interests and
acknowledges receipt of copies of the Loan Agreement, it being understood that
such consent shall not affect any requirement or the absence of any requirement
for any consent under any other circumstances. The Equipment Head Lessor hereby
acknowledges receipt of due notice that the Equipment Head Lessee's interest
in this Equipment Head Lease has been assigned to the Agent as security
pursuant to the Loan Agreement to the extent provided in the Loan Agreement.
Unless and until the Equipment Head Lessor shall have received written notice
from the Agent that the Equipment Head Lessee has the right to have the Lien of
the Loan Agreement discharged, the Agent shall have the right to exercise
the rights of the Equipment Head Lessee under this Equipment Head Lease to
the extent set forth in and subject in each case to the exceptions set forth in
the Loan Agreement.
SECTION 13. MISCELLANEOUS.
SECTION 13.1 AGREEMENT REGARDING EQUIPMENT. The parties hereto
understand and acknowledge that the Unit 1 Equipment and the Common Facilities
Equipment have been constructively severed from the Real Property by the
Severance Agreements and intend that all such equipment be treated as personal
property. However, should it be determined by a court of competent jurisdiction
that (notwithstanding the foregoing) any of the equipment constituting Unit 1
Equipment or Common Facilities Equipment are an interest in real property for
purposes of Virginia Code Section 55-96, the parties hereto agree that such
equipment shall not be part of the Unit 1 Equipment or the Common Facilities
Equipment and shall not be subject to this Equipment Head Lease, but shall
constitute a part of the Unit 1 Foundation or the Common Facilities Foundation
and shall be subject to and leased under the Foundation Head Lease.
SECTION 13.2 AMENDMENTS AND WAIVERS. No term, covenant, agreement or
condition of this Equipment Head Lease may be terminated, amended or compliance
therewith waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto.
11
<PAGE>
SECTION 13.3 NOTICES. Unless otherwise expressly specified or permitted
by the terms of this Equipment Head Lease, all communications and notices
provided for herein to a party hereto shall be in writing or by a
telecommunications device capable of creating a written record, and any such
notice shall become effective (a) upon personal delivery thereof, including,
without limitation, by overnight mail or courier service, (b) in the case of
notice by United States mail, certified or registered, postage prepaid, return
receipt requested, upon receipt thereof, or (c) in the case of notice by such a
telecommunications device, upon transmission thereof, provided such transmission
is promptly confirmed by either of the methods set forth in clauses (a) or (b)
above, in each case addressed to such party at its address set forth below or at
such other address as such party may from time to time designate by written
notice to the other party hereto:
If to the Equipment Head Lessor:
Old Dominion Electric Cooperative
4201 Dominion Boulevard
Glen Allen, Virginia 23060
Facsimile No.: (804) 747-3742
Telephone No.: (804) 747-0592
Attention: Vice President of Accounting and Finance
If to the Equipment Head Lessee:
State Street Bank and Trust Company
Two International Place
Fourth Floor
Boston, Massachusetts 02110
Facsimile No.: (617) 664-5371
Telephone No.: (617) 664-5610
Attention: Manager - Corporate Trust
A copy of all communications and notices provided for herein shall be sent by
the party giving such communication or notice to Virginia Power at:
12
<PAGE>
Virginia Electric and Power Company
P.O. Box 26666
Richmond, Virginia 23261
Attention: President
SECTION 13.4 SURVIVAL. All warranties, representations, indemnities and
covenants made by either party hereto, herein or in any certificate or other
instrument delivered by either such party or on the behalf of either such party
under this Equipment Head Lease, shall be considered to have been relied upon by
the other party hereto and shall survive the consummation of the transactions
contemplated hereby on the Closing Date regardless of any investigation made by
either party or on behalf of either party.
SECTION 13.5 SUCCESSORS AND ASSIGNS. (a) This Equipment Head Lease
shall be binding upon and shall inure to the benefit of, and shall be
enforceable by, the parties hereto and their respective successors and assigns
as permitted by and in accordance with the terms hereof. Each time a successor
Owner Trustee is appointed in accordance with the terms of the Trust Agreement
and Section 5.5 of the Participation Agreement, such successor Owner Trustee
shall, without further act, succeed to all rights, duties, immunities and
obligations of the predecessor Owner Trustee hereunder, and the predecessor
Owner Trustee shall be released from all further duties and obligations
hereunder, all without the necessity of any consent or approval by the Equipment
Head Lessor and without in any way altering the terms of this Equipment Head
Lease or the rights or obligations of the Equipment Head Lessor or the Equipment
Head Lessee hereunder. The Equipment Head Lessor shall, at its expense, upon
receipt of written notice of the appointment of a successor Owner Trustee under
the Trust Agreement, promptly make such modifications and changes to reflect
such appointment as shall be reasonably requested by such successor Owner
Trustee in any instruments relating to the Equipment Head Lease Interest or
this Equipment Head Lease, all in form and substance reasonably
satisfactory to such successor Owner Trustee.
(b) Except as expressly provided herein or in any other
Operative Document, the Equipment Head Lessor, may not assign its interests
herein without the consent of the Equipment Head Lessee. Except as expressly
provided in the Operative Documents, the Equipment Head Lessee may not assign
its interests herein during the Term of the Equipment Operating Lease without
the consent of the Equipment Head Lessor.
SECTION 13.6 BUSINESS DAY. Notwithstanding anything herein to the
contrary, if the date on which any payment is to be made pursuant to this
Equipment Head Lease is not a Business Day, the payment otherwise payable on
such date shall be payable on the next succeeding Business Day with the same
force and effect as if made on such scheduled date and (PROVIDED such payment is
made on such succeeding Business Day) no interest shall accrue on the amount of
such payment
13
<PAGE>
from and after such scheduled date to the time of such payment on such next
succeeding Business Day.
SECTION 13.7 GOVERNING LAW. THIS EQUIPMENT HEAD LEASE SHALL BE IN ALL
RESPECTS GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
SECTION 13.8 SEVERABILITY. Whenever possible, each provision of this
Equipment Head Lease shall be interpreted in such manner as to be effective and
valid under Applicable Law, but if any provision of this Equipment Head Lease
shall be prohibited by or invalid under Applicable Law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Equipment Head Lease.
SECTION 13.9 COUNTERPARTS. This Equipment Head Lease may be executed in
any number of counterparts, each executed counterpart constituting an original
but all together only one agreement.
SECTION 13.10 HEADINGS AND TABLE OF CONTENTS. The headings of the
sections of this Equipment Head Lease and the Table of Contents are inserted for
purposes of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
SECTION 13.11 LIMITATIONS OF LIABILITY. It is expressly understood and
agreed by and between the Equipment Head Lessor and the Equipment Head Lessee
and their respective successors and permitted assigns, that all representations,
warranties and undertakings of the Equipment Head Lessee hereunder shall be
binding upon the Equipment Head Lessee only in its capacity as Owner Trustee
under the Trust Agreement, and neither the Equipment Head Lessee in its
individual capacity nor any past, present or future Affiliate, partner, officer,
director, owner, shareholder, agent or employee of it or in any thereof or of
any partner thereof or their legal representatives, successors or assigns
shall be liable for any breach thereof; and all Persons having any claim
against the Equipment Head Lessee by reason of the transactions contemplated
hereby shall look only to the Trust Estate for payment or satisfaction
thereof.
SECTION 13.12 FURTHER ASSURANCES. Each party hereto will promptly and
duly execute and deliver such further documents to make such further assurances
for and take such further action reasonably requested by the other party hereto,
all as may be reasonably necessary to carry out more effectively the intent and
purpose of this Equipment Head Lease.
SECTION 13.13 EFFECTIVENESS OF EQUIPMENT HEAD LEASE. This Equipment
Head Lease has been dated as of the date first above written for convenience
only. This Equipment Head Lease shall be effective on the date of execution and
delivery by each of the Equipment Head Lessor and the Equipment Head Lessee.
14
<PAGE>
IN WITNESS WHEREOF, the Equipment Head Lessor and the Equipment Head
Lessee have caused this Equipment Head Lease to be duly executed and delivered
by their respective officers thereunto duly authorized.
OLD DOMINION ELECTRIC COOPERATIVE,
as Equipment Head Lessor
By:/s/ DANIEL M. WALKER
----------------------------------------
Daniel M. Walker
Vice President of Accounting and Finance
Date: March 1, 1996
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity, but solely as
Owner Trustee under the Trust Agreement,
as Equipment Head Lessee
By:/s/ E. DECKER ADAMS
----------------------------------------
E. Decker Adams
Vice President
Date: March 1, 1996
<PAGE>
EXHIBIT A-1
TO
EQUIPMENT
HEAD LEASE
DESCRIPTION OF UNIT 1 EQUIPMENT
All those certain assets at or on the Unit 1 Site of Clover
Unit 1 (excluding the Transmission Assets described on Schedule 1-A attached
hereto, and the Unit 1 Foundation) and all replacements or substitutions
thereto, including all those certain parts and items of equipment identified in
the succeeding pages to this Exhibit A-1 (which is not intended to limit the
generality of the foregoing definition to the assets identified therein)
attached hereto, together with all auxiliary and support items, including all
valves, backflow preventers, breakdown orifices, exhaust heads, expansion
joints, flexible hoses, gage glasses, relief valves, sight flow indicators,
strainers, traps, local switch stations, transducers, circuit breakers, transfer
switches, disconnect switches, junction boxes, motors, transformers (other),
panel boards (other), local control devices, miscellaneous panels and
instruments, solenoid valves, control drives, signal converters and monitors,
conductivity instrumentation, pH instrumentations, recorders, subpanels and
switches/lights, and recorders/pen description.
A-1
<PAGE>
EXHIBIT A-2
TO
EQUIPMENT
HEAD LEASE
DESCRIPTION OF COMMON FACILITIES EQUIPMENT
All those certain assets used in connection with the
operation or maintenance of the Clover Unit 1 Generating Facility, the Unit 2
Foundation and the Unit 2 Equipment (excluding the Transmission Assets
identified on Schedule 1-A to this Lease, the Unit 1 Equipment, the Unit 2
Equipment, the Unit 1 Foundation, the Unit 2 Foundation and the Common
Facilities Foundation) and all replacements or substitutions thereto,
including all those certain parts and items of equipment identified in the
succeeding pages to this Exhibit A-2 (which is not intended to limit the
generality of the foregoing definition to the assets identified therein)
attached hereto, together with all auxiliary and support items, including all
valves, backflow preventers, breakdown orifices, exhaust heads, expansion
joints, flexible hoses, gage glasses, relief valves, sight flow indicators,
strainers, traps, local switch stations, transducers, circuit breakers,
transfer switches, disconnect switches, junction boxes, motors,
transformers (other), panel boards (other), local control devices,
miscellaneous panels and instruments, solenoid valves, control drives, signal
converters and monitors, conductivity instrumentation, pH instrumentations,
recorders, subpanels and switches/lights, and recorders/pen description.
A-2-1
<PAGE>
EXHIBIT A-3
TO
EQUIPMENT
HEAD LEASE
DESCRIPTION OF RETAINED ASSETS
All those certain assets on the Unit 1 Site and the
Common Facilities Site (excluding the Unit 1 Foundation, the Common
Facilities Foundation, the Transmission Assets identified on Schedule 1-A
to this Lease and Pollution Control Assets) and all replacements or
substitutions thereto, including all those certain parts and items of
equipment identified in the succeeding pages to this Exhibit A-3 (which is not
intended to limit the generality of the foregoing definition to the assets
identified therein) attached hereto, together with all auxiliary and support
items, including all valves, backflow preventers, breakdown orifices,
exhaust heads, expansion joints, flexible hoses, gage glasses, relief
valves, sight flow indicators, strainers, traps, local switch stations,
transducers, circuit breakers, transfer switches, disconnect switches, junction
boxes, motors, transformers (other), panel boards (other), local control
devices, miscellaneous panels and instruments, solenoid valves, control drives,
signal converters and monitors, conductivity instrumentation, pH
instrumentations, recorders, subpanels and switches/lights, and recorders/pen
description.
A-3-1
<PAGE>
EXHIBIT A-4
TO
EQUIPMENT
HEAD LEASE
DESCRIPTION OF POLLUTION CONTROL ASSETS
All those certain assets comprising 100% of the Unit
2 Equipment and the Common Facilities Equipment that were leased to the
Pollution Control Assets Lessor under the Pollution Control Assets Lease
and all replacements or substitutions thereto, including all those certain
parts and items of equipment identified in the succeeding pages to this Exhibit
A-4 (which is not intended to limit the generality of the foregoing
definition to the assets identified therein) attached hereto, together
with all auxiliary and support items, including all valves, backflow
preventers, breakdown orifices, exhaust heads, expansion joints, flexible
hoses, gage glasses, relief valves, sight flow indicators, strainers,
traps, local switch stations, transducers, circuit breakers, transfer
switches, disconnect switches, junction boxes, motors, transformers
(other), panel boards (other), local control devices, miscellaneous panels and
instruments, solenoid valves, control drives, signal converters and monitors,
conductivity instrumentation, pH instrumentations, recorders, subpanels
and switches/lights, and recorders/pen description.
A-4-1
=======================================
EQUIPMENT OPERATING LEASE AGREEMENT
Dated as of February 29, 1996
between
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity except
as expressly provided herein, but
solely as Owner Trustee,
as Lessor
and
OLD DOMINION ELECTRIC COOPERATIVE,
as Lessee
CLOVER UNIT 1 GENERATING FACILITY
AND
COMMON FACILITIES
=======================================
CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS EQUIPMENT
OPERATING LEASE AGREEMENT OF STATE STREET BANK AND TRUST COMPANY, AS OWNER
TRUSTEE UNDER THE TRUST AGREEMENT, DATED AS OF FEBRUARY 29, 1996 BETWEEN STATE
STREET BANK AND TRUST COMPANY AND FIRST UNION NATIONAL BANK OF FLORIDA, HAVE
BEEN ASSIGNED TO AND ARE SUBJECT TO A FIRST PRIORITY SECURITY INTEREST IN FAVOR
OF UTRECHT-AMERICA FINANCE CO., AS AGENT AND LENDER UNDER THE LOAN AND SECURITY
AGREEMENT, DATED AS OF FEBRUARY 29, 1996. THIS EQUIPMENT OPERATING LEASE
AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE ORIGINAL
COUNTERPART CONTAINS THE RECEIPT THEREFOR EXECUTED BY THE AGENT ON THE SIGNATURE
PAGE THEREOF. SEE SECTION 25 FOR INFORMATION CONCERNING THE RIGHTS OF THE
HOLDERS OF THE VARIOUS COUNTERPARTS HEREOF.
1
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.................................................. 3
SECTION 2. LEASING OF THE EQUIPMENT INTEREST............................ 3
SECTION 3. TERM AND RENT................................................ 4
SECTION 3.1 Term......................................... 4
SECTION 3.2 Basic Rent................................... 4
SECTION 3.3 Supplemental Rent............................ 4
SECTION 3.4 Adjustment Of Basic Rent..................... 4
SECTION 3.5 Manner Of Payments........................... 6
SECTION 3.6 Business Day................................. 7
SECTION 3.7 Agreement With Respect To Amounts Payable
Under Payment Undertaking Agreement.......................... 8
SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT........... 8
SECTION 4.1 Disclaimer of Warranties..................... 8
SECTION 4.2 Quiet Enjoyment.............................. 9
SECTION 5. RETURN OF EQUIPMENT INTEREST................................. 10
SECTION 5.1 Return....................................... 10
SECTION 5.2 Condition Upon Return........................ 10
SECTION 5.3 Environmental Report......................... 14
SECTION 5.4 Expenses..................................... 15
SECTION 6. LIENS........................................................ 15
SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS...................... 15
SECTION 7.1 Maintenance.................................. 15
SECTION 7.2 Replacement of Components.................... 15
SECTION 8. MODIFICATIONS................................................ 16
SECTION 8.1 Required Modifications....................... 16
SECTION 8.2 Optional Modifications....................... 16
SECTION 8.3 Title to Modifications; Subjection to
Equipment Head Lease......................... 17
SECTION 9. NET LEASE.................................................... 17
SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC.......................... 18
i
<PAGE>
TABLE OF CONTENTS, CONTINUED
SECTION 10.1 Events of Loss............................... 18
SECTION 10.2 Payment of Termination Value; Rent
Termination.................................. 19
SECTION 10.3 Repair or Replacement........................ 20
SECTION 10.4 Eminent Domain............................... 23
SECTION 11. INSURANCE.................................................... 23
SECTION 12. INSPECTION................................................... 26
SECTION 13. LESSEE TERMINATION OPTION FOR BURDENSOME EVENTS.............. 26
SECTION 13.1 Election to Terminate........................ 26
SECTION 13.2 Procdeure for Exercise of Termination
Option....................................... 27
SECTION 14. TERMINATION FOR OBSOLESCENCE................................. 28
SECTION 14.1 Termination.................................. 28
SECTION 14.2 Solicitation of Offers....................... 29
SECTION 14.3 Right of Lessor to Retain equipment Interest. 29
SECTION 14.4 Procedure for exercise of Termination Option. 29
SECTION 15. LESSEE'S END OF TERM OPTIONS................................. 31
SECTION 15.1 Options...................................... 31
SECTION 15.2 Procedure for the Exercise of Purchase
Option....................................... 31
SECTION 15.3 Procedure for Exercise of the Service
Contract Option............................. 32
SECTION 15.4 Procedure for Exercise of the Return
Option....................................... 36
SECTION 15.5 Lease Obligation to Pay amount Equal to
Principal and Interest on Loan Certificates
Upon Virginia Power Default.................. 37
SECTION 16. EVENTS OF DEFAULT............................................ 37
SECTION 17. REMEDIES..................................................... 39
SECTION 17.1 Remedies for Event of Default................ 39
SECTION 17.2 Cumulative Remedies.......................... 42
SECTION 17.3 No Delay or Omission to be Construed
as Waiver.................................... 42
SECTION 18. LESSEE TERMINATION OPTION FOR APPEAL OF FERC ORDER........... 42
SECTION 18.1 Lessee Option to Termination................. 42
SECTION 18.2 Procedure for Exercise of Termination
Option....................................... 43
SECTION 19. LESSEE RIGHT TO SUBLEASE..................................... 43
SECTION 20. FURTHER ASSURANCES........................................... 44
ii
<PAGE>
TABLE OF CONTENTS, CONTINUED
SECTION 21. LESSOR'S RIGHT TO PERFORM................................ 45
SECTION 22. NOTICES.................................................. 45
SECTION 23. LIMITATION OF THE LESSOR'S LIABILITY..................... 46
SECTION 24. INVESTMENT OF SECURITY FUNDS............................. 47
SECTION 25. SECURITY FOR LESSOR'S OBLIGATION TO THE LENDERS. ....... 47
SECTION 26. MISCELLANEOUS............................................ 48
SECTION 26.1 GOVERNING LAW.......................... 48
SECTION 26.2 SEVERABILITY........................... 48
SECTION 26.3 HEADINGS AND TABLE OF CONTENTS......... 48
SECTION 26.4 SUCCESSORS AND ASSIGNS................. 48
SECTION 26.5 TRUE LEASE............................. 49
SECTION 26.6 IDENTIFICATION......................... 49
SECTION 26.7 AMENDMENTS AND WAIVERS................. 49
SECTION 26.8 AGREEMENT REGARDING EQUIPMENT.......... 50
SECTION 26.9 SURVIVAL............................... 50
SECTION 26.10 COUNTERPARTS........................... 50
SECTION 26.11 EFFECTIVENESS.......................... 50
ATTACHMENTS TO EQUIPMENT OPERATING LEASE AGREEMENT:
Appendix A - Definitions........................................... A-1
Exhibit A-1 - Description of Unit 1 Equipment..................... A-1-1
Schedule 1-A - Description of Transmission Assets.................. S-1-1
Exhibit A-2 - Description of Common Facilities Equipment.......... A-2-1
Exhibit A-3 - Description of Retained Assets...................... A-3-1
Exhibit A-4 - Description of Pollution Control Assets............. A-4-1
Exhibit B - Form of Power Sales Agreement......................... B-1
Exhibit C - Form of Management Agreement.......................... C-1
Schedule 1 - Basic Rent Percentages............................... S1-1
Schedule 2 - Termination Value Percentages........................ S2-1
Schedule 3 - Terms and Conditions of New Loan to be Issued Upon
Commencement of Service Contract Option.............. S3-1
iii
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EQUIPMENT OPERATING LEASE AGREEMENT
This EQUIPMENT OPERATING LEASE AGREEMENT dated as of February 29, 1996
(this "Equipment Operating Lease") between STATE STREET BANK AND TRUST COMPANY,
a state-chartered trust company organized and existing under the laws of the
Commonwealth of Massachusetts, not in its individual capacity except as
expressly provided herein, but solely as Owner Trustee (the "Lessor"), and OLD
DOMINION ELECTRIC COOPERATIVE, a wholesale power supply cooperative organized
under the laws of the Commonwealth of Virginia (the "Lessee").
WHEREAS, capitalized terms used herein and not otherwise defined shall
have the meanings given them in Appendix A - Definitions which is attached
hereto as part hereof;
WHEREAS, the Clover Real Estate is more particularly described in
Schedule 1 and comprised of the Unit 1 Site described in Schedule 2, the Unit 2
Site described in Schedule 3, and the Common Facilities Site described in
Schedule 4, and certain other property, each such Schedule 1, Schedule 2,
Schedule 3, and Schedule 4 being attached to the Ground Lease and Sublease as
part thereof, the form of which Ground Lease and Sublease is marked Exhibit A
and is attached to, and recorded in the Halifax Clerk's Office with, the Option
Agreement of even date herewith;
WHEREAS, a copy of the Clover Power Station Plat is marked Exhibit B
and is attached to, and recorded in the Halifax Clerk's Office with, the Option
Agreement as a part thereof;
WHEREAS, Old Dominion and Virginia Power own the Clover Real Estate as
tenants- in-common;
WHEREAS, by the Clover Agreements, Old Dominion and Virginia Power
established their respective rights and obligations as tenants-in-common of the
Clover Real Estate and of all improvements thereafter to be constructed, and all
personal property thereafter to be situated, on the Clover Real Estate. Such
improvements and personal property owned by Old Dominion and Virginia Power as
tenants-in-common include, but are not limited to, (a) the Unit 1 Foundation
constructed on the Unit 1 Site, (b) the Unit 2 Foundation being constructed on
the Unit 2 Site, (c) the Common Facilities Foundation constructed on the Common
Facilities Site, (d) the Unit 1 Equipment situated on the Unit 1 Site, (e) the
Unit 2 Equipment being situated on the Unit 2 Site, and (f) the Common
Facilities Equipment situated on the Common Facilities Site;
WHEREAS, as tenants-in-common of such real and personal property, each
of Old Dominion and Virginia Power owns a 50% undivided interest in such real
and personal property, including the right to nonexclusive possession of all
such real and personal property, subject to (a) the rights of the other to
nonexclusive possession of all such real and personal property, (b) the terms
and conditions of the Clover Agreements and (c) in the case of the Pollution
Control Assets, the rights of the Pollution Control Assets Lessor;
<PAGE>
WHEREAS, by the Option Agreement which is recorded in the Halifax
Clerk's Office, Old Dominion granted and conveyed to the Lessor, its successors
and assigns, the right and option to lease the Ground Interest from Old
Dominion, subject to the Lessor's agreement to sublease the Ground Interest
simultaneously back to Old Dominion upon the terms and conditions of the Option
Agreement if the Lessor exercises such option;
WHEREAS, Old Dominion has leased to the Lessor (a) the Foundation
Interest by the Foundation Head Lease and (b) the Equipment Interest by the
Equipment Head Lease;
WHEREAS, by the Foundation Operating Lease, the Lessor leased the
Foundation Interest back to Old Dominion upon a term which shall end prior to
the expiration of the term of the Foundation Head Lease;
WHEREAS, by this Equipment Operating Lease, the Lessor is leasing the
Equipment Interest back to Old Dominion upon a term which shall end prior to the
expiration of the term of the Equipment Head Lease;
WHEREAS, although Old Dominion and the Lessor intend that the
Foundation Interest at all times and in all respects be and remain personal
property under Virginia law, they recorded the Foundation Head Lease and the
Foundation Operating Lease in the Halifax Clerk's Office, in order to satisfy
the conditions of Section 55-96 of the Code of Virginia 1950, as amended, in the
event that the Foundation Interest is deemed to be real estate or an interest in
real estate for purposes of such Section 55-96. The Equipment Head Lease and
this Equipment Operating Lease are not to be recorded; and
WHEREAS, Old Dominion (on the one hand) and the Lessor (on the
other hand) shall share equally all of those rights, and shall be subject
equally to having all of those responsibilities undertaken, which are imposed
upon Old Dominion with respect to the Common Facilities Site, the Common
Facilities Foundation, and the Common Facilities Equipment, as (a)
tenant-in-common with Virginia Power of such property, and (b) a party to the
Clover Agreements.
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
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<PAGE>
1. DEFINITIONS.
The capitalized terms used in this Equipment Operating Lease and not
otherwise defined herein shall have the respective meanings set forth in
Appendix A hereto. All references in this Equipment Operating Lease to
sections, paragraphs, clauses, schedules, appendices and exhibits are
to sections, paragraphs, clauses, schedules, appendices and exhibits in
this Equipment Operating Lease unless otherwise indicated and the words
"herein", "hereof" and "hereunder" and other words of similar import refer to
this Equipment Operating Lease as a whole and not to any particular section or
other subdivision.
Where any provision in this Equipment Operating Lease refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
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<PAGE>
2. LEASING OF THE EQUIPMENT INTEREST.
The Lessor hereby agrees, simultaneously with the leasing of the
Equipment Interest from Old Dominion to the Lessor pursuant to the Equipment
Head Lease, to lease the Equipment Interest to the Lessee hereunder, and the
Lessee hereby agrees to lease the Equipment Interest from the Lessor hereunder.
The Lessor and the Lessee understand and acknowledge that (a) legal title to all
assets in the Equipment Interest constituting Retained Assets is vested in Old
Dominion and Virginia Power as tenants-in-common, (b) such Retained Assets are
subject and subordinate to the Lien of the Old Dominion Indenture (including,
without limitation, any amendments, supplements or issuance of additional
advances or debt thereunder) and Permitted Encumbrances, (c) all right, title
and interest of Old Dominion in and to such assets in the Equipment Interest
constituting Retained Assets have been leased to the Owner Trustee pursuant to
the Equipment Head Lease, and (d) this Equipment Operating Lease constitutes a
sublease of the Owner Trustee's interests set forth in clause (c) above. The
Lessor and the Lessee understand and acknowledge that (v) legal title to all
assets in the Equipment Interest constituting Pollution Control Assets is vested
in the Pollution Control Assets Lessor and Virginia Power as tenants-in-common,
(w) such Pollution Control Assets are subject and subordinate to the Lien of the
Old Dominion Indenture (including, without limitation, any amendments,
supplements or issuance of additional advances or debt thereunder) and Permitted
Encumbrances, (x) all right, title and interest of Old Dominion in and to such
assets of the Equipment Interest constituting Pollution Control Assets have been
transferred to the Pollution Control Assets Lessor and leased back to Old
Dominion pursuant to the Pollution Control Assets Lease, (y) all right, title
and interest of Old Dominion in and to such Pollution Control Assets have been
leased to the Owner Trustee pursuant to the Equipment Head Lease, and (z) this
Equipment Operating Lease constitutes a sublease of the Owner Trustee's
interests set forth in clause (y) above. The Equipment Interest shall be subject
to the terms of this Equipment Operating Lease from the date on which this
Equipment Operating Lease is executed and delivered.
Descriptions of the Unit 1 Equipment and the Common Facility Equipment
are set forth on Exhibits A-1 and A-2, respectively, to this Equipment Operating
Lease. Descriptions of the Retained Assets and the Pollution Control Assets are
set forth on Exhibits A-3 and A-4, respectively, to this Equipment Operating
Lease.
3. TERM AND RENT
1 TERM. The term of this Equipment Operating Lease for the Equipment
Interest shall be comprised of the Interim Term and the Basic Term, subject to
earlier termination pursuant to Section 10, 13, 14, 17 or 18 hereof. The
Interim Term for this Equipment Operating Lease shall commence on the
Closing Date and shall terminate on (but exclude) the Basic Term Commencement
Date. The Basic Term of this Equipment Operating Lease shall commence on the
Basic Term Commencement Date and shall terminate at 11:59 P.M. (New York City
time) on the Expiration Date.
4
<PAGE>
2 BASIC RENT. No Basic Rent shall be payable for the Interim Term. The
Lessee hereby agrees to pay the Lessor Basic Rent for the Equipment Interest
throughout the Basic Term in twenty-two consecutive annual installments payable
in advance or in arrears, as the case may be, on each Rent Payment Date as
indicated on Schedule 1 hereto under the caption "Advance Rent" and/or
"Arrears Rent". Each such payment of Basic Rent shall be in an amount equal to
the product of the Equipment Interest Cost multiplied by the Basic Rent
percentage set forth opposite such Rent Payment Date on Schedule 1 hereto, in
each case, subject to Section 3.4 hereof.
3 SUPPLEMENTAL RENT. The Lessee also agrees to pay to the Lessor, or to
any other Person entitled thereto, any and all Supplemental Rent, promptly as
the same shall become due and owing, or where no due date is specified,
promptly after demand by the Person entitled thereto, and in the event of
any failure on the part of the Lessee to pay any Supplemental Rent, the Lessor
shall have all rights, powers and remedies provided for herein or by law or
equity or otherwise for the failure to pay Basic Rent. The Lessee will also
pay as Supplemental Rent (i) to the extent permitted by Applicable Law, an
amount equal to interest at the applicable Overdue Rate on any part of any
installment of Basic Rent not paid when due for any period for which the same
shall be overdue and on any payment of Supplemental Rent not paid when due
(whether on demand or otherwise) for the period from such due date until the
same shall be paid. All Supplemental Rent to be paid pursuant to this Section
3.3 shall be payable in the manner set forth in Section 3.5.
4 ADJUSTMENT OF BASIC RENT. (a) The Lessee and the Lessor agree that
Basic Rent, Termination Values and the Purchase Option Price shall be adjusted,
either upwards or downwards, to reflect (i) any Proposed Tax Law Change,
(ii) the principal amount, amortization and interest rate on any
Additional Loan Certificates issued pursuant to Section 2.11 of the Loan
Agreement to finance Nonseverable Modifications to the Unit 1 Equipment or the
Common Facilities Equipment, (iii) the principal amount, amortization and
interest rate on any Additional Loan Certificates issued pursuant to Section
2.11 of the Loan Agreement in connection with a refinancing of any Loan
Certificates (including adjusting the interest rate on the Series A Loan
Certificates to the Reset Rate pursuant to Section 2.12 of the Loan Agreement),
(iv) adjusting the interest rate on the Series A Loan Certificates pursuant to
paragraph (c) of Section 2.1 of the Loan Agreement, and (v) the exercise by the
Lessee of its option pursuant to Section 4(b)(1) of the Tax Indemnity Agreement
to make indemnity payments in the form of upward adjustments to Basic Rent. Any
adjustment pursuant to clause (i), (iii), (iv), or (v) of the immediately
preceding sentence shall be coordinated with any comparable adjustment made
pursuant to Section 3.4 of the Foundation Operating Lease such that the
aggregate adjustment shall be apportioned between this Equipment Operating
Lease and the Foundation Operating Lease in the same ratio as Equipment
Interest Cost bears to the Foundation Interest Cost. Any adjustments
pursuant to this Section 3.4 will be calculated to preserve the Owner
Participant's Net Economic Return; PROVIDED, HOWEVER, that (a) to the extent
consistent with preserving such Net Economic Return, all adjustments shall
minimize the present value to the Lessee of the Basic Rent or, at the
Lessee's election, the Basic Rent and the Purchase Option Price and (b) all
adjustments shall be consistent with the conclusions of the Appraiser set forth
5
<PAGE>
in the Appraisal. Adjustments will be made using the same method of computation
and assumptions originally used (other than those that have changed as the
result of the event giving rise to the adjustment) in the calculation of the
Basic Rent and the Purchase Option Price. The adjustments contemplated by this
Section 3.4 will result in corresponding adjustments to Termination Values. All
Basic Rent adjustments shall be consistent with Rev. Procs. 75-21 and 75-28 and
section 467 of the Code (to the extent the Basic Rent complied with such section
467 on the Closing Date), including any final, proposed or temporary regulations
or other administrative announcements issued thereunder and in no event shall
such adjustment cause this Equipment Operating Lease to become a "disqualified
leaseback or long-term agreement" within the meaning of section 467 of the Code
and any such regulations or announcements thereunder. Any adjustment made to the
Purchase Option Price may result in an increase or decrease in such Purchase
Option Price, but the Purchase Option Price shall not be subject to decrease
below the projected fair market value of the Equipment Interest on the
Expiration Date as set forth in the Appraisal.
(a) Each installment of Basic Rent payable hereunder, whether or not
adjusted in accordance with this Section 3.4, when combined with Foundation
Basic Rent payable under the Foundation Operating Lease on such date, shall be
in an amount at least sufficient to pay in full any payments of principal and
interest on the Loan Certificates on each Rent Payment Date. Termination Values
payable from time to time under this Equipment Operating Lease, the Walk Away
Payment and the initial installment of the Purchase Option Price, whether or not
adjusted in accordance with this Section 3.4, when combined with Termination
Values, the Foundation Walk Away Payment and the initial installment of the
Foundation Purchase Option Price payable under the Foundation Operating Lease on
such date, shall, together with all other Basic Rent and Foundation Basic Rent
due and owing on the date such amount is due, exclusive of any portion thereof
that is an Excepted Payment, be in an amount at least sufficient to pay in full
the principal of and accrued interest on the Loan Certificates.
(b) Any adjustment pursuant to this Section 3.4 shall initially be
computed by the Owner Participant. Once computed, the results of such
computation shall promptly be delivered by the Owner Participant to the Lessee,
the Lessor and the Agent. Within 20 days (5 days in the case of a Proposed Tax
Law Change) after the receipt of the results of any such adjustment, the Lessee
may request that an investment banking firm selected by the Owner
Participant and reasonably satisfactory to the Lessee (the "Intermediary")
verify, after consultation with the Owner Participant and the Lessee, the
accuracy of such adjustment in accordance with this Section 3.4, and the Owner
Participant and the Lessee hereby agree to provide the Intermediary (on a
confidential basis) with all information and materials as shall be reasonably
necessary in connection therewith, PROVIDED that the Owner Participant shall not
be required to disclose any of its own proprietary data or tax returns. If the
Intermediary confirms that such adjustment is in accordance with this Section
3.4, it shall so certify to the Lessee, the Lessor and the Owner Participant,
and such certification shall be final, binding and conclusive on the Lessee, the
Owner Participant and the Lessor. If the Intermediary concludes that such
adjustment is not in accordance with this Section 3.4, it shall so certify to
the Lessee, the Lessor and the Owner Participant, and the Owner Participant
shall again compute the required adjustment. Such re-computation shall be
subject to the provisions of this Section 3.4 and the results of such
re-computation shall be final, binding and conclusive on the Lessee, the
Lessor and the Owner Participant. If the Lessee does not request verification
of any adjustment within the period specified above, the computation
provided by the Owner Participant shall be final, binding and conclusive on the
Lessee, the Lessor and the Owner Participant. The final determination of any
adjustment hereunder shall
6
<PAGE>
be set forth in an amendment to this Equipment Operating Lease, executed and
delivered by the Lessor and the Lessee and consented to by the Owner
Participant; PROVIDED, HOWEVER, that any omission to execute and deliver such
amendment shall not affect the validity and effectiveness of any such
adjustment. The reasonable fees, costs and expenses of the Intermediary in
verifying an adjustment pursuant to this Section 3.4 shall be paid by Lessee;
PROVIDED, FURTHER, that, in the event that such Intermediary determines that the
present value of Basic Rent or, at the Lessee's election, Basic Rent and the
Purchase Option Price payments to be made under this Equipment Operating Lease
as calculated by the Owner Participant are greater than the present value of the
correct Basic Rent and Purchase Option Price payments as certified by the
Intermediary, discounted annually at the Debt Rate by, more than 0.10% of the
Equipment Interest Cost, then such expenses of the Intermediary shall be paid by
the Owner Participant. Notwithstanding anything herein to the contrary, the sole
responsibility of the Intermediary shall be to verify the calculations hereunder
and matters of interpretation of this Equipment Operating Lease or any other
Operative Document shall not be within the scope of the Intermediary's
responsibilities.
5 MANNER OF PAYMENTS. (a) All Rent (whether Basic Rent or Supplemental
Rent) shall be paid by the Lessee in lawful currency of the United States of
America in immediately available funds to the recipient not later than 12:00
noon (New York City time) on the date due. All Rent payable to the Lessor
(other than Excepted Payments) shall be paid by the Lessee to the Lessor at its
account at Two International Place, Fourth Floor, Boston, Massachusetts 02110,
Account No.: 9900-314-7, or to such other place as the Lessor shall notify the
Lessee in writing; PROVIDED, HOWEVER, that so long as the Lien of the Loan
Agreement has not been discharged, the Lessor hereby irrevocably directs (it
being agreed and understood that such direction shall be deemed to have been
revoked after the Lien of the Loan Agreement shall have been discharged pursuant
to Section 8.1 thereof), and the Lessee agrees, that all Rent (other than
Excepted Payments) payable to the Lessor shall be paid by wire transfer
directly to the Agent's Account or to such other place as the Agent shall
notify the Lessee in writing. Payments constituting Excepted Payments shall
be made to the Person entitled thereto at the address for such Person set forth
in the Participation Agreement, or to such other place as such Person shall
notify the Lessee in writing.
(b) Payments made to the Lessor from the Qualifying Security shall
satisfy the Lessee's obligation to pay amounts of Basic Rent or Supplemental
Rent to the extent of such payments. So long as the Lien of the Loan Agreement
has not been discharged, no amount paid to the Lessor or the Owner Participant
under or with respect to any Qualifying Letter of Credit maintained pursuant to
Section 10.1 hereof or Section 7.7 of the Participation Agreement shall satisfy
or be treated as performance of any of the Lessee's obligations under this
Equipment Operating Lease or any other Operative Document or in any way limit or
offset any amounts payable by the Lessee.
7
<PAGE>
(c) The Lessee hereby acknowledges and agrees that, anything to the
contrary in this Equipment Operating Lease or the Loan Agreement
notwithstanding, the Lessee's obligation to pay any Basic Rent, Walk Away
Payment, Termination Value and amounts sized by reference to Termination Value
under this Equipment Operating Lease (i) shall only be reduced by operation of
the provisions of Section 3.3 of the Loan Agreement to the extent that amounts
realized on the Collateral or the Payment Undertaking Collateral are actually
distributed to or applied in satisfaction of obligations owing to the Lenders or
the Lessor and (ii) shall not be reduced by the amount of any distributions to
Old Dominion by operation of Section 3.3(c) or (d) of the Loan Agreement.
6 BUSINESS DAY. Notwithstanding anything herein or in any other
Operative Document to the contrary, if the date on which any payment is to be
made pursuant to this Equipment Operating Lease or any other Operative
Document is not a Business Day, the payment otherwise payable on such date shall
be payable on the next succeeding Business Day with the same force and effect as
if made on such scheduled date and, PROVIDED such payment is made on such
succeeding Business Day, no interest shall accrue on the amount of such payment
from and after such scheduled date to the time of such payment on such next
succeeding Business Day.
7 AGREEMENT WITH RESPECT TO AMOUNTS PAYABLE UNDER PAYMENT UNDERTAKING
AGREEMENT. The Lessor hereby acknowledges that the Lessee has pledged to
the Lessor as security for the payment of Basic Rent, Foundation Basic
Rent, Walk Away Payment, Foundation Walk Away Payment, Purchase Option
Price, Foundation Purchase Option Price, Termination Value and amounts sized by
reference to Termination Value under this Equipment Operating Lease and the
Foundation Operating Lease certain security as more fully described in the
Payment Undertaking Agreement pursuant to which the Bank has undertaken to pay
to Old Dominion or its assignee or pledgee on each date on which any Basic Rent,
Foundation Basic Rent, Walk Away Payment, Foundation Walk Away Payment, Purchase
Option Price, Foundation Purchase Option Price, Termination Value or
amounts sized by reference to Termination Value are due under the Equipment
Operating Lease and the Foundation Operating Lease an amount equal to the
portion of Basic Rent, Foundation Basic Rent, Walk Away Payment, Foundation Walk
Away Payment, Purchase Option Price, Foundation Purchase Option Price,
Termination Value and amounts sized by reference to Termination Value under this
Equipment Operating Lease and the Foundation Operating Lease which corresponds
to the principal and interest on the Series A Loan Certificates due on such
date (including in respect of acceleration). The Lessor hereby agrees that
with respect to that portion of Basic Rent, Walk Away Payment, Purchase
Option Price, Termination Value and amounts sized by reference to Termination
Value under this Equipment Operating Lease equal to 95.81 percent (95.81%) of
the amounts payable under the Payment Undertaking Agreement by the Bank that
it will first pursue due diligence to obtain payment from the Bank, before
it will pursue the Lessee under this Equipment Operating Lease or any other
Operative Document for such amounts. If the Bank has fully performed its
obligations under the Payment Undertaking Agreement in respect of such
payment, the Lessor shall be conclusively presumed to have satisfied the
foregoing requirement.
8
<PAGE>
4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT.
1 DISCLAIMER OF WARRANTIES. Without waiving any claim the Lessee may
have against any manufacturer, vendor or contractor under the Clover Ownership
Agreement, THE LESSEE ACKNOWLEDGES AND AGREES SOLELY FOR THE BENEFIT OF THE
LESSOR AND THE OWNER PARTICIPANT THAT (a) CLOVER UNIT 1 AND EACH
COMPONENT THEREOF ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE ACCEPTABLE TO
THE LESSEE, (b) THE LESSEE IS SATISFIED THAT CLOVER UNIT 1 AND EACH COMPONENT
THEREOF ARE SUITABLE FOR THEIR RESPECTIVE PURPOSES, (c) NEITHER THE LESSOR NOR
THE OWNER PARTICIPANT IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND,
(d) CLOVER UNIT 1 AND EACH COMPONENT THEREOF ARE LEASED HEREUNDER SUBJECT TO ALL
APPLICABLE LAWS NOW IN EFFECT OR HEREAFTER ADOPTED AND IN THE CONDITION OF EVERY
PART THEREOF WHEN THE SAME FIRST BECAME SUBJECT TO THIS EQUIPMENT OPERATING
LEASE WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR OR THE OWNER
PARTICIPANT AND (e) THE LESSOR LEASES AND THE LESSEE TAKES THE EQUIPMENT
INTEREST UNDER THIS EQUIPMENT OPERATING LEASE "AS-IS", "WHERE-IS" AND "WITH ALL
FAULTS", AND THE LESSEE ACKNOWLEDGES THAT NEITHER THE OWNER TRUSTEE, AS THE
LESSOR OR IN ITS INDIVIDUAL CAPACITY, NOR THE OWNER PARTICIPANT MAKES NOR SHALL
BE DEEMED TO HAVE MADE, AND EACH EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS,
CLAIMS, WARRANTIES OR REPRESENTATIONS, EITHER EXPRESS OR IMPLIED, AS TO THE
VALUE, CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION,
MERCHANTABILITY THEREOF OR AS TO THE TITLE OF CLOVER UNIT 1, THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO SPECIFICATIONS,
FREEDOM FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY
LATENT OR OTHER DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY
OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED
REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT THERETO, except that the
Lessor, in its individual capacity, represents and warrants that on the Closing
Date, the Equipment Interest will be free of Lessor's Liens attributable to the
Lessor in its individual capacity. It is agreed that all such risks, as between
the Lessor, the Owner Participant, the Agent and the Lenders on the one hand and
the Lessee on the other hand, are to be borne by the Lessee. None of the Lessor,
the Owner Participant, the Agent nor the Lenders shall have any responsibility
or liability to the Lessee or any other Person with respect to any of the
following: (i) any liability, loss or damage caused or alleged to be caused
directly or indirectly by Clover Unit 1 or any Component or by any inadequacy
thereof or deficiency or defect therein or by any other circumstances in
connection therewith; (ii) the use, operation or performance of Clover Unit 1 or
any Component or any risks relating thereto; (iii) any interruption of service,
loss of business or anticipated profits or consequential damages; or (iv) the
delivery, operation, servicing, maintenance, repair, improvement, replacement or
decommissioning of Clover Unit 1 or any Component.
9
During the Term, so long as no Event of Default shall have occurred
and be continuing, the Lessor hereby appoints irrevocably and
constitutes the Lessee its agent and attorney-in-fact, coupled with an interest,
to assert and enforce, from time to time, in the name and for the account of the
Lessor and the Lessee, as their interests may appear, but in all cases at the
sole cost and expense of the Lessee, whatever claims and rights the Lessor may
have in respect of the Equipment Interest against the manufacturers of the Unit
1 Equipment or the Common Facilities Equipment, or vendors or contractors under
the Clover Ownership Agreement.
2 QUIET ENJOYMENT. The Lessor agrees that, notwithstanding any
provision of any other Operative Document, so long as no Event of Default
shall have occurred and be continuing, it shall not through its own actions or
inactions interfere with or interrupt the quiet enjoyment of the use, operation
and possession by the Lessee of the leasehold interest in Clover Unit 1 or the
Equipment Interest subject to the terms of this Equipment Operating Lease;
PROVIDED, HOWEVER, that Lessor makes no covenant with respect to the
interruption of such enjoyment, use, operation and possession of Clover Unit 1
or the Equipment Interest arising from actions of any Lender or the Agent.
5. RETURN OF EQUIPMENT INTEREST.
1 RETURN. Upon any expiration, other than an expiration in accordance
with paragraph (a) of Section 15.1, or upon any early termination of this
Equipment Operating Lease, other than a termination in accordance with
Section 10, 13 or 18, the Lessee, at its own expense, shall return the Equipment
Interest by delivering constructive possession of the same to the Lessor, at the
location of Clover Unit 1 on the Clover Real Estate in Clover, Virginia and
shall comply with the provisions of Section 5 of the Foundation Operating Lease
in respect of the Foundation Interest.
2 CONDITION UPON RETURN. Except with respect to a return of the
Equipment Interest pursuant to Section 14.3, at the time of any return of the
Equipment Interest by the Lessee in accordance with Section 5.1 the
following conditions shall be complied with, all at the Lessee's sole cost and
expense:
(a) the right to use the Equipment Interest granted
hereunder for the benefit of the Lessee shall cease and
terminate;
(b) Clover Unit 1 will be in at least as good condition as
if it had been maintained, repaired and operated during
the
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Term in compliance with the provisions of this
Equipment Operating Lease and there shall be no
deferred maintenance in respect of Clover Unit 1;
(c) the Lessee shall cooperate with all reasonable requests
of the Owner Participant or the Lessor, at the expense of
the Lessee, for purposes of obtaining, or enabling the
Owner Participant or the Lessor to obtain, any and all
licenses, permits, approvals and consents of any
Governmental Entities or other Persons (including
Virginia Power) that are or will be required to be
obtained by the Owner Participant or the Lessor in
connection with its use, operation or maintenance of the
Equipment Interest on or after such return in compliance
with Applicable Law and in the manner contemplated by the
Clover Agreements (including without limitation, to the
extent permitted by Applicable Law, the transfer by the
Lessee to the Owner Participant or the Lessor of any such
licenses, permits, approvals and consents of any
Governmental Entities or other Persons as are maintained
in the name of the Lessee);
(d) the Lessee shall return and surrender possession
of Equipment Interest to the Lessor (or its designee)
free and clear of all Liens (other than Liens described
in clauses (iv), (v), (vi), (vii) (but only in
circumstances where the Lessee elects the Service
Contract Option, no Payment Default has occurred and
is continuing and the Owner Trustee refinances the
then outstanding aggregate principal amount of the
Loans by the issuance of Additional Loan Certificates
under the Loan Agreement to evidence a New Loan in such
aggregate principal amount and then only to the extent of
such aggregate principal amount), (viii), (ix), (xi) (but
only if such return shall occur prior to December 30,
2004), and (x) of the definition of "Permitted Liens")
and "Permitted Post-Term Encumbrances";
(e) the Lessee shall deliver to the Lessor all books
and records (including records maintained on
electronic media) relating to Clover Unit 1 in its
possession (including operating, maintenance,
overhaul and modification records and engineering
reports);
(f) the Lessee and Clover Unit 1 shall be in compliance
with Applicable Laws and relevant licenses, permits,
approvals and consents of Governmental Entities (without
regard to whether the Lessee is contesting the
validity or applicability thereof) and all other
applicable provisions of this Equipment Operating
Lease and the Foundation Operating Lease (including with
respect to the maintenance and condition thereof);
(g) if the Lessee exercises the Service Contract Option,
the Lessee shall take such action as shall be
expressly required pursuant to the Operative Documents,
the Clover
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Agreements, the Power Sales Agreement, the Management
Agreement and any Transmission and Interconnection
Agreement required by Section 15.3, for purposes of
putting into effect the terms and provisions thereof;
(h) the Lessee shall provide a written report by
an Independent Engineer in form and substance
reasonably acceptable to the Owner Participant
certifying that (i) Clover Unit 1 is in the state of
repair and maintenance required by this Equipment
Operating Lease and the Foundation Operating Lease
and (ii) the following specific conclusions, based
on tests, inspections and evaluations conducted by
such Independent Engineer not more than 360 days and
not less than 180 days prior to the end of the Term:
(1) the net unit heat rate of the Clover Unit 1
Generating Facility, as determined by an integrated
heat rate test conducted in conjunction with the net
electrical output test, at full load (380 MW, valves
wide open, normal pressure conditions) is at most
10,100 BTU/KW;
(2) the net electrical output of the Clover Unit 1
Generating Facility, as determined over a 24-hour
test period conducted concurrently with the above
heat rate test, is not less than 380 MW;
(3) the Clover Unit 1 Generating Facility's emissions at
maximum load (390 MW, valves wide open, 5% over
normal pressure conditions) and all reasonably
anticipated partial load conditions, and when
operating on all fuels within ranges permitted under
all applicable permits, are within all applicable
operating permits for the Clover Unit 1 Generating
Facility, as determined by a detailed review of stack
emissions data and historical environmental reporting
history;
(4) the performance of the main generator, step-up, unit
auxiliary and all medium to low voltage step-down
transformers are at levels better than or equal to
performance levels required to successfully operate
the Clover Unit 1 Generating Facility at full load
(380 MW) and all reasonably anticipated partial load
conditions;
(5) there are no material tube failures in respect of the
Clover Unit 1 Generating Facility, as demonstrated by
operation of such facility for not less than 72
consecutive hours with turbine inlet pressure at 105%
(or more) of the rated turbine guarantee pressure and
turbine valves wide open;
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(6) the boiler feedwater pumps perform at levels better
than or equal to performance levels required to
successfully operate the Clover Unit 1 Generating
Facility at full load and all reasonably anticipated
partial load conditions, as demonstrated by
performance testing that includes cycling the Clover
Unit 1 Generating Facility through partial to full
loads and testing of individual pumps and testing of
the pumps in combination;
(7) the Clover Unit 1 Generating Facility is operable
within the operating parameters then existing and
reasonably anticipated to exist for at least 13 years
after the date of such return, as determined based on
an evaluation of the Clover Unit 1 Generating
Facility's systems, emissions controls and such other
tests as may be specified by the Independent
Engineer;
(8) there are no condenser tube leaks in respect of the
Clover Unit 1 Generating Facility, as determined
through inspection;
(9) all the Clover Unit 1 Generating Facility piping,
including all high pressure piping, is acceptable in
accordance with Prudent Utility Practices, as
determined through inspections of piping and piping
components;
(10) major overhauls of the turbine in respect of the
Clover Unit 1 Generating Facility, which include
the examination of the complete turbine
including high pressure, intermediate pressure, and
low pressure blading, bearings, steam and drain
pipes, bypass valves and control valves, have
been performed in accordance with recommended
supplier inspection schedules and Prudent
Utility Practices and all necessary and desirable
repairs and replacements have been performed during
such overhauls;
(11) conveyer belting has been replaced on a
staggered basis based on results of annual
inspections, as is customary for other
facilities similar to Clover Unit 1 that are
operated by the then current Clover Unit 1
Operator;
(12) all other Components shall be in a condition that
reflects the Clover Unit 1 Operator's ongoing
repair, maintenance and replacement program as
described in the Clover Agreements;
(13) it has reviewed in respect of Clover Unit 1 all
operating records, outage reports, all turbine
opening reports, all major equipment inspection
reports, all outstanding work requests and
equipment repair orders over at least the four-year
period preceding the date of expiration or earlier
termination of the Term of this Equipment Operating
Lease;
(14) it has performed in respect of Clover Unit 1 an
analysis of significant deviations from expected
plant conditions as of the Expiration Date,
including an estimate with such certificate of the
cost of restoring Clover Unit 1 to that expected
condition; and
(15) there are no material capital expense items other
than routine major maintenance items anticipated
during the 13 years following the date of such
return.
The conclusions of the Independent Engineer hereinabove
referred to shall be accompanied by such inspection
reports, tests and other data as shall be reasonably
necessary to substantiate such conclusions.
(i) there shall be no material litigation or similar
proceeding pending against the Lessee, the Foundation
Lessee or the Clover Unit 1 Operator with respect to
Clover Unit 1 (or the Equipment Interest or the
Foundation Interest) if the likelihood of a failure to
succeed is other than remote or could, if determined
adversely to the Lessee, the Foundation Lessee or the
Clover Unit 1 Operator, reasonably be expected to result
in a material adverse effect on Clover Unit 1, the
Equipment Interest or the Foundation Interest;
(j) all property and similar Taxes (other than any Taxes in
respect of which specific provision has been made in the
Operative Documents) payable in connection with such
surrender and return shall, subject to Section 8.2 of the
Participation Agreement, have been paid by the Lessee;
and
(k) the Owner Participant and the Lessor shall have received
evidence satisfactory to the Owner Participant and the
Lessor that (i) each of the Clover Agreements are in full
force and effect, (ii) there have been no amendments,
supplements or modifications to the Clover Agreements
other than in accordance with Section 7 of the Clover
Agreements Assignment, (iii) if the Service Contract
Option is elected, the Clover Agreements as thus amended
are adequate to enable required performance under the
Power Sales Agreement and (iv) the Lessee is not, and to
the best of the Lessee's knowledge, no other party to the
Clover Agreements is, in default in the performance of
its obligations, covenants or conditions contained
therein.
<PAGE>
3 ENVIRONMENTAL REPORT. (a) In connection with a return pursuant to
Section 5.2 and Section 14.3, the Lessee shall provide to the Lessor and the
Owner Participant, not later than 270 days prior to the Expiration Date, or in
connection with a return other than on the Expiration Date, not later than the
date of return, an inspection report prepared by a reputable environmental
consulting firm (selected by the Owner Participant and reasonably acceptable to
the Lessee) as to the environmental condition of Clover Unit 1 and the Clover
Real Estate and the compliance or non-compliance with applicable environmental
laws, in form, scope and substance reasonably satisfactory to the Owner
Participant. The costs and expenses of preparing and providing such report shall
be for the account of the Lessee. The provision of such report shall not relieve
the Lessee of liability with respect to environmental conditions, known or
unknown, in respect of Clover Unit 1 and the Clover Real Estate, and the Lessee
will take any and all actions necessary to ensure that Clover Unit 1 and the
Clover Real Estate comply with all such environmental laws. If such report shall
indicate that either Clover Unit 1 or the Clover Real Estate is not in
compliance with applicable environmental laws, the Lessee shall, within 90 days
of the Lessor having received such inspection report, (a) provide the Owner
Participant with a remediation plan approved by the applicable Governmental
Entity designed to ensure that Clover Unit 1 and the Clover Real Estate will be
brought into compliance with applicable environmental laws as promptly as is
reasonably practical and without materially adversely affecting the continued
operation of Clover Unit 1 and (b) (i) place in escrow funds in an amount
corresponding to the Lessor's Percentage of the cost estimate of such
remediation plan (as certified by the environmental consulting firm that
prepared such report or another expert reasonably satisfactory to the Owner
Participant), which escrow shall provide for the payment of the costs of such
plan as the same become due and payable or (ii) make other arrangements that are
satisfactory to the Owner Participant, as determined in its sole discretion
acting in good faith, for such purposes. The obligations of the Lessee
set forth in this Section 5.3 shall survive the termination of this Equipment
Operating Lease and the expiration of the Term.
4 EXPENSES. The Lessee agrees to pay or reimburse, on demand, all costs
and expenses (including legal fees and expenses) incurred by the Lessor,
the Owner Participant, the Agent or any Lender (including the costs, fees and
expenses of any Independent Engineer, any environmental consultant fees and
financial adviser fees) in connection with any return contemplated by this
Section 5.
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6 LIENS.
The Lessee will not directly or indirectly create, incur, assume or
suffer to exist any Lien on or with respect to the Lessor's Unit 1 Interest or
any interest therein or in, to or under this Equipment Operating Lease or any
other Operative Document, except Permitted Liens, and the Lessee shall promptly
notify the Lessor of the imposition of any such Lien of which the Lessee is
aware and shall promptly, at its own expense, take such action as may be
necessary duly to discharge such Lien.
7. MAINTENANCE; REPLACEMENTS OF COMPONENTS
1 MAINTENANCE. The Lessee, at its own cost and expense, will cause Clover
Unit 1 to be maintained consistent with Prudent Utility Practice and in good
condition, repair and working order and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, (a) all
as may be necessary so that the business carried on in connection with the
Equipment Interest may be properly and advantageously conducted by the
Lessee at all times, (b) in accordance with the Clover Agreements and (c) in
compliance with all material Applicable Laws of any Governmental Entity having
jurisdiction, including, without limitation, all material environmental
protection, pollution and safety laws.
2 REPLACEMENT OF COMPONENTS. In addition, in the ordinary course of
maintenance, service, repair or testing, the Lessee, at its own cost and
expense, may remove or cause to be removed from Clover Unit 1 any Component;
PROVIDED, HOWEVER, that the Lessee shall cause such Component to be replaced by
a replacement Component which shall be free and clear of all Liens (except
Permitted Liens) and shall be in as good operating condition as, and shall have
a current and residual value, remaining useful life and utility at least equal
to, that of the Component replaced, assuming such replaced Component was in at
least the condition and repair required to be maintained in accordance with the
terms of this Equipment Operating Lease (each such replacement Component being
herein referred to as a "Replacement Component") as promptly as practicable. If
any part of Clover Unit 1 shall be removed and such removal shall cause material
damage to Clover Unit 1, the Lessee, at its own cost and expense, shall promptly
repair or cause the repair of such damage. An undivided interest equal to the
Lessor's Percentage in each Component at any time removed from the Unit 1
Equipment or the Common Facilities Equipment shall remain subject to the
Equipment Head Lease and this Equipment Operating Lease, wherever located,
until such time as such Component shall be replaced by a Replacement
Component which has been incorporated in Clover Unit 1 and which meets the
requirements for Replacement Components specified above. Immediately upon any
Replacement Component becoming incorporated in the Unit 1 Equipment or the
Common Facilities Equipment, without further act, (i) the replaced Component
shall no longer be subject to the Equipment Head Lease or this Equipment
Operating Lease, (ii) an undivided
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interest equal to the Lessor's Percentage in the Replacement Component shall
thereupon become subject to the Equipment Head Lease, and (iii) an undivided
interest equal to the Lessor's Percentage in such Replacement Component shall
become subject to this Equipment Operating Lease and be deemed a part of Clover
Unit 1 for all purposes hereof. Notwithstanding anything in this Section 7.2 or
elsewhere in this Equipment Operating Lease to the contrary, if the Lessee or
the Clover Unit 1 Operator has determined that a Component is surplus or
obsolete, it shall have the right to remove such Component without replacing it,
PROVIDED that no such Component may be so removed without being replaced if such
removal would diminish the current or residual value, remaining useful life or
utility of Clover Unit 1.
8. MODIFICATIONS.
1 REQUIRED MODIFICATIONS. Subject to the Clover Agreements, the Lessee,
at its own cost and expense, shall make or cause to be made all Modifications
to Clover Unit 1 as it relates to the Equipment Interest as may be from time to
time (a) installed in accordance with the Clover Agreements or (b) required in
order to comply with all Applicable Laws (each, a "Required
Modification"); PROVIDED, HOWEVER, that the Lessee may, in good faith and by
appropriate proceedings diligently conducted, contest the validity or
application of any such Applicable Laws in any reasonable manner which does not
involve any danger of (i) foreclosure, sale, forfeiture or loss of, or
imposition of a Lien on any part of Clover Unit 1 or the Clover Real Estate or
the impairment of Clover Unit 1 in any material respect or (ii) any criminal
liability being incurred or any material adverse effect on the Lessor, the Owner
Participant, the Agent or the Lenders (in each case in the reasonable opinion of
such Person).
2 OPTIONAL MODIFICATIONS. The Lessee at any time may make or cause to be
made any Modification to the Unit 1 Equipment as the Lessee considers
desirable in the proper conduct of its business (an "Optional
Modification"); PROVIDED that no Optional Modification to the Unit 1 Equipment
shall impair the operation of Clover Unit 1 or diminish the current or residual
value, remaining useful life or utility of Clover Unit 1 below the current or
residual value, remaining useful life or utility thereof immediately prior to
such Optional Modification, assuming such Clover Unit 1 was then in the
condition required to be maintained by the terms of this Equipment Operating
Lease and the Foundation Operating Lease.
3 TITLE TO MODIFICATIONS; SUBJECTION TO EQUIPMENT HEAD LEASE. Title to an
undivided interest as a tenant in common with Virginia Power in (a) all
Modifications to the Retained Assets and (b) all Severable Modifications to the
Pollution Control Assets, shall immediately vest in Old Dominion and become
subject to the Lien of the Old Dominion Indenture and be deemed Retained Assets
for all purposes of this Equipment Operating Lease. Title to an undivided
interest as a tenant in common with Virginia Power in any Nonseverable
Modifications to the Pollution Control Assets shall immediately vest in the
Pollution Control Assets Lessor and become subject to the Pollution Control
Assets Lease and be deemed Pollution Control Assets for all purposes of this
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Equipment Operating Lease. An undivided interest equal to the Lessor's
Percentage in all Required Modifications and all Nonseverable Modifications
shall immediately become subject to the Equipment Head Lease (at no cost to the
Lessor and with no adjustment to the Equipment Head Lease Basic Rent) and be
deemed a part of the Equipment Interest for all purposes hereof, and the Lessee,
at its own cost and expense, shall take such steps as the Lessor may require
from time to time to confirm that the foregoing Modifications are subject to the
Equipment Head Lease. No interest in any Optional Modification which is a
Severable Modification shall become subject to the Equipment Head Lease or this
Equipment Operating Lease, PROVIDED that if the Lessee shall, at its cost and
expense, cause such Optional Modifications which are Severable Modifications to
be made to the Unit 1 Equipment, the Lessor shall have the right, prior to the
return of the Equipment Interest to the Lessor hereunder, to purchase any such
Optional Modifications which are Severable Modifications at their then fair
market value. If the Lessor does not elect to purchase such Optional
Modifications which are Severable Modifications, the Lessee may remove such
Modifications at the end of the Term, all at the Lessee's cost and expense.
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9 NET LEASE.
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This Equipment Operating Lease is a net lease and the Lessee's
obligation to pay all Rent payable hereunder shall be absolute and unconditional
under any and all circumstances and shall not be affected by any circumstance of
any character, including, without limitation, (i) any setoff, counterclaim,
recoupment, defense or other right which the Lessee may have against the Lessor,
the Owner Participant, the Agent or any Lender or any other Person, (ii) any
lack or invalidity of title or any defect in the title, condition, design,
operation, merchantability or fitness for use of Clover Unit 1 or any Component,
any unavailability of Clover Unit 1, the Clover Real Estate, any Component, the
Lessee's Unit 1 Interest or any part after its delivery and acceptance by the
Lessee hereunder, for any reason, (iii) any loss or destruction of, or damage
to, Clover Unit 1 or any Component or interruption or cessation in the use or
possession thereof by the Lessee for any reason whatsoever and of whatever
duration, (iv) the condemnation, requisitioning, expropriation, seizure or other
taking of title to or use of Clover Unit 1, the Clover Real Estate, any
Component, the Lessee's Unit 1 Interest or any part thereof by any Governmental
Entity or otherwise, (v) the invalidity or unenforceability or lack of due
authorization or other infirmity of this Equipment Operating Lease or any other
Operative Document, (vi) the lack of right, power or authority of the Lessor to
enter into this Equipment Operating Lease or any Operative Document, (vii) any
ineligibility of Clover Unit 1 or any Component for any particular use,
whether or not due to any failure of the Lessee or the Clover Unit 1
Operator to comply with any Applicable Law, (viii) any event of Force
Majeure or any frustration, (ix) any legal requirement similar or dissimilar
to the foregoing, any present or future law to the contrary notwithstanding,
(x) any insolvency, bankruptcy, reorganization or similar proceeding by
or against the Lessee or any other Person, (xi) any Lien of any Person with
respect to Clover Unit 1, the Clover Real Estate, any Component, the Lessee's
Unit 1 Interest or any part thereof, (xii) the occurrence of a Lessor Event of
Default, (xiii) the existence of the Qualifying Security, the Payment
Undertaking Agreement, the Deposit or any Qualifying Letter of Credit (other
than to the extent of the Rent payment intended to be discharged from any
remittance from the Qualifying Security, Payment Undertaking Agreement, the
Deposit or Qualifying Letter of Credit) or (xiv) any other cause whether
similar or dissimilar to the foregoing, any present or future law
notwithstanding, except as set forth herein or in any other Operative
Documents, it being the intention of the parties hereto that all Rent payable by
the Lessee hereunder shall continue to be payable in all events in the manner
and at times provided for herein. Such Rent shall not be subject to any
abatement and the payments thereof shall not be subject to any setoff or
reduction for any reason whatsoever, including any present or future claims of
the Lessee against the Lessor or any other Person under this Equipment Operating
Lease or otherwise. To the extent permitted by Applicable Law, the Lessee hereby
waives 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 Equipment Operating Lease with respect to the Equipment Interest,
except in accordance with Sections 10, 13, 14, 15 and 18. If for any reason
whatsoever this Equipment Operating Lease shall be terminated in whole or in
part by operation of law or otherwise, except as specifically provided herein,
the Lessee nonetheless agrees to the extent permitted by Applicable Law, to pay
to the Lessor an amount equal to each installment of Basic Rent and all
Supplemental Rent due and owing, at the time such payment would have become due
and payable in accordance with the terms hereof had this Equipment Operating
Lease not been so terminated. Nothing contained herein shall be construed to
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waive any claim which the Lessee might have under any of the Operative Documents
or otherwise or to limit the right of the Lessee to make any claim it might have
against the Lessor or any other Person or to pursue such claim in such manner as
the Lessee shall deem appropriate.
10 LOSS, DESTRUCTION, REQUISITION, ETC.
1 EVENTS OF LOSS. Upon the occurrence of an Event of Loss (or, if the
Lessee shall have Actual Knowledge thereof, an event that with the passage of
time, would constitute an Event of Loss) the Lessee shall notify the Lessor,
the Owner Participant and the Agent promptly but in any event within 30 days of
such Event. Lessee also will notify the Lessor, the Owner Participant and the
Agent of any damage to Clover Unit 1, the Lessee's responsibility for which
under the Clover Operating Agreement is at least $10,000,000, which notice shall
include a description of the property insurance maintained in respect of
Clover Unit 1 at such time and shall include a certification of the Lessee that
the property damage insurance maintained in respect of Clover Unit 1 complies
with paragraph (a) of Section 11 of this Equipment Operating Lease. If an
Event of Loss described in clauses (i), (ii) or (iii) of the definition of
Event of Loss or a Significant Damage Event shall occur, the Lessee shall
within 30 days following such occurrence (provided the Lessee shall not at
such time be maintaining a Qualifying Letter of Credit in accordance with
Section 7.7 of the Participation Agreement) shall obtain for the benefit of the
Owner Participant a Qualifying Letter of Credit. The Lessee shall cause such
Qualifying Letter of Credit to be maintained in accordance with this Section
10.1 until the earliest of (i) termination of this Lease in accordance with
Section 10.2, (ii) the Replacement Closing Date and (iii) the Owner
Participant's agreement that such Qualifying Letter of Credit need no longer
be maintained. If an Event of Loss described in clauses (i), (ii), or (iii) of
the definition of Event of Loss shall occur, then no later than 180 days
following such occurrence the Lessee shall notify the Lessor in writing of
its election to either (a) if no Credit Default or Event of Default has occurred
and is continuing and subject to the Lessee having obtained a Qualifying Letter
of Credit for the benefit of the Owner Participant pursuant to the preceding
sentence and to the satisfaction of the other conditions set forth in Section
10.3, repair or replace Clover Unit 1 in accordance with the provisions of
the Clover Agreements with a similar facility having a fair market value
(present and residual), remaining useful life and utility at least equal to
Clover Unit 1 prior to such repair or replacement, assuming Clover Unit 1 was in
the condition and repair required to be maintained by this Equipment
Operating Lease and the Foundation Operating Lease or (b) terminate this
Equipment Operating Lease and the Foundation Operating Lease pursuant to Section
10.2 hereof and Section 10.2 thereof. The Lessee may elect the option provided
in clause (b) of the preceding sentence regardless of whether Clover Unit 1 is
to be repaired or replaced. If the Lessee fails to make an election as provided
above or if Lessee shall have elected the option provided in clause (a) of such
preceding sentence, but has not fulfilled the conditions provided as set forth
in Section 10.3 hereof within the time period required therein, the Lessee shall
be deemed to elect to terminate this Equipment Operating Lease and the
Foundation Operating Lease pursuant to Section 10.2 hereof and Section 10.2 of
the Foundation Operating Lease.
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2 PAYMENT OF TERMINATION VALUE; RENT TERMINATION. If (w) the Lessee shall
elect not to repair or replace Clover Unit 1 pursuant to Section 10.3 hereof
following an Event of Loss described in clause (i), (ii) or (iii) of the
definition of Event of Loss, (x) an Event of Loss described in clause (iv) of
the definition of Event of Loss shall occur, or (y) an Event of Loss
described in clause (v) of the definition of Event of Loss shall occur, then, on
the next Termination Date following the Lessee's notice of its election referred
to in the fourth sentence of Section 10.1 in the case of clause (w) above, on
the next Termination Date occurring at least three months after such occurrence
in the case of clause (x) above, or on the Mandatory Prepayment Date (which
shall be a Termination Date) in the case of clause (y) above, the Lessee shall
terminate this Equipment Operating Lease and pay to the Lessor (a) the
Termination Value determined as of the relevant Termination Date, plus (b) all
amounts of Supplemental Rent (including, without limitation, all costs and
expenses of the Lessor, the Owner Participant, the Agent and the Lenders, and
all sales, use, value added and other Taxes required to be indemnified by the
Lessee pursuant to Section 8.2 of the Participation Agreement, associated
with the exercise of the termination option pursuant to this Section 10.2) due
and payable on or prior to such Termination Date, plus (c) any unpaid Basic
Rent due before such Termination Date and, if such Termination Date shall
be a Rent Payment Date, the Basic Rent (to the extent payable in arrears) due
and payable on such Rent Payment Date. Concurrently with the payment of all sums
required to be paid pursuant to this Section 10.2 and Section 10.2 of the
Foundation Operating Lease, (1) Basic Rent for the Equipment Interest shall
cease to accrue, (2) the Lessee shall cease to have any liability to the Lessor
with respect to the Equipment Interest except for Supplemental Rent
obligations (including, without limitation, those under Sections 8.1 and 8.2
of the Participation Agreement and the Tax Indemnity Agreement) surviving
pursuant to the express provisions of any Operative Document or which have
otherwise accrued but not been paid as of such Termination Date, (3) the Lessor
will prepay the Loan Certificates pursuant to Section 2.10 of the Loan
Agreement, (4) the Lessor will at Lessee's cost and expense execute and deliver
to the Lessee a release or termination of this Equipment Operating Lease, the
Equipment Head Lease, the Foundation Operating Lease, the Foundation Head Lease,
the Ground Lease and Sublease (if delivered) and the Clover Agreements
Assignment and the Lessor shall transfer the Lessor's Unit 1 Interest to the
Lessee on an "as is", "where is" basis, without representations or warranties
other than a warranty as to the absence of Lessor's Liens and Owner
Participant's Liens and (5) this Equipment Operating Lease shall terminate and
the Lessee shall, assuming the Lessor and the Owner Participant are in
compliance with all of their obligations under the Operative Documents, cause
the Agent to discharge the Liens of the Loan Agreement and the Leasehold
Mortgage and to execute and deliver appropriate releases and all other documents
or instruments necessary or desirable to effect the foregoing, all at the cost
and expense of the Lessee.
3 REPAIR OR REPLACEMENT. The Lessee's right to repair or replace
Clover Unit 1 pursuant to clause (a) of Section 10.1 hereof shall be subject
to the fulfillment, at the Lessee's sole cost and expense, in addition to the
conditions contained in said paragraph (a) and the conditions contained in
Section 10.3 of the Foundation Operating Lease, of the following conditions:
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(a) on the date the Lessee shall notify the Lessor of its
election to repair or replace Clover Unit 1 pursuant to
Section 10.1, the Lessee shall deliver to the Lessor and
the Owner Participant either (x) a tax opinion of
Chadbourne & Parke LLP to the effect that, assuming the
proposed repair or replacement is completed in the manner
and within the time proposed, such repair or replacement
will not adversely affect the federal or state income tax
consequences of the transaction contemplated by the
Operative Documents to the Owner Participant, the Lessor or
any Affiliate, or (y) if the Old Dominion Bonds are rated
at least the Minimum Credit Rating, (i) a tax opinion of
counsel to the Lessee, such counsel and such opinion
reasonably satisfactory to the Owner Participant, to the
effect that it is more likely than not that, assuming the
proposed repair or replacement is completed in the manner
and within the time proposed, such repair or
replacement will not adversely affect the federal or
state income tax consequences of the transaction
contemplated by the Operative Documents to the Owner
Participant, the Lessor or any Affiliate, and (ii) an
indemnity to the Owner Participant and the Lessor in form
and substance satisfactory to the Owner Participant and
the Lessor, respectively, against any adverse federal or
state income tax consequences resulting in whole or in
part from the proposed repair or replacement;
(b) the Lessee shall cause the repair or replacement of Clover
Unit 1 to commence as soon as practicable after the
occurrence of such Event of Loss and in all events within
24 months of such occurrence and will cause work on such
repair or replacement to proceed diligently thereafter. As
the repair or replacement of Clover Unit 1 progresses,
title to an undivided interest in such repaired or replaced
facilities (i) which are repairs to or replacements of the
Retained Assets shall immediately vest in Old Dominion and
Virginia Power as tenants-in-common, and (ii) which are
repairs to or replacements of Pollution Control Assets
shall immediately vest in the Pollution Control Assets
Lessor and Virginia Power as tenants-in-common, subject to
the Lien of the Old Dominion Indenture and, if such
facilities are repairs to or replacements of Pollution
Control Assets, the Pollution Control Assets Lease, and an
undivided interest equal to the Lessor's Percentage in such
repaired or replaced facilities corresponding to the Unit 1
Equipment and the Common Facilities Equipment shall become
subject to the Equipment Head Lease and to this Equipment
Operating Lease, automatically, for all purposes hereof,
without any further act by any Person;
(c) on a date not later than four years following the
occurrence of such Event of Loss (the "Replacement Closing
Date") such repair or replacement of Clover Unit 1 shall be
completed and the following documents shall have been duly
authorized, executed and delivered and, if appropriate,
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filed for recordation by the respective party or parties
thereto and shall be in full force and effect, and an
executed counterpart of each thereto shall be delivered to
the Lessor and the Owner Participant: (1) supplements to
the Equipment Head Lease and this Equipment Operating
Lease, subjecting an undivided interest equal to the
Lessor's Percentage in the repaired or replaced facilities
to the Equipment Head Lease and this Equipment Operating
Lease, (2) a supplement to the Loan Agreement subjecting
the Equipment Head Lease Interest in such repaired or
replaced facilities to the Lien of the Loan Agreement, (3)
such recordings and filings as may be reasonably requested
by the Owner Participant or the Agent to be made or filed
in such public offices as are necessary, (4) an opinion of
counsel of the Lessee, such counsel and such opinion to be
reasonably satisfactory to the Owner Participant and the
Agent, to the effect that (w) the supplements to the
Equipment Head Lease and this Equipment Operating Lease
referred to in clause (1) above constitute effective
instruments for subjecting such repaired or replaced
facilities to the Equipment Head Lease and this Equipment
Operating Lease, (x) the supplement to the Loan Agreement
referred to in clause (2) above constitutes an effective
instrument for subjecting the Equipment Head Lease
Interest in such repaired or replaced facilities to the
Lien of the Loan Agreement, (y) all filings and other
action necessary to perfect and protect the Lessor's
interest in an undivided interest equal to the Lessor's
Percentage in the repaired or replaced facilities and to
subject the Equipment Head Lease Interest in such repaired
or replaced facilities to the Lien of the Loan Agreement
have been accomplished, and (z) such repaired or
replaced facilities corresponding to the Unit 1
Equipment or the Common Facilities Equipment have been
constructively severed from the Clover Real Estate
and, hence, constitute personal property for purposes
of Virginia law, (5) an appraisal by an Independent
Appraiser, certifying that Clover Unit 1 as so repaired
or replaced has a fair market value (present and
residual), remaining useful life and utility at least
equal to Clover Unit 1 prior to such repair or replacement
(assuming Clover Unit 1 was in the condition and repair
required to be maintained by the terms of this Equipment
Operating Lease and the Foundation Operating Lease),
(6) a report by an Independent Engineer certifying
that Clover Unit 1 as so repaired or replaced is in a
state of repair and condition required by this Equipment
Operating Lease and the Foundation Operating Lease,
(7) an Officer's Certificate of the Lessee as to
compliance with this Section 10.3 and that no Event of
Default shall have occurred as a result of the repair or
replacement and (8) satisfactory evidence as to the
compliance with Section 11 of the Equipment Operating
Lease and Foundation Operating Lease with respect to
Clover Unit 1 as so repaired or replaced;
(d) on the Replacement Closing Date, the Lessor shall receive
a valid leasehold interest in the repaired or replaced
facility under the Equipment Head Lease, free and clear
of Liens other than Permitted Liens; and
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(e) on the Replacement Closing Date, the Lessor, the Owner
Participant and the Agent shall have received such
documents and evidence with respect to the Lessee and the
repaired or replaced facility as the Lessor, the Owner
Participant and the Agent may request in order to
establish the consummation of the transactions
contemplated by this Section 10.3 and Section 10.3 of the
Foundation Operating Lease, the taking of all necessary
action in connection therewith (including without
limitation the receipt of all relevant licenses, permits,
approvals and consents of all Governmental Entities), and
compliance with all conditions set forth in this
Section 10.3 and in Section 10.3 of the Foundation
Operating Lease, in each case in form and substance
satisfactory to the Lessor, the Owner Participant
and the Agent.
Whether or not the transactions contemplated by this Section 10.3 are
consummated, the Lessee agrees to pay or reimburse, on an After-Tax Basis, any
costs or expenses (including reasonable legal fees and expenses) incurred by the
Lessor, the Owner Participant, the Lenders or the Agent in connection with the
transactions contemplated by this Section 10.3
4 EMINENT DOMAIN. In the event that during the Term the use of the
Equipment Interest is requisitioned or taken by or pursuant to a request of any
Governmental Entity under the power of eminent domain or otherwise for a period
which does not constitute an Event of Loss, the Lessee's obligation to pay
all installments of Basic Rent shall continue for the duration of such
requisitioning or taking. The Lessee shall be entitled to receive and retain for
its own account all sums payable for any such period by such Governmental Entity
as compensation for such requisition or taking of possession. Any amount
referred to in this Section 10.4 which is payable to the Lessee shall not be
paid to the Lessee, or if it has been previously paid directly to the Lessee,
shall not be retained by the Lessee, if at the time of such payment a Payment
Default, a Credit Default or Event of Default shall have occurred and be
continuing, but shall be paid to and held by the Lessor as security for the
obligations of the Lessee under this Equipment Operating Lease, and upon the
earlier of (a) 180 days after the Lessor shall have received such amount,
PROVIDED the Lessor has not proceeded to exercise any remedy under Section 17
and it is not stayed or prevented by law or otherwise from exercising such
remedy and (b) such time as there shall not be continuing any such Payment
Default, a Credit Default or Event of Default, such amount shall be paid to the
Lessee.
11 INSURANCE.
(a) Subject to paragraph (b), the Lessee shall procure at its own
expense and maintain or cause to be maintained in full force and effect:
(i) workers' compensation insurance as required by Applicable
Law and, to the extent applicable, Longshoremen's and Harbor Workers'
Compensation Act insurance including, without limitation, employer's
liability insurance with a limit of not less than $25,000,000
(including coverage under any applicable excess umbrella liability
policy) per occurrence and in the aggregate amount where applicable;
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(ii) commercial general liability insurance with (A)
Associated Electric & Gas Insurance Services Limited or (B) other
insurance carriers having a reported policyholder surplus of
$50,000,000 or more, and, if rated by A.M. Best Company having a Best
rating of at least A-VII or better (except for policies underwritten by
Lloyds of London and other companies reasonably acceptable to the
Lessor), against premises and operations claims for bodily injury
(including death) and property damage to third parties. Such insurance
shall provide blanket contractual liability, broad form property
damage and personal injury coverage with no less than $25,000,000 per
occurrence/aggregate (including coverage under any applicable excess
umbrella liability policy);
(iii) business automobile liability insurance against claims
for bodily injury (including death) and property damage covering all
owned, leased, non-owned and hired motor vehicles, in an amount not
less than $20,000,000 (including coverage under any applicable excess
umbrella liability policy) minimum limit per occurrence for combined
bodily injury and property damage and in the aggregate where
applicable; and
(iv) property damage insurance on a basis as required under,
and to the extent required by, the Old Dominion Indenture and the
Clover Agreements, in any event consistent with prudent industry
standards and risk management practices and taking into account the
Lessee's business operations, capital structure, financial condition
and risk management policies. Lessee shall at all times actively and
prudently pursue its rights conferred by Article 4 and 9 of the Clover
Operating Agreement to cause the Clover Unit 1 Operator to maintain
property damage insurance meeting the criteria of the preceding
sentence.
(b) All policies of insurance maintained pursuant to clauses (i) and
(iv) of paragraph (a) of this Section 11 shall be with insurance carriers having
a reported policyholder surplus of $50,000,000 or more and, if rated by A.M.
Best Company having a Best rating of at least A-VII or better (except for
policies underwritten by Lloyds of London and other companies reasonably
acceptable to the Lessor). The Lessee's obligation to maintain liability
insurance in the amounts set forth in clause (ii) of paragraph (a) of this
Section 11 shall be subject to the availability of such insurance in such
amounts on commercially reasonable terms. If such amounts are not available on
commercially reasonable terms, the Lessee shall maintain such liability
insurance in the amount then indicative of prudent industry standards taking
into account the Lessee's business operations, capital structure, financial
condition and risk management policies but, in no event in amounts per
occurrence less than or on terms less beneficial to the insureds than liability
insurance maintained by the Lessee in respect of other coal-fired generating
units owned or leased by the Lessee for which the Lessee has the ability to
determine liability insurance amounts and provisions. If the Lessee maintains
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any such coverage on a "claims made" basis, it shall cause any such coverage to
remain in effect for a period of two years after the earlier of the termination
of such insurance coverage or the termination of this Equipment Operating Lease.
The Lessee will periodically review the liability and property insurance
maintained by it or on its behalf and will, if necessary, revise such coverages
in order that the liability and property insurance maintained by it or on its
behalf is consistent with that maintained by prudent power producers similar to
the Lessee taking into account the Lessee's business operations, capital
structure, financial condition and risk management policies, subject to the
availability of such insurance in such amounts on commercially reasonable terms.
(c) All policies of insurance required to be maintained pursuant to
clause (ii) of paragraph (a) of this Section 11 shall within 90 days of the
Closing Date, (i) provide that there shall be no recourse against the Lessor,
the Owner Participant, the Agent and the Lenders for payment of premiums,
commissions, assessments or calls or other amounts with respect thereto, (ii)
provide the Lessor, the Owner Participant, the Agent and the Lenders with at
least 60 days' (or 10 days' in the case of nonpayment of premiums) prior written
notice of reduction in coverage or amount (other than a reduction in coverage or
amount resulting from a payment thereunder), cancellation or non-renewal of any
policy, (iii) waive the right of subrogation of the insurers against the Lessor,
the Owner Participant, the Agent and the Lenders, (iv) provide that the
insurance be primary and not excess to or contributory to any insurance or
self-insurance maintained by the Lessor, the Owner Participant, the Agent and
the Lenders, and (v) insure the interest of the Lessor, the Owner Participant,
the Agent and the Lenders regardless of any breach or violation by the Lessee,
Virginia Power or others of warranties, declarations or conditions contained in
such policies, any action or inaction of the Lessee or others, or any
foreclosure relating to Clover Unit 1 or any change in ownership of all or any
portion of Clover Unit 1. All liability policies required to be maintained
pursuant to this Section 11 shall (x) name the Lessor, the Owner Participant,
the Agent and the Lenders as additional insureds, (y) include a severability of
interest or cross liability clause, and (z) waive the right of subrogation of
the insurers against the Lessor, the Owner Participant, the Agent and the
Lenders.
(d) The Lessee will advise the Lessor, the Owner Participant, the Agent
and the Lenders in writing promptly after obtaining Actual Knowledge thereof of
any default in the payment of any premium and any other act or omission on the
part of the Lessee or others which might invalidate or render unenforceable, in
whole or in part, any insurance required to be maintained pursuant to paragraph
(a) of this Section 11 hereof.
(e) Within 30 days of each fiscal year of the Lessee, the Lessee will
provide the Lessor, the Owner Participant and the Agent with a certificate of
insurance of Watson Wyatt Worldwide or an independent insurance broker of
recognized standing in Virginia (i) setting forth the carriers with which the
liability insurance required by this Section 11 is maintained, (ii) to the
effect that such insurance complies with this Section 11, and (iii) to the
effect that all premiums in respect of such insurance have been paid.
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(f) In the event the Lessee fails to take out or maintain insurance
coverage required by this Section 11, the Lessor, upon 30 days' prior written
notice (unless the aforementioned insurance would lapse within such period, in
which event notice should be given as soon as reasonably possible) to the Lessee
of any such failure, may (but shall not be obligated to) take out the required
policies of insurance and pay the premiums on the same in accordance with
Section 21.
(g) At any time the Lessor (either directly or in the name of the Owner
Participant) may at its own expense and for its own account carry insurance with
respect to its leasehold interest in the Equipment Interest, PROVIDED, that such
insurance does not in any way interfere with the Lessee's ability to obtain
insurance with respect to the Equipment Interest described in paragraph (a)
of this Section 11. Any insurance payments received from policies maintained
by the Lessor pursuant to the previous sentence shall be retained by the
Lessor without reducing or otherwise affecting the Lessee's obligations
hereunder.
(h) As soon as practical after the effective date of the property
damage insurance policy or policies obtained by the Clover Unit 1 Operator for
Clover Unit 1 for property damage insurance subsequent to the commercial
operation of Clover Unit 2, the Lessee will provide the Owner Participant with a
written description of the insurance coverages then maintained for Clover Unit 1
and a certificate of the Lessee to the effect that (i) it has pursued its rights
under Articles 7 and 9 of the Clover Operating Agreement to cause such insurance
coverage to comply with the provisions of paragraph (a) of this Section 11 and
(ii) the insurance maintained in respect of Clover Unit 1 complies with this
Section 11.
12 INSPECTION
During the Term, at such times as reasonably requested, each of the
Owner Participant, the Lessor, the Agent, each Lender and their representatives
may, at reasonable times, on reasonable notice to the Lessee and the Clover Unit
1 Operator and at their own risk and expense (except, at the expense, but not
risk, of the Lessee when an Event of Default has occurred and is continuing),
inspect Clover Unit 1 and the Clover Real Estate; PROVIDED, HOWEVER, that any
such inspection will not interfere with the Co-Owner's normal commercial
operation of Clover Unit 1 and will be in accordance with the Lessee's and the
Clover Unit 1 Operator's safety and insurance programs.
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13 LESSEE TERMINATION OPTION FOR BURDENSOME EVENTS.
1 ELECTION TO TERMINATE. After the occurrence and during the continuance
of any of the events specified below, the Lessee shall have the right, at
its option, so long as no Event of Default shall have occurred and be
continuing, upon at least 30 days' (one day in the case of a Burdensome Tax Law
Change) prior written notice to the Lessor, the Owner Participant and the Agent
to terminate this Equipment Operating Lease on the Termination Date specified in
such notice (which shall be a date occurring not more than 90 days after such
notice in the case of the events described in clauses (a), (b) and (c) below and
a date occurring not more than thirty days after such notice in the case of an
event described in clause (d) below) if:
(a) a Lessor Event of Default shall have occurred and be
continuing; or
(b) it shall have become illegal for the Lessee to continue
this Equipment Operating Lease or the Foundation Operating Lease or for
the Lessee to make payments under this Equipment Operating Lease or the
Foundation Operating Lease; or
(c) one or more events outside the control of the Lessee shall
have occurred which, in the reasonable judgment of the Lessee, will
give rise to an obligation by the Lessee to pay or indemnify in respect
of Section 8.1 or 8.2 of the Participation Agreement or the Tax
Indemnity Agreement; PROVIDED, HOWEVER, that (i) the indemnity
obligation (and the underlying cost or Tax) can be avoided in whole or
in part by such purchase and (ii) the amount of such avoided payments
would exceed (on a present value basis, discounted annually at the Debt
Rate, to the date of the termination) one percent of the Equipment
Interest Cost. If the Owner Participant shall waive its right to
amounts of indemnification payments in respect of Section 8.1 or 8.2 of
the Participation Agreement or the Tax Indemnity Agreement in excess of
such amount as to cause such avoided payments, computed in accordance
with the preceding sentence, not to exceed one percent of Equipment
Interest Cost, no such termination option in favor of the Lessee shall
exist; or
(d) a Burdensome Tax Law Change shall occur.
If the Lessee does not give notice of its exercise of the termination option
under this Section 13.1 within 180 days of the date the Lessee receives Actual
Knowledge of the event or condition described above, the Lessee will lose its
rights to terminate this Equipment Operating Lease pursuant to this Section 13.1
as a result of such event or condition. The Lessee shall be permitted to
exercise the option provided by this Section 13 only if it shall simultaneously
exercise the termination option provided by Section 13 of the Foundation
Operating Lease.
2 PROCEDURE FOR EXERCISE OF TERMINATION OPTION. If the Lessee shall
have exercised its option under Section 13.1, on the Termination Date
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specified in the Lessee's notice of such exercise, the Lessee shall pay to the
Lessor (a) (i) in the case of an event specified in clause (b) or (c) above, the
higher of Fair Market Sales Value of the Lessor's Unit 1 Interest allocated to
the Equipment Interest in accordance with the definitions of Fair Market
Sales Value or Termination Value, determined as of such Termination Date, (ii)
in the case of an event specified in clause (a) of Section 13.1, Termination
Value determined as of such Termination Date and (iii) in the case of an event
described in clause (d) of Section 13.1, the Burdensome Tax Law Change Value,
plus (b) all amounts of Supplemental Rent (including, without limitation, in the
case of an event specified in clause (b), (c) or (d) of Section 13.1, all costs
and expenses of the Lessor, the Owner Participant, the Agent and the Lenders and
all sales, use, valued added and other Taxes covered by Section 8.2 of the
Participation Agreement associated with the exercise of the termination option
pursuant to this Section 13) due and payable on or prior to the Termination Date
and, (c) any unpaid Basic Rent due before such Termination Date and, if such
Termination Date shall be a Rent Payment Date, the Basic Rent (to the extent
payable in arrears) due and payable on such Rent Payment Date. If the Lessee
shall exercise its option provided in this Section 13 in consequence of an event
described in clause (a) of Section 13.1, the Owner Participant will pay the
costs and expenses of the Lessor, the Owner Participant, the Agent, the Lessee
and the Lenders and all sales, use, value added and other Taxes associated with
the exercise of the termination option provided in this Section 13. Concurrently
with the payment of all sums specified in this Section 13.2 and Section 13.2
of the Foundation Operating Lease, (1) Basic Rent for the Equipment Interest
shall cease to accrue, (2) the Lessee shall cease to have any liability to the
Lessor with respect to the Equipment Interest, except for Supplemental Rent
obligations (including, without limitation, those under Sections 8.1 and 8.2
of the Participation Agreement and the Tax Indemnity Agreement) surviving
pursuant to the express terms of any Operative Document or which have otherwise
accrued but not been paid as of the Termination Date, (3) the Lessor will prepay
the Loan Certificates pursuant to Section 2.10 of the Loan Agreement, (4) the
Lessor will execute and deliver to the Lessee, at Lessee's cost and expense, a
release or termination of this Equipment Operating Lease, the Equipment Head
Lease, the Foundation Operating Lease, the Foundation Head Lease, the Ground
Lease and Sublease (if delivered) and the Clover Agreements Assignment, and the
Lessor will transfer the Lessor's Unit 1 Interest to the Lessee on an "as is",
"where is" basis, without representations or warranties other than a warranty as
to the absence of Lessor's Liens and Owner Participant's Liens and (5) this
Equipment Operating Lease shall terminate and, assuming the Lessor and the Owner
Participant have complied with all of their obligations under the Operative
Documents, the Lessee shall cause the Agent to discharge the Liens of the Loan
Agreement and the Leasehold Mortgage and to execute and deliver appropriate
releases and all other documents or instruments necessary or desirable to effect
the foregoing, all, except as expressly provided in this Section 13.2, at the
cost and expense of the Lessee.
Notwithstanding the Lessee's exercise of the election provided in this
Section 13 in consequence of a Lessor Event of Default, the Lessee reserves the
right to exercise any and all remedies available to it at law or equity in
respect of any Lessor Event of Default and its election to exercise the election
pursuant to this Section 13 shall not be deemed an exclusive election of
remedies.
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14 TERMINATION FOR OBSOLESCENCE.
1 TERMINATION. Upon 270 days' prior written notice to the Lessor, the
Owner Participant and the Agent, which notice shall contain a
certification by the Board of Directors of the Lessee that Clover Unit 1 is
economically or technologically obsolete or that Clover Unit 1 is surplus to the
Lessee's needs, the Lessee shall have the option, so long as no Payment Default
or Event of Default shall have occurred and be continuing, to terminate this
Equipment Operating Lease on any Termination Date occurring on or after the
fifth anniversary of the Closing Date (the "Obsolescence Termination Date") on
the terms and conditions set forth in this Section 14. Any termination of this
Equipment Operating Lease pursuant to this Section 14 shall be permitted only in
conjunction with a simultaneous termination of the Foundation Operating Lease
pursuant to Section 14 thereof.
2 SOLICITATION OF OFFERS. If the Lessee shall give the Lessor notice
pursuant to Section 14.1 and the Lessor shall not have elected to retain the
Equipment Interest and the Foundation Interest pursuant to Section 14.3
hereof and Section 14.3 of the Foundation Operating Lease, respectively, the
Lessee may, as non-exclusive agent for the Lessor, use its best efforts to
obtain bids for the cash purchase of the Lessor's Unit 1 Interest. The
Lessor shall also have the right to obtain bids for the cash purchase of the
Lessor's Unit 1 Interest either directly or through agents other than the
Lessee. The Lessee shall certify to the Lessor within five days after the
Lessee's receipt of each bid or offer (and in any event prior to the
Obsolescence Termination Date) the amount and terms thereof and the name and
address of the party (which shall not be the Lessee or any member cooperative of
the Lessee) submitting such bid or offer.
3 RIGHT OF LESSOR TO RETAIN EQUIPMENT INTEREST. The Lessor may
irrevocably elect to retain, rather than sell, the Equipment Interest, by
giving notice to the Lessee at least 90 days prior to the Obsolescence
Termination Date, PROVIDED that the Lessor simultaneously elects to retain the
Foundation Interest pursuant to Section 14.3 of the Foundation Operating Lease.
If the Lessor elects to retain the Equipment Interest pursuant to this Section
14.3, on the Obsolescence Termination Date (a) the Lessee shall pay to the
Lessor all Supplemental Rent (including, without limitation, all costs and
expenses of the Lessor, the Owner Participant, the Agent and the Lenders and all
sales, use, value added and other Taxes covered by Section 8.2 of the
Participation Agreement associated with the exercise of the termination option
pursuant to this Section 14) due and payable on such Obsolescence Termination
Date and (b) the Lessee shall pay to the Lessor any unpaid Basic Rent due before
such Obsolescence Termination Date and, if such Obsolescence Termination Date
shall be a Rent Payment Date, the Basic Rent (to the extent payable in arrears)
due and payable on such Rent Payment Date, but shall not be required to pay
Termination Value. Concurrently with the payment of all sums required to be paid
pursuant to this Section 14.3 and Section 14.3 of the Foundation Operating Lease
(i) Basic Rent for the Equipment Interest shall cease to accrue, (ii) the Lessee
shall cease to have any liability to the Lessor with respect to the Equipment
Interest, except for Supplemental Rent obligations (including, without
limitation, those under Sections 8.1 and 8.2 of the Participation Agreement and
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the Tax Indemnity Agreement) surviving pursuant to the express terms of any
Operative Document or which have otherwise accrued but not been paid as of such
Obsolescence Termination Date, (iii) the Lessor shall pay all principal and
accrued interest on the Loan Certificates, (iv) the Lessee will return the
Equipment Interest to the Lessor in accordance with paragraphs (a), (b), (c),
(d), (e), (f) and (h)(i) of Section 5.2 and Section 5.3, and (v) this Equipment
Operating Lease shall terminate and, assuming the Lessor and the Owner
Participant have complied with all of their obligations under the Operative
Documents, the Lessee shall cause the Agent to discharge the Liens of the Loan
Agreement and the Leasehold Mortgage and to execute and deliver appropriate
releases and all other documents or instruments necessary or desirable to effect
the foregoing, all at the cost and expense of the Lessee.
4 PROCEDURE FOR EXERCISE OF TERMINATION OPTION. If the Lessor has not
elected to retain Equipment Interest and the Foundation Interest in accordance
with Section 14.3 hereof and Section 14.3 of the Foundation Operating
Lease, respectively, on the Obsolescence Termination Date the Lessor shall
sell the Lessor's Unit 1 Interest for cash to the bidder or bidders (which shall
not be the Lessee or a cooperative member of the Lessee or any Affiliate
thereof), that shall have submitted the highest net cash bid or bids with
respect to the Lessor's Unit 1 Interest before the Obsolescence Termination Date
and that shall simultaneously purchase the Foundation Interest pursuant to
Section 14.4 of the Foundation Operating Lease, and the Lessee shall certify to
the Lessor and the Owner Participant that such buyer is not the Lessee or a
cooperative member of Lessee or any Affiliate thereof. On the Obsolescence
Termination Date, the Lessee shall pay to the Lessor (a) the excess, if any, of
Termination Value determined as of such Obsolescence Termination Date over the
total sale price for the Lessor's Unit 1 Interest allocated to the Equipment
Interest in accordance with the definition of Fair Market Sales Value paid to or
retained by the Lessor, after deducting from the sale price the expenses, if
any, incurred by the Lessor and the Owner Participant in connection with such
sale, (b) any unpaid Basic Rent due before such Obsolescence Termination Date
and, if such Obsolescence Termination Date shall be a Rent Payment Date, any
Basic Rent (to the extent payable in arrears) due and payable on such Rent
Payment Date, plus (c) all amounts of Supplemental Rent (including, without
limitation, all costs and expenses of the Lessor, the Owner Participant, the
Agent and the Lenders and all sales, use, value added and other Taxes covered by
Section 8.2 of the Participation Agreement associated with the exercise of the
termination option pursuant to this Section 14) due and payable on such
Obsolescence Termination Date. Concurrently with the payment of all sums
required to be paid pursuant to this Section 14.4 and Section 14.4 of the
Foundation Operating Lease (i) Basic Rent for the Equipment Interest shall cease
to accrue, (ii) the Lessee shall cease to have any liability to the Lessor with
respect to the Equipment Interest, except for Supplemental Rent obligations
(including, without limitation, Sections 8.1 and 8.2 of the Participation
Agreement and the Tax Indemnity Agreement) surviving pursuant to the express
terms of any Operative Document or which have otherwise accrued but not been
paid as of such Obsolescence Termination Date, (iii) the Lessor will prepay the
Loan Certificates pursuant to Section 2.10 of the Loan Agreement, (iv) the
Lessor will transfer (by an appropriate instruments of transfer) the Lessor's
Unit 1 Interest to the purchaser on an "as is", "where is" basis, without
representations or warranties other than a warranty as to the absence of
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Lessor's Liens or Owner Participant's Liens and (v) this Equipment Operating
Lease shall terminate and, assuming the Lessor and the Owner Participant have
complied with all of their obligations under the Operative Documents, the Lessee
shall cause the Agent to discharge the Liens of the Loan Agreement and the
Leasehold Mortgage and to execute and deliver appropriate releases and all other
documents or instruments necessary or desirable to effect the foregoing, all at
the cost and expense of the Lessee. Unless the Lessor shall have elected to
retain the Equipment Interest pursuant to Section 14.3, the Lessee may, at its
election, revoke its notice of termination on at least 10 days' prior notice to
the Lessor, the Owner Participant and the Agent, in which event this Equipment
Operating Lease shall continue with respect to the Equipment Interest; PROVIDED,
HOWEVER, that a notice of termination may be revoked on not more than one
occasion during the Term. The Lessor shall be under no duty to solicit bids, to
inquire into the efforts of the Lessee to obtain bids or otherwise take any
action in arranging any such sale of the Lessor's Unit 1 Interest other than, if
the Lessor has not elected to retain the Equipment Interest, to transfer the
Lessor's Unit 1 Interest in accordance with clause (iv) of the second preceding
sentence. If, because of a default by a prospective purchaser of its obligation
to consummate a purchase of the Lessor's Unit 1 Interest no sale shall occur on
the Obsolescence Termination Date, the notice of termination shall be deemed
revoked and this Equipment Operating Lease shall continue as to the Equipment
Interest in full force and effect in accordance with its terms (without
prejudice to the Lessee's right to exercise its rights under this Section 14
thereafter).
15 LESSEE'S END OF TERM OPTIONS.
1 OPTIONS. Unless this Equipment Operating Lease shall have been
previously terminated pursuant to Section 10, 13, 14, 17 or 18 hereof, at any
time not more than forty-two months, nor less than eighteen month's prior to the
Expiration Date, the Lessee shall have the option, upon giving written
notice to the Lessor, the Owner Participant and Virginia Power, to elect
irrevocably (subject to paragraph (d) of Section 15.3) one of the following
options:
(a) to purchase the Equipment Interest on the Expiration Date
for the Purchase Option Price in accordance with Section 15.2 (the
"Purchase Option"); or
(b) to arrange for an Acceptable Power Purchaser to enter into
a Power Sales Agreement on the Expiration Date in accordance with
Section 15.3 (the "Service Contract Option"); or
(c) to return the Equipment Interest pursuant to Section 5 and
to pay on the Expiration Date the Walk Away Payment in accordance with
Section 15.4 (the "Return Option").
If the Lessee shall not elect any of the options set forth in
accordance with this Section 15.1 by the date eighteen months prior to the
Expiration Date, it will be deemed to have elected the Return Option. The Lessee
shall be permitted to exercise one of the options provided in this Section 15.1
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only in connection with its simultaneous exercise of the similar option with
respect to the Foundation Interest in accordance with Section 15.1 of the
Foundation Operating Lease.
2 PROCEDURE FOR THE EXERCISE OF PURCHASE OPTION. If the Lessee shall
have exercised the Purchase Option under clause (a) of Section 15.1, the
Lessee shall become unconditionally obligated to pay (a) on the Expiration
Date (i) the initial installment of the Purchase Option Price in the amount of
$308,635,015.23, (ii) all amounts of Supplemental Rent (including, without
limitation, all costs and expenses of the Lessor, the Owner Participant, the
Agent and the Lenders and all sales, use, value added and other Taxes
covered by Section 8.2 of the Participation Agreement associated with the
Purchase Option) due and payable on the Expiration Date, and (iii) any unpaid
Basic Rent due before the Expiration Date and, if the Expiration Date is a Rent
Payment Date, the Basic Rent (to the extent payable in arrears) due and payable
on such Rent Payment Date and (b) subsequent installments of the Purchase Option
Price in the amounts and on the dates set forth below:
Date Amount
April 15, 2018 $10,203,274.82
June 15, 2018 31,282,564.56
September 15, 2018 31,282,564.56
December 15, 2018 31,282,564.54
The covenant to pay the subsequent installments of the Purchase Option
Price in accordance with the preceding sentence shall survive the termination of
this Equipment Operating Lease. Concurrently with the payment of the sums
specified in clause (a) of this Section 15.2 and clause (a) of Section 15.2 of
the Foundation Operating Lease (w) Basic Rent for the Equipment Interest shall
cease to accrue, (x) the Lessee shall cease to have any liability to the Lessor
with respect to the Equipment Interest, except for Supplemental Rent obligations
(including, without limitation, those under Sections 8.1 and 8.2 of the
Participation Agreement, the Tax Indemnity Agreement and the additional
installments of the Purchase Option Price payable in accordance with the first
sentence of this Section 15.2) surviving pursuant to the express terms of any
Operative Document or which have otherwise accrued but not been paid as of such
Expiration Date, (y) the Lessor will transfer Lessor's Unit 1 Interest to the
Lessee on an "as is", "where is" basis, without representations or warranties
other than a warranty as to the absence of Lessor's Liens or Owners
Participant's Liens and (z) this Equipment Operating Lease shall terminate and,
assuming the Lessor and the Owner Participant have complied with all of their
obligations under the Operative Documents, the Lessee shall cause the Lessor to
discharge the Liens of the Loan Agreement and the Leasehold Mortgage and to
execute and deliver appropriate releases and all other documents or instruments
necessary or desirable to effect the forgoing, all at the cost and expense of
the Lessee.
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3 PROCEDURE FOR EXERCISE OF THE SERVICE CONTRACT OPTION.
(a) If the Lessee shall have elected the Service Contract Option:
(i) The Lessee shall make a good faith effort
to arrange for an Acceptable Power Purchaser to execute
and deliver a Power Sales Agreement on the Expiration Date.
Not less than 6 months prior to the Expiration Date, the
Lessee shall give the Owner Participant notice of the
proposed Power Purchaser, together with financial and such
other information as the Owner Participant may reasonably
request in order to determine whether such proposed Power
Purchaser constitutes an Acceptable Power Purchaser;
(ii) The Lessee will execute and deliver on the
Expiration Date a Management Agreement with the Lessor and
with any other Persons having a long term leasehold interest
in Clover Unit 1 or Clover Unit 2 (other than Virginia Power
or any successor or assigns thereof). In addition, if
requested by the Lessor, the Lessee will execute and
deliver on the Expiration Date, a Transmission and
Interconnection Agreement with the Lessor providing for
access, at no cost to the Lessor, to the transmission and
interconnection facilities necessary to permit delivery of
electrical energy and capacity to the Power Purchaser in
accordance with the Power Sales Agreement; and
(iii) The Lessor will cooperate with the Lessee, and
the Lessee will make a good faith effort, to arrange a New
Loan to be made to the Lessor on the Expiration Date, such New
Loan to be substantially in accordance with the terms and
conditions set forth on Schedule 3 hereto. The Lessor will pay
the outstanding Loan Certificates at their maturity on the
Expiration Date with the proceeds of the New Loan.
(b) The obligation by the Lessor and the Owner Participant to
enter into or accept, as the case may be, a Power Sales Agreement and to
consummate the Service Contract Option shall be subject to the fulfillment or
waiver, on or before the Expiration Date, to the satisfaction of each such
Person of the following conditions precedent (it being understood and agreed
that the agreement of each such Person to the foregoing matters shall not be
subject to such Person's own performance of or compliance with the provisions
hereof):
(i) each such Person shall have received such
documents or other evidence as it shall reasonably have
requested with respect to the prospective Power Purchaser to
establish (A) that such Person meets each of the requirements
for an Acceptable Power Purchaser and (B) the taking of all
requisite corporate or other similar actions and proceedings
in connection therewith;
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(ii) each such Person shall have received an opinion
of counsel for the Power Purchaser, which counsel and opinion
shall be acceptable to each such Person, (A) to the effect
that the Power Sales Agreement, and each other agreement to
which the Power Purchaser is a party in connection with such
Power Sales Agreement have been duly authorized, executed and
delivered by the Power Purchaser and constitute the legal,
valid and binding obligations of the Power Purchaser and (B)
covering such other matters incident to such Power Sales
Agreement arrangement as each such Person may reasonably
request;
(iii) the Owner Participant shall have received an
opinion from counsel for the Lessor, which counsel and opinion
shall be acceptable to the Owner Participant, to the effect
that the Power Sales Agreement, the Management Agreement, any
Transmission and Interconnection Agreement, if required, and
each other agreement to which the Lessor is a party in
connection with such Power Sales Agreement have been duly
authorized, executed and delivered by the Lessor and
constitute legal, valid and binding obligations of the Lessor,
in its trust capacity, and covering such other matters
incident to the transactions contemplated by such Power Sales
Agreement arrangement as the Owner Participant may reasonably
request;
(iv) the Lessor and the Owner Participant shall each
have received an opinion from counsel to the Lessee (which
opinion and counsel shall be acceptable to each such Person)
to the effect that the Management Agreement, the Transmission
and Interconnection Agreement, if required, and each other
agreement to which the Lessee is a party in connection with
such Power Sales Agreement have been duly authorized, executed
and delivered by the Lessee and constitute legal, valid and
binding obligations of the Lessee and covering such other
matters incident to the transactions contemplated by such
Power Sales Agreement arrangement as the Owner Participant may
reasonably request, and to the effect that by reason of the
Lessor entering into or performing its obligations pursuant to
a Power Sales Agreement, neither the Owner Participant, the
Lessor nor an Affiliate of either thereof will be in violation
of any Applicable Law;
(v) the Owner Participant shall have received the
following, in each case in form and substance reasonably
satisfactory to it:
(A) an incumbency certificate of the Power
Purchaser regarding the officers of the Power
Purchaser authorized to execute and deliver the
documents referred to in this Section 15.3 to which
it is a party and any other documents or agreements
delivered in connection therewith;
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(B) the Lessee shall have obtained (1)
liability and casualty insurance coverage
substantially comparable to the insurance required
under Section 11 and (2) business interruption
insurance in respect of the Clover Unit 1 Generating
Facility for the benefit of the Lessor under the
Power Sales Agreement, which insurance shall be
satisfactory to the Owner Participant, shall be
payable in connection with damage to or destruction
of Clover Unit 1, shall be in an amount sufficient to
cover the incremental Monthly Capacity Payments under
Section 5.4(a) and 5.4(b) under the Power Sales
Agreement for a period of 18 to 24 months and shall
be subject to an exclusion period of not more than 90
days.
(C) certified copies of all documents
evidencing the corporate (or similar) actions of the
Power Purchaser including, without limitation,
resolutions of the board of directors of the Power
Purchaser duly authorizing the execution, delivery
and performance by the Power Purchaser of each of the
documents referred to in this Section 15.3 to which
it is a party and the transactions contemplated
thereby;
(D) certified copies of the by-laws and
certificate of incorporation (or comparable
organizational or governing documents) of the Power
Purchaser; and
(E) such other agreements, documents,
certifications and opinions as each such Person shall
reasonably determine are necessary or appropriation
in connection with the consummation of such Power
Sales Agreement;
(vi) the Power Sales Agreement shall be duly executed
and delivered by the Power Purchaser and shall have been
permitted to become effective or approved by FERC and any
other relevant federal or state regulatory agency or agencies,
if and to the extent required by Applicable Law, and such
other recordings, filings, financing statements, continuation
statements or other instruments shall have been filed or made
and all other actions shall have been taken as are necessary
or desirable in the opinion of the Owner Participant and the
Owner Trustee to maintain all of the Owner Trustee's right,
title and interest in and to the Lessor's Unit 1 Interest;
(vii) all other matters and proceedings
taken in connection with such transaction shall be
reasonably satisfactory to the Owner Participant and the
Lessor.
(c) The Lessee agrees to pay or reimburse, or cause to be paid or
reimbursed, on an After-Tax Basis, within 10 Business Days of the date of
demand, all costs and expenses, including reasonable legal fees and expenses
incurred by the Lessor, any Person making the New Loan on the Expiration Date
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and the Owner Participant in connection with the implementation of the Service
Contract Option, whether or not any such transactions are consummated; PROVIDED,
however, that, the Lessee shall not be responsible for any such fees and
expenses incurred by any such Person if such transactions are not consummated by
reason of a breach by any such Person of its obligations hereunder or under the
other Operative Documents.
(d) If the Lessee elects the Service Contract Option and, after
a good faith effort, is unsuccessful in arranging for an Acceptable Power
Purchaser to enter into a Power Sales Agreement or arranging the refinancing of
the Loan Certificates with the proceeds of a New Loan or satisfying any other
condition to the exercise of the Service Contract Option, the Lessee shall elect
either the Purchase Option or the Return Option, such election to be made by
written notice to the Lessor and the Owner Participant at least sixty days prior
to the Expiration Date and the Lessee shall simultaneously elect the Foundation
Purchase Option or the Foundation Return Option, as the case may be, pursuant to
paragraph (d) of Section 15.3 of the Foundation Operating Lease.
4 PROCEDURE FOR EXERCISE OF THE RETURN OPTION. If the Lessee shall elect,
or be deemed to have elected, the Return Option, the Lessee shall pay to the
Lessor on the Expiration Date (a) the Walk Away Payment, plus (b) all other
Supplemental Rent (including, without limitation, all costs and expenses of
the Lessor, the Owner Participant, the Agent and the Lenders, and all sales,
use, value added and other Taxes required to be indemnified pursuant to Section
8.2 of the Participation Agreement, associated with the exercise of the Return
Option pursuant to this Section 15.4) due and payable on or prior to the
Expiration Date and (c) any unpaid Basic Rent due before the Expiration Date
and, if such Expiration Date shall be a Rent Payment Date, the Basic Rent (to
the extent payable in arrears) due and payable on such Rent Payment Date.
Concurrently with the payment of all sums specified in this Section 15.4 and
Section 15.4 of the Foundation Operating Agreement (1) Basic Rent for the
Equipment Interest shall cease to accrue, (2) the Lessee shall cease to have any
liability to the Lessor with respect to the Equipment Interest, except for
Supplemental Rent obligations (including, without limitation, Sections 8.1 and
8.2 of the Participation Agreement and the Tax Indemnity Agreement) surviving
pursuant to the express terms of any Operative Document or which have otherwise
accrued but not been paid as of the Expiration Date, (3) the Lessee will return
the Equipment Interest to the Lessor in accordance with Section 5 and (4) this
Equipment Operating Lease shall terminate. If the Lessor shall request in
writing that the Lessor's Unit 1 Interest be sold, the Lessee will use its best
efforts to cause the Lessor's Unit 1 Interest to be sold as of the Expiration
Date. If such a sale shall occur, the net sale proceeds of such sale allocable
to the Equipment Interest in accordance with the definition of Fair Market Sales
Value will be deducted from Termination Value in the calculation of the Walk
Away Payment payable on the Expiration Date, in lieu of deducting Fair Market
Sales Value reduced by hypothetical disposition costs, PROVIDED that in no event
shall the sum of such net sales proceeds, the Walk Away Payment and the
Foundation Walk Away Payment be less than the principal amount and accrued
interest on the outstanding Loan Certificates. Any election by the Lessor to
cause the Lessor's Unit 1 Interest to be sold pursuant to this Section 15.4
shall be made in connection with a simultaneous election pursuant to Section
15.4 of the Foundation Operating Lease. If such election is made but the
Lessor's Unit 1 Interest has not been sold by the Expiration Date, the Fair
Market Sales Value of the Equipment Interest shall be deemed to equal zero and
the Lessee will pay, on the Expiration Date, the Walk Away Payment computed
accordingly. Upon subsequent sale by the Lessor of the Lessor's Unit 1 Interest,
the Lessee will be promptly reimbursed out of the net sales proceeds actually
received in excess of the sum of (a) 20% of the Equipment Interest Cost and (b)
interest on 20% of the Equipment Interest Cost at the Debt Rate from the
Expiration Date to the date such proceeds are received. If such sale has not
been completed within 36 months of the Expiration Date, the Fair Market Sales
Value shall be deemed to equal zero; and net sale proceeds, if any, after such
reimbursement will be for the account of the Lessor. Any such return, together
with payment by the Lessee of such Walk Away Payment and other amounts then due
under the Operative Documents, will satisfy the Lessee's obligations under this
Equipment Operating Lease with respect thereto. The Lessor will be entitled to
retain all Rent and any other payments previously made and Lessee will not have
any further right, title or interest in or to the Equipment Interest or any
proceeds of dispositions thereof. The provisions of this Section 15.4 shall
survive the termination of this Equipment Operating Lease.
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5 LEASE OBLIGATION TO PAY AMOUNT EQUAL TO PRINCIPAL AND INTEREST ON
LOAN CERTIFICATES UPON VIRGINIA POWER DEFAULT. If (i) Virginia Power shall elect
to purchase the Equipment Interest and the Foundation Interest in accordance
with Section 6.3 of the Equipment Head Lease and Section 6.3 of the Foundation
Head Lease, respectively, (ii) the Lessor and Virginia Power shall execute a
contract for the sale of the Equipment Interest and the Foundation Interest
to Virginia Power pursuant to Section 6.3 of the Equipment Head Lease and
Section 6.3 of the Foundation Head Lease and (iii) Virginia Power shall
default on its obligation to pay the initial installment of the Purchase Option
Price on the Expiration Date pursuant to such purchase contract, the Lessee
shall, within 30 days of the Expiration Date, pay an amount equal to the
installment of the Purchase Option Price due on the Expiration Date, plus
interest on such amount at the Overdue Rate from the Expiration Date to such
date of payment. The Lessee also agrees to pay any other installments of the
Purchase Option Price if not paid by Virginia Power at the time required by the
contract or contracts for sale of the Equipment Interest and the Foundation
Interest executed by the Lessor and Virginia Power. Upon payment by the Lessee
of any amount required by this Section 15.5, the Lessee shall be subrogated to
the rights of the Lessor under such contract for sale with Virginia Power, to
the extent of the Lessee's payment.
16 EVENTS OF DEFAULT.
The following events shall constitute "Event of Defaults" hereunder
(whether any such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
Governmental Entity):
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(a) the Lessee shall fail to make any payment of Basic
Rent within five Business Days after the same shall have become due; or
(b) the Lessee shall fail to make any payment of
Supplemental Rent (other than the Purchase Option Price or the Walk
Away Payment), after the same shall have become due and such failure
shall continue unremedied for a period of 10 Business Days after
receipt by the Lessee of written notice of such failure from the
Lessor or the Owner Participant; or
(c) any representation or warranty made by the Lessee in
the Operative Documents (other than the Tax Indemnity Agreement)
shall be untrue, inaccurate or misleading in any material respect
and, if capable of remedy, no action to cure has commenced within 30
days after notice or, if such action has been taken and the Lessee is
diligently pursuing such cure, such action has not succeeded within
a period of 180 days after such notice; or
(d) the Lessee shall have failed to perform or observe any
other material covenant, obligation or agreement to be performed or
observed by it under any Operative Document (other than the Tax
Indemnity Agreement or Section 7.6 or 7.7 of the Participation
Agreement or the second or third sentences of Section 10.1 hereof)
in any material respect and, if capable of remedy, no action to cure
has commenced within 30 days after notice or, if such action has been
taken and the Lessee is diligently pursuing such cure, such action
has not succeeded within a period of 180 days after such notice,
PROVIDED, HOWEVER that in the case of the Lessee's obligation set
forth in clause (c) of Section 7.1 of this Equipment Operating
Lease if, to the extent and for so long as a test, challenge, appeal or
proceeding for review of such compliance shall be prosecuted in good
faith by the Lessee or the Clover Unit 1 Operator under the Clover
Agreements, the failure by the Lessee to comply with such requirement
shall not constitute an Event of Default hereunder if, but only if,
such test challenge, appeal or proceeding shall not involve any danger
of (i) foreclosure, sale, forfeiture or loss of, or imposition of a
Lien on, any part of Clover Unit 1 or the Clover Real Estate or the
impairment of Clover Unit 1 or the Clover Real Estate in any material
respect or any adverse impact on Lessee's ability to pay Rent, or (ii)
any criminal liability being incurred or any material adverse effect on
the Lessor, the Owner Participant, the Agent or the Lenders (in each
case in the reasonable opinion of such Person) and PROVIDED FURTHER in
the case of the Lessee's obligation set forth in clause (c) of Section
7.1 of this Equipment Operating Lease, if the noncompliance is not of a
type that can be immediately remedied, the failure to comply shall not
be an Event of Default hereunder if the Lessee is taking all reasonable
action to remedy such noncompliance if, but only if, such noncompliance
shall not involve any danger of any criminal liability being incurred
or any material adverse effect on the Lessor, the Owner Participant,
the Agent or the Lenders (in each case in the reasonable opinion of
such Person); or
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(e) the Lessee shall fail to observe or perform its
obligation to maintain the insurance required by Section 11; or
(f) the Expiration Date shall have occurred and none of
the following events shall have occurred on or prior to such date:
(i) Lessee shall have elected the Purchase Option and all of the
provisions of Section 15.2 shall have been complied with, (ii) the
Lessee shall have elected the Service Contract Option and all of the
provisions of Section 15.3 shall have been complied with or (iii)
the Lessee shall have elected (or be deemed to have elected) the
Return Option and all of the provisions of Section 15.4 shall have
been complied with; or
(g) an "Event of Default" shall occur and be continuing
under the Old Dominion Indenture and the Indenture Trustee shall
have declared the principal and interest of Old Dominion's Bonds
to be immediately due and payable; or
(h) an "Event of Default" under the Clover Operating
Agreement shall occur in consequence of which the "Ownership
Interest" of Old Dominion shall be decreased pursuant to Section
13.04 of the Clover Operating Agreement; or
(i) the Lessee shall have failed to observe or perform
its obligation set forth in Sections 7.6 or 7.7 of the
Participation Agreement or the second or third sentence of Section
10.1 hereof and the Owner Participant shall have given written notice
to the Lessee and the Lessor declaring an Event of Default under this
paragraph (i); or
(j) an "Event of Default" under the Foundation Operating
Lease shall have occurred and be continuing; or
(k) the Lessee shall (i) commence a voluntary case or
other proceeding seeking relief under Title 11 of the Bankruptcy
Code or liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect, or apply for or consent to the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or (ii)
consent to, or fail to controvert in a timely manner, any such relief
or to the appointment of or taking possession by any such official in
any voluntary case or other proceeding commenced against it, or
(iii) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, or (iv) admit in
writing its inability to pay its debts generally as they come due, or
(v) make a general assignment for the benefit of creditors, or (vi)
take any corporate action to authorize any of the foregoing; or
(l) an involuntary case or other proceeding shall be
commenced against the Lessee seeking (i) liquidation, reorganization
or other relief with respect to it or its debts under Title 11 of the
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Bankruptcy Code or any bankruptcy, insolvency or other similar
law now or hereafter in effect, or (ii) seeking the appointment of
a trustee, receiver, liquidator, custodian or other similar official,
or (iii) the winding-up or liquidation of the Lessee; and such
involuntary case of other proceeding shall remain undismissed and
unstayed for a period of 60 days.
17 REMEDIES.
1 REMEDIES FOR EVENT OF DEFAULT. Subject to Section 3.7, upon the
occurrence of any Event of Default and at any time thereafter so long as the
same shall be continuing, the Lessor may, at its option, declare this
Equipment Operating Lease to be in default by a written notice to the Lessee,
PROVIDED that upon the occurrence of an Event of Default described in paragraph
(k) or (l) of Section 16, this Equipment Operating Lease shall automatically be
deemed to be in default without the need for giving any notice; and at any time
thereafter, so long as the Lessee shall not have remedied all outstanding Events
of Default, the Lessor may do one or more of the following as the Lessor in its
sole discretion shall elect, to the extent permitted by, and subject to
compliance with any mandatory requirements of, Applicable Law then in effect:
(a) proceed by appropriate court action or actions, either
at law or in equity, to enforce performance by the Lessee of
the applicable covenants and terms of this Equipment Operating Lease
or to recover damages for breach thereof;
(b) by notice in writing to the Lessee, terminate
this Equipment Operating Lease and the Lessee's Unit 1 Interest
whereupon all right of the Lessee to the possession and use of the
Equipment Interest under this Equipment Operating Lease shall
absolutely cease and terminate but the Lessee shall remain liable
as hereinafter provided; and thereupon, the Lessor may demand that the
Lessee, and the Lessee shall, upon written demand of the Lessor and
at the Lessee's expense, forthwith return constructive possession
of the Equipment Interest to the Lessor or its order in the manner
and condition required by, and otherwise in accordance with all of
the provisions of Sections 5.2 and 5.3, except those provisions
relating to periods of notice; and the Lessor may thenceforth hold,
possess and enjoy the same free from any right of the Lessee, or its
successor or assigns, to use the Equipment Interest for any purpose
whatever;
(c) sell the Lessor's Unit 1 Interest or Clover Unit 1
at public or private sale, as the Lessor may determine, free and clear
of any rights of the Lessee and without any duty to account to the
Lessee with respect to such sale or for the proceeds thereof (except
to the extent required by paragraph (e) below if the Lessor elects to
exercise its rights under said paragraph and by Applicable Law), in
which event the Lessee's obligation to pay Basic Rent hereunder due for
any periods subsequent to the date of such sale shall terminate
(except to the extent that Basic Rent and other Rent are to
be included in computations under paragraph (e) or (f) below if the
Lessor elects to exercise its rights under either of said paragraphs);
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(d) hold, keep idle or lease to others the Lessor's Unit
1 Interest or Clover Unit 1 as the Lessor in its sole discretion
may determine, free and clear of any rights of the Lessee and without
any duty to account to the Lessee with respect to such action or
inaction or for any proceeds with respect thereto, except that the
Lessee's obligation to pay Basic Rent with respect to the Equipment
Interest due for any periods subsequent to the date upon which the
Lessee shall have been deprived of possession and use of the Equipment
Interest pursuant to this Section 17 shall be reduced by the net
proceeds, if any, received by the Lessor from leasing the Lessor's
Unit 1 Interest (and allocable to the Equipment Interest in
accordance with the definition of Fair Market Sales Value) to any
Person other than the Lessee;
(e) whether or not the Lessor shall have exercised, or
shall thereafter at any time exercise, any of its rights under
paragraph (b) above with respect to the Lessor's Unit 1 Interest or
Clover Unit 1, the Lessor, by written notice to the Lessee specifying
a Termination Date that shall be not earlier than 30 days after
the date of such notice, may demand that the Lessee pay to the Lessor,
and the Lessee shall pay to the Lessor, on the Termination Date
specified in such notice, any unpaid Basic Rent due before such
Termination Date and, if such Termination Date shall be a Rent Payment
Date, any Basic Rent (to the extent payable in arrears) due and payable
on such Rent Payment Date plus as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the Basic Rent due after the
Termination Date specified in such notice), (i) an amount equal to the
excess, if any, of the Termination Value computed as of the Termination
Date specified in such notice over the Fair Market Sales Value of the
Lessor's Unit 1 Interest allocable to the Equipment Interest in
accordance with the definition of Fair Market Sales Value as of the
Termination Date specified in such notice; or (ii) an amount equal to
the Termination Value computed as of the Termination Date specified in
such notice (and, upon payment of such Termination Value by the Lessee
pursuant to this clause (ii) and all other Rent then due and payable by
the Lessee, the Lessor will forthwith transfer the Lessor's Unit 1
Interest to the Lessee on an "as is", "where is" basis, without
representation or warranties other than a warranty as to the absence of
Lessor's Liens and Owner Participant's Liens, all of its interest in
the Lessor's Unit 1 Interest and, assuming the Lessor and the Owner
Participant are in compliance with all of their obligations under the
Operative Documents, the Lessee shall cause the Agent to discharge the
Liens of the Loan Agreement and the Leasehold Mortgage and to execute
and deliver appropriate releases and all other documents or
instructions necessary or desirable to effect the foregoing, all at the
cost and expense of the Lessee); and
(f) if the Lessor shall have sold the Lessor's Unit 1
Interest or Clover Unit 1 pursuant to paragraph (c) above, the Lessor,
in lieu of exercising its rights under paragraph (e) above with
respect to the Lessor's Unit 1 Interest or Clover Unit 1 may, if it
shall so elect, demand that the Lessee pay to the Lessor, and the
Lessee shall pay to the Lessor, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the Basic Rent due for any
periods subsequent to the date of such sale), any unpaid Basic
Rent due before the date of such sale and, if that date is a Rent
Payment Date, the Basic Rent due on that date (to the extent payable
in arrears), or, if that date is not a Rent Payment Date, the daily
equivalent of Basic Rent for the period from the preceding Rent
Payment Date to the date of such sale (to the extent payable in
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arrears), plus the amount, if any, by which the Termination Value
computed as of the Rent Payment Date next preceding the date of
such sale or, if such sale occurs on a Rent Payment Date, then
computed as of such Rent Payment Date, exceeds the net proceeds of
such sale, such sales proceeds apportioned between the Equipment
Interest and the Foundation Interest in accordance with the definition
of Fair Market Sales Value.
In addition, the Lessee shall be liable, except as otherwise provided
above, for any and all unpaid Rent due hereunder before or during the exercise
of any of the foregoing remedies, and, on an After-Tax Basis, for legal fees and
other costs and expenses incurred by reason of the occurrence of any Event of
Default or the exercise of the Lessor's remedies with respect thereto, including
the repayment in full of any costs and expenses necessary to be expended in
connection with the return of the Equipment Interest in accordance with Sections
5.2 and 5.3 hereof, including, without limitation, any costs and expenses
incurred by the Lessor, the Owner Participant, the Agent or any Lender in
connection with retaking constructive possession of, or in repairing, the
Equipment Interest in order to cause it to be in compliance with all
maintenance standards imposed by this Equipment Operating Lease.
2 CUMULATIVE REMEDIES. The remedies in this Equipment Operating Lease
provided in favor of the Lessor shall not be deemed exclusive, but shall be
cumulative and shall be in addition to all other remedies in its favor
existing at law or in equity. To the extent permitted by Applicable Law, the
Lessee hereby waives any rights now or hereafter conferred by statute or
otherwise which may require the Lessor to sell, lease or otherwise use the
Equipment Interest or any Component thereof in mitigation of Lessor's damages as
set forth in this Section 17 or which may otherwise limit or modify any of
Lessor's rights and remedies in this Section 17.
3 NO DELAY OR OMISSION TO BE CONSTRUED AS WAIVER. No delay or omission
to exercise any right, power or remedy accruing to the Lessor upon any breach
or default by the Lessee under this Equipment Operating Lease shall impair any
such right, power or remedy of the Lessor, nor shall any such delay or
omission be construed as a waiver of any breach or default, or of any similar
breach or default hereafter occurring; nor shall any waiver of a single breach
or default be deemed a waiver of any subsequent breach or default.
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18 LESSEE TERMINATION OPTION FOR APPEAL OF FERC ORDER.
1 LESSEE OPTION TO TERMINATION. If, on or prior to the date 35 days
following the Closing Date, (a) an appeal shall be filed (including by
post-order intervention) of the FERC Order including the amendment thereto
issued on February 26, 1996 and (b) the Lessee shall give notice to the Lessor,
the Owner Participant and the Agent of such appeal, the Lessee shall have the
option to terminate the Equipment Head Lease and this Equipment Operating Lease
upon not less than five days' prior written notice to the Lessor, the Owner
Participant and the Agent given not later than 100 days following the Closing
Date on the Termination Date following such notice, upon payment to the Lessor
of an amount equal to the Equipment Interest Cost plus interest at the Debt Rate
on such amount from, and including, the Closing Date to, but excluding, such
Termination Date. The Lessee shall be permitted to exercise the option provided
in this Section 18 only if it shall simultaneously exercise the termination
option provided by Section 18 of the Foundation Operating Lease.
2 PROCEDURE FOR EXERCISE OF TERMINATION OPTION. If the Lessee shall
have exercised its option under Section 18.1, on the Termination Date
specified in the Lessee's notice of such exercise, the Lessee shall pay to the
Lessor (a) the amount specified in Section 18.1, plus (b) all amounts of
Supplemental Rent (including, without limitation, all costs and expenses of the
Lessor, the Owner Participant, and the Agent and the Lenders and all sales, use,
valued added and other Taxes covered by Section 8.2 of the Participation
Agreement associated with the exercise of the termination option pursuant to
this Section 18) due and payable on or prior to such Termination Date, and
(c) any unpaid Basic Rent due before such Termination Date. Concurrently
with the payment of all sums specified in this Section 18.2 and Section 18.2 of
the Foundation Operating Lease, (1) the Lessee shall cease to have any
liability to the Lessor with respect to the Equipment Interest, except for
Supplemental Rent obligations (including, without limitation, Sections
8.1 and 8.2 of the Participation Agreement and the Tax Indemnity Agreement)
surviving pursuant to the express terms of any Operative Document or which
have otherwise accrued but not been paid as of such Termination Date,
(2) the Lessor will prepay the Loan Certificates pursuant to Section 2.10 of
the Loan Agreement, (3) the Lessor will execute and deliver to the Lessee, at
Lessee's cost and expense, a release or termination of this Equipment
Operating Lease, the Equipment Head Lease, the Foundation Operating Lease, the
Foundation Head Lease, the Ground Lease and Sublease (if delivered) and the
Clover Agreements Assignment, and the Lessor will transfer the Lessor's Unit 1
Interest to the Lessee on an "as-is", "where-is" basis, without
representations or warranties other than a warranty as to the absence of
Lessor's Liens and Owner Participant's Liens and (5) this Equipment Operating
Lease shall terminate and, assuming the Lessor and the Owner Participant have
complied with all of their obligations under the Operative Documents, the Lessee
shall cause the Agent to discharge the Liens of the Loan Agreement and the
Leasehold Mortgage and to execute and deliver appropriate releases and all other
documents or instruments necessary or desirable to effect the foregoing, all at
the cost and expense of the Lessee.
45
<PAGE>
19 LESSEE RIGHT TO SUBLEASE.
The Lessee will not, without the prior written consent of the Lessor
and the Agent, relinquish use, possession or control of Equipment Interest, or
any part thereof, PROVIDED that, unless a Payment Default, a Credit Default or
an Event of Default shall have occurred and be continuing, no consent of the
Lessor or the Agent shall be required for any sublease of the Equipment Interest
if:
(a) the sublessee is a solvent corporation not subject to
any bankruptcy proceeding;
(b) such sublease does not extend beyond the Expiration Date
and is expressly subject and subordinate to the Equipment Head Lease
and this Equipment Operating Lease;
(c) the Lessee remains fully and primarily liable for all of
its obligations under this Equipment Operating Lease and the other
Operative Documents as if such sublease had not occurred;
(d) all terms and conditions of the Equipment Head Lease
and this Equipment Operating Lease and the other Operative Documents
remain in effect;
(e) such sublease prohibits further subletting without
the prior written consent of the Lessor and the Agent;
(f) the entering into such sublease is permitted by the
Clover Agreements;
(g) such sublease shall not result in any unindemnified
adverse tax consequences to the Lessor or the Owner Participant; and
(h) such sublessee shall be a sublessee of the Foundation
Interest in accordance with Section 19 of the Foundation Operating
Lease.
As a condition precedent to such sublease, the Lessee shall provide the
Lessor and the Agent with all documentation in respect of such sublease and
opinion of counsel to the Lessee to the effect that such sublease complies with
the provisions of this Section 19 (such documentation, counsel and opinion to be
satisfactory to the Lessor and the Owner Participant).
20. FURTHER ASSURANCES.
The Lessee, at its own cost and expense, will duly execute and deliver
to the Lessor such further documents and assurances and take such further action
46
<PAGE>
as the Lessor may from time to time reasonably request in order to establish and
protect the rights and remedies created in favor of the Lessor hereunder. The
Lessee, at its own cost and expense, will cause such continuation statements in
respect of financing statements under the Uniform Commercial Code contemplated
by Section 7.9 of the Participation Agreement or Section 10.3 hereof to be made
from time to time as requested by the Lessor as shall be necessary to maintain
the perfection of the security interest contemplated thereby.
21. LESSOR'S RIGHT TO PERFORM.
If the Lessee fails to make any payment required to be made by it
hereunder (other than Supplemental Rent in respect of the Purchase Option Price
or the Walk Away Payment) or fails to perform or comply with any of its other
agreements contained herein after notice to the Lessee and failure of the Lessee
to so perform or comply within 30 days thereafter, the Lessor may itself make
such payment or perform or comply with such agreement in a reasonable manner,
but shall not be obligated hereunder to do so, and the amount of such payment
and of the reasonable expenses of the Lessor incurred in connection with such
payment or the performance of or compliance with such agreement, as the case may
be, together with interest thereon at the Overdue Rate, to the extent permitted
by Applicable Law, shall be deemed to be Supplemental Rent, payable by the
Lessee to the Lessor on demand.
22. NOTICES.
Unless otherwise expressly specified or permitted by the terms hereof,
all communications and notices provided for herein to a party hereto shall be in
writing or by a telecommunications device capable of creating a written record,
and any such notice shall become effective (a) upon personal delivery thereof,
including, without limitation, by overnight mail or courier service, (b) in the
case of notice by United States mail, certified or registered, postage prepaid,
return receipt requested, upon receipt thereof, or (c) in the case of notice by
such a telecommunications device, upon transmission thereof, PROVIDED such
transmission is promptly confirmed by either of the methods set forth in clauses
(a) and (b) above, in each case addressed to such party at its address set forth
below or at such other address as such party may from time to time designate by
written notice to the other party hereto:
47
<PAGE>
If to the Lessor State Street Bank and Trust Company
Two International Place
Fourth Floor
Boston, Massachusetts 02110
Attention: Manager-Corporate Trust
Fax No.: (617) 664-5371
Confirmation No.: (617) 664-5610
With a copy to the Owner
Participant: First Union National Bank of Florida
301 South College Street, 20th Floor
Charlotte, North Carolina 28288-0658
Attention: Leasing Group
Fax No.: (704) 374-4724
Confirmation No.: (704) 374-3241
If to the Lessee: Old Dominion Electric Cooperative
P. O. Box
2310 Glen Allen, Virginia 23058-2310
Attention: Vice President of Accounting and Finance Fax
No.: (804) 747-3742
Confirmation No.: (804)747-0592
A copy of all communications and notices provided for herein shall be sent by
the party giving such communication or notice to Virginia Power at:
Virginia Electric and Power Company
P.O. Box 26666
Richmond, Virginia 23261
Attention: President
48
<PAGE>
23. LIMITATION OF THE LESSOR'S LIABILITY.
(a) Anything in this Equipment Operating Lease or the
Loan Certificates to the contrary notwithstanding, except as otherwise
provided in Section 4.1 and except with respect to Lessor's Liens, it is
understood and agreed that (irrespective of any breach of any
representation, covenant, agreement or undertaking of any nature whatsoever
made in this Equipment Operating Lease or the Loan Certificates by the
Lessor), no recourse shall be had under any rule of law, statute or
constitution or by the enforcement of any assessments or penalties or otherwise
for the payment of any amounts due on the Loan Certificates or due under the
Operative Documents or for any claim based thereon or otherwise in respect
thereof against (i) except as a result of its gross negligence, fraud or
willful misconduct, the Lessor or any past, present or future Affiliate,
partner, officer, director, owner, shareholder, agent or employee of or in any
thereof or director or shareholder of any partner thereof or their legal
representatives, successors or assigns, (ii) except as a result of its gross
negligence, fraud or willful misconduct, any successor Lessor or (iii) any
Person for whom the Lessor was acting as an agent for the account and benefit
of such Person in entering into the transactions evidenced by this
Equipment Operating Lease and the Loan Certificates, and that such Person was or
was alleged to be the principal of the Lessor. Furthermore it is expressly
understood that, except as expressly set forth in this Section 23, all such
liability (a) of the Lessor or any past, present or future Affiliate, partner,
officer, director, owner, shareholder, agent or employee of or in any thereof or
director or shareholder of any partner thereof or any of their respective legal
representatives, successors or assigns, (b) any successor Lessor or (c) such
other Person, is and is being expressly waived and released as a consideration
for the execution of this Equipment Operating Lease by the Lessor and all
Persons having any claim against the Lessor by reason of the transactions
contemplated by this Equipment Operating Lease and the other Operative Documents
agree to look solely to the Trust Estate and to the sums due or to become due
under the Trust Estate (other than Excluded Payments) for the payment of any
such sums.
(b) In addition to and not in limitation of the foregoing, it
is understood and agreed that (i) this Equipment Operating Lease is executed
and delivered by the Lessor, not in its individual capacity but solely as
trustee under the Trust Agreement in the exercise of the power and authority
conferred and vested in it as such trustee, (ii) except as to Lessor's Liens
applicable to the Trust Company and Section 4.1 each of the representations,
undertakings and agreements made herein by the Lessor are not personal
representations, undertakings and agreements of the Trust Company, but are
binding only on the Lessor, as trustee, and (iii) actions to be taken by the
Lessor pursuant to its obligations hereunder and under the Loan Certificates
may be taken by the Lessor only upon specific authority of the Owner
Participant as provided in the Trust Agreement.
49
<PAGE>
24. INVESTMENT OF SECURITY FUNDS.
Any moneys received by the Lessor pursuant to Section 10.4 shall, until
paid to the Lessee as provided in Section 10.4, be invested in Permitted
Investments by the Lessor (at the sole risk of the Lessee) from time to time as
directed in writing by the Lessee if such investments are reasonably available
for purchase. Any gain (including interest received) realized as the result of
any such Permitted Investment (net of any fees, commissions, taxes and other
expenses, if any, incurred in connection with such Permitted Investment) shall
be applied or remitted to the Lessee in the same manner as the principal
invested.
25. SECURITY FOR LESSOR'S OBLIGATION TO THE LENDERS.
In order to secure all amounts payable by and all obligations to be
performed by the Lessor under the Loan Agreement, the Lessor has assigned in the
Loan Agreement to the Agent for its benefit and the ratable benefit of the
Lenders its rights under this Equipment Operating Lease and granted security
interests in favor of the Agent in all of the Lessor's right, title and interest
in and to the Equipment Interest and its interest in this Equipment Operating
Lease (other than Excepted Payments and Excepted Rights). The Lessee hereby
consents to such assignment and to the creation of such security interests and
acknowledges receipt of copies of the Loan Agreement, it being understood that
such consent shall not affect any requirement or the absence of any requirement
for any consent under any other circumstances. To the extent, if any, that this
Equipment Operating Lease constitutes chattel paper (as such term is defined in
the Uniform Commercial Code as in effect in any applicable jurisdiction), no
security interest in this Equipment Operating Lease may be created through the
transfer or possession of any counterpart hereof other than the original
counterpart, which shall be identified as the counterpart containing the receipt
therefor executed by the Agent on the signature page thereof. The Lessee hereby
acknowledges receipt of due notice that the Lessor's interest in this Equipment
Operating Lease has been assigned to the Agent as security pursuant to the Loan
Agreement to the extent provided in the Loan Agreement. Unless and until the
Lessee shall have received written notice from the Agent that the Liens of the
Loan Agreement and the Leasehold Mortgage have been terminated pursuant to the
terms of each thereof, the Agent shall have the right to exercise the rights of
the Lessor under this Equipment Operating Lease to the extent set forth in and
subject in each case to the exceptions set forth in the Loan Agreement.
26. MISCELLANEOUS.
1 GOVERNING LAW. THIS EQUIPMENT OPERATING LEASE SHALL BE IN ALL RESPECTS
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
50
<PAGE>
2 SEVERABILITY. Whenever possible, each provision of this Equipment
Operating Lease shall be interpreted in such manner as to be effective and valid
under Applicable Law, but if any provision of this Equipment Operating Lease
shall be prohibited by or invalid under Applicable Law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Equipment Operating Lease.
3 HEADINGS AND TABLE OF CONTENTS. The headings of the sections of
this Equipment Operating Lease and the Table of Contents are inserted for
purposes of convenience only and shall not be construed to affect the meaning
or construction of any of the provisions hereof.
4 SUCCESSORS AND ASSIGNS. (a) This Equipment Operating Lease shall be
binding upon and shall inure to the benefit of, and shall be
enforceable by, the parties hereto and their respective successors and assigns
as permitted by and in accordance with the terms hereof. Each time a successor
Owner Trustee is appointed in accordance with the terms of the Trust Agreement
and Section 5.5 of the Participation Agreement, such successor Owner Trustee
shall, without further act, succeed to all rights, duties, immunities, and
obligations of the predecessor Owner Trustee hereunder and the predecessor Owner
Trustee shall be released from all further duties and obligations hereunder, all
without the necessity of any consent or approval by the Lessor and without in
any way altering the terms and conditions of this Equipment Operating Lease or
the rights and obligations of the Lessee hereunder. The Lessor shall, at its
expense, upon receipt of written notice of the appointment of a successor Owner
Trustee under the Trust Agreement, promptly make such modifications and changes
to reflect such appointment as shall be reasonably requested by such successor
Owner Trustee in any instruments relating to this Equipment Operating Lease, all
in form and substance reasonably satisfactory to such successor Owner Trustee.
(b) Except as expressly provided herein or in the other
Operative Documents, neither party hereto may assign its interests herein
without the consent of the parties hereto.
5 TRUE LEASE. It is the intent of the parties to this Equipment
Operating Lease that it be, and this Equipment Operating Lease shall be, a true
lease, and that, notwithstanding the fact that legal title to the Retained
Assets is vested in the Co-Owners, as tenants in common, and legal title to
the Pollution Control Assets is vested in the Pollution Control Asset Lessor
and Virginia Power, as tenants in common, the interest of the Lessor under
the Equipment Head Lease shall cause the Lessor to be the owner of the
Equipment Interest for all United States income tax purposes, this Equipment
Operating Lease conveying to the Lessee no right, title or interest in the
Equipment Interest except as lessee of the Equipment Interest.
6 IDENTIFICATION. The Lessee will, at its own cost and expense, cause
Clover Unit 1 to be legibly, conspicuously and permanently marked,
51
<PAGE>
throughout the Term in a reasonably prominent location, with a plate or other
marking, which plate or other marking shall set forth the following
legend:
"SO MUCH OF THIS PROPERTY AS CONSTITUTES THE EQUIPMENT
INTEREST, AS DESCRIBED IN THE EQUIPMENT OPERATING LEASE
AGREEMENT, DATED AS OF FEBRUARY 29, 1996, BETWEEN STATE STREET
BANK AND TRUST COMPANY, AS OWNER TRUSTEE, AND OLD DOMINION
ELECTRIC COOPERATIVE, AS LESSEE, IS HELD IN TRUST BY THE
AFOREMENTIONED TRUSTEE."
In addition, so long as the Lien of the Loan Agreement has not been terminated
pursuant to Section 8.1 thereof the following inscription shall be included with
the first sentence of the foregoing: "AND IS SUBJECT TO A LIEN IN FAVOR OF
UTRECHT-AMERICA FINANCE CO., AS AGENT."
7 AMENDMENTS AND WAIVERS. No term, covenant, agreement or condition of
this Equipment Operating Lease may be terminated, amended or compliance
therewith waived (either generally or in a particular instance,
retroactively or prospectively) except by an instrument or instruments in
writing executed by each party hereto.
8 AGREEMENT REGARDING EQUIPMENT. The parties hereto understand and
acknowledge that the Unit 1 Equipment and the Common Facilities Equipment have
been constructively severed from the Real Property by the Severance
Agreements and intend that all such equipment be treated as personal property.
However, should it be determined by a court of competent jurisdiction that
(notwithstanding the foregoing) any of the equipment constituting Unit 1
Equipment or Common Facilities Equipment are an interest in real property for
purposes of Virginia Code Section 55-96, the parties hereto agree that such
equipment shall not be part of the Unit 1 Equipment or the Common Facilities
Equipment and shall not be subject to this Equipment Operating Lease, but shall
constitute a part of the Unit 1 Foundation or the Common Facilities Foundation
and shall be subject to and leased under the Foundation Operating Lease.
9 SURVIVAL. All warranties, representations, indemnities and covenants
made by either party hereto, herein or in any certificate or other instrument
delivered by either such party or on the behalf of such party under this
Equipment Operating Lease, shall be considered to have been relied upon by the
other party hereto and shall survive the consummation of the transactions
contemplated hereby on the Closing Date regardless of any investigation made by
either party or on behalf of such party.
10 COUNTERPARTS. This Equipment Operating Lease may be executed by the
parties hereto in separate counterparts, each of which, subject to Section 25,
when so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
52
<PAGE>
11 EFFECTIVENESS. This Equipment Operating Lease has been dated as of the
date first above written for convenience only. This Equipment Operating Lease
shall be effective on the date of execution and delivery by each of the Lessee
and the Lessor.
53
<PAGE>
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this
Equipment Operating Lease to be duly executed and delivered by their respective
officers thereunto duly authorized.
STATE STREET BANK AND TRUST
COMPANY, not in its
individual capacity except
as expressly provided but
solely as Owner Trustee
under the Trust Agreement,
as Lessor
By:/s/ E. DECKER ADAMS
---------------------------
E. Decker Adams
Vice President
Date: March 1, 1996
OLD DOMINION ELECTRIC COOPERATIVE,
as Lessee
By:/s/ DANIEL M. WALKER
------------------------
Daniel M. Walker
Vice President of Accounting and Finance
Date: March 1, 1996
<PAGE>
CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS EQUIPMENT
OPERATING LEASE HAVE BEEN ASSIGNED TO AND ARE SUBJECT TO A FIRST PRIORITY
SECURITY INTEREST IN FAVOR OF THE UNDERSIGNED, AS AGENT, UNDER THE LOAN AND
SECURITY AGREEMENT, DATED AS OF FEBRUARY 29, 1996. THIS AGREEMENT HAS BEEN
EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE ORIGINAL COUNTERPART CONTAINS THE
RECEIPT THEREFOR EXECUTED BY THE UNDERSIGNED, ON THE SIGNATURE PAGES HEREOF. SEE
SECTION 25 HEREOF FOR INFORMATION CONCERNING THE RIGHTS OF THE HOLDERS OF THE
VARIOUS COUNTERPARTS HEREOF.
Receipt of this original counterpart of this Equipment
Operating Lease is hereby acknowledged on this 1st day of March, 1996.
UTRECHT-AMERICA FINANCE CO.
By:
___________________________
Title:
___________________________
<PAGE>
APPENDIX
TO
EQUIPMENT
OPERATING LEASE
DEFINITIONS
This Appendix A has been filed separately. See Appendix A to Exhibit 10.35 to
Old Dominion's Form 10-K for the year ended December 31, 1996.
A-1
<PAGE>
EXHIBIT A-1
TO
EQUIPMENT
OPERATING LEASE
DESCRIPTION OF UNIT 1 EQUIPMENT
All those certain assets at or on the Unit 1 Site of Clover
Unit 1 (excluding the Transmission Assets described on Schedule 1-A attached
hereto, and the Unit 1 Foundation) and all replacements or substitutions
thereto, including all those certain parts and items of equipment identified in
the succeeding pages to this Exhibit A-1 (which is not intended to limit the
generality of the foregoing definition to the assets identified therein)
attached hereto, together with all auxiliary and support items, including all
valves, backflow preventers, breakdown orifices, exhaust heads, expansion
joints, flexible hoses, gage glasses, relief valves, sight flow indicators,
strainers, traps, local switch stations, transducers, circuit breakers, transfer
switches, disconnect switches, junction boxes, motors, transformers (other),
panel boards (other), local control devices, miscellaneous panels and
instruments, solenoid valves, control drives, signal converters and monitors,
conductivity instrumentation, pH instrumentations, recorders, subpanels and
switches/lights, and recorders/pen description.
A-1-1
<PAGE>
EXIBIT A-2
TO
EQUIPMENT
OPERATING LEASE
DESCRIPTION OF COMMON FACILITIES EQUIPMENT
All those certain assets used in connection with the operation
or maintenance of the Clover Unit 1 Generating Facility, the Unit 2 Foundation
and the Unit 2 Equipment (excluding the Transmission Assets identified on
Schedule 1-A to this Lease, the Unit 1 Equipment, the Unit 2 Equipment, the Unit
1 Foundation, the Unit 2 Foundation and the Common Facilities Foundation) and
all replacements or substitutions thereto, including all those certain parts and
items of equipment identified in the succeeding pages to this Exhibit A-2 (which
is not intended to limit the generality of the foregoing definition to the
assets identified therein) attached hereto, together with all auxiliary and
support items, including all valves, backflow preventers, breakdown orifices,
exhaust heads, expansion joints, flexible hoses, gage glasses, relief valves,
sight flow indicators, strainers, traps, local switch stations, transducers,
circuit breakers, transfer switches, disconnect switches, junction boxes,
motors, transformers (other), panel boards (other), local control devices,
miscellaneous panels and instruments, solenoid valves, control drives, signal
converters and monitors, conductivity instrumentation, pH instrumentations,
recorders, subpanels and switches/lights, and recorders/pen description.
A-2-1
<PAGE>
EXHIBIT A-3
TO
EQUIPMENT
OPERATING LEASE
DESCRIPTION OF RETAINED ASSETS
All those certain assets on the Unit 1 Site and the Common
Facilities Site (excluding the Unit 1 Foundation, the Common Facilities
Foundation, the Transmission Assets identified on Schedule 1-A to this Lease and
Pollution Control Assets) and all replacements or substitutions thereto,
including all those certain parts and items of equipment identified in the
succeeding pages to this Exhibit A-3 (which is not intended to limit the
generality of the foregoing definition to the assets identified therein)
attached hereto, together with all auxiliary and support items, including all
valves, backflow preventers, breakdown orifices, exhaust heads, expansion
joints, flexible hoses, gage glasses, relief valves, sight flow indicators,
strainers, traps, local switch stations, transducers, circuit breakers, transfer
switches, disconnect switches, junction boxes, motors, transformers (other),
panel boards (other), local control devices, miscellaneous panels and
instruments, solenoid valves, control drives, signal converters and monitors,
conductivity instrumentation, pH instrumentations, recorders, subpanels and
switches/lights, and recorders/pen description.
A-3-1
<PAGE>
EXHIBIT A-4
TO
EQUIPMENT
OPERATING LEASE
DESCRIPTION OF POLLUTION CONTROL ASSETS
All those certain assets comprising 100% of the Unit 2
Equipment and the Common Facilities Equipment that were leased to the Pollution
Control Assets Lessor under the Pollution Control Assets Lease and all
replacements or substitutions thereto, including all those certain parts and
items of equipment identified in the succeeding pages to this Exhibit A-4 (which
is not intended to limit the generality of the foregoing definition to the
assets identified therein) attached hereto, together with all auxiliary and
support items, including all valves, backflow preventers, breakdown orifices,
exhaust heads, expansion joints, flexible hoses, gage glasses, relief valves,
sight flow indicators, strainers, traps, local switch stations, transducers,
circuit breakers, transfer switches, disconnect switches, junction boxes,
motors, transformers (other), panel boards (other), local control devices,
miscellaneous panels and instruments, solenoid valves, control drives, signal
converters and monitors, conductivity instrumentation, pH instrumentations,
recorders, subpanels and switches/lights, and recorders/pen description.
A-4-1
<PAGE>
EXHIBIT B
TO
EQUIPMENT
OPERATING LEASE
FORM OF POWER SALES AGREEMENT
B-1
<PAGE>
EXHIBIT C
TO
EQUIPMENT
OPERATING LEASE
FORM OF MANAGEMENT AGREEMENT
C-1
<PAGE>
SCHEDULE 1
TO
Equipment Operating Lease
-------------------------
BASIC RENT PERCENTAGES
----------------------
Advance Rent Arrears Rent
(% of Equipment (% of Equipment
Rent Payment Date Interest Cost) Interest Cost)
----------------- --------------- ---------------
5-Jan-98 5.57748848% 0.29355203%
5-Jan-99 4.65710270% 0.49716584%
5-Jan-00 4.72494838% 1.41755162%
5-Jan-01 4.85354406% 1.34970594%
5-Jan-02 5.13288975% 1.22111025%
5-Jan-03 5.25923543% 0.94176457%
5-Jan-04 6.04910611% 0.81541889%
5-Jan-05 6.74695179% 0.02554821%
5-Jan-06 6.80625000% 0.00000000%
5-Jan-07 7.37060596% 0.00000000%
5-Jan-08 7.42457671% 0.00000000%
5-Jan-09 7.42457671% 0.00000000%
5-Jan-10 7.42457671% 0.00000000%
5-Jan-11 7.42457671% 0.00000000%
5-Jan-12 7.42457671% 0.00000000%
5-Jan-13 7.42457671% 0.00000000%
5-Jan-14 7.42457671% 0.00000000%
5-Jan-15 7.42457671% 0.00000000%
5-Jan-16 7.42457671% 0.00000000%
5-Jan-17 7.42457671% 0.00000000%
5-Jan-18 0.00000000% 0.00000000%
<PAGE>
SCHEDULE 2
to
Equipment Operating Lease
-------------------------
TERMINATION VALUE PERCENTAGES
-----------------------------
Percentage of
Equipment
Termination Date Interest Cost
---------------- -------------
05-Mar-96 102.06050610%
05-Apr-96 102.77654877%
05-May-96 103.48681128%
05-Jun-96 104.19830954%
05-Jul-96 104.90399703%
05-Aug-96 105.61088887%
05-Sep-96 106.31899335%
05-Oct-96 107.02126392%
05-Nov-96 107.72471571%
05-Dec-96 108.42935680%
05-Jan-97 109.12814028%
05-Feb-97 109.82808126%
05-Mar-97 110.53836454%
05-Apr-97 111.27997328%
05-May-97 112.01277577%
05-Jun-97 112.74669945%
05-Jul-97 113.47176447%
05-Aug-97 114.19789807%
05-Sep-97 114.92510763%
05-Oct-97 115.64341271%
05-Nov-97 116.36274039%
05-Dec-97 117.08309776%
05-Jan-98 117.50095177%
05-Feb-98 112.63465332%
05-Mar-98 113.34681214%
05-Apr-98 114.05994610%
05-May-98 114.76972052%
05-Jun-98 115.48045392%
05-Jul-98 116.18781137%
05-Aug-98 116.89611136%
05-Sep-98 117.60536050%
05-Oct-98 118.31122343%
05-Nov-98 119.01801886%
05-Dec-98 119.72575312%
05-Jan-99 119.93292503%
05-Feb-99 115.99153716%
05-Mar-99 116.70818021%
05-Apr-99 117.42575785%
05-May-99 118.13980357%
05-Jun-99 118.85476610%
05-Jul-99 119.56617887%
05-Aug-99 120.27849061%
05-Sep-99 120.99170759%
05-Oct-99 121.70136277%
05-Nov-99 122.41190505%
05-Dec-99 123.12334050%
05-Jan-00 122.41365037%
<PAGE>
SCHEDULE 2
to
Equipment Operating Lease
-------------------------
TERMINATION VALUE PERCENTAGES
-----------------------------
Percentage of
Equipment
--------------
05-Feb-00 118.40250091%
05-Mar-00 119.11718076%
05-Apr-00 119.83274724%
05-May-00 120.54468362%
05-Jun-00 121.25748800%
05-Jul-00 121.96664336%
05-Aug-00 122.67664794%
05-Sep-00 123.38750757%
05-Oct-00 124.09470481%
05-Nov-00 124.80273797%
05-Dec-00 125.51161272%
05-Jan-01 124.86710567%
05-Feb-01 120.72464528%
05-Mar-01 121.43655697%
05-Apr-01 122.14930196%
05-May-01 122.85830358%
05-Jun-01 123.56811887%
05-Jul-01 124.27417073%
05-Aug-01 124.98101636%
05-Sep-01 125.68866075%
05-Oct-01 126.39252703%
05-Nov-01 127.09717207%
05-Dec-01 127.80260117%
05-Jan-02 127.28312668%
05-Feb-02 122.85713626%
05-Mar-02 123.56480438%
05-Apr-02 124.27324644%
05-May-02 124.97783317%
05-Jun-02 125.68317291%
05-Jul-02 126.38463617%
05-Aug-02 127.08683117%
05-Sep-02 127.78976289%
05-Oct-02 128.48880174%
05-Nov-02 129.18855582%
05-Dec-02 129.88903002%
05-Jan-03 129.64383002%
05-Feb-03 125.08765130%
05-Mar-03 125.79141116%
05-Apr-03 126.49587895%
05-May-03 127.19635447%
05-Jun-03 127.89751557%
05-Jul-03 128.59466188%
05-Aug-03 129.29247109%
05-Sep-03 129.99094771%
05-Oct-03 130.68539127%
05-Nov-03 131.38047933%
05-Dec-03 132.07621627%
05-Jan-04 131.95248271%
05-Feb-04 126.59776869%
05-Mar-04 127.29279085%
05-Apr-04 127.98844727%
<PAGE>
SCHEDULE 2
to
Equipment Operating Lease
-------------------------
TERMINATION VALUE PERCENTAGES
-----------------------------
Percentage of
Equipment
-------------
05-May-04 128.68001934%
05-Jun-04 129.37220217%
05-Jul-04 130.06027698%
05-Aug-04 130.74893875%
05-Sep-04 131.43819147%
05-Oct-04 132.12331622%
05-Nov-04 132.80900784%
05-Dec-04 133.49527020%
05-Jan-05 134.15183601%
05-Feb-05 128.09035711%
05-Mar-05 128.77638008%
05-Apr-05 129.46295690%
05-May-05 130.14599265%
05-Jun-05 130.82956190%
05-Jul-05 131.50956961%
05-Aug-05 132.19009020%
05-Sep-05 132.87112716%
05-Oct-05 133.54858534%
05-Nov-05 134.22653903%
05-Dec-05 134.90499161%
05-Jan-06 135.57984781%
05-Feb-06 129.45174432%
05-Mar-06 130.13037187%
05-Apr-06 130.80948375%
05-May-06 131.48500962%
05-Jun-06 132.16099869%
05-Jul-06 132.83338050%
05-Aug-06 133.50620409%
05-Sep-06 134.17947249%
05-Oct-06 134.84911510%
05-Nov-06 135.51918085%
05-Dec-06 136.18967263%
05-Jan-07 136.85651970%
05-Feb-07 130.15266113%
05-Mar-07 130.81981539%
05-Apr-07 131.48737928%
05-May-07 132.15184660%
05-Jun-07 132.81670527%
05-Jul-07 133.47844895%
05-Aug-07 134.14056543%
05-Sep-07 134.80305723%
05-Oct-07 135.46241794%
05-Nov-07 136.12213520%
05-Dec-07 136.78221147%
05-Jan-08 137.43914017%
05-Feb-08 130.67095330%
05-Mar-08 131.32768544%
05-Apr-08 131.98476225%
05-May-08 132.63874093%
05-Jun-08 133.29304551%
05-Jul-08 133.94423310%
<PAGE>
SCHEDULE 2
to
Equipment Operating Lease
-------------------------
TERMINATION VALUE PERCENTAGES
-----------------------------
Percentage of
Equipment
-------------
05-Aug-08 134.59572759%
05-Sep-08 135.24753106%
05-Oct-08 135.89620050%
05-Nov-08 136.54515970%
05-Dec-08 137.19441061%
05-Jan-09 137.84051012%
05-Feb-09 131.06136036%
05-Mar-09 131.70706141%
05-Apr-09 132.35303844%
05-May-09 132.99585943%
05-Jun-09 133.63893677%
05-Jul-09 134.27883833%
05-Aug-09 134.91897636%
05-Sep-09 135.55935249%
05-Oct-09 136.19653443%
05-Nov-09 136.83393434%
05-Dec-09 137.47155369%
05-Jan-10 138.10596009%
05-Feb-10 131.31497316%
05-Mar-10 131.94876338%
05-Apr-10 132.58275537%
05-May-10 133.21352869%
05-Jun-10 133.84448325%
05-Jul-10 134.47219846%
05-Aug-10 135.10007408%
05-Sep-10 135.72811121%
05-Oct-10 136.35288912%
05-Nov-10 136.97780745%
05-Dec-10 137.60286715%
05-Jan-11 138.22464735%
05-Feb-11 131.42087900%
05-Mar-11 132.04180818%
05-Apr-11 132.66285901%
05-May-11 133.28062346%
05-Jun-11 133.89848798%
05-Jul-11 134.51304443%
05-Aug-11 135.12767913%
05-Sep-11 135.74239261%
05-Oct-11 136.35377656%
05-Nov-11 136.96521714%
05-Dec-11 137.57671475%
05-Jan-12 138.18486094%
05-Feb-12 131.36729128%
05-Mar-12 131.97433316%
05-Apr-12 132.58141012%
05-May-12 133.18512748%
05-Jun-12 133.78885727%
05-Jul-12 134.39074855%
05-Aug-12 134.99263983%
05-Sep-12 135.59453112%
05-Oct-12 136.19642240%
<PAGE>
SCHEDULE 2
to
Equipment Operating Lease
-------------------------
TERMINATION VALUE PERCENTAGES
-----------------------------
Percentage of
Equipment
-------------
05-Nov-12 136.79831368%
05-Dec-12 137.40020497%
05-Jan-13 138.00209626%
05-Feb-13 131.17814907%
05-Mar-13 131.77877860%
05-Apr-13 132.37940812%
05-May-13 132.98003765%
05-Jun-13 133.58066718%
05-Jul-13 134.18129671%
05-Aug-13 134.78192623%
05-Sep-13 135.38255577%
05-Oct-13 135.98318528%
05-Nov-13 136.58381481%
05-Dec-13 137.18444433%
05-Jan-14 137.78507386%
05-Feb-14 130.95977028%
05-Mar-14 131.55904342%
05-Apr-14 132.15831655%
05-May-14 132.75758969%
05-Jun-14 133.35686283%
05-Jul-14 133.95613597%
05-Aug-14 134.55540910%
05-Sep-14 135.15468223%
05-Oct-14 135.75395537%
05-Nov-14 136.35322852%
05-Dec-14 136.95250166%
05-Jan-15 137.55177478%
05-Feb-15 130.72501309%
05-Mar-15 131.32282810%
05-Apr-15 131.92064312%
05-May-15 132.51845814%
05-Jun-15 133.11627316%
05-Jul-15 133.71408817%
05-Aug-15 134.31190319%
05-Sep-15 134.90971821%
05-Oct-15 135.50753324%
05-Nov-15 136.10534824%
05-Dec-15 136.70316326%
05-Jan-16 137.30097828%
05-Feb-16 130.47264910%
05-Mar-16 131.06889664%
05-Apr-16 131.66514418%
05-May-16 132.26139171%
05-Jun-16 132.85763925%
05-Jul-16 133.45388679%
05-Aug-16 134.05013433%
05-Sep-16 134.64638187%
05-Oct-16 135.24262941%
05-Nov-16 135.83887695%
05-Dec-16 136.43512448%
05-Jan-17 137.03137203%
<PAGE>
SCHEDULE 2
to
Equipment Operating Lease
-------------------------
TERMINATION VALUE PERCENTAGES
-----------------------------
Percentage of
Equipment
-------------
05-Feb-17 130.20135781%
05-Mar-17 130.79592031%
05-Apr-17 131.39048281%
05-May-17 131.98504531%
05-Jun-17 132.57960781%
05-Jul-17 133.17417031%
05-Aug-17 133.76873281%
05-Sep-17 134.36329532%
05-Oct-17 134.95785781%
05-Nov-17 135.55242031%
05-Dec-17 136.14698281%
05-Jan-18 136.74154531%
<PAGE>
SCHEDULE 3
TO
EQUIPMENT
OPERATING LEASE
TERMS AND CONDITIONS OF NEW LOAN TO BE MADE UPON COMMENCE-
MENT OF SERVICE CONTRACT OPTION
27. BORROWER: The Owner Trustee which acts as the Lessor under the
Equipment Operating Lease to which this Term Sheet is attached.
28. PURPOSE: To provide non-recourse debt which will be serviced by
the Capacity Purchase Price and energy payments afforded under one or more take
if tendered Power Sales Agreements as arranged as part of the Service Contract
Option as defined in the Equipment Operating Lease.
29. LENDER: To be arranged by Old Dominion in accordance with
Section 15.3 of the Equipment Operating Lease.
30. AMOUNT: Such amount as shall be equal to the unpaid principal
amount of the Loans outstanding under the Loan Agreement on the Expiration Date.
31. MATURITY: To be determined based on Lender's proposal; final
maturity not to exceed 13 years; average life not to exceed 13 years.
32. INTEREST RATE: A fixed rate of interest for the term to be
determined based upon competitive bids obtained from not less than three
prospective Lenders.
33. AMORTIZATION: Mortgage-style amortization of principal (i.e. level
payments of principal and interest)
34. SECURITY: A first priority security interest in all assets of the
Borrower consisting of:
(a) the Borrower's interest in the Equipment Interest, the
Foundation Interest, the Clover Agreements Assignment and the
Management Agreement;
(b) the Power Sales Agreement and all accounts receivable arising
thereunder, revenues therefrom, and other proceeds thereof;
S3-1
<PAGE>
(c) the interest of the Borrower in, to and under all other
contracts and agreements relating to the Equipment Interest
and the Foundation Interest, the ownership and operation
thereof, the transmission of the output thereof, and the Power
Sales Agreement;
(d) all insurance proceeds relating to the Equipment Interest, the
Foundation Interest and the Power Sales Agreement, consistent,
however, with the Clover Agreements; and
(e) the New Loan shall be non-recourse to the Lessor, payable only
from the Lessor's interest in the Trust Estate.
35. INDEMNITIES: Customary in loans of this nature, including,
without limitation, increased costs, capital adequacy, withholding tax and
other tax liabilities and other indemnities. The Borrower will indemnify
the Lender against all losses, liabilities, claims, damages or expenses,
including, without limitation, legal or other expenses incurred in connection
with investigating, preparing to defend or defending any claim, however
asserted, incurred in conjunction with the contemplated transactions. Such
indemnities will be secured by the security interest referred to in paragraph 8.
36. REPRESENTATIONS AND WARRANTIES: Customary in loans of this nature,
including, without limitation, those pertaining to the following:
o Organization, authority, due execution and validity;
o Title to properties, licenses and environmental compliance;
o No Liens other than Permitted Liens;
o Use of proceeds to pay Loan Certificates outstanding on the
Expiration Date;
o True and complete disclosure, no material litigation; and
o Absence of default.
37. COVENANTS: Customary in loans of this nature without limitation,
including, without limitation:
Additional Indebtedness. The Borrower shall not incur
additional indebtedness without the consent of the Lender.
S3-2
<PAGE>
Negative Pledge. The Borrower shall not create or suffer to exist any
Lien on the collateral except for Permitted Liens except with the
consent of the Lender.
Other Covenants. Including, but not limited to, the following topics:
o Punctual payments, compliance with laws;
o Maintenance of properties and insurance, payment of
taxes;
o Maintenance of books and records;
o Compliance with environmental laws and regulations;
o Notices of default, material litigation;
o ERISA compliance;
o All loan and related documents to be kept in full force
and effect with no amendments;
o No change in fiscal year;
o Physical inspection of books and records by the Lender
or its designee, upon reasonable notice and subject to
reasonable limitations;
o Nature of business will remain substantially the same;
and
o All governmental licenses, approvals, permits, etc.
38. REPORTING REQUIREMENTS OF POWER PURCHASER:
Unaudited financial statements: Within 60 days of the close of
each quarter.
Compliance certificate: Within 90 days of the close of each
quarter.
Annual audited financial statements: Within 90 days after the
close of each fiscal year.
39. EVENTS OF DEFAULT: Customary for loans of this nature,
including, but not limited to, the following:
o Payment defaults;
o Any representation or warranty made in connection with
the Loan being incorrect in any material respect when
made;
S3-3
<PAGE>
o Failure to comply with covenants;
o Failure to perform in other material respects under the
Loan;
o Voluntary or involuntary receivership or bankruptcy
filing; and
o Insolvency of Borrower.
40. CONDITIONS PRECEDENT: Those customarily found in loans of this nature,
including, but not limited to, the following:
o Loan agreement and other related documentation to be in
form and substance satisfactory;
o Legal opinions;
o Receipt of evidence of insurance coverage satisfactory
to the Lender;
o No material adverse change in financial and operating
condition of Power Purchaser;
o No default or event of default;
o Payment of all fees and expenses, including all legal
costs and expenses of the Lender;
o Compliance with environmental laws and regulations;
o Representations and warranties true and correct;
o Other documents reasonably requested.
41. GOVERNING LAW: The loan agreement will be subject to the laws
of the State of New York.
S3-4
<PAGE>
42. ASSIGNMENT/PARTICIPATION SALES: Assignments of interests in the
Loan may be made by the Lender with the consent of the Borrower, subject to a
minimum assignment amount of $10,000,000. Customary participation rights (with
customary voting limitations) will be available to assignees and participants).
S3-5
<PAGE>
Errors having been discovered in the Option Agreement to Lease recorded in the
Clerk's Office of the Circuit Court of Halifax County, Virginia, in Deed Book
645, Page 245, the parties thereto record this Corrected Option Agreement to
Lease in such Clerk's Office to correct such errors.
CORRECTED OPTION AGREEMENT TO LEASE
Dated as of February 29, 1996
among
OLD DOMINION ELECTRIC COOPERATIVE,
and
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity,
but solely as Owner Trustee
Clover Unit 1 Generating Facility
and
Common Facilities
<PAGE>
CORRECTED OPTION AGREEMENT TO LEASE
THIS CORRECTED OPTION AGREEMENT TO LEASE, dated as of February 29, 1996
(this "OPTION AGREEMENT"), by and between OLD DOMINION ELECTRIC COOPERATIVE, a
wholesale power supply cooperative organized under the laws of the Commonwealth
of Virginia ("OPTIONOR"), and STATE STREET BANK AND TRUST COMPANY, a
state-chartered trust company organized and existing under the laws of the
Commonwealth of Massachusetts, not in its individual capacity, but as the Owner
Trustee under the Trust Agreement ("OPTIONEE"), recites and provides:
RECITALS.
WHEREAS, capitalized terms used herein and not otherwise defined shall
have the meanings given them in Appendix A - Definitions which is attached
hereto as part hereof and recorded herewith;
WHEREAS, the Clover Real Estate is more particularly described in
Schedule 1 and comprised of the Unit 1 Site described in Schedule 2, the Unit 2
Site described in Schedule 3, and the Common Facilities Site described in
Schedule 4, and certain other property, each such Schedule 1, Schedule 2,
Schedule 3, and Schedule 4 being attached to and made part of the form of the
Deed of Ground Lease and Sublease Agreement (the "DEED OF GROUND LEASE AND
SUBLEASE") which is attached hereto as part hereof, marked Exhibit A and
recorded herewith;
WHEREAS, a copy of the Clover Power Station Plat is attached hereto as
part hereof, marked Exhibit B and recorded herewith;
WHEREAS, Optionor and Virginia Power own the Clover Real Estate as
tenants-in-common;
WHEREAS, by the Clover Agreements, Optionor and Virginia Power
established their respective rights and obligations as tenants-in-common of the
Clover Real Estate and of all improvements thereafter to be constructed, and all
personal property thereafter to be situated, on the Clover Real Estate. Such
improvements and personal property owned by Optionor and Virginia Power as
tenants-in-common include, but are not limited to, (a) the Unit 1 Foundation
constructed on the Unit 1 Site, (b) the Unit 2 Foundation being constructed on
the Unit 2 Site, (c) the Common Facilities Foundation constructed on the Common
Facilities Site, (d) the Unit 1 Equipment situated on the Unit 1 Site, (e) the
Unit 2 Equipment being situated on the Unit 2 Site, and (f) the Common
Facilities Equipment situated on the Common Facilities Site;
WHEREAS, as tenants-in-common of such real and personal property, each
of Optionor and Virginia Power owns a 50% undivided interest in such real and
personal property, including the right to nonexclusive possession of all such
real and personal property, subject to (a) the rights of the other to
nonexclusive possession of all such real and personal property and (b) the
terms and conditions of the Clover Agreements;
<PAGE>
WHEREAS, Optionor will lease to Optionee (a) the Foundation Interest by
the Foundation Head Lease and (b) the Equipment Interest by the Equipment Head
Lease;
WHEREAS, by the Foundation Operating Lease, Optionee will lease the
Foundation Interest back to Optionor upon a term which shall end prior to the
expiration of the term of the Foundation Head Lease;
WHEREAS, by an Equipment Operating Lease, Owner Trustee will lease the
Equipment Interest back to Optionor upon a term which shall end prior to the
expiration of the term of the Equipment Head Lease;
WHEREAS, although Optionor and Optionee intend that the Foundation
Interest at all times and in all respects be and remain personal property under
Virginia law, they are to record the Foundation Head Lease and the Foundation
Operating Lease in the Halifax Clerk's Office, on the date that this Option
Agreement is recorded in the Halifax Clerk's Office, in order to satisfy the
conditions of Section 55-96 of the Code of Virginia 1950, as amended, in the
event that the Foundation Interest is deemed to be real estate or an interest in
real estate estate for purposes of such Section 55-96. The Equipment Head Lease
and the Equipment Operating Lease are not to be recorded; and
WHEREAS, Optionor now desires to grant and convey to Optionee, its
successors and permitted assigns, the exclusive right and option to lease the
Ground Interest from Optionor, subject to Optionee's agreement to sublease the
Ground Interest simultaneously back to Optionor if Optionee exercises such
option (with each of such lease and such sublease being encumbered by the
Permitted Liens), and Optionee desires to so obtain such right and option from
Optionor upon Optionee's obligation to so sublease the Ground Interest back to
Optionor, all upon the terms and conditions hereinafter set forth.
OPTION AGREEMENT TO LEASE.
NOW THEREFORE, for and in consideration of the mutual promises
hereinafter set forth, $100.00 (the "OPTION FEE") cash in hand paid by Optionee
to Optionor on the date (the "EXECUTION DATE") as of which this Option Agreement
is fully executed and delivered, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Optionor and Optionee
agree as follows.
1. OPTION TO LEASE. Subject to the provisions of this Option Agreement,
Optionor hereby grants and conveys to Optionee, its successors and permitted
assigns, the exclusive right and option (the "OPTION") to lease the Ground
Interest from Optionor upon the terms and conditions of this Option Agreement.
2. DURATION OF OPTION. The period of the Option shall begin on the
Execution Date and shall end at midnight on March 1, 2096 (the "OPTION PERIOD");
unless earlier terminated pursuant to the terms of this Option Agreement.
2
<PAGE>
3. EXERCISE OF OPTION. At any time during the Option Period, Optionee
may elect to exercise the Option by giving to Optionor notice of exercise (the
"EXERCISE NOTICE") with which Optionee encloses (a) a counterpart original of
the Deed of Lease and Sublease (in the form attached hereto as part hereof and
marked Exhibit A) as duly executed and acknowledged on behalf of Optionee and
(b) a statement of the amount of the taxes and fees which are to be payable to
the Halifax Clerk's Office for the recordation of the Deed of Lease and Sublease
in the Halifax Clerk's Office (together, the "RECORDATION COST").
4. EARLY TERMINATION OF OPTION PERIOD. The Option Period shall
terminate prior to the scheduled expiration of the Option Period, if (a)
Optionor shall exercise its option to terminate the Equipment Operating Lease
and the Foundation Operating Lease pursuant to Section 10, 13 or 18 of the
Equipment Operating Lease and the Foundation Operating Lease or (b) Optionor
exercises the Purchase Option pursuant to paragraph (a) of Section 15.1 of the
Equipment Operating Lease and the Foundation Purchase Option pursuant to
paragraph (a) of Section 15.1 of the Foundation Operating Lease, or (c) Optionor
exercises its right to terminate the Equipment Head Lease and the Foundation
Head Lease pursuant to Section 10.2 of each such Lease and in each case complies
with its obligations under the Operative Documents in connection therewith.
Optionee shall transfer to Optionor, by a release or termination of the Option
to be prepared by Optionor and in a form reasonably satisfactory to Optionee to
be duly recorded in the Halifax Clerk's Office, all of Optionee's right, title
and interest in and to the Option.
5. LEASE AND SUBLEASE OF THE GROUND INTEREST. If Optionee gives the
Exercise Notice as provided above, Optionor shall, within five (5) Business Days
after receipt thereof, (a) have the counterpart original of the Deed of Lease
and Sublease, which was delivered to it by Optionee pursuant to the Exercise
Notice, duly executed and acknowledged on behalf of Optionor and (b) deliver to
Optionee both such executed and acknowledged counterpart original and
immediately available federal funds in the amount of the Recordation Cost. Upon
such deliveries by Optionor, the Deed of Lease and Sublease shall be deemed
effective, in accordance with its terms, to lease the Ground Interest from
Optionor to Optionee and sublease the Ground Interest from Optionee to Optionor,
in each case encumbered by the Permitted Liens. Optionee shall have such
counterpart original of the Deed of Lease and Sublease recorded in the Halifax
Clerk's Office within three (3) Business Days after receiving the foregoing
deliveries from Optionor.
6. TAXES. Until recordation of the Deed of Lease and Sublease as
provided above in Section 5, Optionor shall be responsible for payment of all
taxes attributable to the Ground Interest.
7. TITLE. Until recordation of the Deed of Lease and Sublease as
provided above in Section 5, Optionor shall not, without Optionee's prior
written consent, (a) convey or lease all or any portion of the Ground Interest,
(b) consent to, or acquiesce in, the condemnation, or taking by exercise of the
power of eminent domain (or by deed in lieu thereof), of all or any portion of
the Ground Interest, or (c) take, fail to take or allow to be taken any
action which may be adverse to title to all or any portion of the Ground
Interest, including the creation, or consent to the imposition of, any
lien (including liens of mechanics and materialmen), encumbrance,
easement,
3
<PAGE>
condition, limitation, covenant, restriction, or tenancy upon the Ground
Interest (other than those accepted or waived by Optionee and Permitted
Liens). Notwithstanding the foregoing, Optionor shall have the right, without
Optionee's consent, to (a) grant one or more rights-of-way and easements over or
in respect of any portion of the Clover Real Estate and (b) lease or convey
one or more portions of the Clover Real Estate; provided, however, that (i)
each such grant, lease and conveyance shall be in accordance with the Clover
Agreements and (ii) no such grant, lease or conveyance shall either impair the
use or operation of, or the ability to maintain, improve or rebuild, Clover Unit
1 as contemplated by the Clover Agreements and the Operative Documents or
materially reduce the value of the Clover Real Estate or Clover Unit 1.
8. SECURITY FOR OPTIONEE'S OBLIGATION TO THE LENDERS. In order to
secure all amounts payable, and all obligations to be performed, by Optionee
under the Loan Agreement and the Leasehold Mortgage, Optionee has assigned in
the Loan Agreement to the Agent for the Agent's benefit and the ratable benefit
of the Lenders, and granted and conveyed in the Leasehold Mortgage to the
Trustees for the benefit of the Agent and the ratable benefit of the Lenders,
Optionee's rights under this Option Agreement (and, upon exercise of the Option,
Optionee's rights under the Deed of Lease and Sublease) and granted security
interests in favor of the Agent and the Trustees for the benefit of the Agent in
all of Optionee's right, title and interest in and to the Ground Interest,
including Optionee's interests in this Option Agreement (and, upon exercise of
the Option, Optionee's interests in the Deed of Lease and Sublease), other than
Excepted Payments and Excepted Rights and subject to Old Dominion's right to
quiet enjoyment pursuant to Section 7 of the Ground Lease and Sublease and
Section 9 of the Participation Agreement. Optionor hereby consents to such
grant, conveyance and assignment and to the creation of such security interests
and acknowledges receipt of copies of the Loan Agreement and the Leasehold
Mortgage, it being understood that such consent shall not affect any requirement
or the absence of any requirement for any consent under any other circumstances.
Optionor hereby acknowledges receipt of due notice that Optionee's interest in
this Option has been assigned to the Agent as security pursuant to the Loan
Agreement to the extent provided in the Loan Agreement and granted and conveyed
Optionee's interest in the Option Agreement (and in the Deed of Lease and
Sublease upon exercise of the Option) to the Trustees pursuant to the Leasehold
Mortgage to the extent provided in the Leasehold Mortgage. Unless and until
Optionor shall have received written notice from the Agent that Optionee has the
right to have the Liens of the Loan Agreement discharged, and the Liens of the
Leasehold Mortgage released, the Agent shall have the right to exercise the
rights of Optionee under this Option Agreement (and, upon exercise of the
Option, the rights of Optionee under the Deed of Lease and Sublease) to the
extent set forth in and subject in each case to the exceptions set forth in the
Loan Agreement and the Leasehold Mortgage.
9. AMENDMENTS AND WAIVERS. No term, covenant, agreement or condition
of this Option Agreement may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto.
10. NOTICES. Unless otherwise expressly specified or permitted by the
terms hereof, all communications and notices provided for herein to a party
hereto shall be in writing or by a
4
<PAGE>
telecommunications device capable of creating a written record, and any such
notice shall become effective (a) upon personal delivery thereof, including,
without limitation, by overnight mail or courier service, (b) in the case of
notice by United States mail, certified or registered, postage prepaid,
return receipt requested, upon receipt thereof, or (c) in the case of notice by
such a telecommunications device, upon transmission thereof, provided such
transmission is promptly confirmed by either of the methods set forth in
clauses (a) or (b) above, addressed to such party at its address set forth
below or, at such other address as such party may from time to time designate by
written notice to the other party hereto:
If to Optionor:
Old Dominion Electric Cooperative
Innsbrook Corporate Center
4201 Dominion Boulevard
Glen Allen, Virginia 23060
Facsimile No.: (804) 747-3742
Telephone No.: (804) 747-0592
Attention: Vice President of Accounting and Finance
If to Optionee:
State Street Bank and Trust Company
Two International Place
Fourth Floor
Boston, Massachusetts 02110
Facsimile No.: (617) 664-5371
Telephone No.: (617) 664-5610
Attention: Manager-Corporate Trust
A copy of all communications and notices provided for herein shall be sent by
the party giving such communication or notice to Virginia Power at:
Virginia Electric and Power Company
P.O. Box 26666
Richmond, Virginia 23261
Attention: President
11. SURVIVAL. All warranties, representations, indemnities and
covenants made by either party hereto, herein or in any certificate or other
instrument delivered by either such party or on the behalf of such party under
this Option Agreement shall be considered to have been relied upon by the other
party hereto and shall survive the consummation of the transactions
5
<PAGE>
contemplated hereby on the Closing Date regardless of any investigation made by
either party or on behalf of either party.
12. ENTIRE AGREEMENT. This Option Agreement contains the entire
agreement between the parties hereto relating to the Option and supersedes all
prior and contemporaneous negotiations, understandings and agreements, written
or oral, between the parties. This Option Agreement shall not be amended or
modified, and no waiver of any provision hereof shall be effective, unless set
forth in a written instrument authorized and executed with the same formality as
this Option Agreement.
13. SUCCESSORS AND ASSIGNS. (a) This Option Agreement shall be binding
upon and shall inure to the benefit of, and shall be enforceable by, the parties
hereto and their respective successors and assigns as permitted by and in
accordance with the terms hereof. Each time a successor Owner Trustee is
appointed in accordance with the terms of the Trust Agreement and Section 5.5 of
the Participation Agreement, such successor Owner Trustee shall, without further
act, succeed to all rights, duties, immunities, and obligations of the
predecessor Owner Trustee hereunder and the predecessor Owner Trustee shall be
released from all further duties and obligations hereunder, all without the
necessity of any consent or approval by the Optionor and without in any way
altering the terms and conditions of this Option Agreement or the rights and
obligations of the Optionee hereunder. The Optionor shall, at its expense, upon
receipt of written notice of the appointment of a successor Owner Trustee under
the Trust Agreement, promptly make such modifications and changes to reflect
such appointment as shall be reasonably requested by such successor Owner
Trustee in any instruments relating to this Option Agreement, all in form and
substance reasonably satisfactory to such successor Owner Trustee.
(b) Except as expressly provided herein or in the Operative Documents,
neither party hereto may assign its interests herein without the consent of the
other party hereto.
14. BUSINESS DAY. Notwithstanding anything herein to the contrary, if
the date on which any payment is to be made pursuant to this Option Agreement is
not a Business Day, the payment otherwise payable on such date shall be payable
on the next succeeding Business Day with the same force and effect as if made on
such scheduled date and (PROVIDED such payment is made on such succeeding
Business Day) no interest shall accrue on the amount of such payment from and
after such scheduled date to the time of such payment on such next succeeding
Business Day.
15. GOVERNING LAW. This Option Agreement shall be in all respects
governed by and construed in accordance with the laws of the Commonwealth of
Virginia including all matters of construction, validity and performance.
16. SEVERABILITY. Whenever possible, each provision of this Option
Agreement shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Option Agreement shall be
prohibited by or invalid under Applicable Law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Option Agreement.
6
<PAGE>
17. COUNTERPARTS. This Option Agreement may be executed in any number
of counterparts, each executed counterpart constituting an original but all
together only one instrument.
18. HEADINGS. The headings of this Option Agreement are inserted for
purposes of convenience only and shall not be construed to affect the meaning of
any of the provisions hereof.
19. TIME OF THE ESSENCE. Time is of the essence for all purposes of
this Option Agreement.
20. LIMITATIONS OF LIABILITY. It is expressly understood and agreed by
and between the parties hereto and their respective successors and permitted
assigns, that all representations, warranties and undertakings of the Optionee
hereunder shall be binding upon the Optionee only in its capacity as Owner
Trustee under the Trust Agreement, and neither the Optionee in its individual
capacity nor any past, present or future Affiliate, partner, officer, director,
owner, shareholder, agent or employee of it or in any thereof or of any partner
thereof or their legal representatives, successors or assigns shall be liable
for any breach thereof; and all Persons having any claim against the Optionee by
reason of the transactions contemplated hereby shall look only to the Trust
Estate for payment or satisfaction thereof.
21. FURTHER ASSURANCES. Each party hereto will promptly and duly
execute and deliver such further documents and make such further assurances for
and take such further action reasonably requested by any party to whom such
first party is obligated, all as may be reasonably necessary to carry out more
effectively the intent and purpose of this Option Agreement.
22. MEASURING LIVES. If and to the extent that any of the rights and
privileges granted under the provisions of this Option Agreement would, in the
absence of the limitation imposed by this Section 22, be invalid or
unenforceable as being in violation of the rule against perpetuities or any
other rule or law relating to the vesting of interests in property or the
suspension of the power of alienation of property, then it is agreed that
notwithstanding any other provision of this Option Agreement, such options,
rights and privileges, subject to the respective conditions governing the
exercise of such options, rights and privileges, will be exercisable only during
(a) a period which will end twenty-one (21) years after the death of the last
survivor of the Boards of Directors of Optionor named in Exhibit C hereto,
together with all such persons' children and grandchildren who are living on the
date of the execution of this Option Agreement or (b) the specific applicable
period of time expressed in this Option Agreement, whichever is shorter.
7
<PAGE>
WITNESS the following signatures.
OLD DOMINION ELECTRIC COOPERATIVE,
as Optionor
By:/s/ DANIEL M. WALKER
---------------------------------------
Name: Daniel M. Walker
Title: Vice President
Date Executed: July 30, 1996
-------------------------
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement, as Optionee
By:/s/ E. DECKER ADAMS
---------------------------------------
Name: E. Decker Adams
Title: Vice President
Date Executed: July 30, 1996
-------------------------
8
<PAGE>
State Street Bank and Trust Company having (a) assigned its right,
title and interest under the Option Agreement to Utrecht-America Finance Co., as
Agent, under the Loan Agreement and (b) assigned, transferred, granted and
conveyed its right, title and interest under the Option Agreement to David S.
Cohn and C. Cotesworth Pinckney, as Trustees, under the Leasehold Mortgage, the
Agent and one of the Trustees (upon the direction of the Agent) have executed
this Corrected Option Agreement to Lease for the sole purpose of evidencing
their consent hereto.
AGENT
Utrecht-America Finance Co.
By:/s/ ILLEGIBLE
-------------------------
Title: ______________________
By:/s/ ILLEGIBLE
-------------------------
Title: ______________________
SOLE ACTING TRUSTEE
/s/ DAVID S. COHN
-------------------------------------
David S. Cohn, as sole acting trustee
9
<PAGE>
STATE OF NEW YORK )
) ss:
CITY/COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this 30 day of
July, ____, by Daniel M. Walker, as Vice President of OLD DOMINION ELECTRIC
COOPERATIVE, a wholesale power supply cooperative organized under the laws of
the Commonwealth of Virginia, on behalf of such cooperative.
/s/ MILAGROS COLON-PADILLA
----------------------------------
Name: Milagros Colon-Padilla
Notary Public
(Notarial Seal)
My commission expires:______________________________________
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this 30 day of
July, ____, by E. Decker Adams as Vice President of STATE STREET BANK AND
TRUST COMPANY, a state chartered trust company organized and existing under the
laws of the Commonwealth of Massachusetts, on behalf of such Trust Company not
in its individual capacity but solely as Owner Trustee under the Trust
Agreement.
/s/ MILAGROS COLON-PADILLA
----------------------------------
Name: Milagros Colon-Padilla
Notary Public
My commission expires:______________________________________
[NOTARIAL SEAL]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this 31 day of
July, 1996, by as of Utrecht-America Finance Co., a corporation organized
and existing under the laws of the State of Delaware, on behalf of the
corporation.
/s/ SUSANA CARVALLO
----------------------------------
Name: Susana Carvallo
Notary Public
(Notarial Seal)
My Commission expires: _______________________
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this 31 day of
July, 1996, by as of Utrecht-America Finance Co., a corporation organized
and existing under the laws of the State of Delaware, on behalf of the
corporation.
/s/ SUSANA CARVALLO
----------------------------------
Name: Susana Carvallo
Notary Public
(Notarial Seal)
My Commission expires: _______________________
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this 31st day of
July, 1996, by David S. Cohn, as Sole Acting Trustee.
/s/ MILAGROS COLON-PADILLA
----------------------------------
Name: Milagros Colon-Padilla
Notary Public
(Notarial Seal)
My Commission expires: _______________________
<PAGE>
APPENDIX A
TO OPTION AGREEMENT TO LEASE
BETWEEN OLD DOMINION ELECTRIC COOPERATIVE (AS OPTIONOR)
AND
STATE STREET BANK AND TRUST COMPANY (AS OPTIONEE)
DEFINITIONS
This Appendix A has been filed separately. See Appendix A to Exhibit 10.35 to
Old Dominion's Form 10-K for the year ended December 31, 1996.
<PAGE>
EXHIBIT A
TO OPTION AGREEMENT TO LEASE
BETWEEN OLD DOMINION ELECTRIC COOPERATIVE (AS OPTIONOR)
AND
STATE STREET BANK AND TRUST COMPANY (AS OPTIONEE)
FORM OF THE DEED OF GROUND LEASE AND SUBLEASE AGREEMENT
<PAGE>
EXHIBIT B
TO OPTION AGREEMENT TO LEASE
BETWEEN OLD DOMINION ELECTRIC COOPERATIVE (AS OPTIONOR)
AND
STATE STREET BANK AND TRUST COMPANY (AS OPTIONEE)
COPY OF THE CLOVER POWER STATION PLAT
RECORDED IN PLAT BOOK 18, PAGE 50
AND AS RERECORDED AS A CORRECTION IN
PLAT BOOK _____, PAGE ____
<PAGE>
EXHIBIT C
TO OPTION AGREEMENT TO LEASE
BETWEEN OLD DOMINION ELECTRIC COOPERATIVE (AS OPTIONOR)
AND
STATE STREET BANK AND TRUST COMPANY (AS OPTIONEE)
LIST OF MEASURING LIVES
The following are the names of the members of the Board of Directors of
Old Dominion Electric Cooperative:
M. Dale Bradshaw
Glenn F. Chappell
Hugh M. Landes
Dick D. Bowman
C. Douglas Wine
M. John Bowman
Calvin P. Carter
E. Paul Bienvenue
Bruce E. Henry
John E. Bonfadini
William M. Leech, Jr.
William M. Alphin
David J. Jones
Hunter R. Greenlaw, Jr.
Cecil E. Viverette, Jr.
Stanley C. Feuerberg
Gwaltney W. White, Jr.
Frank W. Blake
James M. Reynolds
Carl R. Widdowson
Frederick L. Hubbard
Vernon N. Brinkley
John C. Anderson
Charles R. Rice, Jr.
<PAGE>
EXHIBIT A
to
Option Agreement
FORM OF DEED OF GROUND LEASE AND SUBLEASE AGREEMENT
- - --------------------------------------------------------------------------------
DEED OF GROUND LEASE AND SUBLEASE AGREEMENT
Dated as of ______________
between
OLD DOMINION ELECTRIC COOPERATIVE,
as Ground Lessor
[To be indexed as both GRANTOR and GRANTEE]
and
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity, but
solely as Owner Trustee,
as Ground Lessee
[To be indexed as both GRANTEE and GRANTOR]
-----------------------------------------------------
Land Located
in Halifax County, Virginia
- - --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 1. DEFINITIONS
SECTION 2. LEASE OF GROUND INTEREST
SECTION 2.1. LEASE OF GROUND INTEREST.................................................... 3
SECTION 2.2. BASIC GROUND LEASE TERM..................................................... 3
SECTION 2.3. RENEWAL GROUND LEASE TERM................................................... 3
SECTION 2.4. RETURN OF GROUND INTEREST................................................... 4
SECTION 2.5. NONTERMINABILITY............................................................ 4
SECTION 3. RENT FOR THE LEASE OF THE GROUND INTEREST
SECTION 3.1. ANNUAL RENT..................................................................... 4
SECTION 3.2. TAXES AND ASSESSMENTS........................................................... 4
SECTION 4. SUBLEASE OF GROUND INTEREST
SECTION 5. RENT FOR THE SUBLEASE OF THE GROUND INTEREST
SECTION 6. QUIET ENJOYMENT IN FAVOR OF THE GROUND LESSEE.
SECTION 7. QUIET ENJOYMENT IN FAVOR OF THE GROUND LESSOR.
SECTION 8. USE OF THE GROUND INTEREST BY GROUND LESSEE
SECTION 9. USE OF THE GROUND INTEREST BY GROUND LESSOR
SECTION 10. EARLY TERMINATION OF GROUND LEASE TERM
SECTION 11. EARLY TERMINATION OF GROUND SUBLEASE TERM
SECTION 12. LIENS
SECTION 13. WAIVER OF PARTITION
SECTION 14. SECURITY FOR GROUND LESSEE'S OBLIGATION TO THE
LENDERS.
SECTION 15. NONMERGER
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 16. MISCELLANEOUS
SECTION 16.1. AMENDMENTS AND WAIVERS...................................................... 9
SECTION 16.2. NOTICES..................................................................... 9
SECTION 16.3. SURVIVAL.................................................................... 10
SECTION 16.4. SUCCESSORS AND ASSIGNS...................................................... 10
SECTION 16.5. BUSINESS DAY................................................................ 10
SECTION 16.6. GOVERNING LAW............................................................... 10
SECTION 16.7. SEVERABILITY................................................................ 10
SECTION 16.8. COUNTERPARTS................................................................ 11
SECTION 16.9. HEADINGS AND TABLE OF CONTENTS.............................................. 11
SECTION 16.10. LIMITATIONS OF LIABILITY................................................... 11
SECTION 16.11. FURTHER ASSURANCES......................................................... 11
SECTION 16.12. EFFECTIVENESS OF GROUND LEASE AND SUBLEASE................................. 11
Appendix A - Definitions
Schedule 1 - Description of the Clover Real Estate
Schedule 2 - Description of the Unit 1 Site
Schedule 3 - Description of the Unit 2 Site
Schedule 4 - Description of Common Facilities Site
</TABLE>
ii
<PAGE>
DEED OF GROUND LEASE AND SUBLEASE AGREEMENT
THIS DEED OF GROUND LEASE AND SUBLEASE AGREEMENT, dated as of
_______________ (this "Ground Lease and Sublease"), between OLD DOMINION
ELECTRIC COOPERATIVE, a wholesale power supply cooperative organized under the
laws of the Commonwealth of Virginia (the "Ground Lessor", to be indexed as both
GRANTOR and GRANTEE), and STATE STREET BANK AND TRUST COMPANY, a state chartered
trust company organized and existing under the laws of the Commonwealth of
Massachusetts, not in its individual capacity but solely as Owner Trustee under
the Trust Agreement (the "Ground Lessee", to be indexed as both GRANTEE and
GRANTOR).
WHEREAS, capitalized terms used herein and not otherwise defined shall
have the meanings given them in Appendix A - Definitions which is attached
hereto as part hereof.
WHEREAS, the Clover Real Estate is more particularly described in
Schedule 1 and comprised of the Unit 1 Site described in Schedule 2, the Unit 2
Site described in Schedule 3, and the Common Facilities Site described in
Schedule 4, and certain other property, each such Schedule 1, Schedule 2,
Schedule 3, and Schedule 4 being attached to the Ground Lease and Sublease as
part thereof, the form of which Ground Lease and Sublease is marked Exhibit A
and is attached to, and recorded in the Halifax Clerk's Office with, the Option
Agreement of even date herewith.
WHEREAS, a copy of the Clover Power Station Plat is marked Exhibit B
and is attached to, and recorded in the Halifax Clerk's Office with, the Option
Agreement as a part thereof.
WHEREAS, Old Dominion and Virginia Power own the Clover Real Estate as
tenants-in-common.
WHEREAS, by the Clover Agreements, Old Dominion and Virginia Power
established their respective rights and obligations as tenants-in-common of the
Clover Real Estate and of all improvements thereafter to be constructed, and all
personal property thereafter to be situated, on the Clover Real Estate. Such
improvements and personal property owned by Old Dominion and Virginia Power as
tenants-in-common include, but are not limited to, (a) the Unit 1 Foundation
constructed on the Unit 1 Site, (b) the Unit 2 Foundation being constructed on
the Unit 2 Site, (c) the Common Facilities Foundation constructed on the Common
Facilities Site, (d) the Unit 1 Equipment situated on the Unit 1 Site, (e) the
Unit 2 Equipment being situated on the Unit 2 Site, and (f) the Common
Facilities Equipment situated on the Common Facilities Site.
WHEREAS, as tenants-in-common of such real and personal property, each
of Old Dominion and Virginia Power owns a 50% undivided interest in such real
and personal property, including the right to nonexclusive possession of all
such real and personal property, subject to (a) the rights of the other to
nonexclusive possession of all such real and personal property, (b) the terms
and conditions of the Clover Agreements and (c) in the case of the Pollution
Control Assets, the rights of the Pollution Control Assets Lessor.
<PAGE>
WHEREAS, by the Option Agreement which is recorded in the Halifax
Clerk's Office, Old Dominion granted and conveyed to the Owner Trustee, its
successors and assigns, the exclusive right and option to lease the Ground
Interest from Old Dominion, subject to the Owner Trustee's agreement to sublease
the Ground Interest simultaneously back to Old Dominion upon the terms and
conditions of the Option Agreement if the Owner Trustee exercises such option.
WHEREAS, Old Dominion has leased to the Owner Trustee (a) the
Foundation Interest by the Foundation Head Lease and (b) the Equipment Interest
by the Equipment Head Lease.
WHEREAS, by the Foundation Operating Lease, the Owner Trustee leased
the Foundation Interest back to Old Dominion upon a term which shall end prior
to the expiration of the term of this Foundation Head Lease.
WHEREAS, by the Equipment Operating Lease, the Owner Trustee leased the
Equipment Interest back to Old Dominion upon a term which shall end prior to the
expiration of the term of the Equipment Head Lease.
WHEREAS, although Old Dominion and the Owner Trustee intend that the
Foundation Interest at all times and in all respects be and remain personal
property under Virginia law, they recorded copies of this Foundation Head Lease
and the Foundation Operating Lease in the Halifax Clerk's Office in order to
satisfy the conditions of Section 55-96 of the Code of Virginia 1950, as
amended, in the event that the Foundation Interest is deemed to be real estate
or an interest in real estate for purposes of such Section 55-96. The Equipment
Head Lease and the Equipment Operating Lease are not to be recorded.
WHEREAS, upon the leasing or other conveyance by Old Dominion to the
Unit 2 Parties of the foundation and the equipment in connection with Clover
Unit 2, each of Owner Trustee (on the one hand) and the Unit 2 Parties (on the
other hand) shall share equally all of those rights, and shall be subject
equally to having all of those responsibilities undertaken, which are imposed
upon Old Dominion with respect to the Common Facilities Site, the Common
Facilities Foundation, and the Common Facilities Equipment, as (a)
tenant-in-common with Virginia Power of such property, and (b) a party to the
Clover Agreements.
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
2
<PAGE>
SECTION 1. DEFINITIONS
The capitalized terms used in this Ground Lease and Sublease and not
otherwise defined herein shall have the respective meanings set forth in
Appendix A hereto unless the context hereof shall otherwise require. All
references in this Ground Lease and Sublease to Sections, paragraphs, clauses,
appendices and exhibits are to Sections, paragraphs, clauses, appendices and
exhibits in this Ground Lease and Sublease unless otherwise indicated and the
words "herein", "hereof" and "hereunder" and other words of similar import refer
to this Ground Lease and Sublease as a whole and not to any particular Section
or other subdivision.
Where any provision in this Ground Lease and Sublease refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
SECTION 2. LEASE OF GROUND INTEREST
SECTION 2.1. LEASE OF GROUND INTEREST. The Ground Lessor hereby leases
the Ground Interest to the Ground Lessee and the Ground Lessee hereby leases the
Ground Interest from the Ground Lessor on the terms and conditions hereof. The
parties hereto acknowledge and agree that legal title to the Clover Real Estate,
including the Unit 1 Site and the Common Facilities Site, shall at all times
remain in the Ground Lessor and Virginia Power, as tenants-in-common, and that
the Ground Interest is subject to the Lien of the Old Dominion Indenture,
Permitted Encumbrances and the rights of Virginia Power under the Clover
Agreements.
SECTION 2.2. BASIC GROUND LEASE TERM. The term of the foregoing lease
to the Ground Lessee will commence on the date of the execution and delivery of
this Ground Lease and Sublease and will expire at 11:59 p.m. (New York City
time) on March 1, 2045 (the "Basic Ground Lease Term"), unless earlier
terminated pursuant to the terms of this Ground Lease and Sublease; PROVIDED,
HOWEVER, that in no event shall the Basic Ground Lease Term terminate so long as
the Ground Lessee's leasehold interest in the Ground Interest shall be subject
to the Lien of the Leasehold Mortgage.
SECTION 2.3. RENEWAL GROUND LEASE TERM. At the expiration of the Basic
Ground Lease Term and each Renewal Ground Lease Term, by giving at least 180
days prior written notice to the Ground Lessor, the Ground Lessee may extend the
Basic Ground Lease Term or such existing Renewal Ground Lease Term for an
additional term of not less than one year (each a "Renewal Ground Lease Term");
PROVIDED that, the Ground Lessee shall be permitted to renew the term of this
Ground Lease for a Renewal Ground Lease Term only if (a) concurrently with such
renewal, the Equipment Head Lease and the Foundation Head Lease are renewed for
an Equipment Head Lease Renewal Term and Foundation Head Lease Renewal Term,
respectively, equal to the Renewal Ground Lease Term, and (b) on the date of
such notice and at the commencement of such Renewal Ground Lease Term (i) Clover
Unit 1 Generating Facility continues to be used for the production of electric
capacity and energy on the Clover Real Estate and (ii) the Clover Unit 1
Generating Facility shall not be retired in accordance with Section 11.01(a) of
the Clover Operating Agreement. Notwithstanding the foregoing, if the Ground
Lease Term is not earlier terminated, it shall end on March 1, 2096.
3
<PAGE>
SECTION 2.4. RETURN OF GROUND INTEREST. Subject to Section 10, on the
last day of the Ground Lease Term the Ground Lessee shall return the Ground
Interest to the Ground Lessor by surrendering the same unto the possession of
the Ground Lessor without representation or warranty other than that the Ground
Interest is free and clear of all Lessor's Liens and Owner Participant's Liens.
The obligations of the Ground Lessee under this Section 2.4 shall survive the
termination of this Ground Lease and Sublease.
SECTION 2.5. NONTERMINABILITY. Subject to Section 10, the Ground Lease
Term shall not terminate, nor shall any of the rights granted and conveyed
hereunder to the Ground Lessee be extinguished, lost or otherwise impaired, in
whole or in part, by any cause or for any reason whatsoever, including, without
limitation, the following: (a) any damage to or loss or destruction of all or
any part of Clover Unit 1 for any reason whatsoever and of whatever duration,
(b) the condemnation, requisition (by eminent domain or otherwise), seizure or
other taking of title or use of Clover Unit 1 by any Governmental Entity or
otherwise, (c) any prohibition, limitation or restriction on the use by any
party of all or any part of its property or the interference with such use by
any Person, or any eviction by paramount title or otherwise, (d) any inadequacy,
incorrectness or failure of the description of the Clover Real Estate or the
Ground Interest or any part thereof or any rights or property in which an
interest is intended to be granted or conveyed by this Ground Lease and
Sublease, (e) the insolvency, bankruptcy, reorganization or similar proceedings
by or against the Ground Lessor or the Ground Lessee or any other Person, (f)
failure by the Ground Lessee to comply with Section 2.4, 3 or 8 hereof, or (g)
any other reason whatsoever, whether similar or dissimilar to any of the
foregoing.
SECTION 3. RENT FOR THE LEASE OF THE GROUND INTEREST
SECTION 3.1. ANNUAL RENT. As rent for the Ground Interest, the Ground
Lessee agrees to pay to the Ground Lessor rent of $100 per year, payable in
advance on March 1 of each year during that portion of the Ground Lease Term
equal to the Ground Sublease Term. From and after the expiration and termination
of the Ground Sublease Term, as rent for the Ground Interest, the Ground Lessee
agrees to pay to the Ground Lessor rent equal to the fair market rental value of
the Ground Interest, such fair market rental value to be determined at the
expiration or termination of the Ground Sublease Term by an appraiser mutually
acceptable to the Ground Lessor and the Ground Lessee.
SECTION 3.2. TAXES AND ASSESSMENTS. From and after the expiration or
termination of the Ground Sublease Term and until the expiration or termination
of the Ground Lease Term, the Ground Lessee agrees to pay to the Ground Lessor
an amount equal to 50% of all Taxes and assessments, general or special, taxed,
charged, levied, assessed or imposed upon the Unit 1 Site and 25% of all Taxes
and assessments, general or special, taxed, charged, levied, assessed or imposed
upon the Common Facilities Site. Such payment shall be due upon demand by the
Ground Lessor, but in no event shall such amounts be due prior to the date such
Taxes and assessments are due and payable to a taxing or assessing Governmental
Entity.
4
<PAGE>
SECTION 4. SUBLEASE OF GROUND INTEREST
The Ground Lessee hereby subleases the Ground Interest to the Ground
Lessor, and the Ground Lessor hereby subleases the Ground Interest from the
Ground Lessee for a term commencing on the date of execution and delivery of
this Ground Lease and Sublease and expiring at 11:59 p.m. (New York City time)
on the date one day prior to the earlier of the Expiration Date or the date the
Ground Lease Term is earlier terminated pursuant to Section 10 of this Ground
Lease and Sublease (the "Ground Sublease Term").
SECTION 5. RENT FOR THE SUBLEASE OF THE GROUND INTEREST.
As rent for the sublease of the Ground Interest provided in Section 4,
the Ground Lessor agrees to pay to the Ground Lessee annual rent of $100 per
year, payable in advance on March 1 of each year during the Ground Sublease
Term. The Ground Lessor and the Ground Lessee agree that, during the Ground
Sublease Term, each payment of rent by the Ground Lessee for the Ground Interest
pursuant to Section 3.1 and each payment of rent by the Ground Lessor for the
sublease of the Ground Interest pursuant to this Section 5 shall be offset, and
no amounts shall be payable by the Ground Lessee or the Ground Lessor in respect
thereof.
SECTION 6. QUIET ENJOYMENT IN FAVOR OF THE GROUND LESSEE.
The Ground Lessor warrants that it has full right and authority to
lease the Ground Interest to the Ground Lessee pursuant to the terms of this
Ground Lease and Sublease and agrees that, notwithstanding any provision of any
other Operative Documents, it shall not through its own actions or inactions
interfere with or interrupt the quiet enjoyment of the use, operation and
possession by the Ground Lessee of the leasehold interest in the Ground Interest
subject to the terms and conditions hereof; PROVIDED, HOWEVER, that the Ground
Lessor makes no covenant with respect to the interruptions of such enjoyment,
use, operation or possession of the Ground Interest by the Indenture Trustee,
the Lenders or the Agent.
Notwithstanding anything in this Ground Lease and Sublease to the
contrary, the Ground Lessor shall have the right, without the Ground Lessee's
permission, without being deemed to breach the foregoing covenant of quiet
enjoyment, to (a) grant one or more rights of way and easements over or in
respect of any portion of the Clover Real Estate and (b) lease or convey one or
more portions of the Clover Real Estate; PROVIDED, HOWEVER, that (i) each such
grant, lease and conveyance shall be in accordance with the Clover Agreements
and (ii) no such grant, lease or conveyance shall either impair the use or
operation of, or the ability to maintain, improve or rebuild, the Clover Unit 1
as contemplated by the Clover Agreements and the Operative Documents or
materially reduce the value of Clover Unit 1.
5
<PAGE>
SECTION 7. QUIET ENJOYMENT IN FAVOR OF THE GROUND LESSOR.
The Ground Lessee warrants that it has full right and authority to
sublease the Ground Interest to the Ground Lessor pursuant to the terms of this
Ground Lease and Sublease and agrees that, notwithstanding any provision of any
other Operative Documents, it shall not through its own actions or inactions
interfere with or interrupt the quiet enjoyment of the use, operation and
possession by the Ground Lessor of the subleasehold interest in the Ground
Interest; PROVIDED, HOWEVER, that the Ground Lessee makes no covenant with
respect to the interruption of such enjoyment, use, operation and possession of
the Ground Interest arising from actions of the Indenture Trustee, any Lender or
the Agent.
SECTION 8. USE OF THE GROUND INTEREST BY GROUND LESSEE.
The Ground Lessee's rights hereunder to use the Ground Interest shall
be limited to the right to use the Ground Interest in connection with the use,
operation and maintenance of Clover Unit 1 and in accordance with the terms and
provisions of the Clover Agreements, which shall include the right to construct,
install, operate, use, repair and relocate and remove facilities and structures
on or under the Unit 1 Site and the Common Facilities Site, including buildings,
roads, paths, walkways, sanitary sewers, storm drains, water and gas mains,
waste disposal systems, electric power lines, telephone, television and
telecommunication lines, fire protection systems, coal, water, limestone and
other commodity transport systems, safety sensor and monitoring systems, fuel
lines and other utility lines and systems, all as reasonably necessary or
advisable for the commercial operation of Clover Unit 1, but in each case, only
to the extent permitted by the Clover Agreements.
SECTION 9. USE OF THE GROUND INTEREST BY GROUND LESSOR.
The Ground Lessor's rights hereunder to use the Ground Interest during
the Ground Sublease Term shall include the right to construct, install, operate,
use, repair and relocate facilities and structures on or under the Unit 1 Site
and the Common Facilities Site, including buildings, roads, paths, walkways,
sanitary sewers, storm drains, water and gas mains, waste disposal systems,
electric power lines, telephone, television and telecommunication lines, fire
protection systems, coal, water, limestone and other commodity transport
systems, safety sensor and monitoring systems, fuel lines and other utility
lines and systems, and any other uses as shall be permitted by the Clover
Agreements.
6
<PAGE>
SECTION 10. EARLY TERMINATION OF GROUND LEASE TERM.
The Ground Lease Term shall terminate prior to the scheduled expiration
of the Basic Ground Lease Term or Renewal Ground Lease Term, as the case may be,
(a) if the Ground Lessor shall exercise its option to terminate the Equipment
Operating Lease and the Foundation Operating Lease pursuant to Section 10, 13
or 18 of the Equipment Operating Lease and the Foundation Operating Lease or
(b) if the Ground Lessor exercises the Purchase Option pursuant to paragraph
(a) of Section 15.1 of the Equipment Operating Lease and the Foundation Purchase
Option pursuant to paragraph (a) of Section 15.1 of the Foundation Operating
Lease, (c) if the Ground Lessee exercises its right to terminate the
Equipment Head Lease and the Foundation Head Lease pursuant to Section 10.2
of each such lease or (d) 30 days after the Clover Unit 1 Generating Facility
shall be retired from service pursuant to Section 11.01(a) of the Clover
Operating Agreement and all decommissioning activities shall be concluded.
Upon satisfaction of the requirements of the relevant Sections of the
Equipment Operating Lease, the Foundation Operating Lease, the Equipment
Head Lease and the Foundation Head Lease, the Ground Lease Term shall terminate
without any action of any Person whatsoever, and the Ground Lessor and the
Ground Lessee agree to comply with the provisions of the applicable
Sections of the Equipment Operating Lease, the Foundation Operating Lease, the
Equipment Head Lease and the Foundation Head Lease in connection with such
termination. The Ground Lessee shall transfer to the Ground Lessor, by a
release or termination of the Ground Lease Interest to be prepared by the Ground
Lessor and in a form reasonably satisfactory to the Ground Lessee to be duly
recorded in the Halifax Clerk's Office all of the Ground Lessee's right, title
and interest in and to the Ground Interest.
SECTION 11. EARLY TERMINATION OF GROUND SUBLEASE TERM.
The Ground Sublease Term shall terminate prior to the scheduled
expiration of the Ground Sublease Term if (a) the Ground Lessor shall exercise
its option to terminate the Equipment Operating Lease and the Foundation
Operating Lease pursuant to Section 14 of each thereof or (b) the Equipment
Operating Lease and the Foundation Operating Lease shall be terminated pursuant
to Section 17 of each thereof. Upon satisfaction of the requirements of Section
14 of the Equipment Operating Lease and the Foundation Operating Lease or upon
termination of the Equipment Operating Lease and the Foundation Operating Lease
pursuant to Section 17 of each thereof, the Ground Sublease Term shall terminate
without any action of any Person whatsoever, provided, however, that,
notwithstanding the foregoing, in every instance, the Ground Sublease Term shall
end on the day prior to the expiration or earlier termination of the Ground
Lease Term. The Ground Lessor agrees to execute and deliver an instrument, in a
form reasonably satisfactory to the Ground Lessee, evidencing the termination of
the Ground Lessor's subleasehold interest in and to the Ground Interest for
recordation in the Halifax Clerk's Office.
7
<PAGE>
SECTION 12. LIENS
The Ground Lessee covenants and agrees that it will not create, incur,
assume or suffer to exist any Lessor's Liens or Owner Participant's Liens on the
Clover Real Estate and the Ground Interest other than the Lien of Leasehold
Mortgage.
SECTION 13. WAIVER OF PARTITION
As permitted by Section 56-90.1 of the Code of Virginia, each of the
Ground Lessor and the Ground Lessee, on its own behalf and on behalf of its
successors and assigns, hereby waives any right, whether pursuant to statute or
common law, to partition the Clover Real Estate, or any interest or portion
thereof, and such waiver will continue in effect until the earlier of (a)
termination of the Clover Ownership Agreement pursuant to Section 16.01 of the
Clover Ownership Agreement and Clover Operating Agreement pursuant to Section
14.01 of the Clover Operating Agreement in accordance with their terms or (b)
December 31, 2089. Each of the Ground Lessor and the Ground Lessee agrees not to
commence during such period any action of any kind seeking any form of partition
with respect thereto. Each of the Ground Lessor and the Ground Lessee agrees to
incorporate this waiver in all deeds, deeds of trust, and instruments of
conveyance relating to the Clover Real Estate (or any interest or portion
thereof), whether delivered at the Closing or thereafter.
SECTION 14. SECURITY FOR GROUND LESSEE'S OBLIGATION TO THE LENDERS.
In order to secure all amounts payable by, and all obligations to be
performed by, the Ground Lessee under the Leasehold Mortgage, the Ground Lessee
has the right to grant a Lien by the Leasehold Mortgage to the Trustees for the
benefit of the Agent and the ratable benefit of the Lenders on all of the Ground
Lessee's right, title and interest in and to the Ground Interest. The Ground
Lessor hereby consents to the grant of such Lien and acknowledges receipt of
copies of the Leasehold Mortgage, it being understood that such consent shall
not affect any requirement or the absence of any requirement for any consent
under any other circumstances. Unless and until the Ground Lessor shall have
received written notice from the Agent that the Lien of the Leasehold Mortgage
has been released, the Agent and the Trustees under the Leasehold Mortgage shall
have the rights of the Ground Lessee under this Ground Lease and Sublease to the
extent set forth in and subject in each case to the exceptions set forth in the
Leasehold Mortgage.
8
<PAGE>
SECTION 15. NONMERGER
The remainder in the Ground Interest conveyed by this Ground Lease and
Sublease shall not merge into the interest in the Ground Interest conveyed by
the Ground Lease and Sublease even if such remainder and such interest are at
any time vested in or held by the same person or entity, but this Ground Lease
and Sublease shall nonetheless remain in full force and effect in accordance
with its terms notwithstanding such vesting or holding.
SECTION 16. MISCELLANEOUS
SECTION 16.1. AMENDMENTS AND WAIVERS. No term, covenant, agreement or
condition of this Ground Lease and Sublease may be terminated, amended or
compliance therewith waived (either generally or in a particular instance,
retroactively or prospectively) except by an instrument or instruments in
writing executed by each party hereto.
SECTION 16.2. NOTICES. Unless otherwise expressly specified or
permitted by the terms hereof, all communications and notices provided for
herein to a party hereto shall be in writing or by a telecommunications device
capable of creating a written record, and any such notice shall become effective
(a) upon personal delivery thereof, including, without limitation, by overnight
mail or courier service, (b) in the case of notice by United States mail,
certified or registered, postage prepaid, return receipt requested, upon receipt
thereof, or (c) in the case of notice by such a telecommunications device, upon
transmission thereof, provided such transmission is promptly confirmed by either
of the methods set forth in clauses (a) or (b) above, in each case addressed to
such party at its address set forth below or at such other address as such party
may from time to time designate by written notice to the other party hereto:
9
<PAGE>
If to the Ground Lessor:
Old Dominion Electric Cooperative
Innsbrook Corporate Center
4201 Dominion Boulevard
Glen Allen, Virginia 23060
Facsimile No.: (804) 747-3742
Telephone No.: (804) 747-0592
Attention: Vice President of Accounting and Financing
If to the Ground Lessee:
State Street Bank and Trust Company
Two International Place, 4th Floor
Boston, Massachusetts 02110
Facsimile No.: (617) 664-5371
Telephone No.: (617) 664-5610
Attention: Manager - Corporate Trust
A copy of all communications and notices provided for herein shall be sent by
the party giving such communication or notice to Virginia Power at:
Virginia Electric and Power Company
P.O. Box 26666
Richmond, Virginia 23261
Attention: President
SECTION 16.3. SURVIVAL. All warranties, representations, indemnities
and covenants made by either party hereto, herein or in any certificate or other
instrument delivered by either such party or on the behalf of such party under
this Ground Lease and Sublease, shall be considered to have been relied upon by
the other party hereto and shall survive the consummation of the transactions
contemplated hereby on the Closing Date regardless of any investigation made by
either party or on behalf of either party.
SECTION 16.4. SUCCESSORS AND ASSIGNS. (a) This Ground Lease and
Sublease shall be binding upon and shall inure to the benefit of, and shall be
enforceable by, the parties hereto and their respective successors and assigns
as permitted by and in accordance with the terms hereof. Each time a successor
Owner Trustee is appointed in accordance with the terms of the Trust Agreement
and Section 5.5 of the Participation Agreement, such successor Owner Trustee
10
<PAGE>
shall, without further act, succeed to all rights, duties, immunities, and
obligations of the predecessor Owner Trustee hereunder and the predecessor Owner
Trustee shall be released from all further duties and obligations hereunder, all
without the necessity of any consent or approval by the Ground Lessor and
without in any way altering the terms and conditions of this Ground Lease and
Sublease or the rights and obligations of the Ground Lessor or the Ground Lessee
hereunder. The Ground Lessee shall, at its expense, upon receipt of written
notice of the appointment of a successor Owner Trustee under the Trust
Agreement, promptly make such modifications and changes to reflect such
appointment as shall be reasonably requested by such successor Owner Trustee in
any instruments relating to this Ground Lease and Sublease, all in form and
substance reasonably satisfactory to such successor Owner Trustee.
(b) Except as expressly provided herein or in the Operative Documents,
neither party hereto may assign its interests herein without the consent of the
other party hereto.
SECTION 16.5. BUSINESS DAY. Notwithstanding anything herein to the
contrary, if the date on which any payment is to be made pursuant to this Ground
Lease and Sublease is not a Business Day, the payment otherwise payable on such
date shall be payable on the next succeeding Business Day with the same force
and effect as if made on such scheduled date and (PROVIDED such payment is made
on such succeeding Business Day) no interest shall accrue on the amount of such
payment from and after such scheduled date to the time of such payment on such
next succeeding Business Day.
SECTION 16.6. GOVERNING LAW. THIS GROUND LEASE AND SUBLEASE SHALL
BE IN ALL RESPECTS GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE COMMONWEALTH OF VIRGINIA INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
SECTION 16.7. SEVERABILITY. Whenever possible, each provision of this
Ground Lease and Sublease shall be interpreted in such manner as to be effective
and valid under Applicable Law, but if any provision of this Ground Lease and
Sublease shall be prohibited by or invalid under Applicable Law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions
of this Ground Lease and Sublease.
SECTION 16.8. COUNTERPARTS. This Ground Lease and Sublease may be
executed in any number of counterparts, each executed counterpart constituting
an original but all together only one instrument.
SECTION 16.9. HEADINGS AND TABLE OF CONTENTS. The headings of the
sections of this Ground Lease and Sublease and the Table of Contents are
inserted for purposes of convenience only and shall not be construed to affect
the meaning or construction of any of the provisions hereof.
11
<PAGE>
SECTION 16.10. LIMITATIONS OF LIABILITY. It is expressly understood and
agreed by and between the parties hereto and their respective successors and
permitted assigns, that all representations, warranties and undertakings of the
Ground Lessee hereunder shall be binding upon the Ground Lessee only in its
capacity as Owner Trustee under the Trust Agreement, and neither the Ground
Lessee in its individual capacity nor any past, present or future Affiliate,
partner, officer, director, any owner, shareholder, agent or employee of it or
in any thereof or of any partner thereof or their legal representatives,
successors or assigns shall be liable for any breach thereof; and all Persons
having any claim against the Ground Lessee by reason of the transactions
contemplated hereby shall look only to the Trust Estate for payment or
satisfaction thereof.
SECTION 16.11. FURTHER ASSURANCES. Each party hereto will promptly and
duly execute and deliver such further documents to make such further assurances
for and take such further action reasonably requested by any party to whom such
first party is obligated, all as may be reasonably necessary to carry out more
effectively the intent and purpose of this Ground Lease and Sublease.
SECTION 16.12. EFFECTIVENESS OF GROUND LEASE AND SUBLEASE. This Ground
Lease and Sublease has been dated as of the date first above written for
convenience only. This Ground Lease and Sublease shall be effective on the date
of execution and delivery by each of the Ground Lessee and the Ground Lessor.
12
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Ground Lease and
Sublease to be duly executed and delivered by their respective officers
thereunto duly authorized.
OLD DOMINION ELECTRIC COOPERATIVE,
a wholesale power supply cooperative
organized under the laws of the
Commonwealth of Virginia as
Ground Lessor
By:_____________________________________ [Seal]
Name:
Title:
Date:
STATE STREET BANK AND TRUST COMPANY,
a state chartered trust company
organized under the laws of the
Commonwealth of Massachusetts,
not in its individual capacity,
but solely as Owner Trustee
under the Trust Agreement, as
Ground Lessee
By:_____________________________________ [Seal]
Name:
Title:
Date:
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
The foregoing instrument was acknowledged before me this __ day of
_______, ____, by ________________ as ______________ of Old Dominion Electric
Cooperative, a wholesale power supply cooperative organized under the laws of
the Commonwealth of Virginia, on behalf of said cooperative.
----------------------------------
Name:
Notary Public
(Notarial Seal)
My Commission expires: _________________________
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
The foregoing instrument was acknowledged before me this __ day of
_______, _____, by _______________ as ______________ of State Street Bank and
Trust Company, a state chartered trust company organized under the laws of the
Commonwealth of Massachusetts, as Owner Trustee on behalf of said corporation.
----------------------------------
Name:
Notary Public
(Notarial Seal)
My Commission expires: _______________________
<PAGE>
APPENDIX A
TO
GROUND LEASE
AND SUBLEASE
DEFINITIONS
<PAGE>
SCHEDULE 1
TO
GROUND LEASE
AND SUBLEASE
DESCRIPTION OF THE CLOVER REAL ESTATE
All that certain parcel of land belonging, lying and being in the Roanoke
Magisterial district of Halifax County, Virginia and all appurtenances thereto
belonging, and more particularly described as follows:
AND BEING a portion of the same land and appurtenances acquired by Old Dominion
Electric Cooperative ("Old Dominion") as tenant in common with Virginia Electric
and Power Company ("Virginia Power") by deeds which are recorded in the Halifax
Clerk's Office as follows:
<TABLE>
<CAPTION>
Grantors Date of Deed Deed Book Page Number
___________ ____________ _________ ___________
<S> <C>
Clover Project Corp. May 30, 1990 550 465
Kenneth R. Wilborne, et al. October 1, 1990 556 367
William D. Gravitt, et al. July 3, 1991 570 8
William R. Watkins, et al. March 14, 1991 561 353
Walter Lacks, et al. July 24, 1991 569 844
Burlington Industries October 23, 1991 570 13
B. F. Blount, et al. May 22, 1992 579 412
Norfolk Southern Railway June 9, 1992 579 771
Company
</TABLE>
A-1
<PAGE>
LESS AND EXCEPT, however, those certain parcels of land conveyed by Old Dominion
and Virginia Power by deeds which are recorded in the Halifax Clerk's Office as
follows:
<TABLE>
<CAPTION>
Grantees Date of Deed Deed Book Page Number
- - -------- ------------ --------- -----------
<S> <C>
William D. Gravitt, et al. October 7, 1991 570 10
Commonwealth of Virginia June 23, 1992 580 576
Commonwealth of Virginia December 1, 1994 632 57
Commonwealth of Virginia June 1, 1995 632 255
</TABLE>
SUBJECT, however, to all existing exceptions, reservations, easements,
conditions, restrictions, covenants, agreements, limitations and waivers of
record that may apply to the foregoing parcel of land.
A-2
<PAGE>
SCHEDULE 2
TO
GROUND LEASE
AND SUBLEASE
DESCRIPTION OF THE UNIT 1 SITE
ALL those two certain parcels of land lying and being in Roanoke Magisterial
district of Halifax County, Virginia, with all appurtenances thereunto
belonging, being those portions of the Clover Real Estate which are outlined and
marked on the Clover Power Station Plat as Parcel I and Parcel II of the Unit 1
Site.
B-1
<PAGE>
SCHEDULE 3
TO
GROUND LEASE
AND SUBLEASE
DESCRIPTION OF THE UNIT 2 SITE
ALL those certain parcels of land lying and being in Roanoke Magisterial
district of Halifax County, Virginia, with all appurtenances thereunto
belonging, being those portions of the Clover Real Estate which are outlined and
marked on the Clover Power Station Plat as Parcel I and Parcel II of the Unit 2
Site.
C-1
<PAGE>
SCHEDULE 4
TO
GROUND LEASE
AND SUBLEASE
DESCRIPTION OF COMMON FACILITIES SITE
ALL that certain parcel of land lying and being in Roanoke Magisterial district
of Halifax County, Virginia, with all appurtenances thereunto belonging,
outlined and marked as Parcel "B" on the Clover Power Station Plat, LESS AND
EXCEPT those parcels of real estate outlined and marked on the Clover Power
Station Plat as Parcel I and Parcel II of the Unit 1 Site and Parcel I and II of
the Unit 2 Site.
D-1
CLOVER AGREEMENTS ASSIGNMENT AND
ASSUMPTION AGREEMENT
Dated as of February 29, 1996
between
OLD DOMINION ELECTRIC COOPERATIVE,
as Assignor
and
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity, but
solely as Owner Trustee,
as Assignee
CLOVER UNIT 1 GENERATING FACILITY
AND
COMMON FACILITIES
<PAGE>
CLOVER AGREEMENTS ASSIGNMENT AND ASSUMPTION AGREEMENT
This CLOVER AGREEMENTS ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as
of February 29, 1996 (this "Assignment and Assumption"), between OLD DOMINION
ELECTRIC COOPERATIVE, a wholesale power supply cooperative organized under the
laws of the Commonwealth of Virginia (the "Assignor"), and STATE STREET BANK
AND TRUST COMPANY, a state chartered trust company organized and operating
under the laws of the Commonwealth of Massachusetts, not in its individual
capacity, but solely as Owner Trustee under the Trust Agreement (the
"Assignee").
WHEREAS, the Clover Real Estate is more particularly described in
Schedule 1 and comprised of the Unit 1 Site described in Schedule 2, the Unit 2
Site described in Schedule 3, and the Common Facilities Site described in
Schedule 4, and certain other property, each such Schedule 1, Schedule 2,
Schedule 3, and Schedule 4 being attached to and made part of the form of the
Deed of Ground Lease and Sublease Agreement;
WHEREAS, Assignor and Virginia Power own the Clover Real Estate as
tenants-in- common;
WHEREAS, by the Clover Agreements, Assignor and Virginia Power
established their respective rights and obligations as tenants-in-common of the
Clover Real Estate and of all improvements thereafter to be constructed, and all
personal property thereafter to be situated, on the Clover Real Estate. Such
improvements and personal property owned by Assignor and Virginia Power as
tenants-in-common include, but are not limited to, (a) the Unit 1 Foundation
constructed on the Unit 1 Site, (b) the Unit 2 Foundation being constructed on
the Unit 2 Site, (c) the Common Facilities Foundation constructed on the Common
Facilities Site, (d) the Unit 1 Equipment situated on the Unit 1 Site, (e) the
Unit 2 Equipment being situated on the Unit 2 Site, and (f) the Common
Facilities Equipment situated on the Common Facilities Site;
WHEREAS, as tenants-in-common of such real and personal property, each
of Assignor and Virginia Power owns a 50% undivided interest in such real and
personal property, other than the Pollution Control Assets including the right
to nonexclusive possession of all such real and personal property, subject to
(a) the rights of the other to nonexclusive possession of all such real and
personal property and (b) the terms and conditions of the Clover Agreements;
WHEREAS, by the Option Agreement which is recorded in the Halifax
Clerk's Office, Assignor granted and conveyed to the Assignee, its successors
and assigns, the right and option to lease the Ground Interest from Assignor,
subject to the Assignee's agreement to sublease the Ground Interest
simultaneously back to Assignor upon the terms and conditions of the Option
Agreement if the Assignee exercises such option;
WHEREAS, Assignor has leased to Assignee (a) the Foundation Interest by
the Foundation Head Lease and (b) the Equipment Interest by the Equipment Head
Lease;
<PAGE>
WHEREAS, by the Foundation Operating Lease, Assignee will lease the
Foundation Interest back to Assignor upon a term which shall end prior to the
expiration of the term of the Foundation Head Lease;
WHEREAS, by the Equipment Operating Lease, Assignee will lease the
Equipment Interest back to Assignor upon a term which shall end prior to the
expiration of the term of the Head Lease;
WHEREAS, although Assignor and Assignee intend that the Foundation
Interest at all times and in all respects be and remain personal property under
Virginia law, they have recorded the Foundation Head Lease, and will record the
Foundation Operating Lease, in the Halifax Clerk's Office in order to satisfy
the conditions of Section 55-96 of the Code of Virginia 1950, as amended, in the
event that the Foundation Interest is deemed to be real estate or an interest in
real estate for purposes of such Section 55-96. The Equipment Head Lease and the
Equipment Operating Lease are not to be recorded; and
WHEREAS, upon the leasing or other conveyance by Assignor to the Unit 2
Parties of the foundation and the equipment in connection with Clover Unit 2,
each of Assignee (on the one hand) and the Unit 2 Parties (on the other hand)
shall share equally all of those rights, and shall be subject equally to having
all of those responsibilities undertaken, which are imposed upon Assignor with
respect to the Common Facilities Site, the Common Facilities Foundation, and the
Common Facilities Equipment, as (a) tenant-in-common with Virginia Power of such
property, and (b) a party to the Clover Agreements.
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Assignment and Assumption and not
otherwise defined herein shall have the respective meanings specified in
Appendix A to the Participation Agreement, dated as of February 29, 1996, among
the Assignor, the Assignee, First Union National Bank of Florida and
Utrecht-America Finance Co. All references to sections herein are to sections of
this Assignment and Assumption unless otherwise indicated and the words
"herein", "hereof" and "hereunder" and other words of similar import refer to
this Assignment and Assumption as a whole and not to any particular section or
other subdivision.
Where any provision in this Assignment and Assumption refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
2
<PAGE>
SECTION 2. ASSIGNMENT OF ASSIGNED CLOVER INTERESTS TO ASSIGNEE.
Assignor hereby assigns the Assigned Clover Interests to the Assignee.
The assignment effected by this Section 2 shall become effective on and as of
the Closing Date and shall terminate on the expiration or earlier termination of
the Equipment Head Lease Term and the Foundation Head Lease Term, as
contemplated by Section 6 hereof.
SECTION 3. ASSUMPTION BY ASSIGNEE.
SECTION 3.1 ASSUMPTION OF LIABILITIES. Assignee hereby assumes, and
agrees to perform any and all liabilities and obligations of the Assignor
incurred with respect to the Assigned Clover Interests assigned pursuant to
Section 2. This assumption shall be effective on and as of the Closing Date and
shall terminate (except with respect to any liability or obligation which has
accrued after the Closing Date and prior to such termination) on the expiration
or earlier termination of the Equipment Head Lease Term and the Foundation Head
Lease Term.
SECTION 3.2 TAXES AND ASSESSMENTS. From and after the expiration or
termination of the Term of the Equipment Operating Lease and the Foundation
Operating Lease, the Assignee agrees to pay to the Assignor an amount equal to
50% of all Taxes and assessments, general or special, taxed, charged, levied,
assessed or imposed upon the Clover Unit 1 Generating Facility and 25% of all
Taxes and assessments, general or special, taxed, charged, levied, assessed or
imposed upon the Common Facilities in each case, to the extent such amounts are
not paid by the Assignee pursuant to Section 3.1 above. Such payment shall be
due upon demand by the Assignor, but in no event shall such amounts be due prior
to the date such Taxes and assessments are due and payable to a taxing or
assessing Governmental Entity. This Section 3.2 shall terminate (except with
respect to any tax or assessment which have accrued after the expiration or
termination of the Term of the Equipment Operating Lease and the Foundation
Operating Lease and prior to such termination) on the expiration or earlier
termination of the Equipment Head Lease Term and Foundation Head Lease Term.
SECTION 4. REASSIGNMENT OF ASSIGNED CLOVER INTERESTS TO ASSIGNOR.
Assignee hereby reassigns to Assignor all right, title, and interest of
Assignee in the Assigned Clover Interests assigned to the Assignee pursuant to
Section 2 hereof. This assignment shall become effective on and as of the
Closing Date and shall terminate upon the expiration or earlier termination of
the Term of the Equipment Operating Lease and the Foundation Operating Lease, as
contemplated by Section 6 hereof.
3
<PAGE>
SECTION 5. ASSUMPTION BY ASSIGNOR.
Assignor hereby assumes and agrees to perform any and all liabilities
and obligations of the Assignee incurred with respect to the Assigned Clover
Interests resulting from the Assignee's assumption of the liabilities and
obligations of the Assignor in Section 3 including the payments referred to in
Section 3.2. This assumption shall become effective on and as of the Closing
Date and shall terminate (except with respect to any liability or obligation
which has accrued after the Closing Date and prior to such termination) upon the
expiration or termination of the Term of the Equipment Operating Lease and the
Foundation Operating Lease, as contemplated by Section 6 hereof.
SECTION 6. EARLY TERMINATION OF ASSIGNMENT AND ASSUMPTION
The assignment to the Assignee effected by Section 2 and the Assignee's
assumption effected by Section 3 shall terminate prior to the scheduled
expiration of the Equipment Head Lease Term and the Foundation Head Lease Term
if the Equipment Operating Lease and the Foundation Operating Lease are
terminated pursuant to Section 10, 13 or 18 of each thereof or if the Assignor
purchases the Equipment Interest and the Foundation Interest on the Expiration
Date pursuant to Section 15.2 of each thereof. Upon satisfaction of the
requirements of the relevant sections of the Equipment Operating Lease and the
Foundation Operating Lease, the assignment effected by Section 2 and the
assumption effected by Section 3 shall terminate without any action by any
Person whatsoever, and the Assignor and the Assignee shall comply with the
provisions of the applicable sections of the Equipment Operating Lease and the
Foundation Operating Lease in connection with such termination. The reassignment
to the Assignor effected by Section 4 and the Assignor's assumption effected by
Section 5 shall terminate prior to the Expiration Date if the Equipment
Operating Lease and the Foundation Operating Lease are terminated pursuant to
Section 10, 13, 14, 17 or 18 of each thereof or if the Assignor purchases the
Equipment Interest and the Foundation Interest on the Expiration Date pursuant
to Section 15.2 of each thereof. Upon satisfaction of the requirements of the
relevant sections of the Equipment Operating Lease and the Foundation Operating
Lease or termination of the Equipment Operating Lease or the Foundation
Operating Lease pursuant to Section 17 thereof, the assignment effected by
Section 4 and the assumption effected by Section 5 shall terminate without any
action by any Person whatsoever, and the Assignor and the Assignee shall comply
with the applicable provisions of the Equipment Operating Lease and the
Foundation Operating Lease in connection with such termination.
4
<PAGE>
SECTION 7. LIMITATIONS ON AMENDMENTS TO CLOVER AGREEMENTS.
The Assignor agrees that it will not, without the prior written consent
of the Assignee which consent may not be unreasonably withheld, supplement or
amend, or permit any supplement or amendment of, the Clover Ownership Agreement
or the Clover Operating Agreement, which supplement or amendment (a)
discriminates against the Equipment Interest or the Foundation Interest when
compared with other undivided interests of Old Dominion, Virginia Power or
others in the Clover Unit 1 or Clover Unit 2, (b) discriminates
against the beneficial ownership of the Equipment Interest or the Foundation
Interest in respect of the period subsequent to the Expiration Date when
compared with the period prior to the Expiration Date, (c) decreases the
Lessor's entitlement to Available Capacity from the Clover Unit 1 Generating
Facility except in connection with a reduction of the entire Available Capacity
of the Clover Unit 1 Generating Facility, (d) is entered into on or after the
Election Date, unless prior to entering such supplement or amendment the
Assignor shall have irrevocably elected the Purchase Option and the Foundation
Purchase Option, (e) except if required to operate or maintain Clover Unit 1 in
accordance with Applicable Law, individually or in the aggregate materially
changes the financial responsibilities or obligations of the Assignee, as the
owner of an "Ownership Interest" as such term is defined in the Clover Operating
Agreement or (f) impairs the ability or responsibility of the Clover Unit 1
Operator to operate Clover Unit 1 in accordance with Prudent Utility Practice or
interferes with the Clover Unit 1 Operator's unfettered access to the Real
Property.
SECTION 8. SECURITY FOR ASSIGNEE'S OBLIGATION TO THE LENDERS.
In order to secure all amounts payable by, and all obligations to be
performed by, Assignee under the Loan Agreement, Assignee has assigned in the
Loan Agreement to the Agent for its benefit and the ratable benefit of the
Lenders its rights under this Assignment and Assumption and granted security
interests in favor of the Agent in all of Assignee's right, title and interest
in and to the Lessor's Unit 1 Interest, including its interest in this
Assignment and Assumption (other than Excepted Payments and Excepted Rights).
Assignor hereby consents to such assignment and to the creation of such security
interests and acknowledges receipt of copies of the Loan Agreement, it being
understood that such consent shall not affect any requirement or the absence of
any requirement for any consent under any other circumstances. Assignor hereby
acknowledges receipt of due notice that Assignee's interest in this Assignment
and Assumption has been assigned to the Agent as security pursuant to the Loan
Agreement to the extent provided in the Loan Agreement. Unless and until
Assignor shall have received written notice from the Agent that the Lien of the
Loan Agreement and the Leasehold Mortgage has been discharged, the Agent shall
have the right to exercise the rights of Assignee under this Assignment and
Assumption to the extent set forth in and subject in each case to the exceptions
set forth in the Loan Agreement.
5
<PAGE>
SECTION 9. MISCELLANEOUS
SECTION 9.1 AMENDMENTS AND WAIVERS. No term, covenant, agreement or
condition of this Assignment and Assumption may be terminated, amended or
compliance therewith waived (either generally or in a particular instance,
retroactively or prospectively) except by an instrument or instruments in
writing executed by each party hereto.
SECTION 9.2 NOTICES. Unless otherwise expressly specified or permitted
by the terms hereof, all communications and notices provided for herein to a
party hereto shall be in writing or by a telecommunications device capable of
creating a written record, and any such notice shall become effective (a) upon
personal delivery thereof, including, without limitation, by overnight mail
or courier service, (b) in the case of notice by United States mail, certified
or registered, postage prepaid, return receipt requested, upon receipt
thereof, or (c) in the case of notice by such a telecommunications device, upon
transmission thereof, provided such transmission is promptly confirmed by
either of the methods set forth in clauses (a) or (b) above, in each case
addressed to such party at its address set forth below or at such other address
as such party may from time to time designate by written notice to the other
party hereto:
If to the Assignor:
Old Dominion Electric Cooperative
4201 Dominion Boulevard
Glen Allen, Virginia 23060
Facsimile No.: (804) 747-3742
Telephone No.: (804) 747-0592
Attention: Vice President of Accounting and Finance
If to the Assignee:
State Street Bank and Trust Company
Two International Place
Fourth Floor
Boston, Massachusetts 02110
Facsimile No.: (617) 664-5371
Telephone No.: (617) 664-5610
Attention: Manager - Corporate Trust
6
<PAGE>
with a copy to the Owner Participant:
First Union National Bank of Florida
301 South College Street, 20th Floor
Charlotte, North Carolina 28288-0658
Facsimile No.: (704) 374-4724
Telephone No.: (704) 374-3241
Attention: Leasing Group
A copy of all communications and notices provided for herein shall be sent by
the party giving such communication or notice to Virginia Power at:
Virginia Electric and Power Company
P.O. Box 26666
Richmond, Virginia 23261
Attention: President
SECTION 9.3 SURVIVAL. All warranties, representations, indemnities and
covenants made by either party hereto, herein or in any certificate or other
instrument delivered by either such party or on the behalf of either such party
under this Agreement, shall be considered to have been relied upon by the other
party hereto and shall survive the consummation of the transactions contemplated
hereby on the Closing Date regardless of any investigation made by either party
or on behalf of either party.
SECTION 9.4 SUCCESSORS AND ASSIGNS. (a) This Assignment and Assumption
shall be binding upon and shall inure to the benefit of, and shall be
enforceable by, the parties hereto and their respective successors and assigns
as permitted by and in accordance with the terms hereof. Each time a successor
Owner Trustee is appointed in accordance with the terms of the Trust Agreement
and Section 5.5 of the Participation Agreement, such successor Owner Trustee
shall, without further act, succeed to all rights, duties, immunities and
obligations of the predecessor Owner Trustee hereunder, and the predecessor
Owner Trustee shall be released from all further duties and obligations
hereunder, all without the necessity of any consent or approval by the Assignor
and without in any way altering the terms of this Assignment and Assumption or
the rights or obligations of the Assignee hereunder. The Assignor shall, at its
expense, upon receipt of written notice of the appointment of a successor Owner
Trustee under the Trust Agreement, promptly make such modifications and changes
to reflect such appointment as shall be reasonably requested by such successor
Owner Trustee in any instruments relating to this Assignment and Assumption, all
in form and substance reasonably satisfactory to such successor Owner Trustee.
(b) Except as expressly provided herein or in the other Operative
Documents, neither party hereto may assign its interests herein without the
consent of the other party hereto.
7
<PAGE>
SECTION 9.5 GOVERNING LAW. THIS ASSIGNMENT AND ASSUMPTION SHALL BE IN
ALL RESPECTS GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
SECTION 9.6 SEVERABILITY. Whenever possible, each provision of this
Assignment and Assumption shall be interpreted in such manner as to be effective
and valid under Applicable Law, but if any provision of this Assignment and
Assumption shall be prohibited by or invalid under Applicable Law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Assignment and Assumption.
SECTION 9.7 COUNTERPARTS. This Assignment and Assumption may be
executed in any number of counterparts, each executed counterpart constituting
an original but all together only one instrument.
SECTION 9.8 HEADINGS. The headings of the sections of this Assignment
and Assumption are inserted for purposes of convenience only and shall not be
construed to affect the meaning or construction of any of the provisions hereof.
SECTION 9.9 LIMITATIONS OF LIABILITY. It is expressly understood and
agreed by and between the Assignor and the Assignee and their respective
successors and permitted assigns, that all representations, warranties and
undertakings of the Assignee hereunder shall be binding upon the Assignee only
in its capacity as Owner Trustee under the Trust Agreement, and neither the
Assignee in its individual capacity nor any past, present or future Affiliate,
partner, officer, director, owner, shareholder, agent or employee of it or in
any thereof or of any partner thereof or their legal representatives, successors
or assigns shall be liable for any breach hereof; and, all Persons having any
claim against the Assignee by reason of the transactions contemplated hereby
shall look only to the Trust Estate for payment or satisfaction thereof.
SECTION 9.10 FURTHER ASSURANCES. Each party hereto will promptly and
duly execute and deliver such further documents to make such further assurances
for and take such further action reasonably requested by any party to whom such
first party is obligated, all as may be reasonably necessary to carry out more
effectively the intent and purpose of this Assignment and Assumption.
SECTION 9.11 EFFECTIVENESS OF ASSIGNMENT AND ASSUMPTION. This
Assignment and Assumption has been dated as of the date first above written for
convenience only. This Assignment and Assumption shall be effective on the date
of execution and delivery by each of the Assignee and the Assignor.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Assumption to be duly executed by their respective officers
thereunto duly authorized.
OLD DOMINION ELECTRIC COOPERATIVE,
as Assignor
By:/s/ DANIEL M. WALKER
----------------------------------------
Daniel M. Walker
Vice President of Accounting and Finance
Date: March 1, 1996
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement, as Assignee
By:/s/ E. DECKER ADAMS
----------------------------------------
E. Decker Adams
Vice President
Date: March 1, 1996
<PAGE>
=======================================
DEPOSIT AGREEMENT
Dated as of February 29, 1996
between
OLD DOMINION ELECTRIC COOPERATIVE,
as Depositor
and
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH,
as Issuer
=======================================
<PAGE>
DEPOSIT AGREEMENT
THIS DEPOSIT AGREEMENT is dated as of February 29, 1996
Between
(1) OLD DOMINION ELECTRIC COOPERATIVE (hereinafter the "Depositor"); and
(2) COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH (hereinafter the "Issuer").
WHEREAS, subject to the terms and conditions of this Agreement, the Depositor
wishes to place the Deposit with the Issuer which is prepared to accept the
Deposit on the terms set forth herein.
NOW THIS AGREEMENT WITNESSETH as follows:
1. DEFINITIONS
1.1 In this Agreement (including the Exhibits) all terms used but not
defined herein shall have the same meaning as defined in Appendix A to the
Participation Agreement (as defined below). The following terms have, unless
the context otherwise requires, the respective meanings shown opposite them:
"Certificate of Deposit" The Certificate of Deposit in the form of
Exhibit C to this Agreement.
"Deposit" The aggregate of the cash deposited by the
Depositor on the Closing Date in the amount
of $26,651,308.91 with the Issuer on the
terms and conditions set forth in this
Agreement, together with interest accrued
thereon upon the terms set forth herein. The
Depositor's interest in the Deposit shall be
evidenced by the Certificate of Deposit.
"Interest Payment Date" Each date specified on Exhibit A, as
modified by any amendment hereto.
"Participation Agreement" The Participation Agreement, dated as of
February 29, 1996 among (i) the Depositor,
(ii) First Union National Bank of Florida, a
national banking association, (iii)
Utrecht-America Finance Co., a Delaware
corporation, and (iv) State Street Bank and
Trust Company, a state-chartered trust
company organized and existing under the
laws of the Commonwealth of Massachusetts,
<PAGE>
not in its individual capacity, except as
otherwise expressly provided therein, but
solely as Owner Trustee under the Trust
Agreement, dated as of February 29, 1996,
between the Owner Trustee and First Union
National Bank of Florida (the "Trust
Agreement").
"Pledgee" State Street Bank and Trust Company, a
state-chartered trust company organized and
existing under the laws of the Commonwealth
of Massachusetts, not in its individual
capacity, but solely as Owner Trustee under
the Trust Agreement (the "Owner Trustee").
"Repayment Amount" As to any Repayment Date, the amount to be
paid hereunder as specified in Exhibit B,
as the same may from time to time be
amended.
"Repayment Date" Each of the dates specified in Exhibit B
hereto.
1.2 References in this Agreement to any agreement or document shall include
references to that agreement or document as amended, varied or
supplemented from time to time.
1.3 Clause headings are used herein for ease of reference only.
2. THE DEPOSIT, ETC.
2.1 The Depositor shall deposit on the Closing Date with the Issuer the
Deposit, and the Issuer shall accept such Deposit. The Depositor's
interest in the Deposit will be evidenced by the Certificate of
Deposit.
2.2 Interest shall accrue on the Deposit at the rate of 7.2% per annum in
respect of the amount from time to time on deposit. Interest shall be
calculated on the basis of a year of 360 days and 12 months of 30 days
each. To the extent set forth in Exhibit A under the column "Interest
Added to Deposit" with respect to any Interest Payment Date, an amount
equal to the portion of the interest which accrued on the Deposit from
the preceding Interest Payment Date shown on Exhibit A shall not be
paid on such Interest Payment Date but shall increase the amount of the
Deposit and the amount of interest actually payable on such Interest
Payment Date shall be the amount on Exhibit A under the column
"Interest Payable."
2.3 The Issuer shall repay the Deposit in accordance with Clause 3.1.
2.4 The Depositor and the Issuer acknowledge and agree that (i) the
Depositor's rights hereunder have been pledged to the Pledgee pursuant
to the Deposit Pledge Agreement, dated as of February 29, 1996, between
2
<PAGE>
the Depositor and the Pledgee and re-pledged by the Pledgee to the
Agent, acting on behalf and for the benefit of itself and the Lenders,
pursuant to the Loan Agreement, (ii) so long as any such pledge is in
effect, the Deposit and the Certificate of Deposit shall be under the
sole dominion and control of the relevant pledgee and (iii) so long as
any such pledge is in effect the Issuer shall not make any payments on
account of the Deposit to the Depositor unless it shall have received
notice from the Agent in the form of Exhibit D hereto.
3. REPAYMENT
3.1 The Deposit shall be paid in whole or in part on each Repayment Date in
the amount of the Repayment Amount for such Repayment Date as set forth
in Exhibit B. The Deposit shall also be paid in whole, upon demand by
the Depositor (or the relevant pledgee), on the date on which (i) the
Depositor is or becomes obligated to pay Termination Value or Fair
Market Sales Value under the Equipment Operating Lease or the
Foundation Operating Lease, the Walk Away Payment, the Foundation Walk
Away Payment, the Purchase Option Price or the Foundation Purchase
Option Price or any payment computed by reference thereto, (ii) the
Equipment Operating Lease or the Foundation Operating Lease is
terminated for whatever reason (including without limitation in
consequence of an Event of Default thereunder), (iii) any prepayment of
the Series B Loan Certificates, or (iv) the Owner Trustee or the Owner
Participant exercises its right to purchase the Loan Certificates under
Section 4.8 of the Loan Agreement. In addition, in the event that an
illegality of the character described in Clause 5.1 cannot be avoided
as contemplated therein within a 30-day period after the Issuer's
notification to the Depositor, the Issuer shall repay the Deposit.
4. PAYMENTS
4.1 To the maximum extent permitted under Applicable Law, all payments to
be made by the Issuer hereunder shall be paid without deduction,
set-off or counterclaim of any kind whatsoever, nor shall the Issuer be
entitled to exercise in respect of the Deposit any right of set-off,
combination, merger or consolidation and the Issuer hereby expressly
waives any and all such rights and any comparable rights, with respect
to any amounts owed to the Issuer by the Depositor, the Pledgee or any
other Person.
4.2 Any Repayment Amounts and, to the extent permitted by law, interest not
paid when due shall bear interest at the Overdue Rate for the period
during which the same shall be overdue.
For purposes of this Agreement, the Issuer acknowledges that it has
opened and will maintain an account in the name of the Depositor, which
account shall be under the sole dominion and control of the Agent,
acting on behalf and for the benefit of itself and the Lenders.
3
<PAGE>
All payments by the Issuer hereunder shall be made prior to 12:00 noon,
New York City time, on each payment date specified in Clauses 2.2 and
3.1 hereof. All payments are to be made to the Depositor, subject to
the receipt of the notice contemplated by Section 2.4.
4.3 If any payment from the Deposit is required to be made on a day which
is not a Business Day, such a payment shall be due the next succeeding
Business Day with the same effect as if paid on the date when due and,
if such payment is paid on such succeeding Business Day, without any
additional interest on such amount.
5. ILLEGALITY
5.1 If it shall become (or become apparent that it will become) unlawful
for the Issuer to make any repayment of the Deposit or to accept or
continue to hold the Deposit in accordance with the terms of this
Agreement, then the Issuer shall, upon becoming aware of any of the
aforesaid circumstances, notify the Depositor, the Pledgee and the
Agent, and the Issuer and the Depositor in consultation with the
Pledgee and the Agent shall co-operate to take such action as may be
reasonably available to each such Person to avoid or mitigate the
imposition of any such illegality, it being expressly understood and
agreed that the Issuer shall not be obligated to take any action
adverse to its interests nor incur any material cost or expense not
indemnified by the Depositor to the reasonable satisfaction of the
Issuer.
6. ASSIGNMENT
6.1 This Agreement, including the Certificate of Deposit, shall inure to
the benefit of and be binding upon each of the parties hereto and their
respective successors and permitted assigns. No interest in the Deposit
may be conveyed or created without transfer of the Certificate of
Deposit.
6.2 The rights and duties of either party under this Agreement in respect
of any Deposit or otherwise, may not be assigned, transferred, pledged
or re-pledged in whole or in part (save only as provided by the Deposit
Pledge Agreement and the Loan Agreement or pursuant to any enforcement
thereof), without the prior written consent of the other party and then
only by transfer of the Certificate of Deposit.
7. REPRESENTATIONS AND WARRANTIES OF THE ISSUER
As of the date hereof, the Issuer represents and warrants to
the Depositor, the Pledgee and the Agent that:
(a) Organization; Authority. The Issuer is the New York Branch
of a Dutch bank organized, validly existing and in good standing and
has the full corporate power and authority to conduct its business as
presently conducted, to own or hold under lease its properties and to
execute, deliver and perform this Agreement.
4
<PAGE>
(b) Due Authorization. The execution, delivery and performance
of this Agreement have been duly authorized by all necessary corporate
action on the part of the Issuer and do not require approval or consent
of, or notice to, any trustee or holders of any indebtedness or
obligations of the Issuer or any lessor under any lease to the Issuer.
(c) Conflict. Neither the execution, delivery or performance
by the Issuer of this Agreement nor the consummation or performance by
the Issuer of the transactions contemplated hereby will conflict with
or result in any violation of, constitute a default under, or result in
the creation of any Lien upon any property of the Issuer under, any
term of the certificate of incorporation or other charter documents or
By-laws of the Issuer or any agreement, mortgage, contract, indenture,
lease or other instrument, or any Applicable Law, by which the Issuer
or its properties or assets are bound.
(d) Legal, Valid and Binding Obligations. This Agreement has
been duly executed and delivered by the Issuer and constitutes the
legal, valid and binding obligation of the Issuer enforceable against
the Issuer in accordance with its terms except as such enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium, and
other similar laws affecting the rights of creditors generally and by
general principles of equity regardless of whether enforcement is
pursuant to a proceeding in equity or at law.
(e) Governmental Consents. Neither the execution or delivery
by the Issuer of this Agreement nor the consummation of any of the
transactions contemplated hereby by the Issuer requires the consent or
approval of, the giving of notice to, the registration with, or the
taking of any other action in respect of, any United States federal,
state or other governmental authority or agency, including any judicial
body.
(f) Business. The Issuer is a financial institution
regularly engaged in issuing Dollar deposits.
8. MISCELLANEOUS
8.1 Any provision hereof 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 or affecting the validity or enforceability
of such provision in any other jurisdiction. Any such prohibited or
unenforceable provision shall be replaced by a provision coming as
close as possible to the economic intent of the prohibited or
unenforceable provision.
8.2 Unless otherwise expressly specified or permitted by the terms hereof,
all communications and notices provided for herein shall be in writing
or by a telecommunications device capable of creating a written record,
and any such notice shall become effective (a) upon personal delivery
thereof, including, without limitation, by overnight mail or courier
service, (b) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt
4
<PAGE>
thereof, or (c) in the case of notice by such a telecommunications
device, upon transmission thereof, provided such transmission is
promptly confirmed by either of the methods set forth in clauses (a)
or (b) above, in each case addressed to each party hereto at its
address set forth below or, in the case of any such party hereto, at
such other address as such party may from time to time designate
by written notice to the other parties hereto:
If to the Agent:
Utrecht-America Finance Co.
245 Park Avenue
New York, New York 10167
Attention: Corporate Finance Department
Telefax: (212) 922-0969
If to the Issuer:
Cooperatieve Centrale Raiffeisen-Boerenleenbank
B.A., "Rabobank Nederland", New York Branch
245 Park Avenue
New York, New York 10167
Attention: Corporate Finance Department
Telefax: (212) 922-0969
If to the Depositor:
Old Dominion Electric Cooperative
P. O. Box 2310
Glen Allen, Virginia 23058-2310
Attention: Vice President of Accounting and Finance
Telefax: (804) 747-3742
If to the Pledgee:
State Street Bank and Trust Company
Two International Place
Fourth Floor
Boston, Massachusetts 02110
Attention: Manager - Corporate Trust
Telefax: (617) 664-5371
6
<PAGE>
with a copy to the Owner Participant:
First Union National Bank of Florida
1 First Union Center
Charlotte, North Carolina 28288-0739
Attention: Mr. Michael L. Taylor
Vice President
Telefax: (704) 374-4724
In the case of notice by facsimile such notice shall be effective upon
receipt which shall be deemed to occur when the addressee receives the
document in legible form and, in the case of a notice dispatched by
post (registered postage prepaid), on the fifth Business Day after
posting.
8.3 This Agreement may be executed in any number of counterparts and any
single counterpart or set of counterparts signed, in either case, by
each of the parties hereto shall be deemed to constitute a full and
original agreement for all purposes.
8.4 THIS AGREEMENT IS GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE.
7
<PAGE>
IN WITNESS WHEREOF, the Depositor and the Issuer have caused
this Deposit Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized.
OLD DOMINION ELECTRIC
COOPERATIVE,
as Depositor
By:/s/ DANIEL M. WALKER
--------------------
Daniel M. Walker
Vice President of Accounting and Finance
Date: March 1, 1996
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND", NEW YORK BRANCH,
as Issuer
By: /s/ CHRIS G. KORTLANDT /s/ J.W. DEN BAAS
---------------------- ----------------
Name: Chris G. Kortlandt Name: J.W. Den Baas
Title: Vice President Title: Managing Director
Date: March 1, 1996
<PAGE>
EXHIBIT A
TO
Deposit Agreement
-----------------
INTEREST PAYMENT SCHEDULE
-------------------------
Interest Interest Interest Added
Payment Date Accrued to Deposit Interest Payable
------------ -------- -------------- ----------------
28-Feb-97 1,902,903.46 1,902,903.46 0.00
5-Jan-98 1,746,643.50 40,076.36 1,706,567.14
5-Jan-99 2,064,497.50 526,923.64 1,537,573.86
5-Jan-00 2,102,436.00 255,150.00 1,847,286.00
5-Jan-01 2,120,806.80 255,150.00 1,865,656.80
5-Jan-02 2,139,177.60 226,800.00 1,912,377.60
5-Jan-03 2,155,507.20 292,005.00 1,863,502.20
5-Jan-04 2,176,531.56 104,895.00 2,071,636.56
5-Jan-05 2,184,084.00 141,750.00 2,042,334.00
5-Jan-06 2,194,290.00 141,750.00 2,052,540.00
5-Jan-07 2,204,496.00 0.00 2,204,496.00
5-Jan-08 2,202,667.86 0.00 2,202,667.86
5-Jan-09 2,199,478.55 0.00 2,199,478.55
5-Jan-10 2,196,050.04 0.00 2,196,050.04
5-Jan-11 2,192,364.39 0.00 2,192,364.39
5-Jan-12 2,188,402.32 0.00 2,188,402.32
5-Jan-13 2,184,143.10 0.00 2,184,143.10
5-Jan-14 2,179,564.43 0.00 2,179,564.43
5-Jan-15 2,174,642.36 0.00 2,174,642.36
5-Jan-16 2,169,351.14 0.00 2,169,351.14
5-Jan-17 2,163,663.07 0.00 2,163,663.07
5-Jan-18 2,157,548.41 0.00 2,157,548.41
<PAGE>
EXHIBIT B
TO
Deposit Agreement
-----------------
REPAYMENT AMOUNTS
-----------------
Repayment Date Repayment Amount
-------------- ----------------
28-Feb-97 28,633,500.01
5-Jan-98 28,673,576.37
5-Jan-99 29,200,500.01
5-Jan-00 29,455,650.01
5-Jan-01 29,710,800.01
5-Jan-02 29,937,600.01
5-Jan-03 30,229,605.01
5-Jan-04 30,334,500.01
5-Jan-05 30,476,250.01
5-Jan-06 30,618,000.01
5-Jan-07 30,592,609.13
5-Jan-08 30,548,313.15
5-Jan-09 30,500,694.98
5-Jan-10 30,449,505.44
5-Jan-11 30,394,476.69
5-Jan-12 30,335,320.78
5-Jan-13 30,271,728.18
5-Jan-14 30,203,366.13
5-Jan-15 30,129,876.93
5-Jan-16 30,050,876.04
5-Jan-17 29,965,950.08
5-Jan-18 0.00
<PAGE>
EXHIBIT C
TO
DEPOSIT AGREEMENT
CERTIFICATE OF DEPOSIT
U.S. $26,651,308.91 Maturity Date: January 5, 2018
This Certificate of Deposit evidences the obligation of Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch (the
"Issuer") to pay to the order of Old Dominion Electric Cooperative (the
"Depositor") the sum identified above, together with interest thereon at the
rate of 7.20% per annum, calculated on the basis of a year of 360 days and 12
months of 30 days each (the "Deposit"), in accordance with the provisions of the
Deposit Agreement, dated as of February 29, 1996 between the Depositor and the
Issuer (the "Deposit Agreement").
The Deposit shall be repaid by the Issuer to the Depositor in accordance with
the provisions of the Deposit Agreement, including the notice required by
Section 2.4 of the Deposit Agreement. Reference is made to the Deposit Agreement
for provisions concerning the prepayment of the Deposit prior to its maturity.
No interest in the Deposit, including any pledge or creation of a security
interest therein, may be effected without conveyance of this Certificate.
This Certificate shall be governed by and construed in accordance with the laws
of the State of New York.
IN WITNESS WHEREOF, the Issuer has caused this Certificate to be executed in its
corporate name, by one of its duly authorized officers.
Cooperatieve Centrale Raiffeisen-Boerenleenbank
B.A., "Rabobank Nederland"
-------------------------------------------
Name:
Title:
TRANSFER OF THIS CERTIFICATE IS SUBJECT TO RESTRICTIONS SET FORTH IN THE DEPOSIT
AGREEMENT REFERRED TO ABOVE.
C-1
<PAGE>
EXHIBIT D
TO
DEPOSIT AGREEMENT
NOTICE OF PAYMENT OF RENT AND FOUNDATION RENT
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.,
"Rabobank Nederland", New York Branch
245 Park Avenue
New York, New York 10167
Attention: Corporate Finance Department
Telefax: (212) 922-0969
The undersigned, as pledgee of the Deposit and Certificate of
Deposit (as each of such terms is defined in Appendix A to the Participation
Agreement defined in the Deposit Agreement dated as of February 29, 1996 between
Old Dominion Electric Cooperative and the addressee of this notice (the "Deposit
Agreement")), hereby advises you that there is no reason to withhold any payment
due on the date of this notice in respect of interest or Repayment Amounts under
the Deposit Agreement.
UTRECHT-AMERICA FINANCE CO.
------------------------------------
Title:
Date:
D-1
DEPOSIT PLEDGE AGREEMENT
Dated as of February 29, 1996
between
OLD DOMINION ELECTRIC COOPERATIVE,
as Pledgor
and
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity, but
solely as Owner Trustee, as Pledgee
CLOVER UNIT 1 GENERATING FACILITY
AND
COMMON FACILITIES
<PAGE>
DEPOSIT PLEDGE AGREEMENT
This DEPOSIT PLEDGE AGREEMENT, dated as of February 29, 1996
(this "Agreement"), between OLD DOMINION ELECTRIC COOPERATIVE, a wholesale power
supply cooperative, organized under the laws of the Commonwealth of Virginia, as
pledgor (the "Pledgor"), and STATE STREET BANK AND TRUST COMPANY, a
state-chartered trust Company organized and existing under the laws of the
Commonwealth of Massachusetts not in its individual capacity, but solely as
Owner Trustee under the Trust Agreement, as pledgee (the "Pledgee").
WHEREAS, the Pledgor, the Pledgee, First Union National Bank
of Florida and Utrecht-America Finance Co., have entered into a Participation
Agreement dated as of February 29, 1996 (the "Participation Agreement");
WHEREAS, the Pledgor, as lessee, and the Pledgee, as lessor
have entered into the Equipment Operating Lease and the Foundation Operating
Lease; and
WHEREAS, the Pledgor has deposited the Deposit with
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New
York Branch (the "Issuer"), pursuant to the Deposit Agreement, dated as of
February 29, 1996 (the "Deposit Agreement"), which Deposit is evidenced by the
Certificate of Deposit and which Deposit the Pledgor is willing to pledge to the
Pledgee to secure its obligations under the Equipment Operating Lease and the
Foundation Operating Lease.
NOW, THEREFORE, in consideration of the mutual agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINED TERMS.
Capitalized terms used in this Agreement and not otherwise defined
herein shall have the respective meanings specified in Appendix A to the
Participation Agreement. All references to sections herein are to sections of
this Agreement unless otherwise indicated and the words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section or other subdivision.
SECTION 2. PLEDGE.
SECTION 2.1 PLEDGE OF DEPOSIT AND DEPOSIT AGREEMENT. To secure the
Secured Claims (defined below), the Pledgor hereby transfers, assigns and
pledges to the Pledgee for its benefit all of the Pledgor's right, title and
interest in the Deposit (including the Certificate of Deposit) and the Deposit
Agreement, including, without limitation, the right of the Depositor to receive
all amounts payable under the Deposit Agreement, to give or receive any notice,
warrant, waiver or approval or take any other action under the Deposit Agreement
(the
<PAGE>
"Pledged Collateral"). The Pledged Collateral will also include the Certificate
of Deposit and any other instruments or certificates evidencing the Deposit and
all interest, cash, instruments or other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for, any or all
of the Deposit and all proceeds of the Deposit. The Pledgee acknowledges receipt
of the Deposit and the Certificate of Deposit in accordance with this Agreement
and agrees to hold such Deposit and the Certificate of Deposit in accordance
with the terms of this Agreement.
SECTION 3. NETHERLANDS LAW.
To the extent that a court would hold that Netherlands law is
applicable to the assignment, transfer or pledge of the Pledged Collateral or to
the creation of another security right in the Pledged Collateral and that such
assignment, transfer, and pledge or other security right is invalid and/or
unenforceable in The Netherlands, the Pledgor hereby creates a right of pledge
("vestigt een pandrecht") in favor of Pledgee, pursuant to articles 3:94,
paragraph 1 and 3:236, paragraph 2, Netherlands Civil Code on the rights of
Pledgor against the Issuer, as such rights may exist or come to exist hereafter
against the Issuer pursuant to or under the Pledged Collateral as security for
the Secured Claims, which right of pledge the Pledgee hereby accepts.
In accordance with article 3:242, Netherlands Civil Code, the Pledgee
is hereby irrevocably authorized to repledge ("herverpanden") the Pledged
Collateral in favor of the Agent, acting on behalf of and for the benefit of
itself and the Lenders, to secure the Pledgee's obligations to the Agent and the
Lenders mentioned in the Granting Clause of the Loan Agreement.
SECTION 4. SECURED CLAIMS.
The purpose of this pledge is to secure the Pledgor's obligation
(whether now or hereafter existing) under the Equipment Operating Lease and the
Foundation Operating Lease to pay Basic Rent, Foundation Basic Rent, the
Purchase Option Price, the Foundation Purchase Option Price, Walk Away Payment
and Foundation Walk Away Payment, Termination Value, and amounts defined by
reference to Termination Value under the Equipment Operating Lease and
Foundation Operating Lease. All of the foregoing obligations shall be referred
to as "Secured Claims."
Without limiting the generality of the foregoing, this Agreement
secures the payment of all amount that constitute part of the Secured Claims and
would be payable to the Pledgee under the Equipment Operating Lease and the
Foundation Operating Lease but for the fact that they are unenforceable or not
allowable due to (a) the existence of a bankruptcy, insolvency, reorganization,
arrangement or moratorium involving the Pledgor or (b) other laws relating to or
effecting the enforcement of creditors' rights generally against the Pledgor.
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<PAGE>
SECTION 5 REMEDIES
SECTION 5.1 RIGHTS OF THE PLEDGEE. Upon the happening and during the
occurrence of any Event of Default under the Equipment Operating Lease or the
Foundation Operating Lease, the Pledgee may (in addition to any other actions
permitted under the other Operative Documents or by statute or at law or in
equity) exercise any rights or remedies granted hereunder. The Pledgee may
enforce the right of pledge created hereby to the fullest extent possible in
accordance with, and shall be entitled to all rights, remedies and benefits
afforded to pledgees under, the laws of the State of New York.
SECTION 5.2 FILINGS. The Pledgor agrees that it shall, at its own
expense, execute and deliver all financing statements necessary to perfect the
Pledgee's and any assignee's interest in the Pledged Collateral or any
assignment or other document reasonably requested by the Pledgee or the Agent to
perfect, protect, enforce, or otherwise give effect to the Pledgee's rights and
remedies hereunder.
SECTION 5.3 ATTORNEY-IN-FACT. If the Pledgor is unable or unwilling to
sign such assignments, financing statements or other documents and to file
financing statements or other public notices or recording with the appropriate
authorities, as and when reasonably requested by counsel to the Pledgee, the
Pledgor hereby authorizes the Pledgee to sign as the Pledgor's true and lawful
agent and attorney-in-fact any such assignments, financing statement or other
documents and to make any such filings.
SECTION 5.4 THE PLEDGEE'S DUTIES. The powers conferred on the Pledgee
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the safe
custody of the Pledged Collateral (including the Certificate of Deposit) in its
possession and the accounting for monies actually received by it hereunder, the
Pledgee shall have no duty as to the Pledged Collateral or other matters
relative to the Pledged Collateral, whether or not the Pledgee has or is deemed
to have knowledge of such matters, or as to the taking of any necessary steps to
preserve rights against any parties or any other rights pertaining to the
Pledged Collateral; PROVIDED, HOWEVER, that, if delivery or presentment of the
Pledged Collateral to any other Person is required in connection with any
distribution in respect of the Pledged Collateral, the Pledgee shall, at the
Pledgor's expense, cooperate to effect such delivery. The Pledgee shall be
deemed to have exercised reasonable care in the custody and preservation of the
Pledged Collateral in its possession if such Pledged Collateral is accorded
treatment substantially equal to that which Pledgee accords similar property.
SECTION 6. RELEASE OF PLEDGED COLLATERAL; DISCHARGE.
SECTION 6.1 RELEASE OF PLEDGED COLLATERAL. Provided no Payment Default
or Event of Default under the Equipment Operating Lease or the Foundation
Operating Lease shall have occurred and be continuing, the Pledgee agrees that,
subject to the provisions of Section 2.4 of the Deposit Agreement, the Pledgor
shall be entitled to receive (a) all amounts of interest payable by the Issuer
of the Deposit pursuant to Section 2.2 of the Deposit Agreement on the
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<PAGE>
dates and in the amounts paid under the Deposit Agreement, (b) all amounts
payable by the Issuer in respect of a prepayment of the Deposit in consequence
of a termination of the Equipment Operating Lease and the Foundation Operating
Lease pursuant to Section 10, 13, 14, 15, 17 or 18 of each thereof, PROVIDED
that the Pledgor shall have discharged all of its obligations under such
Sections of the Equipment Operating Lease and the Foundation Operating Lease to
pay all amounts of Termination Value or amounts defined by reference thereto
thereunder, and (c) all amounts payable by the Issuer in respect of any other
repayment of the Deposit pursuant to the Deposit Agreement, PROVIDED that the
Pledgor shall have discharged all of its obligations under the Operative
Documents in respect of such prepayment.
Section 6.2 DISCHARGE. The Pledgee agrees that when the Secured Claims
shall have been fully paid and discharged, the Pledgee, at the written request
and cost of the Pledgor, shall immediately confirm the release of the Pledged
Collateral of any pledge, Lien and security interest created pursuant to this
Agreement and of all claims that the Pledgee may have hereunder.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
SECTION 7.1 HOLDER. The Pledgor represents and warrants that it is the
legal and beneficial owner of the Deposit (including the Certificate of Deposit)
and that the Deposit (including the Certificate of Deposit) is not subject to
any pledge, lien or security interest or any other right of any third party,
except as provided by the Operative Documents.
SECTION 7.2 RIGHTS IN THE DEPOSIT. The Pledgor represents and warrants
that assuming that the Issuer maintains possession control over the Deposit, the
pledge of the Deposit under this Agreement vest in the Pledgee a valid pledge of
in the Deposit as contemplated by this Agreement.
SECTION 8. COVENANT OF THE PLEDGOR.
The Pledgor shall not, without the prior written consent of the Pledgee
(a) sell, assign, pledge, or otherwise dispose of, or grant any option with
respect to, the Deposit (including the Certificate of Deposit) or (b) create or
permit any Lien upon or with respect to the Deposit (including the Certificate
of Deposit) or any other Pledged Collateral, except for the pledge created
hereby.
SECTION 9. MISCELLANEOUS.
SECTION 9.1. AMENDMENTS AND WAIVERS. No term, covenant, agreement or
condition of this Agreement may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by the
party against whom enforcement of such change is
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<PAGE>
sought.
SECTION 9.2. NOTICES. Unless otherwise expressly specified or permitted
by the terms hereof, all communications and notices provided for herein to a
party hereto shall be in writing or by a telecommunications device capable of
creating a written record, and any such notice shall become effective (a) upon
personal delivery thereof, including, without limitation, by overnight mail or
courier service, (b) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt thereof, or
(c) in the case of notice by such a telecommunications device, upon transmission
thereof, provided such transmission is promptly confirmed by either of the
methods set forth in clauses (a) or (b) above, in each case addressed to such
party at its address set forth below or at such other address as such party may
from time to time designate by written notice to the other parties hereto:
If to the Pledgor:
Old Dominion Electric Cooperative
4201 Dominion Boulevard
Glen Allen, Virginia 23060
Facsimile No.: (804) 747-3742
Telephone No.: (804) 747-0592
Attention: Vice President of Accounting and Finance
If to the Pledgee:
State Street Bank and Trust Company
Two International Place
Fourth Floor
Boston, Massachusetts 02110
Facsimile No.: (617) 664-5371
Telephone No.: (617) 664-5610
Attention: Manager - Corporate Trust
with a copy to the Agent:
Utrecht-America Finance Co.
245 Park Avenue
New York, New York 10167
Facsimile No.: (212) 922-0969
Telephone No.: (212)
Attention: Corporate Finance Department
5
<PAGE>
SECTION 9.3. SURVIVAL. All warranties, representations, indemnities and
covenants made by either party hereto, herein or in any certificate or other
instrument delivered by either such party or on the behalf of either such party
under this Agreement shall be considered to have been relied upon by the other
party hereto and shall survive the consummation of the transactions contemplated
hereby on the Closing Date regardless of any investigation made by either party
or on behalf of either party.
SECTION 9.4. SUCCESSORS AND ASSIGNS. (a) This Agreement shall be
binding upon and shall inure to the benefit of, and shall be enforceable by, the
parties hereto and their respective successors and assigns as permitted by and
in accordance with the terms hereof. Each time a successor Owner Trustee is
appointed in accordance with the terms of the Trust Agreement and Section 5.5 of
the Participation Agreement, such successor Owner Trustee shall, without further
act, succeed to all rights, duties, immunities and obligations of the
predecessor Owner Trustee hereunder, and the predecessor Owner Trustee shall be
released from all further duties and obligations hereunder, all without the
necessity of any consent or approval by the Pledgor and without in any way
altering the terms of this Agreement or the rights or obligations of the Pledgee
hereunder. The Pledgor shall, at its expense (except as otherwise provided in
Section 5.5 of the Participation Agreement), upon receipt of written notice of
the appointment of a successor Owner Trustee under the Trust Agreement, promptly
make such modifications and changes to reflect such appointment as shall be
reasonably requested by such successor Owner Trustee in any instruments relating
to this Agreement, all in form and substance reasonably satisfactory to such
successor Owner Trustee.
(b) Except as expressly provided herein or in any other
Operative Document, the Pledgor may not assign its interests herein without the
consent of the Pledgee. Except as expressly provided in the Operative Documents,
the Pledgee may not assign its interests herein during the Term of the Equipment
Operating Lease without the consent of the Pledgor.
SECTION 9.5. BUSINESS DAY. Notwithstanding anything herein to the
contrary, if the date on which any payment is to be made pursuant to this
Agreement is not a Business Day, the payment otherwise payable on such date
shall be payable on the next succeeding Business Day with the same force and
effect as if made on such scheduled date and (provided such payment is made on
such succeeding Business Day) no interest shall accrue on the amount of such
payment from and after such scheduled date to the time of such payment on such
next succeeding Business Day.
SECTION 9.6. GOVERNING LAW. THIS AGREEMENT SHALL BE IN ALL RESPECTS
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
SECTION 9.7. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Agreement shall be prohibited by or
invalid under Applicable Law, such
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<PAGE>
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Agreement.
SECTION 9.8. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together only one Agreement.
SECTION 9.9. HEADINGS. The headings of the sections of this Agreement
are inserted for purposes of convenience only and shall not be construed to
affect the meaning or construction of any of the provisions hereof.
SECTION 9.10. FURTHER ASSURANCES. Each party hereto will promptly and
duly execute and deliver such further documents to make such further assurances
for and take such further action reasonably requested by any party to whom such
first party is obligated, all as may be reasonably necessary to carry out more
effectively the intent and purpose of this Agreement.
SECTION 9.11. LIMITATIONS OF LIABILITY. It is expressly understood and
agreed by and between the Pledgor and the Pledgee and their respective
successors and permitted assigns, that all representations, warranties and
undertakings of the Pledgee hereunder shall be binding upon the Pledgee only in
its capacity as Owner Trustee under the Trust Agreement, and neither the Pledgee
in its individual capacity nor any past, present or future Affiliate, partner,
officer, director, owner, shareholder, agent or employee of it or in any thereof
or of any partner thereof or their legal representatives, successors or assigns
shall be liable for any breach thereof; and all Persons having any claim against
the Pledgee by reason of the transactions contemplated hereby shall look only to
the Trust Estate for payment or satisfaction thereof.
SECTION 9.12. EFFECTIVENESS OF AGREEMENT. This Agreement has been dated
as of the date first above written for convenience only. This Agreement shall be
effective on the date of execution and delivery by each of the Pledgee and the
Pledgor.
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<PAGE>
IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused
this Deposit Pledge Agreement to be duly executed and delivered by their
respective officers thereunto duly authorized.
OLD DOMINION ELECTRIC COOPERATIVE,
as Pledgor
By:/s/ DANIEL M. WALKER
-----------------------------------
Daniel M. Walker
Vice President of Accounting
and Finance
Date: March 1, 1996
STATE STREET BANK AND TRUST
COMPANY, not in its
individual capacity, but
solely as Owner Trustee
under the Trust Agreement,
as Pledgee
By:/s/ E. DECKER ADAMS
-----------------------------------
E. Decker Adams
Vice President
Date: March 1, 1996
Acknowledged by:
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND", NEW YORK BRANCH
By:/s/ CHRIS G. KORTLANDT /s/ J.W. DEN BAAS
---------------------------- ------------------------
Name: Name: J.W. Den Baas
Title: Vice President Title: Managing Director
Date: March 1, 1996 Date: March 1, 1996
PAYMENT UNDERTAKING AGREEMENT
Dated as of February 29, 1996
between
OLD DOMINION ELECTRIC COOPERATIVE,
and
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH
CLOVER UNIT 1 GENERATING FACILITY
AND
COMMON FACILITIES
<PAGE>
PAYMENT UNDERTAKING AGREEMENT
This PAYMENT UNDERTAKING AGREEMENT, dated as of February 29,
1996 (this "Agreement"), between OLD DOMINION ELECTRIC COOPERATIVE, a wholesale
power supply cooperative organized under the laws of the Commonwealth of
Virginia (herein together with its successors and assigns, called "Old
Dominion"), and COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", New York Branch (herein in such capacity, together with its
successors and assigns, called the "Bank").
WITNESSETH:
WHEREAS, Old Dominion is the Lessee under an Equipment
Operating Lease, dated as of February 29, 1996, with the Owner Trustee, and Old
Dominion is the Foundation Lessee under a Foundation Operating Lease, dated as
of February 29, 1996, with the Owner Trustee; and
WHEREAS, Old Dominion desires to arrange for another Person to
make the payments described herein in consideration for the payment by Old
Dominion of an amount, the Specified Sum, which is advantageous to Old Dominion,
and the Bank is willing to make such payments.
NOW, THEREFORE, in consideration of the foregoing and of the
payment of $600,000 to the Bank, the parties hereto agree as follows that:
1. DEFINITIONS
Capitalized terms used in this Agreement and not otherwise defined
herein shall have the respective meanings specified in Appendix A to the
Participation Agreement, dated as of February 29, 1996, among Old Dominion,
State Street Bank and Trust Company, First Union National Bank of Florida and
Utrecht-America Finance Co. All references to sections herein are to sections of
this Agreement unless otherwise indicated and the words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section or other subdivision.
Where any provision in this Agreement refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person.
<PAGE>
2. SPECIFIED SUM
.1. SPECIFIED SUM. Old Dominion will pay on the Closing Date the
Specified Sum to the Bank in immediately available funds at such account as the
Bank may specify in payment instructions to Old Dominion on or prior to the
Closing Date. Old Dominion acknowledges that payment of the Specified Sum is
absolute and unconditional and shall not be refundable to Old Dominion;
PROVIDED, HOWEVER, that Old Dominion shall be entitled to the payments as
provided herein.
SECTION 3. PAYMENTS
.1. SCHEDULED PAYMENTS. Subject to Section 3.2 and the Payment Instruction,
the Bank shall pay to Old Dominion on each Payment Undertaking Payment Date
set forth on Schedule A the Payment Amount specified on Schedule A hereto with
respect to such Payment Undertaking Payment Date.
.2. EARLY TERMINATION.
(a) So long as this Agreement is pledged to the Owner Trustee, as Lessor
under the Equipment Operating Lease and as Foundation Lessor under the
Foundation Operating Lease, pursuant to the Payment Undertaking Pledge
Agreement, the Bank shall, upon not less than two Business Days' prior notice
from Old Dominion, pay to Old Dominion on the Payment Undertaking Payment Date
(as set forth in such notice) that corresponds to a date specified in clauses
(i) through (ix) of this Section 3.2, the Early Termination Amount specified on
Schedule B hereto with respect to such Payment Undertaking Payment Date:
(i) on the applicable Termination Date on which the
Equipment Operating Lease and the Foundation Operating
Lease shall be terminated in the event the Equipment
Operating Lease and the Foundation Operating Lease shall
be terminated pursuant to the provisions of Section 10.2
of each thereof; or
(ii) on the applicable Termination Date on which the Equipment
Operating Lease and the Foundation Operating Lease shall
be terminated in the event the Equipment Operating Lease
and the Foundation Operating Lease shall be terminated
pursuant to the provisions of Section 13 of each thereof;
or
(iii) on the applicable Termination Date on which the Equipment
Operating Lease and the Foundation Operating Lease shall
be terminated in the event the Equipment Operating
Lease and the Foundation Operating Lease shall be
terminated pursuant to the provisions of Section 14 of
each thereof; or
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<PAGE>
(iv) on the date of any termination of the Equipment Operating
Lease and the Foundation Operating Lease pursuant to the
provisions of Section 17 of each thereof or the date upon
which Termination Value or an amount computed by
reference to Termination Value is payable under Section
17 of the Equipment Operating Lease and the Foundation
Operating Lease (unless such date is not a Payment
Undertaking Payment Date, in which case Early
Termination Amount shall be determined as of the Payment
Undertaking Payment Date immediately preceding such Payment
Undertaking Payment Date); or
(v) on the applicable Termination Date on which the
Equipment Operating Lease and the Foundation
Operating Lease shall be terminated in the event the
Equipment Operating Lease and the Foundation Operating
Lease shall be terminated pursuant to the provisions
of Section 18 of each thereof; or
(vi) on the Loan Refinancing Date on which the Series B Loan
Certificate shall be prepaid pursuant to Section
10.2(a) of the Participation Agreement and Section 2.10
of the Loan Agreement; or
(vii) on the Loan Refinancing Date on which the Loan
Certificates shall be prepaid pursuant to Section 10.3 of
the Participation Agreement and Section 2.10 of the Loan
Agreement; or
(viii) on the Payment Date on which the Owner Trustee or Owner
Participant shall purchase the Series A Loan Certificate
pursuant to Section 4.8 of the Loan Agreement; or
(ix) on the Termination Date on which the Payment Undertaking
Agreement shall be replaced with a Successor Payment
Undertaking Agreement or Acceptable Substitute Collateral
(as such terms are defined in Section 11A of the
Participation Agreement) pursuant to Section 11A of the
Participation Agreement.
If payment is made pursuant to clause (i), (ii), (iii), (iv), (v), (vi), (vii),
(viii) or (ix), then this Agreement shall terminate and no Payment Amount
payable on any Payment Undertaking Payment Date subsequent to such Payment
Undertaking Payment Date shall be required hereunder.
(b) The Early Termination Amount payable on any Payment
Undertaking Payment Date pursuant to Section 3.2(a) includes the Payment Amount
for such Payment Undertaking Payment Date.
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<PAGE>
(c) If not earlier repaid in full pursuant to the terms
hereof, the Bank shall pay to Old Dominion on the Final Payment Undertaking
Payment Date an amount equal to the amount specified in Schedule A hereto with
respect to such Date.
.3. ADJUSTMENT OF SCHEDULED PAYMENTS AND EARLY TERMINATION AMOUNTS. If the
interest rate on the Series A Loan Certificate shall be reset to the Reset
Rate in accordance with Section 2.12 of the Loan Agreement, the schedules
of Payment Amounts specified on Schedule A hereto and the schedules of Early
Termination Amounts specified on Schedule B hereto shall be adjusted for all
Payment Undertaking Payment Dates occurring on or after such date of reset to
reflect the Reset Rate in accordance with this Section 3.3. Following such
adjustments (i) each Payment Amount specified on Schedule A shall be equal to
principal and interest due and payable on the Series A Loan Certificate
bearing interest at the Reset Rate on the Payment Date corresponding to such
Payment Undertaking Payment Date and (ii) each Early Termination Amount
specified on Schedule B shall be equal to the sum of (1) the outstanding
principal amount of the Series A Loan Certificate on the Payment Date
corresponding to such Payment Undertaking Payment Date (after taking into
account any payment of principal on the Series A Loan Certificate on such
Payment Undertaking Payment Date) and (2) the Payment Amount for such Payment
Undertaking Payment Date reflecting interest on the Series A Loan certificate at
the Reset Rate. The Bank and Old Dominion agree to amend Schedules A and B to
this Agreement upon reset of the interest rate on the Series A Loan Certificate
to reflect the Reset Rate, but any adjustment to the Payment Amounts and Early
Termination Amounts shall be effective as of the date of resetting the interest
rate on the Series A Loan Certificate to the Reset Rate. Old Dominion agrees to
pay to the Bank a fee of $25,000 for each adjustment to Payment Amounts and
Early Termination amounts made pursuant to this Section 3.3.
.4. OVERDUE INTEREST. Any amount payable by the Bank hereunder which shall not
be paid when due shall bear interest at the Overdue Rate from the due date of
such amount until the date of its payment.
.5. NO OTHER PAYMENTS. Except as expressly provided in this Section 3 and in
any Payment Instruction, the Bank shall have no obligation to make any payment
hereunder.
.6. TIME, PLACE AND METHOD OF MAKING PAYMENTS. All payments required to be
made hereunder shall be made to Old Dominion in immediately available
funds prior to 10:00 A.M., New York City time, on the date on which such payment
is due at Old Dominion's address for payments specified in the Participation
Agreement (or at such other place as Old Dominion may designate in
writing to the Bank by two Business Days' notice prior to the date on which
such payment is due); provided that so long as Old Dominion's rights under
this Agreement are pledged to the Owner Trustee pursuant to the Payment
Undertaking Pledge Agreement and re-pledged to the Agent pursuant to the Loan
Agreement, all payments required to be made hereunder shall be made in
accordance with the Payment Instruction. This Agreement relates to an
international financing transaction in accordance with which the specification
of U.S. Dollars is of the essence, and U.S.Dollars shall be the currency of
account in the case of all obligations under this Agreement and the Payment
Instruction.
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<PAGE>
.7. PAYMENT UPON WRITTEN NOTICE.
(a) Scheduled payments under Section 3.1 shall be made by the Bank
without further act or notice by any Person. Other payments hereunder
(except pursuant to Section 3.2(c)) shall be made only upon two Business Days'
prior written notice from Old Dominion, which written notice shall be
accompanied by an Officer's Certificate of Old Dominion stating that the
circumstances requiring such payment hereunder have occurred and including a
sufficient description of such circumstances as shall satisfactorily evidence
the requirements of the subject payment to be made hereunder.
(b) So long as Old Dominion's rights under this Agreement are pledged
to the Owner Trustee pursuant to the Payment Undertaking Pledge
Agreement or are re-pledged to the Agent pursuant to the Loan Agreement, a
notice under clause 3.2 to be effective must be endorsed with the consent of the
Owner Trustee and so long as the Liens of the Loan Agreement and the Leasehold
Mortgage have not been discharged, the Agent.
(c) The Bank agrees that, in the event that it has received such a
notice under clause 3.2 with any necessary consents, it will pay the Early
Termination Amount in accordance with the relevant notice without offset,
deduction or withholding and without regard to any conflicting payment
instruction delivered by any other Person.
(d) The Bank shall rely on any such notice under Section 3.2 purported
to be signed by a Responsible Officer of the appropriate signatory without
inquiry as to whether the matters stated in it are true.
.8. USE OF PAYMENTS.
It is understood and agreed that the Bank will have no
responsibility or obligation with respect to the applications of monies upon
their payment to the Person entitled thereto pursuant to the provisions hereof.
.9. UNCONDITIONAL OBLIGATION; NO SET-OFF. The obligation of the Bank to make
each payment in accordance with the terms and conditions of this Agreement,
constitutes an absolute and unconditional obligation of the Bank, and
the Bank agrees to pay the same without counterclaim, abrogation, set-off
or other reduction by the Bank against amounts otherwise due and owing to the
Bank or any Affiliate thereof by Old Dominion or any other Person; and the
Bank hereby expressly waives any rights it may have under Applicable Law or
otherwise to any set-off or other reduction by the Bank against amounts
otherwise owed to the Bank or its Affiliates by Old Dominion or any other
Person.
.10. PAYMENT INSTRUCTIONS.
(a) The parties agree that concurrently with execution of this Agreement
Old Dominion has given the Payment Instruction to the Bank.
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<PAGE>
(b) So long as Old Dominion's rights under this Agreement are pledged
to the Owner Trustee pursuant to the Payment Undertaking Pledge
Agreement and re-pledged to the Agent pursuant to the Loan Agreement, the
Payment Instruction is irrevocable, unless the prior consent of Old Dominion,
the Owner Trustee and the Agent is given, and all payments under this Agreement
must be paid in accordance with the Payment Instructions.
(c) The Bank must, upon receipt of the Payment Instruction, execute
and give to each of Old Dominion, the Owner Trustee and the Agent its
Acknowledgment in the form attached.
(d) The Bank shall maintain its obligations hereunder at its New York
Branch and shall not delegate its obligations hereunder (including, but not
limited to, the delegation to any other branch) without the consent of Old
Dominion and any permitted assignee and, so long as Old Dominion's rights under
this Agreement are pledged to the Owner Trustee pursuant to the Payment
Undertaking Pledge Agreement and to the Agent pursuant to the Loan Agreement,
the Owner Trustee and, so long as the Liens of the Loan Agreement and the
Leasehold Mortgage have not been discharged, the Agent.
.11. PAYMENT OF BREAK COSTS. If the Bank shall pay Old Dominion the Early
Termination Amount pursuant to clause (ix) of paragraph (a) of Section 3.2, Old
Dominion shall pay all Break Costs associated with such early Termination.
4. REPRESENTATIONS OF THE BANK
The Bank represents and warrants that:
(a) Organization. It has full power and authority to conduct
its business as presently conducted, to own or hold under lease its properties
and to execute, deliver and perform this Agreement and the Acknowledgment.
(b) Due Authorization. Its execution, delivery and performance
of this Agreement and the Acknowledgment have been duly authorized by all
necessary action on its part and do not require any stockholder approval, or any
approval or consent of, or notice to, any trustee or holder of any indebtedness
or obligation of the Bank.
(c) Legal, Valid and Binding Obligations. Each of this
Agreement and the Acknowledgment has been duly executed and delivered by it and
constitutes its legal, valid and binding obligation enforceable against it in
accordance with its terms except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium, and other similar laws
affecting the rights of creditors generally and by general principles of equity
regardless of whether enforcement is pursuant to a proceeding in equity or at
law.
5. PLEDGE AND RE-PLEDGE
6
<PAGE>
The parties acknowledge that this Agreement will be pledged by Old
Dominion to the Owner Trustee pursuant to the Payment Undertaking Pledge
Agreement to secure its obligations under the Equipment Operating Lease and the
Foundation Operating Lease and that the Owner Trustee will re-pledge such rights
to the Agent under the Loan Agreement as security for the Owner Trustee's
obligations under the Series A Loan Certificate. The Bank hereby consents to
such pledge and re-pledge. So long as this Agreement is subject to the Liens of
the Payment Undertaking Pledge Agreement or the Loan Agreement, Old Dominion may
not transfer, assign, pledge or otherwise dispose of, or grant any option,
participation or interest in, with respect to or measured by, its rights as a
beneficiary under this Agreement to any Person other than the Owner Trustee
pursuant to the Payment Undertaking Pledge Agreement or the Agent
pursuant to the Loan Agreement. Without limiting the generality of the
foregoing, any payment in accordance with the provisions hereof and the
Payment Instruction by the Bank shall release the Bank from any further
liability hereunder to Old Dominion or the Owner Trustee in respect of such
payment.
6. MISCELLANEOUS
.1. AMENDMENTS AND WAIVERS. No term, covenant, agreement or condition of
this Agreement may be terminated, amended or compliance therewith waived
(either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto.
.2. NOTICES. Unless otherwise expressly specified or permitted by the terms
hereof, all communications and notices provided for herein shall be in writing
or by a telecommunications device capable of creating a written record, and
any such notice shall become effective (a) upon personal delivery thereof,
including, without limitation, by overnight mail or courier service, (b) in
the case of notice by United States mail, certified or registered,
postage prepaid, return receipt requested, upon receipt thereof, or (c) in the
case of notice by such a telecommunications device, upon transmission thereof,
provided such transmission is promptly confirmed by either of the methods set
forth in clauses (a) or (b) above, in each case addressed to each party hereto
at its address set forth below or, in the case of either party hereto, at such
other address as such party may from time to time designate by written notice to
the other party hereto:
7
<PAGE>
If to Old Dominion:
Old Dominion Electric Cooperative
4201 Dominion Boulevard
Glen Allen, Virginia 23060
Facsimile No.: (804) 747-3742
Telephone No.: (804) 747-0592
Attention: Vice President of Accounting and Finance
If to the Bank:
Rabobank Nederland
c/o Utrecht-America Finance Co.
245 Park Avenue
New York, New York 10167-0062
Facsimile No.: (212) 916-7880
Telephone No.: (212) 916-7864
Attention: General Counsel's Office
.3. SURVIVAL. All warranties, representations, indemnities and covenants made
by either party hereto, herein or in any certificate or other instrument
delivered by either such party or on the behalf of such party under this
Agreement, shall be considered to have been relied upon by the other party
hereto and shall survive the consummation of the transactions contemplated
hereby on the Closing Date regardless of any investigation made by either party
or on behalf of such party.
.4. SUCCESSORS AND ASSIGNS. (a) This Agreement shall be binding upon and
shall inure to the benefit of, and shall be enforceable by, the parties hereto
and their respective successors and assigns as permitted by and in accordance
with the terms hereof.
(b) Except as expressly provided herein or in the other Operative
Documents, neither party hereto may assign its interests herein without the
consent of the other party hereto.
.5. BUSINESS DAY. Notwithstanding anything herein or in any other Operative
Document to the contrary, if the date on which any payment is to be made
pursuant to this Agreement is not a Business Day, the payment otherwise payable
on such date shall be payable on the next succeeding Business Day with the
same force and effect as if made on such scheduled date and (PROVIDED such
payment is made on such succeeding Business Day) no interest shall accrue on the
amount of such payment from and after such scheduled date to the time of such
payment on such next succeeding Business Day.
.6. GOVERNING LAW. THIS AGREEMENT SHALL BE IN ALL RESPECTS GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
8
<PAGE>
.7. SEVERABILITY. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under Applicable Law,
but if any provision of this Agreement shall be prohibited by or invalid under
Applicable Law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
.8. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each executed counterpart constituting an original but all together only one
instrument.
.9. HEADINGS. The headings of the sections of this Agreement are inserted for
purposes of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
.10. FURTHER ASSURANCES. Each party hereto will promptly and duly execute and
deliver such further documents to make such further assurances for and take
such further action reasonably requested by any party to whom such first party
is obligated, all as may be reasonably necessary to carry out more effectively
the intent and purpose of this Agreement and the other Operative Documents.
.11. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
Each of the parties hereto (i) hereby irrevocably submits to the
nonexclusive jurisdiction of the Supreme Court of the State of New York, New
York County (without prejudice to the rights of any party to remove to the
United States District Court for the Southern District of New York) and to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York, for the purposes of any suit, action or other proceeding
arising out of this Agreement, the Payment Instruction, or the subject matter
hereof or thereof or any of the transactions contemplated hereby or thereby
brought by any of the parties hereto or their successors or assigns, (ii) hereby
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such New York State court or, to the fullest extent
permitted by Applicable Law, in such Federal court, and (iii) to the extent
permitted by Applicable Law, hereby irrevocably waives, and agrees not to
assert, by way of motion, as a defense, or otherwise, in any such suit, action
or proceeding any claim that it is not personally subject to the jurisdiction of
the above-named courts, that the suit, action or proceeding is improper or that
this Agreement, the Payment Instruction or the subject matter hereof or thereof
may not be enforced in or by such court. A final judgment obtained in respect of
any action, suit or proceeding referred to in this Section 6.11 shall be
conclusive and may be enforced in other jurisdictions by suit or judgment or in
any manner as provided by Applicable Law. Each of the parties hereto hereby
consents to service of process by registered mail, Federal Express, DHL or
similar courier at the address to which notices to are to be given, it being
agreed that service in such manner shall constitute valid service upon such
party or its respective successors or assigns in connection with any such action
or proceeding only; provided, however, that nothing in this Section 6.11 shall
9
<PAGE>
affect the right of any of such parties or their respective successors or
assigns to serve legal process in any other manner permitted by Applicable Law
or affect the right of any of such parties or its respective property in the
courts of other jurisdictions.
10
<PAGE>
IN WITNESS WHEREOF, each of Old Dominion and the Bank has executed this
Agreement as of the date and year first above written.
OLD DOMINION ELECTRIC COOPERATIVE
By:/s/ DANIEL M. WALKER
-----------------------------------
Daniel M. Walker
Vice President of Accounting and Finance
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
By:/s/ CHRIS G. KORTLANDT /s/ J.W. DEN BAAS
------------------------ -----------------
Name: Chris G. Kortlandt Name: J.W. Den Baas
Title: Vice President Title: Managing Director
<PAGE>
SCHEDULE A
TO
Payment Undertaking Agreement
-----------------------------
PAYMENT AMOUNTS
---------------
Payment Undertaking
Payment Date Payment Amount
------------------- --------------
28-Feb-97 0.00
05-Jan-98 16,121,471.17
05-Jan-99 14,612,351.32
05-Jan-00 17,413,987.51
05-Jan-01 17,586,213.75
05-Jan-02 18,013,590.00
05-Jan-03 17,579,835.00
05-Jan-04 19,460,928.38
05-Jan-05 19,200,037.50
05-Jan-06 19,295,718.75
05-Jan-07 20,895,667.90
05-Jan-08 21,048,674.99
05-Jan-09 21,048,674.99
05-Jan-10 21,048,674.99
05-Jan-11 21,048,674.99
05-Jan-12 21,048,674.99
05-Jan-13 21,048,674.99
05-Jan-14 21,048,674.99
05-Jan-15 21,048,674.99
05-Jan-16 21,048,674.99
05-Jan-17 21,048,674.99
05-Jan-18 289,920,566.14
<PAGE>
SCHEDULE B
to
Payment Undertaking Agreement
-----------------------------
EARLY TERMINATION AMOUNTS
-------------------------
Payment Undertaking
Payment Date Early Termination Amount
------------------- ------------------------
05-Mar-96 240,061,664.92
05-Apr-96 241,560,801.04
05-May-96 243,059,937.17
05-Jun-96 244,559,073.29
05-Jul-96 246,058,209.42
05-Aug-96 247,557,345.54
05-Sep-96 249,056,481.67
05-Oct-96 250,555,617.80
05-Nov-96 252,054,753.92
05-Dec-96 253,553,890.05
05-Jan-97 255,053,026.17
05-Feb-97 256,552,162.30
05-Mar-97 258,077,314.68
05-Apr-97 259,687,949.05
05-May-97 261,298,583.43
05-Jun-97 262,909,217.80
05-Jul-97 264,519,852.18
05-Aug-97 266,130,486.55
05-Sep-97 267,741,120.93
05-Oct-97 269,351,755.30
05-Nov-97 270,962,389.68
05-Dec-97 272,573,024.05
05-Jan-98 258,062,187.26
05-Feb-98 259,675,075.93
05-Mar-98 261,287,964.60
05-Apr-98 262,900,853.27
05-May-98 264,513,741.94
05-Jun-98 266,126,630.61
05-Jul-98 267,739,519.28
05-Aug-98 269,352,407.95
05-Sep-98 270,965,296.62
05-Oct-98 272,578,185.29
05-Nov-98 274,191,073.96
05-Dec-98 275,803,962.63
05-Jan-99 262,804,499.98
05-Feb-99 264,447,028.10
05-Mar-99 266,089,556.23
05-Apr-99 267,732,084.35
05-May-99 269,374,612.48
05-Jun-99 271,017,140.60
05-Jul-99 272,659,668.73
05-Aug-99 274,302,196.85
05-Sep-99 275,944,724.98
05-Oct-99 277,587,253.10
05-Nov-99 279,229,781.23
05-Dec-99 280,872,309.35
05-Jan-00 265,100,849.97
05-Feb-00 266,757,730.28
05-Mar-00 268,414,610.59
<PAGE>
SCHEDULE B
to
Payment Undertaking Agreement
-----------------------------
EARLY TERMINATION AMOUNTS
-------------------------
Payment Undertaking
Payment Date Early Termination Amount
------------------- ------------------------
05-Apr-00 270,071,490.91
05-May-00 271,728,371.22
05-Jun-00 273,385,251.53
05-Jul-00 275,042,131.84
05-Aug-00 276,699,012.16
05-Sep-00 278,355,892.47
05-Oct-00 280,012,772.78
05-Nov-00 281,669,653.09
05-Dec-00 283,326,533.41
05-Jan-01 267,397,199.97
05-Feb-01 269,068,432.47
05-Mar-01 270,739,664.97
05-Apr-01 272,410,897.47
05-May-01 274,082,129.97
05-Jun-01 275,753,362.47
05-Jul-01 277,424,594.97
05-Aug-01 279,095,827.47
05-Sep-01 280,767,059.97
05-Oct-01 282,438,292.47
05-Nov-01 284,109,524.97
05-Dec-01 285,780,757.47
05-Jan-02 269,438,399.97
05-Feb-02 271,122,389.97
05-Mar-02 272,806,379.97
05-Apr-02 274,490,369.97
05-May-02 276,174,359.97
05-Jun-02 277,858,349.97
05-Jul-02 279,542,339.97
05-Aug-02 281,226,329.97
05-Sep-02 282,910,319.97
05-Oct-02 284,594,309.97
05-Nov-02 286,278,299.97
05-Dec-02 287,962,289.97
05-Jan-03 272,066,444.97
05-Feb-03 273,766,860.25
05-Mar-03 275,467,275.53
05-Apr-03 277,167,690.81
05-May-03 278,868,106.09
05-Jun-03 280,568,521.38
05-Jul-03 282,268,936.66
05-Aug-03 283,969,351.94
05-Sep-03 285,669,767.22
05-Oct-03 287,370,182.50
05-Nov-03 289,070,597.78
05-Dec-03 290,771,013.06
05-Jan-04 273,010,499.96
05-Feb-04 274,716,815.58
05-Mar-04 276,423,131.21
05-Apr-04 278,129,446.83
05-May-04 279,835,762.46
05-Jun-04 281,542,078.08
<PAGE>
SCHEDULE B
to
Payment Undertaking Agreement
-----------------------------
EARLY TERMINATION AMOUNTS
-------------------------
Payment Undertaking
Payment Date Early Termination Amount
------------------- ------------------------
05-Jul-04 283,248,393.71
05-Aug-04 284,954,709.33
05-Sep-04 286,661,024.96
05-Oct-04 288,367,340.58
05-Nov-04 290,073,656.21
05-Dec-04 291,779,971.83
05-Jan-05 274,286,249.96
05-Feb-05 276,000,539.02
05-Mar-05 277,714,828.08
05-Apr-05 279,429,117.15
05-May-05 281,143,406.21
05-Jun-05 282,857,695.27
05-Jul-05 284,571,984.33
05-Aug-05 286,286,273.40
05-Sep-05 288,000,562.46
05-Oct-05 289,714,851.52
05-Nov-05 291,429,140.58
05-Dec-05 293,143,429.64
05-Jan-06 275,561,999.96
05-Feb-06 277,284,262.46
05-Mar-06 279,006,524.96
05-Apr-06 280,728,787.46
05-May-06 282,451,049.96
05-Jun-06 284,173,312.46
05-Jul-06 285,895,574.96
05-Aug-06 287,617,837.46
05-Sep-06 289,340,099.96
05-Oct-06 291,062,362.46
05-Nov-06 292,784,624.96
05-Dec-06 294,506,887.46
05-Jan-07 275,333,482.06
05-Feb-07 277,054,316.32
05-Mar-07 278,775,150.59
05-Apr-07 280,495,984.85
05-May-07 282,216,819.11
05-Jun-07 283,937,653.37
05-Jul-07 285,658,487.64
05-Aug-07 287,379,321.90
05-Sep-07 289,100,156.16
05-Oct-07 290,820,990.43
05-Nov-07 292,541,824.69
05-Dec-07 294,262,658.95
05-Jan-08 274,934,818.22
05-Feb-08 276,653,160.83
05-Mar-08 278,371,503.45
05-Apr-08 280,089,846.06
05-May-08 281,808,188.68
05-Jun-08 283,526,531.29
05-Jul-08 285,244,873.90
05-Aug-08 286,963,216.52
05-Sep-08 288,681,559.13
<PAGE>
SCHEDULE B
to
Payment Undertaking Agreement
-----------------------------
EARLY TERMINATION AMOUNTS
-------------------------
Payment Undertaking
Payment Date Early Termination Amount
------------------- ------------------------
05-Oct-08 290,399,901.74
05-Nov-08 292,118,244.36
05-Dec-08 293,836,586.97
05-Jan-09 274,506,254.60
05-Feb-09 276,221,918.69
05-Mar-09 277,937,582.78
05-Apr-09 279,653,246.87
05-May-09 281,368,910.97
05-Jun-09 283,084,575.06
05-Jul-09 284,800,239.15
05-Aug-09 286,515,903.24
05-Sep-09 288,231,567.33
05-Oct-09 289,947,231.42
05-Nov-09 291,662,895.51
05-Dec-09 293,378,559.60
05-Jan-10 274,045,548.71
05-Feb-10 275,758,333.39
05-Mar-10 277,471,118.07
05-Apr-10 279,183,902.75
05-May-10 280,896,687.43
05-Jun-10 282,609,472.11
05-Jul-10 284,322,256.79
05-Aug-10 286,035,041.47
05-Sep-10 287,747,826.15
05-Oct-10 289,460,610.82
05-Nov-10 291,173,395.50
05-Dec-10 292,886,180.18
05-Jan-11 273,550,289.87
05-Feb-11 275,259,979.18
05-Mar-11 276,969,668.49
05-Apr-11 278,679,357.81
05-May-11 280,389,047.12
05-Jun-11 282,098,736.43
05-Jul-11 283,808,425.74
05-Aug-11 285,518,115.05
05-Sep-11 287,227,804.36
05-Oct-11 288,937,493.68
05-Nov-11 290,647,182.99
05-Dec-11 292,356,872.30
05-Jan-12 273,017,886.62
05-Feb-12 274,724,248.41
05-Mar-12 276,430,610.20
05-Apr-12 278,136,971.99
05-May-12 279,843,333.79
05-Jun-12 281,549,695.58
05-Jul-12 283,256,057.37
05-Aug-12 284,962,419.16
05-Sep-12 286,668,780.95
05-Oct-12 288,375,142.74
05-Nov-12 290,081,504.53
05-Dec-12 291,787,866.33
<PAGE>
SCHEDULE B
to
Payment Undertaking Agreement
-----------------------------
EARLY TERMINATION AMOUNTS
-------------------------
Payment Undertaking
Payment Date Early Termination Amount
------------------- ------------------------
05-Jan-13 272,445,553.13
05-Feb-13 274,148,337.84
05-Mar-13 275,851,122.54
05-Apr-13 277,553,907.25
05-May-13 279,256,691.96
05-Jun-13 280,959,476.67
05-Jul-13 282,662,261.37
05-Aug-13 284,365,046.08
05-Sep-13 286,067,830.79
05-Oct-13 287,770,615.49
05-Nov-13 289,473,400.20
05-Dec-13 291,176,184.91
05-Jan-14 271,830,294.62
05-Feb-14 273,529,233.96
05-Mar-14 275,228,173.30
05-Apr-14 276,927,112.64
05-May-14 278,626,051.99
05-Jun-14 280,324,991.33
05-Jul-14 282,023,930.67
05-Aug-14 283,722,870.01
05-Sep-14 285,421,809.35
05-Oct-14 287,120,748.69
05-Nov-14 288,819,688.03
05-Dec-14 290,518,627.38
05-Jan-15 271,168,891.73
05-Feb-15 272,863,697.30
05-Mar-15 274,558,502.88
05-Apr-15 276,253,308.45
05-May-15 277,948,114.02
05-Jun-15 279,642,919.60
05-Jul-15 281,337,725.17
05-Aug-15 283,032,530.74
05-Sep-15 284,727,336.32
05-Oct-15 286,422,141.89
05-Nov-15 288,116,947.46
05-Dec-15 289,811,753.04
05-Jan-16 270,457,883.62
05-Feb-16 272,148,245.39
05-Mar-16 273,838,607.17
05-Apr-16 275,528,968.94
05-May-16 277,219,330.71
05-Jun-16 278,909,692.48
05-Jul-16 280,600,054.26
05-Aug-16 282,290,416.03
05-Sep-16 283,980,777.80
05-Oct-16 285,671,139.57
05-Nov-16 287,361,501.35
05-Dec-16 289,051,863.12
05-Jan-17 269,693,549.90
05-Feb-17 271,379,134.59
05-Mar-17 273,064,719.27
<PAGE>
SCHEDULE B
to
Payment Undertaking Agreement
-----------------------------
EARLY TERMINATION AMOUNTS
-------------------------
Payment Undertaking
Payment Date Early Termination Amount
------------------- ------------------------
05-Apr-17 274,750,303.96
05-May-17 276,435,888.65
05-Jun-17 278,121,473.33
05-Jul-17 279,807,058.02
05-Aug-17 281,492,642.71
05-Sep-17 283,178,227.40
05-Oct-17 284,863,812.08
05-Nov-17 286,549,396.77
05-Dec-17 288,234,981.46
05-Jan-18 0.00
<PAGE>
SCHEDULE C
to
Payment Undertaking
Agreement
To: Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.,
"Rabobank Nederland", New York Branch (the "Bank")
Dear Ladies and Gentlemen:
We refer to the Payment Undertaking Agreement, dated as of February 29, 1996,
between the Bank and Old Dominion Electric Cooperative ("Old Dominion") (the
"Agreement").
Words and phrases have the same meaning as in the Agreement.
We hereby give you notice that by a Payment Undertaking Pledge Agreement, dated
as of February 29, 1996, all of our right, title and interest in, to and under
the Agreement has been pledged to the Owner Trustee and, pursuant to the Loan
Agreement, dated as of February 29, 1996 (the "Loan Agreement"), re-pledged by
the Owner Trustee to UtrechtAmerica Finance Co., as Agent.
We hereby authorize and instruct you to make all payments under the Agreement to
the Agent at Account No. 13679 at Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch, unless
you have been notified by Old Dominion, the Owner Trustee and the Agent that the
Agreement has been released from the Liens of the Payment Undertaking Pledge
Agreement and the Loan Agreement, in which case we hereby authorize and instruct
you to make all payments under the Agreement to Old Dominion or as Old Dominion
directs.
Kindly sign and return the attached acknowledgement to us.
Dated: March 1, 1996
For and on behalf of
OLD DOMINION ELECTRIC COOPERATIVE
By: _______________________________________
<PAGE>
ACKNOWLEDGMENT
To: Old Dominion Electric Cooperative
State Street Bank and Trust Company
Utrecht-America Finance Co.
Ladies and Gentlemen:
We refer to the Payment Undertaking Agreement entered into on or about today
between ourselves and Old Dominion Electric Cooperative ("Old Dominion") (the
"Agreement") and the Payment Instruction (as defined in the Agreement).
Words and phrases have the same meaning as in the Agreement.
In consideration of your agreeing, on condition, inter alia, of receipt of this
Acknowledgment, to enter into transactions related to the Agreement, we
undertake, until such time as we receive notice from the Owner Trustee and the
Agent that their interests in the Agreement have been terminated, for your
benefit that:
(a) subject to any contrary instruction from Old Dominion as referred to
in the Payment Instruction, we will make all payments under the
Agreement in accordance with the Payment Instruction;
(b) we will comply with our obligations under the Agreement; and
(c) we will not agree to any variation, termination, repudiation
or rescission of the Agreement or, subject to any contrary
instruction from Old Dominion as referred to in the Payment
Instruction, the Payment Instruction or to give or accept any
compromise, waiver or release of any rights or obligations under the
Agreement or the Payment Instruction without the prior written
consent of Old Dominion, the Owner Trustee and the Agent.
Any instruction to us (other than the Payment Instruction) under the Agreement
must be accompanied by sufficient evidence of the authority of the signatory
thereto (unless such evidence has previously been furnished to us).
We have received notice that all of the Old Dominion's right, title and interest
in, to and under the Agreement have been pledged as security to the Owner
Trustee (pursuant to the Payment Undertaking Pledge Agreement) and re-pledged by
the Owner Trustee to the Agent (pursuant to the Loan Agreement). We have
received no notice of any charge, assignment or encumbrance of the right, title
or interest of Old Dominion in, to or under the Agreement, except for the notice
referred to in the preceding sentence. We hereby confirm that unless and until
we receive notice in writing from the Owner Trustee and the Agent to the effect
that the Liens of the Payment Undertaking Pledge Agreement and the Loan
Agreement have been discharged, the Agent, or if the Lien of the Loan Agreement
is discharged, the Owner Trustee shall have the right, to the exclusion of Old
Dominion, to exercise the rights of Old Dominion under the Agreement.
<PAGE>
Dated: March 1, 1996
For and on behalf of
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH
By:_________________________________________________
<PAGE>
- - --------------------------------------------------------------------------------
PAYMENT UNDERTAKING PLEDGE AGREEMENT
Dated as of February 29, 1996
between
OLD DOMINION ELECTRIC COOPERATIVE,
as Payment Undertaking Pledgor
and
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity, but
solely as Owner Trustee, as Payment Undertaking Pledgee
CLOVER UNIT 1 GENERATING FACILITY
AND
COMMON FACILITIES
- - --------------------------------------------------------------------------------
<PAGE>
PAYMENT UNDERTAKING PLEDGE AGREEMENT
This PAYMENT UNDERTAKING PLEDGE AGREEMENT, dated as of
February 29, 1996 (this "Agreement"), between OLD DOMINION ELECTRIC COOPERATIVE,
a wholesale power supply cooperative, organized under the laws of the
Commonwealth of Virginia, as pledgor (the "Payment Undertaking Pledgor"), and
STATE STREET BANK AND TRUST COMPANY, a state-chartered trust Company organized
and existing under the laws of the Commonwealth of Massachusetts not in its
individual capacity, but solely as Owner Trustee under the Trust Agreement, as
pledgee (the "Payment Undertaking Pledgee").
WHEREAS, the Payment Undertaking Pledgor, the Payment
Undertaking Pledgee, First Union National Bank of Florida and Utrecht-America
Finance Co., have entered into a Participation Agreement dated as of February
29, 1996 (the "Participation Agreement");
WHEREAS, the Payment Undertaking Pledgor, as lessee, and the
Payment Undertaking Pledgee, as lessor have entered into the Equipment Operating
Lease and the Foundation Operating Lease; and
WHEREAS, the Payment Undertaking Pledgor has entered into a
Payment Undertaking Agreement with Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch (the
"Bank"), dated as of February 29, 1996 (the "Payment Undertaking Agreement"),
which Payment Undertaking Agreement the Payment Undertaking Pledgor is willing
to pledge to the Payment Undertaking Pledgee to secure its obligations under the
Equipment Operating Lease and the Foundation Operating Lease.
NOW, THEREFORE, in consideration of the mutual agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINED TERMS.
Capitalized terms used in this Agreement and not otherwise defined
herein shall have the respective meanings specified in Appendix A to the
Participation Agreement. All references to sections herein are to sections of
this Agreement unless otherwise indicated and the words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section or other subdivision.
<PAGE>
SECTION 2. PLEDGE.
Section 2.1 Pledge of Payment Undertaking Agreement. To secure the
Secured Obligations (defined below), the Payment Undertaking Pledgor hereby
transfers, assigns and pledges to the Payment Undertaking Pledgee for its
benefit, all of its right, title and interest in the Payment Undertaking
Agreement, (including, without limitation, the right of the Payment Undertaking
Pledgor to receive all amounts payable under the Payment Undertaking Agreement
in accordance therewith and the Payment Instruction, to give and receive any
notice, consent, waiver or approval or take any other action under the Payment
Undertaking Agreement), all instruments or certificates evidencing the Payment
Undertaking Agreement and all interest, cash, instruments or other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for, any or all of the Payment Undertaking Agreement and all proceeds
of the Payment Undertaking Agreement.
SECTION 3. NETHERLANDS LAW.
To the extent that a court would hold that Netherlands law is
applicable to the assignment, transfer and pledge of the right, title and
interest in the Payment Undertaking Agreement or to the creation of another
security right on the Payment Undertaking Agreement and that such assignment,
transfer, pledge or other security right is invalid and/or unenforceable in The
Netherlands, the Payment Undertaking Pledgor hereby creates a right of pledge
("vestigt een pandrecht") in favor of the Payment Undertaking Pledgee, pursuant
to articles 3:94, paragraph 1 and 3:236, paragraph 2, Netherlands Civil Code on
the rights of the Payment Undertaking Pledgor against the Bank, as such rights
may exist or come to exist hereafter against the Bank pursuant to the terms of
the Payment Undertaking Agreement, as security for the Secured Obligations,
which right of pledge the Payment Undertaking Pledgee hereby accepts.
In accordance with article 3:242, Netherlands Civil Code, the Payment
Undertaking Pledgee is hereby irrevocably authorized to repledge
("herverpanden") the above-mentioned rights pursuant to the terms of the Payment
Undertaking Agreement in favor of Utrecht-America Finance Co., as Agent, to
secure the Payment Undertaking Pledgee's obligations to Utrecht-America Finance
Co. under the Series A Loan Certificates.
SECTION 4. SECURED OBLIGATIONS.
The purpose of this pledge is to secure the Payment Undertaking
Pledgor's obligation (whether now or hereafter existing) under the Equipment
Operating Lease and the Foundation Operating Lease to pay Basic Rent, Foundation
Basic Rent, Termination Value, the Purchase Option Price, the Foundation
Purchase Option Price, Walk-Away Payment and Foundation Walk-Away Payment. All
of the foregoing obligations shall be referred to as "Secured Obligations."
Without limiting the generality of the foregoing, this Agreement
secures the payment of all amounts that constitute part of the Secured
Obligations and would be payable to the
2
<PAGE>
Payment Undertaking Pledgee under the Equipment Operating Lease and the
Foundation Operating Lease but for the fact that they are unenforceable or not
allowable due to (a) the existence of a bankruptcy, insolvency, reorganization,
arrangement or moratorium involving the Payment Undertaking Pledgor or (b) other
laws relating to or effecting the enforcement of creditor's rights generally
against the Payment Undertaking Pledgor.
SECTION 5. REMEDIES
Section 5.1 Rights of the Payment Undertaking Pledgee. Upon the
happening and during the occurrence of any Event of Default under the Equipment
Operating Lease or the Foundation Operating Lease, the Payment Undertaking
Pledgee may (in addition to any other actions permitted under the other
Operative Documents or by statute or at law or in equity) exercise any rights or
remedies granted hereunder. The Payment Undertaking Pledgee may enforce the
right of pledge created hereby to the fullest extent possible in accordance
with, and shall be entitled to all rights, remedies and benefits afforded to
pledgees under, the laws of the State of New York. To the extent necessary to
realize the benefit of the pledge of the Payment Undertaking Agreement effected
by Section 4, the Payment Undertaking Pledgor authorizes the Payment Undertaking
Pledgee to exercise any of its rights under the Payment Undertaking Agreement.
Section 5.2 Filings. The Payment Undertaking Pledgor agrees that it
shall, at its own expense, execute and deliver all financing statements
necessary to perfect the Payment Undertaking Pledgee's or any assignee's
interest in the Payment Undertaking Agreement or any assignment or other
document reasonably requested by the Payment Undertaking Pledgee or the Holders
of the Series A Loan Certificate to perfect, protect, enforce, or otherwise give
effect to the Payment Undertaking Pledgee's rights and remedies hereunder.
Section 5.3 Attorney-in-Fact. If the Payment Undertaking Pledgor is
unable or unwilling to sign such assignments, financing statements or other
documents and to file financing statements or other public notices or recording
with the appropriate authorities, as and when reasonably requested by counsel to
the Payment Undertaking Pledgee, the Payment Undertaking Pledgor hereby
authorizes the Payment Undertaking Pledgee to sign as the Payment Undertaking
Pledgor's true and lawful agent and attorney-in-fact any such assignments,
financing statement or other documents and to make any such filings.
Section 5.4 The Payment Undertaking Pledgee's Duties. The powers
conferred on the Payment Undertaking Pledgee hereunder are solely to protect its
interest in the Payment Undertaking Agreement and shall not impose any duty upon
it to exercise any such powers. Except for the accounting for monies actually
received by it hereunder, the Payment Undertaking Pledgee shall have no duty as
to the Payment Undertaking Agreement or other matters relative to the Payment
Undertaking Agreement, whether or not the Payment Undertaking Pledgee has or is
deemed to have knowledge of such matters, or as to the taking of any necessary
steps to preserve rights against any parties or any other rights pertaining to
the Payment Undertaking Agreement.
3
<PAGE>
SECTION 6. DISCHARGE.
The Payment Undertaking Pledgee agrees that when the Secured
Obligations shall have been fully paid and discharged, the Payment Undertaking
Pledgee, at the written request and cost of the Payment Undertaking Pledgor,
shall immediately confirm the release of the Payment Undertaking Agreement from
any Lien created pursuant to this Agreement and of all claims that the Payment
Undertaking Pledgee may have hereunder.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
Section 7.1 Unlimited Holder. The Payment Undertaking Pledgor
represents and warrants that it is the legal and beneficial owner of the Payment
Undertaking Agreement and that the Payment Undertaking Agreement is not subject
to any Lien or any other right of any third party, except as provided by the
Operative Documents.
Section 7.2 Rights in the Payment Undertaking Agreement. The Payment
Undertaking Pledgor represents and warrants that the pledge of the Payment
Undertaking Agreement under this Agreement vests in the Payment Undertaking
Pledgee a valid security interest in the Payment Undertaking Agreement, as
contemplated by this Agreement, subject to the provisions, if applicable, of
Section 9-306 of the Uniform Commercial Code as in effect in New York.
SECTION 8. COVENANT OF THE PAYMENT UNDERTAKING PLEDGOR.
The Payment Undertaking Pledgor shall not, without the prior written
consent of the Payment Undertaking Pledgee (a) sell, assign, pledge or otherwise
dispose of, or grant any option with respect to, the Payment Undertaking
Agreement or (b) create or permit any Lien upon or with respect to the Payment
Undertaking Agreement, except for the pledge created hereby and the Loan
Agreement.
SECTION 9. MISCELLANEOUS.
Section 9.1. Amendments and Waivers. No term, covenant, agreement or
condition of this Agreement may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by the
party against whom enforcement of such change is sought.
Section 9.2. Notices. Unless otherwise expressly specified or permitted
by the terms hereof, all communications and notices provided for herein to a
party hereto shall be in writing or by a telecommunications device capable of
creating a written record, and any such notice shall become effective (a) upon
personal delivery thereof, including, without limitation, by overnight mail or
courier service, (b) in the case of notice by United States
4
<PAGE>
mail, certified or registered, postage prepaid, return receipt requested, upon
receipt thereof, or (c) in the case of notice by such a telecommunications
device, upon transmission thereof, provided such transmission is promptly
confirmed by either of the methods set forth in clauses (a) or (b) above, in
each case addressed to such party at its address set forth below or at such
other address as such party may from time to time designate by written notice to
the other parties hereto:
If to the Payment Undertaking Pledgor:
Old Dominion Electric Cooperative
4201 Dominion Boulevard
Glen Allen, Virginia 23060
Facsimile No.: (804) 747-3742
Telephone No.: (804) 747-0592
Attention: Vice President of Accounting and Finance
If to the Payment Undertaking Pledgee:
State Street Bank and Trust Company
Two International Place
Fourth Floor
Boston, Massachusetts 02110
Facsimile No.: (617) 664-5371
Telephone No.: (617) 664-5610
Attention: Manager - Corporate Trust
with a copy to Utrecht-America:
Utrecht-America Finance Co.
245 Park Avenue
New York, New York 10167
Facsimile No.: (212) 922-0969
Telephone No.: (212)
Attention: Corporate Finance Department
Section 9.3 Survival. All warranties, representations, indemnities and
covenants made by either party hereto, herein or in any certificate or other
instrument delivered by either such party or on the behalf of either such party
under this Payment Undertaking Pledge Agreement shall be considered to have been
relied upon by the other party hereto and shall survive the consummation of the
transactions contemplated hereby on the Closing Date regardless of any
investigation made by either party or on behalf of either party.
5
<PAGE>
Section 9.4 Successors and Assigns. (a) This Payment Undertaking Pledge
Agreement shall be binding upon and shall inure to the benefit of, and shall be
enforceable by, the parties hereto and their respective successors and assigns
as permitted by and in accordance with the terms hereof. Each time a successor
Owner Trustee is appointed in accordance with the terms of the Trust Agreement
and Section 5.5 of the Participation Agreement, such successor Owner Trustee
shall, without further act, succeed to all rights, duties, immunities and
obligations of the predecessor Owner Trustee hereunder, and the predecessor
Owner Trustee shall be released from all further duties and obligations
hereunder, all without the necessity of any consent or approval by the Payment
Undertaking Pledgor and without in any way altering the terms of this Payment
Undertaking Pledge Agreement or the rights or obligations of the Payment
Undertaking Pledgee hereunder. The Payment Undertaking Pledgor shall, at its
expense (except as otherwise provided in Section 5.5 of the Participation
Agreement), upon receipt of written notice of the appointment of a successor
Owner Trustee under the Trust Agreement, promptly make such modifications and
changes to reflect such appointment as shall be reasonably requested by such
successor Owner Trustee in any instruments relating to this Payment Undertaking
Pledge Agreement, all in form and substance reasonably satisfactory to such
successor Owner Trustee.
(b) Except as expressly provided herein or in any other
Operative Document, the Payment Undertaking Pledgor may not assign its interests
herein without the consent of the Payment Undertaking Pledgee. Except as
expressly provided in the Operative Documents, the Payment Undertaking Pledgee
may not assign its interests herein during the Term of the Equipment Operating
Lease without the consent of the Payment Undertaking Pledgor other than pursuant
to the Loan Agreement.
Section 9.5. Business Day. Notwithstanding anything herein to the
contrary, if the date on which any payment is to be made pursuant to this
Agreement is not a Business Day, the payment otherwise payable on such date
shall be payable on the next succeeding Business Day with the same force and
effect as if made on such scheduled date and (provided such payment is made on
such succeeding Business Day) no interest shall accrue on the amount of such
payment from and after such scheduled date to the time of such payment on such
next succeeding Business Day.
Section 9.6. Governing Law. This Agreement shall be in all respects
governed by and construed in accordance with the laws of the State of New York
including all matters of construction, validity and performance.
Section 9.7. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Agreement shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
Section 9.8. Counterparts. This Agreement may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together only one Agreement.
6
<PAGE>
Section 9.9. Headings. The headings of the sections of this Agreement
are inserted for purposes of convenience only and shall not be construed to
affect the meaning or construction of any of the provisions hereof.
Section 9.10. Further Assurances. Each party hereto will promptly and
duly execute and deliver such further documents to make such further assurances
for and take such further action reasonably requested by any party to whom such
first party is obligated, all as may be reasonably necessary to carry out more
effectively the intent and purpose of this Agreement.
Section 9.11. Limitations of Liability. It is expressly understood and
agreed by and between the Payment Undertaking Pledgor and the Payment
Undertaking Pledgee and their respective successors and permitted assigns, that
all representations, warranties and undertakings of the Payment Undertaking
Pledgee hereunder shall be binding upon the Payment Undertaking Pledgee only in
its capacity as Owner Trustee under the Trust Agreement, and neither the Payment
Undertaking Pledgee in its individual capacity nor any past, present or future
Affiliate, partner, officer, director, owner, shareholder, agent or employee of
it or in any thereof or of any partner thereof or their legal representatives,
successors or assigns shall be liable for any breach thereof; and all Persons
having any claim against the Payment Undertaking Pledgee by reason of the
transactions contemplated hereby shall look only to the Trust Estate for payment
or satisfaction thereof.
Section 9.12. Effectiveness of Agreement. This Agreement has been dated
as of the date first above written for convenience only. This Agreement shall be
effective on the date of execution and delivery by each of the Payment
Undertaking Pledgee and the Payment Undertaking Pledgor.
7
<PAGE>
IN WITNESS WHEREOF, the Payment Undertaking Pledgor and the
Payment Undertaking Pledgee have caused this Payment Undertaking Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized.
OLD DOMINION ELECTRIC COOPERATIVE,
as Payment Undertaking Pledgor
By:/s/ DANIEL M. WALKER
-------------------------------
Name: Daniel M. Walker
Title: Vice President
Date: March 1, 1996
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity, but
solely as Owner Trustee under the
Trust Agreement, as Payment
Undertaking Pledgee
By:/s/ E. DECKER ADAMS
--------------------------------
Name: E. Decker Adams
Title: Vice President
Date: March 1, 1996
Acknowledged and consented to by:
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND", NEW YORK BRANCH
By:/s/ CHRIS G. KORTLANDT /s/ J.W. DEN BAAS
------------------------------ --------------------
Name: Chris G. Kortlandt Name: J.W. Den Baas
Title: Vice President Title: Managing Director
Date: March 1, 1996 Date: March 1, 1996
<PAGE>
PLEDGE AGREEMENT
Dated as of February 29, 1996
between
OLD DOMINION ELECTRIC COOPERATIVE,
as Pledgor
and
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity, but
solely as Owner Trustee,
as Pledgee
CLOVER UNIT 1 GENERATING FACILITY
AND
COMMON FACILITIES
<PAGE>
PLEDGE AGREEMENT
This PLEDGE AGREEMENT, dated as of February 29, 1996 (this
"Agreement"), between OLD DOMINION ELECTRIC COOPERATIVE, a wholesale power
supply cooperative, organized under the laws of the Commonwealth of Virginia, as
pledgor (the "Pledgor"), and STATE STREET BANK AND TRUST COMPANY, a
state-chartered trust company organized and existing under the laws of the
Commonwealth of Massachusetts, not in its individual capacity, but solely as
Owner Trustee under the Trust Agreement, as pledgee (the "Pledgee").
WHEREAS, the Pledgor, the Pledgee, First Union National Bank
of Florida and Utrecht-America Finance Co., have entered into a Participation
Agreement dated as of February 29, 1996 (the "Participation Agreement");
WHEREAS, the Pledgor, as lessee, and the Pledgee, as lessor,
have entered into the Equipment Operating Lease; and
WHEREAS, the Pledgor has deposited the Collateral (as defined
in Section 2 hereof) with the Pledgee pursuant to this Agreement, which the
Pledgor is willing to pledge to the Pledgee to secure its obligations under the
Equipment Operating Lease.
NOW, THEREFORE, in consideration of the mutual agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINED TERMS.
Capitalized terms used in this Agreement and not otherwise defined
herein shall have the respective meanings specified in Appendix A to the
Participation Agreement. Notwithstanding the foregoing, except as otherwise
defined or indicated by the context herein, all terms which are defined in the
Uniform Commercial Code as in effect in the State of New York from time to time
("Uniform Commercial Code") shall have their respective meanings as used in
Chapters 8 and 9 of the Uniform Commercial Code. All references to sections
herein are to sections of this Agreement unless otherwise indicated and the
words "herein", "hereof" and "hereunder" and other words of similar import refer
to this Agreement as a whole and not to any particular section or other
subdivision.
SECTION 2. PLEDGE.
To secure the Secured Claims (defined in Section 3 hereof),
the Pledgor hereby grants, bargains, pledges, sells, assigns, transfers,
conveys, mortgages, warrants and confirms to the Pledgee a security interest in,
mortgage on, and pledge of, all of the Pledgor's rights, title and interest in
and to the First Mortgage Bonds delivered to the Pledgee on the Closing Date and
described below and all interest, cash, instruments and other property from time
to time
<PAGE>
received, receivable or otherwise distributed to it in respect of such First
Mortgage Bonds; all property into which such right, title and interest may be
exchanged or converted; and all proceeds of any and all of the foregoing and, to
the extent not otherwise included, all cash in respect of such First Mortgage
Bonds (the "Collateral"). The Collateral delivered on the Closing Date shall
consist of:
Those certain First Mortgage Bonds, 1996 Series A, issued
under the Old Dominion Indenture, in the aggregate face amount
of $25,565,961.82, consisting of the following bonds:
Bond No. Stated Maturity Face Amount
A-1 February 28, 1997 $25,565,961.82
insured by Financial Guaranty Insurance Policy No. FG0207BE
(the "Policy") with respect to payments due for principal of
the above Bonds which has been issued by AMBAC Indemnity
Corporation, which Policy has been delivered to the United
States Trust Company of New York, New York, New York, as
Insurance Trustee, the above described Bonds hereinafter
called the "Bonds".
The Pledgor hereby represents that the Collateral described above is a
Qualifying Security. The original Policy was delivered to United States Trust
Company of New York, as Insurance Trustee under said Policy. The Pledgee
acknowledges receipt of the Collateral in accordance with this Agreement and
agrees to hold such Collateral in accordance with the terms of this Agreement.
The Pledgor shall have the right to replace the Collateral, from time
to time, with a replacement Qualifying Security in accordance with Section 7.6
of the Participation Agreement.
SECTION 3. Secured Claims
The purpose of this pledge is to secure all of the Pledgor's
obligations (whether now or hereafter existing) under the Equipment Operating
Lease to pay Basic Rent, Termination Value and amounts sized by reference to
Termination Value. All of the obligations described in the immediately preceding
sentence shall be referred to as "Secured Claims".
Without limiting the generality of the foregoing, this
Agreement secures the payment of all amounts that constitute part of the Secured
Claims and would be payable to the Pledgee under the Equipment Operating Lease
but for the fact that they are unenforceable or not allowable due to (a) the
existence of a bankruptcy, insolvency, reorganization, arrangement or moratorium
involving the Pledgor or (b) other laws relating to, or effecting the
enforcement of, creditor's rights generally against the Pledgor.
2
<PAGE>
SECTION 4. REMEDIES
4.1. RIGHTS OF THE PLEDGEE. Remedies. If any Event of
Default under the Equipment Operating Lease shall have occurred and be
continuing, then whether or not the Equipment Operating Lease has been declared
in default pursuant to the terms thereof:
(i) the Pledgee may exercise in respect of the
Collateral, in addition to other rights and remedies provided
for herein or otherwise available to it, all the rights and
remedies of a secured party upon default under the Uniform
Commercial Code and also may, without notice except as
specified below, sell the Collateral or any part thereof at
public or private sale, at any of the Pledgee's offices or
elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Pledgee may deem commercially
reasonable. The Pledgee shall provide 10 calendar days'
written notice to the Pledgor at the Pledgor's address
specified in the Participation Agreement by (i) registered
mail, or (ii) hand delivery, or (iii) special courier service
(such as DHL, TNT, Worldcourier or similar courier);
(ii) Without limitation of the foregoing, the Pledgee
may exercise, in its own name or in the name and on behalf of
the Pledgor, all of the Pledgor's rights under and in respect
of the Collateral and the documentation evidencing or
governing the Collateral; and
(iii) All cash proceeds received by the Pledgee with
respect to the Collateral or in respect of any sale of,
collection from, or other realization upon all or any part of
the Collateral may, in the discretion of the Pledgee, be held
by the Pledgee as collateral for, and/or then or at any time
thereafter applied in whole or in part by the Pledgee against,
all or any part of the Secured Claims in such order as Pledgee
shall elect. Any surplus of such cash or cash proceeds held by
the Pledgee and remaining after payment in full of all the
Secured Claims shall be paid over to the Pledgor or to
whomsoever may be lawfully entitled to receive such surplus.
4.2. FILINGS. The Pledgor agrees that it shall, at its own
expense, execute and deliver all financing statements necessary to perfect the
Pledgee's interest in the Collateral or any assignment or other document
reasonably requested by the Pledgee or the Owner Participant, to perfect,
protect, enforce, or otherwise give effect to the Pledgee's rights and remedies
hereunder.
4.3. ATTORNEY-IN-FACT. The Pledgor hereby irrevocably
appoints, effective and during the continuance of any Event of Default, the
Pledgee as the Pledgor's attorney-in-fact, with full authority in the place and
stead of the Pledgor and in the name of the Pledgor or otherwise, from time to
time in the Pledgee's discretion, to take any action and to execute any
instrument that the Pledgee may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation:
3
<PAGE>
(a) to ask for, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for monies due and to become
due under or in respect of any of the Secured Claims,
(b) to receive, indorse and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (a)
above, and
(c) to file any claims or take any action or institute any
proceedings that the Pledgee may deem necessary or desirable for the
collection of any of the Secured Claims or otherwise to enforce
compliance with the terms and conditions of any Operative Document.
4.4. THE PLEDGEE'S DUTIES. The powers conferred on the Pledgee
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of the Collateral in its possession and the accounting for monies actually
received by it hereunder, the Pledgee shall have no duty as to the Collateral or
other matters relative to the Collateral, whether or not the Pledgee has or is
deemed to have knowledge of such matters, or as to the taking of any necessary
steps to preserve rights against any parties or any other rights pertaining to
the Collateral; PROVIDED, HOWEVER, that, if delivery or presentment of the
Collateral to any other Person is required in connection with any distribution
in respect of the Collateral, the Pledgee shall, at the Pledgor's expense,
cooperate to effect such delivery. The Pledgee shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which Pledgee accords its own property.
SECTION 5. RELEASE OF COLLATERAL; DISCHARGE.
5.1. RELEASE OF COLLATERAL. Provided no Payment Default,
Credit Default or Event of Default under the Equipment Operating Lease shall
have occurred and be continuing, the Pledgee agrees that the Pledgor shall be
entitled to receive (a) all amounts received by the Pledgee upon maturity of any
Bond; PROVIDED that the Pledgor shall have discharged all of its obligations
under the Equipment Operating Lease. The Collateral shall also be released by
the Pledgee upon replacement of the Collateral with a replacement Qualifying
Security in full compliance with Section 7.6 of the Participation Agreement.
5.2. DISCHARGE. Provided that no Payment Default, Credit
Default or Event of Default under the Equipment Operating Lease shall have
occurred and be continuing, the Pledgee agrees that when the Secured Claims
shall have been fully paid and discharged and the Equipment Operating Lease has
expired or been earlier terminated in accordance with its terms, the Pledgee, at
the written request and cost of the Pledgor, shall immediately confirm the
release the Collateral of any pledge, lien and security interest created
pursuant to this Agreement and of all claims that the Pledgee may have
hereunder.
4
<PAGE>
SECTION 6. REPRESENTATIONS AND WARRANTIES.
6.1. OWNER. The Pledgor represents and warrants that it is
the legal and beneficial owner of the Collateral and that the Collateral is not
subject to any pledge, lien or security interest or any other right of any third
party, except as provided by this Agreement.
6.2. RIGHTS IN THE COLLATERAL. The Pledgor represents and
warrants that assuming that the Pledgee maintains possession and control over
the Collateral in accordance with the applicable provisions of the Uniform
Commercial Code, the pledge and assignment of the Collateral and the grant of a
security interest therein under this Agreement vest in the Pledgee a valid and
perfected security interest in the Collateral as contemplated by this Agreement,
subject to the provisions of Section 9-306 of the Uniform Commercial Code.
SECTION 7. COVENANTS OF THE PLEDGOR
The Pledgor shall not, without the prior written consent of
the Pledgee (a) sell, assign or otherwise dispose of, or grant any option with
respect to, the Collateral or (b) create or permit to exist any Lien, upon or
with respect to the Collateral, except for the Lien created hereby.
SECTION 8. MISCELLANEOUS.
SECTION 8.1. AMENDMENTS AND WAIVERS. No term, covenant, agreement or
condition of this Agreement may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by the
party against whom enforcement of such change is sought.
SECTION 8.2. NOTICES. Unless otherwise expressly specified or permitted
by the terms hereof, all communications and notices provided for herein to a
party hereto shall be in writing or by a telecommunications device capable of
creating a written record, and any such notice shall become effective (a) upon
personal delivery thereof, including, without limitation, by overnight mail or
courier service, (b) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt thereof, or
(c) in the case of notice by such a telecommunications device, upon transmission
thereof, provided such transmission is promptly confirmed by either of the
methods set forth in clauses (a) or (b) above, in each case addressed to such
party at its address set forth below or at such other address as such party may
from time to time designate by written notice to the other parties hereto:
5
<PAGE>
If to the Pledgor:
Old Dominion Electric Cooperative
4201 Dominion Boulevard
Glen Allen, Virginia 23060
Facsimile No.: (804) 747-3742
Telephone No.: (804) 747-0592
Attention: Vice President of Accounting and Finance
If to the Pledgee:
State Street Bank and Trust Company
Two International Place
Fourth Floor
Boston, Massachusetts 02110
Facsimile No.: (617) 664-5371
Telephone No.: (617) 664-5610
Attention: Manager - Corporate Trust
with a copy to the Owner Participant:
First Union National Bank of Florida
301 South College Street
20th Floor
Charlotte, North Carolina 28288-0658
Facsimile No.: (704) 374-4724
Telephone No.: (704) 374-3241
Attention: Michael L. Taylor, Vice President
SECTION 8.3. SURVIVAL. All warranties, representations, indemnities and
covenants made by either party hereto, herein or in any certificate or other
instrument delivered by either such party or on the behalf of either such party
under this Agreement shall be considered to have been relied upon by the other
party hereto and shall survive the consummation of the transactions contemplated
hereby on the Closing Date regardless of any investigation made by either party
or on behalf of either party.
SECTION 8.4. SUCCESSORS AND ASSIGNS. (a) This Agreement shall be
binding upon and shall inure to the benefit of, and shall be enforceable by, the
parties hereto and their respective successors and assigns as permitted by and
in accordance with the terms hereof. Each time a successor Owner Trustee is
appointed in accordance with the terms of the Trust Agreement and Section 5.5 of
the Participation Agreement, such successor Owner Trustee shall, without further
act, succeed to all rights, duties, immunities and obligations of the
predecessor Owner Trustee
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<PAGE>
hereunder, and the predecessor Owner Trustee shall be released from all further
duties and obligations hereunder, all without the necessity of any consent or
approval by the Pledgor and without in any way altering the terms of this
Agreement or the rights or obligations of the Pledgee hereunder. The Pledgor
shall, at its expense (except as otherwise provided in Section 5.5 of the
Participation Agreement), upon receipt of written notice of the appointment of a
successor Owner Trustee under the Trust Agreement, promptly make such
modifications and changes to reflect such appointment as shall be reasonably
requested by such successor Owner Trustee in any instruments relating to this
Agreement, all in form and substance reasonably satisfactory to such successor
Owner Trustee.
(b) Except as expressly provided herein or in any other
Operative Document, the Pledgor may not assign its interests herein without the
consent of the Pledgee. Except as expressly provided in the Operative Documents,
the Pledgee may not assign its interests herein during the Term of the Equipment
Operating Lease without the consent of the Pledgor.
SECTION 8.5. BUSINESS DAY. Notwithstanding anything herein to the
contrary, if the date on which any payment is to be made pursuant to this
Agreement is not a Business Day, the payment otherwise payable on such date
shall be payable on the next succeeding Business Day with the same force and
effect as if made on such scheduled date and (provided such payment is made on
such succeeding Business Day) no interest shall accrue on the amount of such
payment from and after such scheduled date to the time of such payment on such
next succeeding Business Day.
SECTION 8.6. GOVERNING LAW. THIS AGREEMENT SHALL BE IN ALL RESPECTS
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
SECTION 8.7. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Agreement shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
SECTION 8.8. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together only one Agreement.
SECTION 8.9. HEADINGS. The headings of the sections of this
Agreement are inserted for purposes of convenience only and shall not be
construed to affect the meaning or construction of any of the provisions hereof.
SECTION 8.10. FURTHER ASSURANCES. Each party hereto will promptly and
duly execute and deliver such further documents to make such further assurances
for and take such further action reasonably requested by any party to whom such
first party is obligated, all as may be reasonably necessary to carry out more
effectively the intent and purpose of this Agreement.
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<PAGE>
SECTION 8.11. LIMITATIONS OF LIABILITY. It is expressly understood and
agreed by and between the Pledgor and the Pledgee and their respective
successors and permitted assigns, that all representations, warranties and
undertakings of the Pledgee hereunder shall be binding upon the Pledgee only in
its capacity as Owner Trustee under the Trust Agreement, and neither the Pledgee
in its individual capacity nor any past, present or future Affiliate, partner,
officer, director, owner, shareholder, agent or employee of it or in any thereof
or of any partner thereof or their legal representatives, successors or assigns
shall be liable for any breach thereof; and, all Persons having any claim
against the Pledgee by reason of the transactions contemplated hereby shall look
only to the Trust Estate for payment or satisfaction thereof.
SECTION 8.12. EFFECTIVENESS OF AGREEMENT. This Agreement has been dated
as of the date first above written for convenience only. This Agreement shall be
effective on the date of execution and delivery by each of the Pledgee and the
Pledgor.
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<PAGE>
IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused
this Pledge Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized.
OLD DOMINION ELECTRIC COOPERATIVE,
as Pledgor
By:/s/ DANIEL M. WALKER
-----------------------------------------
Daniel M. Walker
Vice President of Accounting and Finance
Date:
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity, but solely
as Owner Trustee under the Trust Agreement,
as Pledgee
By:/s/ E. DECKER ADAMS
-----------------------------------------
E. Decker Adams
Vice President
Date:
Acknowledged by:
FIRST UNION NATIONAL BANK OF FLORIDA,
as Owner Participant
By:
-----------------------------
Name:
Title:
Date:
<PAGE>
TAX INDEMNITY AGREEMENT
Dated as of February 29, 1996
between
OLD DOMINION ELECTRIC COOPERATIVE
and
FIRST UNION NATIONAL BANK OF FLORIDA,
as Owner Participant
CLOVER UNIT 1 GENERATING FACILITY
AND
COMMON FACILITIES
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.................................................... 1
SECTION 2. TAX ASSUMPTIONS................................................ 2
SECTION 3. TAX REPRESENTATIONS, WARRANTIES AND COVENANTS.................. 3
SECTION 4. INDEMNITY...................................................... 5
SECTION 5. TAX SAVINGS.................................................... 12
SECTION 6. CONTESTS....................................................... 13
SECTION 7. CERTAIN ADJUSTMENTS............................................ 15
SECTION 8. MISCELLANEOUS.................................................. 15
i
<PAGE>
TAX INDEMNITY AGREEMENT
This TAX INDEMNITY AGREEMENT, dated as of February 29, 1996
(this "Tax Indemnity Agreement" or this "Agreement"), between OLD DOMINION
ELECTRIC COOPERATIVE, a wholesale power supply cooperative organized under the
laws of the Commonwealth of Virginia (together with its successors and assigns,
"Old Dominion"), and FIRST UNION NATIONAL BANK OF FLORIDA, a national banking
association (together with its successors and assigns, the "Owner Participant").
WITNESSETH:
WHEREAS, in entering into the transactions contemplated by the
Operative Documents, the Owner Participant made the assumption that it would be
entitled to certain income tax benefits identified in Section 2 of this
Agreement, and Old Dominion has agreed to indemnify the Owner Participant under
certain circumstances for the loss of certain of such benefits.
NOW, THEREFORE, as an inducement to the Owner Participant to
enter into the transactions contemplated by the Operative Documents and in
consideration of the mutual covenants contained in this Agreement and in the
other Operative Documents, the parties agree as follows:
SECTION 1. DEFINITIONS.
Unless the context otherwise requires, capitalized terms used
in this Tax Indemnity Agreement and not otherwise defined herein shall have the
respective meanings specified in Appendix A to the Participation Agreement,
dated as of February 29, 1996 (the "Participation Agreement"), between Old
Dominion, State Street Bank and Trust Company, not in its individual capacity
except as expressly provided therein, but solely as trustee of the Trust
Agreement referred to therein and Utrecht-America Finance Co., as a lender and
as agent for the lenders named therein. For purposes of this Agreement, the term
"Owner Participant" includes any member of an affiliated group of corporations
of which the Owner Participant is, or shall become, a member if consolidated
returns are or shall be filed for such affiliated group for federal income tax
purposes; the term "Head Lease" shall mean the Equipment Head Lease together
with the Foundation Head Lease; the term "Undivided Interest" shall mean the
Equipment Interest together with the Foundation Interest; the term "Basic Head
Lease Rent" shall mean the Basic Equipment Head Lease Rent plus the Basic
Foundation Head Lease Rent; the term "Operating Lease" shall mean the Equipment
Operating Lease together with the Foundation Operating Lease; the term "Basic
Rent" shall mean the Basic Rent plus the Foundation Basic Rent; the term
"Undivided Interest Cost" shall mean the Equipment Interest Cost plus the
Foundation Interest Cost; and the term "Purchase Option Price" shall mean the
Purchase Option Price together with the Foundation Purchase Option Price. All
references to Sections herein are to Sections of this Tax Indemnity Agreement
unless otherwise indicated and the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Tax Indemnity Agreement as a whole
and not to any particular Section or other subdivision.
<PAGE>
SECTION 2. TAX ASSUMPTIONS.
Old Dominion acknowledges that the Owner Participant entered
into the transactions contemplated by the Operative Documents on the basis of
certain income tax assumptions, including, among others, the following
assumptions for federal income tax purposes (the "Tax Assumptions"):
(a) The Head Lease will be treated as a current sale of the
Undivided Interest by Old Dominion to the Owner Trustee and the Basic
Head Lease Rent will be treated as the purchase price for such sale.
(b) The Operating Lease will be a "true lease", the Owner
Participant will be treated as the purchaser, owner and lessor of the
Undivided Interest and Old Dominion will be treated as the lessee
thereof.
(c) The obligations evidenced by the Loans will constitute
indebtedness of the Owner Trustee, and the Owner Participant will be
entitled to current deductions under section 163 of the Code for
interest accrued thereon (the "Interest Deductions").
(d) The Undivided Interest will be treated as "tax-exempt use
property" as defined in section 168 of the Code.
(e) The Owner Participant's tax basis in the Undivided
Interest on the Closing Date will be equal to the Undivided Interest
Cost, and the Owner Participant will be entitled to cost recovery
deductions beginning in the taxable year of the Owner Participant that
includes the Closing Date under section 168(g)(2) of the Code on a
straight-line basis using a "half-year" convention and a recovery
period equal to (i) 125% of the combined Interim Term and Basic Term in
the case of the portion of the Undivided Interest which constitutes ADR
"electric utility steam production plant" assets, (ii) 30 years in the
case of the portion of the Undivided Interest which constitutes ADR
"electric utility transmission and distribution plant" assets and (iii)
40 years in the case of the portion of the Undivided Interest which
constitutes non-residential real property under section 168 of the Code
(the "Depreciation Deductions").
(f) The Owner Participant will be entitled to amortize the
Transaction Costs paid by it attributable to (i) the Operating Lease on
a straight-line basis over the combined Interim Term and Basic Term and
(ii) the Loans on a straight-line basis over the term of the Loans
(collectively, the "Amortization Deductions").
<PAGE>
(g) The Owner Participant's marginal federal income tax rate
at all times during the Term will be 35% and its combined effective
federal, state and local tax rate will be 36.7875% (the "Effective
Rate"); the Effective Rate will be applicable to all items of income
and deduction of the Owner Participant for federal income tax purposes
attributable to the transactions contemplated by the Operative
Documents; and, the Owner Participant will always have sufficient
taxable income to utilize the Interest Deductions, Depreciation
Deductions and Amortization Deductions.
(h) The Owner Participant's accrual of Basic Rent will not be
computed by reference to section 467(b)(2) of the Code.
(i) The Basic Rent and all other amounts received under the
Operating Lease or with respect to the transactions contemplated by the
Operative Documents and the Interest Deductions, Amortization
Deductions and Depreciation Deductions will be treated as derived from,
or allocable to, sources within the United States pursuant to section
861 of the Code.
(j) The Undivided Interest will be treated as "placed in
service" by the Owner Participant within the meaning of section 168 of
the Code on the Closing Date.
(k) As a result of entering into the transactions contemplated
by the Operative Documents, the Owner Participant will not be required
to include any amount in gross income other than (i) Basic Rent in the
amounts and at the times such payments are accrued pursuant to the
terms of the Operating Lease, (ii) gain upon the receipt of Termination
Value (or other amounts based on Termination Value) on the date such
amount is determined to be paid and in the amount equal to the excess
of the payment over the Owner Participant's adjusted basis in the
Undivided Interest or the relevant portion thereof, (iii) gain upon the
receipt of the Purchase Option Price at the time such payment is
required to be made, (iv) any amount payable to the Owner Participant
on an After-Tax Basis on the date such amount is payable, (v) any other
amount to the extent it results in an equal and offsetting deduction of
the same character in the same taxable year as the inclusion and (vi)
amounts identified as interest under the Operative Documents.
(l) The Trust created for the benefit of the Owner Participant
will be treated as a grantor trust, and the Owner Participant, as owner
of the Trust, will be entitled and required to take into account, in
computing its federal taxable income, all items of income, gain, loss
or deduction with respect to the Undivided Interest.
Old Dominion does not make any representation, warranty or covenant with respect
to any of the foregoing assumptions (except to the extent set forth in Section 3
hereof). Except as expressly provided herein, Old Dominion has no obligation to
indemnify the Owner Participant by reason of any of the above assumptions
proving to be incorrect. If the Owner Participant shall suffer a Loss (as such
term is defined in Section 4 below) with respect to which Old Dominion is
required to pay an indemnity hereunder or in the event of any rental adjustment
under Section 3.4 of the Operating Lease involving a change in the Tax
Assumptions, then the Tax Assumptions, without further act of the parties
hereto, shall thereafter be and be deemed to be amended, if and to the extent
appropriate, to reflect such Loss or change in Tax Assumptions.
<PAGE>
SECTION 3. TAX REPRESENTATIONS, WARRANTIES AND COVENANTS.
Old Dominion represents, warrants and covenants that for federal income
tax purposes:
(a) All written information supplied by or on behalf of Old
Dominion to the Appraiser or the Engineer and identified in an appendix
to the Appraisal or the Engineering
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<PAGE>
Report as relied upon by the Appraiser or the Engineer, as the case may
be, was accurate in all material respects as of the date so supplied
and as of the Closing Date, and Old Dominion did not omit to supply any
other information available to Old Dominion which would render such
supplied information misleading in any material respect.
(b) Neither Old Dominion, nor any Person in possession of the
Undivided Interest or any portion thereof, the Pollution Control Assets
Lessor, Virginia Power or any Affiliate of any thereof (each, a "Lessee
Person" and collectively, the "Lessee Group"), will take any position
in any filing by it for United States federal, state or local income
tax purposes that is inconsistent with the Tax Assumptions.
(c) Old Dominion, together with its Affiliates, will not at
any time hold directly or indirectly (i) more than 90% in aggregate
principal amount of all Loan Certificates then outstanding; or (ii) any
interest whatsoever in a Series B Loan Certificate.
(d) On the Closing Date, there will not be any agreements,
side letters or other arrangements (or plan or expectation of such
agreements, side letters or other arrangements) not disclosed in
writing to the Owner Participant prior to Closing (i) between any
member of the Lessee Group and any Person pertaining to the exercise or
non-exercise by Old Dominion of any of the options set forth in Section
15 of the Operating Lease and (ii) between any member of the Lessee
Group and any Person or, to Old Dominion's knowledge, between any
Persons (other than Owner Participant or the Owner Trustee) pertaining
to the Loan Certificates or the Deposit.
(e) On the Closing Date, the Clover Unit 1 Generation Facility
will not require any improvement, modification or addition (other than
ancillary items of removable equipment of a kind that are customarily
selected and furnished by purchasers and lessees of similar equipment
and various "punch list" type items) in order for the Undivided
Interest to be rendered complete for its use by any Lessee Person.
(f) After payment of the Undivided Interest Cost of the
Undivided Interest, each Lessee Person will have been fully reimbursed
for the cost of its investment in the Undivided Interest.
(g) The Undivided Interest will have been "placed in service"
within the meaning of section 168 of the Code prior to the Closing
Date.
(h) Old Dominion will treat the Head Lease as effecting a sale
of the Undivided Interest by Old Dominion to the Owner Participant for
all United States federal, state and local income tax purposes.
(i) The allocation of the Undivided Interest Cost among the
components of the Undivided Interest are as set forth in the Appraisal
(this is not a representation that the Owner Participant is the owner
of the Undivided Interest for federal income tax purposes).
4
<PAGE>
(j) Old Dominion and Virginia Power have effectively elected
to be excluded from the provisions of subchapter K of the Code with
respect to Clover Unit 1 Generation Facility pursuant to section 761(a)
of the Code, and such exclusion election is in full force and effect as
of the Closing Date.
(k) Other than capital improvements which would normally be
expected with a power generating facility similar to Clover Unit 1
Generation Facility, Old Dominion has no plan or expectation, and is
unaware that Virginia Power has any plan or expectation, of making any
capital improvements to Clover Unit 1 Generation Facility during the
Term, except as disclosed in writing to the Appraiser prior to Closing.
(l) The Depreciation Deductions will not fail to be available
to the Owner Participant by reason of section 168(f)(2) of the Code
unless such failure results from the Owner Trustee or the Owner
Participant being a public utility (other than solely by reason of the
transactions contemplated by the Operative Documents).
SECTION 4. INDEMNITY.
(a)(1) If as a result of:
(i) any act or failure to act by a Lessee Person (including
any amendment or supplement to any Operative Document, the Clover
Agreements, the Pollution Control Assets Lease, the Old Dominion
Indenture or Old Dominion Bonds) other than (w) the execution and
delivery of the Operative Documents, the Clover Agreements, the Old
Dominion Indenture or the Pollution Control Assets Lease, (x) any act
required or expressly permitted by any Operative Document (other than
refinancings pursuant to Section 10 of the Participation Agreement and
modifications and substitutions pursuant to Section 7 or 8 of the
Operating Lease), (y) any omission to perform any act, which omission
is required or expressly permitted by any Operative Document and (z)
any act or failure to act taken or not taken at the express written
request of any member of the Lessor Group other than an act or failure
to act that is (I) required by the Operative Documents or (II) a
permitted act or omission excluded by the parenthetical phrase in
clause (x); or
(ii) the breach or inaccuracy of any representation, warranty
or covenant set forth in Section 3(a) through 3(l) of this Agreement or
Sections 7.12 of the Participation Agreement; or
(iii) any Event of Loss or other loss, damage, destruction,
non-use, theft, seizure, confiscation, forfeiture, condemnation,
taking, requisition of title, requisition of use, removal or
replacement of, or substitution to, the Undivided Interest or any
portion thereof; or
(iv) any payment to Old Dominion or any other Person of any
damages, refunds, warranty, indemnity or other similar amounts with
respect to the Undivided Interest or any portion thereof to the extent
such payment is not paid over to or retained by the Owner Trustee or
the Owner Participant; or
5
<PAGE>
(v) any bankruptcy or insolvency of any Lessee Person or any
foreclosure or remedies taken while an Event of Default shall have
occurred and be continuing; or
(vi) the failure on or before two years from the Closing of
Clover Unit 1 to achieve an operating capacity of 391 (net) MW on a
continuous basis while meeting the NOx emission limitations of 0.32
lb./mmbtu and 1,307.2 lb./hr. (in each case as determined on a thirty
day rolling average);
the Owner Participant shall for federal income tax purposes lose, shall not
have, or shall suffer a disallowance of the right to claim, shall suffer a
disallowance, elimination, reduction, disqualification or deferral of, or shall
be required to recapture all or any portion of, or shall not claim (based on a
written opinion of independent tax counsel selected by the Owner Participant and
reasonably acceptable to Old Dominion not less than 30 days prior to the date on
which the tax return is filed on which such claim will not be made, to the
effect that there is no Reasonable Basis to make such claim) the Interest
Deductions, Depreciation Deductions or Amortization Deductions (any of the
events so resulting being referred to hereinafter as a "Loss of Deductions"); or
(2) if as a result of:
(i) any (x) Event of Loss to the extent the actual date on
which the income tax consequences thereof are required to be taken into
account is different from the date assumed in calculating the income
tax consequences reflected in the applicable Termination Value or (y)
refinancings, substitutions or improvements of the Undivided Interest
or any portion thereof; or
(ii) any payment to Old Dominion or any other Person of any
damages, refunds, warranty, indemnity or other similar amounts with
respect to the Undivided Interest or any portion thereof to the extent
such payment is not paid over to or retained by the Owner Trustee or
the Owner Participant; or
(iii) the prepayment of Basic Rent, or any Lessee Person's
taking of a deduction for Basic Rent with respect to a period that is
inconsistent with the allocation of Basic Rent under the Operating
Lease; or
(iv) a change, adjustment or modification of the schedule of
Basic Rent following an Event of Default; or
(v) the payment by any Lessee Person of any contest expenses
in respect of the transactions contemplated by the Operative Documents;
or
(vi) any foreclosure or other pursuit of remedies while an
Event of Default shall have occurred and be continuing; or
(vii) any loss, damage, casualty, theft, taking, confiscation,
requisition, seizure or condemnation of the Undivided Interest or
Clover Unit 1 Generation Facility not constituting an Event of Loss; or
<PAGE>
(viii) the payment by Lessee of any of the expenses of the
Owner Participant, the Owner Trustee, the Trust Estate, or any Lender;
or
(ix) any payments made in connection with the establishment of
a Power Sales Agreement (to the extent that the payment is not made to
the Owner Participant on an AfterTax Basis pursuant to Section 15.3 of
the Operating Lease);
the Owner Participant shall be required to include in gross income for federal
income tax purposes any amount at any time other than as set forth in Section
2(k) (an "Income Inclusion", any "Loss of Deductions" or "Income Inclusion"
being referred to herein as a "Loss"), then Old Dominion will pay to the Owner
Participant an indemnity determined pursuant to Section 4(b) below. If a Loss
shall occur, the Loss shall be deemed to include a corresponding loss of tax
benefits for state and local income tax purposes, as follows: (x) state and
local income tax deductions shall be treated as allowable or lost in the same
amounts, at the same time and to the same extent as the corresponding federal
income tax deduction are allowable or lost, and (y) an Income Inclusion shall be
treated as requiring an inclusion in gross income for sate and local income tax
purposes corresponding in timing and amounts to the inclusion for federal income
tax purposes.
(b) If a Loss shall occur, then Old Dominion will pay to the
Owner Participant as an indemnity an amount, at the election of Old Dominion,
determined in accordance with paragraph (1), (2) or (3) below:
(1) So long as no Event of Default has occurred and is
continuing and Old Dominion's Bonds are rated at least BBB- by S&P or
Baa3 by Moody's, Old Dominion may elect to make indemnity payments in
the form of upward adjustments in the amount of Basic Rent payable by
Old Dominion pursuant to the Operating Lease, commencing on the next
Rent Payment Date after the date the payment obligation commences under
Section 4(c) below and continuing on each Rent Payment Date occurring
thereafter during the Basic Term, in amounts such that, on an After-Tax
Basis, the sum of all such payments provided by this paragraph (1)
shall be at least sufficient to preserve the Net Economic Return of the
Owner Participant as if such Loss had not occurred. The computation
thereof shall be made utilizing the methodology and assumptions,
including the Tax Assumptions, utilized by the Owner Participant in
determining Basic Rent and Termination Value, except as such
assumptions shall be varied to take into account such Loss and any
prior Loss. The computation of such adjustment to Basic Rent under this
paragraph (1) also shall take into account any past, current and
anticipated interest, penalties and additions to tax imposed by the IRS
or any state or local taxing authority and payable by the Owner
Participant as a result of such Loss (other than penalties or additions
to tax payable under the Code or applicable state or local tax law,
together with interest imposed thereon, caused by negligence or
disregard of rules or regulations by the Owner Participant (other than
negligence or disregard of rules or regulations based upon the Owner
Participant's compliance with its obligations under this Agreement,
including its obligations under Section 6 hereof)). Such computation
shall be made assuming that at all times (I) the Owner Participant has
sufficient taxable income to make full use of such Loss in the current
year in which all of the Tax Benefits that are the subject of such Loss
(or result from the Loss or the events giving rise thereto) were
assumed (or, in the case of benefits that result from
7
<PAGE>
the Loss or the events giving rise thereto, are reasonably anticipated)
to be available, and (II) with respect to a Loss of Deductions, the
Owner Participant shall be deemed to pay income taxes at a combined
effective rate equal to the Effective Rate, and with respect to an
Income Inclusion, the Owner Participant shall be deemed to pay income
taxes at the highest combined effective marginal corporate federal
income tax rate and comparable state and local tax rates (calculated by
taking into account the deductibility of state and local tax for
federal income tax purposes) (the "Highest Rate"). Upon the occurrence
of a Event of Default or a termination of the Operating Lease prior to
the scheduled expiration of the Basic Term, there shall thereupon be
immediately due and payable by Old Dominion to the Owner Participant a
lump-sum amount equal to the amount that, after taking into account all
amounts theretofore paid with respect to such Loss pursuant to this
paragraph (1), preserves, on an After-Tax Basis, the Net Economic
Return of the Owner Participant.
(2) If Old Dominion has not elected to pay, or cannot elect to
pay, an indemnity pursuant to either paragraph (1) above or paragraph
(3) below by providing written notice of such election to the Owner
Participant prior to the date that Old Dominion's payment obligation
commences under Section 4(c) below, then Old Dominion shall pay to the
Owner Participant as an indemnity a lump-sum amount which, on an
After-Tax Basis, shall be sufficient to preserve the Net Economic
Return of the Owner Participant as if such Loss had not occurred. The
computation of such lump-sum amount shall be made by the Owner
Participant utilizing the methodology and assumptions, including the
Tax Assumptions, utilized by the Owner Participant in determining Basic
Rent and Termination Value, except as such assumptions shall be varied
to take into account such Loss and any prior Loss. For the purpose of
calculating the amount of income taxes presumed to be payable by the
Owner Participant as a result of such Loss, (I) the Owner Participant
shall be deemed to have sufficient taxable income to make full use of
such Loss in the current year in which all of the Tax Benefits that are
the subject of such Loss (or result from the Loss or the events giving
rise thereto) were assumed (or, in the case of benefits that result
from the Loss or the events giving rise thereto, are reasonably
anticipated) to be available, and (II) with respect to a Loss of
Deductions, the Owner Participant shall be deemed to pay income taxes
at a combined effective rate equal to the Effective Rate and with
respect to an Income Inclusion, the Owner Participant shall be deemed
to pay income taxes at a combined effective rate equal to the Highest
Rate. The computation of such lump-sum amount under this paragraph (2)
also shall take into account any past, current and anticipated
interest, penalties and additions to tax imposed by the IRS or any
state or local taxing authority and payable by the Owner Participant as
a result of such Loss (other than penalties or additions to tax payable
under the Code or applicable state or local tax law, together with
interest imposed thereon, caused by negligence or disregard of rules or
regulations by the Owner Participant (other than negligence or
disregard of rules or regulations based upon the Owner Participant's
compliance with its obligations under this Agreement, including its
obligations under Section 6 hereof)).
(3) So long as no Event of Default has occurred and is
continuing and Old Dominion's Bonds are rated at least BBB- by S&P or
Baa3 by Moody's, Old Dominion may elect to pay to the Owner Participant
as an indemnity from time to time on an After-Tax Basis such amount or
amounts as shall be equal to the additional income taxes assumed to
8
<PAGE>
be payable by the Owner Participant as a result of such Loss as
provided in this paragraph (3). For the purpose of calculating the
amount of income taxes presumed to be payable by the Owner Participant
as a result of such Loss, (I) the Owner Participant shall be deemed to
have sufficient taxable income to make full use of such Loss in the
current year in which all of the Tax Benefits that are the subject of
such Loss (or result from the Loss or the events giving rise thereto)
were assumed (or, in the case of benefits that result from the Loss or
the events giving rise thereto, are reasonably anticipated) to be
available, and (II) with respect to a Loss of Deductions, the Owner
Participant shall be deemed to pay income taxes at a combined effective
rate equal to the Effective Rate, and with respect to an Income
Inclusion, the Owner Participant shall be deemed to pay income taxes at
a combined effective rate equal to the Highest Rate. The computation of
such amount under this paragraph (3) also shall take into account any
past, current or anticipated interest, penalties and additions to tax
imposed by the IRS or any state or local taxing authority and payable
by the Owner Participant as a result of such Loss (other than penalties
or additions to tax payable under the Code or applicable state or local
tax law, together with interest imposed thereon, caused by negligence
or disregard of rules or regulations by the Owner Participant (other
than negligence or disregard of rules or regulations based upon the
Owner Participant's compliance with its obligations under this
Agreement, including its obligations under Section 6 hereof)).
(c) Any amount payable by Old Dominion to the Owner
Participant pursuant to Section 4(b) shall be paid not later than (or, in the
case of a Basic Rent increase under Section 4(b)(1) hereof, shall commence not
later the next Rent Payment Date after) the latest to occur of (i) 30 days
following Old Dominion's receipt of the Owner Participant's written notice to
Old Dominion pursuant to Section 6 hereof, (ii) if any such indemnity payment
relates to a Loss that is contested pursuant to Section 6 hereof, 30 days
following the date of a Final Determination with respect to such Loss, and (iii)
if Old Dominion shall elect to indemnify the Owner Participant pursuant to
paragraph (3) of Section 4(b) hereof, the date which is five Business Days prior
to the date on which the Owner Participant shall be required to pay the
additional federal income taxes in question (such date to be determined based on
the assumptions set forth in Section 4(b)(3) hereof); PROVIDED, HOWEVER, that
the date required for payment (or commencement of a Basic Rent increase under
Section 4(b)(1) hereof) shall not be earlier than 10 days following the delivery
to Old Dominion of the Officer's Certificate required pursuant to Section 4(d)
hereof, or, if Old Dominion shall seek verification pursuant to Section 4(d)
hereof, 10 days following the completion of such verification; and PROVIDED,
FURTHER, Old Dominion shall pay interest on the amount ultimately determined to
be due pursuant to such verification from the date such payment otherwise would
have been due at the rate applicable to underpayments of federal income taxes
for the period in question. If Old Dominion shall elect to pay such sum prior to
the later of the dates described in clauses (i), (ii) and (iii) of the preceding
sentence, then Old Dominion shall not be required to pay the Owner Participant
the amount of any interest, penalties or additions to tax that shall be
attributable to the period following such payment by Old Dominion if there is a
procedure whereby the Owner Participant can make a payment or deposit only with
respect to the Loss that will stop the accumulation of such interest, penalties
or additions to tax and that will not have any unindemnified or material adverse
financial effect on the Owner Participant or adversely affect the Owner
Participant's right to contest vigorously any claims the IRS may have with
respect to matters other than matters related to the transactions contemplated
by the Operative Documents for which Old
9
<PAGE>
Dominion is providing full indemnification (and the Owner Participant will
promptly return any such sum to Old Dominion at its written request therefor if
no such procedure is available).
(d) When requesting payment by Old Dominion pursuant to this
Section 4, the Owner Participant shall, not less than 10 days prior to the
latest of the dates described in clauses (i), (ii) and (iii) of Section 4(c),
deliver to Old Dominion an Officer's Certificate setting forth the amount
payable by Old Dominion and computing in reasonable detail such amount under
Section 4(b). If Old Dominion shall disagree with the Owner Participant's
calculation of the amount to be paid by Old Dominion under Section 4(b), such
amount shall be verified by independent nationally recognized accountants
selected by the Owner Participant and reasonably acceptable to Old Dominion (the
"Independent Public Accountants"). The costs of such verification shall be borne
by Old Dominion unless such verification shall result in an adjustment in Old
Dominion's favor of ten percent or more of the net present value (using a
discount rate equal to the rate applicable to underpayments of federal income
taxes for the period in question and calculating such value as of the date such
payment becomes due and payable or commences under this Agreement) of the
indemnity payment or payments computed by the Owner Participant, in which case
such costs shall be borne by the Owner Participant. The Owner Participant agrees
to cooperate with such Independent Public Accountants and to supply them with
all information reasonably necessary to permit them to accomplish such review
and determination. Such information shall be for the confidential use of the
Independent Public Accountants and shall not be disclosed to Old Dominion or to
any other Person. Old Dominion and the Owner Participant agree that the sole
responsibility of the Independent Public Accountants shall be to verify the
calculation of payments pursuant to paragraphs (1), (2) or (3) of Section 4(b)
(setting forth fully the assumptions on which such verification is based) and
that matters of interpretation of this Agreement are not within the scope of the
Independent Public Accountants' responsibility. Neither the Independent Public
Accountants nor Old Dominion will have any right to examine the tax returns of
the Owner Participant in connection with the verification procedure described in
this Section 4(d) or otherwise.
(e) Notwithstanding the foregoing and any other provision of
this Agreement or the other Operative Documents, Old Dominion shall not have any
liability to the Owner Participant for indemnification under this Section 4 for
any Loss (or any interest, penalties or additions to tax with respect to such
Loss) if such Loss results from one or more of the following:
(i) any voluntary or involuntary sale, transfer or other
disposition by the Owner Trustee or the Owner Participant or an
Affiliate of either (each a "member of the Lessor Group", and
collectively, the "Lessor Group") of (x) any interest in or arising
under the Operative Documents, (y) the Undivided Interest or any
interest therein or (z) any interest in the Owner Participant, the
Owner Trustee or any Affiliate of the Owner Participant, unless in each
case, such sale, transfer or other disposition is in connection with
the pursuit of remedies upon the occurrence and continuance of an Event
of Default;
(ii) any Event of Loss or any other event whereby Old Dominion
is required to pay, and shall have paid in full, Termination Value or
an amount determined by reference thereto, except to the extent that
the Termination Value or such amount determined by reference thereto,
as the case may be, does not properly reflect the timing of the Loss
resulting from such event;
10
<PAGE>
(iii) the failure of a member of the Lessor Group to have
sufficient taxable income to benefit from any of the benefits described
in the Tax Assumptions;
(iv) any amendment to or change in the Code, Treasury
Regulations, administrative pronouncements, executive order or judicial
decision (a "Tax Change") which shall occur after the Closing Date,
other than in respect of refinancings, or substitutions or improvements
which are not required substitutions or improvements;
(v) the failure for federal income tax purposes of (x) the
Head Lease to be treated as a sale of the Undivided Interest to the
Owner Trustee or the prepaid rent under the Head Lease to be treated as
the purchase price of such sale, (y) the Operating Lease to treated as
a "true lease" or (z) the Owner Trustee to be considered the borrower
under the Loans or the owner of the Undivided Interest, unless, in each
case, such failure is the result of any event described in clause (i)
or (ii) of Section 4(a)(1) hereof;
(vi) any fraud, willful misconduct or gross negligence of a
member of the Lessor Group;
(vii) the failure of a member of the Lessor Group to file any
tax return in accordance with the appropriate filing procedure and to
timely file such tax return, unless as the result of Old Dominion's
failure to provide the Owner Trustee with information which Old
Dominion is required to give to the Owner Trustee and which is
necessary to so timely file;
(viii) the failure of the appropriate member of the Lessor
Group to contest a proposed adjustment in accordance with, and to the
extent required by Section 6 of this Agreement, if such failure
precludes or materially adversely effects the initiation or
continuation of such contest;
(ix) the failure of the Trust to be treated as a grantor
trust for federal income tax purposes;
(x) any member of the Lessor Group being or becoming for
federal income tax purposes a charitable organization, a tax-exempt
entity within the meaning of section 168(h) of the Code, an agency or
instrumentality of the United States, a state or political subdivision
thereof or an international organization or the status of a member of
the Lessor Group as an entity subject to the provisions of sections 55,
56, 57, 58, 59, 59A, 291, 465, 469, 501, 542, 552, 851, 856 or 1361 of
the Code;
(xi) the application of section 467 of the Code or, except as
to substitutions, section 168(d)(3) of the Code;
(xii) a change in the Owner Participant's taxable year or the
Owner Participant having a short taxable year;
11
<PAGE>
(xiii) the inclusion in income by the Owner Participant upon
termination of the Operating Lease of amounts attributable to
improvements, modifications or additions to the Undivided Interest;
(xiv) the failure of the Owner Participant to have an initial
tax basis in the Undivided Interest equal to the Undivided Interest
Cost, other than as a result of an event described in clause (i) or
(ii) of Section 4(a)(1) hereof;
(xv) an amendment, supplement, modification or waiver to any
Operative Document to which any member of the Lessor Group is a party
and to which Old Dominion is not a party, which is not initiated or
requested by or consented to by Old Dominion in writing unless (x) it
may be necessary or appropriate to, and is in conformity with, any such
amendment, supplement, modification or waiver initiated or requested by
or consented to by Old Dominion in writing or (y) it is required by the
terms of the Operative Documents; and
(xvi) penalties or additions to tax under section 6662 or 6663
of the Code or relating to estimated tax, in either case to the extent
resulting from or measured by matters unrelated to the transactions
contemplated by the Operative Documents.
SECTION 5. TAX SAVINGS.
If Old Dominion indemnifies the Owner Participant with respect
to any Loss pursuant to Section 4(a) hereof, and the Owner Participant shall
realize with respect to any year federal income tax savings that would not have
been realized but for such Loss or the events giving rise thereto and which tax
savings were not taken into account in calculating Old Dominion's indemnity
payment to the Owner Participant, then the Owner Participant shall pay to Old
Dominion an amount equal to the sum of (i) such federal income tax savings and
(ii), in the case of an Income Inclusion, the amount of any state and local
income tax savings and (iii) any tax benefit realized by the Owner Participant
from the payment contemplated by clauses (i) and (ii) above; PROVIDED, HOWEVER,
that for the purpose of calculating the amount of the federal, state and local
income tax savings realized by the Owner Participant, (A) the Owner Participant
shall be deemed to have sufficient federal, state and local taxable income to
make full use in the current year of all of the tax benefits that would not have
been realized but for such Loss or the events giving rise thereto, (B) the Owner
Participant shall be deemed to have state and local income tax consequences that
correspond to the Owner Participant's federal income tax consequences, and (C)
with respect to tax savings related to a Loss of Deductions, the Owner
Participant shall be deemed to have paid income taxes at the Effective Rate, and
with respect to tax savings related to an Income Inclusion or a tax benefit
realized from a payment hereunder, the Owner Participant shall be deemed to have
paid income taxes at the Highest Rate; and PROVIDED, FURTHER, that the amount
payable by the Owner Participant to Old Dominion pursuant to clauses (i) and
(ii) of this Section 5 shall not exceed the excess of the amount of all prior
payments made to the Owner Participant by Old Dominion pursuant to Section 4
hereof with respect to the Loss that gave rise to such tax savings (net of any
amount necessary to make such prior payments on an After-Tax Basis) over the
amounts previously paid by the Owner Participant to Old Dominion pursuant to
clauses (i) and (ii) of this Section 5 with respect to such Loss; and PROVIDED,
FURTHER, that any such excess shall be carried forward and shall offset, to the
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<PAGE>
extent thereof, any future liability of Old Dominion under Sections 4 and 8
hereof with respect to such Loss. The loss of any tax savings subsequent to the
year of realization by the Owner Participant shall be treated as a Loss that is
indemnifiable pursuant to the provisions of this Agreement other than Section
4(d) hereof, but only to the extent of any payment by the Owner Participant
pursuant to this Section 5 with respect to such tax savings. Any payment due to
Old Dominion pursuant to this Section 5 shall be paid promptly and in any event
within 30 days after the Owner Participant shall realize the tax savings as
determined in accordance with the calculation methods and assumptions set forth
in this Section 5; PROVIDED, HOWEVER, that such amount shall not be payable
during the continuation of a Event of Default or before such time as Old
Dominion shall have made all payments or indemnities then due pursuant to this
Agreement.
SECTION 6. CONTESTS.
(a) If an adjustment shall be proposed by the IRS in writing
that, if sustained, would result in a Loss for which Old Dominion could be
required to indemnify the Owner Participant under this Agreement, the Owner
Participant agrees promptly to notify Old Dominion in writing of such proposed
adjustment; PROVIDED, HOWEVER, that any failure to provide such notice shall not
relieve Old Dominion of any obligation to indemnify the Owner Participant
hereunder unless such failure precludes or materially adversely effects the
initiation or continuation of the contest of such adjustment. If (i) within 90
days after receipt of such notice Old Dominion shall request in writing that the
Owner Participant contest such proposed adjustment and (ii) the Owner
Participant shall have received, at the commencement of the contest and before
each level of judicial proceeding, an opinion of Independent Tax Counsel, to the
effect that there is a Reasonable Basis for contesting the proposed adjustment
(and, in the case of an appeal from an adverse judicial determination, an
opinion from such counsel to the effect that there is a substantial possibility
(which is a higher standard than Reasonable Basis, although it is not
necessarily more likely than not) that such adverse determination will be
reversed or substantially modified upon appeal in a manner favorable to the
taxpayer) (which opinions (a) will be furnished at Old Dominion's expense, and
(b) the Owner Participant will assist in good faith and with diligence in
promptly procuring), the Owner Participant shall contest such proposed
adjustment; PROVIDED, HOWEVER, that the Owner Participant may, in its sole
discretion, either pay the tax proposed and sue for a refund or contest the
proposed adjustment in any permissible forum considering, however, in good faith
such requests as Old Dominion may make concerning the most appropriate forum in
which to proceed. Notwithstanding the foregoing, the Owner Participant shall not
be required to pursue any such contest unless (v) Old Dominion shall have agreed
in writing to pay and shall pay on demand all reasonable costs and expenses that
the Owner Participant shall incur in connection with contesting such proposed
adjustment, including, without limitation, reasonable attorneys', accountants'
and investigatory fees and disbursements; (w) the proposed adjustment that could
result in a payment by Old Dominion (if a lump-sum amount were to be paid
pursuant to Section 4(b)(2) hereof) in connection with such proposed adjustment,
taking into account the amount of all similar and logically related adjustments
with respect to the transactions contemplated by the Operative Documents that
could be raised in an audit of any other taxable year of the Owner Participant
(including any future taxable year) not barred by the statute of limitations
shall be at least $100,000 and at least $250,000 with respect to any judicial
appeal; (x) no Payment Default or Event of Default shall have occurred and be
continuing; and (y) if the Owner Participant shall determine to pay the tax
proposed and sue for a
13
<PAGE>
refund, Old Dominion shall advance to the Owner Participant on an interest-free
basis and with no additional net after-tax cost to the Owner Participant
sufficient funds to pay the tax and interest, penalties and additions to tax
payable with respect thereto (to the extent such amount is indemnified against
pursuant to Section 4 hereof (an "Advance")); and PROVIDED, HOWEVER, that the
Owner Participant shall not be required to pursue any appeal to the United
States Supreme Court.
(b) The Owner Participant also shall not be required to
contest any proposed adjustment if the subject matter thereof shall be of a
continuing nature and there shall have been a Final Determination with respect
thereto, unless there shall have been a change in facts or law (including,
without limitation, amendments to statutes or Treasury Regulations,
administrative rulings and court decisions), and the Owner Participant shall
have received an opinion of Independent Tax Counsel (which opinion (i) will be
furnished at Old Dominion's expense, and (ii) the Owner Participant will assist
in good faith and with diligence in promptly procuring) to the effect that as
the result of such change in facts or law there is a substantial possibility
(which is a higher standard than Reasonable Basis, although it is not
necessarily more likely than not) that the Owner Participant will prevail in the
contest of such proposed adjustment.
(c) In connection with any proposed adjustment described in
Section 6(a) hereof, the Owner Participant shall not make payment of such
proposed adjustment for at least 30 days after the giving of written notice of
such proposed adjustment to Old Dominion (except that if the Owner Participant
shall be required by law or regulation to take action with respect to any such
adjustment prior to the end of such 30-day period, the Owner Participant shall,
in such notice to Old Dominion, so inform Old Dominion, and the Owner
Participant shall not take any action with respect to such adjustment without
the consent of Old Dominion (not unreasonably to be withheld) before the date on
which the Owner Participant shall be required to take action). Notwithstanding
anything herein to the contrary, the Owner Participant shall have full control
over any contest pursuant to this Section 6 and shall determine in its sole
discretion the nature of all actions to be taken in connection with any contest
including the right to pursue or forego any administrative proceedings;
PROVIDED, HOWEVER, that the Owner Participant shall contest such claim at the
administrative level if such action shall be necessary to preserve available
judicial remedies; and PROVIDED, FURTHER, the Owner Participant shall consult in
good faith with Old Dominion and its counsel in the contest of any claim and
shall keep such counsel reasonably informed regarding such contest. Nothing
contained in this Section 6 shall require the Owner Participant to contest a
proposed adjustment that it would otherwise be required to contest pursuant to
this Section 6 if the Owner Participant (i) waives the payment by Old Dominion
of any amount that might otherwise be payable by Old Dominion under this
Agreement by way of indemnity in respect of such proposed adjustment and (ii)
pays to Old Dominion any amount of taxes, interest, penalties and additions to
tax previously paid or advanced by Old Dominion pursuant to this Agreement with
respect to such proposed adjustment, plus interest on such amounts at the IRS
rate for refunds, payable from the date of payment by Old Dominion to the Owner
Participant of such amounts to (but excluding) the date of repayment of such
amounts by the Owner Participant to Old Dominion; PROVIDED, HOWEVER, that if the
Owner Participant settles a proposed adjustment such that Old Dominion is
precluded as a matter of law from initiating or continuing a contest hereunder
of any adjustment for any other taxable period, the Owner Participant shall be
deemed to have waived the payment by Old Dominion under this Agreement of any
indemnity amounts in respect of such other adjustment.
14
<PAGE>
(d) If Old Dominion shall have requested the Owner Participant
to contest a proposed adjustment as above provided and shall have duly complied
with all the terms of this Section 6, Old Dominion's liability for
indemnification due under Section 4 hereof shall, at Old Dominion's election
(except for amounts provided for under Section 6(a) hereof), be deferred until
Final Determination of the liability of the Owner Participant. At such time, Old
Dominion shall become obligated for the payment of any indemnification due under
Section 4 hereof resulting from the outcome of such contest. Upon payment in
full by Old Dominion of any indemnity amounts due under this Agreement, the
Owner Participant shall become obligated to refund to Old Dominion an amount
equal to any amount received as a refund of income taxes by the Owner
Participant or credited to the Owner Participant (including any refund or credit
that would have been received but for a counterclaim or other claim not
indemnified by Old Dominion hereunder) that is fairly attributable to advances
or indemnity payments made by Old Dominion under this Agreement, together with
any interest received (or that would have been received) by the Owner
Participant on such refund, plus an amount equal to any tax benefit realized by
the Owner Participant as the result of the payment contemplated by this
sentence. Such obligations of the Owner Participant and Old Dominion will first
be set off against each other, and any difference owing by either party shall be
paid within 30 days after such Final Determination but not prior to the date
determined in accordance with Section 4(b) hereof.
SECTION 7. CERTAIN ADJUSTMENTS.
If Old Dominion shall become obligated to make payments under
this Agreement, the Owner Participant shall, if appropriate, make adjustments to
the schedules of Termination Value and the Purchase Option Price to preserve its
Net Economic Return and to prevent any duplication of payments or any payment
for Losses previously paid. If an event giving rise to the payment of an amount
determined by reference to a schedule of Termination Values shall occur and the
date as of which the Owner Participant shall be affected for tax purposes shall
be earlier than the date taken into account in computing such schedule, such
values shall be appropriately adjusted based otherwise on the same methodology
and assumptions previously used by the Owner Participant in calculating such
schedule.
SECTION 8. MISCELLANEOUS.
(a) PAYMENTS. Any payments to be made to the Owner Participant
pursuant to this Agreement shall constitute Supplemental Rent and shall be made
directly to the Owner Participant. All payments to be made hereunder shall be
made by wire transfer of immediately available funds to a bank account of the
Owner Participant or Old Dominion, as the case may be, in the continental United
States as specified by the recipient thereof in written directions to the payor,
or if no such direction shall have been given, by check of the payor or any
Affiliate thereof payable to the order of the recipient thereof and mailed to
the recipient thereof by certified mail, postage prepaid, at its address as set
forth in the Participation Agreement.
15
<PAGE>
(b) LATE PAYMENTS. Any late payment by either party of any
of its obligations under this Agreement shall result in the obligation on the
part of such party promptly to pay an amount equal to interest at the Overdue
Rate.
(c) EFFECT OF OTHER INDEMNITIES. Old Dominion's obligations
under the indemnities provided for in this Agreement shall be those of a primary
obligor whether or not the Owner Participant shall also be indemnified with
respect to the same matter under the terms of the Participation Agreement, the
Trust Agreement or any other document or instrument, and the Owner Participant
may in seeking indemnification from Old Dominion pursuant to any provisions of
this Agreement proceed directly against Old Dominion without first seeking to
enforce any other right of indemnification.
(d) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Agreement shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
(e) SURVIVAL. All warranties, representations and covenants
made by either party hereto, herein or in any certificate or other instrument
delivered by either such party or on the behalf of either such party under this
Agreement, shall be considered to have been relied upon by the other party
hereto and shall survive the consummation of the transactions contemplated
hereby on the Closing Date regardless of any investigation made by either party
or on behalf of either party. The obligations and liabilities of the parties
arising under this Agreement shall continue in full force and effect,
notwithstanding the assignment, expiration or other termination of the Operating
Lease, until all such obligations have been met and such liabilities have been
paid in full, whether by expiration of time, by operation of law or otherwise.
(f) AMENDMENTS AND WAIVERS. No term, covenant, agreement or
condition of this Agreement may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto.
(g) COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together only one instrument.
(h) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of, and shall be enforceable by, the parties
hereto and their respective successors and assigns as permitted by and in
accordance with the terms hereof, including each successive holder of the
Beneficial Interest permitted under Section 5.1 of the Participation Agreement.
Except as expressly provided herein or in the other Operative Documents, neither
party hereto may assign its interests herein without the consent of the other
party hereto.
(i) HEADINGS AND TABLE OF CONTENTS. The headings of the
sections of this Agreement and the Table of Contents are inserted for purposes
of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
16
<PAGE>
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE IN ALL RESPECTS
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
(k) NOTICES. Unless otherwise expressly specified or permitted
by the terms of this Tax Indemnity Agreement, all communications and notices
provided for herein to a party hereto shall be in writing or by a
telecommunications device capable of creating a written record, and any such
notice shall become effective (i) upon personal delivery thereof, including,
without limitation, by overnight mail or courier service, (ii) in the case of
notice by United States mail, certified or registered, postage prepaid, return
receipt requested, upon receipt thereof, or (iii) in the case of notice by such
a telecommunications device, upon transmission thereof, PROVIDED such
transmission is promptly confirmed by either of the methods set forth in clauses
(i) or (ii) above, in each case addressed to such party at its address set forth
in the Participation Agreement or at such other address as such party may from
time to time designate by written notice to the other party hereto.
(l) RECORDS. Old Dominion covenants that it will maintain or
cause to be maintained and retain sufficient factual records (to the extent such
records are maintained by Old Dominion, any sublessee, or any trustee for or
Affiliate of any thereof, in the ordinary course of their respective businesses)
to enable the Owner Participant to prepare required United States federal, state
and local income tax returns. Upon the request of the Owner Participant, Old
Dominion shall deliver such records to the Owner Participant at the expense of
Old Dominion. In addition, as soon as practicable, Old Dominion shall provide or
cause to be provided (at the expense of Old Dominion) to the Owner Participant
such information (in form and substance reasonably satisfactory to the Owner
Participant) as the Owner Participant may reasonably request from and as shall
be reasonably available to Old Dominion or any sublessee, trustee or Affiliate
to enable the Owner Participant to fulfill its tax return filing obligations, to
respond to requests for information, to verify information in connection with
any income tax audit and to participate effectively in any tax contest.
(m) EFFECTIVENESS OF AGREEMENT. This Agreement has been dated
as of the date first above written for convenience only. This Agreement shall be
effective on the date of execution and delivery by each of Old Dominion and the
Owner Participant.
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IN WITNESS WHEREOF, the parties hereto have caused this Tax
Indemnity Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized.
OLD DOMINION ELECTRIC COOPERATIVE
By: /s/ DANIEL M. WALKER
-----------------------------------------
Daniel M. Walker
Vice President of Accounting and Finance
Date: March 1, 1996
FIRST UNION NATIONAL BANK OF FLORIDA,
as Owner Participant
By: /s/ DAVID G. TAYLOR
-----------------------------------------
Name: David G. Taylor
Title: Senior Vice President
Date: March 1, 1996
- - --------------------------------------------------------------------------------
PARTICIPATION AGREEMENT
Dated as of July 1, 1996
among
OLD DOMINION ELECTRIC COOPERATIVE,
CLOVER UNIT 2 GENERATING TRUST,
WILMINGTON TRUST COMPANY,
EPC CORPORATION
and
UTRECHT-AMERICA FINANCE CO.
Clover Unit 2 Generating Facility
and
Common Facilities
- - --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION
AGREEMENT.................................................................................. 1
SECTION 1.1. DEFINITIONS........................................................... 1
SECTION 1.2. DIRECTLY OR INDIRECTLY................................................ 2
SECTION 2. PARTICIPATION; CLOSING DATE; TRANSACTION COSTS............................................. 2
SECTION 2.1. AGREEMENTS TO PARTICIPATE............................................. 2
SECTION 2.2. CLOSING DATE; PROCEDURE FOR PARTICIPATION............................. 3
SECTION 2.3. OWNER PARTICIPANT'S INSTRUCTIONS TO THE OWNER TRUSTEE................. 5
SECTION 2.4. TRANSACTION COSTS..................................................... 5
SECTION 3. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS......................................... 5
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE OWNER TRUSTEE AND THE
TRUST COMPANY......................................................... 5
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF THE OWNER PARTICIPANT............... 7
SECTION 3.3. REPRESENTATIONS AND WARRANTIES OF OLD DOMINION........................ 8
SECTION 3.4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF EACH ORIGINAL LENDER.... 14
SECTION 3.5. REPRESENTATIONS AND WARRANTIES OF THE AGENT........................... 14
SECTION 3.6. REPRESENTATIONS AND WARRANTIES OF THE FACILITY OWNER.................. 15
SECTION 4. CLOSING CONDITIONS......................................................................... 16
SECTION 4.1. OPERATIVE DOCUMENTS................................................... 16
SECTION 4.2. EQUITY INVESTMENT; LOANS.............................................. 17
SECTION 4.3. EQUITY COLLATERAL..................................................... 17
SECTION 4.4. PAYMENT UNDERTAKING................................................... 17
SECTION 4.5. CERTIFIED COPIES...................................................... 17
SECTION 4.6. CORPORATE DOCUMENTS................................................... 17
SECTION 4.7. NO DEFAULTS........................................................... 17
SECTION 4.8. NO THREATENED PROCEEDINGS............................................. 17
SECTION 4.9. CONSENTS.............................................................. 18
SECTION 4.10. GOVERNMENTAL ACTIONS.................................................. 18
SECTION 4.11. INSURANCE............................................................. 18
SECTION 4.12. ENGINEERING REPORT.................................................... 18
SECTION 4.13. SURVEY................................................................ 19
SECTION 4.14. APPRAISAL............................................................. 19
SECTION 4.15. INVESTMENT BANKING OPINION............................................ 19
SECTION 4.16. OPINION WITH RESPECT TO CERTAIN TAX ASPECTS........................... 19
</TABLE>
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SECTION 4.17. OPINION OF COUNSEL.................................................... 19
SECTION 4.18. RECORDINGS AND FILINGS................................................ 19
SECTION 4.19. INTENTIONALLY LEFT BLANK.............................................. 20
SECTION 4.20. CHANGE IN LAW......................................................... 20
SECTION 4.21. QUALIFIED INTERMEDIARY EXCHANGE AGREEMENTS............................ 20
SECTION 4.22. GUARANTY AGREEMENT.................................................... 20
SECTION 4.23. PURCHASE AGREEMENT.................................................... 20
SECTION 5. CERTAIN COVENANTS OF THE OWNER PARTICIPANT................................................. 20
SECTION 5.1. RESTRICTIONS ON TRANSFER OF BENEFICIAL INTEREST....................... 20
SECTION 5.2. OWNER PARTICIPANT'S LIENS............................................. 21
SECTION 5.3. AMENDMENTS OR REVOCATION OF TRUST AGREEMENT........................... 22
SECTION 5.4. FACILITY OWNER; TRUST ESTATE.......................................... 22
SECTION 5.5. APPOINTMENT OF SUCCESSOR OWNER TRUSTEE OR CO-TRUSTEES................. 22
SECTION 6. COVENANTS OF THE TRUST COMPANY, THE OWNER TRUSTEE AND THE FACILITY OWNER................... 22
SECTION 6.1. COMPLIANCE WITH THE TRUST AGREEMENT................................... 22
SECTION 6.2. FACILITY OWNER'S LIENS................................................ 23
SECTION 6.3. AMENDMENTS TO OPERATIVE DOCUMENTS..................................... 23
SECTION 6.4. TRANSFER OF THE FACILITY OWNER'S UNIT 2 INTEREST...................... 23
SECTION 6.5. FACILITY OWNER; TRUST ESTATE.......................................... 23
SECTION 6.6. LIMITATION ON INDEBTEDNESS AND ACTIONS................................ 23
SECTION 6.7. CHANGE OF LOCATION.................................................... 23
SECTION 6.8. ASSIGNMENT OF PAYMENT UNDERTAKING AGREEMENT........................... 24
SECTION 7. COVENANTS OF OLD DOMINION.................................................................. 24
SECTION 7.1. MAINTENANCE OF CORPORATE EXISTENCE.................................... 24
SECTION 7.2. MERGER, CONSOLIDATION, SALE OF ASSETS................................. 24
SECTION 7.3. NOTICE OF CHANGE IN ADDRESS OR NAME................................... 25
SECTION 7.4. EXERCISE OF EARLY PURCHASE OPTION UNDER POLLUTION CONTROL ASSETS
LEASE................................................................. 25
SECTION 7.5. DELIVERY OF FINANCIAL STATEMENTS AND NO DEFAULT CERTIFICATE........... 25
SECTION 7.6. EQUITY SECURITY DEPOSIT............................................... 26
SECTION 7.7. INTENTIONALLY LEFT BLANK.............................................. 26
SECTION 7.8. SURETY BOND........................................................... 26
SECTION 7.9. QUALIFYING LETTER OF CREDIT........................................... 27
SECTION 7.10. INFORMATION CONCERNING CLOVER UNIT 2.................................. 27
SECTION 7.11. FURTHER ASSURANCES.................................................... 28
SECTION 7.12. AMENDMENT OF CERTAIN DOCUMENTS........................................ 28
SECTION 7.13. LOAN CERTIFICATES..................................................... 28
SECTION 7.14. POST-TERM ARRANGEMENTS................................................ 28
</TABLE>
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SECTION 8. OLD DOMINION'S INDEMNIFICATIONS............................................................ 29
SECTION 8.1. GENERAL INDEMNITY..................................................... 29
SECTION 8.2. GENERAL TAX INDEMNITY................................................. 34
SECTION 8.3. SURVIVAL.............................................................. 44
SECTION 9. OLD DOMINION'S RIGHT OF QUIET ENJOYMENT.................................................... 44
SECTION 10. SUPPLEMENTAL FINANCING; LOAN PREPAYMENTS AND REFINANCINGS.................................. 44
SECTION 10.1. FINANCING MODIFICATIONS............................................... 44
SECTION 10.2. OPTIONAL REFINANCING OF THE SERIES A LOAN CERTIFICATE................. 46
SECTION 10.3. FINANCING AND REFINANCING COSTS....................................... 48
SECTION 11. CONVEYANCE OF TITLE TO RETAINED ASSETS..................................................... 48
SECTION 12. SPECIAL EQUITY REMEDY...................................................................... 50
SECTION 13. AGREEMENTS CONCERNING PAYMENT UNDERTAKING AGREEMENT........................................ 51
SECTION 13.1. AGREEMENT CONCERNING DATES IN PAYMENT UNDERTAKING AGREEMENT........... 51
SECTION 13.2. PAYMENT OF EXCESS AMOUNTS............................................. 51
SECTION 13.3. PAYMENT DIRECTION BY FACILITY OWNER................................... 51
SECTION 14. MISCELLANEOUS.............................................................................. 52
SECTION 14.1. CONSENTS.............................................................. 52
SECTION 14.2. BANKRUPTCY OF TRUST ESTATE............................................ 52
SECTION 14.3. AMENDMENTS AND WAIVERS................................................ 52
SECTION 14.4. NOTICES............................................................... 52
SECTION 14.5. SURVIVAL.............................................................. 54
SECTION 14.6. SUCCESSORS AND ASSIGNS................................................ 54
SECTION 14.7. BUSINESS DAY.......................................................... 55
SECTION 14.8. GOVERNING LAW......................................................... 55
SECTION 14.9. SEVERABILITY.......................................................... 55
SECTION 14.10. COUNTERPARTS.......................................................... 55
SECTION 14.11. HEADINGS AND TABLE OF CONTENTS........................................ 55
SECTION 14.12. LIMITATIONS OF LIABILITY.............................................. 55
SECTION 14.13. CONSENT TO JURISDICTION; WAIVER OF TRIAL BY JURY...................... 56
SECTION 14.14. FURTHER ASSURANCES.................................................... 57
SECTION 14.15. EFFECTIVENESS......................................................... 57
SECTION 14.16. MEASURING LIFE........................................................ 57
</TABLE>
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Attachments to Participation Agreement:
Appendix A - Definitions
Schedule 1 - Transaction Costs
Schedule 2 - Recordings and Filings
Schedule 3 - Equity Exposure Amounts
Exhibit A - Intentionally Omitted
Exhibit B - Form of Trust Agreement
Exhibit C - Form of Head Equipment Agreement
Exhibit D - Form of Head Foundation Agreement
Exhibit E - Form of Ground Lease and Sublease
Exhibit F - Form of Clover Agreements Assignment
Exhibit G - Form of Operating Equipment Agreement
Exhibit H - Form of Operating Foundation Agreement
Exhibit I - Form of Loan Agreement
Exhibit J - Form of Leasehold Mortgage
Exhibit K - Form of Payment Undertaking Agreement
Exhibit L - Form of Payment Undertaking Pledge Agreement
Exhibit M - Form of Equity Security Pledge Agreement
Exhibit N - Form of Investment Agreement
Exhibit O - Form of Investment Agreement Pledge Agreement
Exhibit P - Form of Assumption Agreement
Exhibit Q - Form of Guaranty
Exhibit R - Form of Surety Bond
Exhibit S - Form of Subordinated Mortgage
Exhibit T - Form of Subordinated Security Agreement
Exhibit U - Form of Operating Agency Agreement
Exhibit V - Form of Assignment and Acceptance of
Replacement Property Contract
Exhibit W - Form of Old Dominion Agreement
with Qualified Intermediary
Exhibit X - Form of Notice of Assignment of Replacement
Property Contract
Exhibit Y - Form of Direction of Transfer
Exhibit Z - Form of Reassignment and Reacceptance of
Replacement Property Contract
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PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT, dated as of July 1, 1996 (this
"Participation Agreement" or this "Agreement"), among (i) OLD DOMINION ELECTRIC
COOPERATIVE, a wholesale power supply cooperative organized under the laws of
the Commonwealth of Virginia (herein together with its successors and assigns,
called "Old Dominion"), (ii) CLOVER UNIT 2 GENERATING TRUST, a Delaware business
trust (herein together with its successors and assigns called the "Facility
Owner") created pursuant to the Trust Agreement (as hereinafter defined), (iii)
EPC CORPORATION, a Delaware corporation, as Owner Participant (herein in such
capacity, together with its successors and assigns, called the "Owner
Participant"), (iv) WILMINGTON TRUST COMPANY, not in its individual capacity,
except as specifically provided herein, but solely as trustee under the Trust
Agreement (herein in its capacity as trustee under the Trust Agreement, together
with its successors and assigns, called the "Owner Trustee" and herein in its
individual capacity, together with its successors and assigns, called the "Trust
Company") and (v) UTRECHT-AMERICA FINANCE CO., a Delaware corporation, as the
Series A Lender and initial Series B Lender (herein in such capacity, together
with its successors and assigns, called the "Original Lenders") and as Agent for
the Lenders (herein in such capacity, together with its successors and assigns,
called the "Agent").
WITNESSETH:
WHEREAS, concurrently with the execution and delivery of this
Participation Agreement, the Owner Participant has entered into the Trust
Agreement, pursuant to which the Facility Owner agrees, among other things and
subject to the terms and conditions thereof and hereof, to lease the Ground
Interest from Old Dominion pursuant to the Ground Lease and Sublease and to
acquire the Equipment Interest and the Foundation Interest for a term of years
from Old Dominion pursuant to the Head Equipment Agreement and the Head
Foundation Agreement, respectively, and concurrently therewith sublease such
Ground Interest to Old Dominion under the Ground Lease and Sublease and convey
the use and possession of the Equipment Interest and Foundation Interest to Old
Dominion for a term of years under the Operating Equipment Agreement and the
Operating Foundation Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION
AGREEMENT
SECTION 1.1. DEFINITIONS. The capitalized terms used in this
Participation Agreement (including the foregoing recitals) and not otherwise
defined herein shall have the respective meanings specified in Appendix A
hereto.
<PAGE>
SECTION 1.2. DIRECTLY OR INDIRECTLY. Where any provision in this
Participation Agreement refers to action to be taken by any Person, or which
such Person is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Person.
SECTION 2. PARTICIPATION; CLOSING DATE; TRANSACTION COSTS
SECTION 2.1. AGREEMENTS TO PARTICIPATE. Subject to the terms and
conditions of this Agreement, and in reliance on the agreements, representations
and warranties made herein, the parties agree to participate in the transactions
described in this Section 2.1 on the Closing Date as follows:
(1) The Owner Participant agrees to make an Equity Investment
in the Facility Owner in an amount equal to (a) the Owner Participant's
Commitment and (b) an amount sufficient to pay the Transaction Costs
which the Facility Owner is responsible to pay pursuant to Section
2.4(a) hereof. The Equity Investment in the Facility Owner equal to the
Owner Participant's Commitment may be made by paying that amount to, or
at the direction of, the Qualified Intermediary for the purposes
described in clause (7) of this Section 2.1.
(2) Subject to the rights of Virginia Power under the Clover
Agreements and the Lien of the Old Dominion Indenture, Old Dominion
agrees to convey the Equipment Interest and Foundation Interest to the
Facility Owner for a term of years, the Facility Owner agrees to accept
such conveyance of the Equipment Interest and the Foundation Interest
from Old Dominion, and each agrees to execute and deliver the Head
Equipment Agreement, the Head Foundation Agreement, the Operating
Agency Agreement and the Clover Agreements Assignment.
(3) Subject to the rights of Virginia Power under the Clover
Agreements and the Lien of the Old Dominion Indenture, the Facility
Owner agrees to convey the use and possession of the Equipment Interest
and the Foundation Interest to Old Dominion for a term of years, Old
Dominion agrees to accept such conveyance of the Equipment Interest and
the Foundation Interest from the Facility Owner and each agrees to
execute and deliver the Operating Equipment Agreement and the Operating
Foundation Agreement.
(4) Subject to the rights of Virginia Power under the Clover
Agreements and the Lien of the Old Dominion Indenture, Old Dominion
agrees to lease the Ground Interest to the Facility Owner, the Facility
Owner agrees to sublease the Ground Interest to Old Dominion and each
agrees to execute and deliver the Ground Lease and Sublease.
(5) The Original Lenders agree to enter into the Loan
Agreement and make non-recourse secured loans to fund a portion of the
Head Equipment Agreement Consideration and the Head Foundation
Agreement Consideration payable on the Closing Date equal to their
respective Loan Commitments.
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(6) The Facility Owner agrees to enter into the Loan Agreement
and issue Loan Certificates to the Original Lenders in the aggregate
principal amount equal to their respective Loan Commitments.
(7) The Facility Owner agrees to pay an amount equal to the
funds received from the Owner Participant and the Original Lenders
pursuant to clauses (1)(a) and (5), respectively, of this Section 2.1
to or at the direction of the Qualified Intermediary who will use those
funds to pay on the Closing Date all Head Equipment Agreement
Consideration and Head Foundation Agreement Consideration, due under
the Head Equipment Agreement and the Head Foundation Agreement,
respectively.
(8) Old Dominion agrees to pledge certain obligations and
deposits and to furnish surety bonds to the Facility Owner to secure or
otherwise support its obligations under the Operating Equipment
Agreement and the Operating Foundation Agreement.
(9) The Owner Participant and Old Dominion agree to enter into
the Tax Indemnity Agreement.
(10) The Owner Participant agrees to pay all Transaction Costs
payable by it pursuant to Section 2.4(a) hereof.
(11) The Series A Lender agrees to pay the Transaction Costs
described in clause (vi) of the definition thereof.
(12) The initial Series B Lender agrees to sell the Series B
Loan Certificate to AMBAC Indemnity pursuant to the Series B Loan
Certificate Purchase Agreement.
SECTION 2.2. CLOSING DATE; PROCEDURE FOR PARTICIPATION.
(a) CLOSING DATE. The closing of the transactions contemplated hereby
(the "Closing") shall take place at 10:00 a.m., New York City time, on the
Scheduled Closing Date or such other date as the parties hereto shall mutually
agree (the "Closing Date"), at the offices of Orrick, Herrington & Sutcliffe,
666 Fifth Avenue, New York, New York 10103.
(b) PROCEDURES FOR FUNDING. Unless the Closing Date shall have been
postponed pursuant to Section 2.2(c), the Owner Participant and the Original
Lenders shall make the amount of their Commitments available to the Facility
Owner not later than 10:00 a.m., New York City time, on the Scheduled Closing
Date, by transferring or delivering such amount, in funds immediately available
on such Closing Date to the Facility Owner in accordance with the applicable
wire transfer instructions delivered prior to the Scheduled Closing Date.
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<PAGE>
(c) POSTPONEMENT OF THE CLOSING. The Scheduled Closing Date may be
postponed from time to time for any reason if Old Dominion gives the Owner
Participant, the Facility Owner, the Owner Trustee, the Original Lenders and the
Agent telex, telegraphic, facsimile or telephonic (confirmed in writing) notice
of such postponement and notice of the date to which the Closing has been
postponed, such notice of postponement to be received by each party no later
than 10:00 a.m., New York City time, on the original Scheduled Closing Date. If,
prior to receipt of a postponement notice under this Section 2.2(c), any
Participant shall have provided funds in accordance with Section 2.2(b), such
funds shall be returned to such Participant, as soon as reasonably practicable
but in no event later than the Business Day following the Scheduled Closing
Date, unless such Participant shall have otherwise directed. All funds made
available pursuant to Section 2.2(b) will be held by the Facility Owner in trust
for the Participant who provided such funds and shall not be part of the
Collateral or the Trust Estate, shall be invested by the Facility Owner in
accordance with clause (d) below and such funds shall remain the sole property
of such Participant unless and until applied to pay the Head Equipment Agreement
Consideration, Head Foundation Agreement Consideration or Transaction Costs or
returned to the applicable Participant, as provided in this Agreement.
(d) INVESTMENT OF FUNDS. If on the Scheduled Closing Date a Participant
has made its Commitment available to the Facility Owner in accordance with
Section 2.2(b), the Closing does not occur on such date and the Facility Owner
is unable to return such funds to the Participants who made them available, the
Facility Owner shall, subject to Section 2.2(c) above, use reasonable efforts to
invest such funds from time to time at Old Dominion's expense and risk in
Permitted Investments or repurchase agreements backed by U.S. government
securities until such funds can be returned to the Participants. If on the
Scheduled Closing Date a Participant has made its Commitment available to the
Facility Owner in accordance with Section 2.2(b), the Closing does not occur on
such date and the Facility Owner has not returned such funds to any Participant
who made them available on or before 1:00 p.m., New York City time, on such
date, then Old Dominion shall reimburse such Participant for loss of use of such
funds at the Applicable Rate for each day, from and including the day that such
were made available to the Facility Owner by such Participant to but excluding
the earlier of (i) the day that such funds have been returned to such
Participant pursuant to Section 2.2(c) (funds received by any Participant after
1:00 p.m. of any day shall be deemed to be returned on the next succeeding
Business Day) and (ii) the Closing Date. Subject to payment for the account of
the relevant Participant of any reimbursement for loss of use of funds due to it
at the Applicable Rate, any net gain realized on the investment of such funds
(including interest) shall be paid to Old Dominion by the Facility Owner on the
earlier of (i) the date such funds are returned to the Participants pursuant to
Section 2.2(c) and (ii) the Closing Date. The Facility Owner shall not be liable
for any interest on or loss resulting from such investments and, if such funds
are utilized to pay Head Equipment Agreement Consideration and Head Foundation
Agreement Consideration or Transaction Costs on the Closing Date, Old Dominion
shall reimburse the Facility Owner for any net loss realized on the investment
of such funds. Old Dominion shall reimburse the Participants on the Closing Date
for any net loss realized on the investments of such funds. In order to obtain
funds for payment of the Head Equipment Agreement Consideration, Head Foundation
Agreement Consideration or Transaction Costs or to return funds made available
to the Facility Owner by any Participant, the Facility Owner is authorized
to sell any investments or obligations purchased as aforesaid.
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(e) EXPIRATION OF COMMITMENTS. The obligation of the Owner Participant
to make its Equity Investment and the obligations of the Original Lenders to
make the Loans shall expire at 11:59 p.m., New York City time, on July 31, 1996.
If the Closing Date has not occurred on or before July 31, 1996, the parties
hereto shall have no obligation to consummate the transactions contemplated
under this Agreement.
SECTION 2.3. OWNER PARTICIPANT'S INSTRUCTIONS TO THE OWNER TRUSTEE. The
Owner Participant agrees that the making available to the Facility Owner of the
amount of its Commitment in accordance with the terms of Section 2.2 shall
constitute, without further act, authorization and direction by the Owner
Participant to the Owner Trustee, subject, on the Closing Date, to the
conditions set forth in Section 4 having been fulfilled to the satisfaction of
the Owner Participant or waived by the Owner Participant, to take the actions
specified in Article III of the Trust Agreement.
SECTION 2.4. TRANSACTION COSTS.
(a) If the transactions contemplated by this Participation Agreement
are consummated, the Owner Participant will promptly pay all Transaction Costs
identified on or prior to the Closing Date and payable to the Persons identified
on Schedule 1 hereto. Following the Closing Date, the Facility Owner will
promptly pay with funds provided by the Owner Participant, all Transaction Costs
referred to in clauses (ii), (v), (vii), (viii), (ix), (x) and (xii) of the
definition of Transaction Costs identified following the Closing Date, the
Series A Lender will pay all Transaction Costs referred to in clause (vi) of the
definition of Transaction Costs identified following the Closing Date and Old
Dominion will pay all other Transaction Costs.
(b) Following the Closing Date, Old Dominion will be responsible for,
and will pay as Supplemental Payment, the annual administration fees, if any,
and expenses of the Owner Trustee under the Trust Agreement.
SECTION 3. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE OWNER TRUSTEE
AND THE TRUST COMPANY. The Trust Company and the Owner Trustee hereby
severally, represents and warrants that, as of the Closing Date:
(a) the Trust Company is a banking corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, has the
corporate power and authority, as Owner Trustee and/or in its individual
capacity to the extent expressly provided herein or in the Trust Agreement, to
enter into and perform its obligations under the Trust Agreement and assuming
due authorization, execution and delivery of the Trust Agreement by the Owner
Participant, this Agreement and each of the other Operative Documents to which
it is a party;
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(b) (i) the Trust Agreement has been duly authorized, executed and
delivered by the Trust Company and (ii) assuming the due authorization,
execution and delivery of the Trust Agreement by the Owner Participant, the
Trust Agreement constitutes a legal, valid and binding obligation of the Owner
Trustee, enforceable against it in its individual capacity or as Owner Trustee,
as the case may be, in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
arrangement, moratorium or other laws relating to or affecting the rights of
creditors generally and by general principles of equity;
(c) (i) this Agreement has been duly authorized, executed and delivered
by the Owner Trustee, and (ii) assuming the due authorization, execution and
delivery of this Agreement by each party hereto other than the Owner Trustee and
the Trust Company, this Agreement constitutes a legal, valid and binding
obligation of the Trust Company and the Owner Trustee, enforceable against the
Trust Company or as Owner Trustee, as the case may be, in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, arrangement, moratorium or other laws relating to or
affecting the rights of creditors generally and by general principles of equity;
(d) (i) each of the Operative Documents to which the Facility Owner is
a party has been duly authorized, executed and delivered by the Owner Trustee on
behalf of the Facility Owner, and (ii) assuming the due authorization, execution
and delivery of each of the Operative Documents by each party thereto other than
the Facility Owner, each of the Operative Documents to which the Facility Owner
is a party constitutes a legal, valid and binding obligation of the Facility
Owner, enforceable against the Facility Owner in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, arrangement, moratorium or other laws relating to or
affecting the rights of creditors generally and by general principles of equity;
(e) the execution and delivery by the Trust Company, in its individual
capacity or as Owner Trustee, as the case may be, of the Trust Agreement, this
Agreement and the other Operative Documents to which it is a party, the
consummation by the Trust Company, in its individual capacity or as Owner
Trustee, as the case may be, of the transactions contemplated hereby and
thereby, and the compliance by the Trust Company, in its individual capacity or
as Owner Trustee, as the case may be, with the terms and provisions hereof and
thereof, do not and will not contravene any Applicable Law of the United States
of America or the State of Delaware governing the Trust Company or the banking
or trust powers of the Trust Company, or the Trust Agreement, or its
organizational documents or by-laws, or contravene the provisions of, or
constitute a default by the Trust Company under, or result in the creation of
any Facility Owner's Lien upon the Trust Estate or any indenture, mortgage or
other material contract, agreement or instrument to which the Trust Company is a
party or by which the Trust Company or its property is bound; PROVIDED, HOWEVER,
that no representation is made with respect to the right, power or authority of
the Trust Company or the Owner Trustee to act as operator of Clover Unit 2
following an Event of Default;
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(f) no authorization or approval or other action by, and no notice to
or filing with, any Governmental Entity is required for the due execution,
delivery or performance by the Trust Company or the Owner Trustee, as the case
may be, of the Trust Agreement, this Agreement or the other Operative Documents
to which the Facility Owner is a party, other than any such authorization or
approval or other action or notice or filing as has been duly obtained, taken or
given;
(g) there is no pending or, to the knowledge of the Trust Company,
threatened action, suit, investigation or proceeding against the Trust Company
either in its individual capacity or as Owner Trustee, before any Governmental
Entity which, if determined adversely to it, would materially adversely affect
the ability of the Trust Company, in its individual capacity or as Owner
Trustee, as the case may be, to perform its obligations under the Trust
Agreement, this Agreement or the other Operative Documents to which it is a
party; and
(h) the Facility Owner's right, title and interest in and to the Trust
Estate is free of any Facility Owner's Liens attributable to the Trust Company.
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF THE OWNER
PARTICIPANT. The Owner Participant represents and warrants that, as of the
Closing Date:
(a) the Owner Participant is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to enter into and perform its obligations
under this Agreement, the Trust Agreement, the Tax Indemnity Agreement and the
Operating Agency Agreement;
(b) this Agreement, the Trust Agreement and the Tax Indemnity Agreement
have been duly authorized, executed and delivered by the Owner Participant and
assuming the due authorization, execution and delivery by each other party
thereto, constitute the legal, valid and binding obligations of the Owner
Participant, enforceable against the Owner Participant in accordance with their
respective terms, except as the same may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, arrangement, moratorium or other laws
relating to or affecting the rights of creditors generally and by general
principles of equity;
(c) the execution and delivery by the Owner Participant of this
Agreement, the Trust Agreement, the Tax Indemnity Agreement and the Operating
Agency Agreement, the consummation by the Owner Participant of the transactions
contemplated hereby and thereby, and compliance by the Owner Participant with
the terms and provisions hereof and thereof, do not and will not contravene any
federal or Delaware Applicable Law binding on the Owner Participant, or its
articles of incorporation or by-laws, or contravene the provisions of, or
constitute a default under, or result in the creation of any Lien (other than
any Lien created under any Operative Document) upon the Trust Estate under any
indenture, mortgage or other material contract, agreement or instrument to which
the Owner Participant is a party or by which the Owner Participant or its
property is bound (it being understood that no representation or warranty is
being made as to any Applicable Laws relating to Clover Unit 2 or the Clover
Real Estate);
7
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(d) no authorization or approval or other action by, and no notice to
or filing with, any federal or Delaware Governmental Entity is required for the
due execution, delivery or performance by the Owner Participant of this
Agreement, the Trust Agreement, the Tax Indemnity Agreement or the Operating
Agency Agreement, other than any authorization or approval or other action or
notice or filing as has been duly obtained, taken or given other than the filing
of the Form U-7D with the Securities and Exchange Commission within 30 days
after the Closing Date (it being understood that no representation or warranty
is being made as to any Applicable Laws relating to Clover Unit 2 or the Clover
Real Estate);
(e) there is no pending or, to the knowledge of the Owner Participant,
threatened action, suit, investigation or proceeding against the Owner
Participant before any Governmental Entity which, if determined adversely to it,
would materially adversely affect the Owner Participant's ability to perform its
obligations under this Agreement, the Trust Agreement, the Tax Indemnity
Agreement or the Operating Agency Agreement;
(f) the Trust Estate is free of any Owner Participant's Liens;
(g) no part of the funds to be used by the Owner Participant to make
its investment pursuant to this Agreement, directly or indirectly, constitutes
or is deemed to constitute assets (within the meaning of ERISA and any
applicable rules and regulations thereunder) of any Plan;
(h) the Owner Participant is purchasing the Beneficial Interest to be
acquired by it for its own account with no present intention of distributing
such Beneficial Interest or any part thereof in any manner which would require
registration under the Securities Act, but without prejudice, however, to the
right of the Owner Participant at all times to sell or otherwise dispose of all
or any part of such Beneficial Interest under a registration statement under the
Securities Act or under an exemption from such registration available under such
Act; and
(i) no Event of Loss of the type referred to in clause (iv) or (vi) of
the definition of Event of Loss has occurred or is continuing.
SECTION 3.3. REPRESENTATIONS AND WARRANTIES OF OLD DOMINION. Old
Dominion represents and warrants that, as of the Closing Date:
(a) Old Dominion is a wholesale power supply cooperative duly
organized, validly existing, and in good standing under the laws of the
Commonwealth of Virginia, is duly licensed or qualified and in good standing in
each jurisdiction in which the failure so to qualify would have a material
adverse effect on its financial condition, business or operations or its ability
to enter into and perform its obligations under this Agreement or any of the
other Operative Documents to which it is a party, and has the corporate power
and authority to carry on its business as now conducted and to enter into and
perform its obligations under this Agreement and each of the other Operative
Documents to which it is a party;
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(b) this Agreement, the Clover Agreements and each of the other
Operative Documents to which it is a party have been duly authorized, executed
and delivered by Old Dominion and, assuming the due authorization, execution
and delivery by each other party thereto, constitute the legal, valid and
binding obligations of Old Dominion, enforceable against Old Dominion in
accordance with their respective terms, except as the same may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement,
moratorium or other laws relating to or affecting the rights of creditors
generally and by general principles of equity;
(c) the execution, delivery and performance by Old Dominion of this
Agreement and each of the other Operative Documents to which it is a party, the
consummation by Old Dominion of the transactions contemplated hereby and
thereby, and compliance by Old Dominion with the terms and provisions hereof and
thereof, do not and will not contravene any Applicable Law binding on Old
Dominion or its property, or its certificate of incorporation or by-laws, or
constitute a default by Old Dominion under, or result in the creation of any
Lien (except for Permitted Liens) upon the property of Old Dominion or any
indenture, mortgage or other material contract, agreement or instrument to which
Old Dominion is a party (including the Clover Agreements, the Old Dominion
Indenture, the Pollution Control Assets Lease Documents or the Clover 1
Documents) or by which Old Dominion or any of its property is bound;
(d) the execution, delivery and performance by the Transaction Parties
of this Agreement, each of the other Operative Documents to which any of them is
a party and the Operating Agency Agreement, the consummation by the Transaction
Parties of the transactions contemplated hereby or thereby, and compliance by
the Transaction Parties with the terms and provisions hereof and thereof do not
and will not contravene the provisions of any indenture, mortgage or other
material contract, agreement or instrument to which Old Dominion is a party
(including the Clover Agreements, the Old Dominion Indenture, the Pollution
Control Assets Lease Documents or the Clover 1 Documents) or by which Old
Dominion or any of its property is bound;
(e) no authorization or approval or other action by, and no notice to
or filing with, any Governmental Entity is required (A) for the due execution,
delivery or performance by Old Dominion of this Agreement, the other Operative
Documents to which it is a party or the Operating Agency Agreement or (B) to be
obtained by Old Dominion, the Owner Trustee, the Facility Owner or the Owner
Participant with respect to the use, occupancy, possession, operation,
maintenance, ownership, lease, alteration or repair of Clover Unit 2 prior to
termination of the Term of the Operating Equipment Agreement or the Operating
Foundation Agreement in accordance with the Operative Documents, or, without
regard to any other transactions of the Owner Participant, the Owner Trustee or
the Facility Owner and assuming that neither the Owner Participant, the Owner
Trustee, the Facility Owner or any Affiliate of any of them is an "electric
utility" or a "public utility" or a "public utility holding company" under any
Applicable Law immediately prior to the Closing, with respect to the
participation by the Owner Trustee, the Facility Owner or the Owner Participant
in the transactions contemplated by this Agreement and the other Operative
Documents, other than those which have already been duly obtained and other than
(i) the FERC Orders and the Virginia Commission Order which have been obtained,
(ii) the filing by the Owner Participant, Owner Trustee and the Facility
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Owner of a Form U-7D with the Securities and Exchange Commission under Rule 7(d)
of the Holding Company Act, (iii) as may be required in connection with any
refinancing of the Loan Certificates or the issuance of Additional Loan
Certificates, (iv) as may be required under Applicable Law providing for the
supervision or regulation of the Owner Participant, the Owner Trustee or the
Facility Owner as a result of investing, lending or other commercial activity in
which the Owner Participant, the Owner Trustee or the Facility Owner is or may
be engaged other than the transactions contemplated hereby or by any of the
other Operative Documents, (v) as may be required with respect to the Owner
Participant, the Owner Trustee or the Facility Owner as a result of investing,
lending or other commercial activity in which the Owner Participant, the Owner
Trustee or the Facility Owner is or may be engaged other than the transactions
contemplated hereby or by any of the other Operative Documents, (vi) as may be
required under existing Applicable Laws to be obtained, given, accomplished or
renewed at any time after the Closing Date or from time to time after the
Closing Date in connection with the maintenance or operation of Clover Unit 2
and which are routine in nature or which cannot be obtained, or are not normally
applied for, prior to the time they are required, and which Old Dominion has no
reason to believe will not be timely obtained, (vii) as may be required in
consequence of any transfer of ownership of the Trust Estate by the Facility
Owner or any relinquishment of use or operation of Clover Unit 2 by Old Dominion
or (viii) as may be required under any Applicable Law enacted or adopted after
the date hereof;
(f) no approval or consent of Virginia Power (except as have been
obtained), the Pollution Control Assets Lessor, the Indenture Trustee or any
holders of Old Dominion's Bonds is required in connection with the transactions
contemplated by the Operative Documents;
(g) neither (i) consummation of the transactions to be consummated on
the Closing Date, (ii) except as provided in Sections 6.2 and 6.3 of the Head
Equipment Agreement and Sections 6.2 and 6.3 of the Head Foundation Agreement,
the exercise by Old Dominion of the Purchase Option and the Foundation Purchase
Option or the Service Contract Option on the Expiration Date nor (iii) any
transfer of the Beneficial Interest in accordance with Section 5.1 or 12 hereof
prior to termination of the Operating Equipment Agreement or the Operating
Foundation Agreement nor (iv) the execution and delivery of the Operating Agency
Agreement, gives rise, or will give rise, to a right by Virginia Power of first
refusal, or right to consent, under Section 15.02 or 15.03 of the Clover
Operating Agreement or Section 17.02 or 17.03 of the Clover Ownership Agreement;
(h) there is no pending or, to the knowledge of Old Dominion,
threatened action, suit, investigation or proceeding against Old Dominion before
any Governmental Entity which, if determined adversely to it, would materially
adversely affect Old Dominion's financial condition, business or operations or
its ability to perform its obligations hereunder, under the other Operative
Documents to which it is a party or under the Operating Agency Agreement;
(i) the insurance (including all related endorsements) required by
Section 11 of the Operating Equipment Agreement and Section 11 of the Operating
Foundation Agreement is in full force and effect and all premiums thereon are
current;
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(j) the chief executive office and principal place of business of Old
Dominion and the office where Old Dominion will keep its corporate records
concerning Clover Unit 2, the Clover Real Estate and the Operative Documents is
located at Henrico County, Virginia;
(k) no Event of Default, Event of Loss (other than an Event of Loss
referred to in clause (iv) or clause (vi) of the definition of Event of Loss) or
event that with the passage of time or giving of notice or both would constitute
an Event of Default or Event of Loss (other than an Event of Loss referred to in
clause (iv) or clause (vi) of the definition of Event of Loss) has occurred and
is continuing;
(l) no event of default or event of loss has occurred and is continuing
under the Pollution Control Assets Lease, the Clover 1 Foundation Operating
Lease or the Clover 1 Equipment Operating Lease;
(m) no event of default has occurred and is continuing under the Old
Dominion Indenture;
(n) Old Dominion is not an "investment company" or an "affiliated
person" of an "investment company" within the meaning of the Investment Company
Act of 1940;
(o) neither Old Dominion nor anyone authorized by it has directly or
indirectly offered or sold any interest in the Beneficial Interest or the Loans
or any part thereof, or in any similar security or lease, or in any security or
lease the offering of which for the purposes of the Securities Act would be
deemed to be part of the same offering as the offering of the Beneficial
Interest or the Loans or any part thereof or solicited any offer to acquire any
of the same in violation of the registration requirements of Section 5 of the
Securities Act. The representation and warranty in the preceding sentence is
made by Old Dominion in reliance upon, and is subject to the accuracy of, the
representation and warranty made by the Owner Participant in Section 3.2(h)
hereof and the representation and warranty made by the Original Lenders in
Section 3.4(ii) hereof;
(p) Old Dominion is not in default in any respect, and no condition
exists that with notice or lapse of time or both would constitute a default in
any respect, under the Clover Agreements or any mortgage, indenture or other
material contract, agreement or instrument to which Old Dominion is a party or
by which Old Dominion or its property is bound, in any such case where any such
default, individually or in the aggregate, could reasonably be expected to have
a material adverse effect on (i) its financial condition, business or operations
or (ii) its ability to enter into and perform its obligations under this
Agreement or any other Operative Document;
(q) the Unit 2 Equipment and the Unit 2 Foundation are located on the
Real Property and the Common Facilities are located on the Clover Real Estate;
(r) Old Dominion has (i) good and valid title, as a tenant-in-common
with Virginia Power to the Retained Assets free and clear of all Liens other
than Permitted Liens, (ii) a valid leasehold interest, to the extent of a 50%
undivided interest, in the Pollution Control Assets free and clear of all Liens
other than Permitted Liens, and (iii) good and marketable title as a
tenant-in-common with Virginia Power in the Clover Real Estate;
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(s) the Head Equipment Agreement and the Head Foundation Agreement
create valid leasehold interests in favor of the Facility Owner in the Equipment
Interest and the Foundation Interest, respectively, under the laws of the
Commonwealth of Virginia;
(t) assuming that the Facility Owner maintains possession and control
over the Collateral (as defined in the Equity Security Pledge Agreement) in
accordance with the applicable provisions of the Uniform Commercial Code, the
Equity Security Pledge Agreement creates a valid and perfected security interest
in such Collateral as contemplated thereby subject to the provisions of Section
9-306 of the Uniform Commercial Code;
(u) assuming that the Loan Agreement has been duly authorized, executed
and delivered by each party thereto, the Loan Agreement creates a valid (subject
to the rights of quiet enjoyment of Old Dominion under Section 9 hereof and
Section 4.2 of the Operating Equipment Agreement) security interest in favor of
the Agent in the Equipment Interest. No filing, recording, registration or
notice with any federal or state Governmental Entity is necessary to establish
or, except for such filing and recording as have been made pursuant to Section
4.18 hereof and for the performance of the terms of the Loan Agreement, to
perfect the Agent's security interest in the Equipment Interest;
(v) assuming that the Loan Agreement and the Leasehold Mortgage have
been duly authorized, executed and delivered by each of the parties thereto, the
Loan Agreement and the Leasehold Mortgage create valid (subject to the rights of
quiet enjoyment of Old Dominion under Section 9 hereof, Section 4.2 of the
Operating Foundation Agreement and Section 7 of the Ground Lease and Sublease)
Liens in favor of the Agent for the benefit of the Lenders in the Foundation
Interest and the Ground Interest. No filing, recording, registration or notice
with any federal or state Governmental Entity is necessary to establish or,
except for such filings and recordings as have been made pursuant to Section
4.18 and for the performance of the terms of the Loan Agreement and the
Leasehold Mortgage, to perfect the Liens in favor of the Agent for the benefit
of the Lenders in the Foundation Interest and the Ground Interest;
(w) Old Dominion's audited financial statements for the fiscal year
ended December 31, 1995, including the footnotes thereto, present fairly the
consolidated financial position, results of operations and cash flow for Old
Dominion as of and for the periods stated and have been prepared in conformity
with GAAP on a consistent basis; and since December 31, 1995 no material adverse
change has occurred in the financial condition, business or operations of Old
Dominion and no event has occurred since December 31, 1995 which would
materially adversely affect the ability of Old Dominion to perform its
obligations under this Agreement or any other Operative Document to which it is
a party;
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(x) Old Dominion owns or possesses or has obtained all
governmental franchises, licenses and permits necessary to lease or own, as the
case may be, and to operate, its properties and to carry on its business as
presently conducted where its ownership or lease of substantial properties or
the conduct of its business requires such franchises, licenses or permits
and where the failure to do so would materially adversely affect its financial
condition, business or operations;
(y) Old Dominion has filed all federal, state and local tax returns
which are required to be filed by it and has paid (prior to their delinquency
dates) any taxes which have become due pursuant to such returns or pursuant to
any assessment received by it (other than taxes and assessments the payment of
which is being contested in good faith by Old Dominion, with adequate reserves,
in the aggregate, for the payment of which having been set aside on the books of
Old Dominion), and Old Dominion has no Actual Knowledge of any actual or
proposed deficiency or additional assessment in connection therewith which,
either in any case or in the aggregate, would materially adversely affect Old
Dominion's financial condition, business or operations; and any charges,
accruals and reserves on the books of Old Dominion with respect to federal,
state and local taxes for all open years, and for the current fiscal year, make
adequate provision for any unpaid tax liabilities for such periods;
(z) the qualification of the Agent, the Lenders, the Facility Owner,
the Owner Trustee, the Trust Company or the Owner Participant for admission to
do business under the laws of the Commonwealth of Virginia or any political
subdivision thereof is not required solely in connection with the execution and
delivery of the Operative Documents, the making of the Equity Investment or the
Loans or, prior to termination of the Operating Equipment Agreement or the
Operating Foundation Agreement, the performance by the Agent, the Lenders, the
Facility Owner, the Owner Trustee or the Owner Participant of this Agreement or
any other Operative Document to which it is a party;
(aa) Old Dominion has validly submitted to the jurisdiction of the
Supreme Court of the State of New York, New York County and the United States
District Court for the Southern District of New York;
(ab) the choice by Old Dominion of the laws of the State of New York to
govern this Agreement and the other Operative Documents to which Old Dominion is
a party and which are expressed to be governed by the laws of the State of New
York is valid and binding under the Applicable Laws of the Commonwealth of
Virginia, and a court in the Commonwealth of Virginia would uphold such choice
of law in a legal proceeding to enforce this Agreement and such other Operative
Documents to which Old Dominion is a party brought in such court, subject to the
enforceability of security documents being subject to the laws applicable to or
affecting the collateral provided in respect thereof;
(ac) the use by Old Dominion of the proceeds of the Loan Certificates
and the Equity Investment will not violate or result in a violation of Section 7
of the Exchange Act, or any regulations issued pursuant thereto, including,
without limitation, Regulations G, T, U and X of the regulations of the Federal
Reserve System;
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(ad) performance by any of the Agent, any Lender, the Facility Owner,
the Owner Trustee, or the Owner Participant of any action required under the
Operative Documents will not violate any Applicable Law of the Commonwealth of
Virginia or any political subdivision thereof;
(ae) Clover Unit 2 was declared commercial by the Construction
Management Committee under the Clover Ownership Agreement on March 28, 1996; and
(af) Old Dominion is an "electric utility company," but is not a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company" within the meaning of the Holding Company
Act.
SECTION 3.4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF EACH
ORIGINAL LENDER. (a) Each Original Lender represents and warrants that, as of
the Closing Date:
(i) no part of the funds to be used by such Lender to make its
Loan and acquire its Loan Certificate pursuant to this Agreement or the Loan
Agreement constitutes or is deemed to constitute assets (within the meaning of
ERISA and any applicable rules or regulations thereunder) of any Plan; and
(ii) such Lender is making the Loans and acquiring the Loan
Certificates for investment and not with a view towards any resale or
distribution thereof, and neither it nor anyone authorized by it to act on its
behalf has directly or indirectly offered any Loan Certificate or any interest
in the Trust Estate, the Collateral, the Payment Undertaking Collateral or any
similar security for sale to, or solicited any offer to acquire any of the same
from, anyone, it being understood that such Lender makes no representations as
to actions taken by the Owner Participant, the Facility Owner, the Owner Trustee
or Old Dominion or anyone acting on behalf of such Persons.
(b) Each Lender represents, warrants and agrees that it will not
transfer the Loan Certificates it holds except in a transaction constituting an
exempt transaction under the Securities Act.
SECTION 3.5. REPRESENTATIONS AND WARRANTIES OF THE AGENT. The
Agent represents and warrants that, as of the Closing Date:
(a) the Agent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, has the corporate power
and authority to enter into and perform its obligations, as Agent, under this
Agreement and the other Operative Documents to which it is a party;
(b) this Agreement and the other Operative Documents to which it is a
party have been duly authorized, executed and delivered by the Agent and,
assuming the due authorization, execution and delivery by each other party
thereto, constitute the legal, valid and binding obligations of the Agent
enforceable against the Agent in accordance with their respective terms,
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except as the same may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, arrangement, moratorium or other laws relating to or
affecting the rights of creditors generally and by general principles of equity;
and
(c) the execution, delivery and performance by the Agent of this
Agreement and each of the other Operative Documents to which it is a party, the
consummation by the Agent of the transactions contemplated hereby or thereby,
and compliance by the Agent with the provisions hereof and thereof do not
contravene any Applicable Laws binding on the Agent or its organizational
documents or by-laws, or contravene the provisions of, or constitute a default
by the Agent under any indenture, mortgage or other material contract, agreement
or instrument to which the Agent is a party or by which the Agent or its
property is bound.
SECTION 3.6. REPRESENTATIONS AND WARRANTIES OF THE FACILITY OWNER.
The Facility Owner hereby represents and warrants that, as of the Closing Date:
(a) the Facility Owner is a duly organized and validly existing
"business trust" under the laws of the State of Delaware of which the Owner
Participant is the beneficial owner, and has the power and authority to enter
into and perform its obligations under this Agreement and each of the other
Operative Documents to which it is a party;
(b) (i) this Agreement and each of the other Operative Documents to
which the Facility Owner is a party (other than the Loan Certificates) have been
duly authorized, executed and delivered by the Facility Owner, and (ii) assuming
the due authorization, execution and delivery of this Agreement and each of the
other Operative Documents by each party hereto and thereto other than the
Facility Owner, this Agreement and each of the other Operative Documents (other
than the Loan Certificates) to which the Facility Owner is a party constitute a
legal, valid and binding obligation of the Facility Owner, enforceable against
the Facility Owner in accordance with their respective terms, except as the same
may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
arrangement, moratorium or other laws relating to or affecting the rights of
creditors generally and by general principles of equity;
(c) upon the execution and delivery of the Loan Certificates by the
Facility Owner in accordance with the Loan Agreement and payment therefor in
accordance with the terms of this Agreement, the Loan Certificates will
constitute the legal, valid and binding obligations of the Facility Owner,
enforceable against the Facility Owner in accordance with their respective
terms, except as the same may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, arrangement, moratorium or other laws relating to or
affecting the rights of creditors generally and by general principles of equity;
(d) the execution and delivery by the Facility Owner of this Agreement,
the other Operative Documents to which it is a party and the Operating Agency
Agreement, the consummation by the Facility Owner of the transactions
contemplated hereby and thereby, and the compliance by the Facility Owner with
the terms and provisions hereof and thereof, do not and will not contravene any
Applicable Law of the United States of America or the State of Delaware, or the
Trust Agreement or the Facility Owner's other organizational documents, or
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contravene the provisions of, or constitute a default by the Facility Owner
under any indenture, mortgage or other material contract, agreement or
instrument to which the Facility Owner is a party or by which the Facility Owner
or its property is bound, or result in the creation of any Facility Owner's Lien
upon the Trust Estate; PROVIDED, HOWEVER, that no representation is made with
respect to the right, power or authority of the Facility Owner to act as
operator of Clover Unit 2;
(e) no authorization or approval or other action by, and no notice to
or filing with, any Governmental Entity is required for the due execution,
delivery or performance by the Facility Owner of this Agreement, the other
Operative Documents to which it is a party or the Operating Agency Agreement,
other than any such authorization or approval or other action or notice or
filing as has been duly obtained, taken or given other than the filing of the
Form U-7D with the Securities and Exchange Commission within 30 days after the
Closing Date;
(f) there is no pending or, to the knowledge of the Facility Owner,
threatened action, suit, investigation or proceeding against the Facility Owner,
before any Governmental Entity which, if determined adversely to it, would
materially adversely affect the ability of the Facility Owner to perform its
obligations under this Agreement, the other Operative Documents to which it is a
party or the Operating Agency Agreement;
(g) the Facility Owner's right, title and interest in and to the Trust
Estate is free of any Facility Owner's Liens;
(h) the chief executive office of the Facility Owner is located at
Rodney Square North, 1100 North Market Street, Wilmington, DE 19890-0001, and
the place where the records concerning the Head Equipment Agreement Interest,
the Head Foundation Agreement Interest and all the interest of the Facility
Owner in, to and under all documents relating to the Trust Estate, is located at
Rodney Square North, 1100 North Market Street, Wilmington, DE 19890-0001; and
(i) as of the Closing Date, the situs of the Facility Owner is
Wilmington, Delaware.
SECTION 4. CLOSING CONDITIONS
The obligations of the Owner Participant, the Facility Owner, the Owner
Trustee, the Agent, the Original Lenders and Old Dominion to consummate the
transactions contemplated hereby on the Closing Date shall be subject to the
following conditions, except that the obligations of any Person shall not be
subject to such Person's own performance or compliance.
SECTION 4.1. OPERATIVE DOCUMENTS. On or before the Closing Date, each
of the Operative Documents to be delivered at the Closing shall have been duly
authorized, executed and delivered by the parties thereto in substantially the
form attached as an Exhibit hereto, shall each be in full force and effect, and
executed counterparts of each shall have been delivered to each of the parties
hereto.
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SECTION 4.2. EQUITY INVESTMENT; LOANS. The Owner Participant shall have
made the Equity Investment and the Original Lenders shall have made their
respective Loans available to the Owner Trustee at the place and in the manner
contemplated by Section 2.
SECTION 4.3. EQUITY COLLATERAL. (a) Old Dominion shall have made
provision for the purchase of the Qualifying Security and shall have deposited
the settlement amount for the Qualifying Security with the Collateral Agent
pursuant to the Equity Security Pledge Agreement for the benefit of the Facility
Owner and the Owner Participant.
(b) Old Dominion shall have obtained a Qualifying Surety Bond
meeting the applicable requirements of Section 7.8 from AMBAC for the benefit of
the Facility Owner and the Owner Participant.
SECTION 4.4. PAYMENT UNDERTAKING. Old Dominion shall have paid the Bank
the Specified Sum and the fee payable under the Payment Undertaking Agreement
and pledged its right, title and interest, if any, under the Payment Undertaking
Agreement to the Facility Owner pursuant to the Payment Undertaking Pledge
Agreement.
SECTION 4.5. CERTIFIED COPIES. The Owner Participant, the Facility
Owner, the Owner Trustee, the Agent and the Original Lenders shall have received
copies certified by the Secretary of Old Dominion of the Clover Agreements, the
Old Dominion Indenture, the Severance Agreements, the Clover 1 Documents and the
Pollution Control Assets Lease Documents, and all amendments to each thereof.
SECTION 4.6. CORPORATE DOCUMENTS. Each of the parties hereto shall have
received certified copies of the by-laws and organizational documents of each of
the other parties hereto and resolutions of the Board of Directors of each such
other corporate party duly authorizing the transaction (other than from the
Agent and the Original Lenders) and such documents and such evidence as each
party may reasonably request in order to establish the authority of each such
other party to consummate the transactions contemplated by this Agreement, the
taking of all corporate and other proceedings in connection therewith and
compliance with the conditions herein or therein set forth and the incumbency of
all officers signing any of the Operative Documents. Each of the foregoing
documents shall be reasonably satisfactory to the recipient.
SECTION 4.7. NO DEFAULTS. No Event of Default, Event of Loss or event
that with the passage of time or giving of notice or both would constitute an
Event of Default or an Event of Loss shall have occurred and be continuing; no
event of default or event of loss or event that with the passage of time or
giving of notice or both would constitute an event of default or event of loss
under the Pollution Control Assets Lease shall have occurred and be continuing;
and no event of default or event that with the passage of time or giving of
notice or both would constitute an event of default under the Old Dominion
Indenture shall have occurred and be continuing.
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SECTION 4.8. NO THREATENED PROCEEDINGS. No action, suit,
investigation or proceeding shall have been instituted nor shall governmental
action be threatened before any Governmental Entity, nor shall any order,
judgment or decree have been issued or proposed to be issued by any Governmental
Entity at the time of the Closing Date, to set aside, restrain, enjoin or
prevent the consummation of the transactions contemplated by the Operative
Documents.
SECTION 4.9. CONSENTS. All approvals and consents, if any, of (a) any
trustees or holders of any indebtedness or obligations of the Transaction
Parties, (b) Virginia Power and (c) the Pollution Control Assets Lessor, which
are required in connection with the transactions contemplated by the Operative
Documents, shall have been duly obtained and be in full force and effect and
shall be in the form and substance satisfactory to the Owner Participant, the
Owner Trustee, the Facility Owner, Old Dominion, the Agent and the Original
Lenders; and the Owner Participant, the Facility Owner, the Owner Trustee, Old
Dominion, the Agent and the Original Lenders shall have received a copy of such
approval or consent certified by the applicable Transaction Party in the case of
clause (a) or by the Secretary of Old Dominion in the case of clauses (b) or
(c).
SECTION 4.10. GOVERNMENTAL ACTIONS. All actions, if any, required to
have been taken by any Governmental Entity on or prior to the Closing Date in
connection with the transactions contemplated by any Operative Documents on the
Closing Date shall have been taken and all orders, permits, waivers, exemptions,
authorizations and approvals of such Governmental Entities required to be in
effect on the Closing Date in connection with the transactions contemplated by
the Operative Documents on the Closing Date shall have been issued; and all such
orders, permits, waivers, exemptions, authorizations and approvals shall be in
full force and effect on the Closing Date; and the Owner Participant, the
Facility Owner, the Owner Trustee, Old Dominion, the Agent and the Original
Lenders shall have received a copy of any such order, permit, waiver, exemption,
authorization or approval certified by the appropriate official of the
Governmental Entity issuing, granting or giving such order, permit, waiver,
exemption, authorization or approval.
SECTION 4.11. INSURANCE. Insurance (including all related endorsements)
complying with the requirements of Section 11 of the Operating Equipment
Agreement and Section 11 of the Operating Foundation Agreement shall be in full
force and effect and all premiums thereon shall be current. The Owner
Participant, the Facility Owner, the Owner Trustee, the Original Lenders and the
Agent shall have received a certificate or certificates dated the Closing Date
of Watson Wyatt Worldwide or an independent insurance broker or carrier
reasonably satisfactory to such Persons specifying the types and amounts of
insurance maintained pursuant to Section 11 of the Operating Equipment Agreement
and Section 11 of the Operating Foundation Agreement, and stating that such
insurance is in full force and effect, and that no notice of cancellation,
non-renewal or material change in provisions has been issued.
SECTION 4.12. ENGINEERING REPORT. Each such Person shall have received,
on or before the Closing Date, a final copy of the Engineering Report prepared
by the Engineer reasonably acceptable in form and substance by the Owner
Participant.
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SECTION 4.13. SURVEY. The Owner Participant, the Facility Owner, the
Owner Trustee, the Original Lenders and the Agent shall have received a current
survey of the Real Property in form reasonably satisfactory to each of them.
SECTION 4.14. APPRAISAL. The Owner Participant shall have received the
Appraisal prepared by the Appraiser, reasonably satisfactory in form and
substance to the Owner Participant; and the Agent shall receive a letter from
the Appraiser as to the fair market value of the Facility Owner's Unit 2
Interest on the Closing Date.
SECTION 4.15. INVESTMENT BANKING OPINION. The Owner Participant shall
have received a satisfactory opinion of Smith Barney Inc. or another investment
banking firm reasonably acceptable to the Owner Participant to the effect that
the terms and conditions for a New Loan set forth on Schedule 3 to the Operating
Equipment Agreement are commercially reasonable and (i) the possibility that the
New Loan at a market rate of interest will fail to be made on the Expiration
Date to an independent third party lender in the event the Service Contract
Option is elected, is remote and (ii) the interest rates (or imputed discount
rates) and other terms and conditions of the Loan Certificates and the Payment
Undertaking Agreement and the terms and conditions of the Qualifying Surety Bond
reflect arm's-length rates, terms and conditions that could be negotiated with
counterparties for each such agreement that had no other interest in the
contemplated transaction.
SECTION 4.16. OPINION WITH RESPECT TO CERTAIN TAX ASPECTS. The Owner
Participant shall have received the opinion, dated the Closing Date, of Milbank,
Tweed, Hadley & McCloy addressed to the Owner Participant, in form and substance
satisfactory to the Owner Participant, containing such counsel's favorable
opinion with respect to the federal income tax aspects of the transaction
contemplated hereby.
SECTION 4.17. OPINION OF COUNSEL. Each such Person shall have received
an opinion, dated the Closing Date, of (i) Orrick, Herrington & Sutcliffe, New
York counsel to Old Dominion, (ii) LeClair Ryan, Virginia counsel to Old
Dominion, (iii) in-house legal counsel to the Owner Participant, (iv) Milbank,
Tweed, Hadley & McCloy, New York counsel to the Owner Participant, (v) Mays &
Valentine, Virginia counsel to the Owner Participant and the Original Lenders,
(vi) Richards, Layton & Finger, counsel to the Owner Trustee and the Facility
Owner, (vii) Davis Polk & Wardwell, New York counsel to the Bank and
Utrecht-America, (viii) Guillermo G. Bilbao, General Counsel for the Bank and
Utrecht-America, (ix) DeBrauw, Blackstone & Westbroek, Dutch counsel to the
Bank, and (x) in-house legal counsel to AMBAC, addressed to and in form and
substance reasonably acceptable to such Person. Each such Person expressly
consents to the rendering by its counsel of the opinion referred to in this
Section 4.17 and acknowledges that such opinion shall be deemed to be rendered
at the request and upon the instructions of such Person, each of whom has
consulted with and has been advised by its counsel as to the consequences of
such request, instructions and consent.
SECTION 4.18. RECORDINGS AND FILINGS. All filings and recordings listed
on Schedule 2 hereto shall have been duly made and all filing, recordation and
other fees payable in connection therewith shall have been paid; and the filing
of all precautionary financing statements under the
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Uniform Commercial Code of Virginia and any other mortgages, security agreements
or other documents as may be reasonably requested by counsel to the Owner
Participant, the Original Lenders or the Agent to perfect the right, title and
interest of the Facility Owner in the Facility Owner's Unit 2 Interest or any
part thereof or interest therein and the Liens of the Loan Agreement and the
Leasehold Mortgage thereon, shall have been made.
SECTION 4.19. INTENTIONALLY LEFT BLANK.
SECTION 4.20. CHANGE IN LAW. No change or proposed change in applicable
accounting rules or federal or state tax law shall have occurred between May 2,
1996 and the Closing Date which adversely affects the Owner Participant.
SECTION 4.21. QUALIFIED INTERMEDIARY EXCHANGE AGREEMENTS. The
documents set forth as Exhibits V through Y hereof shall have been duly
authorized, executed and delivered.
SECTION 4.22. GUARANTY AGREEMENT. Chrysler Capital Corporation shall
have executed and delivered a Guaranty in substantially the form of Exhibit Q
hereto, pursuant to which Chrysler Capital Corporation shall guaranty the Owner
Participant's obligations under this Agreement and the other Operative
Documents.
SECTION 4.23. PURCHASE AGREEMENT. AMBAC Indemnity shall have
executed and delivered the Purchase Agreement and paid the purchase price
specified therein for the Series B Loan Certificate.
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SECTION 5. CERTAIN COVENANTS OF THE OWNER PARTICIPANT
SECTION 5.1. RESTRICTIONS ON TRANSFER OF BENEFICIAL INTEREST. (a) The
Owner Participant covenants and agrees that, except as otherwise permitted by
Section 12, it shall not directly or indirectly during the Term of the Operating
Agreements assign, convey or transfer any of its right, title or interest in the
Beneficial Interest without the prior written consent, so long as no Event of
Default has occurred and is continuing, of Old Dominion and, so long as the
Loans are outstanding, of each Lender; PROVIDED, HOWEVER, that the Owner
Participant may assign, convey or transfer all of its interest in the Beneficial
Interest without such consent to a Person (the "Transferee") which shall assume
the duties and obligations of the Owner Participant under the Operative
Documents pursuant to an assumption agreement substantially in the form of
Exhibit P hereto, which Transferee shall be either (i) an Affiliate of Chrysler
Capital Corporation which does not otherwise qualify under clause (ii) below,
provided that all of the payment and performance obligations of the Transferee
under the Operative Documents shall be guaranteed by Chrysler Capital
Corporation pursuant to a guaranty substantially in the form of Exhibit Q hereto
or (ii) a Person which meets, or the payment and performance obligations of
which under the Operative Documents are guaranteed (pursuant to a guaranty
substantially in the form of Exhibit Q hereto) by a Person (Chrysler Capital
Corporation or such other guarantor, the "Guarantor") which meets, the following
criteria: (A) the tangible net worth of the Transferee or Guarantor and any
general partner thereof, if any, is at least equal to $100 million; (B) each of
the Transferee and any Guarantor is a financial institution, corporation or
business trust or a partnership all of whose partners are financial
institutions, corporations or business trusts; (C) the Transferee is a "United
States person" within the meaning of 7701(a)(30) of the Code; (D) so long as no
Event of Default has occurred and is continuing and except from and after the
date 18 months preceding the end of the Term of the Operating Equipment
Agreement if Old Dominion has not elected to exercise the Purchase Option, such
Transferee is not a direct competitor of Old Dominion. Notwithstanding the
foregoing, the Owner Participant covenants and agrees for the benefit of
Virginia Power that it shall not directly or indirectly during the Term of the
Operating Leases assign, convey or transfer any of its right, title or interest
in the Beneficial Interest to a direct competitor (or an Affiliate thereof) of
Virginia Power without the prior written consent of Virginia Power.
(b) The Owner Participant shall give Old Dominion, Virginia Power and
the Agent 30 days prior written notice of such transfer, or 10 days in the case
of a transfer to an Affiliate of Chrysler Capital Corporation specifying the
name and address of any proposed Transferee and such additional information as
shall be necessary to determine whether the proposed transfer satisfies the
requirements of this Section 5.1. All reasonable fees, expenses and charges of
the Agent and Old Dominion (including reasonable attorneys' fees) in connection
with any such transfer (or proposed transfer), including any of the foregoing
relating to any amendments to the Operative Documents required in connection
therewith, shall be paid by the Owner Participant, without any right of
indemnification from Old Dominion or any other Person; PROVIDED, HOWEVER, that
the Owner Participant shall have no obligation to pay such fees, expenses or
charges as a result of any transfer while an Event of Default is continuing, in
which case Old Dominion shall be obligated to pay such costs.
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(c) Upon any such transfer in compliance with this Section 5.1, (i)
such Transferee shall be deemed the "Owner Participant" for all purposes, and
shall enjoy the rights and privileges and perform the obligations of the Owner
Participant hereunder and under the Assumption Agreement, the Guaranty and each
other Operative Document to which such Owner Participant is a party, and each
reference in this Agreement, the Assumption Agreement, the Guaranty and each
other Operative Document to the "Owner Participant" shall thereafter be deemed
to include such Transferee for all purposes and (ii) the transferor Owner
Participant and the Guarantor, if any, of such transferor Owner Participant's
obligations shall be released from all obligations hereunder and under each
other Operative Document to which such transferor or Guarantor is a party or by
which such transferor Owner Participant or Guarantor is bound to the extent such
obligations are expressly assumed by a Transferee; PROVIDED, HOWEVER, that in no
event shall any such transfer waive or release the transferor or its Guarantor
from any liability existing immediately prior to or occurring simultaneously
with such transfer.
SECTION 5.2. OWNER PARTICIPANT'S LIENS. The Owner Participant covenants
that it will not directly or indirectly create, incur, assume or suffer to exist
any Owner Participant's Lien and the Owner Participant shall promptly notify Old
Dominion and the Agent of the imposition of any such Lien of which the Owner
Participant has Actual Knowledge and shall promptly, at its own expense, take
such action as may be necessary to duly discharge such Owner Participant's Lien.
SECTION 5.3. AMENDMENTS OR REVOCATION OF TRUST AGREEMENT. The Owner
Participant covenants that it will not (i) amend, supplement, or otherwise
modify Section 9.1, Section 10.1 or Section 10.3 of the Trust Agreement without
the prior written consent of Old Dominion so long as no Event of Default has
occurred and is continuing or of each Lender so long as the Loans are
outstanding, in each case which consent shall not be unreasonably withheld, or
(ii) revoke the Trust Agreement without the prior written consent of Old
Dominion, so long as no Event of Default has occurred and is continuing, and of
each Lender, so long as the Loans are outstanding.
SECTION 5.4. FACILITY OWNER; TRUST ESTATE. The Owner Participant
covenants that it will not voluntarily take any action to subject the Facility
Owner or the Trust Estate to the provisions of any applicable bankruptcy or
insolvency law (as now or hereafter in effect).
SECTION 5.5. APPOINTMENT OF SUCCESSOR OWNER TRUSTEE OR CO-TRUSTEES.
Notwithstanding any other provision of this Agreement, a successor Owner Trustee
or Co-trustee shall not be appointed without the consent of Old Dominion and the
Agent unless such successor Owner Trustee or Co-trustee (a) meets the
requirements of Section 9.3 of the Trust Agreement, and (b) is either (i)
incorporated in Delaware or (ii) incorporated, or has its principal place of
business, in a state other than Delaware and in the case of this clause (ii) Old
Dominion, the Agent and the Lenders shall have received opinions of counsel in
such state (x) in substantially the form of the opinions to be delivered by
counsel to Owner Trustee on the Closing Date at the expense of the Owner
Participant and (y) as to such other matters of the law of such state as Old
Dominion or any Lender may reasonably request, such additional matters to be
addressed at the expense of Old Dominion or such Lender, as the case may be;
PROVIDED, HOWEVER, that if the Owner Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of the Owner Trustee or
its properties shall be appointed or any public officer shall take charge or
control of the Owner Trustee or its property or affairs for the purpose of
rehabilitation, conservation or liquidation, the opinion required by clause (x)
shall be at the expense of Old Dominion.
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SECTION 6. COVENANTS OF THE TRUST COMPANY, THE OWNER TRUSTEE AND
THE FACILITY OWNER
SECTION 6.1. COMPLIANCE WITH THE TRUST AGREEMENT. The Trust
Company, the Owner Trustee and the Facility Owner each hereby severally
covenants and agrees that it will:
(a) comply with all of the terms of the Trust Agreement applicable to
it; and
(b) not amend, supplement, or otherwise modify Section 9.1, Section
10.1 or Section 10.3 of the Trust Agreement without the prior written consent of
Old Dominion so long as no Event of Default has occurred and is continuing and
each Lender so long so the Loans are outstanding, which consent shall not be
unreasonably withheld.
SECTION 6.2. FACILITY OWNER'S LIENS. The Trust Company, the Owner
Trustee and the Facility Owner each covenants that it will not directly or
indirectly create, incur, assume or suffer to exist any Facility Owner's Lien
and will promptly notify Old Dominion and the Agent of the imposition of any
such Lien of which it has Actual Knowledge and shall promptly, at its own
expense, take such action as may be necessary to duly discharge such Facility
Owner's Lien.
SECTION 6.3. AMENDMENTS TO OPERATIVE DOCUMENTS. The Owner Trustee and
the Facility Owner each covenants that it will not (i) unless (1) such action is
expressly contemplated by the Operative Documents and (2) such action will not
adversely affect any Transaction Parties, through its own action terminate any
Operative Document to which it is a party, (ii) unless (1) such action is
expressly contemplated by the Operative Documents and (2) such action will not
adversely affect any Transaction Parties, amend, supplement, waive or modify (or
consent to any such amendment, supplement, waiver or modification) such
Operative Documents in any manner or (iii) unless such action is expressly
contemplated by the Operative Documents take any action to prepay or refund any
Loan Certificate or amend any of the payment terms of any of the Loan
Certificates without, in each case, the prior written consent of Old Dominion so
long as no Event of Default shall have occurred and be continuing (which consent
in the case of clauses (i) or (iii) shall be in its sole and absolute discretion
and in the case of clause (ii) shall not be unreasonably withheld or delayed)
and of each Lender so long as the Loans are outstanding.
SECTION 6.4. TRANSFER OF THE FACILITY OWNER'S UNIT 2 INTEREST. Other
than the assignment to the Qualified Intermediary pursuant to Exhibit V hereto
or as otherwise specifically permitted by the Operative Documents, the Facility
Owner covenants that it will not assign, pledge, convey or transfer any of its
then existing right, title or interest in and to the Facility Owner's Unit 2
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Interest, the Trust Estate or the other Operative Documents. Nothing in this
Section 6.4 shall limit the ability of the Owner Trustee to appoint a successor
Owner Trustee pursuant to Section 9.3 of the Trust Agreement and Section 5.5
hereof.
SECTION 6.5. FACILITY OWNER; TRUST ESTATE. Each of the Owner Trustee
and the Facility Owner covenants that it will not voluntarily take any action to
subject the Facility Owner or the Trust Estate to the provisions of any
applicable bankruptcy or insolvency law (as now or hereafter in effect).
SECTION 6.6. LIMITATION ON INDEBTEDNESS AND ACTIONS. The Owner Trustee
and the Facility Owner covenants that, so long as the Loans are outstanding, it
will not incur any indebtedness nor enter into any business or activity except
as required or expressly permitted or contemplated by any Operative Document.
SECTION 6.7. CHANGE OF LOCATION. The Owner Trustee and the Facility
Owner each agrees to give the Owner Participant, Old Dominion, the Lenders and
the Agent written notice of any relocation of the Facility Owner's chief
executive office or the place where documents and records relating to the
Facility Owner or the Trust Estate are kept from the location set forth in
Section 3.6(h) and of any change in its name.
SECTION 6.8. ASSIGNMENT OF PAYMENT UNDERTAKING AGREEMENT. The Facility
Owner covenants that it will not transfer, assign or otherwise dispose of, or
grant any option, participation or interest in, with respect to or measured by,
the rights of the Facility Owner as a beneficiary under the Payment Undertaking
Agreement to any Person other than the Agent on behalf of the Series A Lender
pursuant to the Loan Agreement or to any transferee of the Facility Owner's Unit
2 Interest permitted under the Operative Documents.
SECTION 7. COVENANTS OF OLD DOMINION
SECTION 7.1. MAINTENANCE OF CORPORATE EXISTENCE. Except as permitted by
Section 7.2, Old Dominion will at all times maintain its existence as a
cooperative in good standing under the laws of the Commonwealth of Virginia, and
Old Dominion will remain qualified to do business in any state in which the
conduct of its business or the ownership or leasing of assets used in its
business requires such qualification and where the failure to be so qualified
would have a material adverse effect on the operations, business, properties,
assets or condition of Old Dominion and its subsidiaries taken as a whole.
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SECTION 7.2. MERGER, CONSOLIDATION, SALE OF ASSETS.
Old Dominion covenants and agrees as follows:
(a) Old Dominion will not consolidate with or merge into any other
Person, or convey or transfer all or substantially all of its assets to any
Person, unless immediately after giving effect to such transaction:
(i) no Payment Default, Bankruptcy Default or Event of Default
shall have occurred and be continuing under the Operating Equipment
Agreement or Operating Foundation Agreement;
(ii) the entity resulting from such consolidation, surviving
in such merger or succeeding to such assets, if other than Old
Dominion, shall be organized under the laws of the United States, any
state thereof or the District of Columbia;
(iii) such resulting, surviving or succeeding entity, if other
than Old Dominion, shall execute and deliver to the Owner Trustee, the
Facility Owner, the Owner Participant, the Agent and the Lenders an
agreement in form and substance reasonably satisfactory to each of such
parties containing an assumption by such entity of Old Dominion's
obligations under this Participation Agreement and each other Operative
Document to which Old Dominion is then a party;
(iv) no event of default under the Old Dominion Indenture
or the Clover Agreements shall have occurred and be continuing; and
(v) Old Dominion shall have delivered to the Owner Trustee,
the Facility Owner, the Owner Participant, the Agent and the Lenders an
Officer's Certificate and an opinion of counsel reasonably satisfactory
to each of such parties stating that such transaction and such
assumption agreement comply with this Section 7.2 and that all
conditions precedent to the consummation of such transaction set forth
herein have been complied with.
(b) Upon the consummation of such transaction, the surviving entity, if
other than Old Dominion, shall succeed to, and be substituted for, and may
exercise every right and power of, Old Dominion under this Participation
Agreement and each other Operative Document to which Old Dominion was a party
immediately prior to such transaction, with the same effect as if such entity
had been named herein and therein. Nothing contained herein shall permit any
sublease, assignment or other arrangement for the use, operation or possession
of the Equipment Interest or Foundation Interest except in compliance with the
applicable provisions of the Operating Equipment Agreement or Operating
Foundation Agreement, as the case may be.
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SECTION 7.3. NOTICE OF CHANGE IN ADDRESS OR NAME. Old Dominion will
promptly provide the Owner Trustee, the Owner Participant, the Agent and the
Lenders with written notice of any change in its chief executive office, its
principal place of business, its name or the place where Old Dominion maintains
its business records.
SECTION 7.4. EXERCISE OF EARLY PURCHASE OPTION UNDER POLLUTION CONTROL
ASSETS LEASE. If Old Dominion shall not have previously acquired legal title to
all of the Pollution Control Assets from the Pollution Control Assets Lessor, it
will exercise its purchase option set forth in Section 19.2 of the Pollution
Control Assets Lease to acquire all of such lessor's right, title and interest
in the Pollution Control Assets on December 30, 2004.
SECTION 7.5. DELIVERY OF FINANCIAL STATEMENTS AND NO DEFAULT
CERTIFICATE. (a) Old Dominion will deliver to the Owner Participant, the Owner
Trustee, the Facility Owner and, so long as the Loans are outstanding, the Agent
and the Lenders, as soon as practicable and in any event within 120 days after
the end of each fiscal year, an audited balance sheet of Old Dominion as at the
end of such fiscal year and the related statements of revenue, expenses and
patronage capital and cash flows for the year then ended, together with the
report with respect thereto of Coopers & Lybrand LLP or other independent public
accountants reasonably acceptable to the Owner Trustee, the Facility Owner, the
Owner Participant and, so long as the Loans are outstanding, the Agent, all in
reasonable detail and prepared in accordance with GAAP on a consistent basis,
and an Officer's Certificate of Old Dominion stating that (1) the signers have
made, or caused to be made under their supervision, a review of this Agreement
and the other Operative Documents to which it is then a party and (2) such
review has not disclosed the existence during such fiscal year (and the signers
do not have knowledge of the existence as of the date of such certificate) of
any condition or event constituting an Event of Default or Event of Loss or, if
any such condition or event existed or exists, specifying the nature thereof,
the period of existence thereof and what action Old Dominion has taken or
proposes to take with respect thereto.
(b) Old Dominion will deliver to the Owner Participant, the
Owner Trustee, the Facility Owner and, so long as the Loans are outstanding, the
Agent and the Lenders, (i) as soon as reasonably practicable, and in any event
within 60 days after the end of each fiscal quarter, a copy of the Form 10-Q
filed by Old Dominion with the Securities and Exchange Commission or if not so
filed, such other quarterly report as Old Dominion shall distribute to the
holders of its publicly traded securities, and (ii) from time to time such other
information concerning Old Dominion as such parties may reasonably request, to
the extent such information is made available to the holders of Old Dominion's
publicly traded first mortgage bonds or is filed by Old Dominion with the
Securities and Exchange Commission or any other regulatory authority having
jurisdiction over Old Dominion, other than information which is subject to a
confidentiality, or similar, request.
SECTION 7.6. EQUITY SECURITY DEPOSIT. At all times during the Term of
the Operating Agreements Old Dominion shall maintain for the benefit of the
Facility Owner and the Owner Participant a first priority security interest in a
Qualifying Security securing Old Dominion's obligations under the Operating
Agreements and the Special Equity Remedy. Old Dominion shall be permitted, from
time to time, to replace any Qualifying Security with a replacement Qualifying
Security so long as there shall be no interruption in such first priority
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security interest in a Qualifying Security in consequence of any such optional
replacement; PROVIDED that Old Dominion agrees that it will not effect an
optional substitution of any Qualifying Security unless Old Dominion shall
determine in good faith a significant possibility exists that such Qualifying
Security may cease to constitute a Qualifying Security and delivers a favorable
opinion of counsel (such counsel and the form and substance of such opinion to
be reasonably satisfactory to the Owner Participant) regarding the validity and
perfection of the security interest. If any Qualifying Security maintained
pursuant to this Section 7.6 shall cease to be a Qualifying Security, Old
Dominion shall, within 90 days of the earlier of (i) having Actual Knowledge of
such fact or (ii) receiving notice from the Owner Participant of such fact,
provide (A) a first priority security interest in a substitute Qualifying
Security and (B) a favorable opinion of counsel (such counsel and the form and
substance of such opinion to be reasonably satisfactory to the Owner
Participant) regarding the validity and perfection of such security interest.
SECTION 7.7. INTENTIONALLY LEFT BLANK
SECTION 7.8. SURETY BOND. At all times during the Term of the Operating
Agreements Old Dominion shall, subject to the second and third sentences of this
Section 7.8, maintain a Qualifying Surety Bond supporting Old Dominion's
obligations under the Operating Agreements and the Special Equity Remedy. Old
Dominion shall be permitted, from time to time, to replace any Qualifying Surety
Bond with a replacement Qualifying Surety Bond or a Qualifying Letter of Credit
having a maximum drawing amount from time to time equal to the Equity Exposure
Amount, so long as there shall be no interruption in the coverage provided by
the Qualifying Surety Bond or such Qualifying Letter of Credit in consequence of
any such optional replacement; PROVIDED that Old Dominion delivers a favorable
opinion of counsel (such counsel and the form and substance of such opinion to
be reasonably satisfactory to the Owner Participant) regarding the validity and
enforceability of the replacement Qualifying Surety Bond or Qualifying Letter of
Credit. If any Qualifying Surety Bond (or any Qualifying Letter of Credit
maintained pursuant to this Section 7.8) shall cease to be a Qualifying Surety
Bond (or a Qualifying Letter of Credit), Old Dominion shall, within 90 days
of the earlier of (i) having Actual Knowledge of such fact or (ii)
receiving notice from the Owner Participant of such fact, provide (w) a
replacement Qualifying Surety Bond supporting Old Dominion's obligations under
the Operating Agreements and the Special Equity Remedy, (x) a Qualifying Letter
of Credit supporting Old Dominion's obligations under the Operating Agreements
and the Special Equity Remedy having a maximum drawing amount from time to time
equal to the Equity Exposure Amount, (y) other credit enhancement acceptable to
the Owner Participant in its sole discretion or (z) a combination of the credit
enhancements set forth in clause (w), (x) or (y). The provider of any
replacement Qualifying Surety Bond or Qualifying Letter of Credit provided
pursuant to the preceding sentence will meet the then existing credit exposure
policies of the Owner Participant.
SECTION 7.9. QUALIFYING LETTER OF CREDIT. Old Dominion shall be
permitted, from time to time, to replace any Qualifying Letter of Credit issued
pursuant to Section 7.6 or 7.8 or this Section 7.9 with a replacement Qualifying
Letter of Credit or a Qualifying Surety Bond satisfying the terms of the second
sentence of this Section 7.9 as long as there shall be no interruption in the
coverage provided by the Qualifying Letter of Credit or Qualifying Surety Bond
in consequence of such optional replacement; PROVIDED that Old Dominion delivers
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a favorable opinion of counsel (such counsel and the form and substance of such
opinion to be reasonably satisfactory to the Owner Participant) regarding the
validity and enforceability of such replacement Qualifying Letter of Credit or
Qualifying Surety Bond. If a Qualifying Letter of Credit issued pursuant to
Section 7.6 or 7.8 or this Section 7.9 shall have an expiry date prior to the
Expiration Date, Old Dominion shall extend such Qualifying Letter of Credit on
or prior to its expiry date or replace such Qualifying Letter of Credit with a
(i) replacement Qualifying Letter of Credit having a maximum drawing amount from
time to time equal to maximum drawing amounts under the Qualifying Letter of
Credit being replaced, (ii) a Qualifying Surety Bond having a maximum amount
from time to time payable equal to the maximum drawing amount under the
Qualifying Letter of Credit being replaced, (iii) other credit enhancement
acceptable to the Owner Participant in its sole discretion or (iv) a combination
of (i), (ii) and (iii).
SECTION 7.10. INFORMATION CONCERNING CLOVER UNIT 2. Old Dominion shall
furnish the Owner Trustee, the Facility Owner and the Owner Participant and
their respective authorized representatives from time to time such information
as such party shall reasonably request concerning Clover Unit 2 and the Clover
Real Estate, including information concerning the condition, operation,
maintenance and use of Clover Unit 2, to the extent Old Dominion possesses such
information or can obtain such information under the Clover Agreements. To the
extent such information consists of information contained in records kept by Old
Dominion or Virginia Power, such information shall be furnished by Old Dominion
without cost to the recipient. Notwithstanding the foregoing, none of the Owner
Trustee, the Facility Owner or the Owner Participant shall have any duty to make
any inquiry permitted by this Section 7.10, nor shall the Owner Trustee, the
Facility Owner or the Owner Participant incur any obligation or liability by
reason of not making such inquiry.
SECTION 7.11. FURTHER ASSURANCES. Old Dominion, at its own cost,
expense and liability, will cause to be promptly and duly taken, executed,
acknowledged and delivered all such further acts, documents and assurances as
may be necessary in order to carry out the intent and purposes of this
Participation Agreement and the other Operative Documents, and the transactions
contemplated hereby and thereby. Old Dominion, at its own cost, expense and
liability, will cause such financing statements and fixture filings (and
continuation statements with respect thereto) as may be necessary and such other
documents as the Owner Participant, the Owner Trustee or the Agent shall
reasonably request to be recorded or filed at such places and times in such
manner, and will take all such other reasonable actions or cause such actions to
be taken, as may be necessary in order to establish, preserve, protect and
perfect the right, title and interest of the Facility Owner in and to (i) the
Head Equipment Agreement Interest, the Head Foundation Agreement Interest, the
Ground Lease Interest or any part thereof or interest therein and the Liens of
the Leasehold Mortgage and Loan Agreement thereon, (ii) the Qualifying Security
and the Lien of the Equity Security Pledge Agreement thereon and (iii) the
Qualifying Surety Bond. Old Dominion shall promptly from time to time furnish to
the Owner Participant, the Owner Trustee or the Facility Owner such information
with respect to Clover Unit 2, the Clover Real Estate or the transactions
contemplated by the Operative Documents as may be required to enable the Owner
Participant, the Owner Trustee or the Facility Owner, as the case may be, to
timely file with any Governmental Entity any reports and obtain any licenses or
permits required to be filed or obtained by the Facility Owner or the Owner
Trustee under any Operative Document or the Owner Participant as the owner of
the Beneficial Interest.
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SECTION 7.12. AMENDMENT OF CERTAIN DOCUMENTS. Old Dominion agrees that
it will not supplement or amend (a) the Pollution Control Assets Lease Documents
or the Severance Agreements in any manner which adversely affects the rights or
interest of the Owner Trustee, the Facility Owner, the Owner Participant or, so
long as the Loans are outstanding, the Agent or the Lenders or (b) the Old
Dominion Indenture in any manner that would preclude (1) the exercise of the
Purchase Option or the Service Contract Option (taking into consideration the
ability to redeem or defease the Old Dominion Bonds in accordance with the
redemption and defeasance provisions of such Indenture as in effect on the
Closing Date) or (2) Old Dominion from causing the Equipment Interest and the
Foundation Interest to be released from the Lien of the Old Dominion Indenture.
Old Dominion agrees that it will not, except as expressly contemplated by the
Operative Documents (but not if the interest of AMBAC, as provider of the Surety
Bond, is adversely affected), without the prior written consent of AMBAC
Indemnity (i) supplement or amend either Operating Agreement or (ii) assign its
interest in either Operating Agreement.
SECTION 7.13. LOAN CERTIFICATES. Old Dominion covenants that it will
not purchase or own any Loan Certificates.
SECTION 7.14. POST-TERM ARRANGEMENTS. Old Dominion covenants that, from
and after the earliest to occur of (i) the termination of the Operating
Agreements pursuant to Section 14 of each thereof, (ii) the termination of the
Operating Agreements pursuant to Section 17 of each thereof or (iii) if the
Operating Agreements shall not have otherwise terminated and Old Dominion shall
not have exercised the Purchase Option and Foundation Purchase Option, it will
deliver, provide and make available to the Facility Owner during the Ground
Lease Term sufficient waste disposal services to the extent available from Old
Dominion's interest in the Solid Waste Landfill Site and such other services
that are available to Old Dominion by virtue of its interest in the Clover Power
Station and the Clover Real Estate that are not otherwise available from third
parties, to permit the efficient operation of Clover Unit 2 and to permit the
Facility Owner to comply with any obligations it may have under the Clover
Agreements. Old Dominion shall be paid the fair market value for the services
provided pursuant to the preceding sentence. Following any return of the
Equipment Interest and the Foundation Interest pursuant to Section 5 of the
Operating Agreements, unless the Operating Agency Agreement shall have been
previously entered into, Old Dominion covenants and agrees that (A) it will
enter into an operating agency agreement with the Facility Owner substantially
similar to the form Operating Agency Agreement attached hereto as Exhibit U as
it relates to Unit 2 and in form and substance reasonably acceptable to each of
Facility Owner and Old Dominion and (B) it will comply, and cause each of the
other Unit 1 Parties to comply, with all of the payment and performance
obligations of the Unit 1 Parties under the Clover Agreements that relate to
Cover Unit 1.
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SECTION 8. OLD DOMINION'S INDEMNIFICATIONS
SECTION 8.1. GENERAL INDEMNITY
(a) CLAIMS INDEMNIFIED. Subject to the exclusions stated in paragraph
(b) below, Old Dominion agrees to indemnify, protect, defend and hold harmless,
and does hereby indemnify the Owner Trustee, the Trust Company in its individual
capacity, the Trust Estate, the Facility Owner, the Owner Participant, any
Lender and the Agent and their respective Affiliates, successors, assigns,
agents, directors, officers or employees (each an "Indemnitee") against any and
all Claims imposed on, incurred by or asserted against any Indemnitee in any way
relating to or resulting from or arising out of or attributable to:
(i) the construction, financing, refinancing, acquisition,
operation, warranty, ownership, possession, maintenance, repair, lease,
condition, alteration, modification, restoration, refurbishing, return,
decommissioning, sale or other disposition, insuring, sublease, or
other use or non-use of the Clover Real Estate, Clover Unit 1, the
Transmission Assets, Clover Unit 2, the Equipment Interest, the
Foundation Interest, the Ground Interest, the Facility Owner's Unit 2
Interest, any Modifications or Component, or any portion of any thereof
or any interest therein;
(ii) the conduct of the business or affairs of Old
Dominion or the Clover Power Station;
(iii) the manufacture, design, purchase, acceptance,
rejection, delivery or condition of, or improvement to, the Clover Real
Estate, Clover Unit 1, the Transmission Assets, Clover Unit 2, the
Equipment Interest, the Foundation Interest, the Ground Interest, the
Facility Owner's Unit 2 Interest, any Modifications or Component, or
any portion of any thereof or any interest therein;
(iv) the Ground Lease and Sublease, the Head Equipment
Agreement, the Operating Equipment Agreement, the Head Foundation
Agreement, the Operating Foundation Agreement, the Pollution Control
Assets Lease Documents, the Clover Agreements, the Old Dominion
Indenture or any other Transaction Document or the Clover 1 Documents,
the execution or delivery thereof or the performance, enforcement or
amendment of any terms thereof;
(v) the sale of the Loan Certificates or any refinancing
thereof pursuant to Section 10 hereof;
(vi) the establishment or maintenance of the Qualifying
Security, the Qualifying Surety Bond or any Qualifying Letter of
Credit;
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(vii) the reasonable costs and expenses of the Transaction
Parties in connection with amendments to the Transaction Documents or
the Clover 1 Documents;
(viii) the non-performance or breach by Old Dominion of any
obligation or warranty contained in this Agreement or any other
Transaction Document or the falsity of any representation of Old
Dominion contained in the Agreement or any other Transaction Document;
(ix) the continuing fees (if any) and expenses of the Owner
Trustee (including the reasonable compensation and expenses of its
counsel, accountants and other professional persons) arising out of the
Owner Trustee's or the Facility Owner's discharge of its duties under
or in connection with the Transaction Documents or the Clover 1
Documents;
(x) for the benefit of any Lender and the Agent only, a breach
of Section 5.1 or 6.4 hereof resulting from the transfer of the
Beneficial Interest or the Trust Estate to a Person that is not a
"United States person" within the meaning of section 7701(a)(30) of the
Code;
(xi) for the benefit of any Lender and the Agent only, a
breach by the Owner Participant of its representation in paragraph (g)
of Section 3.2;
(xii) for the benefit of the Owner Participant, the Owner
Trustee and the Facility Owner only, any breach by a Lender of Section
3.4(a)(i) hereof, resulting in the occurrence of a non-exempt
"prohibited transaction" (within the meaning of Section 406 of ERISA or
Section 4975 of the Code) in connection with the acquisition or holding
of any Loan Certificate by any such Lender;
(xiii) the payment of all amounts provided for in Section
15.2(d) of the Operating Equipment Agreement;
(xiv) the Unit 1 Parties; and
(xv) any action by Virginia Power or any other Person as
tenant-in-common in Clover Unit 2 or the Clover Unit 2 Operator or
otherwise in connection with the transaction contemplated by the
Transaction Documents.
(b) CLAIMS EXCLUDED. The following are excluded from Old Dominion's
agreement to indemnify any Indemnitee under this Section 8.1:
(i) any Claim attributable to acts, omissions or events
occurring after the earlier of (x) the return of the Facility Owner's
Unit 2 Interest in full compliance of Section 5 of the Operating
Equipment Agreement and Section 5 of the Operating Foundation
Agreement, if applicable, or (y) the expiration or earlier termination
of the Operating Equipment Agreement and the Operating Foundation
Agreement in compliance with the terms thereof under circumstances not
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requiring the return of the Facility Owner's Unit 2 Interest, unless
and to the extent such Claim is attributable to actions, omissions or
events occurring in connection with the exercise of remedies pursuant
to Section 17 of the Operating Equipment Agreement or Section 17 of the
Operating Foundation Agreement, as the case may be, following the
occurrence, and during the continuance, of an Event of Default
thereunder;
(ii) without limiting Old Dominion's obligations under
paragraph (d) below, any Claim that is a Tax, or is a cost of
contesting a Tax imposed on, or asserted against, the Indemnitee or an
Affiliate, whether or not Old Dominion is required to indemnify
therefor under Section 8.2 hereof or the Tax Indemnity Agreement (other
than an indemnity payable to the Lender or the Agent under Section
8.1(a)(x) hereof);
(iii) with respect to any Indemnitee, any Claim attributable
to the gross negligence or wilful misconduct of such Indemnitee or a
Party Related thereto unless attributable to (a) any breach by Old
Dominion or its Affiliates of any covenant, representation or warranty
contained in any Transaction Document or any Clover 1 Document or (b)
any breach by any other Transaction Party or its Affiliates of any
covenant, representation or warranty contained in any Transaction
Document or any Clover 1 Document;
(iv) as to any Indemnitee, any Claim attributable to the
noncompliance of such Indemnitee or any Party Related thereto, with any
of the terms of, or any misrepresentation or breach of warranty by such
Indemnitee or any Party Related thereto contained in any Operative
Document by which such Indemnitee is bound or any breach by such
Indemnitee or any Party Related thereto of any covenant contained in
any Transaction Document by which such Indemnitee is bound unless
attributable to (a) any breach by Old Dominion or its Affiliates of any
covenant, representation or warranty contained in any Transaction
Document or (b) any breach by any other Transaction Party or its
Affiliates of any covenant, representation or warranty contained in any
Transaction Document or any Clover 1 Document;
(v) as to any Indemnitee or Party Related thereto, any Claim
attributable to the offer, sale, assignment, transfer or other
disposition (voluntary or involuntary) by or on behalf of such
Indemnitee of its interest (whether direct or beneficial) in any
Operative Document or in the Facility Owner's Unit 2 Interest or the
Trust Estate, other than a transfer by such Indemnitee (A) required by
the terms of an Operative Document, (B) the entering into of a Power
Sales Agreement and the Control Documents, or (C) any transfer during
the continuance of an Event of Default;
(vi) except in the case of the Lender or the Agent or any
Party Related thereto, any Claim constituting or arising from a
Facility Owner's Lien;
(vii) except in the case of the Trust Company (in its
individual capacity), any Lender or the Agent or any Party Related to
any thereof, any claim constituting or arising from an Owner
Participant's Lien;
(viii) any Claim relating to the payment of any amount which
constitutes Transaction Costs which the Owner Trustee or the Owner
Participant is obligated to pay pursuant to Section 2.4(a) hereof or
any other amount to the extent such Indemnitee or any Party Related
thereto has expressly agreed in any Operative Document to pay such
amount without express right of reimbursement; and
(ix) in the case of the Owner Trustee and the Owner
Participant, any failure on the part of the Facility Owner to
distribute in accordance with the Trust Agreement any amounts received
and distributable by it thereunder.
(c) INSURED CLAIMS. Subject to the provisions of Section 8.1(e), in the
case of any Claim indemnified by Old Dominion hereunder which is covered by a
policy of insurance maintained by Old Dominion, each Indemnitee agrees, unless
it and each other Indemnitee shall waive its rights to indemnification (for
itself and each Party Related thereto) in a manner reasonably acceptable to Old
Dominion, to cooperate, at the sole cost and expense of Old Dominion, with
insurers in exercise of their rights, and to investigate, defend or compromise
such Claim.
(d) AFTER-TAX BASIS. Old Dominion agrees that any payment or indemnity
pursuant to this Section 8.1 in respect of any Claim shall be made to the
Indemnitee of such payment or indemnity on an After-Tax Basis.
(e) CLAIMS PROCEDURE. Each Indemnitee shall promptly after such
Indemnitee shall have Actual Knowledge thereof notify Old Dominion of any Claim
as to which indemnification is sought; PROVIDED, that the failure so to notify
Old Dominion shall not reduce or affect Old Dominion's liability which it may
have to such Indemnitee under this Section 8.1; PROVIDED, however, that Old
Dominion may seek redress at law or in equity against any such Indemnitee or any
Party Related thereto for actual damages resulting directly from the failure or
delay of such Indemnitee or any Party Related thereto to give Old Dominion such
notice. Any amount payable to any Indemnitee pursuant to this Section 8.1 shall
be paid within thirty (30) days after receipt of such written demand therefor
from such Indemnitee, accompanied by a certificate of
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such Indemnitee stating in reasonable detail the basis for the indemnification
thereby sought and (if such Indemnitee is not a party hereto) an agreement to be
bound by the terms hereof as if such Indemnitee were such a party. Promptly
after Old Dominion receives notification of such Claim accompanied by a written
statement describing in reasonable detail the Claims which are the subject of
and basis for such indemnity and the computation of the amount so payable, Old
Dominion shall notify such Indemnitee whether it intends to pay, object to,
compromise or defend any matter involving the asserted liability of such
Indemnitee. Old Dominion shall have the right to investigate and so long as no
Event of Default shall have occurred and be continuing, Old Dominion shall have
the right (so long as it has acknowledged in writing its obligation to indemnify
pursuant to this Section 8.1 in its sole discretion, to defend or compromise any
Claim for which indemnification is sought under this Section 8.1; PROVIDED that
no such defense or compromise shall involve any danger of (i) foreclosure, sale,
forfeiture or loss of, or imposition of a Lien on any part of the Ground
Interest, the Equipment Interest, the Foundation Interest or the Trust Estate or
the impairment of Clover Unit 2 in any material respect or (ii) any criminal
liability being incurred or any material adverse effect on such Indemnitee,
PROVIDED FURTHER, that no Claim shall be compromised by Old Dominion on a basis
that admits any criminal violation or material allegation of wrongdoing or
misconduct on the part of such Indemnitee or any Party Related thereto without
the express written consent of such Indemnitee; and PROVIDED, FURTHER, that to
the extent that other Claims unrelated to the transactions contemplated by the
Transaction Documents are part of the same proceeding involving such Claim, Old
Dominion may assume responsibility for the contest or compromise of such Claim
only if the same may be and is severed from such other Claims (and each
Indemnitee agrees to use reasonable efforts to obtain such a severance). If Old
Dominion elects, subject to the foregoing, to compromise or defend any such
asserted liability, it may do so at its own expense and by counsel selected by
it. Upon Old Dominion's election to compromise or defend such asserted liability
and prompt notification to such Indemnitee of its intent to do so, such
Indemnitee shall cooperate at Old Dominion's expense with all reasonable
requests of Old Dominion in connection therewith and will provide Old Dominion
with all information not within the control of Old Dominion as is reasonably
available to such Indemnitee which Old Dominion may reasonably request;
PROVIDED, HOWEVER, that such Indemnitee shall not, unless otherwise required by
Applicable Law, be obligated to disclose to Old Dominion or any other Person, or
permit Old Dominion or any other Person to examine (i) any income tax returns of
the Owner Participant or any Lender or any of their respective Affiliates or
(ii) any confidential information or pricing information not generally
accessible by the public that are possessed by the Owner Participant, the Agent
or any Lender or any of their respective Affiliates (and, in the event that any
such information is made available, Old Dominion shall treat such information as
confidential and shall take all actions reasonably requested by such Indemnitee
for purposes of obtaining a stipulation from all parties to the related
proceeding providing for the confidential treatment of such information from all
such parties). Where Old Dominion, or the insurers under a policy of insurance
maintained by Old Dominion, undertake the defense of such Indemnitee with
respect to a Claim, no additional legal fees or expenses of such Indemnitee in
connection with the defense of such Claim shall be indemnified hereunder unless
such fees or expenses were incurred at the request of Old Dominion or such
insurers. Notwithstanding the foregoing, an Indemnitee may participate at its
own expense in any judicial proceeding controlled by Old Dominion pursuant to
the preceding provisions; PROVIDED, HOWEVER, that such party's participation
does not in the reasonable opinion
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of independent counsel to Old Dominion interfere with such control; PROVIDED,
FURTHER, that if and to the extent that (i) such Indemnitee is advised by
counsel that an actual or potential conflict of interest exists where it is
advisable for such Indemnitee to be represented by separate counsel or (ii)
there is a risk that such Indemnitee may be indicted or otherwise charged in a
criminal complaint and such Indemnitee informs Old Dominion that such Indemnitee
desires to be represented by separate counsel, such Indemnitee shall have the
right to control its own defense of such Claim and the reasonable fees and
expenses of such separate counsel shall be borne by Old Dominion. No Indemnitee
shall enter into any settlement or other compromise with respect to any Claim
without the prior written consent of Old Dominion, but only insofar as the
Facility Owner shall not have commenced the exercise of remedies pursuant to
Section 17 of the Operating Equipment Agreement or Section 17 of the Operating
Foundation Agreement, as the case may be, following which such Indemnitee may
enter into such settlement or compromise without such consent.
(f) SUBROGATION. To the extent that a Claim indemnified by Old Dominion
under this Section 8.1 is in fact paid by Old Dominion or an insurer under an
insurance policy maintained by Old Dominion, Old Dominion or such insurer shall
be subrogated to the rights and remedies of the Indemnitee on whose behalf such
Claim was paid to the extent of such payment (other than rights of such
Indemnitee under insurance policies maintained at its own expense) with respect
to the transaction or event giving rise to such Claim. Should an Indemnitee
receive any refund, in whole or in part, with respect to any Claim paid by Old
Dominion hereunder, it shall promptly pay the lesser of (i) the amount refunded
reduced by the amount of any Tax incurred by reason of the receipt of such
refund and increased by the amount of any Tax saved as a result of such payment
or (ii) the amount Old Dominion or any of its insurers has paid in respect of
such Claim over to Old Dominion.
(g) MINIMIZE CLAIMS. The Owner Participant, the Facility Owner, the
Owner Trustee, the Agent and the Lenders will use their respective reasonable
efforts to minimize Claims indemnifiable by Old Dominion under this Section 8.1,
including by complying with reasonable requests by Old Dominion to do or to
refrain from doing any act if such compliance is, in the good faith opinion of
the Owner Participant, the Facility Owner, the Owner Trustee, the Agent or a
Lender, as the case may be, of a purely ministerial nature or otherwise has no
unindemnified adverse impact on the Owner Participant, the Facility Owner, the
Owner Trustee, the Agent or a Lender, as the case may be, or any Affiliate of
any thereof or on the business or operations of any of the foregoing.
SECTION 8.2. GENERAL TAX INDEMNITY
(a) INDEMNITY. Except as provided in paragraph (b), Old Dominion agrees
to indemnify, on an After-Tax Basis, each of the Owner Trustee, the Trust
Company in its individual capacity, the Trust Estate, the Owner Participant, the
Agent, the Lenders and Fleet, their respective successors and assigns, and the
Affiliates of each of the foregoing (each a "Tax Indemnitee") for and to hold
each Tax Indemnitee harmless from and against all Taxes that are imposed upon
any Tax Indemnitee, Clover Unit 2 or the Facility Owner's Unit 2 Interest, or
any portion or Component thereof, modification thereto or any interest therein,
or upon any Transaction
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Document or interest therein or payment made thereunder, arising out of, in
connection with or relating to, any of the following:
(i) the construction, financing, refinancing, acquisition,
operation, warranty, ownership, possession, maintenance, repair, lease,
condition, alteration, modification, restoration, refurbishing, return,
sale or other disposition, insuring, sublease, or other use of Clover
Unit 2 or any portion or Component thereof, Modification thereto or any
interest therein;
(ii) the conduct of the business or affairs of Old Dominion or
the Clover Power Station;
(iii) the manufacture, design, purchase, acceptance,
rejection, delivery or condition of, or improvement to, Clover Unit 2,
or any portion or Component thereof, modification thereto or any
interest therein;
(iv) the Ground Lease and Sublease, the Head Equipment
Agreement, the Head Foundation Agreement, the Operating Equipment
Agreement, the Operating Foundation Agreement, the Pollution Control
Assets Lease, the Clover Agreements (including any claim arising out of
any consent by, or right of first refusal of, Virginia Power), the Old
Dominion Indenture or any other Transaction Document, the execution or
delivery thereof, or the performance, enforcement or amendment of the
terms thereof;
(v) the payment or receipt of Basic Payment, Foundation Basic
Payment, Supplemental Payment, Foundation Supplemental Payment, Head
Equipment Agreement Basic Cost, Head Foundation Agreement Basic Cost,
interest or principal on the Loan Certificates or any other amount paid
or payable by or to any Person pursuant to the Transaction Documents;
or
(vi) otherwise in respect of the transactions contemplated by
the Transaction Documents.
(b) EXCLUDED TAXES. The indemnity provided for in paragraph (a) above
shall not extend to any of the following Taxes (the "Excluded Taxes"):
(i) Taxes (other than any sales, use, value added, property or
transfer Taxes or Taxes in the nature thereof and other than the
Halifax County business license tax) imposed on, based on or measured
by (I) net income (including any capital gain minimum taxes or taxes on
items of tax preference), or (II) gross income, net or gross receipts,
capital or net worth, imposed by (x) the U.S. federal government or, in
the case of Taxes described in clause (I) above (other than with
respect to the Lenders), the Commonwealth of Virginia or (y) any
jurisdiction (including the Commonwealth of Virginia) in which the Tax
Indemnitee is subject to such Taxes by reason of transactions or
activities unrelated to the transactions contemplated by the
Transaction Documents or by reason of the presence of any office (other
than an office the Tax Indemnitee is
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treated as having solely by reason of the transactions contemplated by
the Transaction Documents) or other property (other than the Clover
Power Station, the Clover Real Estate or any interest in either,
Modification thereto or Component thereof or any interest under the
Transaction Documents) of such Tax Indemnitee in such jurisdiction;
(ii) Accumulated earnings, withholding, personal holding
company, excess profits, succession or estate, franchise, conduct of
business, other similar Taxes and Taxes in the nature thereof (other
than any sales, use, value added, property or transfer Taxes or Taxes
in the nature thereof and other than the Halifax County business
license tax) imposed by (x) the U.S. federal government or, in the case
of Taxes on, based on, or measured by net income (other than with
respect to the Lenders), the Commonwealth of Virginia or (y) any
jurisdiction (including the Commonwealth of Virginia) in which the Tax
Indemnitee is subject to such Taxes by reason of transactions or
activities unrelated to the transactions contemplated by the
Transaction Documents or by reason of the presence of any office (other
than an office the Tax Indemnitee is treated as having solely by reason
of the transactions contemplated by the Transaction Documents) or other
property (other than the Clover Power Station, the Clover Real Estate
or any interest in either, Modification thereto or Component thereof or
any interest under the Transaction Documents) of such Tax Indemnitee in
such jurisdiction;
(iii) Taxes attributable to any period after the expiration or
earlier termination of the Operating Equipment Agreement and the
Operating Foundation Agreement and return of the Equipment Interest and
the Foundation Interest to the Owner Trustee not attributable to an
Event of Default (other than Taxes attributable to payments made by a
Lessee Person of any amounts under the Transaction Documents after such
event);
(iv) Taxes imposed with respect to a Tax Indemnitee or any
transferee or assignee of any such Tax Indemnitee that result from the
breach by such Tax Indemnitee or such transferee or assignee, as the
case may be, or any Affiliate thereof of any of its representations,
warranties or covenants in any of the Operative Documents or the gross
negligence or willful misconduct of such Tax Indemnitee or such
transferee or assignee, as the case may be, or any Affiliate;
(v) Taxes imposed on the Owner Participant, the Owner Trustee
or the Trust Estate arising out of, or caused by, any assignment, sale,
transfer or other disposition (i) by the Owner Participant of its
Beneficial Interest or a portion thereof or any interest in any
Operative Document, (ii) by the Owner Trustee of the Facility Owner's
Unit 2 Interest or any portion or Component thereof or interest
therein, any Operative Document, or any interest in or arising under
any of the foregoing or (iii) of any interest in the Owner Participant,
other than a disposition (w) in connection with an Event of Loss, (x)
during the continuance of an Event of Default, (y) resulting from the
exercise of rights or performance of obligations by Old Dominion under
the Transaction Documents (including, without limitation, any repair,
replacement, Modification or substitution of or to Clover Unit 2 or any
Component thereof, the exercise of Old Dominion's rights under Section
13, 14, 18 or 19 of either Operating Lease, the exercise
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of the Purchase Option, the Return of the Equipment Interest or the
Foundation Interest) or from the action of any Lessee Person or (z) in
connection with the transactions contemplated to occur on the Closing
Date (other than the transfer by Fleet of the Beneficial Interest to
the Owner Participant);
(vi) Taxes, imposed on the Owner Participant, the Owner
Trustee or the Trust Estate arising in connection with, or as a result
of, Facility Owner's Liens or Owner Participant's Liens, in each case,
attributable to the Tax Indemnitee;
(vii) Otherwise indemnifiable Taxes imposed against a
transferee or assignee of any Tax Indemnitee to the extent of the
excess of such otherwise indemnifiable Taxes over the amount of such
Taxes that would have been imposed on such Tax Indemnitee (but not in
respect of the calculation of After-Tax Basis);
(viii) Taxes that are included (and paid) as a part of the
Transaction Costs;
(ix) Taxes imposed on the Owner Trustee or a Lender with
respect to any fees or other compensation received by the Owner Trustee
or the Lender, respectively, in its capacity as such, other than with
respect to Lender Taxes imposed by the Commonwealth of Virginia (unless
the Commonwealth of Virginia is a jurisdiction described in clause (y)
of Section 8.2(b)(i) hereof with respect to such Lender and such
Taxes);
(x) Taxes that would not have been imposed but for the failure
of a Tax Indemnitee to comply with certification, information,
documentation, reporting or other similar requirements concerning the
nationality, residence, identity, connection with the jurisdiction
imposing such Taxes or other similar matters; PROVIDED that the
foregoing exclusion shall only apply if (i) such Tax Indemnitee shall
have been given timely written notice of such requirement by Old
Dominion, and (ii) such Tax Indemnitee shall have determined that
compliance with such requirement will not have, or create any material
risk of having, any adverse consequence to such Tax Indemnitee or any
Affiliate thereof that is not indemnified against by Old Dominion to
the reasonable satisfaction of the Tax Indemnitee;
(xi) Taxes that would not have been imposed but for the
failure of the Tax Indemnitee to comply with the contest provisions of
paragraph (g) below, but only if the contest of such Taxes was
effectively precluded as a result of such failure;
(xii) except with respect to the Halifax County business
license tax, Taxes that would not have been imposed but for activities
or assets of the Tax Indemnitee (or its Affiliates), or the presence in
the taxing jurisdiction of the Tax Indemnitee (or its Affiliates), in
each case unrelated to the transactions contemplated by the Transaction
Documents;
(xiii) Taxes imposed on any Tax Indemnitee that would not have
been imposed but for an amendment to any Operative Document to which
Old Dominion is not a party
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executed by such Tax Indemnitee (or, in the case of the Owner
Participant, by the Facility Owner if acting at the express direction
of the Owner Participant) that was not joined in, consented to or
requested by Old Dominion unless such consent was required by the
Operative Documents or is made while an Event of Default is continuing;
(xiv) Taxes imposed on the Owner Participant that would not
have been imposed but for the trust created under the Trust Agreement
or the Owner Participant being organized under the laws of a
jurisdiction other than the United States or any state thereof;
(xv) Taxes based on or measured by the value of the interest
of a Lender in any Loan Certificate (other than Taxes imposed by the
Commonwealth of Virginia); and
(xvi) any sales, use, value added or similar Taxes imposed by
the U.S. federal government that are expressly by their terms in
substitution for or in lieu of any Taxes specified in clauses (i) or
(ii) above.
The Owner Participant and the Owner Trustee will, at Old Dominion's expense, use
reasonable efforts to comply with reasonable requests by Old Dominion to do or
to refrain from doing any act if such compliance is, in the good faith opinion
of the Owner Participant, of a purely ministerial nature or otherwise has no
unindemnified adverse impact on the Owner Participant or Owner Trustee or any
Affiliate of either thereof or on the business or operations of any of the
foregoing. A Tax Indemnitee shall also include the employees, officers,
directors and agents of any Tax Indemnitee to the extent of any secondary
liability for indemnifiable Taxes.
(c) PAYMENT. Each payment required to be made by Old Dominion to a Tax
Indemnitee pursuant to paragraph (a) shall be paid in immediately available
funds by the later of (A) 10 Business Days following Old Dominion's receipt of
the Tax Indemnitee's written demand for the payment (which demand shall be
accompanied by an Officer's Certificate of the Tax Indemnitee describing in
reasonable detail the Taxes for which the Tax Indemnitee is demanding indemnity
and the computation of such Taxes), (B) subject to paragraph (g) below, in the
case of amounts which are being contested pursuant to such paragraph (g), at the
time and in accordance with a final determination of such contest (including all
appeals permitted hereby and by law; PROVIDED that no Tax Indemnitee shall be
required to pursue any appeal to the United States Supreme Court), or (C) in the
case of any indemnity demand for which Old Dominion has requested review and
determination pursuant to paragraph (d) below, the completion of such review and
determination; provided, however in no event later than the date which is five
Business Days prior to the date on which such Taxes are required to be paid to
the applicable taxing authority. Any amount payable to Old Dominion pursuant to
paragraph (e) or (f) below shall be paid promptly after the Tax Indemnitee
realizes a Tax Benefit (determined using the same assumptions set forth in the
second sentence under the definition of After-Tax Basis) giving rise to a
payment under paragraph (e) or receives a refund or credit giving rise to a
payment under paragraph (f), as the case may be, and shall be accompanied by an
Officer's Certificate of the Tax Indemnitee computing in reasonable detail the
amount of such payment. Upon the final determination of any contest pursuant to
paragraph (g) below in respect of any Taxes for
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which Old Dominion has made a Tax Advance, the amount of Old Dominion's
obligation under paragraph (a) above shall be determined as if such Tax Advance
had not been made. Any obligation of Old Dominion under this Section 8.2 and the
Tax Indemnitee's obligation to repay the Tax Advance will be satisfied first by
set off against each other, and any difference owing by either party will be
paid within 10 days of such final determination, but not prior to the date
determined in accordance with the first sentence of this paragraph (c).
(d) INDEPENDENT EXAMINATION. Within 15 days after Old Dominion receives
any computation from the Tax Indemnitee, Old Dominion may request in writing
that an independent public accounting firm selected by the Tax Indemnitee and
reasonably acceptable to Old Dominion review and determine on a confidential
basis the amount of any indemnity payment by Old Dominion to the Tax Indemnitee
pursuant to paragraph (a) above or any payment by a Tax Indemnitee to Old
Dominion pursuant to paragraph (e) or (f) below. The Tax Indemnitee shall
cooperate with such accounting firm and supply it with all documentation and
records necessary for the accounting firm to conduct such review and
determination (including relevant data from the Indemnitee's income tax returns
but not such returns themselves), PROVIDED that such accounting firm shall agree
in writing in a manner satisfactory to the Tax Indemnitee to maintain the
confidentiality of such information. The parties hereto agree that the
independent public accounting firm's sole responsibility shall be to verify the
computation of any payment pursuant to this Section 8.2 and that matters of
interpretation of this Participation Agreement or any other Operative Document
are not within the scope of the independent accountant's responsibility. The
fees and disbursements of such accounting firm will be paid by Old Dominion,
PROVIDED that such fees and disbursements will be paid by the Tax Indemnitee if
the verification results in an adjustment in Old Dominion's favor of five
percent or more of the net present value (using a discount rate equal to the
rate of interest on underpayments of federal income tax for the period in
question and calculating such value as of the date such payment becomes due and
payable under this Agreement) of the indemnity payment or payments computed by
the Tax Indemnitee.
(e) TAX BENEFIT. If, as the result of any Taxes paid or indemnified
against by Old Dominion under this Section 8.2, the aggregate Taxes paid by the
Tax Indemnitee for any taxable year and not subject to indemnification pursuant
to this Section 8.2 are less (whether by reason of a deduction, credit,
allocation or apportionment of income or otherwise) than the amount of such
Taxes that otherwise would have been payable by such Tax Indemnitee (a "Tax
Benefit"), then to the extent such Tax Benefit was not taken into account in
determining the amount of indemnification payable by Old Dominion under
paragraph (a) above and provided no Default or Event of Default shall be
continuing, such Tax Indemnitee shall pay to Old Dominion the lesser of (A) (y)
the amount of such Tax Benefit, plus (z) an amount equal to any United States
federal, state or local income tax benefit resulting from the payment under
clause (y) above (determined using the same assumptions as set forth in the
second sentence under the definition of After-Tax Basis) and (B) the amount of
the indemnity paid pursuant to this Section 8.2 giving rise to such Tax Benefit.
If it is subsequently determined that the Tax Indemnitee was not entitled to
such Tax Benefit, the portion of such Tax Benefit that is repaid or recaptured
will be treated as Taxes for which Old Dominion must indemnify the Tax
Indemnitee pursuant to this Section 8.2 without regard to paragraph (b) hereof.
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(f) REFUND. If a Tax Indemnitee obtains a refund or credit of all or
part of any Taxes paid, reimbursed or advanced by Old Dominion pursuant to this
Section 8.2, the Tax Indemnitee promptly shall pay to Old Dominion the amount of
such refund or credit plus or minus any net tax benefit or detriment realized by
such Tax Indemnitee as a result of any Taxes incurred by such Tax Indemnitee by
reason of the receipt or accrual of such refund or credit as well as any Tax
benefits or credits by reason of such payment to Old Dominion (determined using
the same assumptions as set forth in the second sentence under the definition of
After-Tax Basis), PROVIDED that (A) if at the time such payment is due to Old
Dominion and a Bankruptcy Default, Payment Default or an Event of Default under
the Operating Equipment Agreement or the Operating Foundation Agreement shall
have occurred and be continuing, such amount shall not be payable until such
Bankruptcy Default, Payment Default or Event of Default under the Operating
Equipment Agreement or the Operating Foundation Agreement has been cured, and
(B) the amount payable to Old Dominion pursuant to this sentence (net of any
amount in respect of any tax benefit realized by reason of the payment
hereunder) shall not exceed the amount of the indemnity payment in respect of
such refunded or credited Taxes that was made by Old Dominion (net of any amount
that was necessary to make such payment on an After-Tax Basis). If it is
subsequently determined that the Tax Indemnitee was not entitled to such refund
or credit, the portion of such refund or credit that is repaid or recaptured
will be treated as Taxes for which Old Dominion must indemnify the Tax
Indemnitee pursuant to this Section 8.2 without regard to paragraph (b) hereof.
If, in connection with a refund or credit of all or part of any Taxes paid,
reimbursed or advanced by Old Dominion pursuant to this Section 8.2, a Tax
Indemnitee receives an amount representing interest on such refund or credit,
the Tax Indemnitee promptly shall pay to Old Dominion the amount of such
interest that shall be fairly attributable to such Taxes paid, reimbursed or
advanced by Old Dominion prior to the receipt of such refund or credit net of
Taxes payable in respect of such receipt.
(g) CONTEST.
(1) Notice of Contest. If a written claim for payment is made
by any taxing authority against a Tax Indemnitee for any Taxes with
respect to which Old Dominion may be liable for indemnity hereunder (a
"Tax Claim"), such Tax Indemnitee shall give Old Dominion written
notice of such Tax Claim as soon as practicable, and in no event more
than 30 days after its receipt, and shall furnish Old Dominion with
copies of such Tax Claim and all other writings received from the
taxing authority relating to such claim, PROVIDED that failure so to
notify Old Dominion within such 30-day period shall not relieve Old
Dominion of any obligation to indemnify the Tax Indemnitee hereunder
except as provided in clause (xi) of Section 8.2(b). The Tax Indemnitee
shall not pay such Tax Claim until at least 30 days after providing Old
Dominion with such written notice, unless required to do so by law or
regulation.
(2) Control of Contest. Subject to Subsection (g)(3) below,
Old Dominion will be entitled to contest, and control the contest of,
any Tax Claim if such Tax Claim may be and is segregated procedurally
from tax claims for which Old Dominion is not obligated to indemnify
the Tax Indemnitee and the Tax Indemnitee in good faith determines that
there is no material risk of it or an Affiliate being adversely
affected by
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such contest or the conduct thereof, PROVIDED that Old Dominion shall
use its best efforts to contest such Tax Claim in its own name and if
it is contesting the Tax Claim in the Tax Indemnitee's name, it shall
consult with such Tax Indemnitee with respect to the contest of such
Tax Claim. In the case of a Tax Claim that Old Dominion is not entitled
to contest, or that Old Dominion and the Tax Indemnitee otherwise agree
that the Tax Indemnitee shall contest:
(i) the Tax Indemnitee will contest and control such
Tax Claim in good faith,
(ii) at Old Dominion's written request, if payment is
made to the applicable taxing authority, the Tax Indemnitee
shall use reasonable efforts to obtain a refund thereof in
appropriate administrative or (subject to the proviso in the
parenthetical clause in subparagraph (B) of paragraph (c)
above) judicial proceedings,
(iii) the Tax Indemnitee shall consult with and keep
reasonably informed Old Dominion and its designated counsel
with respect to such Tax Claim and shall consider and consult
with Old Dominion concerning any request by Old Dominion to
(a) resist payment of Taxes demanded by the taxing authority
in connection with such Tax Claim if practical and (b) not pay
such Taxes except under protest if protest is necessary and
proper,
(iv) the Tax Indemnitee will not, without Old
Dominion's prior written consent (not unreasonably to be
withheld), forego any administrative appeal, proceeding,
hearing or conference if doing so would preclude as a matter
of law initiating or contesting further such Tax Claim, and
(v) the Tax Indemnitee shall not otherwise settle,
compromise or abandon such contest without Old Dominion's
prior written consent (not unreasonably to be withheld) except
as provided in paragraph (g)(4) below.
(3) Conditions of Contest. Notwithstanding the foregoing, no
contest with respect to a Tax Claim will be required pursuant to this
Section 8.2, and Old Dominion shall be required to pay the applicable
Taxes without contest, unless:
(i) within 30 days after notice by the Tax Indemnitee
to Old Dominion of such Tax Claim, Old Dominion shall request
in writing that such Tax Claim be contested, PROVIDED that if
a shorter period is required for taking action with respect to
such Tax Claim and the Tax Indemnitee notifies Old Dominion of
such requirement, Old Dominion shall use reasonable best
efforts to request such contest within such shorter period,
(ii) no Event of Default under the Operating
Equipment Agreement or the Operating Foundation Agreement has
occurred and is continuing,
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(iii) there is no risk of sale, forfeiture or loss
of, or the creation of a Lien on the Facility Owner's Unit 2
Interest or any Component thereof as a result of such Tax
Claim, PROVIDED that this clause (iii) shall not apply if Old
Dominion posts security satisfactory to the Tax Indemnitee, or
the Tax is paid in either manner specified in clause (iv)
below,
(iv) if such contest involves payment of such Tax,
Old Dominion will either advance to the Tax Indemnitee on an
interest-free basis (without reduction for any Tax savings
that the Tax Indemnitee may realize as a result of the payment
of such Tax) and with no after tax cost to such Tax Indemnitee
or the Owner Participant, which advance will be repaid in full
by the Tax Indemnitee upon the conclusion of the contest (a
"Tax Advance") or pay such Tax Indemnitee the amount payable
by Old Dominion pursuant to paragraph (a) above with respect
to such Tax,
(v) Old Dominion agrees to pay (and pays on demand)
and with no after tax cost to such Tax Indemnitee or the Owner
Participant all reasonable costs and expenses incurred by the
Tax Indemnitee in connection with the contest of such claim
(including, without limitation, reasonable fees and
disbursements of counsel),
(vi) the Tax Indemnitee has been provided at Old
Dominion's sole expense with an opinion, reasonably acceptable
to such Tax Indemnitee, of independent tax counsel of
recognized standing selected by Old Dominion and reasonably
acceptable to the Tax Indemnitee to the effect that there is a
reasonable basis for contesting such Tax Claim, and
(vii) the amount of Taxes in controversy, taking into
account the amount of all similar and logically related Taxes
with respect to the transactions contemplated by Operative
Documents that could be raised in any other year (including
any future year) not barred by the statute of limitations,
exceeds $50,000.
(4) Waiver of Indemnification. Notwithstanding anything to the
contrary contained in this Section 8.2, the Tax Indemnitee at any time
may elect to decline to take any action or any further action with
respect to a Tax Claim and may in its sole discretion settle or
compromise any contest with respect to such Tax Claim without Old
Dominion's consent if the Tax Indemnitee:
(i) waives its right to any indemnity payment by Old
Dominion pursuant to this Section 8.2 in respect of such Tax
Claim, and
(ii) promptly repays to Old Dominion any Tax Advance
and any amount paid to such Tax Indemnitee under paragraph (a)
above in respect of such Taxes, plus interest on such Tax
Advance or other amounts at the IRS rate for
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refunds (or other applicable state or local interest rate for
refunds), payable from the date of payment of such amounts by
Old Dominion to the Tax Indemnitee to (but excluding) the date
of repayment of such amounts by the Tax Indemnitee to Old
Dominion.
If the Tax Indemnitee settles a Tax Claim in respect of which the
consent of Old Dominion to such settlement is required and has
reasonably been withheld and if Old Dominion is thereby precluded as a
matter of law from initiating or continuing a contest hereunder of any
Tax Claim for any other taxable period, the Tax Indemnitee shall be
deemed to have waived the payment by Old Dominion under this Section
8.2 of any indemnity amounts in respect of any such other Tax Claim.
(h) REPORTS.
(1) If any report, statement or return is required to be filed
by a Tax Indemnitee with respect to any Tax that is subject to
indemnification under this Section 8.2, Old Dominion will (1) notify
the Tax Indemnitee in writing of such requirement not later than 30
days prior to the date such report, statement or return is required to
be filed (determined without regard to extensions) and (2) either (x)
if permitted by applicable law, prepare such report, statement or
return for filing by Old Dominion in such manner as will show the
ownership of Clover Unit 2 by the Owner Trustee for United States
federal, state and local income tax purposes (if applicable), send a
copy of such report, statement or return to the Tax Indemnitee and
timely file such report, statement or return with the appropriate
taxing authority, or (y) if so directed by the Tax Indemnitee or in any
event if practicable and if the return to be filed reflects only
information in respect of the transactions contemplated by the
Operative Documents, prepare and furnish to such Tax Indemnitee not
later than 30 days prior to the date such report, statement or return
is required to be filed (determined without regard to extensions) a
proposed form of such report, statement or return for filing by the Tax
Indemnitee. If no report, statement or return is required to be filed
with respect to a Tax subject to indemnification under this Section
8.2, Old Dominion will notify the Tax Indemnitee of such Tax in writing
not later than 30 days prior to the due date for payment of such Tax.
(2) Subject to paragraph (c) above, not later than the date
which is five Business Days prior to the date any Tax described in the
preceding clause (1) is required to be paid by the Tax Indemnitee, Old
Dominion will either (y) if permitted by applicable law, pay such Tax
directly to the appropriate taxing authority or (z) pay the Tax
Indemnitee the amount of such Tax in immediately available funds.
(3) Each of the Tax Indemnitee or Old Dominion, as the case
may be, will timely provide the other, at Old Dominion's expense, with
all information in its possession that the other party may reasonably
require and request to satisfy its obligations under this paragraph
(h). Old Dominion shall hold each Tax Indemnitee harmless on an
After-Tax Basis from and against all liabilities arising out of any
insufficiency or inaccuracy of any report, statement or return if such
insufficiency or
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inaccuracy results from the insufficiency or inaccuracy of any
information required to be supplied by Old Dominion pursuant to this
paragraph (h) in preparing and filing such report, statement or return.
(i) NON-PARTIES. If a Tax Indemnitee is not a party to this Agreement,
Old Dominion may require such Tax Indemnitee to agree in writing, in a form
reasonably acceptable to Old Dominion, to the terms of this Section 8 prior to
making any payment to such Tax Indemnitee under this Section.
SECTION 8.3. SURVIVAL. All the rights, privileges and obligations
arising from this Section 8 shall survive the termination of this Agreement.
SECTION 9. OLD DOMINION'S RIGHT OF QUIET ENJOYMENT
Each party to this Agreement acknowledges notice of, and consents in
all respects to, the terms of the Operating Equipment Agreement, the Operating
Foundation Agreement and the Ground Lease and Sublease and expressly, severally
and as to its own actions only, agrees that, so long as no Event of Default
under the Operating Equipment Agreement or the Operating Foundation Agreement
has occurred and is continuing, it shall not take or cause to be taken any
action contrary to Old Dominion's rights under the Operating Equipment
Agreement, the Operating Foundation Agreement, the Ground Lease and Sublease or
the Clover Agreements Assignment, including the right to possession, use and
quiet enjoyment of the Equipment Interest, the Foundation Interest and the
Ground Interest by Old Dominion.
SECTION 10. SUPPLEMENTAL FINANCING; LOAN PREPAYMENTS AND REFINANCINGS.
SECTION 10.1. FINANCING MODIFICATIONS. Upon the request of Old Dominion
delivered at least 90 days prior to financing the Facility Owner's Percentage of
the cost of any Modification, the Facility Owner, the Agent and the Lenders
agree to cooperate with Old Dominion to (i) issue Additional Loan Certificates
under the Loan Agreement to finance such Modifications which will rank PARI
PASSU with the Loan Certificates then outstanding as to the Collateral and which
will not be secured by the Payment Undertaking Agreement, the Payment
Undertaking Pledge Agreement or the Payment Undertaking Collateral; (ii) execute
and deliver one or more supplements to the Loan Agreement and, if applicable,
the Leasehold Mortgage for purposes of subjecting any such Modifications to the
Liens thereof; and (iii) execute and deliver an amendment to the Operating
Equipment Agreement or the Operating Foundation Agreement, as the case may be,
to reflect the adjustments required by clause (vi) below; PROVIDED, HOWEVER,
that (A) the Owner Participant shall have been given the opportunity, but shall
have no obligation, to provide all or part of the funds required to finance any
such Modification by making an Additional Equity Investment in such amount, if
any, as it may determine in its sole and absolute discretion, but Old Dominion
shall have no obligation to accept such Additional Equity Investment; and (B)
the conditions set forth below and in Section 2.11 of the Loan
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Agreement shall have been satisfied. The obligation to finance such
Modifications through the issuance of Additional Loan Certificates (which Old
Dominion may not purchase) under Section 2.11 of the Loan Agreement (any
financing of Modifications through the issuance of such Additional Loan
Certificates under the Loan Agreement being called a "Supplemental Financing")
is subject to the following additional conditions:
(i) no Payment Default, Bankruptcy Default or Event of Default
under the Operating Equipment Agreement or the Operating
Foundation Agreement shall have occurred and be continuing
unless, in the case of an Event of Default under the Operating
Equipment Agreement or the Operating Foundation Agreement, the
installation or construction of the Modification to be
financed in such Supplemental Financing shall effect the cure
of such Event of Default and such Modification shall be made
in compliance with the Clover Agreements and the other
Operative Documents;
(ii) there shall be no more than one Supplemental Financing in any
calendar year, and no more than three (3) Supplemental
Financings during the Terms of the Operating Equipment
Agreement and the Operating Foundation Agreement;
(iii) each Supplemental Financing shall be for an amount not less
than $20 million and the aggregate principal amount of the
Loan Certificates issued in connection with any Supplemental
Financing shall not be greater than 90% of the cost of such
Modifications;
(iv) the aggregate principal amount of the Loan Certificates at any
time outstanding (including the Additional Loan Certificates
issued in connection with such Supplemental Financing) shall
not exceed 80% of the Fair Market Sales Value of the Facility
Owner's Unit 2 Interest, taking into account the proposed and
all prior Modifications to Clover Unit 2;
(v) each Additional Loan Certificate issued in connection with
such Supplemental Financing shall have a final maturity date
no later than the Loan Maturity Date;
(vi) appropriate adjustments pursuant to Section 3.4 of the
Operating Equipment Agreement and/or Section 3.4 of the
Operating Foundation Agreement, as the case may be, shall be
made to Basic Payments or Foundation Basic Payments, the
applicable Termination Values, Equity Exposure Amounts and the
Purchase Option Price or Foundation Purchase Option Price to
protect the Net Economic Return (determined without regard to
any tax benefits associated with such Modifications) and to
provide the Owner Trustee with sufficient funds to pay the
principal and interest on such Additional Loan Certificates;
(vii) the Owner Participant shall have received a favorable opinion
of the Owner Participant's Tax Counsel (such opinion to be
reasonably satisfactory to the
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Owner Participant) to the effect that the Supplemental
Financing creates no incremental tax risk to the Owner
Participant;
(viii) the Owner Participant shall suffer no adverse accounting
effects from such Supplemental Financing;
(ix) Old Dominion shall provide a Qualifying Surety Bond or
Qualifying Letter of Credit with respect to any increase in
the Equity Exposure Amount resulting from the adjustments
required by clause (vi);
(x) Old Dominion shall have made or delivered such
representations, warranties, covenants, opinions or
certificates as Facility Owner, the Owner Trustee, the Owner
Participant, the Agent or any Lender may reasonably request;
and
(xi) Old Dominion shall pay to the Owner Participant a financing
fee of $25,000 for each Supplemental Financing.
SECTION 10.2. OPTIONAL REFINANCING OF THE SERIES A LOAN
CERTIFICATE.
(a) If (i) the senior unsecured debt obligations (or long-term
deposits) of the Bank shall not be rated at least "AA" by S&P and "Aa2" by
Moody's and (ii) the Series A Lender shall not have approved collateral offered
by Old Dominion to substitute for the Payment Undertaking Collateral (which
approval shall be given by the Series A Lender in its absolute discretion)
within 5 Business Days of such offer, then at the request of Old Dominion, the
Owner Participant, the Facility Owner, the Owner Trustee and the Agent agree to
cooperate with Old Dominion to refinance the Series A Loan Certificate in whole
but not in part, through the issuance of Additional Loan Certificates. The
obligation of the Owner Participant, the Facility Owner and the Owner Trustee to
effect such a refinancing shall be subject to the satisfaction of all conditions
to the issuance of Additional Loan Certificates under Section 2.11 of the Loan
Agreement and to the satisfaction of the following additional conditions:
(i) no Payment Default, Bankruptcy Default or Event of Default
under the Operating Equipment Agreement or the Operating Foundation
Agreement shall have occurred and be continuing;
(ii) the principal amount of such Additional Loan Certificates
shall be equal to the outstanding principal amount of the Series A Loan
Certificate on the date such Loan Certificate is refinanced (the "Loan
Refinancing Date") (after taking into account any scheduled
amortization of principal, if any, occurring on such Loan Refinancing
Date);
(iii) each Additional Loan Certificate shall be prepayable
without premium or penalty of any kind and shall have a final maturity
date no later than the Loan Maturity Date;
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(iv) appropriate adjustments pursuant to Section 3.4 of the
Operating Equipment Agreement and Section 3.4 of the Operating
Foundation Agreement shall be made to Basic Payments and Foundation
Basic Payments and the applicable Termination Values in order to
preserve the Owner Participant's Net Economic Return and reflect the
interest rate on the Additional Loan Certificates;
(v) Old Dominion shall pay (x) if the Loan Refinancing Date is
a Payment Date, the Basic Payments and Foundation Basic Payments due on
such date (to the extent payable in arrears), or (y) if the Loan
Refinancing Date is not a Payment Date, accrued and unpaid interest on
the Series A Loan Certificate being refinanced for the period from the
immediately preceding Payment Date to the Loan Refinancing Date;
(vi) such refinancing shall not, in and of itself, result in a
violation of Applicable Law not attributable to a default in, or a
breach of, the obligations of any such Person hereunder or under the
other Operative Documents;
(vii) the representations and warranties of Old Dominion set
forth in clause (n) of Section 3.3 of this Agreement shall be true and
correct in all material respects on and as of the Loan Refinancing Date
with the same force and effect as though made on and as of such Loan
Refinancing Date and the Owner Participant, the Owner Trustee, the
Facility Owner and the Agent shall have received an Officer's
Certificate from Old Dominion to such effect;
(viii) any authorization or approval or other action by, or
notice to or filing with, any Governmental Entity required for such
issuance of Additional Loan Certificates has been duly obtained, taken
or given and the Owner Participant, the Owner Trustee, the Facility
Owner and the Agent shall have received one or more opinions of counsel
for Old Dominion (such opinions and such counsel to be reasonably
acceptable to the Owner Participant, the Owner Trustee and the Agent)
to such effect;
(ix) the representations and warranties set forth in Section
3.4 of this Agreement shall be true and correct in all material
respects on and as of the Loan Refinancing Date with the same force and
effect with respect to the new Lenders as of such Loan Refinancing Date
and the Owner Participant, the Owner Trustee and the Agent shall have
received an Officer's Certificate from the new Lenders to such effect;
(x) all documentation in connection with such refinancing
shall be reasonably satisfactory to the Owner Trustee, the Facility
Owner and the Owner Participant;
(xi) the Owner Participant shall at the expense of Old
Dominion have obtained a favorable tax opinion from the Owner
Participant's Tax Counsel to the effect that the exercise of such
refinancing right (as opposed to the existence of such right) will not
result in a material incremental risk of any adverse tax consequence to
the Owner Participant;
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(xii) the Owner Participant shall not suffer any adverse
accounting effects as a result of such refinancing, including but not
limited to, the loss of leveraged lease accounting;
(xiii) such additional representations, warranties,
indemnities and opinions of counsel as the Owner Participant or the
Owner Trustee shall reasonably request.
SECTION 10.3. FINANCING AND REFINANCING COSTS. Old Dominion hereby
agrees to pay, on an After-Tax Basis, all reasonable costs and expenses of the
Transaction Parties, including the reasonable fees and expenses of counsel to
the Owner Participant, the Owner Trustee, the Facility Owner, the Lenders and
the Agent, in each case to the extent incurred in connection with any financing
or refinancing pursuant to this Section 10 whether or not the financing or
refinancing is consummated.
SECTION 11. CONVEYANCE OF TITLE TO RETAINED ASSETS
(a) Notwithstanding the provisions of any Operative Document,
including, but not limited to Section 6 of the Operating Equipment Agreement and
Section 6 of the Operating Foundation Agreement, Old Dominion shall have the
right to convey legal title to any or all Retained Assets to a Person in a
transaction characterized as a sale and leaseback for United States commercial
law purposes, but in which ownership is conveyed for tax purposes of the
domicile of such Person, but only for purposes of the domicile of such Person,
PROVIDED THAT such transaction satisfies the following conditions:
(i) no Payment Default, Bankruptcy Default or Event of Default
under the Operating Equipment Agreement or the Operating Foundation
Agreement shall have occurred and be continuing;
(ii) such conveyance and related leaseback shall not affect
the status of the Head Equipment Agreement and the Head Foundation
Agreement as conveying ownership for United States income tax purposes
to the Owner Participant;
(iii) the interest of any purchaser of legal title to Retained
Assets or any portion thereof is subject and subordinate to the
interest of the Owner Trustee under the Head Equipment Agreement and
the Head Foundation Agreement;
(iv) such conveyance and leaseback does not otherwise
adversely affect any right or interest of the Facility Owner under the
Operating Equipment Agreement, the Operating Foundation Agreement, the
Head Equipment Agreement, the Head Foundation Agreement or any other
Operative Document, the Owner Participant under any Operative Document
or of the Lenders or the Agent under the Loan Agreement, the Leasehold
Mortgage or the Payment Undertaking Agreement, and the parties hereto
shall have received an opinion, reasonably satisfactory to each, with
respect to the continued
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validity of the interest created by the Head Agreements, and the
continued validity of the Liens created by the Loan Agreement and the
Leasehold Mortgage;
(v) if the transaction adversely affects the status of the
Head Equipment Agreement or the Head Foundation Agreement as conveying
ownership for state or local income tax purposes in Virginia,
appropriate adjustments pursuant to Section 3.4 of the Operating
Equipment Agreement and Section 3.4 of the Operating Foundation
Agreement shall be made to Basic Payments, Foundation Basic Payments,
Termination Values, Equity Exposure Amounts, Purchase Option Price and
Foundation Purchase Option Price to protect the Owner Participant's Net
Economic Return;
(vi) Old Dominion shall provide a Qualifying Surety Bond or
Qualifying Letter of Credit with respect to any increase in the Equity
Exposure Amounts as a result of any adjustment pursuant to clause (v)
of this Section 11;
(vii) the Owner Participant shall receive a favorable opinion
of Owner Participant's Tax Counsel reasonably satisfactory to Owner
Participant in form and scope, to the effect that the proposed
transaction creates no incremental tax risk to the Owner Participant,
the Owner Trustee or any Affiliate of either thereof;
(viii) Old Dominion shall provide the Owner Participant an
indemnity in form and substance satisfactory to the Owner Participant
against any adverse tax consequences resulting in whole or in part from
the proposed transaction;
(ix) the entering into of such transaction shall be permitted
by the Clover Agreements and the Old Dominion Indenture;
(x) Old Dominion shall remain fully and primarily liable for
its obligations under the Operative Documents; and
(xi) Old Dominion shall pay to the Owner Participant a fee of
$25,000.
(b) Not later than 30 days prior to the date of consummation of a
transaction contemplated by this Section 11, Old Dominion will give the Owner
Trustee, the Owner Participant and the Agent written notice of its intention to
consummate such a transaction along with a written description of the
transaction contemplated. In connection with the negotiation of such proposed
transaction, Old Dominion will make available to the Owner Participant, the
Agent and their counsel drafts of transaction documents in connection with such
proposed transaction at such times as to permit sufficient review to determine
compliance with this Section 11 and to determine whether the opinion of counsel
contemplated by clause (vii) of paragraph (a) of this Section 11 is favorable.
(c) Old Dominion will reimburse the Owner Trustee, the Facility Owner,
the Owner Participant, the Agent and the Lenders on an After-Tax Basis for all
their costs and expenses
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including the reasonable fees and expenses of counsel, in connection with their
review of the proposed transaction whether or not such transaction is
consummated.
SECTION 12. SPECIAL EQUITY REMEDY.
Notwithstanding the limitations set forth in Section 5.1, upon the
occurrence and during the continuance of a Special Equity Event, the Owner
Participant may, upon not less than five days' written notice to Old Dominion
and the Agent, require Old Dominion (or its designee as provided below) to
purchase all of the Owner Participant's Beneficial Interest (the "Special Equity
Remedy") on any date occurring not less than five days after such notice
specified in such notice by the Owner Participant at a price equal to the
Special Equity Remedy Amount determined as of the date of such purchase reduced
by the sum of all amounts received in respect of the Equity Portion of
Termination Value (including the Qualifying Equity Security Deposit and the
Qualifying Surety Bond and substitutes thereafter) by the Owner Participant or
the Facility Owner or the Owner Trustee on behalf of the Owner Participant as a
result of the exercise of any remedies under Section 17 of the Equipment
Operating Agreement and Section 17 of the Foundation Operating Agreement. On the
date identified in the notice of the Owner Participant, Old Dominion shall pay
to the Owner Participant the Special Equity Remedy Amount determined as of such
date and reduced as provided in the immediately preceding sentence, plus all
amounts of Supplemental Payments and Foundation Supplemental Payments (prorated
to the date of such purchase) to the extent payable to the Owner Participant
(including, without limitation, all costs and expenses of the Owner Participant
and all sales, use, value added and other Taxes covered by Section 8.2 of the
Participation Agreement associated with the exercise of the Special Equity
Remedy pursuant to this Section 12, to the extent such amounts have not
otherwise been reimbursed pursuant to Section 12) due and payable on such date.
Concurrently with the payment of all sums required to be paid pursuant to this
Section 12 (or on such later date of transfer of the Beneficial Interest in
accordance with clause (ii) below) (i) Old Dominion shall cease to have any
liability to the Owner Participant with respect to the Operative Documents,
except for obligations (including, without limitation, Sections 8.1 and 8.2
hereof and the Tax Indemnity Agreement) surviving pursuant to the express terms
of any Operative Document or which have otherwise accrued but not been paid as
of such date and (ii) the Owner Participant will transfer (by an appropriate
instrument of transfer) the Beneficial Interest to Old Dominion; PROVIDED,
HOWEVER, that if the Liens of the Loan Agreement and the Leasehold Mortgage have
not been terminated or discharged, such transfer shall not be made to Old
Dominion, but shall be made to Old Dominion's designee (provided such designee
or its Affiliate is not a direct competitor of Virginia Power) promptly upon Old
Dominion's designation of such designee and such designee will agree not to
transfer the Beneficial Interest to Old Dominion until such Liens are terminated
or discharged. At the time of any transfer under this Section 12 the Owner
Participant shall represent and warrant as to the absence of Liens attributable
to the Owner Participant on the Beneficial Interest. It is understood and agreed
among the parties hereto that the transaction contemplated by this Section 12
shall not effect a merger of Old Dominion's ownership interest in Clover Unit 2
and the Clover Real Estate with the Facility Owner's Unit 2 Interest. Old
Dominion will pay all reasonable costs
50
<PAGE>
and expenses of the parties (including reasonable attorneys' fees and
disbursements) in connection with any purchase pursuant to this Section 12.
SECTION 13. AGREEMENTS CONCERNING PAYMENT UNDERTAKING
AGREEMENT
SECTION 13.1. AGREEMENT CONCERNING DATES IN PAYMENT UNDERTAKING
AGREEMENT. The parties agree that the dates referred to in Section 3.2(a) of
the Payment Undertaking Agreement are as follows:
(i) the applicable Termination Date on which the Operating
Agreements shall be terminated pursuant to Section 10.2, 13, 14 or 18
of each thereof;
(ii) the Loan Refinancing Date on which the Series A Loan
Certificate shall be prepaid pursuant to Section 10.2 of the
Participation Agreement and Section 2.10 of the Loan Agreement;
(iii) the date of any termination of the Operating Agreements
pursuant to Section 17 of each thereof;
(iv) the date upon which Termination Value or an amount
determined by reference to Termination Value is payable under Section
17 of the Operating Agreements; and
(v) the date upon which the Owner Participant or its designee
shall purchase the Series A Loan Certificate pursuant to Section 4.8 of
the Loan Agreement.
SECTION 13.2. PAYMENT OF EXCESS AMOUNTS. If (i) the Operating
Agreements shall terminate pursuant to the provisions of Section 10.2, 13, 14,
17 or 18 of each thereof and (ii) Old Dominion shall have discharged all of its
obligations under the Operative Documents, the Facility Owner or the Owner
Participant, as the case may be, shall remit to Old Dominion any proceeds of the
Payment Undertaking Agreement in excess of all amounts owed by Old Dominion
under the Operative Documents.
SECTION 13.3. PAYMENT DIRECTION BY FACILITY OWNER. If (i) the Loan
Refinancing Date or the Obsolescence Termination Date shall occur and (ii) all
amounts payable by Old Dominion on such Loan Refinancing Date or Obsolescence
Termination Date, as the case may be, shall be paid or provided for, the
Facility Owner will direct the Bank to pay to Old Dominion the amounts otherwise
required to be paid by the Bank to the Facility Owner pursuant to Section 3.2(a)
of the Payment Undertaking Agreement.
51
<PAGE>
SECTION 14. MISCELLANEOUS
SECTION 14.1. CONSENTS. The Owner Participant covenants and agrees that
it shall not unreasonably withhold its consent to any consent requested of the
Facility Owner under the terms of the Operative Documents that by its terms is
not to be unreasonably withheld by the Facility Owner.
SECTION 14.2. BANKRUPTCY OF TRUST ESTATE. If (i) all or any part of the
Trust Estate becomes the property of a debtor subject to the reorganization
provisions of Title 11 of the United States Code, as amended from time to time,
(ii) pursuant to such reorganization provisions the Owner Participant is
required, by reason of the Owner Participant being held to have recourse
liability to the debtor or the trustee of the debtor directly or indirectly, to
make payment on account of any amount payable as principal or interest on the
Loan Certificates, and (iii) the Lender actually receives any Excess Amount, as
defined below, which reflects any payment by the Owner Participant on account of
clause (ii) above, the Lender shall promptly refund to the Owner Participant
such Excess Amount. For purposes of this Section 13.2, "Excess Amount" means the
amount by which such payment exceeds the amount which would have been received
by the Lender if the Owner Participant had not become subject to the recourse
liability referred to in clause (ii) above. Nothing contained in this Section
13.2 shall prevent the Lender from enforcing any personal recourse obligations
(and retaining the proceeds thereof) of the Owner Participant as contemplated by
this Participation Agreement (other than referred to in clause (ii)).
SECTION 14.3. AMENDMENTS AND WAIVERS. No term, covenant, agreement or
condition of this Agreement may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto (and, also, in connection with any termination of, or
amendment to, those provisions for which Virginia Power is an intended
beneficiary, approved by Virginia Power).
SECTION 14.4. NOTICES. Unless otherwise expressly specified or
permitted by the terms hereof, all communications and notices provided for
herein shall be in writing or by a telecommunications device capable of creating
a written record, and any such notice shall become effective (a) upon personal
delivery thereof, including, without limitation, by overnight mail or courier
service, (b) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt thereof, or
(c) in the case of notice by such a telecommunications device, upon transmission
thereof, provided such transmission is promptly confirmed by either of the
methods set forth in clauses (a) or (b) above, in each case addressed to each
party hereto at its address set forth below or, in the case of any such party
hereto, at such other address as such party may from time to time designate by
written notice to the other parties hereto:
52
<PAGE>
If to Old Dominion:
Old Dominion Electric Cooperative
4201 Dominion Boulevard
Glen Allen, Virginia 23060
Facsimile No.: (804) 747-3742
Telephone No.: (804) 747-0592
Attention: Vice President of Accounting and Finance
If to the Facility Owner:
Clover Unit 2 Generating Trust
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Facsimile No.: (302) 651-8882
Telephone No.: (302) 651-1000
Attention: Corporate Trust Administration
53
<PAGE>
If to the Owner Trustee:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Facsimile No.: (302) 651-8882
Telephone No.: (302) 651-1000
Attention: Corporate Trust Administration
with a copy to:
the Owner Participant at the address set forth below.
If to the Owner Participant:
EPC Corporation
c/o Chrysler Capital Corporation
225 High Ridge Road
Stamford, Connecticut 06905
Telephone No.: (203) 975-3500
Facsimile No.: (203) 975-3911
Attention: President
If to the Agent or the Series A Lender:
Utrecht-America Finance Co.,
c/o Rabobank Nederland, New York Branch
245 Park Avenue
New York, New York 10167-0062
Facsimile No.: (212) 916-7880
Telephone No.: (212) 916-7864
Attention: General Counsel's Office
If to the initial Series B Lender:
Utrecht-America Finance Co.,
c/o Rabobank Nederland, New York Branch
245 Park Avenue
New York, New York 10167-0062
Facsimile No.: (212) 916-7880
Telephone No.: (212) 916-7864
Attention: General Counsel's Office
A copy of all communications and notices provided for herein shall be sent by
the party giving such communication or notice to Virginia Power at:
Virginia Electric and Power Company
P.O. Box 26666
Richmond, Virginia 23261
Attention: President
SECTION 14.5. SURVIVAL. All warranties, representations, indemnities
and covenants made by any party hereto, herein or in any certificate or other
instrument delivered by any such party or on the behalf of any such party under
this Agreement shall be considered to have been relied upon by each other party
hereto and shall survive the consummation of the transactions contemplated
hereby on the Closing Date regardless of any investigation made by any such
party or on behalf of any such party.
SECTION 14.6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of, and shall be enforceable by, the parties
hereto and their respective successors and assigns as permitted by and in
accordance with the terms hereof, including each successive holder of the
Beneficial Interest permitted under Section 5.1. Except as expressly provided
herein or in the other Operative Documents and except for any assignment to or
by the Qualified Intermediary pursuant to the Exchange Documents, no party
hereto may assign its interests herein without the consent of the other parties
hereto.
54
<PAGE>
SECTION 14.7. BUSINESS DAY. Notwithstanding anything herein or in any
other Operative Document to the contrary, if the date on which any payment is to
be made pursuant to this Agreement or any other Operative Document is not a
Business Day, the payment otherwise payable on such date shall be payable on the
next succeeding Business Day with the same force and effect as if made on such
scheduled date and (PROVIDED such payment is made on such succeeding Business
Day) no interest shall accrue on the amount of such payment from and after such
scheduled date to the time of such payment on such next succeeding Business Day.
SECTION 14.8. GOVERNING LAW THIS AGREEMENT SHALL BE IN ALL RESPECTS
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
SECTION 14.9. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Agreement shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
SECTION 14.10. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together only one Agreement.
SECTION 14.11. HEADINGS AND TABLE OF CONTENTS. The headings of the
sections of this Agreement and the Table of Contents are inserted for purposes
of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
SECTION 14.12. LIMITATIONS OF LIABILITY.
(a) LIABILITIES OF THE PARTICIPANTS. None of the Owner Trustee, the
Trust Company or the Owner Participant shall have any obligation or duty to Old
Dominion or to others with respect to the transactions contemplated hereby,
except those obligations or duties expressly set forth in this Agreement and the
other Operative Documents, and neither the Owner Trustee, the Trust Company nor
the Owner Participant shall be liable for performance by any other party hereto
of such other party's obligations or duties hereunder. Without limitation of the
generality of the foregoing, under no circumstances whatsoever shall the Owner
Participant be liable to Old Dominion for any action or inaction on the part of
the Owner Trustee in connection with the transactions contemplated herein,
whether or not such action or inaction is caused by willful misconduct or gross
negligence of the Owner Trustee, unless such action or inaction is at the
direction of the Owner Participant, and such direction is expressly permitted
hereby.
(b) NO RECOURSE TO THE OWNER TRUSTEE. Anything in this Participation
Agreement or the Loan Certificates to the contrary notwithstanding, except as
otherwise provided in Sections 3.1, 6.1, 6.2 and 6.7 and except with respect to
Facility Owner's Liens, it is understood and agreed that (irrespective of any
breach of any representation, covenant, agreement or undertaking of any nature
whatsoever made in this Participation Agreement or the Loan Certificates by the
55
<PAGE>
Owner Trustee), no recourse shall be had under any rule of law, statute or
constitution or by the enforcement of any assessments or penalties or otherwise
for the payment of any amounts due on the Loan Certificates or due under the
Operative Documents or for any claim based thereon or otherwise in respect
thereof against (i) except as a result of its gross negligence, fraud or willful
misconduct, the Owner Trustee, the Trust Company or any past, present or future
Affiliate, partner, officer, director, any owner, shareholder, agent or employee
of or in any thereof or director or shareholder of any partner thereof or their
legal representatives, successors or assigns, (ii) except as a result of its
gross negligence, fraud or willful misconduct, any successor Owner Trustee or
(iii) any Person for whom the Owner Trustee was acting as an agent for the
account and benefit of such Person in entering into the transactions evidenced
by this Participation Agreement and the Loan Certificates, and that such Person
was or was alleged to be the principal of the Owner Trustee. Furthermore, it is
expressly understood that, except as expressly set forth in this Section
13.12(b), all such liability (a) of the Owner Trustee, the Trust Company or any
past, present or future Affiliate, partner, officer, director, any owner,
shareholder, agent or employee of or in any thereof or director or shareholder
of any partner thereof or any of their respective legal representatives,
successors or assigns, (b) any successor Owner Trustee or (c) such other Person,
is and is being expressly waived and released as consideration for the execution
of this Participation Agreement by the Owner Trustee and all Persons having any
claim against the Owner Trustee by reason of the transactions contemplated by
this Participation Agreement and the other Operative Documents agree to look
solely to the Trust Estate and to the sums due or to become due under the Trust
Estate (other than Excluded Payments) for the payment of any such sums.
(c) In addition to and not in limitation of the foregoing, it is
understood and agreed that (i) this Participation Agreement is executed and
delivered by the Trust Company, not in its individual capacity but solely as
trustee under the Trust Agreement in the exercise of the power and authority
conferred and vested in it as such trustee, (ii) except as to Facility Owner's
Liens applicable to the Trust Company and Sections 3.1, 6.1, 6.2 and 6.7, each
of the representations, undertakings and agreements made herein by the Owner
Trustee are not personal representations, undertakings and agreements of the
Trust Company, but are binding only on the Owner Trustee, as trustee, and (iii)
actions to be taken by the Owner Trustee pursuant to its obligations hereunder
and under the Loan Certificates may be taken by the Owner Trustee only upon
specific authority of the Owner Participant as provided in the Trust Agreement.
SECTION 14.13. CONSENT TO JURISDICTION; WAIVER OF TRIAL BY JURY. (a) To
the extent permitted by applicable law, each of the parties hereto (i) hereby
irrevocably submits to the nonexclusive jurisdiction of the Supreme Court of the
State of New York, New York County (without prejudice to the right of any party
to remove to the United States District Court for the Southern District of New
York) and to the nonexclusive jurisdiction of the United States District Court
for the Southern District of New York for the purposes of any suit, action or
other proceeding arising out of this Agreement, the other Operative Documents,
or the subject matter hereof or thereof or any of the transactions contemplated
hereby or thereby brought by any of the parties hereto or their successors or
assigns; (ii) hereby irrevocably agrees that all claims in respect of such
action or proceeding may be heard and determined in such New York State court,
or in such federal court; and (iii) to the extent permitted by Applicable Law,
hereby
56
<PAGE>
irrevocably waives, and agrees not to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding any claim that it is not
personally subject to the jurisdiction of the above-named courts, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Agreement, the other
Operative Documents, or the subject matter hereof or thereof may not be enforced
in or by such court.
(b) To the extent permitted by applicable law, each of the
parties hereto hereby irrevocably waives the right to demand a trial by jury, in
any such suit, action or other proceeding arising out of this Agreement, the
other Operative Documents, or the subject matter hereof or thereof or any of the
transactions contemplated hereby or thereby brought by any of the parties hereto
or their successors or assigns.
SECTION 14.14. FURTHER ASSURANCES. Each party hereto will promptly and
duly execute and deliver such further documents to make such further assurances
for and take such further action reasonably requested by any party to whom such
first party is obligated, all as may be reasonably necessary to carry out more
effectively the intent and purpose of this Participation Agreement and the other
Operative Documents. Without limiting the generality of the foregoing, the Owner
Participant and the Facility Owner agree to execute and deliver the Reassignment
and Reacceptance of Replacement Property Contract in the form of Exhibit Z.
SECTION 14.15. EFFECTIVENESS. The Participation Agreement has been
dated as of the date first above written for convenience only. This
Participation Agreement shall be effective on the date of execution and delivery
by each of the parties hereto.
SECTION 14.16. MEASURING LIFE. If and to the extent that any of the
rights and privileges granted under this Agreement, including Section 12 hereof,
would, in the absence of the limitation imposed by this sentence, be invalid or
unenforceable as being in violation of the rule against perpetuities or any
other rule or law relating to the vesting of interests in property or the
suspension of the power of alienation of property, then it is agreed that,
notwithstanding any other provision of this Participation Agreement, such
options, rights and privileges, subject to the respective conditions governing
the exercise of such options, rights and privileges, will be exercisable only
during (a) a period which will end twenty-one (21) years after the death of the
last survivor of the members of the Board of Directors of Old Dominion named in
Schedule 5 hereto, together with all such persons' children and grandchildren
who are living on the date of the execution of this Participation Agreement or
(b) the specific applicable period of time expressed in this Participation
Agreement, whichever is shorter.
57
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Participation
Agreement to be executed and delivered by their respective officers thereunto
duly authorized as of the day and year first above written.
OLD DOMINION ELECTRIC COOPERATIVE
By:/s/ DANIEL M. WALKER
---------------------------------------
Name: Daniel M. Walker
Title: Vice President
Date: July 31, 1996
WILMINGTON TRUST COMPANY,
not in its individual capacity, except as
provided herein, but solely as Owner Trustee
under the Trust Agreement
By:/s/ EMMETT R. HARMON
-----------------------------------------
Name: Emmett R. Harmon
Title: Vice President
Date: July 31, 1996
CLOVER UNIT 2 GENERATING TRUST
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement
By:/s/ EMMETT R. HARMON
-----------------------------------------
Name: Emmett R. Harmon
Title: Vice President
Date: July 31, 1996
<PAGE>
EPC CORPORATION
By:/s/ WALTER F. GREENFIELD
-----------------------------------------
Name: Walter F. Greenfield
Title: Vice President
Date: July 31, 1996
UTRECHT-AMERICA FINANCE CO.,
as Agent, Series A Lender and initial Series B
Lender
By:/s/ ROBERT B. BENOIT
--------------------------------------
Name: Robert B. Benoit
Title: Vice President
Date: July 31, 1996
59
<PAGE>
APPENDIX A
TO
PARTICIPATION
AGREEMENT
DEFINITIONS
A-1
<PAGE>
SCHEDULE 1
TO
PARTICIPATION
AGREEMENT
TRANSACTION COSTS
Owner Trustee
Richards, Layton & Finger, counsel to Owner Trustee
Advisors to Owner Participant
Milbank, Tweed, Hadley & McCloy,
special counsel to the Owner Participant
Mays & Valentine, special Virginia counsel
to the Owner Participant
Appraiser
Engineer
Insurance Advisor to Owner Participant
S1-1
<PAGE>
SCHEDULE 2
TO
PARTICIPATION
AGREEMENT
RECORDINGS AND FILINGS
I. Land Records
1. Ground Lease and Sublease
Places Filed: Land Records for Halifax County, Virginia
2. Head Foundation Agreement
Places Filed: Land Records for Halifax County, Virginia
3. Operating Foundation Agreement
Places Filed: Land Records for Halifax County, Virginia
4. Leasehold Mortgage
Places Filed: Land Records for Halifax County, Virginia
5. Subordinated Mortgage
Places Filed: Land Records for Halifax County, Virginia
6. Trust Agreement
Places Filed: Land Records for Halifax County, Virginia
7. Clover Unit 2 Plat
Places Filed: Land Records for Halifax County, Virginia
S2-1
<PAGE>
II. UCC/Financing Statements
1. Perfection of Security Interest Created by the Loan Agreement
Debtor: Clover Unit 2 Generating Trust
Creditor: Utrecht-America Finance Co.
Places Filed: UCC Records for Secretary of State, Delaware
UCC Records for Halifax County, Virginia
UCC Records for Virginia State Corporation
Commission
2. Precautionary Vendor In Possession Filing and Security Interest vs.
Lease Regarding the Head Equipment Agreement and Head Foundation
Agreement
Debtor: Old Dominion Electric Cooperative
Creditor: Clover Unit 2 Generating Trust
Assignee: Utrecht America Finance Co.
Places Filed: UCC Records for Virginia State Corporation
Commission
UCC Records for Henrico County, Virginia
UCC Records for Halifax County, Virginia
3. Precautionary Fixture Filing Regarding the Head Equipment Agreement
and the Head Foundation Agreement
Debtor: Old Dominion Electric Cooperative
Creditor: Clover Unit 2 Generating Trust
Places Filed: UCC Records for Halifax County, Virginia
4. Precautionary Fixture Filing Regarding the Operating Equipment
Agreement and the Operating Foundation Agreement
Debtor: Clover Unit 2 Generating Trust
Creditor: Old Dominion Electric Cooperative
Places Filed: UCC Records for Halifax County, Virginia
S2-2
<PAGE>
5. Precautionary Fixture Filing Regarding the Loan Agreement
Debtor: Clover Unit 2 Generating Trust
Creditor: Utrecht-America Finance Co.
Places Filed: UCC Records for Halifax County, Virginia
6. Perfection of Pledge of Payment Undertaking Agreement
Debtor: Old Dominion Electric Cooperative
Creditor: Clover Unit 2 Generating Trust
Assignee: Utrecht-America Finance Co.
Places Filed: UCC Records for Virginia State Corporation
Commission
UCC Records for Henrico County, Virginia
UCC Records for Halifax County, Virginia
UCC Records for Secretary of State, Delaware
7. Perfection of Security Interest Created by the Subordinated Security
Agreement
Debtor: Old Dominion Electric Cooperative
Creditor: AMBAC Indemnity Corporation
EPC Corporation
Clover Unit 2 Generating Trust
Places Filed: UCC Records for Virginia State Corporation
Commission
UCC Records for Henrico County, Virginia
UCC Records for Halifax County, Virginia
8. Precautionary Fixture Filing Regarding the Subordinated Security
Agreement
Debtor: Old Dominion Electric Cooperative
Creditor: AMBAC Indemnity Corporation
EPC Corporation
Clover Unit 2 Generating Trust
Places Filed: UCC Records for Halifax County, Virginia
9. Precautionary Fixture Filing Regarding the Subordinated Deed of
Trust and Security Agreement
Debtor: Old Dominion Electric Cooperative
S2-3
<PAGE>
Creditor: AMBAC Indemnity Corporation
EPC Corporation
Clover Unit 2 Generating Trust
Places filed: UCC Records for Halifax County, Virginia
10. Perfection of Security Interest Created by the Investment Agreement
Pledge Agreement
Debtor: Old Dominion Electric Cooperative
Creditor: AMBAC Indemnity Corporation
EPC Corporation
Clover Unit 2 Generating Trust
Places Filed: UCC Records for Virginia State Corporation
Commission
UCC Records for Henrico County, Virginia
UCC Records for Halifax County, Virginia
S2-4
<PAGE>
SCHEDULE 3
TO
PARTICIPATION
AGREEMENT
EQUITY EXPOSURE AMOUNT
S4-1
<PAGE>
SCHEDULE 4
TO
PARTICIPATION
AGREEMENT
CLOSING WIRE MEMORANDUM
S4-1
<PAGE>
SCHEDULE 5
TO
PARTICIPATION
AGREEMENT
LIST OF MEASURING LIVES
The following are the members of the Board of Directors of Old Dominion Electric
Cooperative.
M. Dale Bradshaw
Glen F. Chappell
Hugh M. Landes
Dick D. Bowman
C. Douglas Wine
M. John Bowman
Calvin P. Carter
E. Paul Bienvenue
Bruce E. Henry
John E. Bonfadini
William M. Leech, Jr.
William M. Alphin
David J. Jones
Hunter R. Greenlaw, Jr.
Cecil E. Viverette, Jr.
Stanley C. Feuerberg
Gwaltney W. White, Jr.
Frank W. Blake
James M. Reynolds
Carl R. Widdowson
Frederick L. Hubbard
Vernon N. Brinkley
John C. Anderson
Charles R. Rice
S4-2
<PAGE>
EXHIBIT A
TO
PARTICIPATION
AGREEMENT
INTENTIONALLY OMITTED
<PAGE>
EXHIBIT B
TO
PARTICIPATION
AGREEMENT
FORM OF TRUST AGREEMENT
<PAGE>
EXHIBIT C
TO
PARTICIPATION
AGREEMENT
FORM OF HEAD EQUIPMENT AGREEMENT
<PAGE>
EXHIBIT D
TO
PARTICIPATION
AGREEMENT
FORM OF HEAD FOUNDATION AGREEMENT
<PAGE>
EXHIBIT E
TO
PARTICIPATION
AGREEMENT
FORM OF GROUND LEASE AND SUBLEASE
<PAGE>
EXHIBIT F
TO
PARTICIPATION
AGREEMENT
FORM OF CLOVER AGREEMENTS ASSIGNMENT
<PAGE>
EXHIBIT G
TO
PARTICIPATION
AGREEMENT
FORM OF OPERATING EQUIPMENT AGREEMENT
<PAGE>
EXHIBIT H
TO
PARTICIPATION
AGREEMENT
FORM OF OPERATING FOUNDATION AGREEMENT
<PAGE>
EXHIBIT I
TO
PARTICIPATION
AGREEMENT
FORM OF LOAN AGREEMENT
<PAGE>
EXHIBIT J
TO
PARTICIPATION
AGREEMENT
FORM OF LEASEHOLD MORTGAGE
<PAGE>
EXHIBIT K
TO
PARTICIPATION
AGREEMENT
FORM OF PAYMENT UNDERTAKING AGREEMENT
<PAGE>
EXHIBIT L
TO
PARTICIPATION
AGREEMENT
FORM OF PAYMENT UNDERTAKING PLEDGE AGREEMENT
<PAGE>
EXHIBIT M
TO
PARTICIPATION
AGREEMENT
FORM OF EQUITY SECURITY PLEDGE AGREEMENT
<PAGE>
EXHIBIT N
TO
PARTICIPATION
AGREEMENT
FORM OF INVESTMENT AGREEMENT
<PAGE>
EXHIBIT O
TO
PARTICIPATION
AGREEMENT
FORM OF INVESTMENT AGREEMENT PLEDGE AGREEMENT
<PAGE>
EXHIBIT P
TO
PARTICIPATION
AGREEMENT
FORM OF ASSUMPTION AGREEMENT
<PAGE>
EXHIBIT Q
TO
PARTICIPATION
AGREEMENT
FORM OF GUARANTY
<PAGE>
EXHIBIT R
TO
PARTICIPATION
AGREEMENT
FORM OF SURETY BOND
<PAGE>
EXHIBIT S
TO
PARTICIPATION
AGREEMENT
FORM OF SUBORDINATED MORTGAGE
<PAGE>
EXHIBIT T
TO
PARTICIPATION
AGREEMENT
FORM OF SUBORDINATED SECURITY AGREEMENT
<PAGE>
EXHIBIT U
TO
PARTICIPATION
AGREEMENT
FORM OF OPERATING AGENCY AGREEMENT
<PAGE>
EXHIBIT V
TO
PARTICIPATION
AGREEMENT
FORM OF ASSIGNMENT AND ACCEPTANCE OF REPLACEMENT PROPERTY CONTRACT
_____________, 1996
ASSIGNMENT
For value received under an Exchange Agreement, dated as of
February 9, 1996, by and among EPC Corporation, a Delaware corporation (the
"Owner Participant"), Chrysler Capital Corporation, a Delaware corporation and
Fleet National Bank of Connecticut, a national banking association ("Fleet") (x)
the Owner Participant and Clover Unit 2 Generating Trust, a Delaware business
trust (the "Facility Owner") hereby transfer, set over and assign to Fleet, as
their agent, all of their rights (but not their obligations) relating to the
acquisition and lease of an undivided interest in the 391 MW coal-fired electric
generating unit known as "Clover Unit No. 2", located in Clover, Virginia and
certain of those facilities which are common to the operation of Clover Unit No.
1 and Clover Unit No. 2, located in Clover, Virginia (the "Replacement
Property") pursuant to, and as more particularly described in, a Participation
Agreement, dated as of July 1, 1996 (the "Participation Agreement"), among Old
Dominion Electric Cooperative, a wholesale power supply cooperative organized
under the laws of the Commonwealth of Virginia (the "Seller"), the Facility
Owner, Wilmington Trust Company, a Delaware banking corporation (in the
capacities specified therein), the Owner Participant and Utrecht-America Finance
Co., a Delaware corporation, and (y) the Facility Owner hereby transfers, sets
over and assigns to Fleet, as its agent, all of its rights (but not its
obligations) relating to the acquisition and lease of the Replacement Property
pursuant to the Head Equipment Agreement and the Head Foundation Agreement.
Copies of such Participation Agreement, Head Equipment Agreement and Head
Foundation
<PAGE>
Agreement are attached hereto. Capitalized terms used above without definition
shall have the meanings set forth in Appendix A to the Participation Agreement.
EPC CORPORATION
By______________________
Name:
Title:
Date:
CLOVER UNIT 2 GENERATING TRUST
By: Wilmington Trust Company, not
in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By:_________________________________________
Name:
Title:
V-2
<PAGE>
ACCEPTANCE
Fleet National Bank of Connecticut hereby accepts the foregoing
Assignment this ___ day of _________________, 1996.
FLEET NATIONAL BANK OF CONNECTICUT
By________________________________
Name:
Title:
Acknowledged and agreed this ___ day of __________, 1996:
OLD DOMINION ELECTRIC COOPERATIVE
By____________________________
Name:
Title:
UTRECHT-AMERICA FINANCE CO.
By____________________________
Name:
Title:
V-3
<PAGE>
WILMINGTON TRUST COMPANY, IN ITS INDIVIDUAL CAPACITY
By____________________________
Name:
Title:
V-4
<PAGE>
EXHIBIT W
TO
PARTICIPATION
AGREEMENT
FORM OF OLD DOMINION AGREEMENT WITH QUALIFIED INTERMEDIARY
To: Fleet National Bank of Connecticut
From: Old Dominion Electric Cooperative
___________________, 1996
Reference is hereby made to the Exchange Agreement (the "Exchange
Agreement"), dated as of February 9, 1996, by and among EPC Corporation, a
Delaware corporation (the "Owner Participant"), Chrysler Capital Corporation, a
Delaware corporation and Fleet National Bank of Connecticut, a national banking
association ("Fleet"), as exchangor (the "Exchangor"), and to the Head Equipment
Agreement and the Head Foundation Agreement. Capitalized terms used herein
without definition shall have the meanings set forth in Appendix A to the
Participation Agreement, dated as of July 1, 1996, among Old Dominion Electric
Cooperative, a wholesale power supply cooperative organized under the laws of
the Commonwealth of Virginia (the "Seller"), Facility Owner, Owner Participant,
Wilmington Trust Company, a Delaware banking corporation (in the capacities
specified therein) and Utrecht-America Finance Co., a Delaware corporation (the
"Participation Agreement").
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Seller hereby: (i) consents to the assignment,
pursuant to the Exchange Agreement, by the Facility Owner to Fleet, as agent for
the Facility Owner, of all of the Facility Owner's rights (but not its
obligations) relating to the acquisition and lease of an undivided interest in
Clover Unit 2 under the Head Equipment Agreement and the Head Foundation
Agreement; (ii) consents to the assignment, pursuant to the Exchange Agreement,
by the Owner Participant and the Facility Owner to Fleet, as agent for the Owner
Participant and the Facility Owner, of all of the rights (but not the
obligations) of the Owner Participant and the Facility Owner relating to the
acquisition and lease of the foregoing undivided interest in Clover Unit 2
pursuant to, and as more particularly described in, the Participation Agreement;
(iii) agrees to transfer and lease the undivided interest in Clover Unit 2
directly to the Facility Owner as directed by Fleet in a written and signed
direction in substantially the form attached hereto as Addendum I delivered by
Fleet to the Seller by hand delivery, certified mail, Federal Express or other
overnight courier or telecopier
<PAGE>
at 4201 Dominion Boulevard, Glen Allen, Virginia 23060, Facsimile No. 804-
747-3742, Attention: Vice President of Accounting and Finance; and (iv) releases
and forever discharges Fleet from any and all claims or causes of action in law
or in equity, known or unknown, which the Seller ever had, now has or may ever
have against Fleet by virtue of the foregoing assignments, Fleet being an
assignee of the Participation Agreement, the Head Equipment Agreement and/or the
Head Foundation Agreement or any act or omission by Fleet as assignee of the
Participation Agreement, the Head Equipment Agreement and/or the Head Foundation
Agreement.
OLD DOMINION ELECTRIC COOPERATIVE
Dated: ______, 1996
By:__________________________________
Name:
Title:
Acknowledged and agreed:
FLEET NATIONAL BANK OF CONNECTICUT
Dated: ______, 1996
By:__________________________________
Name:
Title:
W-2
<PAGE>
ADDENDUM I TO EXHIBIT W
FORM OF DIRECTION OF TRANSFER
To: Old Dominion Electric Cooperative
From: Fleet National Bank of Connecticut
___________, 1996
Reference is hereby made to the Assignment and Acceptance
dated the date hereof (the "Assignment") by and among EPC Corporation, a
Delaware corporation (the "Owner Participant"), Clover Unit 2 Generating Trust,
a Delaware business trust (the "Facility Owner") and Fleet National Bank of
Connecticut, a national banking association ("Fleet"). Capitalized terms used
herein without definition shall have the meanings set forth in Appendix A to the
Participation Agreement, dated as of July 1, 1996, among Old Dominion Electric
Cooperative, a wholesale power supply cooperative organized under the laws of
the Commonwealth of Virginia (the "Seller"), the Facility Owner, the Owner
Participant, Wilmington Trust Company, a Delaware banking corporation (in the
capacities specified therein) and Utrecht-America Finance Co., a Delaware
corporation.
Fleet, as agent for the Owner Participant, hereby directs the
Seller to transfer the Assigned Clover Interests, the Ground Interest, the
Equipment Interest and the Foundation Interest directly to the Facility Owner
pursuant to the Clover Agreement Assignment, the Ground Lease and Sublease, the
Head Equipment Agreement and the Head Foundation Agreement. Fleet hereby agrees
that, upon such transfer, the Seller shall have fully satisfied its obligations
to Fleet, as agent for the Owner Participant, arising under the Assignment.
FLEET NATIONAL BANK OF CONNECTICUT
Dated: ______, 1996 By:________________________
Name:
Title:
Acknowledged and agreed:
OLD DOMINION ELECTRIC COOPERATIVE
Dated: ______, 1996 By:_______________________________
Name:
Title:
W-3
<PAGE>
EPC CORPORATION
Dated: ______, 1996 By:_______________________________
Name:
Title:
CLOVER UNIT 2 GENERATING TRUST
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under
the Trust Agreement
By:_________________________________________
Name:
Title:
W-4
<PAGE>
EXHIBIT X
TO
PARTICIPATION
AGREEMENT
FORM OF NOTICE OF ASSIGNMENT OF REPLACEMENT PROPERTY CONTRACT
Notice is hereby given that (x) EPC Corporation, a Delaware
corporation (the "Owner Participant"), and the Clover Unit 2 Generating Trust, a
Delaware business trust (the "Facility Owner"), have assigned to Fleet National
Bank of Connecticut, a national banking association ("Fleet"), as their agent,
all of their rights (but not their obligations) relating to the acquisition and
lease of an undivided interest in the 391 MW coal-fired electric generating unit
known as "Clover Unit No. 2", located in Clover, Virginia and certain of those
facilities which are common to the operation of Clover Unit No. 1 and Clover
Unit No. 2, located in Clover, Virginia (the "Replacement Property") pursuant to
that certain Participation Agreement, dated as of July 1, 1996 (the
"Participation Agreement), among Old Dominion Electric Cooperative, a wholesale
power supply cooperative organized under the laws of the Commonwealth of
Virginia (the "Seller"), the Facility Owner, the Owner Participant, Wilmington
Trust Company, a Delaware banking corporation (in the capacities specified
therein) and Utrecht-America Finance Co., a Delaware corporation, and (y) the
Facility Owner has assigned to Fleet, as its agent, all of its rights (but not
its obligations) relating to the acquisition and lease of the Replacement
Property pursuant to the Head Equipment Agreement and the Head Foundation
Agreement. The foregoing assignment was made under an Exchange Agreement dated
as of February 9, 1996 among the Owner Participant, Chrysler Capital
Corporation, a Delaware corporation, and Fleet as exchangor. Capitalized terms
used above without definition shall have the meanings set forth in Appendix A to
the Participation Agreement.
EPC CORPORATION
Dated: _________, 1996 By:____________________________
Name:
Title:
CLOVER UNIT 2 GENERATING TRUST
By: Wilmington Trust Company, not
in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
Dated: _________, 1996 By:_________________________________________
Name:
Title:
<PAGE>
Receipt prior to transfer
of Replacement Property to
the Facility Owner
acknowledged:
OLD DOMINION ELECTRIC COOPERATIVE
Dated: _______, 1996 By:______________________________
Name:
Title:
UTRECHT-AMERICA FINANCE CO.
Dated: _______, 1996 By:______________________________
Name:
Title:
WILMINGTON TRUST COMPANY, IN ITS INDIVIDUAL
CAPACITY
Dated: _______, 1996 By:______________________________
Name:
Title:
X-2
<PAGE>
EXHIBIT Y
TO
PARTICIPATION
AGREEMENT
FORM OF DIRECTION OF TRANSFER
To: Old Dominion Electric Cooperative
From: Fleet National Bank of Connecticut
___________, 1996
Reference is hereby made to the Assignment and Acceptance
dated the date hereof (the "Assignment") by and among EPC Corporation, a
Delaware corporation (the "Owner Participant"), Clover Unit 2 Generating Trust,
a Delaware business trust (the "Facility Owner") and Fleet National Bank of
Connecticut, a national banking association ("Fleet"). Capitalized terms used
herein without definition shall have the meanings set forth in Appendix A to the
Participation Agreement, dated as of July 1, 1996, among Old Dominion Electric
Cooperative, a wholesale power supply cooperative organized under the laws of
the Commonwealth of Virginia (the "Seller"), the Facility Owner, the Owner
Participant, Wilmington Trust Company, a Delaware banking corporation (in the
capacities specified therein) and Utrecht-America Finance Co., a Delaware
corporation.
Fleet, as agent for the Owner Participant, hereby directs the
Seller to transfer the Assigned Clover Interests, Ground Interest, Equipment
Interest and the Foundation Interest directly to the Facility Owner pursuant to
the Clover Agreements Assignment, Ground Lease and Sublease, Head Equipment
Agreement and Head Foundation Agreement. Fleet hereby agrees that, upon such
transfer, the Seller shall have fully satisfied its obligations to Fleet, as
agent for the Owner Participant, arising under the Assignment.
FLEET NATIONAL BANK OF CONNECTICUT
Dated: ______, 1996 By:_________________________________
Name:
Title:
<PAGE>
Acknowledged and agreed:
OLD DOMINION ELECTRIC COOPERATIVE
Dated: ______, 1996 By:__________________________________
Name:
Title:
EPC CORPORATION
Dated: ______, 1996 By:__________________________________
Name:
Title:
CLOVER UNIT 2 GENERATING TRUST
Dated: ______, 1996 By: Wilmington Trust Company, not in its
individual capacity but solely
as Owner Trustee under the
Trust Agreement
Dated: ______, 1996 By:_________________________________________
Name:
Title:
Y-2
<PAGE>
EXHIBIT Z
TO
PARTICIPATION
AGREEMENT
FORM OF REASSIGNMENT AND REACCEPTANCE OF REPLACEMENT PROPERTY CONTRACT
___________, 1996
ASSIGNMENT
For value received under an Exchange Agreement, dated as of
February 9, 1996, by and among EPC Corporation, a Delaware corporation (the
"Owner Participant"), Chrysler Capital Corporation, a Delaware corporation, and
Fleet National Bank of Connecticut, a national banking association ("Fleet"), as
exchangor, Fleet hereby transfers, sets over and assigns to (x) the Owner
Participant and the Clover Unit 2 Generating Trust, a Delaware business trust
("Facility Owner"), all of Fleet's rights under the Participation Agreement,
dated as of July 1, 1996, among Old Dominion Electric Cooperative, a wholesale
power supply cooperative organized under the laws of the Commonwealth of
Virginia (the "Seller"), the Facility Owner, the Owner Participant, Wilmington
Trust Company, a Delaware banking corporation (in the capacities specified
therein) and Utrecht-America Finance Co., a Delaware corporation, and (y) the
Facility Owner all of Fleet's rights under the Clover Agreements Assignment,
Ground Lease and Sublease, Head Equipment Agreement and Head Foundation
Agreement. Capitalized terms used above without definition shall have the
meanings set forth in Appendix A to the Participation Agreement.
FLEET NATIONAL BANK OF CONNECTICUT
By:_________________________________
Name:
Title:
Date:
<PAGE>
ACCEPTANCE
The Owner Participant and the Facility Owner hereby accept the
foregoing Assignment this ____ day of _________, 1996.
EPC CORPORATION
By:_____________________________________
Name:
Title:
Date:
CLOVER UNIT 2 GENERATING TRUST
By: Wilmington Trust Company, not in its
individual capacity but solely as
Owner Trustee under the Trust
Agreement
By:______________________________________
Name:
Title:
Date:
Acknowledged and agreed this ___ day of ________, 1996:
OLD DOMINION ELECTRIC COOPERATIVE
By __________________________
Name:
Title:
UTRECHT-AMERICA FINANCE CO.
By __________________________
Name:
Title:
By __________________________
Name:
Title:
WILMINGTON TRUST COMPANY, IN ITS INDIVIDUAL CAPACITY
By __________________________
Name:
Title:
Z-2
<PAGE>
APPENDIX A - DEFINITIONS
GENERAL PROVISIONS
In this Appendix A and each Operative Document (as hereinafter
defined), unless otherwise provided herein or therein:
(a) the terms set forth in this Appendix A or in any such
Operative Document shall have the meanings herein provided for and any
term used in an Operative Document and not defined therein or in this
Appendix A but in another Operative Document shall have the meaning
provided for in such other Operative Document;
(b) any term defined in this Appendix A by reference to
another document, instrument or agreement shall continue to have the
meaning ascribed thereto whether or not such other document, instrument
or agreement remains in effect;
(c) words importing the singular include the plural and
vice versa;
(d) words importing a gender include any gender;
(e) a reference to a part, clause, section, paragraph,
article, party, annex, appendix, exhibit, schedule or other attachment
to or in respect of an Operative Document is a reference to a part,
clause, section, paragraph, or article of, or a party, annex, appendix,
exhibit, schedule or other attachment to, such Operative Document
unless, in any such case, otherwise expressly provided in any such
Operative Document;
(f) a reference to any statute, regulation, proclamation,
ordinance or law includes all statutes, regulations, proclamations,
ordinances or laws varying, consolidating or replacing the same from
time to time, and a reference to a statute includes all regulations,
policies, protocols, codes, proclamations and ordinances issued or
otherwise applicable under that statute unless, in any such case,
otherwise expressly provided in any such statute;
(g) a reference to any document, instrument or agreement
includes an amendment or supplement to, or restatement, replacement,
modification or novation of, any such document, instrument or
agreement;
(h) a reference to a particular section, paragraph or other
part of a particular statute shall be deemed to be a reference to any
other section, paragraph or other part substituted therefor from time
to time;
<PAGE>
(i) if a capitalized term describes, or shall be defined by
reference to, a document, instrument or agreement that has not as of
any particular date been executed and delivered and such document,
instrument or agreement is attached as an exhibit to the Participation
Agreement (as hereinafter defined), such reference shall be deemed to
be to such form and, following such execution and delivery and subject
to paragraph (g) above, to the document, instrument or agreement as so
executed and delivered;
(j) a reference to any Person (as hereinafter defined)
includes such Person's successors and permitted assigns;
(k) any reference to "days" shall mean calendar days unless
"Business Days" are expressly specified;
(l) if the date as of which any right, option or election is
exercisable, or the date upon which any amount is due and payable, is
stated to be on a date or day that is not a Business Day, such right,
option or election may be exercised, and such amount shall be deemed
due and payable, on the next succeeding Business Day with the same
effect as if the same was exercised or made on such date or day
(without, in the case of any such payment, the payment or accrual of
any interest or other late payment or charge, provided such payment is
made on such next succeeding Business Day);
(m) a reference to the satisfaction, release and/or discharge
of the Loan Agreement (as hereinafter defined) or the Lien (as
hereinafter defined) thereof (or words of similar import) shall,
whether or not so expressly stated, be deemed to be a reference to the
satisfaction, release and discharge in full and cancellation of the
Lien (as hereinafter defined) of the Loan Agreement in accordance with
the express provisions thereof or, if such discharge has not occurred
when the same is required pursuant to the express provisions of the
Loan Agreement, to the date when such discharge is or was required
thereunder;
(n) words such as "hereunder", "hereto", "hereof" and "herein"
and other words of similar import shall, unless the context requires
otherwise, refer to the whole of the applicable document and not to any
particular article, section, subsection, paragraph or clause thereof;
(o) a reference to "including" means including without
limiting the generality of any description preceding such term and for
purposes hereof and of each Operative Document the rule of EJUSDEM
GENERIS shall not be applicable to limit a general statement, followed
by or referable to an enumeration of specific matters, to matters
similar to those specifically mentioned;
(p) a reference to a rating of any obligations of any Person
(as hereinafter defined) by a Rating Agency (as hereinafter defined)
shall refer to a public rating by such Rating Agency or a private
rating by such Rating Agency, in each case that is, after the initial
issuance thereof, reviewed no less than annually; and
2
<PAGE>
(q) on and after the expiration or termination of the
Operating Agreements (as hereinafter defined), a reference to a
"Default" or an "Event of Default" in any Operative Document that
continues in effect after such date of termination or expiration shall
be deemed to be a reference to an event that would have constituted a
"Default" or an "Event of Default" under the Operating Agreements as in
effect on such date of termination or expiration of the Operating
Agreements or, in the case of the Loan Agreement if a Service Contract
Option (as hereinafter defined) has been consummated, to a "default" or
an "event of default", or a termination event or a similar event
substantially similar to a "Default" or an "Event of Default" under a
Power Sales Agreement (as hereinafter defined) (it being understood
that, with respect to any such "Event of Default" or "Default" or
"Event of Default" predicated upon, or occurring in respect of, the
Operative Documents, such "Default" or "Event of Default" shall relate
only to the Operative Documents (or particular provisions thereof) that
are intended to continue in effect on and after the Expiration Date).
DEFINED TERMS
"ACCEPTABLE POWER PURCHASER" shall mean a Person that meets the following
criteria as of the Expiration Date based upon its most recent audited financial
statements:
(i) such Person has a combined capital and surplus or a
consolidated tangible net worth of at least $500 million;
(ii) the unsecured senior debt obligations of such Person have a
credit rating of not less than A2 by Moody's and A by S&P,
unless such Person has provided credit enhancement
(including the possible provision of collateral supporting
its obligations under any Power Sales Agreement) in an
amount and manner and on conditions satisfactory in all
respects to the Owner Participant;
(iii) such Person will not violate the Owner Participant's credit
restrictions or guidelines applicable from time to time for
the extension of credit in general; and
(iv) such Person is not Old Dominion, any cooperative member of
Old Dominion, Virginia Power or an Affiliate of the
foregoing; or a "related party" to any of the foregoing
within the meaning of Section 168(h)(4) of the Code and the
legislative history thereto (S. Rep. No. 98-169, Vol. I,
98th Cong., 2nd Sess. at pp. 150 to 151 (1984)).
"ACTUAL KNOWLEDGE" shall mean, with respect to any Transaction Party, actual
knowledge of, or receipt of written notice by, an officer of such a Transaction
Party having responsibility for the administration of the Overall Transaction.
"ADDITIONAL EQUITY INVESTMENT" shall mean the amount, if any, the Owner
Participant shall provide (in its sole and absolute discretion) to finance all
or a portion of Facility Owner's
3
<PAGE>
Percentage of the cost of any Modification financed pursuant to Section 10.1 of
the Participation Agreement.
"ADDITIONAL LOAN CERTIFICATES" shall mean any Loan Certificates issued pursuant
to Section 2.11 of the Loan Agreement.
"ADR CLASS LIFE" shall mean the class life of an asset determined pursuant to
the class life asset depreciation system under Section 167 of the Code.
"ADVANCE" shall have the meaning specified in Section 6(a) of the Tax Indemnity
Agreement.
"ADVISORS TO OLD DOMINION" shall mean the Structured Finance Group of Price
Waterhouse LLP and Smith Barney Inc.
"ADVISORS TO OWNER PARTICIPANT" shall mean Allco Finance Corporation and First
Union Capital Corp.
"AFFILIATE" of a particular Person shall mean any Person (i) directly or
indirectly controlling, controlled by or under common control with the
particular Person, (ii) that beneficially owns or holds (directly or through a
subsidiary) more than 50% of the voting power of any class of voting securities
of the particular Person or (iii) more than 50% of the voting securities (or in
the case of a Person which is not a corporation, more than 50% of the equity
interest) of which is beneficially owned or held by the particular Person or a
subsidiary thereof. For purposes of this definition, "control" when used with
respect to any particular Person shall mean the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"AFTER-TAX BASIS", in the context of determining the amount of a payment to be
made on such basis, shall mean the payment of an amount which, after reduction
by the net increase in Taxes of the recipient of such payment and its Affiliates
(or any consolidated or combined group of which it is a member) which net
increase shall be calculated by taking into account any reduction in such Taxes
resulting from any Tax benefits realized or (except in the case of the Agent or
any Lender) reasonably expected to be realized by the recipient and its
Affiliates (or any consolidated or combined group of which it is a member) as a
result of such payment, shall be equal to the amount required to be paid. In
calculating the amount payable by reason of this provision, all income taxes
payable and tax benefits realized or to be realized shall be determined on the
assumptions that (i) the recipient shall be subject to the applicable income
taxes at the highest marginal tax rates then applicable to corporate taxpayers
taxed on the same basis as the recipient that are in effect in the applicable
jurisdictions at the time such amount is received or properly accrued, (ii) all
tax benefits are utilized at the highest marginal rates then applicable to
corporate taxpayers taxed on the same basis as the recipient that are then in
effect in the applicable jurisdictions, and (iii) tax benefits to be realized in
any taxable year other than the year of payment are determined on a present
value basis using a discount rate equal to the rate of interest on underpayments
of federal income tax in effect at the time of the determination.
4
<PAGE>
"AGENT" shall mean Utrecht-America, as agent for the Lenders under the Loan
Agreement.
"AGENT'S ACCOUNT" shall mean the account (No. 13679) maintained by the Agent
with Rabobank Nederland, New York Branch or such other account of the Agent in
New York, New York, as the Agent may from time to time specify in a notice to
the other parties to the Participation Agreement.
"AMBAC" AND "AMBAC INDEMNITY" shall mean AMBAC Indemnity Corporation, a
Wisconsin-domiciled stock insurance corporation.
"AMBAC CAPITAL" shall mean AMBAC Capital Funding, Inc., a Delaware corporation.
"AMBAC GUARANTY" shall mean the Guaranty Agreement, dated as of July 1, 1996,
between Old Dominion and AMBAC.
"AMORTIZATION DEDUCTIONS" shall have the meaning specified in Section 2(f) of
the Tax Indemnity Agreement.
"APPLICABLE LAW" shall mean, without limitation, all applicable laws and
treaties, judgments, decrees, injunctions, writs and orders of any court,
arbitration board or Governmental Entity and rules, regulations, orders,
licenses and permits of any Governmental Entity.
"APPLICABLE RATE" shall mean, in the case of the Series A Lender, the Series A
Loan Rate, and in the case of the Series B Lender, the Series B Loan Rate, and
in the case of the Owner Participant, 7% per annum.
"APPRAISAL" shall mean the appraisal prepared by the Appraiser with respect to
the Facility Owner's Unit 2 Interest referred to in Section 4.14 of the
Participation Agreement.
"APPRAISER" shall mean Deloitte & Touche LLP Valuation Group.
"ASSIGNED CLOVER INTERESTS" shall mean all of Old Dominion's rights, obligations
and liabilities under the Clover Agreements attributable to (a) the Unit 2 Site,
the Unit 2 Foundation and the Unit 2 Equipment, (b) the Common Facilities Site,
the Common Facilities Foundation and the Common Facilities Equipment, and (c)
the Unit 1 Site, and which in the case of (b) and (c) are necessary for the use
and operation of the Unit 2 Site, the Unit 2 Foundation and the Unit 2
Equipment.
"ASSIGNEE" shall mean the Facility Owner, as assignee under the Clover
Agreements Assignment.
"ASSIGNOR" shall mean Old Dominion, as assignor under the Clover Agreements
Assignment.
"AVAILABLE CAPACITY" shall have the meaning specified in Section 1.04 of the
Clover Operating Agreement.
5
<PAGE>
"BANK" shall mean Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.,
"Rabobank Nederland", New York Branch.
"BANKRUPTCY CODE" shall mean the United States Bankruptcy Reform Act of 1978, as
amended from time to time, 11 U.S.C. ss.101 ET SEQ.
"BANKRUPTCY DEFAULT" shall mean an event that is, or in the case of Section
16(l) of the Operating Equipment Agreement or Section 16(l) of the Operating
Foundation Agreement, with the passage of time would become, an Event of Default
under Section 16(k), 16(l) or 16(m) of the Operating Equipment Agreement or
Section 16(k), 16(l) or 16(m) of the Operating Foundation Agreement.
"BASIC PAYMENTS" shall mean all amounts payable by Old Dominion to the Facility
Owner pursuant to Section 3.2 of the Operating Equipment Agreement, as the same
may be adjusted from time to time pursuant to Section 3.4 of the Operating
Equipment Agreement.
"BENEFICIAL INTEREST" shall mean the interest of the Owner Participant under the
Trust Agreement.
"BURDENSOME TAX LAW CHANGE" shall mean any change in United States federal
income tax law (including administrative and judicial interpretations) that
adversely affects Owner Participant's Net Economic Return that shall have
occurred or been proposed on or within two Business Days prior to the date of
execution of the Participation Agreement and Old Dominion shall have received
notice of such change or proposed change from the Owner Participant within two
Business Days after the Closing Date.
"BURDENSOME TAX LAW CHANGE VALUE" shall mean an amount equal to the sum of (a)
the outstanding principal balance of the Loan Certificates as of the date of
termination of the Operating Agreements pursuant to Section 13 of each in
consequence of a Burdensome Tax Law Change plus any and all interest accrued and
unpaid thereon as of such date , (b) the amount of the Equity Investment, (c)
interest on the amount specified in clause (b) hereof, calculated at the rate of
7% per annum on the basis of a year of 360 days and the number of days actually
elapsed from the Closing Date to such date of payment and (d) all Transactions
Costs paid or incurred by the Owner Participant or the Facility Owner other than
the fees of Milbank, Tweed Hadley & McCloy.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or other day on
which commercial banking institutions are authorized or required by law,
regulation or executive order to be closed in (i) Glen Allen, Virginia, (ii) the
city and state in which the principal corporate trust office of the Owner
Trustee is located, (iii) the city and state in which the principal office of
the Agent is located, (iv) the city and state in which the principal office of
AMBAC is located or (v) Amsterdam, The Netherlands.
"CAPACITY PAYMENT" shall have the meaning assigned to it in Exhibit B to the
Operating Equipment Agreement.
6
<PAGE>
"CFC" shall mean National Rural Utilities Cooperative Finance Corporation, a
District of Columbia cooperative association, or any successor thereto.
"CLAIM" shall mean any liability (including, without limitation, in respect of
negligence (whether passive or active or other torts), strict or absolute
liability in tort or otherwise, warranty, latent or other defects, statutory
liability, bodily injury or death), obligation, loss, settlement, damage,
penalty, claim, action, suit, proceeding (whether civil or criminal), judgment,
penalty, fine and other legal or administrative sanction, judicial or
administrative proceeding, cost, expense or disbursement, including reasonable
legal fees, expenses and reasonable related charges, of whatsoever kind and
nature.
"CLOSING" shall have the meaning specified in Section 2.2(a) of the
Participation Agreement.
"CLOSING DATE" shall mean the Scheduled Closing Date or such later date on which
the Closing of the transactions contemplated by the Participation Agreement
shall occur.
"CLOVER AGREEMENTS" shall mean the Clover Ownership Agreement and the Clover
Operating Agreement.
"CLOVER AGREEMENTS ASSIGNMENT" shall mean the Clover Agreements Assignment and
Assumption Agreement, dated as of July 1, 1996, between the Assignee and the
Assignor, in substantially the form of Exhibit F to the Participation Agreement.
"CLOVER FACILITY ASSETS" shall have the meaning specified in the first Recital
in the Second Severance Agreement.
"CLOVER 1 CLOVER AGREEMENTS ASSIGNMENT" shall mean the Clover Agreements
Assignment and Assumption Agreement, dated as of February 29, 1996, between Old
Dominion and the Clover 1 Owner Trustee.
"CLOVER 1 DOCUMENTS" shall mean Clover 1 Equipment Head Lease, Clover 1
Equipment Operating Lease, Clover 1 Foundation Head Lease, Clover 1 Foundation
Operating Lease, Clover 1 Ground Lease and Sublease, Clover 1 Assignment and
Assumption Agreement, and the Option Agreement.
"CLOVER 1 EQUIPMENT HEAD LEASE" shall mean the Equipment Interest Lease
Agreement, dated as of February 29, 1996, between Old Dominion and Clover 1
Owner Trustee with respect to the Unit 1 Equipment.
"CLOVER 1 EQUIPMENT OPERATING LEASE" shall mean the Equipment Operating Lease
Agreement, dated as of February 29, 1996, between Clover 1 Owner Trustee and Old
Dominion with respect to the Unit 1 Equipment.
"CLOVER 1 FOUNDATION HEAD LEASE" shall mean the Clover Unit 1 Foundation
Interest Lease Agreement, dated as of February 29, 1996, between Old Dominion
and Clover 1 Owner Trustee
7
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with respect to the Unit 1 Foundation and recorded in the Halifax County Clerk's
Office in Deed Book 645, page 316, as corrected by the Corrected Clover Unit 1
Foundation Interest Lease Agreement, dated as of February 29, 1996, to be
recorded in the Halifax Clerk's Office.
"CLOVER 1 FOUNDATION OPERATING LEASE" shall mean the Foundation Operating Lease
Agreement, dated as of February 29, 1996, between Clover 1 Owner Trustee and Old
Dominion with respect to the Unit 1 Foundation and recorded in the Halifax
County Clerk's Office in Deed Book 645, page 373, as corrected by the Corrected
Foundation Operating Lease Agreement, dated as of February 29, 1996, to be
recorded in the Halifax Clerk's Office.
"CLOVER 1 GROUND LEASE AND SUBLEASE" shall mean a Ground Lease and Sublease to
be entered into by Old Dominion and the Clover 1 Owner Trustee in substantially
the form attached to the Option Agreement.
"CLOVER 1 OWNER TRUSTEE" shall mean State Street Bank and Trust Company, not in
its individual capacity but solely as Owner Trustee under the Trust Agreement,
dated as of February 29, 1996, between it (as Owner Trustee) and First Union
National Bank of Florida (as Owner Participant) with respect to the Unit 1 Site,
the Unit 1 Foundation and the Unit 1 Equipment.
"CLOVER OPERATING AGREEMENT" shall mean that certain Clover Operating Agreement,
dated as of May 31, 1990, between Old Dominion and Virginia Power, as the same
may have been or may be amended.
"CLOVER OWNERSHIP AGREEMENT" shall mean that certain Clover Purchase,
Construction and Ownership Agreement, dated as of May 31, 1990, between Old
Dominion and Virginia Power, as the same may have been or may be amended.
"CLOVER POWER STATION" shall mean the two 391 MW coal-fired generating units,
and related facilities constructed by Old Dominion and Virginia Power, as
tenants-in-common, near Clover, Virginia. The Clover Power Station consists of
Clover Unit 2 and Clover Unit 1.
"CLOVER POWER STATION PLAT" shall mean the plat (consisting of 5 sheets) dated
February 22, 1996, prepared by Hurt & Proffitt Inc., styled "Composite Map of
the Property of Old Dominion Electric Cooperative and Virginia Electric & Power
Company," marked Exhibit A and attached to and recorded with the Ground Lease
and Sublease, being the same plat recorded on the Halifax Clerk's Office in Plat
Book 50, page 18 and corrected by the recordation in the Halifax Clerk's Office.
"CLOVER REAL ESTATE" shall mean certain parcels of land and appurtenances
thereto located in Halifax County, Virginia, which are more particularly
described in Schedules attached to the Ground Lease and Sublease, as part
thereof and recorded therewith. The Clover Real Estate consists of the Unit 1
Site, the Unit 2 Site, the Common Facilities Site and the Solid Waste Landfill
Site.
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"CLOVER UNIT 1" shall mean the 391 MW coal-fired electric generating unit known
as "Clover Unit No. 1", located in Clover, Virginia and those facilities which
are common to the operation of Clover Unit 1 and Clover Unit 2. Clover Unit 1
consists of the Unit 1 Equipment, the Common Facilities Equipment, the Unit 1
Foundation and the Common Facilities Foundation but does not include the
Transmission Assets or any of the Clover Real Estate.
"CLOVER UNIT 1 GENERATING FACILITY" shall mean the Unit 1 Equipment and the Unit
1 Foundation.
"CLOVER UNIT 2" shall mean the 391 MW coal-fired electric generating unit known
as "Clover Unit No. 2", located in Clover, Virginia and those facilities which
are common to the operation of Clover Unit 1 and Clover Unit 2. Clover Unit 2
consists of the Unit 2 Equipment, the Common Facilities Equipment, the Unit 2
Foundation and the Common Facilities Foundation, but does not include the
Transmission Assets or any of the Clover Real Estate.
"CLOVER UNIT 2 GENERATING FACILITY" shall mean the Unit 2 Equipment and the Unit
2 Foundation.
"CLOVER UNIT 2 OPERATOR" shall mean Virginia Power or any successor operating
agent appointed pursuant to Section 2.03 of the Clover Operating Agreement.
"COBANK" shall mean CoBank ACB, an instrumentality of the United States, or any
successor thereto.
"CODE" shall mean the Internal Revenue Code of 1986.
"COLLATERAL" shall have the meaning specified in the Granting Clause of the Loan
Agreement.
"COLLATERAL AGENT" shall mean Wilmington Trust Company, as collateral agent for
the Facility Owner and the Owner Participant in accordance with the provisions
of the Equity Security Pledge Agreement.
"COMMITMENT", with respect to the Owner Participant, shall mean the Owner
Participant's Commitment, with respect to the Series A Lender, shall mean the
Series A Loan Commitment and with respect to the Series B Lender, shall mean the
Series B Loan Commitment.
"COMMON FACILITIES" shall mean the Common Facilities Equipment and the Common
Facilities Foundation.
"COMMON FACILITIES EQUIPMENT" shall mean those assets described on Exhibit A-2
to the Head Equipment Agreement and Exhibit A-2 to the Operating Equipment
Agreement. The Common Facilities Equipment are those assets which are part of
the facilities to be used or useful in connection with the operation or
maintenance of both the Clover Unit 2 Generating Facility and the Clover Unit 1
Generating Facility. The Common Facilities Equipment consists of the Retained
Assets and Pollution Control Assets which are located on the Common Facilities
Site.
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"COMMON FACILITIES FOUNDATION" shall mean all foundations, supports, structures
and other improvements situated on the Common Facilities Site, including those
on which the Common Facilities Equipment are situated.
"COMMON FACILITIES SITE" shall mean the land and appurtenances thereunto
belonging described on Schedule 4 to the Ground Lease and Sublease.
"COMPONENT" shall mean any appliance, part, instrument, appurtenance, accessory,
furnishing, equipment or other property of whatever nature that may from time to
time be incorporated in Clover Unit 2 except to the extent constituting
Modifications.
"CONSTRUCTION MANAGEMENT COMMITTEE" shall mean the committee established by Old
Dominion and Virginia Power pursuant to Section 4.01 of the Clover Ownership
Agreement.
"CONTROL DOCUMENTS" shall have the meaning specified in Section 1.02 of the
Operating Agency Agreement.
"CO-OWNERS" shall mean Old Dominion and Virginia Power, their successors or
permitted assigns, as tenants-in-common of the Clover Power Station.
"CO-TRUSTEE" shall mean any co-trustee appointed pursuant to Section 9.6 of the
Trust Agreement.
"COVERED OBLIGATION" shall have the meaning set forth in the Surety Bond.
"DEBT RATE" (i) during the Term, shall mean the average of the Series A Loan
Rate and the Series B Loan Rate and (ii) during the term of any Power Sales
Agreement in effect following the Expiration Date, shall mean the interest rate
on the New Loan.
"DEED OF TRUST EVENT OF DEFAULT" shall have the meaning specified in Article
VIII of the Leasehold Mortgage.
"DEPRECIATION DEDUCTIONS" shall have the meaning specified in Section 2(e) of
the Tax Indemnity Agreement.
"DEMAND FOR PAYMENT" shall have the meaning specified in paragraph 1 of the
Surety Bond.
"DIRECTIVE" shall mean any instrument in writing executed in accordance with the
Loan Agreement by the Holders, or their duly authorized agent or
attorney-in-fact, representing the Required Lenders, directing the Agent to take
or refrain from taking any actions specified in such instrument or otherwise
advising the Agent.
"DOLLARS" OR THE SIGN "$" shall mean United States dollars or other lawful
currency of the United States.
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"EFFECTIVE RATE" shall have the meaning specified in Section 2(g) of the Tax
Indemnity Agreement.
"ENFORCEMENT NOTICE" shall have the meaning specified in Section 4.4 of the Loan
Agreement.
"ENGINEER" shall mean Burns and McDonnell.
"ENGINEERING REPORT" shall mean the engineering report prepared by the Engineer
with respect to Clover Unit 2 pursuant to Section 4.12 of the Participation
Agreement, which shall be in form and substance reasonably satisfactory to the
Owner Participant and shall address and report on such matters as the Owner
Participant shall reasonably request.
"ENVIRONMENT" shall mean (a) ecosystems and their constituent parts, including
people and communities, (b) all natural and physical resources and (c) the
qualities and characteristics of locations, places and areas, however large or
small, that contribute to their biological diversity and integrity, in intrinsic
or attributed scientific value.
"ENVIRONMENTAL MATERIAL" shall mean any substance which relates to the Unit 1
Site, the Unit 2 Site, the Common Facilities Site or the Solid Waste Landfill
Site, the Clover Power Station, Clover Unit 1 or Clover Unit 2 and:
(a) which is or becomes regulated under any Environmental
Requirements applicable to the Unit 1 Site, the Unit 2 Site, the Common
Facilities Site, the Solid Waste Landfill Site, the Clover Power
Station, Clover Unit 1 or Clover Unit 2, as Pollution, a pollutant,
contaminant, hazardous or toxic, including without limitation, a
hazardous waste or hazardous substance under any treaty or any statute,
regulation or ordinance or amendments thereto; or
(b) which is toxic, explosive, corrosive, flammable, noxious,
infectious, radioactive, carcinogenic, mutagenic or otherwise
hazardous, (i) the presence or release of which causes or is alleged to
cause or threatens to cause or is alleged to threaten or cause a
nuisance, damage or harm to the Environment or poses or threatens to
pose a hazard to the health or safety of any Person or of the
Environment or (ii) the presence of which on or in the Environment
could constitute a trespass; or
(c) which contains or is alleged to contain gasoline, diesel
fuel or other petroleum hydrocarbons or petroleum products; or
(d) which contains or is alleged to contain polychlorinated
biphenyls (PCBs), asbestos or urea formaldehyde; or
(e) which is a Pollutant.
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"ENVIRONMENTAL REQUIREMENTS" shall mean all Applicable Law made or approved by a
Governmental Entity (together with any principle of the common law) that has one
or more of the following purposes or objects:
(a) the protection of the Environment from harm or
degradation;
(b) the prevention, control, management, remediation,
mitigation, abatement or investigation of Environmental Material or
contamination of their effects;
(c) the regulation of waste, waste generation or waste
disposal; or
(d) the regulation of Releases of Environmental
Materials.
"EQUIPMENT INTEREST" shall mean (a) the right as tenant-in-common with Virginia
Power to nonexclusive possession of (i) the Unit 2 Equipment, subject to (1)
Virginia Power's 50% undivided interest therein, (2) the terms and conditions of
the Clover Agreements, and (3) as to the portion of the Unit 2 Equipment which
is comprised of Pollution Control Assets, the rights of the Pollution Control
Assets Lessor as tenant in common with Virginia Power of the Pollution Control
Assets and as lessor under the Pollution Control Assets Lease, and (ii) the
Common Facilities Equipment, subject to (1) Virginia Power's 50% undivided
interest therein, (2) the terms and conditions of the Clover Agreements, (3) the
Unit 1 Parties' right to nonexclusive possession of the Common Facilities
Equipment (other than Transmission Assets) under the Clover 1 Equipment Head
Lease, (4) Old Dominion's right to nonexclusive possession of the Common
Facilities Equipment (other than Transmission Assets) under the Clover 1
Equipment Operating Lease, (5) Old Dominion's right to non-exclusive possession
of the Transmission Assets and (6) as to the portion of the Common Facilities
Equipment which is comprised of Pollution Control Assets, the rights of the
Pollution Control Assets Lessor as tenant in common with Virginia Power of the
Pollution Control Assets and as lessor under the Pollution Control Assets Lease,
(b) all rights and obligations as tenant-in-common with Virginia Power in the
Retained Assets and as lessee under the Pollution Control Assets Lease which are
attributable to the Unit 2 Equipment by Virginia law as modified by the Clover
Agreements, and (c) 50% of the rights and obligations as tenant-in-common with
Virginia Power in the Retained Assets and as lessee under the Pollution Control
Assets Lease which are attributable to the Common Facilities Equipment by
Virginia law as modified by the Clover Agreements.
"EQUIPMENT PAYMENTS" shall mean all Basic Payments and all Supplemental
Payments.
"EQUITY EXPOSURE AMOUNT" for any Termination Date shall mean the amount set
forth opposite such Termination Date on Schedule 3 to the Participation
Agreement.
"EQUITY INVESTMENT" shall mean the Owner Participant's investment in the
Facility Owner contemplated by Section 2.1 of the Participation Agreement.
"EQUITY PORTION OF BASIC PAYMENTS" shall mean for any Payment Date the
difference between (i) the sum of the Basic Payment and the Foundation Basic
Payment under the Operating
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Agreements on such Payment Date and (ii) the principal and interest due and
payable on the Loan Certificates on such Payment Date.
"EQUITY PORTION OF TERMINATION VALUE" in respect of any determination of
Termination Value or amount determined by reference to Termination Value payable
pursuant to the Operative Documents shall mean an amount equal to the excess, if
any, of (i) the sum of the Termination Values set forth opposite the Termination
Date corresponding to, or immediately succeeding, as the case may be, such date
of determination on Schedule 2 of each of the Operating Agreements and, if such
date of determination is a Payment Date, the sum of the Basic Payment and
Foundation Basic Payment due on that date (to the extent payable in arrears) and
(ii) the balance, including accrued interest, on the Loan Certificates scheduled
to be outstanding on such date of determination.
"EQUITY SECURITY PLEDGE AGREEMENT" shall mean the Equity Security Pledge
Agreement, dated as of July 1, 1996, between Old Dominion, as pledgor, and the
Facility Owner, as Collateral Agent, in substantially the form of Exhibit M to
the Participation Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor law.
"EVENT OF DEFAULT" shall have the meaning specified in Section 16 of the
Operating Equipment Agreement or in Section 16 of the Operating Foundation
Agreement, as the case may be.
"EVENT OF LOSS" shall mean any of the following events:
(i) loss of Clover Unit 2 or use thereof due to destruction or
damage to Clover Unit 2 that renders repair uneconomic or that
renders Clover Unit 2 permanently unfit for normal use; or
(ii) any damage to Clover Unit 2 that results in an insurance
settlement with respect to such damage on the basis of a total
loss or an agreed constructive or a compromised total loss; or
(iii) (a) the seizure, expropriation, condemnation or requisition of
title to Clover Unit 2 or the Real Property by any
Governmental Entity that shall have resulted in the loss by
Old Dominion of (x) its title to Clover Unit 2 or (y) its
title to all or any part of the Real Property that would
render the use or operation of Clover Unit 2 uneconomic or
impossible, following all efforts to contest such loss, or (b)
the seizure, expropriation, or requisition of title to all or
any part of the Facility Owner's Unit 2 Interest by any
Governmental Entity that shall have resulted in the loss by
the Facility Owner of the Head Equipment Agreement Interest or
Head Foundation Agreement Interest or the Ground Lease
Interest, following all efforts to contest such loss or (c)
the seizure, expropriation, or requisition of use of Clover
Unit 2 or the Real Property by any Governmental Entity that
shall have resulted in the loss by Old Dominion of possession
of (x) Clover Unit 2 or (y) all
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or any part of the Real Property that would render the use or
operation of Clover Unit 2 impossible, following all efforts
to contest such loss if such loss of possession shall be for
an indefinite period or, if Old Dominion shall not have
exercised the Purchase Option, such loss of possession is
continuing on a date 18 months or less prior to the end of the
Operating Lease Term, unless, in the case of (a), (b) or (c)
waived by the Facility Owner; or
(iv) if elected in writing by the Owner Participant, and only in
circumstances where the termination of the Head Equipment
Agreement, the Head Foundation Agreement, the Operating
Equipment Agreement or the Operating Foundation Agreement
shall remove the basis of the regulation described below,
subjection of the Owner Participant, the Owner Trustee or
Facility Owner to any legal, financial or other regulatory
burden under Applicable Law regulating public utilities or
electric generating facilities of a type similar to Clover
Unit 2 which in the opinion of the Owner Participant is
burdensome, or the subjection of the Owner Participant's or
the Facility Owner's interest in the Head Equipment Agreement,
the Head Foundation Agreement, the Operating Foundation
Agreement or the Operating Equipment Agreement to any rate of
return regulation by any Governmental Entity, in either case
by reason of the participation of the Owner Trustee, the Owner
Participant or Facility Owner in the transactions contemplated
by the Operative Documents and not, in any event, as a result
of (a) investments, loans or other business activities of the
Owner Participant or its Affiliates in respect of equipment or
facilities similar in nature to Clover Unit 2 or any part
thereof or in any other electrical, steam, cogeneration or
other energy or utility related equipment or facilities or the
general business or other activities of the Owner Participant
or its Affiliates or the nature of any of the properties or
assets from time to time owned, leased, operated, managed or
otherwise used or made available for use by the Owner
Participant or its Affiliates or (b) a failure of the Owner
Participant to perform routine, administrative or ministerial
actions the performance of which would not subject the Owner
Participant to any adverse consequence (as determined by the
Owner Participant, in its sole discretion acting in good
faith), PROVIDED that Old Dominion, the Facility Owner and the
Owner Participant agree to cooperate and to take reasonable
measures to alleviate the source or consequence of any
regulation constituting an Event of Loss under this paragraph
(iv), at the cost and expense of the party requesting such
cooperation; or
(v) damage to Clover Unit 2 not constituting an Event of Loss
pursuant to clause (i) or (ii) that renders Clover Unit 2
unfit for service for 18 consecutive months if (a) Old
Dominion shall fail to elect to repair such damage within 18
months of the occurrence of such damage or (b) Old Dominion
shall fail to diligently pursue such repair after such
election or (c) unless Old Dominion has exercised the Purchase
Option, the repair of such damage is not concluded at least 18
months prior to the end of the Term, or an election to
permanently remove Clover Unit 2 from service pursuant to the
Clover Agreements; or
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(vi) if elected by the Owner Participant, the occurrence
of a change in Applicable Law that results in the
continued performance by the Facility Owner or the
Owner Participant of the Overall Transaction being or
becoming unlawful or illegal.
The date of occurrence of an Event of Loss described in clauses (i) or (ii)
shall be the date of the destruction or damage to Clover Unit 2. The date of
occurrence of an Event of Loss described in clause (iii) shall be the date of
the loss of title following all efforts to contest such loss in the case of a
seizure, expropriation, condemnation or requisition of title by Old Dominion or
the Facility Owner to Clover Unit 2, the Real Property or the Facility Owner's
Unit 2 Interest, as the case may be or, in the case of a loss of possession or
use by Old Dominion but not of title, following all efforts to contest such
loss, the date of loss of possession in the case of a loss of possession for an
indefinite period or the date which is 18 months or less prior to the end of the
Term. The date of occurrence of an Event of Loss described in clause (v) shall
be (a) the end of the 18 month period following damage in Clover Unit 2, (b) the
date of Old Dominion's failure to diligently pursue the repair of Clover Unit 2
or the date 18 months prior to the end of the Term, or (c) the election to
permanently remove Clover Unit 2 from service, as the case may be. The date of
occurrence of an Event of Loss described in clause (iv) or (vi) shall be the
date of imposition of such regulation following the exhaustion of all appeals,
if any, initiated by the Owner Trustee, the Facility Owner or the Owner
Participant in its sole and absolute discretion.
"EXCEPTED PAYMENTS" shall mean and include (i)(A) any indemnity (whether or not
constituting Supplemental Payment or Foundation Supplemental Payment and whether
or not an Event of Default exists) payable to the Trust Company, the Owner
Trustee or the Owner Participant or to their respective Parties Related and,
successors and permitted assigns (other than the Agent) pursuant to Section 2.4,
8.1 or 8.2 of the Participation Agreement, Section 5.1 of the Trust Agreement,
and any payments under the Tax Indemnity Agreement (whether reflected as an
adjustment of Basic Payment or Foundation Basic Payment or otherwise) or (B) any
amount payable by Old Dominion to the Owner Trustee, the Facility Owner or to
the Owner Participant to reimburse any such Person for its costs and expenses in
exercising its rights under the Operative Documents, or (C) any fees, costs and
expenses payable to the Trust Company or the Owner Trustee pursuant to Section
5.2 of the Trust Agreement, (ii) (A) insurance proceeds, if any, payable to the
Owner Trustee, the Facility Owner or the Owner Participant under insurance
separately maintained by the Owner Trustee, the Facility Owner or the Owner
Participant with respect to Clover Unit 2 as permitted by Section 11 of the
Operating Equipment Agreement or Section 11 of the Operating Foundation
Agreement or (B) proceeds of personal injury or property damage liability
insurance maintained under any Operative Document for the benefit of the Owner
Trustee, the Facility Owner or the Owner Participant, (iii) any amounts payable
under any Operative Documents to reimburse the Owner Trustee, the Facility Owner
or the Owner Participant (including the reasonable expenses of the Owner
Trustee, the Facility Owner or the Owner Participant incurred in connection with
any such payment) in performing or complying with any of the obligations of Old
Dominion under and as permitted by any Operative Document, (iv) any amount
payable to the Owner Participant as the purchase price of the Owner
Participant's right and interest in the Collateral or the Beneficial Interest,
(v) the Equity Portion
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of Termination Value, (vi) any payments, insurance proceeds or other amounts
with respect to any portion of the Head Equipment Agreement Interest or the Head
Foundation Agreement Interest which has been released from the Liens of the Loan
Agreement and the Leasehold Mortgage, (vii) any payments or distributions to the
Owner Trustee, the Facility Owner or the Owner Participant attributable to any
Qualifying Security, the Qualifying Surety Bond or any Qualifying Letter of
Credit, (viii) any amounts payable to the Owner Participant upon exercise by it
of the Special Equity Remedy pursuant to Section 12 of the Participation
Agreement and (ix) any payments in respect of interest, or any payments made on
an After-Tax Basis, to the extent attributable to payments referred to in clause
(i) through (vii) above that constitute Excepted Payments.
"EXCEPTED RIGHTS" shall have the meaning specified in Section 5.2 of the Loan
Agreement.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"EXCHANGE AGREEMENT" shall mean the Exchange Agreement, dated as of February 9,
1996, by and among the Owner Participant, Chrysler Capital Corporation and
Fleet.
"EXCHANGE DOCUMENTS" shall mean the Exchange Agreement, the Assignment and
Acceptance of Replacement Property Contract, dated as of July 31, 1996, among
the Owner Participant, the Facility Owner and Fleet, the Letter Agreement, re:
Qualifying Intermediary, dated July 31, 1996, to Fleet from Old Dominion, the
Notice of Assignment of the Replacement Property Contract, dated July 31, 1996,
from the Owner Participant and the Facility Owner, the Letter Agreement, re:
Direction of Transfer, dated July 31, 1996, to Old Dominion from Fleet, and the
Reassignment and Acceptance of Replacement Property Contract, dated August 1,
1996, among Fleet, the Owner Participant, and the Facility Owner.
"EXCHANGOR" shall mean Fleet, as exchangor under the Exchange Agreement.
"EXCLUDED PROPERTY" shall mean Excepted Payments and Excepted Rights,
collectively.
"EXCLUDED TAXES" shall have the meaning specified in Section 8.2(b) of the
Participation Agreement.
"EXPIRATION DATE" shall mean January 4, 2020.
"FACILITY OWNER" shall mean Clover Unit 2 Generating Trust, a Delaware business
trust created pursuant to the Trust Agreement.
"FACILITY OWNER'S AVAILABLE CAPACITY" shall mean a portion of the Available
Capacity to the extent, but only to the extent, derived from or attributable to
Clover Unit 2.
"FACILITY OWNER GROUP" shall have the meaning specified in Section 4(e) of the
Tax Indemnity Agreement.
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"FACILITY OWNER'S LIEN" shall mean any Lien on the Trust Estate or any part
thereof arising as a result of (i) Claims against or affecting the Trust
Company, the Facility Owner or the Owner Trustee, or any Party Related thereto
not related to any Operative Document or the transactions contemplated thereby,
(ii) any act or omission of the Trust Company, the Facility Owner or the Owner
Trustee, or Party Related thereto that is not related to any Operative Document
or the transactions contemplated thereby or that is in breach of any covenant or
agreement of the Trust Company, in its individual capacity, specified therein,
(iii) Taxes imposed upon the Trust Company, the Facility Owner or the Owner
Trustee, or any Party Related thereto that are not indemnified against by Old
Dominion pursuant to any Operative Document or (iv) Claims against or affecting
the Trust Company, the Facility Owner or the Owner Trustee, in its individual
capacity, or any Party Related thereto arising out of the voluntary or
involuntary transfer by the Trust Company, the Facility Owner or the Owner
Trustee of any portion of the interest of the Trust Company, the Facility Owner
or the Owner Trustee in the Facility Owner's Unit 2 Interest, and that are not
indemnified against by Old Dominion pursuant to any Operative Document;
PROVIDED, HOWEVER, that any such Lien shall not constitute a Facility Owner's
Lien so long as (i) any such Lien is being diligently contested in good faith by
appropriate proceedings and neither such Lien nor such proceedings involves a
material danger of the sale, forfeiture or loss of the Trust Estate (after
taking into account any bonds provided in respect of such Lien) and (ii) any
such Lien shall not constitute an impermissible encumbrance under Section 14.06
of the Old Dominion Indenture.
"FACILITY OWNER'S PERCENTAGE" shall mean 50% with respect to any Component or
other assets (including any replaced facilities constituting a part of Clover
Unit 2 in accordance with Section 10.3 of the Operating Equipment Agreement and
Section 10.3 of the Operating Foundation Agreement) constituting a part of the
Unit 2 Equipment or the Unit 2 Foundation and 25% with respect to any Component
or other assets (including any replaced facilities constituting a part of Clover
Unit 2 in accordance with Section 10.3 of the Operating Equipment Agreement and
Section 10.3 of the Operating Foundation Agreement) constituting Common
Facilities Equipment or Common Facilities Foundation.
"FACILITY OWNER'S UNIT 2 INTEREST" shall mean the Head Equipment Agreement
Interest, the Head Foundation Agreement Interest, the Ground Lease Interest and
the Assignee's rights and interests in the Assigned Clover Interests.
"FAIR MARKET SALES VALUE", with respect to the Facility Owner's Unit 2 Interest,
shall mean the cash price obtainable for the Facility Owner's Unit 2 Interest,
in an arm's length sale between an informed and willing purchaser under no
compulsion to purchase and an informed and willing seller under no compulsion to
sell, without regard to the rights of Virginia Power set forth in Section 6.3 of
the Head Equipment Agreement and Section 6.3 of the Head Foundation Agreement,
assuming that (i) the conditions contained in Sections 7 and 8 of the Operating
Equipment Agreement and the Operating Foundation Agreement shall have been
complied with in all respects and (ii) the Facility Owner's Unit 2 Interest is
free and clear of all Liens (other than Facility Owner's Liens and Owner
Participant's Liens) (except for purposes of Section 17 of the Operating
Equipment Agreement or Section 17 of the Operating Foundation Agreement, as to
which the Facility Owner's Unit 2 Interest, shall be valued on an "as-is",
"where-is" and
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"with all faults" basis and shall take into account all Liens (other than
Facility Owner's Liens or Owner Participant's Liens)). If the Fair Market Sales
Value of the Facility Owner's Unit 2 Interest is to be determined during the
continuance of an Event of Default or in connection with the exercise of
remedies by the Facility Owner pursuant to Section 17 of the Operating Equipment
Agreement or Section 17 of the Operating Foundation Agreement, such value shall
be determined by an appraiser appointed solely by the Facility Owner; PROVIDED,
HOWEVER, in any such case where the Facility Owner shall be unable to obtain
constructive possession sufficient to realize the economic benefit of the
Facility Owner's Unit 2 Interest, Fair Market Sales Value of the Facility
Owner's Unit 2 Interest shall be deemed equal to $0. Upon any determination of
Fair Market Sales Value of the Facility Owner's Unit 2 Interest, such Fair
Market Sales Value shall be allocated to the Equipment Interest and the
Foundation Interest proportionally to the value the Equipment Interest Cost or
the Foundation Interest Cost bears to the aggregate value of such costs. If the
parties are unable to agree upon a Fair Market Sales Value within 30 days after
a request therefor has been made, the Fair Market Sales Value of the Facility
Owner's Unit 2 Interest shall be determined by appraisal. The Owner Participant
and Old Dominion will consult with the intent of selecting a mutually acceptable
Independent Appraiser. If a mutually acceptable Independent Appraiser is
selected, the Fair Market Sales Value shall be determined by such Independent
Appraiser. If Old Dominion and the Owner Participant are unable to agree upon a
single Independent Appraiser within such 15-day period, the Owner Participant
will retain an Independent Appraiser. Within 15 days after the Owner
Participant's selection of an Independent Appraiser, Old Dominion shall select
an Independent Appraiser. If Old Dominion fails to retain an Independent
Appraiser within such period, the Fair Market Sales Value shall be determined by
the Independent Appraiser retained by the Owner Participant. The Independent
Appraiser selected by Old Dominion and the Independent Appraiser selected by the
Owner Participant shall select a consensus Independent Appraiser within 10 days.
If the Independent Appraisers cannot agree on a consensus Independent Appraiser
within 10 days, the consensus Independent Appraiser shall be selected by the
American Arbitration Association. If the parties are able to agree upon a single
Independent Appraiser or the two Independent Appraisers are able to agree upon a
consensus Independent Appraiser, the single Independent Appraiser or the three
Independent Appraisers, as the case may be, shall within 30 days make a
determination of such Fair Market Sales Value. If there shall be a panel of
three Independent Appraisers, the appraisal which differs most from the other
two appraisals with respect to the Facility Owner's Unit 2 Interest, shall be
excluded and the remaining two appraisals shall be averaged and such average
shall constitute Fair Market Sales Value of the Facility Owner's Unit 2
Interest. Fees and expenses relating to all appraisals shall be payable by Old
Dominion.
"FEDERAL POWER ACT" shall mean the Federal Power Act, as amended.
"FERC" shall mean the Federal Energy Regulatory Commission of the United States
or any successor agency thereto.
"FERC ORDERS" shall mean (i) the order issued by FERC on July 1, 1996 (Docket
Nos. EC96-24-000 and EL96-55-000) under Sections 203 of the Federal Power Act,
together with (ii) the
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order issued by FERC on July 1, 1996 (Docket No. ES96-28-000) under Section 204
of the Federal Power Act.
"FINAL DETERMINATION" with respect to a Loss shall mean (1) a decision,
judgment, decree or other order by any court of competent jurisdiction, which
decision, judgment, decree or other order has become final (I.E., when all
allowable appeals have been exhausted by either party to the action); PROVIDED,
HOWEVER, that in no event shall the Owner Participant be required to appeal to
the United States Supreme Court, (2) a closing agreement entered into under
Section 7121 of the Code or any other settlement agreement entered into in
connection with an administrative or judicial proceeding, or (3) the expiration
of the time for instituting a claim for refund, or if such a claim was filed,
the expiration of the time for instituting suit with respect thereto.
"FIRST SEVERANCE AGREEMENT" shall mean the Personal Property Agreement, dated as
of December 13, 1994, between Old Dominion and Virginia Power.
"FLEET" shall mean Fleet National Bank of Connecticut, a national banking
association.
"FORCE MAJEURE" shall have the meaning specified in Section 1.36 of the Clover
Operating Agreement.
"FORM U-7D" shall mean the certificate to be filed pursuant to Rule 7(d) of the
Holding Company Act for the purpose of exempting the Owner Participant, the
Owner Trustee and the Facility Owner from registration under the Holding Company
Act.
"FOUNDATION BASIC PAYMENTS" shall mean all amounts payable by Old Dominion to
the Facility Owner pursuant to Section 3.2 of the Operating Foundation
Agreement, as the same may be adjusted from time to time pursuant to Section 3.4
of the Operating Foundation Agreement.
"FOUNDATION INTEREST" shall mean (a) the right as tenant-in-common with Virginia
Power to nonexclusive possession of (i) the Unit 2 Foundation, subject to
Virginia Power's 50% undivided interest therein and the terms and conditions of
the Clover Agreements, (ii) the Unit 1 Foundation to the extent but only to the
extent necessary to support for the benefit of the Unit 2 Site the Common
Facilities Equipment located in the scrubber building situated on the Unit 1
Site, subject to (1) Virginia Power's 50% undivided interest therein, (2) the
terms and conditions of the Clover Agreements, (3) the Unit 1 Parties' right to
nonexclusive possession thereof under the Clover 1 Foundation Head Lease, and
(4) Old Dominion's right to nonexclusive possession thereof under the Clover 1
Foundation Operating Lease, and (iii) the Common Facilities Foundation, subject
to (1) Virginia Power's 50% undivided interest therein, (2) the terms and
conditions of the Clover Agreements, (3) the Unit 1 Parties' right to
nonexclusive possession thereof under the Clover 1 Foundation Head Lease, and
(4) Old Dominion's right to nonexclusive possession thereof under the Clover 1
Foundation Operating Lease, (b) all of the rights and obligations as
tenant-in-common with Virginia Power which are attributable to the Unit 2
Foundation by Virginia law as modified by the Clover Agreements, and (c) 50% of
the rights and obligations as tenant-in-common with Virginia Power which are
attributable to the Common Facilities Foundation by Virginia law as modified by
the Clover Agreements.
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"FOUNDATION PAYMENTS" shall mean all Foundation Basic Payment and Foundation
Supplemental Payments.
"FOUNDATION PURCHASE OPTION" shall have the meaning specified in Section 15.1 of
the Operating Foundation Agreement.
"FOUNDATION PURCHASE OPTION PRICE" shall mean $19,226,969.50.
"FOUNDATION SUPPLEMENTAL PAYMENTS" shall mean any and all amounts, liabilities
and obligations (other than Foundation Basic Payment) which Old Dominion assumes
or agrees to pay under the Operating Foundation Agreement to the Facility Owner
or any other Person, including, but not limited to, Termination Value and if and
to the extent applicable, the Foundation Purchase Option Price.
"GAAP" shall mean generally accepted accounting principles.
"GOVERNMENTAL ENTITY" shall mean and include any national government, any
political subdivision of a national government or of any state, country or local
jurisdiction therein or any board, commission, department, division, organ,
instrumentality, court or agency of any thereof.
"GRANTING CLAUSE DOCUMENTS" shall have the meaning specified in the Granting
Clause of the Loan Agreement.
"GRANTOR" shall mean the Facility Owner, as grantor under the Leasehold
Mortgage, together with its successors and permitted assigns, or Old Dominion,
as grantor under the Subordinated Mortgage, as the case may be.
"GROUND INTEREST" shall mean (a) the right as tenant-in-common with Virginia
Power to nonexclusive possession of (i) the Unit 2 Site, subject to Virginia
Power's 50% undivided interest therein and the terms and conditions of the
Clover Agreements, (ii) the Unit 1 Site to the extent but only to the extent
necessary to support, for the benefit of the Unit 2 Parties, the Common
Facilities Equipment and Common Facilities Foundation located in and under the
scrubber building situated on the Unit 1 Site, subject to (1) Virginia Power's
50% undivided interest therein, (2) the terms and conditions of the Clover
Agreements, (3) the Unit 1 Parties' rights as to the Unit 1 Site under the
Option Agreement, and (4) Old Dominion's subleasehold interest under the Clover
Unit 1 Ground Lease and Sublease and (iii) the Common Facilities Site, subject
to (1) Virginia Power's 50% undivided interest therein, (2) the terms and
conditions of the Clover Agreements, and (3) the Unit 1 Parties' rights as to
the Common Facilities Site under the Option Agreement, (b) all of Old Dominion's
rights and obligations as tenant-in-common of the Unit 2 Site which are
attributable to the Unit 2 Site by Virginia law as modified by the Clover
Agreements, and (c) 50% of Old Dominion's rights and obligations as
tenant-in-common of the Common Facilities Site which are attributable to the
Common Facilities Site by Virginia law as modified by the Clover Agreements.
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"GROUND LEASE AND SUBLEASE" shall mean the Deed of Ground Lease and Sublease
Agreement, dated as of July 1, 1996, between the Ground Lessor and the Ground
Lessee, in substantially the form of Exhibit E to the Participation Agreement.
"GROUND LEASE BASIC TERM" shall have the meaning specified in Section 2.2 of the
Ground Lease and Sublease.
"GROUND LEASE INTEREST" shall mean the Ground Lessee's right, title and interest
in, to and under the Ground Interest under the Ground Lease and Sublease.
"GROUND LEASE RENEWAL TERM" shall have the meaning specified in Section 2.3 of
the Ground Lease and Sublease.
"GROUND LEASE TERM" shall mean the Basic Ground Lease Term and any Renewal
Ground Lease Term or Terms elected by the Ground Lessee pursuant to Section 2.3
of the Ground Lease and Sublease.
"GROUND LESSEE" shall mean the Facility Owner, as ground lessee and ground
sublessor under the Ground Lease and Sublease.
"GROUND LESSOR" shall mean Old Dominion, as ground lessor and ground sublessee
under the Ground Lease and Sublease.
"GROUND SUBLEASE TERM" shall have the meaning specified in Section 4 of the
Ground Lease and Sublease.
"GUARANTOR" shall mean, as the context requires, Chrysler Capital Corporation as
guarantor of the Owner Participant's obligation under the Operative Documents
pursuant to the Guaranty or any Person which shall guaranty the obligations of a
Transferee under the Operative Documents in accordance with Section 5.1 of the
Participation Agreement.
"GUARANTY" shall mean the Guaranty, dated as of July 1, 1996, by Chrysler
Capital Corporation or any guaranty of the obligations of a Transferee executed
pursuant to Section 5.1 of, and in substantially the form of Exhibit Q to, the
Participation Agreement.
"HALIFAX CLERK'S OFFICE" shall mean the Clerk's Office of the Circuit Court of
Halifax County, Virginia.
"HEAD AGREEMENTS" shall mean the Head Equipment Agreement and the Head
Foundation Agreement.
"HEAD EQUIPMENT AGREEMENT" shall mean Clover Unit 2 Equipment Interest
Agreement, dated as of July 1, 1996, between the Old Dominion and the Facility
Owner, in substantially the form of Exhibit C to the Participation Agreement.
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"HEAD EQUIPMENT AGREEMENT BASIC TERM" shall have the meaning specified in
Section 3.1 of the Head Equipment Agreement.
"HEAD EQUIPMENT AGREEMENT CONSIDERATION" shall have the meaning specified in
Section 3.3 of the Head Equipment Agreement.
"HEAD EQUIPMENT AGREEMENT INTEREST" shall mean the Facility Owner's right, title
and interest in, to and under the Equipment Interest under the Head Equipment
Agreement.
"HEAD EQUIPMENT AGREEMENT RENEWAL TERM" shall have the meaning specified in
Section 3.2 of the Head Equipment Agreement.
"HEAD EQUIPMENT AGREEMENT TERM" shall have the meaning specified in Section 3.2
of the Head Equipment Agreement.
"HEAD FOUNDATION AGREEMENT" shall mean the Clover Unit 2 Foundation Interest
Agreement, dated as of July 1, 1996, between the Old Dominion and the Facility
Owner, in substantially the form of Exhibit D to the Participation Agreement.
"HEAD FOUNDATION AGREEMENT BASIC TERM" shall have the meaning specified in
Section 3.1 of the Head Foundation Agreement.
"HEAD FOUNDATION AGREEMENT CONSIDERATION" shall have the meaning specified in
Section 3.3 of the Head Foundation Agreement.
"HEAD FOUNDATION AGREEMENT INTEREST" shall mean the Facility Owner's right,
title and interest in, to and under the Foundation Interest under the Head
Foundation Agreement.
"HEAD FOUNDATION AGREEMENT RENEWAL TERM" shall have the meaning specified in
Section 3.2 of the Head Foundation Agreement.
"HEAD FOUNDATION AGREEMENT TERM" shall have the meaning specified in Section 3.2
of the Head Foundation Agreement.
"HIGHEST RATE" shall have the meaning specified in Section 4(b)(1) of the Tax
Indemnity Agreement.
"HOLDERS" and "HOLDERS OF LOAN CERTIFICATES" shall have the meaning specified in
Section 2.7 of the Loan Agreement.
"HOLDING COMPANY ACT" shall mean the Public Utility Holding Company Act of 1935,
as amended.
"IMPROVEMENTS" shall have the meaning specified in Section 4(a)(2) of the Tax
Indemnity Agreement.
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"INCOME INCLUSION" shall have the meaning specified in Section 4(a) of the Tax
Indemnity Agreement.
"INDEMNITEE" shall have the meaning specified in Section 8.1(a) of the
Participation Agreement.
"INDENTURE TRUSTEE" shall mean Crestar Bank, as the trustee under the Old
Dominion Indenture or any successor thereto.
"INDEPENDENT APPRAISER" shall mean a Person independent of the Owner Participant
and Old Dominion having experience in the business of evaluating facilities
similar to Clover Unit 2.
"INDEPENDENT ENGINEER" shall mean an independent engineer selected by the Owner
Participant and, so long as no Event of Default shall have occurred and be
continuing, reasonably acceptable to Old Dominion.
"INDEPENDENT PUBLIC ACCOUNTANTS" shall have the meaning specified in Section
4(d) of the Tax Indemnity Agreement.
"INDEPENDENT TAX COUNSEL" shall mean independent tax counsel reasonably
acceptable to Old Dominion and the Owner Participant.
"INTEREST DEDUCTIONS" shall have the meaning specified in Section 2(c) of the
Tax Indemnity Agreement.
"INTERMEDIARY" shall have the meaning specified in Section 3.4(c) of the
Operating Equipment Agreement or Section 3.4(c) of the Operating Foundation
Agreement, as the case may be.
"IRS" shall mean the Internal Revenue Service of the United States Department of
Treasury or any successor agency.
"LEASEHOLD MORTGAGE" shall mean the Leasehold Deed of Trust, Assignment of
Leases and Rents, and Security Agreement, dated as of July 1, 1996, made by the
Facility Owner, as Grantor, and having David S. Cohn and C. Cotesworth Pinckney,
as Trustees, for the beneficiaries identified therein, in substantially the form
of Exhibit J to the Participation Agreement.
"LENDERS" shall mean the Original Lenders and any future Lenders under the Loan
Agreement.
"LIEN" shall mean any mortgage, pledge, lien, charge, encumbrance, lease,
exercise of rights, security interest, title retention or claim.
"LOAN AGREEMENT" shall mean the Loan and Security Agreement, dated as of July 1,
1996, between the Facility Owner and Utrecht-America, as Series A and initial
Series B Lender and as Agent, in substantially the form of Exhibit I to the
Participation Agreement.
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"LOAN BANKRUPTCY DEFAULT" shall mean an event that is, or in the case of Section
4.2(f) of the Loan Agreement with the passage of time would become, a Loan Event
of Default under Section 4.2(e), (f) or (g) of the Loan Agreement.
"LOAN CERTIFICATE REGISTER" shall have the meaning specified in Section 2.7 of
the Loan Agreement.
"LOAN CERTIFICATES" shall have the meaning specified in Section 2.1(a) of the
Loan Agreement.
"LOAN COMMITMENTS" shall mean the Series A Loan Commitment and the Series B Loan
Commitment.
"LOAN EVENT OF DEFAULT" shall have the meaning specified in Section 4.2 of the
Loan Agreement.
"LOAN MATURITY DATE" shall mean January 4, 2020.
"LOAN PAYMENT DATE" shall mean (i) January 5, 1997 and July 5, 1997 and each
succeeding January 5 and July 5 through and including July 5, 2019 and (ii) the
Loan Maturity Date.
"LOAN PAYMENT DEFAULT" shall mean failure of the Facility Owner to make any
payment in respect of the principal of, or interest on, any Loan Certificates
when the same shall have become due without regard to any grace period or notice
requirement.
"LOAN REFINANCING DATE" shall mean any date on which the Series A Loan
Certificate is refinanced pursuant to Section 10.2 of the Participation
Agreement.
"LOANS" shall mean the loans evidenced by the Series A Loan Certificate, the
Series B Loan Certificate and any Additional Loan Certificates issued from time
to time.
"LOSS" shall have the meaning specified in Section 4(a) of the Tax Indemnity
Agreement.
"LOSS OF DEDUCTIONS" shall have the meaning specified in Section 4(a)(1) of the
Tax Indemnity Agreement.
"MEMBER OF THE FACILITY OWNER GROUP" shall have the meaning specified in Section
4(e) of the Tax Indemnity Agreement.
"MINIMUM CAPACITY PAYMENTS" shall have the meaning assigned to it in Exhibit B
to the Operating Equipment Agreement.
"MODIFICATION" shall mean a Required Modification or an Optional Modification.
"MONTHLY ENERGY CHARGE" shall have the meaning specified in Exhibit B to the
Operating Equipment Agreement.
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"MOODY'S" shall mean Moody's Investors Service, Inc. and any successor thereto.
"MORTGAGEE" shall mean the beneficiary of the Leasehold Mortgage.
"MORTGAGOR" shall mean the Facility Owner, as grantor under the Leasehold
Mortgage.
"NET ECONOMIC RETURN" shall mean the Owner Participant's anticipated (i) net
after-tax yield (computed using the multiple investment sinking fund method) and
(ii) periodic after-tax cash flow, based upon the same assumptions used by the
Owner Participant in making the original computations implicit in (i) the
schedule of Basic Payments attached as Schedule 1 to Operating Equipment
Agreement and (ii) the schedule of Foundation Basic Payments attached as
Schedule 1 to the Operating Foundation Agreement.
"NEW LOAN" shall mean a loan having a principal amount, interest rate, maturity,
amortization and such other terms as set forth in Schedule 3 to the Operating
Equipment Agreement arranged by Old Dominion in accordance with Section 15.3(ii)
of the Operating Equipment Agreement.
"NONSEVERABLE MODIFICATION" shall mean any Modification that is not readily
removable without causing material damage to Clover Unit 2.
"OBSOLESCENCE TERMINATION DATE" shall have the meaning specified in Section 14.1
of the Operating Equipment Agreement.
"OFFICER'S CERTIFICATE" shall mean with respect to any Person, a certificate
signed by the Chairman of the Board, the President, or a Vice President of such
Person or any person authorized by or pursuant to the organizational documents,
the by-laws or any resolution of the Board of Directors or Executive Committee
of such Person (whether general or specific) to execute, deliver and take
actions on behalf of such Person in respect of any of the Operative Documents.
"OLD DOMINION" shall mean Old Dominion Electric Cooperative, a wholesale power
supply cooperative organized under the laws of the Commonwealth of Virginia,
together with its successors.
"OLD DOMINION'S BONDS" shall mean the First Mortgage Bonds issued by Old
Dominion under the Old Dominion Indenture.
"OLD DOMINION GROUP" shall have the meaning specified in Section 1 of the Tax
Indemnity Agreement.
"OLD DOMINION INDENTURE" shall mean the Indenture of Mortgage and Deed of Trust,
dated as of May 1, 1992, made by Old Dominion to the Indenture Trustee, as
supplemented by the First Supplemental Indenture dated as of August 1, 1992, the
Second Supplemental Indenture dated as of December 1, 1992, the Third
Supplemental Indenture dated as of May 1, 1993, the Fourth
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Supplemental Indenture dated as of December 15, 1994, the Fifth Supplemental
Indenture dated as of February 29, 1996 and as hereinafter amended and
supplemented from time to time.
"OLD DOMINION PERSON" shall have the meaning specified in Section 1 of the Tax
Indemnity Agreement.
"OLD DOMINION'S UNIT 2 INTEREST" shall mean Old Dominion's interest in the
Equipment Interest under the Operating Equipment Agreement, Old Dominion's
interest in the Foundation Interest under the Operating Foundation Agreement,
Old Dominion's subleasehold interest in the Ground Interest under the Ground
Lease and Sublease and Old Dominion's rights in the Assigned Clover Interests
reassigned to it by the Owner Trustee under the Clover Agreements Assignment.
Old Dominion's Unit 2 Interest shall not include Old Dominion's remainder
interest in Clover Unit 2 and the Clover Real Estate.
"OPERATING AGENCY AGREEMENT" shall mean the Operating Agency Agreement dated as
of July 1, 1996, among the Facility Owner, the Owner Participant, Old Dominion,
State Street Bank and Trust Company and First Union National Bank of Florida, in
substantially the form of Exhibit U to the Participation Agreement.
"OPERATING AGREEMENTS" shall mean the Operating Equipment Agreement and the
Operating Foundation Agreement.
"OPERATING EQUIPMENT AGREEMENT" shall mean the Operating Equipment Agreement,
dated as of July 1, 1996, between the Facility Owner and Old Dominion, in
substantially the form of Exhibit G to the Participation Agreement.
"OPERATING FOUNDATION AGREEMENT" shall mean the Operating Foundation Agreement,
dated as of July 1, 1996, between the Facility Owner and Old Dominion, in
substantially the form of Exhibit H to the Participation Agreement.
"OPERATIVE DOCUMENTS" shall mean the Participation Agreement, the Severance
Agreements, the Head Equipment Agreement, the Head Foundation Agreement, the
Operating Equipment Agreement, the Operating Foundation Agreement, the Clover
Agreements Assignment, the Ground Lease and Sublease, the Loan Agreement, the
Leasehold Mortgage, the Loan Certificates, the Trust Agreement, the Guaranty,
the Tax Indemnity Agreement, the Operating Agency Agreement, the Payment
Undertaking Agreement, the Payment Undertaking Pledge Agreement, the Qualifying
Surety Bond, the Equity Security Pledge Agreement, the Subordinated Security
Agreement, and the Subordinated Mortgage.
"OPTION AGREEMENT" shall mean the Option Agreement to Lease, dated as of
February 29, 1996, between Old Dominion and the Clover 1 Owner Trustee recorded
in the Halifax Clerk's Office in Deed Book 645, page 245, as corrected by the
Corrected Option Agreement to Lease, dated as of February 29, 1996, recorded in
the Halifax Clerk's Office.
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"OPTION INTEREST" shall mean the Clover 1 Owner Trustee's right and option to
enter into the Clover 1 Ground Lease and Sublease.
"OPTIONAL MODIFICATION" shall have the meaning specified in Section 8.2 of the
Operating Equipment Agreement or Section 8.2 of the Operating Foundation
Agreement, as the case may be.
"ORIGINAL LENDERS" shall mean Utrecht-America, as purchaser of the Series A Loan
Certificate and initial purchaser of the Series B Loan Certificate.
"OTHER LOSS" shall have the meaning specified in Section 4(a)(2)(viii) of the
Tax Indemnity Agreement.
"OVERALL TRANSACTION" shall mean the transactions contemplated by the Operative
Documents.
"OVERDUE RATE" shall mean 1.0% per annum over the rate of interest publicly
announced from time to time by the Bank at its New York office as its prime
lending rate for domestic commercial loans, such rate to change as and when such
prime lending rate changes. For purpose of this definition, "prime lending rate"
shall mean that rate announced by the Bank from time to time as its prime rate
as that rate may change from time to time with changes to occur on the date such
Bank's prime rate changes. Such Bank's prime rate is one of several interest
rate bases used by the Bank. The Bank lends at rates both above and below the
Bank's prime rate, and Old Dominion acknowledges and agrees that the prime rate
is not represented or not intended to be the lowest or most favorable rate of
interest offered by the Bank.
"OWNER PARTICIPANT" shall mean EPC Corporation, a Delaware corporation.
"OWNER PARTICIPANT'S COMMITMENT" shall mean $76,213,404.74.
"OWNER PARTICIPANT'S LIEN" shall mean any Lien on the Trust Estate or any part
thereof arising as a result of (i) Claims against or affecting the Owner
Participant or any Party Related thereto not related to any Transaction Document
or the transactions contemplated thereby, (ii) any act or omission of the Owner
Participant or Party Related thereto that is not related to, or is in violation
of, any Transaction Document or the transactions contemplated thereby or that is
in breach of any covenant or agreement of the Owner Participant set forth
therein, (iii) Taxes against the Owner Participant or Party Related thereto that
are not indemnified against by Old Dominion pursuant to the Operative Documents
or (iv) Claims against or affecting the Owner Participant or Party Related
thereto arising out of the voluntary or involuntary transfer by the Owner
Participant of any portion of the interest of the Owner Participant in the
Beneficial Interest) that are not indemnified against by Old Dominion pursuant
to the Operative Documents; PROVIDED, HOWEVER, that any such Lien shall not
constitute an Owner Participant's Lien hereunder so long as (i) any such Lien is
being diligently contested in good faith by appropriate proceedings and neither
such Lien nor such proceedings involves a material danger of the sale,
forfeiture or loss of the Trust Estate (after taking into account any bonds
provided in respect of
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such Lien) and (ii) any such Lien shall not constitute an impermissible
encumbrance under Section 14.06 of the Old Dominion Indenture.
"OWNER PARTICIPANT'S TAX COUNSEL" shall mean Milbank, Tweed, Hadley & McCloy, or
such other tax counsel as may be selected by the Owner Participant and
reasonably acceptable to Old Dominion.
"OWNER TRUSTEE" shall mean Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity except as expressly provided in the
relevant Operative Document to which it is a party, but solely as owner trustee
under the Trust Agreement, and each other Person which may from time to time be
acting as the Owner Trustee in accordance with the provisions of the Trust
Agreement.
"PARTICIPANTS" shall mean the Owner Participant and the Original Lenders.
"PARTICIPATION AGREEMENT" shall mean the Participation Agreement, dated as of
July 1, 1996, among Old Dominion, the Facility Owner, Wilmington Trust Company
(in the capacities specified therein) the Owner Participant and Utrecht-America.
"PARTY RELATED" shall mean, with respect to any Person or its successors and
assigns, an Affiliate of such Person or its successors and assigns and any
director, officer, servant, employee or agent of that Person or any such
Affiliate or their respective successors and assigns; PROVIDED that the Trust
Company and the Facility Owner shall not be treated as Parties Related to each
other and neither Facility Owner nor Trust Company shall be treated as a Party
Related to the Owner Participant except that, for purposes of Section 8.1 of the
Participation Agreement, the Facility Owner will be treated as a Party Related
to the Owner Participant to the extent that the Facility Owner acts on the
express direction or with the express consent of the Owner Participant.
"PAYMENT DATE" shall mean (i) January 5, 1997 and July 5, 1997, and each
succeeding January 5 and July 5 through and including July 5, 2019, and (ii) the
Expiration Date.
"PAYMENT DEFAULT" shall mean the failure to make any Basic Payment, Foundation
Basic Payment, Foundation Supplemental Payment or Supplemental Payment when due
without regard to any grace period or notice requirement.
"PAYMENT PERIOD" shall mean each six-month or shorter period (i) commencing, in
the case of the first Payment Period, on the Closing Date and, thereafter, on
each Payment Date through and including July 5, 2019, and (ii) ending on the
following January 4 or July 4, as the case may be.
"PAYMENT UNDERTAKING AGREEMENT" shall mean the Payment Undertaking Agreement,
dated as of July 1, 1996, between Old Dominion and the Bank, in substantially
the form of Exhibit K to the Participation Agreement.
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"PAYMENT UNDERTAKING COLLATERAL" shall have the meaning specified in the
Granting Clause of the Loan Agreement.
"PAYMENT UNDERTAKING DOCUMENTS" shall mean the Payment Undertaking Agreement and
the Payment Undertaking Pledge Agreement.
"PAYMENT UNDERTAKING PAYMENT AMOUNT" shall mean in relation to a Payment
Undertaking Payment Date, the amount determined in accordance with Section 3.1
of the Payment Undertaking Agreement with respect to such Payment Undertaking
Payment Date.
"PAYMENT UNDERTAKING PAYMENT DATE" shall mean, with respect to any Payment
Undertaking Payment Amount, any date listed on Schedule A of the Payment
Undertaking Agreement and with respect to any Early Termination Amount, any date
listed on Schedule B of the Payment Undertaking Agreement.
"PAYMENT UNDERTAKING PLEDGE AGREEMENT" shall mean the Payment Undertaking Pledge
Agreement, dated as of July 1, 1996, between the Payment Undertaking Pledgee and
the Payment Undertaking Pledgor, in substantially the form of Exhibit L to the
Participation Agreement.
"PAYMENT UNDERTAKING PLEDGEE" shall mean the Facility Owner, as pledgee under
the Payment Undertaking Pledge Agreement.
"PAYMENT UNDERTAKING PLEDGOR" shall mean Old Dominion, as pledgor under the
Payment Undertaking Pledge Agreement.
"PERMITTED ENCUMBRANCES" shall mean "Permitted Encumbrances" as defined in the
Old Dominion Indenture.
"PERMITTED INVESTMENTS" shall mean investments in (a) overnight loans to or
other customary overnight investments in commercial banks of the type referred
to in paragraph (d) below, (b) obligations of, or guaranteed as to interest and
principal by, the United States maturing within one year after such investment,
(c) open market commercial paper of any corporation incorporated under the laws
of the United States or any State thereof which is rated not less than "prime-1"
or its equivalent by Moody's and "A-1" or its equivalent by S&P maturing within
one year after such investment, and (d) certificates of deposit maturing within
one year after such investment and issued by commercial banks organized under
the laws of the United States or any State thereof or a domestic branch of a
foreign bank (i) having a combined capital and surplus in excess of $500,000,000
and (ii) which are rated "AA" (or "Aa") or better by S&P and/or Moody's;
PROVIDED that no more than $20,000,000 may be invested in such deposits at any
one such bank.
"PERMITTED LIENS" shall mean (i) the interests of Old Dominion and the Owner
Trustee under any of the Operative Documents; (ii) the Lien of the Old Dominion
Indenture; (iii) all liens defined as "Permitted Encumbrances" in, or otherwise
permitted by, the Old Dominion Indenture
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(to the extent applicable to the Facility and, where not differentiated, the
Clover Power Station); (iv) the interest of Virginia Power or its successors and
assigns pursuant to the Clover Agreements; (v) the interest of Virginia Power as
tenant in common with Old Dominion in the Clover Power Station; (vi) the terms
and conditions of the Clover Agreements; (vii) all Facility Owner's Liens and
Owner Participant's Liens; (viii) the Liens of the Loan Agreement and the
Leasehold Mortgage; (ix) the interest of the holder of legal title as
contemplated by Section 11 of the Participation Agreement; (x) the Pollution
Control Assets Lease Documents; (xi) the interest of the Unit 1 Parties in the
Common Facilities; and (xii) the remainder interests of Old Dominion in the
Clover Real Estate, (xiii) the Liens of the Subordinated Mortgage and the
Subordinated Security Agreement and (xiv) any Lien that is expressly by its
terms subject, subordinate and inferior in priority to the Head Agreements, the
Operating Agreements, the Lien of the Loan Agreement and the Lien of the
Leasehold Mortgage.
"PERMITTED POST-TERM ENCUMBRANCES" shall mean these encumbrances specified in
clauses (6), (7), (8), (13), (14), (15), and (19) of the definition of
"Permitted Encumbrances" in the Old Dominion Indenture on the Closing Date.
"PERSON" shall mean any individual, corporation, cooperative, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"PERSONALTY" shall have the meaning specified in the Leasehold Mortgage.
"PLAN" shall mean any "employee benefit plan" (as defined in Section 3(3) of
ERISA) that is subject to ERISA, any "plan" (as defined in Section 4975(e)(1) of
the Code) that is subject to Section 4975 of the Code, any trust created under
any such plan or any "governmental plan" (as defined in Section 3(32) of ERISA
or Section 414(d) of the Code) that is organized in a jurisdiction having
prohibitions on transactions with government plans similar to those contained in
Section 406 of ERISA or Section 4975 of the Code.
"PLANT OPERATOR" shall mean Virginia Power as operator of the Clover Power
Station pursuant to the Clover Agreements and any successor thereto.
"PLEDGEE" shall mean the Facility Owner, as pledgee under the Equity Security
Pledge Agreement.
"PLEDGOR" shall mean Old Dominion, as pledgor under the Equity Security Pledge
Agreement.
"POLLUTION" shall mean any Release of anything (whether by act or omission), in
any state (whether gas, liquid or solid or an odor, organism or energy) or
combination of states, howsoever caused, which brings about or causes or may be
reasonably expected to bring about or cause any impact (including deterioration,
harm, damage or non-beneficial change) to the Environment, the Unit 1 Site, the
Unit 2 Site, the Common Facilities Site, the Solid Waste Landfill Site, the
Clover Power Station, Clover Unit 1 or Clover Unit 2 so as to create or be
likely to create conditions which:
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(a) are a risk to the health of any person or conditions
unsuitable for occupation or any material use;
(b) which result in material degradation in the capacity
to support plant life;
(c) requiring remediation or clean-up to any building,
facility, land, surface waters, ground waters or subsurface strata
under applicable Environmental Requirements; or
(d) require management programs to be implemented to
avoid or minimize impacts on the Environment under applicable
Environmental Requirements.
The terms "Polluted" and "Pollutant" shall have a corresponding meaning.
"POLLUTION CONTROL ASSETS" shall mean assets constituting Unit 2 Equipment and
Common Facilities Equipment which were leased to the Pollution Control Assets
Lessor under the Pollution Control Assets Lease.
"POLLUTION CONTROL ASSETS LEASE" shall mean the Lease Agreement, dated as of
December 15, 1994, between the Pollution Control Assets Lessor and Old Dominion,
as amended from time to time, including, without limitation, as amended by the
Assignment, Assumption and Release Agreement, dated as of July 1, 1995, among
Esbelto B.V., Green Assets B.V. and Old Dominion.
"POLLUTION CONTROL ASSETS LEASE DOCUMENTS" shall mean the Asset Purchase
Agreement dated November 28, 1994 between Old Dominion and Esbelto B.V., the
Limited Warranty Bill of Sale and Personal Property Agreement dated December 30,
1994 between Old Dominion and Esbelto B.V., the Pollution Control Assets Lease,
the Defeasance Agreement dated December 15, 1994 among Old Dominion, Esbelto
B.V. and Internationale Nederlander Lease Structured Finance B.V., the
Conveyance and Security Agreement dated as of December 15, 1994 between Esbelto
B.V. and Old Dominion and the Guaranty dated December 20, 1994 made by
Internationale Nederlander Bank, N.V. and accepted by Old Dominion.
"POLLUTION CONTROL ASSETS LESSOR" shall mean Green Assets B.V., a limited
liability company organized under the laws of The Netherlands, as lessor under
the Pollution Control Assets Lease.
"POWER PURCHASER" shall mean a Person becoming a purchaser of power under a
Power Sales Agreement pursuant to Section 15.3 of the Operating Equipment
Agreement.
"POWER SALES AGREEMENT" shall mean a wholesale power purchase agreement which
constitutes a "service contract" within the meaning of Section 7701(e) of the
Code and which shall: (1) have a term that begins on the day immediately
succeeding the Expiration Date and extending to a date not later than January 4,
2037, or to such earlier date as may be acceptable to Owner Participant; (2)
contain terms and conditions that Owner Participant reasonably requests in light
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of then current market practice or as otherwise acceptable to Owner Participant,
including terms and conditions requiring the payment of liquidated damages upon
default by the Power Purchaser under the Power Sales Agreement in an amount at
least sufficient to discharge the New Loans and preserve the Net Economic
Return; and (3) provide for (A) Capacity Payments to be due on each Power Sales
Payment Date at the highest amount reasonably obtainable and, in any event,
consistent with the provisions of and in amounts at least equal to the amounts
described in Exhibit B to the Operating Equipment Agreement (as such amounts may
be adjusted in accordance with Section 15.3(c)(vii) of the Operating Equipment
Agreement and Exhibit B thereto) and (B) Monthly Energy Charges as described in
Exhibit B to the Operating Equipment Agreement (it being understood that Old
Dominion may compensate the Power Purchaser in order to induce the Power
Purchaser to enter into the Power Sales Agreement). Any Power Sales Agreement
arranged by Old Dominion in accordance with the Service Contract Option shall be
the Power Sales Agreement with the most favorable terms offered in the course of
such arrangement.
"POWER SALES AGREEMENT TERM" shall mean the period described in clause (1) to
the definition of Power Sales Agreement during which a Power Sales Agreement is
in effect.
"POWER SALES PAYMENT DATE" shall mean each date set forth in Annex A to Exhibit
B to the Operating Equipment Agreement under the caption "Power Sales Payment
Date" that occurs during the Power Sales Agreement Term.
"POWER SALES STIPULATED LOSS VALUE" shall mean, as of any date, the amount set
forth on Annex B to Exhibit B to the Operating Equipment Agreement for such date
or, if such date is not a date set forth on such Annex B, on the immediately
succeeding date set forth on such Annex B (as such amounts may be adjusted from
time to time).
"PREEMPTIVE ELECTION" shall have the meaning specified in Section 15.2 of the
Operating Equipment Agreement and Section 15.2 of the Operating Foundation
Agreement.
"PROPERTY" shall have the meaning specified in the Leasehold Mortgage.
"PRUDENT UTILITY PRACTICES" shall have the meaning specified in, and as
interpreted for purposes of, Section 1.67 of the Clover Operating Agreement.
"PURCHASE OPTION" shall have the meaning specified in Section 15.1 of the
Operating Equipment Agreement.
"PURCHASE OPTION PRICE" shall mean $439,650,584.54.
"QUALIFIED INTERMEDIARY" shall mean Fleet.
"QUALIFYING LETTER OF CREDIT" shall mean an irrevocable transferable letter of
credit (i) issued in favor of the Owner Participant and the Facility Owner by a
Qualifying Letter of Credit Bank securing Old Dominion's obligations under the
Operating Agreements and the Special Equity
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Remedy having a stated expiration date of not earlier than one year after the
date of original issuance and (ii) unless the expiry date shall be on or after
the Expiration Date, providing for a draw thereunder if not renewed or replaced
with a Qualifying Letter of Credit or Qualifying Surety Bond prior to its expiry
or within 60 days, or such longer period not to exceed 90 days as shall be
required to obtain any required approval of any Governmental Entity necessary
for the providing of such Letter of Credit, of the issuer ceasing to be a
Qualifying Letter of Credit Bank.
"QUALIFYING LETTER OF CREDIT BANK" shall mean (i) Nationsbank, N.A., First Union
National Bank of North Carolina or Wachovia Bank of North Carolina, N.A.
provided the senior unsecured debt obligations (or long-term deposits) of any
such bank are rated at least "A" by S&P and at least "A2" by Moody's, or (ii)
any bank, the senior unsecured debt obligations (or long-term deposits) of which
are rated at least "AA" by S&P and Aa2 by Moody's if rated by both such Rating
Agencies or having the indicated rating if only rated by one of such Rating
Agencies, in either case which meets the then existing credit exposure policies
of the Owner Participant as of the date of the issuance of a Qualifying Letter
of Credit. A Qualifying Letter of Credit Bank shall cease to be a Qualifying
Letter of Credit Bank if the senior unsecured debt obligations (or long-term
deposits) of such bank shall at any time be rated below "A+" (or below "A-" in
the case of a bank identified in clause (i) of the preceding sentence) by S&P or
"A1" (or below "A3" in the case of a bank identified in clause (i) of the
preceding sentence) by Moody's.
"QUALIFYING SECURITY" shall mean securities:
(a) (i) that are (A) direct obligations of the United States
of America for the payment of which its full faith and credit is
pledged or (B) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America,
the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, and that
in either case under clauses (A) or (B), shall also include a
depository receipt issued by a bank or trust company as custodian with
respect to any such Qualifying Security or a specific payment of
interest on or principal of any such Qualifying Security held by such
custodian for the amount of the holder of a depository receipt; or
(ii) a note, bond, certificate of deposit, deposit
account, guaranteed investment contract or other unqualified obligation
of a bank, investment bank or Affiliates of either, insurance company,
savings and loan association, CFC or CoBank, the senior unsecured debt
obligations of which (or long-term deposits of which) are issued by an
issuer unrelated to the Lender or the Bank and are rated at least "AA"
by S&P and "Aa2" by Moody's if rated by both Rating Agencies or having
the indicated rating if rated by only one of such Rating Agencies; or
(iii) securities issued by an issuer unrelated to the
Lender or the Bank and which are rated at least "AA" by S&P and Aa2 by
Moody's if rated by both Rating
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Agencies or having the indicated rating if rated by only one of such
Rating Agencies (not including a rating reflecting that of any bond
insurer); or
(iv) securities which are insured under a bond
insurance policy issued by a bond insurer whose claim paying ability
has been rated "AAA" (or the equivalent thereof) by each Rating Agency
providing a rating in respect of such claim paying ability; or
(v) a combination of the obligations set forth in
clauses (i), (ii), (iii) and (iv); and
(b) the issuer or insurer of which, on the date the Qualifying
Security is pledged pursuant to Section 7.6 of the Participation
Agreement, is reasonably acceptable to the Owner Participant and meets
the then existing credit exposure policies of the Owner Participant;
and
(c) which provide for the payment of interest and principal or
provide for redemption at the option of the holders thereof, at such
times and in such amounts as shall be sufficient to pay all amounts of
(x) Basic Payment and Foundation Basic Payment in excess of principal
and interest due and payable on the Loan Certificates outstanding on
each Payment Date, (y) the initial installment of the Purchase Option
Price and the initial installment of the Foundation Purchase Option
Price in excess of the principal and interest due and payable on the
Loan Certificates outstanding on the Expiration Date (after taking into
account any Basic Payment or Foundation Basic Payment payable on the
Expiration Date, if any) and (z) each subsequent installment of
Purchase Option Price and Foundation Purchase Option Price on the date
each such installment of Purchase Price and Foundation Purchase Option
Price is due and payable under the Operating Agreements. For purposes
of this clause (c), Basic Payment, Foundation Basic Payment, Purchase
Option Price and Foundation Purchase Option Price shall be the amounts
of each thereof scheduled to be paid on such date as determined on the
Closing Date without reference to any adjustment to Basic Payment,
Foundation Basic Payment, Purchase Option Price or Foundation Purchase
Option Price pursuant to Section 3.4 of the Operating Equipment
Agreement or Section 3.4 of the Operating Foundation Agreement.
In addition, a surety bond or a letter of credit supporting
Old Dominion's obligations under the Operating Agreements and the Special Equity
Remedy and satisfying the applicable requirements set forth below shall be a
"Qualifying Security".
A surety bond that satisfies the requirements of paragraph (a)
and (b) of the definition of Qualifying Surety Bond and shall
provide for a maximum amount payable, at such times and in
such amounts as shall be sufficient to pay all amounts of (x)
Basic Payment and Foundation Basic Payment in excess of
principal and interest due and payable on the Loan
Certificates outstanding on each Payment Date, (y) the initial
installment of the Purchase Option Price and
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the initial installment of the Foundation Purchase Option
Price in excess of the principal and interest due and payable
on the Loan Certificates outstanding on the Expiration Date
(after taking into account any Basic Payment or Foundation
Basic Payment payable on the Expiration Date, if any) and (z)
each subsequent installment of Purchase Option Price and
Foundation Purchase Option Price on the date of each such
installment of Purchase Price and Foundation Purchase Option
Price is due and payable under the Operating Agreements
A letter of credit which is a Qualifying Letter of Credit and
provides for a maximum drawing amount, at such times and in
such amounts as shall be sufficient to pay all amounts of (x)
Basic Payment and Foundation Basic Payment in excess of
principal and interest due and payable on the Loan
Certificates outstanding on each Payment Date, (y) the initial
installment of the Purchase Option Price and the initial
installment of the Foundation Purchase Option Price in excess
of the principal and interest due and payable on the Loan
Certificates outstanding on the Expiration Date (after taking
into account any Basic Payment or Foundation Basic Payment
payable on the Expiration Date, if any) and (z) each
subsequent installment of Purchase Option Price and Foundation
Purchase Option Price on the date of each such installment of
Purchase Price and Foundation Purchase Option Price is due and
payable under the Operating Agreements.
"QUALIFYING SURETY BOND" shall mean a surety bond for the benefit of the
Facility Owner and the Owner Participant (a) issued by AMBAC or other insurer
reasonably acceptable to the Owner Participant having a claims paying ability
rated AAA by S&P and Aaa by Moody's if rated by both S&P and Moody's, or having
the indicated claims paying ability rating if rated by one of such Rating
Agencies, (b) in substantially the form of the surety bond of Exhibit R to the
Participation Agreement or in such other form (including waivers of defenses)
acceptable to the Owner Participant and (c) providing for a maximum amount
payable from time to time equal to the Equity Exposure Amount.
"RATING AGENCIES" shall mean S&P and Moody's.
"REAL PROPERTY" shall mean the Unit 2 Site and the Common Facilities Site.
"REASONABLE BASIS" for a position shall exist if tax counsel may properly advise
reporting such position on a tax return in accordance with Formal Opinion 85-352
issued by the Standing Committee on Ethics and Professional Responsibility of
the American Bar Association (or any successor to such Opinion).
"REASSIGNMENT AND REACCEPTANCE OF REPLACEMENT PROPERTY CONTRACT" shall mean the
Reassignment and Reacceptance of Replacement Property Contract, dated August 1,
1996, among Fleet, the Owner Participant and the Facility Owner in the form of
Exhibit Z to the Participation Agreement.
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"RELEASE" shall mean any filling, leaking, pumping, spillage, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, seepage, dumping, or
disposing into the Environment.
"RENEWAL GROUND LEASE TERM" shall have the meaning specified in Section 2.3 of
the Ground Lease and Sublease.
"REPLACEMENT CLOSING DATE" shall have the meaning specified in paragraph (c) of
Section 10.3 of the Operating Equipment Agreement.
"REPLACEMENT COMPONENT" shall have the meaning specified in Section 7.2 of the
Operating Equipment Agreement or Section 7.2 of the Operating Foundation
Agreement, as the case may be.
"REPLACEMENT PROPERTY" shall have the meaning specified in Exhibits V and X to
the Participation Agreement.
"REQUIRED LENDERS" shall mean the Lender or Lenders which at the time of such
determination shall be the Holders, owners or obligees of a majority in
aggregate amount of the Secured Indebtedness, PROVIDED that for purposes of this
definition of Required Lenders, no outstanding principal or accrued interest in
respect of the Series A Loan Certificate issued on the Closing Date shall be
included in such amounts of Secured Indebtedness in such computation unless, and
then only to the extent of any outstanding principal and accrued interest in
respect of which, (i) there shall have occurred and be continuing a Loan Event
of Default and (ii) the Bank at such time shall have complied with all of its
obligations under the Payment Undertaking Agreement (it being understood that
the Bank shall not be deemed to have failed to comply with the obligations in
the Payment Undertaking Agreement to the extent it shall be effectively enjoined
from such compliance), PROVIDED, FURTHER, that, for all purposes of directing
the Agent in taking actions in respect of the Payment Undertaking Collateral,
the Series A Lender shall be deemed the Required Lender.
"REQUIRED MODIFICATION" shall have the meaning specified in Section 8.1 of the
Operating Equipment Agreement or Section 8.1 of the Operating Foundation
Agreement, as the case may be.
"RESPONSIBLE OFFICER" shall mean, with respect to any Person, its Chairman of
the Board, its President, any Senior Vice President, the Chief Financial
Officer, any Vice President, the Treasurer or any other management employee (a)
that has the power to take the action in question and has been authorized,
directly or indirectly, by the Board of Directors of such Person, (b) working
under the direct supervision of such Chairman of the Board, President, Senior
Vice President, Chief Financial Officer, Vice President or Treasurer and (c)
whose responsibilities include the administration of the transactions and
agreements contemplated by the Operative Documents.
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"RETAINED ASSETS" shall mean (i) all assets constituting the Unit 2 Equipment
which are not Pollution Control Assets and (ii) all assets constituting the
Common Facility Equipment which are not Pollution Control Assets.
"S&P" shall mean Standard & Poor's Rating Group, a division of McGraw-Hill, Inc.
or any successor thereto.
"SCHEDULED CLOSING DATE" shall mean July 31, 1996 and any date set for Closing
in a notice of postponement pursuant to Section 2.2(c) of the Participation
Agreement.
"SCHEDULED PAYMENTS" shall have the meaning specified in Section 1 of the
Payment Undertaking Agreement.
"SECOND SEVERANCE AGREEMENT" shall mean the Personal Property Agreement, dated
as of February 29, 1996, between Old Dominion and Virginia Power.
"SECURED CLAIMS" shall have the meaning specified in Section 3 of the Equity
Security Pledge Agreement.
"SECURED INDEBTEDNESS" shall have the meaning specified in the Granting Clause
of the Loan Agreement.
"SECURED OBLIGATIONS" shall have the meaning specified in the Granting Clause of
the Subordinated Security Agreement, the Subordinated Mortgage and the
Investment Agreement Pledge Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECURITY" shall have the same meaning as in Section 2(1) of the Securities Act.
"SECURITY AGREEMENTS" shall mean, collectively, the Payment Undertaking Pledge
Agreement and the Equity Security Pledge Agreement.
"SENIOR DOCUMENTS" shall mean the Operative Documents, the Unit 1 Documents, the
Clover Agreements, the Pollution Control Assets Lease Documents and the Old
Dominion Indenture.
"SERIES 1996 LOAN CERTIFICATES" shall mean the Series A Loan Certificate and the
Series B Loan Certificate.
"SERIES A LENDER" shall mean Utrecht-America or any subsequent Holder of the
Series A Loan Certificate.
"SERIES A LOAN CERTIFICATE" shall mean Series A Loan Certificate, dated the
Closing Date, in substantially the form of Exhibit A to the Loan Agreement, in
an initial principal amount equal
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to the Series A Loan Commitment, issued by the Facility Owner to the Series A
Lender pursuant to Section 2.1 of the Loan Agreement.
"SERIES A LOAN COMMITMENT" shall mean $219,407,935.73.
"SERIES A LOAN RATE" shall mean 7.94% semi-annually.
"SERIES B LENDER" shall mean initially Utrecht-America, or any subsequent Holder
of the Series B Loan Certificate.
"SERIES B LOAN CERTIFICATE" shall mean Series B Loan Certificate, dated the
Closing Date, in substantially the form of Exhibit B to the Loan Agreement, in
an initial principal amount equal to the Series B Loan Commitment, issued by the
Facility Owner to the initial Series B Lender pursuant to Section 2.1 of the
Loan Agreement.
"SERIES B LOAN CERTIFICATE PURCHASE AGREEMENT" shall mean the Certificate
Purchase Agreement dated July 31, 1996 between the initial Series B Lender and
AMBAC.
"SERIES B LOAN COMMITMENT" shall mean $24,378,659.53.
"SERIES B LOAN RATE" shall mean 7.94% semi-annually.
"SERVICE CONTRACT OPTION" shall have the meaning specified in Section 15.2 of
the Operating Equipment Agreement.
"SEVERABLE MODIFICATION" shall mean any Modification that is readily removable
without causing material damage to Clover Unit 2.
"SEVERANCE AGREEMENTS" shall mean the First Severance Agreement and the Second
Severance Agreement.
"SOLID WASTE LANDFILL SITE" shall mean parcel A shown on the Clover Plat.
"SPECIAL EQUITY EVENT" shall mean an Event of Default under the Operating
Equipment Agreement or the Operating Foundation Agreement.
"SPECIAL EQUITY REMEDY" shall mean the right of the Owner Participant to require
Old Dominion to purchase the Beneficial Interest pursuant to Section 12 of the
Participation Agreement.
"SPECIAL EQUITY REMEDY AMOUNT" shall mean for any date, the amount determined as
follows:
(a) (i) if the determination date is a Termination Date, the sum
of the Termination Values under the Operating Agreements on
such date, or (ii) if such date shall not
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be a Termination Date, the sum of the Termination Values under
the Operating Agreements on the immediately succeeding
Termination Date;
plus
(b) (i) the sum of any unpaid Basic Payments and Foundation Basic
Payments due before the date of such determination plus (ii)
if the determination date is a Payment Date, the Basic
Payments and Foundation Basic Payments due on that date (to
the extent payable in arrears);
minus
(c) the sum of all outstanding principal and accrued interest on
the Loan Certificates on such determination date (in each
case, if such determination date is a Payment Date, before
taking into account any Basic Payment and Foundation Basic
Payment due on such determination date).
"SPECIFIED SUM" shall mean $219,407,935.73.
"SUBORDINATED COLLATERAL" shall have the meaning specified in the Granting
Clause of the Subordinated Security Agreement.
"SUBORDINATED DEED OF TRUST EVENTS OF DEFAULT" shall have the meaning specified
in Article VII of the Subordinated Mortgage.
"SUBORDINATED MORTGAGE" shall mean the Subordinated Deed of Trust and Security
Agreement, dated as of July 1, 1996, made by Old Dominion, as Grantor, and
having Richard W. Gregory and Michael P. Drzal, as Subordinated Trustees, for
the beneficiaries identified therein, in substantially the form of Exhibit S to
the Participation Agreement.
"SUBORDINATED REAL PROPERTY" shall mean the Unit 2 Site and the Unit 2
Foundation.
"SUBORDINATED SECURED PARTIES" shall mean AMBAC, the Owner Participant and the
Facility Owner, as secured parties under the Subordinated Mortgage and the
Subordinated Security Agreement.
"SUBORDINATED SECURITY AGREEMENT" shall mean the Subordinated Security
Agreement, dated as of July 1, 1996, among Old Dominion, the Owner Participant,
AMBAC and the Facility Owner, in substantially the form of Exhibit T to the
Participation Agreement.
"SUBORDINATED SECURITY AGREEMENT EVENT OF DEFAULT" shall have the meaning
specified in Section 3.1 of the Subordinated Security Agreement.
"SUBORDINATED TRUSTEES" shall mean Richard Gregory and Michael Drzal as trustees
under the Subordinated Mortgage, and their successors and persons or entities
substituted for them.
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"SUBSIDIARY" of any Person shall mean any corporation, association, or other
business entity of which more than 50% (by number of votes) of the voting stock
at the time outstanding shall at the time be owned, directly or indirectly, by
such Person or by any other corporation, association or trust which is itself a
Subsidiary within the meaning of this definition, or collectively by such Person
and any one or more such Subsidiaries.
"SUPPLEMENTAL FINANCING" shall have the meaning specified in Section 10.1 of the
Participation Agreement.
"SUPPLEMENTAL PAYMENTS" shall mean any and all amounts, liabilities and
obligations (other than Basic Payments or amounts paid under or in respect of
Section 12 of the Participation Agreement) which Old Dominion assumes or agrees
to pay under the Operative Documents (other than the Operating Foundation
Agreement) to the Facility Owner or any other Person, including, but not limited
to, Termination Value, Burdensome Tax Law Change Value and if and to the extent
applicable, the Purchase Option Price.
"SURETY BOND" shall have the meaning specified in the Recitals of the
Subordinated Security Agreement.
"TAX" or "TAXES" shall mean all fees, taxes (including sales taxes, use taxes,
transfer taxes, value-added taxes, ad valorem taxes, property taxes (personal
and real, tangible and intangible), income taxes, gross receipts taxes,
withholding taxes and stamp taxes), levies, assessments, withholdings and other
charges and impositions of any nature, plus all related penalties, fines and
additions to tax, now or hereafter imposed by any government or other taxing
authority.
"TAX ADVANCE" shall have the meaning specified in Section 8.2(g)(3) of the
Participation Agreement.
"TAX ASSUMPTIONS" shall have the meaning specified in Section 2 of the Tax
Indemnity Agreement.
"TAX BENEFIT" shall have the meaning specified in Section 8.2(e) of the
Participation Agreement.
"TAX CLAIM" shall have the meaning specified in Section 8.2(g)(1) of the
Participation Agreement.
"TAX INDEMNITEE" shall have the meaning specified in Section 8.2(a) of the
Participation Agreement.
"TAX INDEMNITY AGREEMENT" shall mean the Tax Indemnity Agreement, dated as of
July 1, 1996, between Old Dominion and the Owner Participant.
"TERM" shall have the meaning specified in Section 3.1 of each of the Operating
Equipment Agreement and the Operating Foundation Agreement.
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"TERMINATION DATE" shall mean each of the monthly dates during the Term
identified as a "Termination Date" on Schedule 2 of the Operating Equipment
Agreement or Schedule 2 of the Operating Foundation Agreement, as the case may
be.
"TERMINATION VALUE" for any Termination Date shall mean (a) with respect to the
Equipment Interest, the Termination Value set forth on Schedule 2 of the
Operating Equipment Agreement for such Termination Date and (b) with respect to
the Operating Foundation Agreement, the Termination Value set forth on Schedule
2 of the Operating Foundation Agreement for such Termination Date.
"TRANSACTION COSTS" shall mean the following:
(i) the cost of reproducing and printing the Operative
Documents and all costs and fees in connection with the initial filing
and recording of the Head Foundation Agreement, the Operating
Foundation Agreement, the Ground Lease and Sublease and the Leasehold
Mortgage and the Subordinated Mortgage and any other document required
to be filed or recorded pursuant to the provisions hereof or of any
other Operative Document and any Uniform Commercial Code filing fees in
respect of the perfection of any security interests created by any of
the Operative Documents or as otherwise reasonably required by the
Owner Participant;
(ii) the reasonable fees and expenses of Milbank, Tweed,
Hadley & McCloy, special counsel for the Owner Participant and of Mays
& Valentine as special Virginia counsel to the Owner Participant, for
their services rendered in connection with the negotiation, execution
and delivery of the Participation Agreement and the other Operative
Documents;
(iii) the reasonable fees and expenses of Orrick, Herrington &
Sutcliffe, special counsel for Old Dominion (up to the amount
separately agreed to by Old Dominion), for their services rendered in
connection with the negotiation, execution and delivery of the
Participation Agreement and the other Operative Documents;
(iv) the reasonable fees and expenses of LeClair Ryan, general
Virginia counsel for Old Dominion (up to the amount separately agreed
to by Old Dominion), for their services rendered in connection with the
negotiation, execution and delivery of the Participation Agreement and
the other Operative Documents;
(v) the reasonable fees and expenses of Richards, Layton &
Finger, special counsel for the Owner Trustee, for their services
rendered in connection with the negotiation, execution and delivery of
the Participation Agreement and the other Operative Documents;
(vi) the reasonable fees and expenses of Davis Polk &
Wardwell, special counsel for the Agent and the Lenders (up to the
amount separately agreed to by the Agent and Old Dominion), Mays &
Valentine as special Virginia counsel to the Agent
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and the Lenders and of DeBrauw, Blackstone & Westbroek, Dutch counsel
to the Bank for their services rendered in connection with the
negotiation, execution and delivery of the Participation Agreement and
the other Operative Documents;
(vii) the initial fees and expenses of the Owner Trustee in
connection with the execution and delivery of the Participation
Agreement and the other Operative Documents to which it is or will be a
party;
(viii) the fees of the Engineer, for its services rendered in
connection with delivering the Engineering Report required by Section
4.12 of the Participation Agreement;
(ix) the fees of the Appraiser, for its services rendered in
connection with delivering the Appraisal required by Section 4.14 of
the Participation Agreement;
(x) the fees of an insurance advisor and environmental
consultant to Owner Participant, for its services rendered in
connection with reviewing certain insurance and environmental
compliance matters;
(xi) the fees of the Advisors to Old Dominion (up to the
amount separately agreed to by the Advisors to Old Dominion), for their
services rendered in connection with the transactions contemplated by
the Participation Agreement;
(xii) the fees payable to the Advisors to Owner Participant,
for their services rendered in connection with the transactions
contemplated by the Participation Agreement; and
(xiii) the fees and expenses of Chadbourne & Parke in
connection with negotiating the Operating Agency Agreement on behalf of
the Unit 1 Parties in an amount not in excess of $35,000.
Notwithstanding the foregoing, Transaction Costs shall not include internal
costs and expenses such as salaries and overhead of whatsoever kind or nature
nor costs incurred by the parties to the Participation Agreement pursuant to
arrangements with third parties for services (other than those expressly
referred to above or listed on Schedule 1 to the Participation Agreement), such
as computer time procurement, financial analysis and consulting, advisory
services, and costs of a similar nature.
"TRANSACTION DOCUMENTS" shall mean the Operative Documents, the Clover
Agreements, the Old Dominion Indenture, the Pollution Control Assets Lease
Documents, and any other documents, agreements, certificates or other
arrangements contemplated thereby.
"TRANSACTION PARTY" shall mean, individually or collectively as the context
shall require, all or any of the parties to the Operative Documents (including
the Trust Company).
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"TRANSFEREE" shall have the meaning specified in Section 5.1(a) of the
Participation Agreement.
"TRANSMISSION AND INTERCONNECTION AGREEMENT" shall mean a transmission and
interconnection agreement to be entered into by the Facility Owner and Old
Dominion in connection with Old Dominion's exercise of the Service Contract
Option under the Operating Equipment Agreement.
"TRANSMISSION ASSETS" shall mean Old Dominion's undivided interest as
tenant-in-common with Virginia Power in the step-up transformer used in
connection with Clover Unit 2, a related length of 230 kV transmission line and
certain common facilities located in the switchyard on the Common Facilities
Site.
"TREASURY REGULATIONS" shall mean regulations, including temporary regulations,
promulgated under the Code.
"TRUST AGREEMENT" shall mean the Trust Agreement, dated as of July 1, 1996,
between the Owner Participant and the Owner Trustee in its individual capacity
to the extent expressly stated therein and otherwise not in its individual
capacity but solely as trustee thereunder.
"TRUST COMPANY" shall mean Wilmington Trust Company, a Delaware banking
corporation.
"TRUSTEES" shall mean David S. Cohn and C. Cotesworth Pinckney as trustees under
the Leasehold Mortgage, and persons or entities substituted for them.
"TRUST ESTATE" shall mean all the estate, right, title and interest of the
Facility Owner in, to and under the Ground Interest, the Foundation Interest,
the Equipment Interest and the Assigned Clover Interests and the Operative
Documents, including all funds advanced to the Facility Owner by the Owner
Participant, all installments and other payments of Basic Payment, Foundation
Basic Payment, Supplemental Payment, Foundation Supplemental Payment,
Termination Value under the Operating Equipment Agreement and the Operating
Foundation Agreement, condemnation awards, purchase price, sale proceeds,
insurance proceeds and all other proceeds, rights and interests of any kind for
or with respect to the estate, right, title and interest of the Facility Owner
in, to and under the Ground Interest, the Foundation Interest, the Equipment
Interest and the Assigned Clover Interests and the Operative Documents and any
of the foregoing, but shall not include Excluded Property.
"UNIFORM COMMERCIAL CODE" OR "UCC" shall mean the Uniform Commercial Code as in
effect in the applicable jurisdiction.
"UNIT 1 EQUIPMENT" shall mean those assets listed on Exhibit A-1 to the Clover 1
Head Equipment Agreement and Exhibit A-1 to the Clover 1 Equipment Operating
Lease.
"UNIT 1 FOUNDATION" shall mean all foundations, supports, structures and other
improvements situated on the Unit 1 Site, including those upon which the Unit 1
Equipment is situated.
43
<PAGE>
"UNIT 1 PARTIES" shall mean at any time all of the parties (other than Virginia
Power or any of its successors or assigns) which are then tenants or grantees of
all or any portion of an interest in Clover Unit 1 and the Unit 1 Site or owners
of the beneficial interest in such party which on the Closing Date include Old
Dominion, First Union National Bank of Florida, State Street Bank & Trust
Company and Utrecht-America Finance Co.
"UNIT 1 SITE" shall mean the land on which the Clover Unit 1 Generating Facility
is situated, which land is described in Schedule 2 to the Clover 1 Ground Lease
and Sublease which is marked Exhibit A and attached to, and recorded in the
Halifax Clerk's Office with, the Option Agreement.
"UNIT 2 EQUIPMENT" shall mean those assets listed on Exhibit A-1 to the Head
Equipment Agreement and Exhibit A-1 to the Operating Equipment Agreement. The
Unit 2 Equipment includes Retained Assets and Pollution Control Assets which are
located on the Unit 2 Site, but does not include the Common Facilities
Equipment, the Unit 2 Foundation, the Common Facilities Foundation or the Clover
Real Estate.
"UNIT 2 FOUNDATION" shall mean all foundations, supports, structures and other
improvements situated on the Unit 2 Site, including those upon which the Unit 2
Equipment is situated.
"UNIT 2 PARTIES" shall mean at any time all of the parties (other than Virginia
Power or any of its successors or assigns) which are then tenants or grantees of
all or any portion of an interest in Clover Unit 2 and the Unit 2 Site or owners
of the beneficial interest in such parties which on the Closing Date include Old
Dominion, EPC Corporation, Chrysler Capital Corporation, Clover Unit 2
Generating Trust, Wilmington Trust Company in its individual capacity and as the
Owner Trustee and Utrecht-America Finance Co.
"UNIT 2 SITE" shall mean the land on which the Clover Unit 2 Generating Facility
is situated, which land is described in Schedule 3 to the Ground Lease and
Sublease.
"UNITED STATES" shall mean the United States of America.
"UTRECHT-AMERICA" shall mean Utrecht-America Finance Co., a corporation
organized and existing under the laws of the State of Delaware and any successor
thereto.
"VIRGINIA COMMISSION" shall mean the Virginia State Corporation Commission,
including any successor governmental agency.
"VIRGINIA COMMISSION ORDER" shall mean the order issued by the Virginia
Commission with respect to the Overall Transaction (Case No. PUA 96A960036) on
June 14, 1996.
"VIRGINIA POWER" shall mean Virginia Electric and Power Company, a corporation
organized under the laws of the Commonwealth of Virginia and any successor
thereto.
44
CLOVER UNIT 2
EQUIPMENT INTEREST AGREEMENT
Dated as of July 1, 1996
between
OLD DOMINION ELECTRIC COOPERATIVE
and
CLOVER UNIT 2 GENERATING TRUST
CLOVER UNIT 2 GENERATING FACILITY
AND
COMMON FACILITIES
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Page
SECTION 1. DEFINITIONS............................................................................. 2
SECTION 2. CONVEYANCE OF THE EQUIPMENT INTEREST.................................................... 3
SECTION 3. TERM AND CONSIDERATION.................................................................. 3
Section 3.1. Basic Term.......................................................... 3
Section 3.2. Renewal Term........................................................ 3
Section 3.3. Head Equipment Agreement Consideration.............................. 4
Section 3.4. Nonterminability.................................................... 4
SECTION 4. DISCLAIMER OF WARRANTIES................................................................ 4
SECTION 5. RIGHT OF QUIET ENJOYMENT................................................................ 5
SECTION 6. SURRENDER AND TRANSFER OF EQUIPMENT INTEREST............................................ 6
Section 6.1. Surrender of Equipment Interest..................................... 6
Section 6.2. Right of First Refusal in Virginia Power............................ 6
Section 6.3. Right of Virginia Power to Exercise Purchase
Option.................................................................................. 7
Section 6.4. Transfer of Equipment Interest...................................... 8
SECTION 7. LIENS................................................................................... 8
SECTION 8. OPERATION AND MAINTENANCE; REPLACEMENT
COMPONENTS.............................................................................. 8
Section 8.1. Operation and Maintenance........................................... 8
Section 8.2. Replacement Components.............................................. 8
SECTION 9. MODIFICATIONS........................................................................... 9
SECTION 10. SURRENDER OR TRANSFER OF EQUIPMENT INTEREST............................................. 9
Section 10.1. Surrender or Transfer during the Operating
Equipment Agreement Term................................................................ 9
Section 10.2. Surrender or Transfer After the Operating
Equipment Agreement Term................................................................ 9
SECTION 11. PURCHASE OPTION OF REMAINDER INTEREST OF OLD
DOMINION................................................................................ 9
SECTION 12. INSPECTION.............................................................................. 10
<PAGE>
SECTION 13. SECURITY FOR FACILITY OWNER'S OBLIGATION TO THE
LENDERS................................................................................. 10
SECTION 14. NONMERGER............................................................................... 11
SECTION 15. MISCELLANEOUS........................................................................... 11
Section 15.1. Agreement Regarding Equipment....................................... 11
Section 15.2. Amendments and Waivers.............................................. 11
Section 15.3. Notices............................................................. 11
Section 15.4. Survival............................................................ 12
Section 15.5. Successors and Assigns.............................................. 13
Section 15.6. Business Day........................................................ 13
Section 15.7. Governing Law....................................................... 13
Section 15.8. Severability........................................................ 13
Section 15.9. Counterparts........................................................ 13
Section 15.10. Headings and Table of Contents...................................... 13
Section 15.11. Further Assurances.................................................. 13
Section 15.12. Effectiveness of Head Equipment Agreement........................... 14
Section 15.13. Limitation of Liability............................................. 14
Section 15.14. Measuring Life...................................................... 14
</TABLE>
Exhibit A-1 - Description of Unit 2 Equipment
Exhibit A-2 - Description of Common Facilities Equipment
ii
<PAGE>
CLOVER UNIT 2
EQUIPMENT INTEREST AGREEMENT
This CLOVER UNIT 2 EQUIPMENT INTEREST AGREEMENT, dated as of July 1,
1996 (this "Head Equipment Agreement"), between OLD DOMINION ELECTRIC
COOPERATIVE, a wholesale power supply cooperative organized under the laws of
the Commonwealth of Virginia ("Old Dominion"), and CLOVER UNIT 2 GENERATING
TRUST, a Delaware business trust created pursuant to the Trust Agreement, dated
as of July 1, 1996, between EPC Corporation and Wilmington Trust Company
("Facility Owner").
WHEREAS, the Clover Real Estate is more particularly described in
Schedule 1 to the Ground Lease and Sublease and is comprised of the Unit 1 Site
described in Schedule 2 thereto, the Unit 2 Site described in Schedule 3
thereto, the Common Facilities Site described in Schedule 4 thereto, and certain
other property, each such Schedule 1, Schedule 2, Schedule 3 and Schedule 4
being attached to, and recorded in the Halifax Clerk's Office with, the Ground
Lease and Sublease as part thereof;
WHEREAS, a copy of the Clover Power Station Plat is marked Exhibit A
and attached to, and recorded in the Halifax Clerk's Office with, the Ground
Lease and Sublease as a part thereof;
WHEREAS, Old Dominion and Virginia Power own the Clover Real Estate as
tenants-in-common;
WHEREAS, by the Clover Agreements, Old Dominion and Virginia Power
established their respective rights and obligations as tenants-in-common of the
Clover Real Estate and of all improvements thereafter to be constructed, and all
personal property thereafter to be situated, on the Clover Real Estate. Such
improvements and personal property held by Old Dominion and Virginia Power as
tenants-in-common include (a) the Unit 1 Foundation constructed on the Unit 1
Site, (b) the Unit 2 Foundation constructed on the Unit 2 Site, (c) the Common
Facilities Foundation constructed on the Common Facilities Site, (d) the Unit 1
Equipment situated on the Unit 1 Site, (e) the Unit 2 Equipment situated on the
Unit 2 Site, and (f) the Common Facilities Equipment situated on the Common
Facilities Site;
WHEREAS, as tenants-in-common of such real and personal property, each
of Old Dominion and Virginia Power holds a 50% undivided interest in such real
and personal property, including the right to nonexclusive possession of all
such real and personal property, subject to (a) in the case of all such real and
personal property, the rights of the other to nonexclusive possession and the
terms and conditions of the Clover Agreements, (b) in the case of the Pollution
Control Assets, the rights, terms and conditions described above in clause (a)
and the rights of the Pollution Control Assets Lessor, and (c) in the case of
the Common Facilities, the Unit 1 Site, the Unit 1 Foundation and the Unit 1
Equipment, the
<PAGE>
rights, terms and conditions described above in clause (a) and the rights of the
Unit 1 Parties;
WHEREAS, by the Ground Lease and Sublease, Old Dominion has leased the
Ground Interest to the Facility Owner and the Facility Owner simultaneously has
subleased the Ground Interest back to Old Dominion upon the terms and conditions
of the Ground Lease and Sublease;
WHEREAS, by the Head Foundation Agreement, Old Dominion is conveying
the Foundation Interest to the Facility Owner for a term of years;
WHEREAS, by the Operating Foundation Agreement, the Facility Owner will
convey the use and possession of the Foundation Interest back to Old Dominion
for a term of years which shall end prior to the expiration of the term of the
Head Foundation Agreement;
WHEREAS, by the Operating Equipment Agreement, the Facility Owner will
convey the use and possession of the Equipment Interest back to Old Dominion for
a term of years which shall end prior to the expiration of the term of this Head
Equipment Agreement;
WHEREAS, although Old Dominion and the Facility Owner intend that the
Foundation Interest at all times and in all respects be and remain personal
property under Virginia law, they are recording the Head Foundation Agreement,
and will record the Operating Foundation Agreement, in the Halifax Clerk's
Office in order to satisfy the conditions of Section 55-96 of the Code of
Virginia 1950, as amended, in the event that the Foundation Interest is deemed
to be real estate or an interest in real estate for purposes of such Section
55-96; and
WHEREAS, the Unit 1 Parties and the Unit 2 Parties shall share equally
all of those rights, and shall be subject equally to having all of those
responsibilities undertaken, which are granted to or imposed upon Old Dominion
with respect to the Common Facilities Site, the Common Facilities Foundation and
the Common Facilities Equipment, as (a) tenant-in-common with Virginia Power of
such property and (b) a party to the Clover Agreements.
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
2
<PAGE>
SECTION 1. DEFINITIONS.
Capitalized terms used in this Head Equipment Agreement and not
otherwise defined herein shall have the respective meanings set forth in
Appendix A to the Participation Agreement, dated as of July 1, 1996, among Old
Dominion, the Facility Owner, Wilmington Trust Company (in the capacities
set forth therein), EPC Corporation and Utrecht-America Finance Co.
Where any provision in this Head Equipment Agreement refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
SECTION 2. CONVEYANCE OF THE EQUIPMENT INTEREST.
Old Dominion hereby conveys the Equipment Interest to the Facility
Owner for the term and renewal terms described below, and the Facility Owner
hereby takes such interest in the Equipment Interest from Old Dominion. Old
Dominion and the Facility Owner understand and agree that (a) this conveyance of
the Equipment Interest is subject to the limitations identified in the
definition of Equipment Interest, (b) legal title to all assets in the Equipment
Interest constituting Retained Assets remains vested in Old Dominion and
Virginia Power as tenants-in-common, (c) all assets in the Equipment Interest
constituting Pollution Control Assets have been conveyed to the Pollution
Control Assets Lessor and leased back to Old Dominion pursuant to the Pollution
Control Assets Lease and that legal title to such Pollution Control Assets
remains vested in the Pollution Control Assets Lessor and Virginia Power as
tenants-in-common, and (d) this conveyance of the Equipment Interest is subject
and subordinate to the lien of the Old Dominion Indenture (including any future
amendments, supplements or issuance of additional advances or indebtedness
thereunder), Permitted Encumbrances and the rights of Virginia Power under the
Clover Agreements.
Descriptions of the Unit 2 Equipment and the Common Facilities
Equipment are set forth on Exhibits A-1 and A-2, respectively, to this Head
Equipment Agreement.
SECTION 3. TERM AND CONSIDERATION.
SECTION 3.1. BASIC TERM. The term of this Head Equipment
Agreement shall commence on the Closing Date and shall terminate at 11:59 p.m.
(New York City time) on January 5, 2060 (the "Head Equipment Agreement Basic
Term").
SECTION 3.2. RENEWAL TERM. At the expiration of the Head Equipment
Agreement Basic Term or any Head Equipment Agreement Renewal Term (as
hereinafter defined), the Facility Owner
3
<PAGE>
may renew this Head Equipment Agreement for an additional term or terms of
not less than 1 year each (each a "Head Equipment Agreement Renewal Term"
and, together with the Head Equipment Agreement Basic Term, the "Head
Equipment Agreement Term") by giving Old Dominion 180 days prior written
notice; PROVIDED that the Facility Owner shall only be permitted to renew the
term of this Head Equipment Agreement for a Head Equipment Agreement Renewal
Term if (a) concurrently with such renewal, the Head Foundation Agreement Term
is renewed for a period equal to the Head Equipment Agreement Renewal Term and
(b) on the date that notice of such renewal is given and at the commencement of
such Head Equipment Agreement Renewal Term, (i) the Clover Unit 2 Generating
Facility continues to be used for the production of electric capacity and
energy and (ii) no determination has been made in accordance with Section
11.01(a) of the Clover Operating Agreement to retire the Clover Unit 2
Generating Facility prior to the expiration of such Head Equipment Agreement
Renewal Term for which the Head Equipment Agreement Term is then being renewed.
Notwithstanding the foregoing if the Head Equipment Agreement Term is not
earlier terminated, it shall end on December 31, 2089.
SECTION 3.3. HEAD EQUIPMENT AGREEMENT CONSIDERATION. The Facility Owner
hereby agrees to pay Old Dominion $306,592,000 on the Closing Date as
consideration for the conveyance of the Equipment Interest for the Head
Equipment Agreement Basic Term and all Head Equipment Agreement Renewal Terms
(the "Head Equipment Agreement Consideration"). Old Dominion acknowledges
receipt of such amount in full satisfaction of the Facility Owner's obligation
to pay the consideration for the term of years conveyed by this Head Equipment
Agreement during the Head Equipment Agreement Basic Term and each Head Equipment
Agreement Renewal Term. If the Facility Owner elects to renew the term of the
Head Equipment Agreement for a Head Equipment Agreement Renewal Term or Terms,
pursuant to Section 3.2 hereof, Old Dominion agrees that no additional
consideration shall be payable in respect of any such Head Equipment Agreement
Renewal Term.
SECTION 3.4. NONTERMINABILITY. Subject to Section 10 hereof, this Head
Equipment Agreement shall not terminate, nor shall any of the rights granted and
conveyed hereunder to the Facility Owner be extinguished, lost or otherwise
impaired, in whole or in part, by any circumstances of any character or for any
reason whatsoever, including, without limitation, the following: (a) any damage
to or loss or destruction of all or any part of Clover Unit 2 for any reason
whatsoever and of whatever duration, (b) the condemnation, requisition (by
eminent domain or otherwise), seizure or other taking of title or use of Clover
Unit 2 by any Governmental Entity or otherwise, (c) any prohibition, limitation
or restriction on the use by any Person of all or any part of its property or
the interference with such use by any Person, or any eviction by paramount title
or otherwise, (d) any inadequacy, incorrectness or failure of the description of
Clover Unit 2 or any part thereof or any rights or property in which an interest
is intended to be granted or conveyed by this Head Equipment Agreement, (e) the
insolvency, bankruptcy, reorganization or similar proceedings by or against Old
Dominion, the Facility Owner or any other Person, (f) the failure by the
Facility Owner to comply with Section 6, 7 or 8 hereof or (g) any other reason
whatsoever, whether similar or dissimilar to any of the foregoing.
4
<PAGE>
SECTION 4. DISCLAIMER OF WARRANTIES.
WITHOUT WAIVING ANY CLAIM THE FACILITY OWNER MAY HAVE AGAINST ANY
MANUFACTURER, VENDOR OR CONTRACTOR UNDER ANY OF THE CLOVER AGREEMENTS, THE
FACILITY OWNER ACKNOWLEDGES AND AGREES SOLELY FOR THE BENEFIT OF OLD DOMINION
THAT (a) CLOVER UNIT 2 AND EACH COMPONENT THEREOF ARE OF A SIZE, DESIGN,
CAPACITY AND MANUFACTURE ACCEPTABLE TO THE FACILITY OWNER, (b) THE FACILITY
OWNER IS SATISFIED THAT CLOVER UNIT 2 AND EACH COMPONENT THEREOF ARE SUITABLE
FOR THEIR RESPECTIVE PURPOSES, (c) OLD DOMINION IS NOT A MANUFACTURER OR A
DEALER IN PROPERTY OF SUCH KIND, (d) CLOVER UNIT 2 AND EACH COMPONENT THEREOF
ARE CONVEYED HEREUNDER FOR THE TERM AND THE RENEWAL TERM SPECIFIED ABOVE
SUBJECT TO ALL APPLICABLE LAWS NOW IN EFFECT OR HEREAFTER ADOPTED AND IN
THE STATE AND CONDITION OF EVERY PART THEREOF WHEN THE SAME FIRST BECAME
SUBJECT TO THIS HEAD EQUIPMENT AGREEMENT WITHOUT REPRESENTATION OR WARRANTY
OF ANY KIND BY OLD DOMINION AND (e) OLD DOMINION CONVEYS FOR THE TERM AND
THE RENEWAL TERM SPECIFIED ABOVE AND THE FACILITY OWNER TAKES THE EQUIPMENT
INTEREST UNDER THIS HEAD EQUIPMENT AGREEMENT "AS-IS", "WHERE-IS" AND "WITH
ALL FAULTS", AND THE FACILITY OWNER ACKNOWLEDGES THAT OLD DOMINION MAKES NO,
NOR SHALL BE DEEMED TO HAVE MADE, AND EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS,
CLAIMS, WARRANTIES OR REPRESENTATIONS, EITHER EXPRESS OR IMPLIED, AS TO THE
VALUE, CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION, OR
MERCHANTABILITY THEREOF OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP
THEREOF OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM FROM PATENT,
COPYRIGHT OR TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR OTHER DEFECT,
WHETHER OR NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY OBLIGATIONS BASED ON
STRICT LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR
WARRANTY WHATSOEVER WITH RESPECT THERETO, except that Old Dominion represents
and warrants to the Facility Owner that Old Dominion has (1) good and valid
title, as a tenant-in-common with Virginia Power, to the Retained Assets
free and clear of all Liens other than the Lien of Old Dominion Indenture,
Permitted Encumbrances, the rights of Virginia Power under the Clover
Agreements and, in the case of the Common Facilities Equipment which is
part of the Retained Assets, the rights of the Unit 1 Parties, and (2) a
valid leasehold interest, to the extent of a 50% undivided interest, in the
Pollution Control Assets free and clear of all Liens other than the Lien of Old
Dominion Indenture, Permitted Encumbrances, the rights of Virginia Power
under the Clover Agreements and, in the case of the Common Facilities
Equipment which is part of the Pollution Control Assets, the rights of the Unit
1 Parties.
5
<PAGE>
SECTION 5. RIGHT OF QUIET ENJOYMENT.
Old Dominion agrees that, notwithstanding any other provision of any of
the Operative Documents, so long as the Head Equipment Agreement Interest has
not been surrendered pursuant to the express provisions of Section 10 hereof,
Old Dominion shall not through its own actions or inactions interfere with or
interrupt the quiet enjoyment of the use, operation and possession by the
Facility Owner of the Head Equipment Agreement Interest subject to the terms
hereof.
SECTION 6. SURRENDER AND TRANSFER OF EQUIPMENT INTEREST.
SECTION 6.1. SURRENDER OF EQUIPMENT INTEREST. Upon surrender of the
Head Equipment Agreement Interest pursuant to Section 10.2 or, subject to
Section 10.1, on the last day of the Head Equipment Agreement Term, the Facility
Owner shall return the Equipment Interest by delivering constructive possession
of the same to Old Dominion at the location of Clover Unit 2 in Clover,
Virginia, and shall execute, acknowledge and deliver a release, surrender or
conveyance of all of its rights, title and interests in the Equipment Interest
to be prepared by and at the expense of Old Dominion in a form reasonably
satisfactory to the Facility Owner, in each case without representation or
warranty other than that the Equipment Interest is free and clear of all
Facility Owner's Liens and Owner Participant's Liens, without any other
liability or cost to the Facility Owner. The obligations of the Facility Owner
under this Section 6.1 shall survive termination of this Head Equipment
Agreement.
SECTION 6.2. RIGHT OF FIRST REFUSAL IN VIRGINIA POWER. If (a) at any
time during the Head Equipment Agreement Term the Facility Owner shall seek to
sell, lease, convey or otherwise transfer its interest in (i) the Head Equipment
Agreement Interest or any part thereof or (ii) the Facility Owner's Percentage
in the Unit 2 Equipment and the Common Facilities Equipment (if such interests
have been obtained by the Facility Owner pursuant to Section 11 hereof), or any
part thereto, to any Person other than Old Dominion pursuant to any provision of
the Operating Equipment Agreement, or (b) on or after the expiration or
termination of the Term of the Operating Equipment Agreement, the Owner
Participant seeks to sell the Beneficial Interest or any part thereof (other
than pursuant to Section 12 of the Participation Agreement), such Head Equipment
Agreement Interest or Beneficial Interest, as the case may be, shall be subject
to Virginia Power's right of first refusal on the terms and conditions set forth
in this Section 6.2. The Facility Owner will give Virginia Power prompt written
notice of all bona fide offers which it wishes to accept received from any other
Person to purchase or acquire its interest in the Head Equipment Agreement
Interest, the Facility Owner's Percentage in the Unit 2 Equipment and the Common
Facilities Equipment (if such interests shall have been obtained by the Facility
Owner pursuant to Section 11 hereof), or Owner Participant's Beneficial Interest
or any part of either,
6
<PAGE>
together with a full and complete statement of the price and all of the terms,
conditions and provisions contained in such offers. Virginia Power will
thereafter have the right within a period of forty-five (45) Business Days from
and after the giving of such notice to notify the Facility Owner of its intent
to exercise its rights of first refusal. If Virginia Power elects to exercise
the right provided in the preceding sentence, it will within 180 days of such
notice execute a contract on the same terms and conditions as the offer giving
rise to such right. If Virginia Power does not give such notice to the Facility
Owner within the forty-five (45) Business Day period and execute such a contract
within 180 days of such notice, the Facility Owner will be free to proceed
under the terms and conditions as set forth in its notice to Virginia Power. In
the event that such terms or conditions are revised in any way that materially
changes the agreement for sale, lease, conveyance or transfer (including
any reduction in price or the terms of payment thereof), the Facility Owner must
again comply with the notice and acceptance provisions of this Section 6.2.
Virginia Power shall be deemed a third party beneficiary with respect to
this Section 6.2. The right of first refusal in favor of Virginia Power set
forth in this Section 6.2 shall be exercised only in connection with its
simultaneous exercise of the right of first refusal set forth in Section
6.2 of the Head Foundation Agreement. Notwithstanding any provision to the
contrary, it is agreed and understood that any transfer of the Head Equipment
Agreement Interest by the Owner Trustee to any successor Owner Trustee pursuant
to Section 9 of the Trust Agreement and the assignments between the Facility
Owner and the Qualified Intermediary pursuant to the Exchange Documents shall
not be subject to the provisions of this Section 6.2. In connection with
Virginia Power's exercise of the right of first refusal pursuant to this
Section 6.2 with respect to the Head Equipment Agreement Interest, the
Ground Interest shall be conveyed to Virginia Power. No amendment of this
Section shall be valid unless consented to by Virginia Power.
SECTION 6.3. RIGHT OF VIRGINIA POWER TO EXERCISE PURCHASE OPTION. If
Old Dominion shall not elect the Purchase Option pursuant to Section 15.1 of the
Operating Equipment Agreement, Virginia Power shall have the right to purchase
the Equipment Interest on the Expiration Date on the terms and conditions set
forth in this Section 6.3. Virginia Power shall give Old Dominion and the
Facility Owner written notice of its irrevocable election to exercise the
purchase option provided by this Section 6.3 by the date no later than the
earlier of (i) the date 60 days following the date twenty-four months prior to
the Expiration Date and (ii) the date 60 days following receipt by Virginia
Power from Old Dominion of notice, delivered pursuant to Section 15.1 of the
Operating Equipment Agreement, of its election not to exercise the Purchase
Option. If Virginia Power shall not give the notice contemplated by the
preceding sentence, it will be deemed to have elected not to purchase and it
will have no right to purchase the Equipment Interest pursuant to this Section
6.3. If Virginia Power shall give notice of its election to purchase the
Equipment Interest pursuant to this Section 6.3, it shall become unconditionally
obligated to pay all amounts of the Purchase Option Price at the times and in
the amounts set forth in clause (a)(i) and (b) of Section 15.1 of the Operating
Equipment Agreement and, without duplication of its covenant set forth in the
succeeding sentence and Section 15.5 of the Operating Equipment Agreement, Old
Dominion shall be obligated to pay on the Expiration Date the amounts set forth
in clauses (a)(ii) and (a)(iii) of Section 15.1 of the Operating Equipment
Agreement. If Virginia Power elects to
7
<PAGE>
purchase the Equipment Interest in accordance with this Section 6.3, Old
Dominion and the Facility Owner each agree to comply with their respective
covenants set forth in Section 15.1 of the Operating Equipment Agreement
(other than, in the case of Old Dominion, the covenant to pay any amounts of
the Purchase Option Price) in order to permit Virginia Power to purchase
the Equipment Interest in accordance with such Section 15.1 of the Operating
Equipment Agreement. Other than as set forth in the preceding sentence and
Section 15.4 of the Operating Equipment Agreement, Old Dominion shall have no
obligations in connection with Virginia Power's exercise of the election set
forth in this Section 6.3. Virginia Power shall be deemed a third party
beneficiary with respect to this Section 6.3. The election of Virginia Power to
purchase the Equipment Interest set forth in this Section 6.3 shall be
exercised only in connection with its simultaneous exercise of its election to
purchase the Foundation Interest set forth in Section 6.3 of the Head
Foundation Agreement. If it shall exercise the purchase option set forth in this
Section 6.3, Virginia Power shall be permitted to exercise the Facility Owner's
purchase option set forth in Section 11 of this Head Foundation Agreement. In
connection with Virginia Power's exercise of the purchase option provided by
this Section 6.3, the Ground Interest shall be conveyed to Virginia Power.
No amendment of this section shall be valid unless consented to in writing by
Virginia Power.
SECTION 6.4. TRANSFER OF EQUIPMENT INTEREST. Old Dominion acknowledges
that the Facility Owner shall have the right to transfer and convey the Head
Equipment Agreement Interest under and in accordance with Section 14.4 and
Section 17.1(c) of the Operating Equipment Agreement in connection with the
Facility Owner's transfer thereunder of the Facility Owner's Unit 2 Interest.
SECTION 7. LIENS.
The Facility Owner agrees that it will not, directly or indirectly,
create, incur, assume or suffer to exist any Facility Owner's Liens or Owner
Participant's Liens on or with respect to the Equipment Interest or its Head
Equipment Agreement Interest, and the Facility Owner shall promptly notify Old
Dominion of the imposition of any such Lien of which the Facility Owner is aware
and shall promptly, at its own expense, take such action as may be necessary to
discharge any such Lien.
8
<PAGE>
SECTION 8. OPERATION AND MAINTENANCE; REPLACEMENT COMPONENTS.
SECTION 8.1. OPERATION AND MAINTENANCE. The Facility Owner covenants
and agrees to operate, maintain and insure the Equipment Interest, or cause the
Equipment Interest to be operated, maintained and insured, in accordance with
the Clover Agreements. Simultaneously with the execution and delivery by the
parties of this Head Equipment Agreement, the Facility Owner and Old Dominion
have entered into the Clover Agreements Assignment pursuant to which the
Facility Owner has assumed all of Old Dominion's obligations under the Clover
Agreements, to the extent, but only to the extent, they relate to the Equipment
Interest, the Foundation Interest and the Ground Interest. The Facility Owner
covenants and agrees that it will perform all of its obligations under the
Clover Agreements Assignment. The execution and delivery of the Operating
Equipment Agreement shall be deemed compliance by the Facility Owner with its
covenants set forth in this Section 8.1 during the Term of the Operating
Equipment Agreement without any further action by the Facility Owner, whether or
not Old Dominion shall comply with the corresponding obligations under the
Operating Equipment Agreement. Following the Expiration Date, if the Operating
Agency Agreement shall be in effect and Old Dominion shall be the "Operating
Agent" thereunder, the Facility Owner shall be deemed in compliance with its
covenant set forth in this Section 8.1 without any further action by the
Facility Owner, whether or not Old Dominion shall be in compliance with its
covenants under the Operating Agency Agreement.
SECTION 8.2. REPLACEMENT COMPONENTS. An undivided interest equal
to the Facility Owner's Percentage in all Replacement Components incorporated in
the Unit 2 Equipment and the Common Facilities Equipment included in Clover
Unit 2 during the Head Equipment Agreement Term in accordance with the Operating
Equipment Agreement or the Clover Operating Agreement shall automatically
become subject to this Head Equipment Agreement without any action by any
Person whatsoever and shall be deemed to be a part of Clover Unit 2 and the
Equipment Interest for all purposes of this Head Equipment Agreement.
SECTION 9. MODIFICATIONS.
An undivided interest equal to the Facility Owner's Percentage in all
Modifications to the Unit 2 Equipment and Common Facilities Equipment included
in Clover Unit 2 during the Head Equipment Agreement Term in accordance with the
Operating Equipment Agreement or the Clover Operating Agreement shall
automatically become subject to this Head Equipment Agreement without any action
by any Person whatsoever and shall be deemed to be a part of Clover Unit 2 and
the Equipment Interest for all purposes of this Head Equipment Agreement.
9
<PAGE>
SECTION 10. SURRENDER OR TRANSFER OF EQUIPMENT INTEREST.
SECTION 10.1. SURRENDER OR TRANSFER DURING THE OPERATING EQUIPMENT
AGREEMENT TERM. If (a) the Operating Equipment Agreement is terminated pursuant
to Section 10, 13, 17.1(e) (where the Facility Owner is to transfer the Facility
Owner's Unit 2 Interest to Old Dominion) or 18 thereof, (b) the Purchase Option
pursuant to Section 15.1 of the Operating Equipment Agreement is exercised or
(c) the Facility Owner exercises its right to transfer the Facility Owner's Unit
2 Interest pursuant to Section 17.1(c) of the Operating Equipment Agreement,
either (I) in circumstances where the transferor and transferee are the parties
hereto, the Facility Owner shall, upon satisfaction of the requirements of the
relevant sections of the Operating Equipment Agreement, surrender the Equipment
Interest to Old Dominion in accordance with Section 6.1 and Old Dominion and the
Facility Owner agree to comply with the provisions of the applicable section of
the Operating Equipment Agreement in connection with such surrender or (II) in
all other cases, Old Dominion expressly agrees that the Facility Owner may
convey and transfer the Facility Owner's right, title and interest in the
Equipment Interest as part of its transfer of the Facility Owner's Unit 2
Interest under the relevant section of the Operating Equipment Agreement.
SECTION 10.2. SURRENDER OR TRANSFER AFTER THE OPERATING EQUIPMENT
AGREEMENT TERM. At any time following the expiration or termination of the Term
of the Operating Equipment Agreement and the discharge of the Liens of the Loan
Agreement and the Leasehold Mortgage, the Facility Owner shall have the right to
surrender or transfer the Head Equipment Agreement Interest to Old Dominion in
accordance with Section 6.1.
SECTION 11. PURCHASE OPTION OF REMAINDER INTEREST OF OLD DOMINION.
At any time following the Term and the return of the Equipment Interest
to the Facility Owner in accordance with Section 5 of the Operating Equipment
Agreement in connection with Old Dominion's exercise of the Service Contract
Option or the Facility Owner's exercise of the Preemptive Election or following
the termination of the Operating Agreements pursuant to Sections 14 or 17 of
each, the Facility Owner (or Virginia Power in the event it exercises its rights
under Section 6.3 hereof) shall have the right, exercisable at its option, to
purchase the Facility Owner's Percentage in the Unit 2 Equipment and the Common
Facilities Equipment for $1. If the Facility Owner (or Virginia Power in the
event it exercises its rights under Section 6.3 hereof) elects to exercise such
right, Old Dominion shall convey legal title to such Facility Owner's Percentage
of the Unit 2 Equipment and the Common Facilities Equipment by executing and
delivering to the Facility Owner (or Virginia Power in the event it exercises
its rights under Section 6.3 hereof) a bill of sale reasonably satisfactory to
the Facility Owner (or Virginia Power in the event it exercises its rights under
Section 6.3 hereof) warranting that such Facility Owner's
10
<PAGE>
Percentage in the Unit 2 Equipment and the Common Facilities Equipment is free
of all Liens other than Permitted Post-Term Encumbrances. After giving effect
to such conveyance, the provisions of Section 15.03 of the Clover Operating
Agreement and Section 17.03 of the Clover Ownership Agreement (and Section 6.2
hereof) shall apply. At any time following the Term in the circumstances
contemplated by the first sentence of this Section 11, if requested by the
Facility Owner (or Virginia Power in the event it exercises its rights under
Section 6.3 hereof), Old Dominion shall, at Old Dominion's expense, deliver
in favor of the Facility Owner (or Virginia Power in the event it exercises
its rights under Section 6.3 hereof) a security agreement creating a Lien on
Old Dominion's right, title and interest in the Unit 2 Equipment and the
Common Facilities Equipment in form and substance satisfactory to the
Facility Owner (or Virginia Power in the event it exercises its rights under
Section 6.3 hereof) securing the purchase option provided by this Section 11.
SECTION 12. INSPECTION.
During the Term of the Operating Equipment Agreement, the rights of the
Facility Owner, the Owner Participant, the Agent and their representatives to
inspect Clover Unit 2 shall be governed by Section 12 of the Operating Equipment
Agreement.
SECTION 13. SECURITY FOR FACILITY OWNER'S OBLIGATION TO THE
LENDERS.
In order to secure the Secured Indebtedness, the Facility Owner will
assign in the Loan Agreement to the Agent for its benefit and the ratable
benefit of the Lenders its rights under this Head Equipment Agreement and grant
security interests in favor of the Agent in, inter alia, all of the Facility
Owner's right, title and interest in and to the Equipment Interest, and its
interest in this Head Equipment Agreement (other than Excepted Payments and
Excepted Rights). Old Dominion hereby consents to such grant and assignment and
to the creation of such security interests and acknowledges receipt of copies of
the Loan Agreement, it being understood that such consent shall not
affect any requirement or the absence of any requirement for any consent
under any other circumstances. Old Dominion hereby acknowledges receipt of due
notice that the Facility Owner's interest in this Head Equipment Agreement
will be assigned to the Agent as security pursuant to the Loan Agreement to the
extent provided in the Loan Agreement. Unless and until Old Dominion shall
have received written notice from the Agent that the Facility Owner has the
right to have the Liens of the Loan Agreement and the Leasehold Mortgage
discharged, the Agent shall have the right to exercise the rights of the
Facility Owner under this Head Equipment Agreement to the extent set forth in
and subject in each case to the exceptions set forth in the Loan Agreement.
11
<PAGE>
SECTION 14. NONMERGER.
The remainder in the Equipment Interest conveyed by this Head Equipment
Interest shall not merge into any interest in the Equipment Interest conveyed by
this Head Equipment Agreement even if such remainder and such interest are at
any time vested in or held directly or indirectly by the same Person, but this
Head Equipment Agreement, and the Operating Equipment Agreement (if sooner
terminated) shall nonetheless each remain in full force and effect in accordance
with its respective terms notwithstanding such vesting or holding.
SECTION 15. MISCELLANEOUS.
SECTION 15.1. AGREEMENT REGARDING EQUIPMENT. The parties hereto
understand and acknowledge that the Unit 2 Equipment and the Common Facilities
Equipment have been constructively severed from the Real Property by the
Severance Agreements and intend that all of the foregoing be treated as personal
property. However, should it be determined by a court of competent jurisdiction
that (notwithstanding the foregoing) any of the equipment constituting Unit 2
Equipment or Common Facilities Equipment is an interest in real property for
purposes of Virginia Code Section 55-96, the parties hereto agree that such
equipment shall not be part of the Unit 2 Equipment or the Common Facilities
Equipment and shall not be subject to this Head Equipment Agreement, but shall
constitute a part of the Unit 2 Foundation or the Common Facilities Foundation,
as the case may be, and shall be subject to and conveyed for the Head Foundation
Agreement Term by the Head Foundation Agreement.
SECTION 15.2. AMENDMENTS AND WAIVERS. No term, covenant, agreement or
condition of this Head Equipment Agreement may be terminated, amended or
compliance therewith waived (either generally or in a particular instance,
retroactively or prospectively) except by an instrument or instruments in
writing executed by each party hereto and, also, in connection with any
termination of or amendment to those provisions for which Virginia Power is an
intended beneficiary, approved by Virginia Power.
SECTION 15.3. NOTICES. Unless otherwise expressly specified or
permitted by the terms of this Head Equipment Agreement, all communications and
notices provided for herein to a party hereto shall be in writing or by a
telecommunications device capable of creating a written record, and any such
notice shall become effective (a) upon personal delivery thereof, including,
without limitation, by overnight mail or courier service, (b) in the case of
notice by United States mail, certified or registered, postage prepaid, return
receipt requested, upon receipt thereof, or (c) in the case of notice by such a
telecommunications device, upon transmission thereof, provided such
transmission is promptly confirmed by either of the methods set forth in
clauses (a) or (b) above, in each case addressed to such party at its address
set forth below or at such other address as such party may from time to time
designate by written notice to the other party hereto:
If to Old Dominion:
Old Dominion Electric Cooperative
4201 Dominion Boulevard
Glen Allen, Virginia 23060
Facsimile No.: (804) 747-3742
Telephone No.: (804) 747-0592
Attention: Vice President of Accounting and Finance
If to the Facility Owner:
Clover Unit 2 Generating Trust
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Facsimile No.: (302) 651-8882
Telephone No.: (302) 651-1000
Attention: Corporate Trust Administration
A copy of all communications and notices provided for herein shall be sent by
the party giving such communication or notice to Virginia Power at:
Virginia Electric and Power Company
P.O. Box 26666
Richmond, Virginia 23261
Attention: President
SECTION 15.4. SURVIVAL. All warranties, representations, indemnities
and covenants made by either party hereto, herein or in any certificate or other
instrument delivered by either such party or on the behalf of either such party
under this Head Equipment Agreement, shall be considered to have been relied
upon by the other party hereto and shall survive the consummation of the
transactions contemplated hereby on the Closing Date regardless of any
investigation made by either party or on behalf of either party.
SECTION 15.5. SUCCESSORS AND ASSIGNS.
13
<PAGE>
(a) This Head Equipment Agreement shall be binding upon and
shall inure to the benefit of, and shall be enforceable by, the parties hereto
and their respective successors and assigns as permitted by and in accordance
with the terms hereof.
(b) Except as expressly provided herein or in any other
Operative Document, Old Dominion may not assign its interests herein without the
consent of the Facility Owner. Except as expressly provided in the Operative
Documents, the Facility Owner may not assign its interests herein prior to the
expiration or early termination of the Term of the Operating Equipment Agreement
without the consent of Old Dominion.
SECTION 15.6. BUSINESS DAY. Notwithstanding anything herein to the
contrary, if the date on which any payment is to be made pursuant to this Head
Equipment Agreement is not a Business Day, the payment otherwise payable on such
date shall be payable on the next succeeding Business Day with the same force
and effect as if made on such scheduled date and (PROVIDED such payment is made
on such succeeding Business Day) no interest shall accrue on the amount of such
payment from and after such scheduled date to the time of such payment on such
next succeeding Business Day.
SECTION 15.7. GOVERNING LAW. THIS HEAD EQUIPMENT AGREEMENT SHALL
BE IN ALL RESPECTS GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
SECTION 15.8. SEVERABILITY. Whenever possible, each provision of this
Head Equipment Agreement shall be interpreted in such manner as to be effective
and valid under Applicable Law, but if any provision of this Head Equipment
Agreement shall be prohibited by or invalid under Applicable Law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Head Equipment Agreement.
SECTION 15.9. COUNTERPARTS. This Head Equipment Agreement may be
executed in any number of counterparts, each executed counterpart constituting
an original but all together only one agreement.
SECTION 15.10. HEADINGS AND TABLE OF CONTENTS. The headings of the
sections of this Head Equipment Agreement and the Table of Contents are inserted
for purposes of convenience only and shall not be construed to affect the
meaning or construction of any of the provisions hereof.
SECTION 15.11. FURTHER ASSURANCES. Each party hereto will promptly
and duly execute and deliver such further documents to make such further
assurances for and take such further action reasonably requested by the other
party hereto, all as may be reasonably necessary to carry out more effectively
the intent and purpose of this Head Equipment Agreement.
14
<PAGE>
SECTION 15.12. EFFECTIVENESS OF HEAD EQUIPMENT AGREEMENT. This Head
Equipment Agreement has been dated as of the date first above written for
convenience only. This Head Equipment Agreement shall be effective on the date
of execution and delivery by each of Old Dominion and the Facility Owner.
SECTION 15.13. LIMITATION OF LIABILITY. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is executed and delivered
by Wilmington Trust Company, not individually or personally but solely as
trustee of Clover Unit 2 Generating Trust (the "Trust") under the Trust
Agreement, in the exercise of the powers and authority conferred and vested in
it, (b) each of the representations, undertakings and agreements herein made on
the part of the Trust is made and intended not as personal representations,
undertakings and agreements by Wilmington Trust Company but is made and intended
for the purpose for binding only the Trust, (c) nothing herein contained shall
be construed as creating any liability on Wilmington Trust Company, individually
or personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties hereto
or by any Person claiming by, through or under the parties hereto and (d) under
no circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Trust or be liable for the breach
or failure of any obligation, representation, warranty or covenant made or
undertaken by the Trust under this Agreement or any other Operative Documents.
SECTION 15.14. MEASURING LIFE. If and to the extent that any of the
rights and privileges granted under this Agreement, including Section 11 hereof,
would, in the absence of the limitation imposed by this sentence, be invalid or
unenforceable as being in violation of the rule against perpetuities or any
other rule or law relating to the vesting of interests in property or the
suspension of the power of alienation of property, then it is agreed that
notwithstanding any other provision of this Head Equipment Agreement, such
options, rights and privileges, subject to the respective conditions governing
the exercise of such options, rights and privileges, will be exercisable only
during (a) a period which will end twenty-one (21) years after the death of the
last survivor of the members of the Board of Directors of Old Dominion named in
Exhibit A-5 hereto, together with all such persons' children and grandchildren
who are living on the date of the execution of this Head Equipment Agreement or
(b) the specific applicable period of time expressed in this Head Equipment
Agreement, whichever is shorter.
15
<PAGE>
IN WITNESS WHEREOF, Old Dominion and the Facility Owner have caused
this Head Equipment Agreement to be duly executed and delivered by their
respective officers thereunto duly authorized.
OLD DOMINION ELECTRIC COOPERATIVE
By:/s/ DANIEL M. WALKER
------------------------------
Name: Daniel M. Walker
Title: Vice President
Date: July 31, 1996
CLOVER UNIT 2 GENERATING TRUST
By: Wilmington Trust Company, not
in its individual capacity
but solely as Owner Trustee
under the Trust Agreement
By:/s/ EMMETT R. HARMON
--------------------------
Name: Emmett R. Harmon
Title: Vice President
Date: July 31, 1996
<PAGE> EXHIBIT A-1
TO
HEAD EQUIPMENT
AGREEMENT
DESCRIPTION OF UNIT 2 EQUIPMENT
All those certain assets at or on the Unit 2 Site (excluding
the Unit 2 Foundation) and all replacements or substitutions thereto, including
the generation building, baghouse, scrubber building, and all those certain
parts and items of equipment identified on Schedule 1 (which is not intended to
limit the generality of the foregoing definition to the assets identified
therein) attached hereto, together with all auxiliary and support items,
including all valves, backflow preventers, breakdown orifices, exhaust heads,
expansion joints, flexible hoses, gage glasses, relief valves, sight flow
indicators, strainers, traps, local switch stations, transducers, circuit
breakers, transfer switches, disconnect switches, junction boxes, motors,
transformers (other), panel boards (other), local control devices, miscellaneous
panels and instruments, solenoid valves, control drives, signal converters and
monitors, conductivity instrumentation, pH instrumentations, recorders,
subpanels and switches/lights, and recorders/pen description.
A-1
<PAGE>
EXHIBIT A-2
TO
HEAD EQUIPMENT
AGREEMENT
DESCRIPTION OF COMMON FACILITIES EQUIPMENT
All those certain assets used in connection with the operation
or maintenance of both the Clover Unit 1 Generating Facility and the Clover Unit
2 Generating Facility (excluding, the Unit 1 Equipment, the Unit 2 Equipment,
the Unit 1 Foundation, the Unit 2 Foundation and the Common Facilities
Foundation) and all replacements or substitutions thereto, including the crusher
building, coal car thaw shed, administration building, warehouse, coal yard
control building, machine shop, welding shop, coal yard maintenance building,
line unloading building, service water/five pump building, water treatment
building, plant services building, various electrical equipment buildings and
all those certain parts and items of equipment identified on Schedule 2 (which
is not intended to limit the generality of the foregoing definition to the
assets identified therein) attached hereto, together with all auxiliary and
support items, including all valves, backflow preventers, breakdown orifices,
exhaust heads, expansion joints, flexible hoses, gage glasses, relief valves,
sight flow indicators, strainers, traps, local switch stations, transducers,
circuit breakers, transfer switches, disconnect switches, junction boxes,
motors, transformers (other), panel boards (other), local control devices,
miscellaneous panels and instruments, solenoid valves, control drives, signal
converters and monitors, conductivity instrumentation, pH instrumentations,
recorders, subpanels and switches/lights, and recorders/pen description.
A-2-1
<PAGE>
=======================================
OPERATING EQUIPMENT AGREEMENT
Dated as of July 1, 1996
between
CLOVER UNIT 2 GENERATING TRUST
and
OLD DOMINION ELECTRIC COOPERATIVE
CLOVER UNIT 2 GENERATING FACILITY
AND
COMMON FACILITIES
=======================================
CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS OPERATING
EQUIPMENT AGREEMENT OF CLOVER UNIT 2 GENERATING TRUST HAVE BEEN ASSIGNED TO AND
ARE SUBJECT TO A FIRST PRIORITY SECURITY INTEREST IN FAVOR OF UTRECHT-AMERICA
FINANCE CO., AS AGENT AND LENDER UNDER THE LOAN AND SECURITY AGREEMENT, DATED AS
OF JULY 1, 1996. THIS OPERATING EQUIPMENT AGREEMENT HAS BEEN EXECUTED IN SEVERAL
COUNTERPARTS. ONLY THE ORIGINAL COUNTERPART CONTAINS THE RECEIPT THEREFOR
EXECUTED BY THE AGENT ON THE SIGNATURE PAGE THEREOF. SEE SECTION 24 FOR
INFORMATION CONCERNING THE RIGHTS OF THE HOLDERS OF THE VARIOUS COUNTERPARTS
HEREOF.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DEFINITIONS................................................................................. 2
SECTION 2. CONVEYANCE OF USE AND POSSESSION OF THE
EQUIPMENT INTEREST.......................................................................... 3
SECTION 3. TERM AND BASIC PAYMENTS..................................................................... 3
SECTION 3.1 TERM...................................................................... 3
SECTION 3.2 BASIC PAYMENTS............................................................ 3
SECTION 3.3 SUPPLEMENTAL PAYMENTS..................................................... 4
SECTION 3.4 ADJUSTMENT OF BASIC PAYMENTS.............................................. 4
SECTION 3.5 MANNER OF PAYMENTS........................................................ 6
SECTION 3.6 BUSINESS DAY.............................................................. 7
SECTION 3.7 AGREEMENT WITH RESPECT TO AMOUNTS PAYABLE UNDER
PAYMENT UNDERTAKING AGREEMENT............................................................... 7
SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT......................................... 7
SECTION 4.1 DISCLAIMER OF WARRANTIES.................................................. 7
SECTION 4.2 QUIET ENJOYMENT........................................................... 9
SECTION 5. RETURN OF EQUIPMENT INTEREST................................................................ 9
SECTION 5.1 RETURN.................................................................... 9
SECTION 5.2 CONDITION UPON RETURN..................................................... 9
SECTION 5.3 ENVIRONMENTAL REPORT...................................................... 13
SECTION 5.4 EXPENSES.................................................................. 14
SECTION 6. LIENS....................................................................................... 14
SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS..................................................... 14
SECTION 7.1 MAINTENANCE............................................................... 14
SECTION 7.2 REPLACEMENT OF COMPONENTS................................................. 15
SECTION 8. MODIFICATIONS............................................................................... 15
SECTION 8.1 REQUIRED MODIFICATIONS.................................................... 15
SECTION 8.2 OPTIONAL MODIFICATIONS.................................................... 16
SECTION 8.3 TITLE TO MODIFICATIONS; SUBJECTION TO HEAD EQUIPMENT
AGREEMENT................................................................................... 16
SECTION 9. HELL OR HIGH WATER CLAUSE................................................................... 16
</TABLE>
i
<PAGE>
TABLE OF CONTENTS, CONTINUED
<TABLE>
<S> <C>
SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC......................................................... 17
SECTION 10.1 EVENTS OF LOSS............................................................ 17
SECTION 10.2 PAYMENT OF TERMINATION VALUE; TERMINATION OF
EQUIPMENT PAYMENTS.......................................................................... 18
SECTION 10.3 REPLACEMENT............................................................... 20
SECTION 10.4 EMINENT DOMAIN............................................................ 22
SECTION 11. INSURANCE................................................................................... 23
SECTION 12. INSPECTION.................................................................................. 26
SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS.................................................... 26
SECTION 13.1 ELECTION TO TERMINATE..................................................... 26
SECTION 13.2 PROCEDURE FOR EXERCISE OF TERMINATION OPTION.............................. 27
SECTION 14. TERMINATION FOR OBSOLESCENCE................................................................ 28
SECTION 14.1 TERMINATION............................................................... 28
SECTION 14.2 SOLICITATION OF OFFERS.................................................... 28
SECTION 14.3 RIGHT OF FACILITY OWNER TO RETAIN THE EQUIPMENT
INTEREST.................................................................................... 28
SECTION 14.4 PROCEDURE FOR EXERCISE OF TERMINATION OPTION.............................. 29
SECTION 15. END OF TERM OPTIONS......................................................................... 30
SECTION 15.1 OLD DOMINION'S PURCHASE OPTION............................................ 30
SECTION 15.2 FACILITY OWNER'S PREEMPTIVE ELECTION...................................... 32
SECTION 15.3 OLD DOMINION'S EXERCISE OF SERVICE CONTRACT OPTION........................ 32
SECTION 15.4 USE OF PROCEEDS OF QUALIFYING SECURITY.................................... 35
SECTION 15.5 OBLIGATION TO PAY AMOUNT EQUAL TO PRINCIPAL AND
INTEREST ON LOAN CERTIFICATES UPON VIRGINIA POWER DEFAULT................................... 36
SECTION 16. EVENTS OF DEFAULT........................................................................... 36
SECTION 17. REMEDIES.................................................................................... 39
SECTION 17.1 REMEDIES FOR EVENT OF DEFAULT............................................. 39
SECTION 17.2 CUMULATIVE REMEDIES....................................................... 41
SECTION 17.3 NO DELAY OR OMISSION TO BE CONSTRUED AS WAIVER............................ 42
SECTION 18. OLD DOMINION TERMINATION OPTION FOR APPEAL OF
FERC ORDERS................................................................................. 42
SECTION 18.1 OLD DOMINION OPTION TO TERMINATE.......................................... 42
SECTION 18.2 PROCEDURE FOR EXERCISE OF TERMINATION OPTION.............................. 42
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS, CONTINUED
<TABLE>
<S> <C>
SECTION 19. OLD DOMINION'S RIGHT TO SUBLEASE............................................................ 43
SECTION 20. FURTHER ASSURANCES.......................................................................... 44
SECTION 21. FACILITY OWNER'S RIGHT TO PERFORM........................................................... 44
SECTION 22. NOTICES..................................................................................... 45
SECTION 23. SECURITY INTEREST AND INVESTMENT OF SECURITY
FUNDS....................................................................................... 46
SECTION 24. SECURITY FOR FACILITY OWNER'S OBLIGATION TO THE
LENDERS................................................................... 46
SECTION 25. MISCELLANEOUS............................................................................... 47
SECTION 25.1 GOVERNING LAW............................................................. 47
SECTION 25.2 SEVERABILITY.............................................................. 47
SECTION 25.3 HEADINGS AND TABLE OF CONTENTS............................................ 47
SECTION 25.4 SUCCESSORS AND ASSIGNS.................................................... 47
SECTION 25.5 "TRUE LEASE".............................................................. 47
SECTION 25.6 IDENTIFICATION............................................................ 48
SECTION 25.7 AMENDMENTS AND WAIVERS.................................................... 48
SECTION 25.8 AGREEMENT REGARDING EQUIPMENT............................................. 48
SECTION 25.9 SURVIVAL.................................................................. 48
SECTION 25.10 COUNTERPARTS.............................................................. 49
SECTION 25.11 EFFECTIVENESS............................................................. 49
SECTION 25.12 LIMITATION OF LIABILITY................................................... 49
ATTACHMENTS TO OPERATING EQUIPMENT AGREEMENT:
Appendix A - Definitions.................................................................................A-1
Exhibit A-1 - Description of Unit 2 Equipment...........................................................A-1-1
Exhibit A-2 - Description of Common Facilities Equipment................................................A-2-1
Exhibit B - Power Sales Agreement Capacity and Energy Charges...........................................B-1
Schedule 1 - Basic Payments.............................................................................S1-1
Schedule 2 - Termination Values.........................................................................S2-1
Schedule 3 - Terms and Conditions of New Loan to be Issued
Upon Commencement of Service Contract Option...............................................S3-1
</TABLE>
iii
<PAGE>
OPERATING EQUIPMENT AGREEMENT
This OPERATING EQUIPMENT AGREEMENT, dated as of July 1, 1996 (this
"Operating Equipment Agreement"), between CLOVER UNIT 2 GENERATING TRUST, a
Delaware business trust created pursuant to the Trust Agreement, dated as of
July 1, 1996, between EPC Corporation and Wilmington Trust Company (the
"Facility Owner"), and OLD DOMINION ELECTRIC COOPERATIVE, a wholesale power
supply cooperative organized under the laws of the Commonwealth of Virginia
("Old Dominion").
WHEREAS, the Clover Real Estate is more particularly described in
Schedule 1 to the Ground Lease and Sublease and is comprised of the Unit 1 Site
described in Schedule 2 thereto, the Unit 2 Site described in Schedule 3
thereto, the Common Facilities Site described in Schedule 4 thereto, and certain
other property, each such Schedule 1, Schedule 2, Schedule 3 and Schedule 4
being attached to, and recorded in the Halifax Clerk's Office with, the Ground
Lease and Sublease as part thereof;
WHEREAS, a copy of the Clover Power Station Plat is marked Exhibit A
and is attached to, and recorded in the Halifax Clerk's Office with, the Ground
Lease and Sublease as a part thereof;
WHEREAS, Old Dominion and Virginia Power own the Clover Real Estate as
tenants-in-common;
WHEREAS, by the Clover Agreements, Old Dominion and Virginia Power
established their respective rights and obligations as tenants-in-common of the
Clover Real Estate and of all improvements thereafter to be constructed, and all
personal property thereafter to be situated, on the Clover Real Estate. Such
improvements and personal property held by Old Dominion and Virginia Power as
tenants-in-common include (a) the Unit 1 Foundation constructed on the Unit 1
Site, (b) the Unit 2 Foundation constructed on the Unit 2 Site, (c) the Common
Facilities Foundation constructed on the Common Facilities Site, (d) the Unit 1
Equipment situated on the Unit 1 Site, (e) the Unit 2 Equipment situated on the
Unit 2 Site, and (f) the Common Facilities Equipment situated on the Common
Facilities Site;
WHEREAS, as tenants-in-common of such real and personal property, each
of Old Dominion and Virginia Power holds a 50% undivided interest in such real
and personal property, including the right to nonexclusive possession of all
such real and personal property, subject to (a) in the case of all such real and
personal property, the rights of the other to nonexclusive possession and the
terms and conditions of the Clover Agreements, (b) in the case of the Pollution
Control Assets, the rights, terms and conditions described above in clause (a)
and the rights of the Pollution Control Assets Lessor, and (c) in the case of
the Common Facilities, the Unit 1 Site, the Unit 1 Foundation and the Unit 1
Equipment, the rights, terms and conditions described above in clause (a) and
the rights of the Unit 1 Parties;
<PAGE>
WHEREAS, by the Ground Lease and Sublease, Old Dominion has leased the
Ground Interest to the Facility Owner and the Facility Owner simultaneously has
subleased the Ground Interest back to Old Dominion upon the terms and conditions
of the Ground Lease and Sublease;
WHEREAS, Old Dominion has conveyed to the Facility Owner for a term of
years (a) the Foundation Interest by the Head Foundation Agreement and (b) the
Equipment Interest by the Head Equipment Agreement;
WHEREAS, by the Operating Foundation Agreement, the Facility Owner is
conveying use and possession of the Foundation Interest back to Old Dominion for
the Term which shall end prior to the expiration of the term of the Head
Foundation Agreement;
WHEREAS, by this Operating Equipment Agreement, the Facility Owner is
conveying use and possession of the Equipment Interest back to Old Dominion for
the Term which shall end prior to the expiration of the term of the Head
Equipment Agreement;
WHEREAS, although Old Dominion and the Facility Owner intend that the
Foundation Interest at all times and in all respects be and remain personal
property under Virginia law, they have recorded the Head Foundation Agreement,
and are recording the Operating Foundation Agreement, in the Halifax Clerk's
Office in order to satisfy the conditions of Section 55-96 of the Code of
Virginia 1950, as amended, in the event that the Foundation Interest is deemed
to be real estate or an interest in real estate for purposes of such Section
55-96; and
WHEREAS, the Unit 1 Parties and the Unit 2 Parties shall share equally
all of those rights, and shall be subject equally to having all of those
responsibilities undertaken, which are granted to or imposed upon Old Dominion
with respect to the Common Facilities Site, the Common Facilities Foundation and
the Common Facilities Equipment, as (a) tenant-in-common with Virginia Power of
such property and (b) a party to the Clover Agreements.
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Operating Equipment Agreement and not
otherwise defined herein shall have the respective meanings set forth in
Appendix A hereto.
Where any provision in this Operating Equipment Agreement refers to
action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person.
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SECTION 2. CONVEYANCE OF USE AND POSSESSION OF THE EQUIPMENT
INTEREST.
The Facility Owner hereby conveys, simultaneously with the conveyance
of the Equipment Interest for a term of years from Old Dominion to the Facility
Owner pursuant to the Head Equipment Agreement, the use and possession of the
Equipment Interest to Old Dominion for the term described below and Old Dominion
hereby takes such interest in the Equipment Interest from the Facility Owner.
Old Dominion and the Facility Owner understand and agree that (a) this
conveyance of the use and possession of the Equipment Interest is subject to the
limitations identified in the definition thereof, (b) legal title to all assets
in the Equipment Interest constituting Retained Assets remains vested in Old
Dominion and Virginia Power as tenants-in-common, (c) all assets in the
Equipment Interest constituting Pollution Control Assets have been conveyed to
the Pollution Control Assets Lessor and leased back to Old Dominion pursuant to
the Pollution Control Assets Lease and that legal title to such Pollution
Control Assets remains vested in the Pollution Control Assets Lessor and
Virginia Power as tenants-in-common, and (d) this conveyance of the use and
possession of the Equipment Interest is subject and subordinate to the lien of
the Old Dominion Indenture (including any future amendments, supplements or
issuance of additional advances or indebtedness thereunder), Permitted
Encumbrances and the rights of Virginia Power under the Clover Agreements. The
Equipment Interest shall be subject to the terms of this Operating Equipment
Agreement from the date on which this Operating Equipment Agreement is executed
and delivered.
Descriptions of the Unit 2 Equipment and the Common Facilities
Equipment are set forth on Exhibits A-1 and A-2, respectively, to this Operating
Equipment Agreement. Descriptions of the Retained Assets and the Pollution
Control Assets are set forth on Exhibits A-3 and A-4, respectively, to this
Operating Equipment Agreement.
SECTION 3. TERM AND BASIC PAYMENTS
SECTION 3.1 TERM. The term of this Operating Equipment Agreement shall
commence on the Closing Date and shall terminate at 11:59 p.m. (New York City
time) on the Expiration Date, subject to earlier termination pursuant to Section
10, 13, 14, 17 or 18 hereof (the "Term").
SECTION 3.2 BASIC PAYMENTS. Old Dominion hereby agrees to pay to the
Facility Owner the Basic Payments for the use and possession of the Equipment
Interest for each Payment Period throughout the Basic Term in the amounts
payable in advance or in arrears or both, as the case may be, on each Payment
Date as indicated on Schedule 1 hereto under the caption "Advance Payments" in
the case of Payment Periods immediately following such Payment Date and/or
"Arrears Payments" in the case of Payment Periods ending on such Payment Date.
Each such Basic Payment shall be in the amount set forth opposite such Payment
Date on Schedule 1 hereto, in each case, subject to Section 3.4 hereof.
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SECTION 3.3 SUPPLEMENTAL PAYMENTS. Old Dominion also agrees to pay to
the Facility Owner, or to any other Person entitled thereto, any and all
Supplemental Payments, promptly as the same shall become due and owing, or where
no due date is specified, promptly after demand by the Person entitled thereto,
and in the event of any failure on the part of Old Dominion to pay any
Supplemental Payments, the Facility Owner shall have all rights, powers and
remedies provided for herein or by law or equity or otherwise for the failure to
pay Basic Payments. Old Dominion will also pay as Supplemental Payments (i) to
the extent permitted by Applicable Law, an amount equal to interest at the
applicable Overdue Rate on any part of any payment of Basic Payments not paid
when due for any period for which the same shall be overdue and on any
Supplemental Payments not paid when due (whether on demand or otherwise) for the
period from such due date until the same shall be paid. All Supplemental
Payments to be paid pursuant to this Section 3.3 shall be payable in the manner
set forth in Section 3.5.
SECTION 3.4 ADJUSTMENT OF BASIC PAYMENTS. (a) Old Dominion and the
Facility Owner agree that Basic Payments, Termination Values, Equity Exposure
Amounts and the Purchase Option Price shall be adjusted, either upwards or
downwards, to reflect (i) any Burdensome Tax Law Change, (ii) the principal
amount, amortization and interest rate on any Additional Loan Certificates
issued pursuant to Section 2.11 of the Loan Agreement to finance Modifications
to the Unit 2 Equipment or the Common Facilities Equipment, (iii) the principal
amount, amortization and interest rate on any Additional Loan Certificates
issued pursuant to Section 2.11 of the Loan Agreement in connection with a
refinancing of any Loan Certificates, (iv) the exercise by Old Dominion of its
option pursuant to Section 4(b)(1) of the Tax Indemnity Agreement to make
indemnity payments in the form of upward adjustments to Basic Payments, and (v)
Old Dominion's consummation of the transaction contemplated by Section 11 of the
Participation Agreement where the transaction adversely affects the status of
the Head Equipment Agreement or the Head Foundation Agreement as conveying
ownership for state or local income tax purposes in Virginia. Any adjustment
pursuant to clause (i), (iii), (iv) or (v) of the immediately preceding sentence
shall be coordinated with any comparable adjustment made pursuant to Section 3.4
of the Operating Foundation Agreement such that the aggregate adjustment shall
be apportioned between this Operating Equipment Agreement and the Operating
Foundation Agreement in the same ratio as Equipment Interest Cost bears to the
Foundation Interest Cost. Any adjustments pursuant to this Section 3.4 will be
calculated to preserve the Owner Participant's Net Economic Return; PROVIDED,
HOWEVER, that (a) to the extent consistent with preserving such Net Economic
Return, all adjustments shall minimize the present value to Old Dominion of the
Basic Payments or, at Old Dominion's election, the Basic Payments and the
Purchase Option Price and (b) all adjustments shall be consistent with the
conclusions of the Appraiser set forth in the Appraisal. Adjustments will be
made using the same method of computation and assumptions originally used (other
than those that have changed as the result of the event giving rise to the
adjustment) in the calculation of the Basic Payments and the Purchase Option
Price. The adjustments contemplated by this Section 3.4 will result in
corresponding adjustments to Termination Values. In addition, in connection with
any adjustment pursuant to this Section 3.4, the Equity Exposure Amounts shall
be increased by an increase in the Equity Portion of Basic Payments or the
Equity Portion of Termination Value. All Basic Payments adjustments shall be
consistent with Rev. Procs. 75-21 and 75-28 and section
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467 of the Code (to the extent the Basic Payments complied with such section 467
on the Closing Date), including any final, proposed or temporary regulations or
other administrative announcements issued thereunder and in no event shall such
adjustment cause this Operating Equipment Agreement to become a "disqualified
leaseback or long-term agreement" within the meaning of section 467 of the Code
and any such regulations or announcements thereunder. Any adjustment made to the
Purchase Option Price may result in an increase or decrease in such Purchase
Option Price, but the Purchase Option Price shall not be subject to decrease
below the projected fair market value of the Equipment Interest on the
Expiration Date as set forth in the Appraisal.
(a) Each Basic Payment payable hereunder, whether or not adjusted in
accordance with this Section 3.4, when combined with the Foundation Basic
Payment payable under the Operating Foundation Agreement on such date, shall be
in an amount at least sufficient to pay in full principal and interest payable
on the Loan Certificates on each Payment Date. Termination Values (excluding the
Equity Portion of Termination Value) payable on any date under this Operating
Equipment Agreement and the initial installment of the Purchase Option Price,
whether or not adjusted in accordance with this Section 3.4, when combined with
Termination Values (excluding the Equity Portion of Termination Value) and the
initial installment of the Foundation Purchase Option Price payable under the
Operating Foundation Agreement on such date, shall, together with all other
Basic Payments and Foundation Basic Payments due and owing on such date,
exclusive of any portion thereof that is an Excepted Payment, be in an amount at
least sufficient to pay in full the principal of and accrued interest on the
Loan Certificates payable on such date.
(b) Any adjustment pursuant to this Section 3.4 shall initially be
computed by the Owner Participant. Once computed, the results of such
computation shall promptly be delivered by the Owner Participant to Old
Dominion, the Facility Owner and the Agent. Within 20 days after the receipt of
the results of any such adjustment, Old Dominion may request that an investment
banking firm selected by the Owner Participant and reasonably satisfactory to
Old Dominion (the "Intermediary") verify, after consultation with the Owner
Participant and Old Dominion, the accuracy of such adjustment in accordance with
this Section 3.4, and the Owner Participant and Old Dominion hereby agree to
provide the Intermediary (on a confidential basis) with all information and
materials as shall be reasonably necessary in connection therewith; PROVIDED
that the Owner Participant shall not be required to disclose any of its own
proprietary data or tax returns. If the Intermediary confirms that such
adjustment is in accordance with this Section 3.4, it shall so certify to Old
Dominion, the Facility Owner, the Owner Participant and the Agent, and such
certification shall be final, binding and conclusive on Old Dominion, the Owner
Participant and the Facility Owner. If the Intermediary concludes that such
adjustment is not in accordance with this Section 3.4, it shall so certify to
Old Dominion, the Facility Owner, the Owner Participant and the Agent, and the
Owner Participant shall again compute the required adjustment. Such
re-computation shall be subject to the provisions of this Section 3.4 and the
results of such re-computation shall be final, binding and conclusive on Old
Dominion, the Facility Owner and the Owner Participant. If Old Dominion does not
request verification of any adjustment within the period specified above, the
computation provided by the Owner Participant shall be final, binding and
conclusive on Old Dominion, the Facility Owner and the
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Owner Participant. The final determination of any adjustment hereunder shall be
set forth in an amendment to this Operating Equipment Agreement, executed and
delivered by the Facility Owner and Old Dominion and consented to by the Owner
Participant; PROVIDED, HOWEVER, that any omission to execute and deliver such
amendment shall not affect the validity and effectiveness of any such
adjustment. The reasonable fees, costs and expenses of the Intermediary in
verifying an adjustment pursuant to this Section 3.4 shall be paid by Old
Dominion; PROVIDED, FURTHER, that, in the event that such Intermediary
determines that the present value of Basic Payments or, at Old Dominion's
election, Basic Payments and the Purchase Option Price payments to be made under
this Operating Equipment Agreement as calculated by the Owner Participant are
greater than the present value of the correct Basic Payments and Purchase Option
Price payments as certified by the Intermediary, discounted annually at the Debt
Rate, by more than 0.10% of the Equipment Interest Cost, then such expenses of
the Intermediary shall be paid by the Owner Participant. Notwithstanding
anything herein to the contrary, the sole responsibility of the Intermediary
shall be to verify the calculations hereunder and matters of interpretation of
this Operating Equipment Agreement or any other Operative Document shall not be
within the scope of the Intermediary's responsibilities.
SECTION 3.5 MANNER OF PAYMENTS. (a) All Equipment Payments (whether
Basic Payments or Supplemental Payments) shall be paid by Old Dominion in lawful
currency of the United States of America in immediately available funds to the
recipient not later than 12:00 noon (New York City time) on the date due. All
Equipment Payments payable to the Facility Owner (other than Excepted Payments)
shall be paid by Old Dominion to the Facility Owner at its account at Wilmington
Trust Company (ABA Account No. 031100092) Credit - Clover Unit 2 Generating
Trust (Account No.40355-0), or to such other place as the Facility Owner shall
notify Old Dominion in writing; PROVIDED, HOWEVER, that so long as the Liens of
the Loan Agreement and the Leasehold Mortgage have not been discharged, the
Facility Owner hereby irrevocably directs (it being agreed and understood that
such direction shall be deemed to have been revoked after the Liens of the Loan
Agreement and the Leasehold Mortgage shall have been discharged), and Old
Dominion agrees, that all Equipment Payments (other than Excepted Payments)
payable to the Facility Owner shall be paid by wire transfer directly to the
Agent's Account or to such other place as the Agent shall notify Old Dominion in
writing pursuant to the Loan Agreement. Payments constituting Excepted Payments
shall be made to the Person entitled thereto at the address for such Person set
forth in the Participation Agreement, or to such other place as such Person
shall notify Old Dominion in writing.
(b) Payments made to the Facility Owner from the Qualifying Security
and the Qualifying Surety Bond shall satisfy Old Dominion's obligation to pay
amounts of Basic Payments or Supplemental Payments, as the case may be, to the
extent of such payments. Amounts paid to the Facility Owner or the Owner
Participant from the Qualifying Security or the Qualifying Surety Bond in
satisfaction of the Special Equity Remedy shall not satisfy or be treated as
performance of any of Old Dominion's obligations under this Operating Equipment
Agreement or any other Operative Document (other than its obligations under
Section 12 of the Participation Agreement) or in any way limit or offset any
amounts payable by Old Dominion.
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SECTION 3.6 BUSINESS DAY. Notwithstanding anything herein or in any
other Operative Document to the contrary, if the date on which any payment is to
be made pursuant to this Operating Equipment Agreement or any other Operative
Document is not a Business Day, the payment otherwise payable on such date shall
be payable on the next succeeding Business Day with the same force and effect as
if made on such scheduled date and, PROVIDED such payment is made on such
succeeding Business Day, no interest shall accrue on the amount of such payment
from and after such scheduled date to the time of such payment on such next
succeeding Business Day.
SECTION 3.7 AGREEMENT WITH RESPECT TO AMOUNTS PAYABLE UNDER PAYMENT
UNDERTAKING AGREEMENT. The Facility Owner hereby acknowledges that, pursuant to
the Payment Undertaking Agreement, the Bank has undertaken to make Scheduled
Payments to the Facility Owner or its assignee or pledgee on each date specified
therein, and other specified amounts on the terms set forth therein. These
payments are payable when Basic Payments, Foundation Basic Payments, Termination
Value or amounts computed by reference to Termination Value (including by reason
of the failure to pay the Purchase Option Price or the Foundation Purchase
Option Price), are due and, assuming exercise of the Purchase Option and the
Foundation Purchase Option, when the first installment of Purchase Option Price
and Foundation Purchase Option Price will be due under this Operating Equipment
Agreement and the Operating Foundation Agreement in an amount equal to that
portion of Basic Payments, Foundation Basic Payments, Termination Value and
Purchase Option Price and Foundation Purchase Option Price which corresponds to
the principal and interest on the Series A Loan Certificates due on such date
(including in respect of acceleration). The Facility Owner hereby agrees that
with respect to that portion of Basic Payment or Termination Value and amounts
computed by reference to Termination Value (including by reason of the failure
to pay the Purchase Option Price) under this Operating Equipment Agreement equal
to 95.81 percent (95.81%) of the amounts payable under the Payment Undertaking
Agreement by the Bank that it will first pursue due diligence to obtain payment
from the Bank, before it will pursue Old Dominion under this Operating Equipment
Agreement or any other Operative Document for such amounts. If the Bank has
fully performed its obligations under the Payment Undertaking Agreement in
respect of such amounts, the Facility Owner shall be conclusively presumed to
have satisfied the foregoing requirement.
SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT.
SECTION 4.1 DISCLAIMER OF WARRANTIES. WITHOUT WAIVING ANY CLAIM OLD
DOMINION MAY HAVE AGAINST ANY MANUFACTURER, VENDOR OR CONTRACTOR UNDER THE
CLOVER AGREEMENTS, OLD DOMINION ACKNOWLEDGES AND AGREES SOLELY FOR THE BENEFIT
OF THE FACILITY OWNER AND THE OWNER PARTICIPANT THAT (a) CLOVER UNIT 2 AND EACH
COMPONENT THEREOF ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE ACCEPTABLE TO
OLD DOMINION, (b) OLD DOMINION IS SATISFIED THAT CLOVER UNIT 2 AND EACH
COMPONENT THEREOF ARE SUITABLE FOR THEIR RESPECTIVE PURPOSES, (c) NEITHER THE
FACILITY OWNER NOR THE OWNER PARTICIPANT IS A MANUFACTURER OR A DEALER IN
PROPERTY OF SUCH KIND, (d) THE USE AND POSSESSION OF CLOVER UNIT 2 AND EACH
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COMPONENT THEREOF ARE CONVEYED HEREUNDER TO THE EXTENT PROVIDED HEREBY FOR
THE TERM SPECIFIED ABOVE SUBJECT TO ALL APPLICABLE LAWS NOW IN EFFECT OR
HEREAFTER ADOPTED AND IN THE CONDITION OF EVERY PART THEREOF WHEN THE SAME
FIRST BECAME SUBJECT TO THIS OPERATING EQUIPMENT AGREEMENT WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND BY THE FACILITY OWNER OR THE OWNER
PARTICIPANT AND (e) THE FACILITY OWNER CONVEYS FOR THE TERM SPECIFIED
ABOVE, AND OLD DOMINION TAKES THE USE AND POSSESSION OF THE EQUIPMENT INTEREST
UNDER THIS OPERATING EQUIPMENT AGREEMENT "AS-IS", "WHERE-IS" AND "WITH ALL
FAULTS", AND OLD DOMINION ACKNOWLEDGES THAT NEITHER THE FACILITY OWNER, AS THE
FACILITY OWNER OR IN ITS INDIVIDUAL CAPACITY, NOR THE OWNER PARTICIPANT
MAKES NOR SHALL BE DEEMED TO HAVE MADE, AND EACH EXPRESSLY DISCLAIMS, ANY AND
ALL RIGHTS, CLAIMS, WARRANTIES OR REPRESENTATIONS, EITHER EXPRESS OR IMPLIED, AS
TO THE VALUE, CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION,
MERCHANTABILITY THEREOF OR AS TO THE TITLE OF CLOVER UNIT 2, THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM
FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR
OTHER DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY
OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED
REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT THERETO, except that the
Facility Owner represents and warrants that on the Closing Date, the Equipment
Interest will be free of Facility Owner's Liens attributable to the Facility
Owner. It is agreed that all such risks, as between the Facility Owner, the
Owner Participant, the Agent and the Lenders on the one hand and Old Dominion on
the other hand are to be borne by Old Dominion. None of the Facility Owner, the
Owner Trustee, the Owner Participant, the Agent nor the Lenders shall have any
responsibility or liability to Old Dominion or any other Person with respect to
any of the following: (i) any liability, loss or damage caused or alleged to be
caused directly or indirectly by Clover Unit 2 or any Component or by any
inadequacy thereof or deficiency or defect therein or by any other circumstances
in connection therewith; (ii) the use, operation or performance of Clover Unit 2
or any Component or any risks relating thereto; (iii) any interruption of
service, loss of business or anticipated profits or consequential damages; or
(iv) the delivery, operation, servicing, maintenance, repair, improvement,
replacement or decommissioning of Clover Unit 2 or any Component.
During the Term, so long as no Event of Default shall have
occurred and be continuing, the Facility Owner hereby appoints irrevocably and
constitutes Old Dominion its agent and attorney-in-fact, coupled with an
interest, to assert and enforce, from time to time, in the name and for the
account of the Facility Owner and Old Dominion, as their interests may appear,
but in all cases at the sole cost and expense of Old Dominion, whatever claims
and rights the Facility Owner may have in respect of the Equipment Interest
against the manufacturers of the Unit 2 Equipment or the Common Facilities
Equipment, or vendors or contractors under the Clover Agreements.
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SECTION 4.2 QUIET ENJOYMENT. The Facility Owner agrees that,
notwithstanding any provision of any other Operative Document, so long as no
Event of Default shall have occurred and be continuing, it shall not through its
own actions or inactions interfere with or interrupt the quiet enjoyment of the
use, operation and possession by Old Dominion of the interest in Clover Unit 2
or the Equipment Interest conveyed by this Operating Equipment Agreement subject
to the terms of this Operating Equipment Agreement; PROVIDED, HOWEVER, that the
Facility Owner makes no covenant with respect to the interruption of such
enjoyment, use, operation and possession of Clover Unit 2 or the Equipment
Interest arising from actions of any of the Lenders or the Agent.
SECTION 5. RETURN OF EQUIPMENT INTEREST.
SECTION 5.1 RETURN. Upon the expiration of the Term, unless Old
Dominion shall have purchased the Equipment Interest pursuant to Section 15.1,
or upon any early termination of this Operating Equipment Agreement, other than
a termination in accordance with Section 10, 13 or 18 Old Dominion, at its own
expense, shall return the Equipment Interest by delivering constructive
possession of the same to the Facility Owner, at the location of Clover Unit 2
on the Clover Real Estate in Clover, Virginia and shall comply with the
provisions of Section 5 of the Operating Foundation Agreement in respect of the
Foundation Interest. In the event Virginia Power exercises its rights under
Section 6.3 of the Head Agreements, Old Dominion shall return the Equipment
Interest by delivering constructive possession of the same to Virginia Power, at
the location of Clover Unit 2 on the Clover Real Estate in Clover, Virginia and
shall comply with the provisions of Section 5 of the Operation Foundation
Agreement in respect of the Foundation Interest.
SECTION 5.2 CONDITION UPON RETURN. Except with respect to a return of
the Equipment Interest pursuant to Section 14.3, at the time of any return of
the Equipment Interest by Old Dominion in accordance with Section 5.1, the
following conditions shall be complied with, all at Old Dominion's sole cost and
expense:
(a) the right to use the Equipment Interest granted hereunder
for the benefit of Old Dominion shall cease and
terminate;
(b) Clover Unit 2 will be in at least as good condition as if
it had been maintained, repaired and operated during the
Term in compliance with the provisions of this Operating
Equipment Agreement and there shall be no deferred
maintenance in respect of Clover Unit 2;
(c) Old Dominion shall cooperate with all reasonable requests
of the Owner Participant or the Facility Owner, at the
expense of Old Dominion, for purposes of obtaining, or
enabling the Owner Participant or the Facility Owner or
their respective designees to obtain, any and all
licenses, permits, approvals and consents of any
Governmental Entities or other Persons (including
Virginia Power) that are or will be required to be
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obtained by the Owner Participant or the Facility Owner
in connection with its use, operation or maintenance of
the Equipment Interest on or after such return in
compliance with Applicable Law and in the manner
contemplated by the Clover Agreements (including, to the
extent permitted by Applicable Law, the transfer by Old
Dominion to the Owner Participant or the Facility Owner
or their respective designees of any such licenses,
permits, approvals and consents of any Governmental
Entities or other Persons as are maintained in the name
of Old Dominion);
(d) Old Dominion shall return and surrender possession of
Equipment Interest to the Facility Owner (or its
designee) free and clear of all Liens (other than Liens
described in clauses (iii), (iv), (v), (vi), (vii),
(viii) (but only in circumstances where Old Dominion
elects the Service Contract Option, no Payment Default,
Bankruptcy Default or Event of Default has occurred and
is continuing and the Facility Owner refinances the then
outstanding aggregate principal amount of the Loans by
the issuance of Additional Loan Certificates under the
Loan Agreement to evidence a New Loan in such aggregate
principal amount and then only to the extent of such
aggregate principal amount), (ix), (x) (but only if such
return shall occur prior to December 30, 2004) and (xi)
of the definition of "Permitted Liens");
(e) Old Dominion shall deliver to the Facility Owner all
books and records (including records maintained on
electronic media) relating to Clover Unit 2 in its
possession (including operating, maintenance, overhaul
and modification records and engineering reports);
(f) Old Dominion and Clover Unit 2 shall be in compliance
with Applicable Laws and relevant licenses, permits,
approvals and consents of Governmental Entities
(without regard to whether Old Dominion is contesting
the validity or applicability thereof) and all other
applicable provisions of this Operating Equipment
Agreement and the Operating Foundation Agreement
(including with respect to the maintenance and
condition thereof);
(g) if Old Dominion exercises the Service Contract Option,
Old Dominion shall take such action as shall be expressly
required pursuant to the Operative Documents, the Clover
Agreements and the Power Sales Agreement, for purposes of
putting into effect the terms and provisions thereof;
(h) Old Dominion shall provide a written report by an
Independent Engineer in form and substance reasonably
acceptable to the Owner Participant certifying that (i)
Clover Unit 2 is in the state of repair and maintenance
required by this Operating Equipment Agreement and the
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Operating Foundation Agreement and (ii) the following
specific conclusions, based on tests, inspections and
evaluations conducted by such Independent Engineer not
more than 360 days and not less than 180 days prior to
the end of the Term:
(1) the net unit heat rate of the Clover Unit 2
Generating Facility, as determined by an integrated
heat rate test conducted in conjunction with the net
electrical output test, at full load (380 MW, valves
wide open, normal pressure conditions) is at most
10,100 BTU/KWH;
(2) the net electrical output of the Clover Unit 2
Generating Facility, as determined over a 24-hour
test period conducted concurrently with the above
heat rate test, is not less than 380 MW;
(3) the Clover Unit 2 Generating Facility's emissions at
maximum load (390 MW or whatever generation level
results, valves wide open, 5% over normal pressure
conditions) and all reasonably anticipated partial
load conditions, and when operating on all fuels
within ranges permitted under all applicable permits,
are within all applicable operating permits for the
Clover Unit 2 Generating Facility, as determined by a
detailed review of stack emissions data and
historical environmental reporting history;
(4) the performance of the main generator, step-up, unit
auxiliary and all medium to low voltage step-down
transformers are at levels better than or equal to
performance levels required to successfully operate
the Clover Unit 2 Generating Facility at maximum
capability (380 MW) and all reasonably anticipated
partial load conditions;
(5) there are no material tube failures in respect of the
Clover Unit 2 Generating Facility, as demonstrated by
operation of such facility for not less than 72
consecutive hours with turbine inlet pressure at 105%
(or more) of the rated turbine guarantee pressure and
turbine valves wide open;
(6) the boiler feedwater pumps perform at levels better
than or equal to performance levels required to
successfully operate the Clover Unit 2 Generating
Facility at full load (maximum continuous rating, 5%
over normal pressure, valves wide open) and all
reasonably anticipated partial load conditions, as
demonstrated by performance testing that includes
cycling the Clover Unit 2 Generating Facility through
partial to full loads and testing of individual pumps
and testing of the pumps in combination;
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(7) the Clover Unit 2 Generating Facility is operable
within the operating parameters then existing and
reasonably anticipated to exist for at least 13 years
after the date of such return, as determined based on
an evaluation of the Clover Unit 2 Generating
Facility's systems, emissions controls and such other
tests as may be specified by the Independent
Engineer;
(8) there are no condenser tube leaks in respect of the
Clover Unit 2 Generating Facility, as determined
through inspection;
(9) all the Clover Unit 2 Generating Facility piping,
including all high pressure piping, is acceptable in
accordance with Prudent Utility Practices, as
determined through inspections of piping and piping
components;
(10) major overhauls of the turbine in respect of the
Clover Unit 2 Generating Facility, which include the
examination of the complete turbine including high
pressure, intermediate pressure, and low pressure
blading, bearings, steam and drain pipes, bypass
valves and control valves, have been performed
in accordance with recommended supplier
inspection schedules and Prudent Utility
Practices and all necessary and desirable repairs
and replacements have been performed during such
overhauls;
(11) conveyer belting has been replaced on a
staggered basis based on results of annual
inspections, as is customary for other
facilities similar to Clover Unit 2 that are
operated by the then current Clover Unit 2
Operator;
(12) all other Components shall be in a condition that
reflects the Clover Unit 2 Operator's ongoing
repair, maintenance and replacement program as
described in the Clover Agreements;
(13) it has reviewed in respect of Clover Unit 2 all
operating records, outage reports, all turbine
opening reports, all major equipment inspection
reports, all outstanding work requests and
equipment repair orders over at least the four-year
period preceding the date of expiration or earlier
termination of the Term of this Operating Equipment
Agreement (and, if Old Dominion shall have elected
the Service Contract Option, the engineer shall
state the Unit 2 Generating Facility's
Availability (as defined in the Operating Agency
Agreement), expressed as a percentage, for the three
years preceding the expiration of the Term);
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(14) it has performed in respect of Clover Unit 2 an
analysis of significant deviations from expected
plant conditions as of the Expiration Date,
including an estimate with such certificate of the
cost of restoring Clover Unit 2 to that expected
condition; and
(15) there are no material capital expense items other
than routine major maintenance items anticipated
during the 13 years following the date of such
return.
The conclusions of the Independent Engineer hereinabove
referred to shall be accompanied by such inspection
reports, tests and other data as shall be reasonably
necessary to substantiate such conclusions;
(i) there shall be no material litigation or similar
proceeding pending against Old Dominion or the Clover
Unit 2 Operator with respect to Clover Unit 2 (or the
Equipment Interest or the Foundation Interest) if the
likelihood of a failure to succeed is other than remote
or could, if determined adversely to Old Dominion or the
Clover Unit 2 Operator, reasonably be expected to result
in a material adverse effect on Clover Unit 2, the
Equipment Interest or the Foundation Interest;
(j) all property and similar Taxes (other than any Taxes in
respect of which specific provision has been made in the
Operative Documents) payable in connection with such
surrender and return shall, subject to Section 8.2 of the
Participation Agreement, have been paid by Old Dominion;
and
(k) the Owner Participant and the Facility Owner shall have
received evidence satisfactory to the Owner Participant
and the Facility Owner that (i) each of the Clover
Agreements is in full force and effect, (ii) there have
been no amendments, supplements or modifications to the
Clover Agreements other than in accordance with Section 7
of the Clover Agreements Assignment, (iii) if the Service
Contract Option is elected, the Clover Agreements as thus
amended are adequate to enable required performance under
the Power Sales Agreement and (iv) Old Dominion is not,
and to the best of Old Dominion's knowledge no other
party to the Clover Agreements is, in default in the
performance of its obligations, covenants or conditions
contained therein.
SECTION 5.3 ENVIRONMENTAL REPORT. In connection with a return pursuant
to Section 5.2 and Section 14.3, Old Dominion shall provide to the Facility
Owner and the Owner Participant, not later than 270 days prior to the Expiration
Date, or in connection with a return other than on the Expiration Date, not
later than the date of return, an inspection report prepared by a reputable
environmental consulting firm (selected by the Owner Participant and reasonably
acceptable to Old Dominion) as to the environmental condition of Clover Unit 2
and the Clover Real Estate and the compliance or non-compliance with applicable
environmental laws, in form, scope and substance reasonably satisfactory to the
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Owner Participant. The costs and expenses of preparing and providing such report
shall be for the account of Old Dominion. The provision of such report shall
not relieve Old Dominion of liability with respect to environmental conditions,
known or unknown, in respect of Clover Unit 2 and the Clover Real Estate, and
Old Dominion will take any and all actions necessary to ensure that Clover
Unit 2 and the Clover Real Estate comply with all such environmental laws. If
such report shall indicate that either Clover Unit 2 or the Clover Real
Estate is not in compliance with applicable environmental laws, Old
Dominion shall, within 90 days of the Facility Owner having received such
inspection report, (a) provide the Owner Participant with a remediation plan
approved by the applicable Governmental Entity designed to ensure that
Clover Unit 2 and the Clover Real Estate will be brought into compliance
with applicable environmental laws as promptly as is reasonably practical
and without materially adversely affecting the continued operation of Clover
Unit 2 and (b) (i) place in escrow funds in an amount corresponding to the
Facility Owner's Percentage of the cost estimate of such remediation plan (as
certified by the environmental consulting firm that prepared such report or
another expert reasonably satisfactory to the Owner Participant), which escrow
shall provide for the payment of the costs of such plan as the same become due
and payable or (ii) make other arrangements that are satisfactory to the Owner
Participant, as determined in its sole discretion acting in good faith, for such
purposes. The obligations of Old Dominion set forth in this Section 5.3 shall
survive the termination of this Operating Equipment Agreement and the expiration
of the Term.
SECTION 5.4 EXPENSES. Old Dominion agrees to pay or reimburse, on an
After-Tax Basis, on demand, all costs and expenses incurred by the Facility
Owner, the Owner Trustee, the Owner Participant, the Agent or any Lender
(including the costs, fees and expenses of any Independent Engineer,
environmental consultant fees, financial adviser fees and legal counsel fees) in
connection with any return contemplated by this Section 5.
SECTION 6. LIENS.
Old Dominion will not directly or indirectly create, incur, assume or
suffer to exist any Lien on or with respect to all or any portion of the Trust
Estate or in, to or under this Operating Equipment Agreement or any other
Operative Document, except Permitted Liens, and Old Dominion shall promptly
notify the Facility Owner of the imposition of any such Lien of which Old
Dominion is aware and shall promptly, at its own expense, take such action as
may be necessary duly to discharge such Lien.
SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS.
SECTION 7.1 MAINTENANCE. Old Dominion, at its own cost and expense,
will cause Clover Unit 2 to be maintained consistent with Prudent Utility
Practice in good condition, repair and working order and will cause to be made
all necessary repairs, renewals, replacements, betterments and improvements
thereof, (a) all as in the judgment of Old Dominion may be necessary so that the
business carried on in connection with the Equipment Interest may be properly
and advantageously conducted by Old Dominion at all times, (b) in accordance
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with the Clover Agreements, the Old Dominion Indenture and the Pollution
Control Assets Lease Documents and (c) in compliance with all material
Applicable Laws of any Governmental Entity having jurisdiction, including,
without limitation, all material environmental protection, pollution and safety
laws.
SECTION 7.2 REPLACEMENT OF COMPONENTS. In the ordinary course of
maintenance, service, repair or testing, Old Dominion, at its own cost and
expense, may remove or cause to be removed from Clover Unit 2 any Component;
PROVIDED, HOWEVER, that Old Dominion shall cause such Component to be replaced
by a replacement Component which shall be free and clear of all Liens (except
Permitted Liens) and shall be in as good operating condition as, and shall have
a current and residual value, remaining useful life and utility at least equal
to, that of the Component replaced, assuming such replaced Component was in at
least the condition and repair required to be maintained in accordance with the
terms of this Operating Equipment Agreement (each such replacement Component
being herein referred to as a "Replacement Component") as promptly as
practicable. If any part of Clover Unit 2 shall be removed and such removal
shall cause material damage to Clover Unit 2, Old Dominion, at its own cost and
expense, shall promptly repair or cause the repair of such damage. An undivided
interest equal to the Facility Owner's Percentage in each Component at any time
removed from the Unit 2 Equipment or the Common Facilities Equipment shall
remain subject to the Head Equipment Agreement and this Operating Equipment
Agreement, wherever located, until such time as such Component shall be replaced
by a Replacement Component which has been incorporated in Clover Unit 2 and
which meets the requirements for Replacement Components specified above.
Immediately upon any Replacement Component becoming incorporated in the Unit 2
Equipment or the Common Facilities Equipment, without further act (and at no
cost to the Facility Owner and with no adjustment to the Head Equipment
Agreement Basic Consideration), (i) the replaced Component shall no longer be
subject to the Head Equipment Agreement or this Operating Equipment Agreement,
(ii) an undivided interest equal to the Facility Owner's Percentage in the
Replacement Component shall thereupon become subject to the Head Equipment
Agreement, and (iii) an undivided interest equal to the Facility Owner's
Percentage in such Replacement Component shall become subject to this Operating
Equipment Agreement and be deemed a part of Clover Unit 2 for all purposes
hereof. Notwithstanding anything in this Section 7.2 or elsewhere in this
Operating Equipment Agreement to the contrary, if Old Dominion or the Clover
Unit 2 Operator has determined that a Component is surplus or obsolete, it shall
have the right to remove such Component without replacing it; PROVIDED that no
such Component may be so removed without being replaced if such removal would
diminish the current or residual value, remaining useful life or utility of
Clover Unit 2.
SECTION 8. MODIFICATIONS.
SECTION 8.1 REQUIRED MODIFICATIONS. Subject to the Clover Agreements,
Old Dominion, at its own cost and expense, shall make or cause to be made all
Modifications to Clover Unit 2 as it relates to the Equipment Interest as are
required by the Clover Agreements (each, a "Required Modification").
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SECTION 8.2 OPTIONAL MODIFICATIONS. Old Dominion at any time may make
or cause to be made any Modification to the Unit 2 Equipment as Old Dominion
considers desirable in the proper conduct of its business (an "Optional
Modification"); PROVIDED that, no Optional Modification to the Unit 2 Equipment
shall impair the operation of Clover Unit 2 or diminish the current or residual
value, remaining useful life or utility of Clover Unit 2 below the current or
residual value, remaining useful life or utility thereof immediately prior to
such Optional Modification, assuming such Clover Unit 2 was then in the
condition required to be maintained by the terms of this Operating Equipment
Agreement and the Operating Foundation Agreement.
SECTION 8.3 TITLE TO MODIFICATIONS; SUBJECTION TO HEAD EQUIPMENT
AGREEMENT. Title to an undivided interest as a tenant-in-common with Virginia
Power in (a) all Modifications to the Retained Assets and (b) all Severable
Modifications to the Pollution Control Assets, shall immediately vest in Old
Dominion and become subject to the Lien of the Old Dominion Indenture and be
deemed Retained Assets for all purposes of this Operating Equipment Agreement.
Title to an undivided interest as a tenant in common with Virginia Power in any
Nonseverable Modifications to the Pollution Control Assets shall immediately
vest in the Pollution Control Assets Lessor and become subject to the Pollution
Control Assets Lease and be deemed Pollution Control Assets for all purposes of
this Operating Equipment Agreement. An undivided interest equal to the Facility
Owner's Percentage in all Modifications shall immediately become subject to the
Head Equipment Agreement (at no cost to the Facility Owner and with no
adjustment to the Head Equipment Agreement Consideration) and be deemed a part
of the Equipment Interest for all purposes hereof, and Old Dominion, at its own
cost and expense, shall take such steps as the Facility Owner may require from
time to time to confirm that the foregoing Modifications are subject to the Head
Equipment Agreement.
SECTION 9. HELL OR HIGH WATER CLAUSE.
This Operating Equipment Agreement is a "net lease" and Old Dominion's
obligation to pay all Equipment Payments payable hereunder shall be absolute and
unconditional under any and all circumstances and shall not be affected by any
circumstance of any character, including, without limitation, (i) any setoff,
counterclaim, recoupment, defense or other right which Old Dominion may have
against the Facility Owner, the Owner Trustee, the Owner Participant, the Agent
or any Lender or any other Person, (ii) any lack or invalidity of title or any
defect in the title, condition, design, operation, merchantability or fitness
for use of Clover Unit 2 or any Component, any unavailability of Clover Unit 2,
the Clover Real Estate, any Component, any other portion of Old Dominion's Unit
2 Interest or any part of the foregoing after its delivery and acceptance by Old
Dominion hereunder, for any reason, (iii) any loss or destruction of, or damage
to, Clover Unit 2 or any Component or interruption or cessation in the use or
possession thereof by Old Dominion for any reason whatsoever and of whatever
duration, (iv) the condemnation, requisitioning, expropriation, seizure or other
taking of title to or use of Clover Unit 2, the Clover Real Estate, any
Component, any other portion of Old Dominion's Unit 2 Interest or any part of
the foregoing by any Governmental Entity or otherwise, (v) the invalidity or
unenforceability or lack of due authorization or other infirmity of this
Operating Equipment Agreement or any other Operative Document, (vi) the lack of
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right, power or authority of the Facility Owner to enter into this Operating
Equipment Agreement or any other Operative Document, (vii) any ineligibility
of Clover Unit 2 or any Component for any particular use, whether or not due to
any failure of Old Dominion or the Clover Unit 2 Operator to comply with any
Applicable Law, (viii) any event of Force Majeure or any frustration, (ix)
any legal requirement similar or dissimilar to the foregoing, any present
or future law to the contrary notwithstanding, (x) any insolvency,
bankruptcy, reorganization or similar proceeding by or against Old Dominion
or any other Person, (xi) any Lien of any Person with respect to Clover Unit 2,
the Clover Real Estate, any Component, any other portion of Old Dominion's Unit
2 Interest or any part of the foregoing, (xii) the existence of the
Qualifying Security, the Payment Undertaking Agreement or the Qualifying
Surety Bond (other than to the extent of the Equipment Payments discharged
from any remittance from the Qualifying Security, the Payment Undertaking
Agreement or the Qualifying Surety Bond) or (xiii) any other cause, whether
similar or dissimilar to the foregoing, any present or future law
notwithstanding, except as set forth herein or in any other Operative Documents,
it being the intention of the parties hereto that all Equipment Payments
payable by Old Dominion hereunder shall continue to be payable in all events in
the manner and at times provided for herein. Such Equipment Payments shall not
be subject to any abatement and the payments thereof shall not be subject
to any setoff or reduction for any reason whatsoever, including any present
or future claims of Old Dominion against the Facility Owner or any other Person
under this Operating Equipment Agreement or otherwise. To the extent
permitted by Applicable Law, Old Dominion hereby waives 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 Operating
Equipment Agreement with respect to the Equipment Interest, except in accordance
with Sections 10, 13, 14, 15 or 18. If for any reason whatsoever this Operating
Equipment Agreement shall be terminated in whole or in part by operation of law
or otherwise, except as specifically provided herein, Old Dominion nonetheless
agrees to the extent permitted by Applicable Law, to pay to the Facility Owner
an amount equal to each installment of Basic Payment and all Supplemental
Payments due and owing, at the time such payment would have become due and
payable in accordance with the terms hereof had this Operating Equipment
Agreement not been so terminated. Nothing contained herein shall be construed to
waive any claim which Old Dominion might have under any of the Operative
Documents or otherwise or to limit the right of Old Dominion to make any claim
it might have against the Facility Owner or any other Person or to pursue such
claim in such manner as Old Dominion shall deem appropriate.
SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC.
SECTION 10.1 EVENTS OF LOSS. Old Dominion will notify the Facility
Owner, the Owner Participant and the Agent of any damage to Clover Unit 2, which
Old Dominion reasonably anticipates may cause Clover Unit 2 to be out of service
for at least 18 months or any seizure, expropriation, condemnation or
requisition of title to, or use of, Clover Unit 2. Upon the occurrence of an
Event of Loss described in clause (i), (ii), (iii) or (v) of the definition of
Event of Loss of which it is aware, Old Dominion shall notify the Facility
Owner, the Owner Participant and the Agent promptly but in any event within 30
days of such Event. The Owner Participant or the Facility Owner will promptly
notify Old Dominion of any event of which it is aware that upon election of the
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Owner Participant would result in an Event of Loss described in clause (iv) or
(vi) of the definition of Event of Loss. If an Event of Loss described in
clauses (i), (ii) or (iii) of the definition of Event of Loss shall occur, then
no later than six months following such occurrence Old Dominion shall notify
the Facility Owner in writing of its election to either (a) if no Event of
Default has occurred and is continuing and subject to the satisfaction of
the conditions set forth in Section 10.3, replace Clover Unit 2 in accordance
with the provisions of the Clover Agreements with a similar facility having
a fair market value (present and residual), remaining useful life and
utility at least equal to that of Clover Unit 2 prior to such
replacement, assuming Clover Unit 2 was in the condition and repair required to
be maintained by this Operating Equipment Agreement and the Operating Foundation
Agreement or (b) terminate this Operating Equipment Agreement and the Operating
Foundation Agreement pursuant to Section 10.2 hereof and Section 10.2 thereof.
Old Dominion may elect the option provided in clause (b) of the preceding
sentence regardless of whether Clover Unit 2 is to be replaced. If Old Dominion
fails to make an election as provided above, an Event of Loss shall be deemed to
occur as of the end of the six month period referred to in the fourth sentence
of this Section 10.1.
SECTION 10.2 PAYMENT OF TERMINATION VALUE; TERMINATION OF EQUIPMENT
PAYMENTS. (a) If (w) Old Dominion shall elect not to replace Clover Unit 2
pursuant to Section 10.3 hereof following an Event of Loss described in clause
(i), (ii) or (iii) of the definition of Event of Loss or an Event of Loss shall
be deemed to occur pursuant to the last sentence of Section 10.1, (x) an Event
of Loss described in clause (iv) of the definition of Event of Loss shall occur,
or (y) an Event of Loss described in clause (v) of the definition of Event of
Loss shall occur, then, on the next Termination Date following Old Dominion's
notice of its election referred to in the second sentence of Section 10.1 in the
case of clause (w) above, and on the next Termination Date occurring at least
three months after such occurrence in the case of clause (x) or (y) above, Old
Dominion shall terminate this Operating Equipment Agreement and pay to the
Facility Owner (A) the Termination Value determined as of the relevant
Termination Date, plus (B) all amounts of Supplemental Payments (including,
without limitation, all costs and expenses of the Facility Owner, the Owner
Trustee, the Owner Participant, the Agent and the Lenders, and all sales, use,
value added and other Taxes required to be indemnified by Old Dominion pursuant
to Section 8.2 of the Participation Agreement, associated with the exercise of
the termination option pursuant to this Section 10.2) due and payable on or
prior to such Termination Date, plus (C) any unpaid Basic Payment due before
such Termination Date and, if such Termination Date shall be a Payment Date, the
Basic Payment (to the extent payable in arrears) due and payable on such Payment
Date. If an Event of Loss described in clause (vi) of the definition of Event of
Loss shall occur, then on the next Termination Date occurring at least 30 days
following such Event of Loss Old Dominion shall terminate this Operating
Equipment Agreement and pay to the Facility Owner (X) an amount equal to the sum
of the outstanding balance of the Loan Certificates and the proceeds of the
Qualifying Security, plus (Y) all amounts of Supplemental Payments (including,
without limitation, all costs and expenses of the Facility Owner, the Owner
Trustee, the Owner Participant, the Agent and the Lenders, and all sales, use,
value added and other Taxes required to be indemnified by Old Dominion pursuant
to Section 8.2 of the Participation Agreement associated with the exercise of
the termination option pursuant to this Section 10.2) due and payable on or
prior to such Termination Date, plus (Z) any unpaid Basic Payment due before
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such Termination Date and, if such Termination Date shall be a Payment Date,
the Basic Payment (to the extent payable in arrears) due and payable on such
Payment Date. In connection with Old Dominion's payment contemplated by
the preceding sentence, Old Dominion, at the option of the Facility Owner,
shall either liquidate the Qualifying Security and remit the proceeds to the
Facility Owner or deliver the bonds or other securities in the Qualifying
Security to the Facility Owner in satisfaction of Old Dominion's obligation
to pay the proceeds of the Qualifying Security.
(b) Concurrently with the payment of all sums required to be
paid pursuant to this Section 10.2 and Section 10.2 of the Operating Foundation
Agreement, (1) Basic Payments for the Equipment Interest shall cease to accrue,
(2) Old Dominion shall cease to have any liability to the Facility Owner with
respect to the Equipment Interest except for Supplemental Payment obligations
(including, without limitation, those under Sections 8.1 and 8.2 of the
Participation Agreement and the Tax Indemnity Agreement) surviving pursuant to
the express provisions of any Operative Document or which have otherwise accrued
but not been paid as of such Termination Date, (3) the Facility Owner will
prepay the Loan Certificates pursuant to Section 2.10 of the Loan Agreement, (4)
the Facility Owner will at Old Dominion's cost and expense execute and deliver
to Old Dominion a release or termination of this Operating Equipment Agreement,
(5) the Facility Owner shall transfer the Facility Owner's Unit 2 Interest to
Old Dominion pursuant to this Section 10.2 and Section 10.2 of the Operating
Foundation Agreement, Section 10 of the Ground Lease and Sublease and Section
10.1 of each of the Head Agreements on an "as is", "where is" and "with all
faults" basis, without representations or warranties other than a warranty as to
the absence of Facility Owner's Liens and Owner Participant's Liens and (6) this
Operating Equipment Agreement shall terminate and Old Dominion shall, assuming
the Facility Owner and the Owner Participant are in compliance with all of their
obligations under the Operative Documents, cause the Agent to discharge the
Liens of the Loan Agreement and the Leasehold Mortgage and to execute,
acknowledge and deliver (and file and record where appropriate) appropriate
releases and all other documents or instruments necessary or desirable to effect
the foregoing, all in form and substance reasonably satisfactory to the Facility
Owner and at the cost and expense of Old Dominion.
(c) Any payments with respect to the Equipment Interest
received at any time by the Facility Owner, the Owner Trustee or Old Dominion
from any Governmental Entity as a result of the occurrence of an Event of Loss
described in clause (iii) of the definition of Event of Loss shall be applied as
follows:
(i) so much of such payments as shall not exceed the
amount required to be paid by Old Dominion pursuant to clause
(A) of paragraph (a) of this Section 10.2 shall be applied in
reduction of Old Dominion's obligation to pay such amount if
not already paid by Old Dominion or, if already paid by Old
Dominion, shall be applied to reimburse Old Dominion for its
payment of such amount; and
(ii) the balance, if any, of such payments remaining
thereafter shall be apportioned between the Facility Owner
and Old Dominion in the proportion that the value of the
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Facility Owner's Unit 2 Interest bears to the value of Old
Dominion's Unit 2 Interest.
If the Indenture Trustee shall receive any payments with
respect to the Equipment Interest from any Governmental Entity as a result of
the occurrence of an Event of Loss described in clause (iii) of the definition
of Event of Loss, Old Dominion shall pay to the Facility Owner an amount equal
to the amount that would have been payable to the Facility Owner under clause
(ii) of this paragraph (c) had such payments been made to Old Dominion.
SECTION 10.3 REPLACEMENT. Old Dominion's right to replace Clover Unit 2
pursuant to clause (a) of Section 10.1 hereof shall be subject to the
fulfillment, at Old Dominion's sole cost and expense, in addition to the
conditions contained in said clause (a) and the conditions contained in Section
10.3 of the Operating Foundation Agreement, of the following conditions:
(a) on the date Old Dominion shall notify the Facility Owner
of its election to replace Clover Unit 2 pursuant to
Section 10.1, Old Dominion shall deliver to the Facility
Owner and the Owner Participant a tax opinion of counsel,
such counsel and its opinion to be reasonably
satisfactory to the Facility Owner and the Owner
Participant, to the effect that, assuming the proposed
replacement is completed in the manner and within the
time proposed, such replacement will not adversely affect
the federal income tax consequences of the transaction
contemplated by the Operative Documents to the Owner
Participant, the Facility Owner or any Affiliate, such
opinion to take into account any payments made by Old
Dominion (in its discretion) to reimburse any of such
Persons for any loss of Tax Benefits;
(b) Old Dominion shall cause the replacement of Clover Unit 2
to commence as soon as practicable after the occurrence
of such Event of Loss and in all events within 24 months
of the occurrence of the event that caused such Event of
Loss and will cause work on such replacement to proceed
diligently thereafter. As the replacement of Clover Unit
2 progresses, title to an undivided interest in such
replaced facilities (i) which are replacements of the
Retained Assets shall immediately vest in Old Dominion
and Virginia Power as tenants-in-common, and (ii) which
are replacements of Pollution Control Assets shall
immediately vest in the Pollution Control Assets Lessor
and Virginia Power as tenants-in-common, subject to the
Lien of the Old Dominion Indenture and, if such
facilities are replacements of Pollution Control Assets,
the Pollution Control Assets Lease, and an undivided
interest equal to the Facility Owner's Percentage in such
replaced facilities corresponding to the Unit 2 Equipment
and the Common Facilities Equipment shall become subject
to the Head Equipment Agreement and to this Operating
Equipment Agreement, automatically, for all purposes
hereof, without any further act by any Person;
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(c) on the date of the completion of such replacement of
Clover Unit 2 (the "Replacement Closing Date") the
following documents shall have been duly authorized,
executed and delivered and, if appropriate, filed for
recordation by the respective party or parties thereto
and shall be in full force and effect, and an executed
counterpart of each thereto shall be delivered to the
Facility Owner and the Owner Participant: (1) supplements
to the Head Equipment Agreement and this Operating
Equipment Agreement, subjecting an undivided interest
equal to the Facility Owner's Percentage in the replaced
facilities to the Head Equipment Agreement and this
Operating Equipment Agreement (with no change in Head
Equipment Agreement Basic Consideration or Basic Payments
as a result of such replacement), (2) supplements to the
Loan Agreement and the Leasehold Mortgage subjecting the
Facility Owner's Unit 2 Interest in such replaced
facilities to the Liens of the Loan Agreement and the
Leasehold Mortgage, (3) supplements to the Clover
Operating Agreement and the Operating Agency Agreement as
are necessary to subject the replaced facilities to the
Clover Operating Agreement and the Operating Agency
Agreement, (4) such recordings and filings as may be
reasonably requested by the Owner Participant or the
Agent to be made or filed in such public offices as are
necessary, (5) an opinion of counsel of Old Dominion,
such counsel and such opinion to be reasonably
satisfactory to the Owner Participant and the Agent, to
the effect that (w) the supplements to the Head Equipment
Agreement and this Operating Equipment Agreement referred
to in clause (1) above constitute effective instruments
for subjecting such replaced facilities to the Head
Equipment Agreement and this Operating Equipment
Agreement, (x) the supplements to the Loan Agreement and
the Leasehold Mortgage referred to in clause (2) above
constitute effective instruments for subjecting the
Facility Owner's Unit 2 Interest in such replaced
facilities to the Liens of the Loan Agreement and the
Leasehold Mortgage, (y) all filings and other action
necessary to perfect and protect the Facility Owner's
interest in an undivided interest equal to the Facility
Owner's Percentage in the replaced facilities and to
subject the Facility Owner's Unit 2 Interest in such
replaced facilities to the Liens of the Loan Agreement
and the Leasehold Mortgage have been accomplished, and
(z) such replaced facilities corresponding to the Unit 2
Equipment and the Common Facilities Equipment have been
constructively severed from the Clover Real Estate and,
hence, constitute personal property for purposes of
Virginia law, (6) an appraisal by an Independent
Appraiser, certifying that Clover Unit 2 as so replaced
has a fair market value (present and residual), remaining
useful life and utility at least equal to Clover Unit 2
prior to the damage or destruction causing the Event of
Loss (assuming Clover Unit 2 was in the condition and
repair required to be maintained by the terms of this
Operating Equipment Agreement and the Operating
Foundation Agreement), (7) a report by an Independent
Engineer certifying that Clover Unit 2 as so replaced is
in a state of repair and condition required by this
Operating Equipment Agreement and the Operating
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Foundation Agreement, (8) an Officer's Certificate of Old
Dominion as to compliance with this Section 10.3 and that
no Event of Default shall have occurred as a result of
the replacement and (9) satisfactory evidence as to the
compliance with Section 11 of this Operating Equipment
Agreement and the Operating Foundation Agreement with
respect to Clover Unit 2, as so replaced;
(d) on the Replacement Closing Date, the Facility Owner shall
receive a valid interest under the Head Equipment
Agreement in all or the portion of Clover Unit 2
replaced, free and clear of Liens other than Permitted
Liens; and
(e) on the Replacement Closing Date, the Facility Owner, the
Owner Participant and the Agent shall have received such
documents and evidence with respect to Old Dominion and
all or the portion of Clover Unit 2 replaced as the
Facility Owner, the Owner Participant and the Agent may
request in order to establish the consummation of the
transactions contemplated by this Section 10.3 and
Section 10.3 of the Operating Foundation Agreement, the
taking of all necessary action in connection therewith
(including the receipt of all relevant licenses, permits,
approvals and consents of all Governmental Entities), and
compliance with all conditions set forth in this Section
10.3 and in Section 10.3 of the Operating Foundation
Agreement, in each case in form and substance reasonably
satisfactory to the Facility Owner, the Owner Participant
and the Agent.
Whether or not the transactions contemplated by this Section 10.3 are
consummated, Old Dominion agrees to pay or reimburse, on an After-Tax Basis, any
costs or expenses (including reasonable legal fees and expenses) incurred by the
Facility Owner, the Owner Trustee, the Owner Participant, the Lenders or the
Agent in connection with the transactions contemplated by this Section 10.3.
SECTION 10.4 EMINENT DOMAIN. In the event that during the Term the use
of all or any portion of the Equipment Interest is requisitioned or taken by or
pursuant to a request of any Governmental Entity under the power of eminent
domain or otherwise for a period which does not constitute an Event of Loss, Old
Dominion's obligation to pay all installments of Basic Payments shall continue
for the duration of such requisitioning or taking. Old Dominion shall be
entitled to receive and retain for its own account all sums payable for any such
period by such Governmental Entity as compensation for such requisition or
taking of possession. Any amount referred to in this Section 10.4 which is
payable to Old Dominion shall not be paid to Old Dominion, or if it has been
previously paid directly to Old Dominion, shall not be retained by Old Dominion,
if at the time of such payment a Payment Default or Event of Default shall have
occurred and be continuing, but shall be paid to and held by the Facility Owner
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as security for the obligations of Old Dominion under this Operating Equipment
Agreement, and upon the earlier of (a) 180 days after the Facility Owner
shall have received such amount; PROVIDED the Facility Owner has not proceeded
to exercise any remedy under Section 17 and it is not stayed or prevented
by law or otherwise from exercising such remedy and (b) such time as there
shall not be continuing any such Payment Default or Event of Default, such
amount shall be paid to Old Dominion.
SECTION 11. INSURANCE.
(a) Subject to paragraph (b), Old Dominion shall procure at its own
expense and maintain or cause to be maintained in full force and effect:
(i) workers' compensation insurance as required by Applicable
Law and, to the extent applicable, Longshoremen's and Harbor Workers'
Compensation Act insurance including, without limitation, employer's
liability insurance with a limit of not less than $25,000,000
(including coverage under any applicable excess umbrella liability
policy) per occurrence and in the aggregate amount where applicable;
(ii) commercial general liability insurance with (A)
Associated Electric & Gas Insurance Services Limited or (B) other
insurance carriers having a reported policyholder surplus of
$50,000,000 or more, and, if rated by A.M. Best Company having a Best
rating of at least A-VII or better (except for policies underwritten by
Lloyd's of London and other companies reasonably acceptable to the
Facility Owner), against premises and operations claims for bodily
injury (including death) and property damage to third parties. Such
insurance shall provide blanket contractual liability, broad form
property damage and personal injury coverage with no less than
$25,000,000 per occurrence/aggregate (including coverage under any
applicable excess umbrella liability policy);
(iii) business automobile liability insurance against claims
for bodily injury (including death) and property damage covering all
owned, leased, non-owned and hired motor vehicles, in an amount not
less than $20,000,000 (including coverage under any applicable excess
umbrella liability policy) minimum limit per occurrence for combined
bodily injury and property damage and in the aggregate where
applicable; and
(iv) property damage insurance on a basis as required under,
and to the extent required by, the Old Dominion Indenture and the
Clover Agreements, in any event consistent with prudent industry
standards and risk management practices and taking into account Old
Dominion's business operations, capital structure, financial condition
and risk management policies. Old Dominion shall at all times actively
and prudently pursue its rights conferred by Article 4 and 9 of the
Clover Operating Agreement to cause the Clover Unit 2 Operator to
maintain property damage insurance meeting the criteria of the
preceding sentence.
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(b) All policies of insurance maintained pursuant to clauses (i) and
(iv) of paragraph (a) of this Section 11 shall be with insurance carriers having
a reported policyholder surplus of $50,000,000 or more and, if rated by A.M.
Best Company having a Best rating of at least A-VII or better (except for
policies underwritten by Lloyd's of London and other companies reasonably
acceptable to the Facility Owner). Old Dominion's obligation to maintain
liability insurance in the amounts set forth in clause (ii) of paragraph (a) of
this Section 11 shall be subject to the availability of such insurance in such
amounts on commercially reasonable terms. If such amounts are not available on
commercially reasonable terms, Old Dominion shall maintain such liability
insurance in the amount then indicative of prudent industry standards taking
into account Old Dominion's business operations, capital structure, financial
condition and risk management policies but, in no event in amounts per
occurrence less than or on terms less beneficial to the insureds than liability
insurance maintained by Old Dominion in respect of other coal-fired generating
units owned or leased by Old Dominion for which Old Dominion has the ability to
determine liability insurance amounts and provisions. If Old Dominion maintains
any such coverage on a "claims made" basis, it shall cause any such coverage to
remain in effect for a period of two years after the earlier of the termination
of such insurance coverage or the termination of this Operating Equipment
Agreement. Old Dominion will periodically review the liability and property
insurance maintained by it or on its behalf and will, if necessary, revise such
coverages in order that the liability and property insurance maintained by it or
on its behalf is consistent with that maintained by prudent power producers
similar to Old Dominion taking into account Old Dominion's business operations,
capital structure, financial condition and risk management policies, subject to
the availability of such insurance in such amounts on commercially reasonable
terms.
(c) All policies of insurance required to be maintained pursuant to
clause (ii) of paragraph (a) of this Section 11 shall within 90 days of the
Closing Date, (i) provide that there shall be no recourse against the Facility
Owner, the Owner Trustee, the Owner Participant, the Agent and the Lenders for
payment of premiums, commissions, assessments or calls or other amounts with
respect thereto, (ii) provide the Facility Owner, the Owner Trustee, the Owner
Participant, the Agent and the Lenders with at least 60 days' (or 10 days' in
the case of nonpayment of premiums) prior written notice of reduction in
coverage or amount (other than a reduction in coverage or amount resulting from
a payment thereunder), cancellation or non-renewal of any policy, (iii) waive
the right of subrogation of the insurers against the Facility Owner, the Owner
Trustee, the Owner Participant, the Agent and the Lenders, (iv) provide that the
insurance be primary and not excess to or contributory to any insurance or
self-insurance maintained by the Facility Owner, the Owner Trustee, the Owner
Participant, the Agent and the Lenders, and (v) insure the interest of the
Facility Owner, the Owner Trustee, the Owner Participant, the Agent and the
Lenders regardless of any breach or violation by Old Dominion, Virginia Power or
others of warranties, declarations or conditions contained in such policies, any
action or inaction of Old Dominion or others, or any foreclosure relating to
Clover Unit 2 or any change in ownership of all or any portion of Clover Unit 2.
All liability policies required to be maintained pursuant to this Section 11
shall (x) name the Facility Owner, the Owner Trustee, the Owner Participant, the
Agent and the Lenders as additional insureds, (y) include a severability of
interest or cross liability clause, and (z) waive the right of subrogation of
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the insurers against the Facility Owner, the Owner Trustee, the Owner
Participant, the Agent and the Lenders.
(d) Old Dominion will advise the Facility Owner, the Owner Trustee, the
Owner Participant, the Agent and the Lenders in writing promptly after obtaining
Actual Knowledge thereof of any default in the payment of any premium and any
other act or omission on the part of Old Dominion or others which might
invalidate or render unenforceable, in whole or in part, any insurance required
to be maintained pursuant to paragraph (a) of this Section 11 hereof.
(e) Within 30 days of each fiscal year of Old Dominion, Old Dominion
will provide the Facility Owner, the Owner Trustee, the Owner Participant and
the Agent with a certificate of insurance of Watson Wyatt Worldwide or an
independent insurance broker or consultant of recognized standing in Virginia
(i) setting forth the carriers with which the liability insurance required by
this Section 11 is maintained, (ii) to the effect that such insurance complies
with this Section 11, and (iii) to the effect that all premiums in respect of
such insurance have been paid.
(f) In the event Old Dominion fails to take out or maintain insurance
coverage required by this Section 11, the Facility Owner, upon 30 days' prior
written notice (unless the aforementioned insurance would lapse within such
period, in which event notice should be given as soon as reasonably possible) to
Old Dominion of any such failure, may (but shall not be obligated to) take out
the required policies of insurance and pay the premiums on the same in
accordance with Section 20.
(g) At any time the Facility Owner (either directly or in the name of
the Owner Participant) may at its own expense and for its own account carry
insurance with respect to its interest in the Equipment Interest; PROVIDED, that
such insurance does not in any way interfere with Old Dominion's ability to
obtain insurance with respect to the Equipment Interest described in paragraph
(a) of this Section 11. Any insurance payments received from policies maintained
by the Facility Owner pursuant to the previous sentence shall be retained by the
Facility Owner without reducing or otherwise affecting Old Dominion's
obligations hereunder.
(h) As soon as practical after the effective date of the property
damage insurance policy or policies obtained by the Clover Unit 2 Operator for
Clover Unit 2 for property damage insurance subsequent to the commercial
operation of Clover Unit 1, Old Dominion will provide the Owner Participant with
a written description of the insurance coverages then maintained for Clover Unit
2 and a certificate of Old Dominion to the effect that (i) it has pursued its
rights under Articles 7 and 9 of the Clover Operating Agreement to cause such
insurance coverage to comply with the provisions of paragraph (a) of this
Section 11 and (ii) the insurance maintained in respect of Clover Unit 2
complies with this Section 11.
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SECTION 12. INSPECTION.
During the Term, at such times as reasonably requested, each of the
Owner Participant, the Facility Owner, the Owner Trustee, the Agent, each Lender
and their representatives may, at reasonable times, on reasonable notice to Old
Dominion and the Clover Unit 2 Operator and at their own risk and expense
(except, at the expense, but not risk, of Old Dominion when an Event of Default
has occurred and is continuing), inspect Clover Unit 2 and the Clover Real
Estate; PROVIDED, HOWEVER, that any such inspection will not interfere with the
Co-Owners' normal commercial operation of Clover Unit 2 and will be in
accordance with Old Dominion's and the Clover Unit 2 Operator's safety and
insurance programs.
SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS.
SECTION 13.1 ELECTION TO TERMINATE. After the occurrence and during the
continuance of any of the events specified below, Old Dominion shall have the
right, at its option, so long as no Event of Default shall have occurred and be
continuing, upon at least 30 days' (one day's in the case of a Burdensome Tax
Law Change) prior written notice to the Facility Owner, the Owner Trustee, the
Owner Participant and the Agent to terminate this Operating Equipment Agreement
on the Termination Date specified in such notice (which shall be a date
occurring not more than 90 days after such notice in the case of the events
described in clauses (a) and (b) below and a date occurring not more than three
days after such notice in the case of an event described in clause (c) below)
if:
(a) it shall have become illegal for Old Dominion to continue
this Operating Equipment Agreement or the Operating Foundation
Agreement or for Old Dominion to make payments under this Operating
Equipment Agreement or the Operating Foundation Agreement and the
transactions contemplated by the Operative Documents cannot be
restructured in a manner reasonably acceptable to the Transaction
Parties;
(b) one or more events outside the control of Old Dominion
shall have occurred which, in the reasonable judgment of Old Dominion,
will give rise to an obligation by Old Dominion to pay or indemnify in
respect of Section 8.1 or 8.2 of the Participation Agreement or the Tax
Indemnity Agreement; PROVIDED, HOWEVER, that (i) the indemnity
obligation (and the underlying cost or Tax) can be avoided in whole or
in part by such termination and (ii) the amount of such avoided
payments would exceed (on a present value basis, discounted annually at
the Debt Rate, to the date of the termination) 2.5 percent of the sum
of the Equipment Interest Cost and the Foundation Interest Cost. If the
Owner Participant shall waive its right to amounts of indemnification
payments in respect of Section 8.1 or 8.2 of the Participation
Agreement or the Tax Indemnity Agreement in excess of such amount as to
cause such avoided payments, computed in accordance with the preceding
sentence, not to exceed 2.5 percent of the sum of the Equipment
Interest Cost and the Foundation Interest Cost, no such termination
option in favor of Old Dominion shall exist; or
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(c) a Burdensome Tax Law Change shall occur.
If Old Dominion does not give notice of its exercise of the termination option
under this Section 13.1 within six months (two days in the case of an event
described in clause (c) above) of the date Old Dominion receives notice or
Actual Knowledge of the event or condition described above, Old Dominion will
lose its rights to terminate this Operating Equipment Agreement pursuant to this
Section 13.1 as a result of such event or condition. Old Dominion shall be
permitted to exercise the option provided by this Section 13.1 only if it shall
simultaneously exercise the termination option provided by Section 13.1 of the
Operating Foundation Agreement.
SECTION 13.2 PROCEDURE FOR EXERCISE OF TERMINATION OPTION. If Old
Dominion shall have exercised its option under Section 13.1, on the Termination
Date specified in Old Dominion's notice of such exercise, Old Dominion shall pay
to the Facility Owner (a) (i) in the case of an event specified in clause (a) or
(b) of Section 13.1, the higher of Fair Market Sales Value of the Facility
Owner's Unit 2 Interest allocated to the Equipment Interest in accordance with
the definition of Fair Market Sales Value and Termination Value, determined as
of such Termination Date, and (ii) in the case of an event specified in clause
(c) of Section 13.1, the Burdensome Tax Law Change Value, plus (b) all amounts
of Supplemental Payments (including all costs and expenses of the Facility
Owner, the Owner Trustee, the Owner Participant, the Agent and the Lenders and
all sales, use, value added and other Taxes covered by Section 8.2 of the
Participation Agreement associated with the exercise of the termination option
pursuant to this Section 13) due and payable on or prior to the Termination Date
and (c) any unpaid Basic Payments due before such Termination Date and, if such
Termination Date shall be a Payment Date, the Basic Payment (to the extent
payable in arrears) due and payable on such Payment Date. Concurrently with the
payment of all sums specified in this Section 13.2 and Section 13.2 of the
Operating Foundation Agreement, (1) Basic Payments for the Equipment Interest
shall cease to accrue, (2) Old Dominion shall cease to have any liability to the
Facility Owner with respect to the Equipment Interest, except for Supplemental
Payment obligations (including those under Sections 8.1 and 8.2 of the
Participation Agreement and the Tax Indemnity Agreement) surviving pursuant to
the express terms of any Operative Document or which have otherwise accrued but
not been paid as of the Termination Date, (3) the Facility Owner will prepay the
Loan Certificates pursuant to Section 2.10 of the Loan Agreement, (4) the
Facility Owner will execute and deliver to Old Dominion to be prepared (and
where appropriate recorded and filed), at Old Dominion's cost and expense, a
release or termination of this Operating Equipment Agreement and the Operating
Foundation Agreement, (5) the Facility Owner will transfer, pursuant to this
Section 13.2 and Section 13.2 of the Operating Foundation Agreement, Section 10
of the Ground Lease and Sublease and Section 10.1 of each of the Head
Agreements, the Facility Owner's Unit 2 Interest to Old Dominion on an "as is",
"where is" and "with all faults" basis, without representations or warranties
other than a warranty as to the absence of Facility Owner's Liens and Owner
Participant's Liens and (6) this Operating Equipment Agreement shall terminate
and, assuming the Facility Owner and the Owner Participant have complied with
all of their obligations under the Operative Documents, Old Dominion shall cause
the Agent to discharge the Liens of the Loan Agreement and the Leasehold
Mortgage and to execute, acknowledge and deliver, and record and file (as
appropriate), appropriate releases and all other documents or instruments
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necessary or desirable to effect the foregoing, all in form and substance
reasonably satisfactory to the Facility Owners and Old Dominion, at the cost
and expense of Old Dominion.
SECTION 14. TERMINATION FOR OBSOLESCENCE.
SECTION 14.1 TERMINATION. Upon 270 days' prior written notice to the
Facility Owner, the Owner Participant and the Agent, which notice shall contain
a certification by the Board of Directors of Old Dominion that Clover Unit 2 is
economically or technologically obsolete or that Clover Unit 2 is surplus to Old
Dominion's needs, Old Dominion shall have the option, so long as no Payment
Default or Event of Default shall have occurred and be continuing, to terminate
this Operating Equipment Agreement on any Termination Date occurring on or after
the fifth anniversary of the Closing Date (the "Obsolescence Termination Date")
on the terms and conditions set forth in this Section 14. Any termination of
this Operating Equipment Agreement pursuant to this Section 14 shall be
permitted only in conjunction with a simultaneous termination of the Operating
Foundation Agreement pursuant to Section 14 thereof.
SECTION 14.2 SOLICITATION OF OFFERS. If Old Dominion shall give the
Facility Owner notice pursuant to Section 14.1 and the Facility Owner shall not
have elected to retain the Equipment Interest and the Foundation Interest
pursuant to Section 14.3 hereof and Section 14.3 of the Operating Foundation
Agreement, respectively, Old Dominion may, as non-exclusive agent for the
Facility Owner, use its best efforts to obtain bids for the cash purchase of the
Facility Owner's Unit 2 Interest. The Facility Owner shall also have the right
to obtain bids for the cash purchase of the Facility Owner's Unit 2 Interest
either directly or through agents other than Old Dominion. Old Dominion shall
certify to the Facility Owner within five days after Old Dominion's receipt of
each bid or offer (and in any event prior to the Obsolescence Termination Date)
the amount and terms thereof and the name and address of the party (which shall
not be Old Dominion, any member cooperative of Old Dominion or any Affiliate of
any thereof) submitting such bid or offer.
SECTION 14.3 RIGHT OF FACILITY OWNER TO RETAIN THE EQUIPMENT INTEREST.
The Facility Owner may irrevocably elect to retain, rather than sell, the
Equipment Interest, by giving notice to Old Dominion at least 90 days prior to
the Obsolescence Termination Date, PROVIDED that the Facility Owner shall
simultaneously elect to retain the Foundation Interest pursuant to Section 14.3
of the Operating Foundation Agreement. If the Facility Owner elects to retain
the Equipment Interest pursuant to this Section 14.3, on the Obsolescence
Termination Date (a) Old Dominion shall pay to the Facility Owner all
Supplemental Payments (including all costs and expenses of the Facility Owner,
the Owner Trustee, the Owner Participant, the Agent and the Lenders and all
sales, use, value added and other Taxes covered by Section 8.2 of the
Participation Agreement associated with the exercise of the termination option
pursuant to this Section 14.3) due and payable on such Obsolescence Termination
Date and (b) Old Dominion shall pay to the Facility Owner any unpaid Basic
Payment due before such Obsolescence Termination Date and, if such Obsolescence
Termination Date shall be a Payment Date, the Basic Payment (to the extent
payable in arrears) due and payable on such Payment Date, but shall not be
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required to pay Termination Value. Concurrently with the payment of all sums
required to be paid pursuant to this Section 14.3 and Section 14.3 of the
Operating Foundation Agreement (i) Basic Payments for the Equipment Interest
shall cease to accrue, (ii) Old Dominion shall cease to have any liability
hereunder to the Facility Owner with respect to the Equipment Interest, except
for Supplemental Payment obligations (including, without limitation, those under
Sections 8.1 and 8.2 of the Participation Agreement and the Tax Indemnity
Agreement) surviving pursuant to the express terms of any Operative Document or
which have otherwise accrued but not been paid as of such Obsolescence
Termination Date, (iii) the Facility Owner shall pay all principal and accrued
interest on the Loan Certificates, (iv) Old Dominion will return the Equipment
Interest to the Facility Owner in accordance with paragraphs (a), (b), (c), (d),
(e) and (f) of Section 5.2 and Section 5.3, and (v) this Operating Equipment
Agreement shall terminate and, assuming the Facility Owner and the Owner
Participant have complied with all of their obligations under the Operative
Documents, Old Dominion shall cause the Agent to discharge the Liens of the Loan
Agreement and the Leasehold Mortgage and to execute and deliver appropriate
releases and all other documents or instruments necessary or desirable to effect
the foregoing, all at the cost and expense of Old Dominion.
SECTION 14.4 PROCEDURE FOR EXERCISE OF TERMINATION OPTION. If the
Facility Owner has not elected to retain the Equipment Interest and the
Foundation Interest in accordance with Section 14.3 hereof and Section 14.3 of
the Operating Foundation Agreement, respectively, on the Obsolescence
Termination Date the Facility Owner shall sell the Facility Owner's Unit 2
Interest under this Section 14.4, Section 14.4 of the Operating Foundation
Agreement, Section 2.5 of the Ground Lease and Sublease and Section 6.4 of each
of the Head Agreements to the bidder or bidders (which shall not be Old Dominion
or a cooperative member of Old Dominion or any Affiliate thereof), that shall
have submitted the highest net cash bid or bids with respect to the Facility
Owner's Unit 2 Interest before the Obsolescence Termination Date, and Old
Dominion shall certify to the Facility Owner and the Owner Participant that such
buyer is not Old Dominion or a cooperative member of Old Dominion or any
Affiliate thereof. On the Obsolescence Termination Date, Old Dominion shall pay
to the Facility Owner (a) the excess, if any, of Termination Value determined as
of such Obsolescence Termination Date over the total sale price for the Facility
Owner's Unit 2 Interest allocated to the Equipment Interest in accordance with
the definition of Fair Market Sales Value paid to or retained by the Facility
Owner, after deducting from the sale price the expenses, if any, incurred by the
Facility Owner and the Owner Participant in connection with such sale, (b) any
unpaid Basic Payment due before such Obsolescence Termination Date and, if such
Obsolescence Termination Date shall be a Payment Date, any Basic Payment (to the
extent payable in arrears) due and payable on such Payment Date, plus (c) all
amounts of Supplemental Payments (including all costs and expenses of the
Facility Owner, the Owner Trustee, the Owner Participant, the Agent and the
Lenders and all sales, use, value added and other Taxes covered by Section 8.2
of the Participation Agreement associated with the exercise of the termination
options pursuant to this Section 14 and Section 14 of the Operating Foundation
Agreement) due and payable on such Obsolescence Termination Date. Concurrently
with the payment of all sums required to be paid pursuant to this Section 14.4
and Section 14.4 of the Operating Foundation Agreement, (i) Basic Payments for
the Equipment Interest shall cease to accrue, (ii) Old Dominion shall cease to
have any liability hereunder to the Facility Owner with respect to the Equipment
Interest, except for
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Supplemental Payment obligations (including Sections 8.1 and 8.2 of the
Participation Agreement and the Tax Indemnity Agreement) surviving pursuant to
the express terms of any Operative Document or which have otherwise accrued but
not been paid as of such Obsolescence Termination Date, (iii) the Facility Owner
will prepay the Loan Certificates pursuant to Section 2.10 of the Loan
Agreement, (iv) the Facility Owner will transfer (by an appropriate instrument
of transfer in form and substance reasonably satisfactory to the Facility Owner
and prepared and recorded at Old Dominion's expense) the Facility Owner's Unit 2
Interest under this Section 14.4, Section 14.4 of the Operating Foundation
Agreement, Section 2.5 of the Ground Lease and Sublease and Section 6.4 of each
of the Head Agreements to the purchaser on an "as is", "where is" and "with all
faults" basis, without representations or warranties other than a warranty as to
the absence of Facility Owner's Liens or Owner Participant's Liens and (v) this
Operating Equipment Agreement shall terminate and, assuming the Facility Owner
and the Owner Participant have complied with all of their obligations under the
Operative Documents, Old Dominion shall cause the Agent to discharge the Liens
of the Loan Agreement and the Leasehold Mortgage and to execute, acknowledge and
deliver, and record and file (as appropriate), appropriate releases and all
other documents or instruments necessary or desirable to effect the foregoing,
all in form and substance reasonably satisfactory to the Facility Owner and at
the cost and expense of Old Dominion. Unless the Facility Owner shall have
elected to retain the Equipment Interest pursuant to Section 14.3 and the
Foundation Interest pursuant to Section 14.3 of the Operating Foundation
Agreement, Old Dominion may, at its election, revoke its notice of termination
on at least 30 days' prior notice to the Facility Owner, the Owner Trustee, the
Owner Participant and the Agent, in which event this Operating Equipment
Agreement shall continue with respect to the Equipment Interest and the
Operating Foundation Agreement shall continue with respect to the Foundation
Interest; PROVIDED, HOWEVER, that a notice of termination may be revoked on not
more than two occasions during the Term. The Facility Owner shall be under no
duty to solicit bids, to inquire into the efforts of Old Dominion to obtain bids
or otherwise take any action in arranging any such sale of the Facility Owner's
Unit 2 Interest other than, if the Facility Owner has not elected to retain the
Equipment Interest, to transfer the Facility Owner's Unit 2 Interest in
accordance with clause (iv) of the second preceding sentence. If, because of a
default by a prospective purchaser of its obligation to consummate a purchase of
the Facility Owner's Unit 2 Interest no sale shall occur on the Obsolescence
Termination Date, the notice of termination shall be deemed revoked and this
Operating Equipment Agreement shall continue as to the Equipment Interest (and
the Operating Foundation Agreement shall continue as to the Foundation Interest)
in full force and effect in accordance with its terms (without prejudice to Old
Dominion's right to exercise its rights under this Section 14 and Section 14 of
the Operating Foundation Agreement thereafter).
SECTION 15. END OF TERM OPTIONS.
SECTION 15.1 OLD DOMINION'S PURCHASE OPTION. Unless this Operating
Equipment Agreement shall have been previously terminated pursuant to Section
10, 13, 14, 17 or 18 hereof, at any time not more than forty-eight months nor
less than twenty-four months prior to the Expiration Date, Old Dominion shall
have the option, upon giving written notice to the Facility Owner, the Owner
Participant and Virginia Power, to irrevocably elect to purchase the Equipment
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Interest on the Expiration Date for the Purchase Option Price in accordance
with this Section 15.1 (the "Purchase Option"). If Old Dominion shall have
exercised the Purchase Option under this Section 15.1, Old Dominion shall
become unconditionally obligated to pay (a) on the Expiration Date (i) the
initial installment of the Purchase Option Price in the amount of
$324,529,279.82, (ii) all amounts of Supplemental Payments (including, without
limitation, all costs and expenses of the Facility Owner, the Owner Participant,
the Agent and the Lenders and all sales, use, value added and other Taxes
covered by Section 8.2 of the Participation Agreement associated with the
Purchase Option) due and payable on the Expiration Date, and (iii) any unpaid
Basic Payment due before the Expiration Date and the Basic Payment due and
payable on the Expiration Date and (b) subsequent installments of the Purchase
Option Price in the amounts and on the dates set forth below:
Date Amount
- - ---- ------
April 15, 2020 $28,780,326.18
June 15, 2020 $28,780,326.18
September 15, 2020 $28,780,326.18
December 15, 2020 $28,780,326.18
The covenant to pay the subsequent installments of the Purchase Option
Price in accordance with the preceding sentence shall survive the termination of
this Operating Equipment Agreement. Concurrently with the payment of the sums
specified in clause (a) of this Section 15.1 and clause (a) of Section 15.1 of
the Operating Foundation Agreement (w) Basic Payments for the Equipment Interest
shall cease to accrue, (x) Old Dominion shall cease to have any liability to the
Facility Owner with respect to the Equipment Interest, except for Supplemental
Payment obligations (including those under Sections 8.1 and 8.2 of the
Participation Agreement, the Tax Indemnity Agreement and the additional
installments of the Purchase Option Price payable in accordance with the second
sentence of this Section 15.1) surviving pursuant to the express terms of any
Operative Document or which have otherwise accrued but not been paid as of such
Expiration Date, (y) the Facility Owner will, by documents and instruments in
form and substance reasonably satisfactory to the Facility Owner, transfer the
Facility Owner's Unit 2 Interest to Old Dominion in accordance with this Section
15.1 and Section 15.1 of the Operating Foundation Agreement, Section 10 of the
Ground Lease and Sublease and Section 10.1 of each of the Head Agreements on an
"as is", "where is" and "with all faults" basis, without representations or
warranties other than a warranty as to the absence of Facility Owner's Liens or
Owner Participant's Liens and (z) this Operating Equipment Agreement shall
terminate and, assuming the Facility Owner and the Owner Participant have
complied with all of their obligations under the Operative Documents, Old
Dominion shall cause the Facility Owner to discharge the Liens of the Loan
Agreement and the Leasehold Mortgage and to execute and deliver appropriate
releases and all other documents or instruments necessary or desirable to effect
the foregoing, all to be prepared, filed and recorded (as appropriate) at the
cost and expense of Old Dominion. Old Dominion shall be permitted to exercise
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the Purchase Option provided in this Section 15.1 only in connection with its
simultaneous exercise of the Foundation Purchase Option with respect to
the Foundation Interest in accordance with Section 15.1 of the Operating
Foundation Agreement.
SECTION 15.2 FACILITY OWNER'S PREEMPTIVE ELECTION. If (a) this
Operating Equipment Agreement shall not have been previously terminated pursuant
to Section 10, 13, 14, 17 or 18 hereof, (b) Old Dominion shall not have elected
the Purchase Option pursuant to Section 15.1 and (c) Virginia Power shall not
have elected to exercise the purchase option pursuant to Section 6.3 of the Head
Equipment Agreement, the Facility Owner may, at its sole option, make a
preemptive election to require the return of the Equipment Interest by Old
Dominion in accordance with Section 5 of this Operating Equipment Agreement (the
"Preemptive Election"), such election to be made by the Facility Owner
delivering, within nine months following the last date for the exercise by
Virginia Power of the purchase option pursuant to Section 6.3 of the Head
Equipment Agreement, written notice to Old Dominion. If the Facility Owner shall
make the Preemptive Election, on the Expiration Date (t) Old Dominion shall pay
to the Facility Owner all Supplemental Payments (including all costs and
expenses of the Facility Owner, the Owner Trustee, the Owner Participant, the
Agent and the Lenders and all sales, use, value added and other Taxes covered by
Section 8.2 of the Participation Agreement associated with the exercise of the
Preemptive Election pursuant to this Section 15.2) due and payable on the
Expiration Date, (u) Old Dominion shall pay to the Facility Owner any unpaid
Basic Payment due before the Expiration Date, but shall not be required to pay
Termination Value, (v) Old Dominion shall cease to have any liability to the
Facility Owner with respect to the Equipment Interest, except for Supplemental
Payment obligations (including those under Sections 8.1 and 8.2 of the
Participation Agreement and the Tax Indemnity Agreement) surviving pursuant to
the express terms of any Operative Document or which have otherwise accrued but
not been paid as of the Expiration Date, (w) the Facility Owner shall pay all
principal and accrued interest on the Loan Certificates, (x) Old Dominion will
return the Equipment Interest to the Facility Owner in accordance with Section
5, and (y) this Operating Equipment Agreement shall terminate. The Facility
Owner shall be permitted to exercise the Preemptive Election provided in this
Section 15.2 only in connection with its simultaneous exercise of the similar
election with respect to the Foundation Interest in accordance with Section 15.2
of the Operating Foundation Agreement.
SECTION 15.3 OLD DOMINION'S EXERCISE OF SERVICE CONTRACT OPTION.
(a) If (i) this Operating Equipment Agreement shall not have
been previously terminated pursuant to Section 10, 13, 14, 17 or 18
hereof, (ii) Old Dominion shall not have elected the Purchase Option
pursuant to Section 15.1, (iii) Virginia Power shall not have elected
to exercise its purchase option pursuant to Section 6.3 of the Head
Equipment Agreement and (iv) the Facility Owner shall not have elected
the Preemptive Election pursuant to Section 15.2, Old Dominion shall
arrange for an Acceptable Power Purchaser to enter into a Power Sales
Agreement on the Expiration Date in accordance with this Section 15.3
(the "Service Contract Option").
(b) If Old Dominion shall have elected the Service Contract
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Option:
(i) Old Dominion shall arrange for an Acceptable Power
Purchaser to execute and deliver a Power Sales Agreement on
the Expiration Date. Not less than 6 months prior to the
Expiration Date, Old Dominion shall give the Owner
Participant notice of the proposed Power Purchaser, together
with financial and such other information as the Owner
Participant may reasonably request in order to determine
whether such proposed Power Purchaser constitutes an
Acceptable Power Purchaser. Old Dominion will execute and
deliver on the Expiration Date such documents including a
Transmission and Interconnection Agreement, at no cost to the
Facility Owner, as may be necessary to permit the Facility
Owner to deliver electric energy and capacity to the
transmission facilities connected to the Clover Power Station
so that the Facility Owner may arrange delivery thereof to
the Power Purchaser in accordance with the Power Sales
Agreement; and
(ii) The Facility Owner will cooperate with Old Dominion,
and Old Dominion will arrange a New Loan to be made to the
Facility Owner on the Expiration Date, such New Loan to be
substantially in accordance with the terms and conditions set
forth on Schedule 3 hereto. If Old Dominion shall be unable
to arrange a refinancing of the Loan Certificates within nine
months prior to the Expiration Date, the Facility Owner and
the Owner Participant shall have the right to retain an
independent debt placement agent at Old Dominion's expense to
arrange a New Loan. If a New Loan is not arranged, the Owner
Participant will have the right (but not the obligation) to
make the New Loan, in which case the New Loan will reflect a
rate based on prevailing market conditions, the maturity of
the New Loan, the credit risk reflecting the credit rating of
the Power Purchaser, Old Dominion and Virginia Power and the
terms of the Power Purchase Agreements, the Operating Agency
Agreement, the Access and Support Agreement, the Clover
Agreements and other relevant factors. The Facility Owner
will pay the outstanding Loan Certificates at their maturity
on the Expiration Date with the proceeds of the New Loan.
(c) The obligation by the Facility Owner and the Owner
Participant to enter into or accept, as the case may be, a Power Sales Agreement
and to consummate the Service Contract Option shall be subject to the
fulfillment or waiver, on or before the Expiration Date, to the satisfaction of
each such Person of the following conditions precedent (it being understood and
agreed that the agreement of each such Person to the foregoing matters shall not
be subject to such Person's own performance of or compliance with the provisions
hereof):
(i) each such Person shall have received such documents
or other evidence as it shall reasonably have requested with
respect to the prospective Power Purchaser to establish (A)
that such Person meets each of the requirements for an
Acceptable Power Purchaser and (B) the taking of all
requisite corporate or other similar actions and proceedings
in connection therewith;
(ii) each such Person shall have received an opinion of
counsel for the Power Purchaser, which counsel and opinion
shall be reasonably acceptable to each such Person, (A) to
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the effect that the Power Sales Agreement, and each
other agreement to which the Power Purchaser is a party
in connection with such Power Sales Agreement have been
duly authorized, executed and delivered by the Power
Purchaser and constitute the legal, valid and binding
obligations of the Power Purchaser and (B) covering such
other matters incident to such Power Sales Agreement
arrangement as each such Person may reasonably request;
(iii) the Owner Participant shall have received an
opinion from counsel for the Facility Owner, which counsel
and opinion shall be reasonably acceptable to the Owner
Participant, to the effect that (A) the Power Sales Agreement
and each other agreement to which the Facility Owner is a
party in connection with such Power Sales Agreement have been
duly authorized, executed and delivered by the Facility Owner
and constitute legal, valid and binding obligations of the
Facility Owner, and covering such other matters incident to
the transactions contemplated by such Power Sales Agreement
arrangement as the Owner Participant may reasonably request
and (B) the proposed transaction does not constitute a sale
of the Equipment Interest or the Foundation Interest for
federal income tax purposes;
(iv) the Facility Owner and the Owner Participant shall
each have received an opinion from counsel to Old Dominion,
which opinion and counsel shall be reasonably acceptable to
each such Person, to the effect that the Transmission and
Interconnection Agreement and each other agreement to which
Old Dominion is a party in connection with such Power Sales
Agreement have been duly authorized, executed and delivered
by Old Dominion and constitute legal, valid and binding
obligations of Old Dominion and covering such other matters
incident to the transactions contemplated by such Power Sales
Agreement arrangement as the Owner Participant may reasonably
request, and to the effect that by reason of the Facility
Owner entering into or performing its obligations pursuant to
a Power Sales Agreement, neither the Owner Participant, the
Facility Owner nor an Affiliate of either thereof will be in
violation of any Applicable Law or subject to any burdensome
regulation by any Governmental Entity;
(v) the Owner Participant shall have received the
following, in each case in form and substance reasonably
satisfactory to it:
(A) an incumbency certificate of the Power Purchaser
regarding the officers of the Power Purchaser authorized
to execute and deliver the documents referred to in this
Section 15.3 to which it is a party and any other
documents or agreements delivered in connection
therewith;
(B) certified copies of all documents evidencing the
corporate (or similar) actions of the Power Purchaser
including, without limitation, resolutions of the board
of directors of the Power Purchaser duly authorizing the
execution, delivery and performance by the Power
Purchaser of each of the documents referred to in this
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Section 15.3 to which it is a party and the transactions
contemplated thereby;
(C) certified copies of the by-laws and certificate
of incorporation (or comparable organizational or
governing documents) of the Power Purchaser; and
(D) such other agreements, documents, certifications
and opinions as the Owner Participant shall reasonably
determine are necessary or appropriate in connection with
the consummation of such Power Sales Agreement;
(vi) the Power Sales Agreement shall be duly executed and
delivered by the Power Purchaser and shall have been
permitted to become effective or approved by FERC and any
other relevant federal or state regulatory agency or
agencies, if and to the extent required by Applicable Law,
and such other recordings, filings, financing statements,
continuation statements or other instruments shall have been
filed or made and all other actions shall have been taken as
are necessary or desirable in the opinion of the Owner
Participant and the Facility Owner to maintain all of the
Facility Owner's right, title and interest in and to the
Facility Owner's Unit 2 Interest;
(vii) the Minimum Capacity Payments and the Power Sales
Stipulated Loss Values under the Power Sales Agreement shall
have been adjusted upward or downward upon the Expiration
Date in a manner consistent with the methodology and
assumptions originally used in computing such factors and
values to reflect (a) the interest rate on the New Loan, and
(b) any adverse effect on the Owner Participant's
depreciation deductions if the Power Purchaser is a
tax-exempt entity; and
(viii) all other matters and proceedings taken in
connection with such transaction shall be reasonably
satisfactory to the Owner Participant and the Facility Owner.
(d) Old Dominion agrees to pay or reimburse, or cause to be
paid or reimbursed, on an After-Tax Basis, within 30 Business Days of the date
of demand, all costs and expenses, including reasonable legal fees and expenses
incurred by the Facility Owner, any Person making the New Loan on the Expiration
Date and the Owner Participant in connection with the implementation of the
Service Contract Option, whether or not any such transactions are consummated;
PROVIDED, HOWEVER, that, Old Dominion shall not be responsible for any such fees
and expenses incurred by any such Person if such transactions are not
consummated by reason of a breach by any such Person of its obligations
hereunder or under the other Operative Documents.
SECTION 15.4 USE OF PROCEEDS OF QUALIFYING SECURITY. If Old
Dominion shall have paid all other amounts payable by it under the Operative
Documents, it may elect to use the proceeds of the Qualifying Security on the
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Expiration Date to satisfy the balance of its payment obligations under this
Section 15 and Section 15 of the Operating Foundation Agreement.
Notwithstanding the foregoing, if (i) Old Dominion elects the Purchase Option
or (ii) Virginia Power elects to purchase the Equipment Interest and the
Foundation Interest pursuant to Section 6.3 of the Head Equipment
Agreement and the Head Foundation Agreement, respectively, and the Facility
Owner and Virginia Power execute a contract for the sale of the Equipment
Interest and the Foundation Interest pursuant to Section 6.3 of the Head
Equipment Agreement and Section 6.3 of the Head Foundation Agreement, all
unpaid installments of the Purchase Option Price and the Foundation Purchase
Option Price payable by Old Dominion under Section 15.3 or 15.5, as the case may
be, shall be secured by the portion of the Qualifying Security necessary to
satisfy such unpaid installments of the Purchase Option Price and the Foundation
Purchase Option Price.
SECTION 15.5 OBLIGATION TO PAY AMOUNT EQUAL TO PRINCIPAL AND INTEREST
ON LOAN CERTIFICATES UPON VIRGINIA POWER DEFAULT. If (i) Virginia Power shall
elect to purchase the Equipment Interest and the Foundation Interest in
accordance with Section 6.3 of the Head Equipment Agreement and Section 6.3 of
the Head Foundation Agreement, respectively, (ii) the Facility Owner and
Virginia Power shall execute a contract for the sale of the Equipment Interest
and the Foundation Interest to Virginia Power pursuant to Section 6.3 of the
Head Equipment Agreement and Section 6.3 of the Head Foundation Agreement and
(iii) Virginia Power shall default on its obligation to pay the initial
installment of the Purchase Option Price or the Foundation Purchase Option Price
on the Expiration Date pursuant to such purchase contract, Old Dominion shall,
within 30 days of the Expiration Date, pay an amount equal to the installment of
the unpaid portion of the Purchase Option Price and the Foundation Purchase
Option Price due on the Expiration Date, plus interest on such amount at the
Overdue Rate from the Expiration Date to such date of payment. Old Dominion also
agrees to pay any other installments of the Purchase Option Price or the
Foundation Purchase Option Price if not paid by Virginia Power at the time
required by the contract or contracts for sale of the Equipment Interest and the
Foundation Interest, respectively, executed by the Facility Owner and Virginia
Power. Upon payment by Old Dominion of any amount required by this Section 15.5,
Old Dominion shall be subrogated to the rights of the Facility Owner under such
contract for sale with Virginia Power, to the extent of Old Dominion's payment.
In accordance with Section 15.4, Old Dominion may use the proceeds of the
Qualifying Security to satisfy any of its obligations under this Section 15.5.
SECTION 16. EVENTS OF DEFAULT.
The following events shall constitute "Event of Defaults" hereunder
(whether any such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
Governmental Entity):
(a) Old Dominion shall fail to make any payment of Basic
Payment within five Business Days after the same shall have become due;
or
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(b) Old Dominion shall fail to make any payment of
Supplemental Payment (other than the Purchase Option Price), after the
same shall have become due and such failure shall continue unremedied
for a period of 10 Business Days after receipt by Old Dominion of
written notice of such failure from the Facility Owner or the Owner
Participant; or
(c) any representation or warranty made by Old Dominion in
the Operative Documents (other than the Tax Indemnity Agreement) shall
be untrue, inaccurate or misleading in any material respect and, if
capable of remedy, no action to cure has commenced within 30 days after
notice or, if such action has been taken and Old Dominion is diligently
pursuing such cure, such action has not succeeded within a period of
180 days after such notice; or
(d) Old Dominion shall have failed to perform or observe any
material covenant, obligation or agreement to be performed or observed
by it under any Operative Document (other than any covenant, obligation
or agreement contained in the Tax Indemnity Agreement or Section 12 of
the Participation Agreement or any covenants, obligations or agreements
referred to in clauses (a), (b), (e), (f) and (i) of this Section 16 or
clauses (a), (b), (e), (f) and (i) of Section 16 of the Operating
Foundation Agreement) in any material respect and, if capable of
remedy, no action to cure has commenced within 30 days after notice or,
if such action has been taken and Old Dominion is diligently pursuing
such cure, such action has not succeeded within a period of 180 days
after such notice; PROVIDED, HOWEVER, that in the case of Old
Dominion's obligation set forth in clause (c) of Section 7.1 of this
Operating Equipment Agreement, if, to the extent and for so long as a
test, challenge, appeal or proceeding for review of such compliance
shall be prosecuted in good faith by Old Dominion or the Clover Unit 2
Operator under the Clover Agreements, the failure by Old Dominion to
comply with such requirement shall not constitute an Event of Default
hereunder if, but only if, such test challenge, appeal or proceeding
shall not involve any danger of (i) foreclosure, sale, forfeiture or
loss of, or imposition of a Lien on, any part of Clover Unit 2, the
Unit 2 Site or the Common Facilities Site or the impairment of the use,
operation or maintenance of Clover Unit 2, the Unit 2 Site or the
Common Facilities Site in any material respect, or (ii) any criminal
liability being incurred or any material adverse effect on the Facility
Owner, the Owner Trustee, the Owner Participant, the Agent or any
Lender (in each case in the reasonable opinion of such Person)
including, without limitation, subjecting the Facility Owner, the Owner
Trustee, or the Owner Participant to regulation as a public utility
under Applicable Law; and PROVIDED, FURTHER, in the case of Old
Dominion's obligation set forth in clause (c) of Section 7.1 of this
Operating Equipment Agreement, if the noncompliance is not of a type
that can be immediately remedied, the failure to comply shall not be an
Event of Default hereunder if Old Dominion is taking all reasonable
action to remedy such noncompliance and if, but only if, such
noncompliance shall not involve any danger (in each case in the
reasonable opinion of such Person) described in clause (i) or (ii) of
the preceding proviso; and PROVIDED, FURTHER, such noncompliance, or
such test, challenge, appeal or proceeding to review shall not, unless
Old Dominion has irrevocably elected the Purchase Option pursuant to
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Section 15.1, extend beyond a date that is 18 months prior to the
scheduled expiration of the Term; or
(e) Old Dominion shall fail to observe or perform its
obligation to maintain the insurance required by Section 11; or
(f) the Expiration Date shall have occurred and none of the
following events shall have occurred on or prior to such date: (i) Old
Dominion shall have elected the Purchase Option and all of the
provisions of Section 15.1 shall have been complied with, or (ii) Old
Dominion shall have elected the Service Contract Option, all of the
provisions of Section 15.3 shall have been complied with and the Loan
Certificates shall have been repaid or (iii) the Facility Owner shall
have elected the Preemptive Elective and Old Dominion shall have
complied with all of its obligations under Section 15.2 and the Loan
Certificates shall have been paid; or
(g) an "Event of Default" shall occur and be continuing under
the Old Dominion Indenture and the Indenture Trustee shall have (x)
declared the principal of and interest on Old Dominion's Bonds to be
immediately due and payable, (y) taken possession of Clover Unit 2
pursuant to Section 9.03 of the Old Dominion Indenture or (z) commenced
an action pursuant to Section 9.05 of the Old Dominion Indenture to
sell Clover Unit 2; or
(h) an "Event of Default" shall occur, in consequence of
which the "Ownership Interest" of Old Dominion shall be purchased or
decreased, (i) under the Clover Operating Agreement pursuant to Section
13.03 or 13.04 of the Clover Operating Agreement, or (ii) under the
Clover Ownership Agreement pursuant to Section 15.04 of the Clover
Ownership Agreement; or
(i) Old Dominion shall have failed to observe or perform its
obligation set forth in Sections 7.6, 7.7, 7.8 or 7.9 of the
Participation Agreement and the Owner Participant shall have given
written notice to Old Dominion and the Facility Owner declaring an
Event of Default under this paragraph (i); or
(j) an "Event of Default" under the Operating Foundation
Agreement shall have occurred and be continuing; or
(k) Old Dominion shall (i) commence a voluntary case or other
proceeding seeking relief under Title 11 of the Bankruptcy Code or
liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect, or apply for or consent to the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, or (ii) consent to, or fail
to controvert in a timely manner, any such relief or the appointment of
or taking possession by any such official in any voluntary case or
other proceeding commenced against it, or (iii) file an answer
admitting the material allegations of a petition filed against it in
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any such proceeding, or (iv) make a general assignment for the benefit
of creditors; or
(l) an involuntary case or other proceeding shall be
commenced against Old Dominion seeking (i) liquidation, reorganization
or other relief with respect to it or its debts under Title 11 of the
Bankruptcy Code or any bankruptcy, insolvency or other similar law now
or hereafter in effect, or (ii) seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official, or (iii) the
winding-up or liquidation of Old Dominion; and such involuntary case of
other proceeding shall remain undismissed and unstayed for a period of
60 days; or
(m) Old Dominion shall admit in writing its inability to pay
its debts generally as they become due.
SECTION 17. REMEDIES.
SECTION 17.1 REMEDIES FOR EVENT OF DEFAULT. Subject to the penultimate
sentence of Section 3.7 with respect to the Events of Default set forth in
Section 16(a) and 16(b) or an Event of Default set forth in Section 16(k) in
consequence of an Event of Default set forth in Section 16(a) or 16(b) of the
Operating Foundation Agreement, upon the occurrence of any Event of Default and
at any time thereafter so long as the same shall be continuing, the Facility
Owner may, at its option, declare this Operating Equipment Agreement to be in
default by a written notice to Old Dominion; PROVIDED that upon the occurrence
of an Event of Default described in paragraph (k) or (l) of Section 16, this
Operating Equipment Agreement shall automatically be deemed to be in default
without the need for giving any notice; and at any time thereafter, so long as
Old Dominion shall not have remedied all outstanding Events of Default, the
Facility Owner may do one or more of the following as the Facility Owner in its
sole discretion shall elect, to the extent permitted by, and subject to
compliance with any mandatory requirements of, Applicable Law then in effect:
(a) proceed by appropriate court action or actions, either at
law or in equity, to enforce performance by Old Dominion of the
applicable covenants and terms of this Operating Equipment Agreement or
to recover damages for breach thereof;
(b) by notice in writing to Old Dominion, terminate this
Operating Equipment Agreement and Old Dominion's Unit 2 Interest
whereupon all right of Old Dominion to the possession and use of the
Equipment Interest under this Operating Equipment Agreement shall
absolutely cease and terminate but Old Dominion shall remain liable as
hereinafter provided; and thereupon, the Facility Owner may demand that
Old Dominion, and Old Dominion shall, upon written demand of the
Facility Owner and at Old Dominion's expense, forthwith return
constructive possession of the Equipment Interest to the Facility Owner
or its order in the manner and condition required by, and otherwise in
accordance with all of the provisions of Sections 5.2 and 5.3, except
those provisions relating to periods of notice; and the Facility Owner
may thenceforth hold, possess and enjoy the same free from any right of
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Old Dominion, or its successor or assigns, to use the Equipment
Interest for any purpose whatever;
(c) sell the Facility Owner's Unit 2 Interest at public or
private sale, as the Facility Owner may determine, free and clear of
any rights of Old Dominion under this Operating Equipment Agreement and
without any duty to account to Old Dominion with respect to such sale
or for the proceeds thereof (except to the extent required by paragraph
(e) below if the Facility Owner elects to exercise its rights under
said paragraph and by Applicable Law), in which event Old Dominion's
obligation to pay Basic Payment hereunder due for any periods
subsequent to the date of such sale shall terminate (except to the
extent that Basic Payments and other Equipment Payments are to be
included in computations under paragraph (e) or (f) below if the
Facility Owner elects to exercise its rights under either of said
paragraphs);
(d) hold, keep idle or lease to others the Facility Owner's
Unit 2 Interest as the Facility Owner in its sole discretion may
determine, free and clear of any rights of Old Dominion under this
Operating Equipment Agreement and without any duty to account to Old
Dominion with respect to such action or inaction or for any proceeds
with respect thereto, except that Old Dominion's obligation to pay
Basic Payment with respect to the Equipment Interest due for any
periods subsequent to the date upon which Old Dominion shall have been
deprived of possession and use of the Equipment Interest pursuant to
this Section 17 shall be reduced by the net proceeds, if any, received
by the Facility Owner from conveying the Facility Owner's Unit 2
Interest (and allocable to the Equipment Interest in accordance with
the definition of Fair Market Sales Value) to any Person other than Old
Dominion;
(e) whether or not the Facility Owner shall have exercised,
or shall thereafter at any time exercise, any of its rights under
paragraph (b) above with respect to the Facility Owner's Unit 2
Interest, the Facility Owner, by written notice to Old Dominion
specifying a Termination Date that shall be not earlier than 10 days
after the date of such notice, may demand that Old Dominion pay to the
Facility Owner, and Old Dominion shall pay to the Facility Owner, on
the Termination Date specified in such notice, any unpaid Basic Payment
due before such Termination Date and, if such Termination Date shall be
a Payment Date, any Basic Payment (to the extent payable in arrears)
due and payable on such Payment Date, plus as liquidated damages for
loss of a bargain and not as a penalty (in lieu of the Basic Payment
due after the Termination Date specified in such notice), (i) an amount
equal to the excess, if any, of the Termination Value computed as of
the Termination Date specified in such notice over the Fair Market
Sales Value of the Facility Owner's Unit 2 Interest allocable to the
Equipment Interest in accordance with the definition of Fair Market
Sales Value as of the Termination Date specified in such notice; or
(ii) an amount equal to the Termination Value computed as of the
Termination Date specified in such notice (and, upon payment of such
Termination Value by Old Dominion pursuant to this clause (ii) and all
other Equipment Payments then due and payable by Old Dominion, the
Facility Owner will forthwith transfer the Facility Owner's Unit 2
Interest to Old Dominion in accordance with this Section 17.1(e),
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Section 17.1(e) of the Operating Foundation Agreement, Section 10 of
the Ground Lease and Sublease and Section 10.1 of each of the Head
Agreements on an "as is", "where is" and "with all faults" basis,
without representation or warranty other than a warranty as to the
absence of Facility Owner's Liens and Owner Participant's Liens, all of
its interest in the Facility Owner's Unit 2 Interest and, assuming the
Facility Owner and the Owner Participant are in compliance with all of
their obligations under the Operative Documents, Old Dominion shall
cause the Agent to discharge the Liens of the Loan Agreement and the
Leasehold Mortgage and to execute, acknowledge and deliver, and record
and file (as appropriate), appropriate releases and all other documents
or instructions necessary or desirable to effect the foregoing, all in
form and substance reasonably satisfactory to the Facility Owner and at
the cost and expense of Old Dominion); and
(f) if the Facility Owner shall have sold the Facility
Owner's Unit 2 Interest pursuant to paragraph (c) above, the Facility
Owner, in lieu of exercising its rights under paragraph (e) above with
respect to the Facility Owner's Unit 2 Interest may, if it shall so
elect, demand that Old Dominion pay to the Facility Owner, and Old
Dominion shall pay to the Facility Owner, as liquidated damages for
loss of a bargain and not as a penalty (in lieu of the Basic Payment
due for any periods subsequent to the date of such sale), any unpaid
Basic Payment due before the date of such sale and, if that date is a
Payment Date, the Basic Payment due on that date (to the extent payable
in arrears), or, if that date is not a Payment Date, the daily
equivalent of Basic Payment for the period from the preceding Payment
Date to the date of such sale (to the extent payable in arrears), plus
the amount, if any, by which the Termination Value computed as of the
Payment Date next preceding the date of such sale or, if such sale
occurs on a Payment Date, then computed as of such Payment Date,
exceeds the net proceeds of such sale, such sales proceeds apportioned
between the Equipment Interest and the Foundation Interest in
accordance with the definition of Fair Market Sales Value.
In addition, Old Dominion shall be liable, except as otherwise provided
above, for any and all unpaid Equipment Payments due hereunder before or during
the exercise of any of the foregoing remedies, and, on an After-Tax Basis, for
legal fees and other costs and expenses incurred by reason of the occurrence of
any Event of Default or the exercise of the Facility Owner's remedies with
respect thereto, including the repayment in full of any costs and expenses
necessary to be expended in connection with the return of the Equipment Interest
in accordance with Sections 5.2 and 5.3 hereof, including, without limitation,
any costs and expenses incurred by the Facility Owner, the Owner Participant,
the Agent or any Lender in connection with retaking constructive possession of,
or in repairing, the Equipment Interest in order to cause it to be in compliance
with all maintenance standards imposed by this Operating Equipment Agreement.
SECTION 17.2 CUMULATIVE REMEDIES. The remedies in this Operating
Equipment Agreement provided in favor of the Facility Owner shall not be deemed
exclusive, but shall be cumulative and shall be in addition to all other
remedies in its favor existing at law or in equity. To the extent permitted by
Applicable Law, Old Dominion hereby waives any rights now or hereafter conferred
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by statute or otherwise which may require the Facility Owner to sell, lease or
otherwise use the Equipment Interest or any Component thereof in mitigation of
Facility Owner's damages as set forth in this Section 17 or which may
otherwise limit or modify any of Facility Owner's rights and remedies in this
Section 17.
SECTION 17.3 NO DELAY OR OMISSION TO BE CONSTRUED AS WAIVER. No delay
or omission to exercise any right, power or remedy accruing to the Facility
Owner upon any breach or default by Old Dominion under this Operating Equipment
Agreement shall impair any such right, power or remedy of the Facility Owner,
nor shall any such delay or omission be construed as a waiver of any breach or
default, or of any similar breach or default hereafter occurring; nor shall any
waiver of a single breach or default be deemed a waiver of any subsequent breach
or default.
SECTION 18. OLD DOMINION TERMINATION OPTION FOR APPEAL OF FERC
ORDERS.
SECTION 18.1 OLD DOMINION OPTION TO TERMINATE. If, on or prior to
August 2, 1996, (a) an appeal shall be filed (including by post-order
intervention) of either FERC Order and (b) Old Dominion shall give notice to the
Facility Owner, the Owner Trustee, the Owner Participant and the Agent of such
appeal, upon not less than one day's prior written notice to the Facility Owner,
the Owner Participant and the Agent given not later than August 4, 1996, Old
Dominion shall have the option to acquire the Facility Owner's Unit 2 Interest
and terminate this Operating Equipment Agreement on the second day following
such notice, upon payment to the Facility Owner of an amount equal to the sum of
(i) Equipment Interest Cost, (ii) all Transaction Costs paid or incurred by the
Owner Participant and (iii) interest at the Debt Rate on the amounts in clauses
(i) and (ii) from, and including, the Closing Date to, but excluding, such date
of termination. Old Dominion shall be permitted to exercise the option provided
in this Section 18 only if it shall simultaneously exercise the termination
option provided by Section 18 of the Operating Foundation Agreement.
SECTION 18.2 PROCEDURE FOR EXERCISE OF TERMINATION OPTION. If Old
Dominion shall have exercised its option under Section 18.1, on the date
specified in Old Dominion's notice of such exercise, Old Dominion shall pay to
the Facility Owner (a) the amount specified in Section 18.1, plus (b) all
amounts of Supplemental Payments (including, without limitation, all costs and
expenses of the Facility Owner, the Owner Participant, the Agent and the Lenders
and all sales, use, value added and other Taxes covered by Section 8.2 of the
Participation Agreement associated with the exercise of the termination option
pursuant to this Section 18) due and payable on or prior to such Termination
Date, and (c) any unpaid Basic Payments due before such Termination Date.
Concurrently with the payment of all sums specified in this Section 18.2 and
Section 18.2 of the Operating Foundation Agreement, (1) Old Dominion shall cease
to have any liability to the Facility Owner with respect to the Equipment
Interest, except for Supplemental Payment obligations (including, without
limitation, Section 8.1 and 8.2 of the Participation Agreement and the Tax
Indemnity Agreement) surviving pursuant to the express terms of any Operative
Document or which have otherwise accrued but not been paid as of such
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Termination Date, (2) the Facility Owner will prepay the Loan Certificates
pursuant to Section 2.10 of the Loan Agreement, (3) the Facility Owner will
execute, acknowledge and deliver to Old Dominion, and record and file (where
appropriate), all at Old Dominion's cost and expense, each in form and substance
reasonably satisfactory to the Facility Owner, (x) a release or termination of
this Operating Equipment Agreement, the Operating Foundation Agreement, the
Ground Lease and Sublease and the Clover Agreements Assignment and (y) surrender
of the Facility Owner's Unit 2 Interest to Old Dominion in accordance with this
Section 18, Section 18 of the Operating Foundation Agreement, Section 10 of the
Ground Lease and Sublease and Section 10.1 of each of the Head Agreements on an
"as is", "where is", "with all faults" basis, without representations or
warranties other than a warranty as to the absence of Facility Owner's Liens and
Owner Participant's Liens and (4) this Operating Equipment Agreement shall
terminate and, assuming the Facility Owner and the Owner Participant have
complied with all of their obligations under the Operative Documents, Old
Dominion shall cause the Agent to discharge the Liens of the Loan Agreement and
the Leasehold Mortgage and to execute, acknowledge and deliver and record and
file (where appropriate), appropriate releases and all other documents or
instruments necessary or desirable to effect the foregoing, all in form and
substance reasonably satisfactory to the Facility Owner and at the cost and
expense of Old Dominion.
SECTION 19. OLD DOMINION'S RIGHT TO SUBLEASE.
Old Dominion will not, without the prior written consent of the
Facility Owner and the Agent, relinquish use, possession or control of the
Equipment Interest, or any part thereof, PROVIDED that, unless a Payment
Default, a Bankruptcy Default or an Event of Default shall have occurred and be
continuing, no consent of the Facility Owner, the Owner Participant or the Agent
shall be required for any sublease of the Equipment Interest if:
(a) the sublessee is a solvent corporation not subject to any
bankruptcy proceeding;
(b) such sublease does not extend beyond the date 18 months
prior to the scheduled expiration of the Term (unless Old Dominion has
exercised the Purchase Option) and is expressly subject and subordinate
to the Head Equipment Agreement and this Operating Equipment Agreement;
(c) Old Dominion remains fully and primarily liable for all of
its obligations under this Operating Equipment Agreement and the
other Operative Documents as if such sublease had not occurred;
(d) all terms and conditions of the Head Equipment Agreement
and this Operating Equipment Agreement and the other Operative
Documents remain in effect;
(e) entering into such sublease is permitted by the Clover
Agreements, the Pollution Control Assets Lease Documents and the Old
Dominion Indenture;
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<PAGE>
(f) such sublease prohibits further subletting without the prior
written consent of the Facility Owner and the Agent; and
(g) such sublessee shall be a sublessee of the Foundation
Interest in accordance with Section 19 of the Operating Foundation
Agreement, a sublessee of the Ground Interest in accordance with the
provisions of the Ground Lease and Sublease and an assignee of the
Assigned Clover Interests in accordance with the provisions of the
Clover Agreements Assignment.
As a condition precedent to such sublease, Old Dominion shall provide
the Facility Owner and the Agent with all documentation in respect of such
sublease and opinion of counsel to Old Dominion to the effect that such sublease
complies with the provisions of this Section 19 (such documentation, counsel and
opinion to be reasonably satisfactory to the Facility Owner and the Owner
Participant).
SECTION 20. FURTHER ASSURANCES.
Old Dominion, at its own cost and expense, will duly execute and
deliver to the Facility Owner such further documents and assurances and take
such further action as the Facility Owner may from time to time reasonably
request in order to establish and protect the rights and remedies created in
favor of the Facility Owner hereunder. Old Dominion, at its own cost and
expense, will cause such continuation statements in respect of financing
statements under the Uniform Commercial Code contemplated by Section 7.10 of the
Participation Agreement or Section 10.3 hereof to be made from time to time as
requested by the Facility Owner as shall be necessary to maintain the perfection
of the security interest contemplated thereby.
SECTION 21. FACILITY OWNER'S RIGHT TO PERFORM.
If Old Dominion fails to make any payment required to be made by it
hereunder (other than Supplemental Payments in respect of the Purchase Option
Price) or under the Old Dominion Indenture or the Clover Agreements or fails to
perform or comply with any of its other agreements contained herein or in the
Old Dominion Indenture or the Clover Agreements after notice to Old Dominion and
failure of Old Dominion to so perform or comply within 30 days thereafter, the
Facility Owner or the Owner Participant may itself make such payment or perform
or comply with such agreement in a reasonable manner, but shall not be obligated
hereunder to do so, and the amount of such payment and of the reasonable
expenses of the Facility Owner or the Owner Participant incurred in connection
with such payment or the performance of or compliance with such agreement, as
the case may be, together with interest thereon at the Overdue Rate, to the
extent permitted by Applicable Law, shall be deemed to be Supplemental Payment,
payable by Old Dominion to the Facility Owner on demand.
44
<PAGE>
SECTION 22. NOTICES.
Unless otherwise expressly specified or permitted by the terms hereof,
all communications and notices provided for herein to a party hereto shall be in
writing or by a telecommunications device capable of creating a written record,
and any such notice shall become effective (a) upon personal delivery thereof,
including, without limitation, by overnight mail or courier service, (b) in the
case of notice by United States mail, certified or registered, postage prepaid,
return receipt requested, upon receipt thereof, or (c) in the case of notice by
such a telecommunications device, upon transmission thereof, PROVIDED such
transmission is promptly confirmed by either of the methods set forth in clauses
(a) and (b) above, in each case addressed to such party at its address set forth
below or at such other address as such party may from time to time designate by
written notice to the other party hereto:
If to the Facility Owner:
Clover Unit 2 Generating Trust
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Fax No.: (302) 651-8882
Confirmation No.: (302) 651-1000
With a copy to the Owner Participant:
EPC Corporation
c/o Chrysler Capital Corporation
225 High Ridge Road
Stamford, Connecticut 06905
Attention: President
Fax No.: (203) 975-3911
Confirmation No.: (203) 975-3500
If to Old Dominion:
Old Dominion Electric Cooperative
P. O. Box 2310
Glen Allen, Virginia 23058-2310
Attention: Vice President of Accounting and Finance
Fax No.: (804) 747-3742
Confirmation No.: (804) 747-0592
45
<PAGE>
A copy of all communications and notices provided for herein shall be sent by
the party giving such communication or notice to Virginia Power at:
Virginia Electric and Power Company
P.O. Box 26666
Richmond, Virginia 23261
Attention: President
SECTION 23. SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS.
Any moneys received by the Facility Owner pursuant to Section 10.4 or
pursuant to the Payment Undertaking Agreement following the purchase by the
Owner Participant or its designee of the Loan Certificates pursuant to Section
4.8 of the Loan Agreement shall, until paid to Old Dominion as provided in
Section 10.4 (with respect to amounts received pursuant to Section 10.4), be
held by the Facility Owner as security for Old Dominion's obligations under this
Operating Equipment Agreement and invested in Permitted Investments by the
Facility Owner (at the sole risk of Old Dominion) from time to time as directed
in writing by Old Dominion if such investments are reasonably available for
purchase. Any gain (including interest received) realized as the result of any
such Permitted Investment (net of any fees, commissions, taxes and other
expenses, if any, incurred in connection with such Permitted Investment) shall
be (i) in the case of amounts received pursuant to Section 10.4, applied or
remitted to Old Dominion in the same manner as the principal invested and (ii)
in the case of amounts received pursuant to the Payment Undertaking Agreement in
the circumstances described in the first sentence of this Section, applied to
Old Dominion's obligation to make Basic Payments.
SECTION 24. SECURITY FOR FACILITY OWNER'S OBLIGATION TO THE
LENDERS.
In order to secure all amounts payable by and all obligations to be
performed by the Facility Owner under the Loan Agreement, the Facility Owner
will assign in the Loan Agreement to the Agent for its benefit and the ratable
benefit of the Lenders its rights under this Operating Equipment Agreement (as
well as all the components of the Facility Owner's Unit 2 Interest) and grant
security interests in favor of the Agent in all of the Facility Owner's right,
title and interest in and to the Equipment Interest and its interest in this
Operating Equipment Agreement (as well as all the components of the Facility
Owner's Unit 2 Interest) (other than in all cases Excepted Payments and Excepted
Rights). Old Dominion hereby consents to such assignment and to the creation of
such security interests and acknowledges receipt of copies of the Loan
Agreement, it being understood that such consent shall not affect any
requirement or the absence of any requirement for any consent under any other
circumstances. To the extent, if any, that this Operating Equipment Agreement
constitutes chattel paper (as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction), no security interest in this
Operating Equipment Agreement may be created through the transfer or possession
46
<PAGE>
of any counterpart hereof other than the original counterpart, which shall be
identified as the counterpart containing the receipt therefor executed by the
Agent on the signature page thereof. Old Dominion hereby acknowledges
receipt of due notice that the Facility Owner's interest in this Operating
Equipment Agreement and all other components of the Facility Owner's Unit 2
Interest will be assigned to the Agent as security pursuant to the Loan
Agreement to the extent provided in the Loan Agreement. Unless and until Old
Dominion shall have received written notice from the Agent that the Liens of the
Loan Agreement and the Leasehold Mortgage have been terminated, the Agent shall
have the right to exercise the rights of the Facility Owner under this Operating
Equipment Agreement to the extent set forth in and subject in each case to the
exceptions set forth in the Loan Agreement.
SECTION 25. MISCELLANEOUS.
SECTION 25.1 GOVERNING LAW. This Operating Equipment Agreement shall
be in all respects governed by and construed in accordance with the laws of
the state of New York including all matters of construction, validity
and performance.
SECTION 25.2 SEVERABILITY. Whenever possible, each provision of
this Operating Equipment Agreement shall be interpreted in such manner as
to be effective and valid under Applicable Law, but if any provision of this
Operating Equipment Agreement shall be prohibited by or invalid under Applicable
Law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Operating Equipment Agreement.
SECTION 25.3 HEADINGS AND TABLE OF CONTENTS. The headings of the
sections of this Operating Equipment Agreement and the Table of Contents are
inserted for purposes of convenience only and shall not be construed to affect
the meaning or construction of any of the provisions hereof.
SECTION 25.4 SUCCESSORS AND ASSIGNS. (a) This Operating Equipment
Agreement shall be binding upon and shall inure to the benefit of, and shall be
enforceable by, the parties hereto and their respective successors and assigns
as permitted by and in accordance with the terms hereof.
(b) Except as expressly provided herein or in the other Operative
Documents, neither party hereto may assign its interests herein without the
consent of the other party hereto.
SECTION 25.5 "TRUE LEASE". It is the intent of the parties to this
Operating Equipment Agreement that it be, and this Operating Equipment Agreement
shall be, a "true lease," and that, notwithstanding the fact that legal title to
the Retained Assets is vested in the Co-Owners, as tenants-in-common, and legal
title to the Pollution Control Assets is vested in the Pollution Control Assets
Lessor and Virginia Power, as tenants in common, the interest of the Facility
Owner under the Head Equipment Agreement shall cause the Facility Owner to be
the owner of the Equipment Interest for all United States income tax purposes,
47
<PAGE>
this Operating Equipment Agreement conveying to Old Dominion no right, title or
interest in the Equipment Interest except as "lessee" of the Equipment Interest.
SECTION 25.6 IDENTIFICATION. Old Dominion will, at its own cost
and expense, cause Clover Unit 2 to be legibly, conspicuously and
permanently marked, throughout the Term in a reasonably prominent location,
with a plate or other marking, which plate or other marking shall set forth
the following legend:
"SO MUCH OF THIS PROPERTY AS CONSTITUTES THE
EQUIPMENT INTEREST, AS DESCRIBED IN THE HEAD EQUIPMENT
AGREEMENT, DATED AS OF JULY 1, 1996, BETWEEN CLOVER
UNIT 2 GENERATING TRUST AND OLD DOMINION ELECTRIC
COOPERATIVE, IS SUBJECT TO SUCH TRUST'S INTEREST UNDER
SUCH AGREEMENT."
In addition, so long as the Liens of the Loan Agreement and the Leasehold
Mortgage have not been terminated, the following inscription shall be included
with the first sentence of the foregoing: "AND IS SUBJECT TO THE LIEN IN FAVOR
OF UTRECHT-AMERICA FINANCE CO., AS THE AGENT UNDER THE LOAN AGREEMENT REFERRED
TO THEREIN."
SECTION 25.7 AMENDMENTS AND WAIVERS. No term, covenant, agreement or
condition of this Operating Equipment Agreement may be terminated, amended or
compliance therewith waived (either generally or in a particular instance,
retroactively or prospectively) except by an instrument or instruments in
writing executed by each party hereto (and, also, in connection with any
termination of, or amendment to those provisions for which Virginia Power is an
intended beneficiary, approved in writing by Virginia Power).
SECTION 25.8 AGREEMENT REGARDING EQUIPMENT. The parties hereto
understand and acknowledge that the Unit 2 Equipment and the Common Facilities
Equipment have been constructively severed from the Real Property by the
Severance Agreements and intend that all such equipment be treated as personal
property. However, should it be determined by a court of competent jurisdiction
that (notwithstanding the foregoing) any of the equipment constituting Unit 2
Equipment or Common Facilities Equipment is an interest in real property for
purposes of Virginia Code Section 55-96, the parties hereto agree that such
equipment shall not be part of the Unit 2 Equipment or the Common Facilities
Equipment and shall not be subject to this Operating Equipment Agreement, but
shall constitute a part of the Unit 2 Foundation or the Common Facilities
Foundation, as the case may be, and shall be subject to and conveyed for the
term specified herein under the Operating Foundation Agreement.
SECTION 25.9 SURVIVAL. All warranties, representations, indemnities
and covenants made by either party hereto, herein or in any certificate or
other instrument delivered by either such party or on the behalf of such party
under this Operating Equipment Agreement, shall be considered to have been
relied upon by the other party hereto and shall survive the consummation of the
48
<PAGE>
transactions contemplated hereby on the Closing Date regardless of any
investigation made by either party or on behalf of such party.
SECTION 25.10 COUNTERPARTS. This Operating Equipment Agreement may be
executed by the parties hereto in separate counterparts, each of which, subject
to Section 24, when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
SECTION 25.11 EFFECTIVENESS. This Operating Equipment Agreement has
been dated as of the date first above written for convenience only. This
Operating Equipment Agreement shall be effective on the date of execution and
delivery by each of Old Dominion and the Facility Owner.
SECTION 25.12 LIMITATION OF LIABILITY. It is expressly understood
and agreed by the parties hereto that (a) this Agreement is executed and
delivered by Wilmington Trust Company, not individually or personally but solely
as trustee of Clover Unit 2 Generating Trust (the "Trust") under the Trust
Agreement, in the exercise of the powers and authority conferred and vested in
it, (b) each of the representations, undertakings and agreements herein made on
the part of the Trust is made and intended not as personal representations,
undertakings and agreements by Wilmington Trust Company but is made and intended
for the purpose for binding only the Trust, (c) nothing herein contained shall
be construed as creating any liability on Wilmington Trust Company, individually
or personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties hereto
or by any Person claiming by, through or under the parties hereto and (d) under
no circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Trust or be liable for the breach
or failure of any obligation, representation, warranty or covenant made or
undertaken by the Trust under this Agreement or any other Operative Documents.
49
<PAGE>
IN WITNESS WHEREOF, the Facility Owner and Old Dominion have caused
this Operating Equipment Agreement to be duly executed and delivered by their
respective officers thereunto duly authorized.
CLOVER UNIT 2 GENERATING TRUST
By Wilmington Trust Company, not
in its individual capacity but
solely as Owner Trustee under
the Trust Agreement
By:/s/ EMMETT R. HARMON
----------------------------
Name: Emmett R. Harmon
Title: Vice President
Date: July 31, 1996
OLD DOMINION ELECTRIC COOPERATIVE
By:/s/ DANIEL M. WALKER
-----------------------------
Name: Daniel M. Walker
Title: Vice President
Date: July 31, 1996
<PAGE>
CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS OPERATING
EQUIPMENT AGREEMENT HAVE BEEN ASSIGNED TO AND ARE SUBJECT TO A FIRST PRIORITY
SECURITY INTEREST IN FAVOR OF THE UNDERSIGNED, AS AGENT, UNDER THE LOAN AND
SECURITY AGREEMENT, DATED AS OF JULY 1, 1996. THIS AGREEMENT HAS BEEN EXECUTED
IN SEVERAL COUNTERPARTS. ONLY THE ORIGINAL COUNTERPART CONTAINS THE RECEIPT
THEREFOR EXECUTED BY THE UNDERSIGNED, ON THE SIGNATURE PAGES THEREOF. SEE
SECTION 24 HEREOF FOR INFORMATION CONCERNING THE RIGHTS OF THE HOLDERS OF THE
VARIOUS COUNTERPARTS THEREOF.
Receipt of this original counterpart of this Operating Equipment
Agreement is hereby acknowledged on this ___ day of _____, 1996.
UTRECHT-AMERICA FINANCE CO.
By:__________________________________
Title:_______________________________
By:__________________________________
Title:_______________________________
<PAGE>
APPENDIX A
TO
OPERATING
EQUIPMENT AGREEMENT
DEFINITIONS
This Appendix A has been filed separately. See Appendix A to Exhibit 10.46 to
Old Dominion's Form 10-K for the year ended December 31, 1996.
EXHIBIT A-1
to
<PAGE> Operating
Eqipment Agreement
DESCRIPTION OF UNIT 2 EQUIPMENT
All those certain assets at or on the Unit 2 Site (excluding,
the Unit 2 Foundation) and all replacements or substitutions thereto, including
all those certain parts and items of equipment identified on Schedule 1 (which
is not intended to limit the generality of the foregoing definition to the
assets identified therein) attached hereto, together with all auxiliary and
support items, including all valves, backflow preventers, breakdown orifices,
exhaust heads, expansion joints, flexible hoses, gage glasses, relief valves,
sight flow indicators, strainers, traps, local switch stations, transducers,
circuit breakers, transfer switches, disconnect switches, junction boxes,
motors, transformers (other), panel boards (other), local control devices,
miscellaneous panels and instruments, solenoid valves, control drives, signal
converters and monitors, conductivity instrumentation, pH instrumentations,
recorders, subpanels and switches/lights, and recorders/pen description.
A-1-1
<PAGE>
EXHIBIT A-2
to
Operating
Equipment Agreement
DESCRIPTION OF COMMON FACILITIES EQUIPMENT
All those certain assets used in connection with the operation
or maintenance of both the Clover Unit 1 Generating Facility and the Clover Unit
2 Generating Facility (excluding, the Unit 1 Equipment, the Unit 2 Equipment,
the Unit 1 Foundation, the Unit 2 Foundation and the Common Facilities
Foundation) and all replacements or substitutions thereto, including all those
certain parts and items of equipment identified on Schedule 2 (which is not
intended to limit the generality of the foregoing definition to the assets
identified therein) attached hereto, together with all auxiliary and support
items, including all valves, backflow preventers, breakdown orifices, exhaust
heads, expansion joints, flexible hoses, gage glasses, relief valves, sight flow
indicators, strainers, traps, local switch stations, transducers, circuit
breakers, transfer switches, disconnect switches, junction boxes, motors,
transformers (other), panel boards (other), local control devices, miscellaneous
panels and instruments, solenoid valves, control drives, signal converters and
monitors, conductivity instrumentation, pH instrumentations, recorders,
subpanels and switches/lights, and recorders/pen description.
A-2-1
<PAGE>
EXHIBIT B
to
Operating
Equipment Agreement
POWER SALES AGREEMENT
CAPACITY AND ENERGY CHARGES
1. Except as otherwise indicated, the terms used in this Exhibit B
shall have the same meaning as in the Participation Agreement and the following
additional definitions shall apply:
"Actual Available Hours" shall be calculated by multiplying the total
number of hours in a Contract Year by the Equivalent Availability Factor.
"Availability" shall have the meaning set forth in the Operating Agency
Agreement.
"Availability Make-Up Charge" for any Contract Year shall be the amount
determined by dividing (i) the aggregate amount of the Capacity Payments for
such Contract Year by (i) the Target Available Hours for such Contract Year.
"Capacity Payment" for any Contract Year shall mean [115]% of the
Minimum Capacity Payments for such Contract Year, and for any semi-annual period
commencing on a Power Sales Payment Date (or, in the case of the first such
period, commencing on January 5, 2020) shall mean [115]% of the Minimum Capacity
Payment in respect of such period, in either case as such Minimum Capacity
Payment may be adjusted from time to time as described herein.
"Contract Year" shall have the meaning set forth in the Operating
Agency Agreement.
"Equivalent Availability Factor" for any Contract Year shall mean the
equivalent availability of the Facility Owner's Generating Facility Interest
expressed as a percentage and determined by the Owner Participant in accordance
with Prudent Utility Practices.
"Facility Owner's Consideration" shall mean an amount equal to the sum
of Head Equipment Agreement Consideration and Head Foundation Interest
Consideration.
B-1
<PAGE>
"Generating Facility Interest" shall have the meaning set forth in the
Operating Agency Agreement.
"Indemnity Amounts" for any monthly period shall mean the amounts
payable by Facility Owner to a New Lender described in paragraph 9 of Schedule 3
to the Operating Equipment Agreement.
"Minimum Capacity Payment" for any semi-annual period immediately
following a Power Sales Payment Date shall mean the amount set forth on Annex A
to this Exhibit for such Power Sales Payment Date as such amount may be adjusted
in accordance with Section 15.3(c)(vii) of the Operating Equipment Agreement,
and for any Contract Year shall mean the sum of the Minimum Capacity Payments
for the semi-annual periods comprising such Contract Year. In order to preserve
the Net Economic Return of the Owner Participant, the Minimum Capacity Payments
shall also be adjusted from time to time during the Power Sales Agreement Term
to reflect all Capital Repairs or Construction Costs (as such terms are defined
in the Operating Agency Agreement) and taking into account any indebtedness
incurred to fund Capital Repairs or Construction Costs, including any financing
provided to or for the benefit of Facility Owner for such purpose, in accordance
with the assumptions and methodologies (including, without limitation, the Tax
Assumptions and pricing assumptions, as the same shall be adjusted from time to
time) originally used in calculating the amounts set forth on Annex A hereto.
"Monthly Energy Charge" shall mean the amount set forth in the annual
notice provided by the Owner Participant to the Power Purchaser as set forth in
Section 4 below.
"Power Purchaser's Entitlement" shall mean the percentage of the
installed capacity, available capacity or hourly generation of the Generating
Facility Interest which the Power Purchaser has agreed to purchase under the
Power Sales Agreement.
"Power Purchaser's Share" shall mean the percentage, equal to the Power
Purchaser's Entitlement percentage, of the Capacity Payment and Monthly Energy
Charge, in each case, as adjusted below, which the Power Purchaser has agreed to
pay pursuant to the Power Sales Agreement.
"Risk Amount" for any Contract Year shall mean an amount equal to the
difference between the aggregate amount of the relevant Capacity Payments and
the relevant Minimum Capacity Payment.
"Target Availability Factor" shall mean the Generating Facility
Interest's Availability (taking into account variations resulting from the
regular maintenance schedule), expressed as a percentage, for the three years
preceding the Expiration Date as determined by an independent engineer in
accordance with Section 5.2(h) of the Equipment Operating Agreement.
"Target Available Hours" shall be calculated by multiplying the total
number of hours in a Contract Year by the Target Availability Factor.
2. Power Purchaser's Share: The Power Sales Agreement shall obligate
the Power Purchaser to reimburse the Facility Owner for the Power Purchaser's
B-2
<PAGE>
Share of all costs, expenditures and charges associated with the Generating
Facility Interest as set out in Sections 3 through 6 of this Exhibit. Unless the
Power Sales Agreement is terminated as described below or the Generating
Facility Interest is not capable of generating and delivering the Power
Purchaser's Entitlement for an uninterrupted period of 180 days, the Power
Purchaser shall pay the Power Purchaser's Share in all events. The charges for
which the Power Purchaser is liable under the Power Sales Agreement shall
include the Power Purchaser's Share of all of the Facility Owner's and the Owner
Participant's fixed and variable costs of rendering service under the Power
Sales Agreement, except as provided below.
In the event that the Facility Owner fails to perform its material
obligations under the Power Sales Agreement and does not correct such failure
during the notice period specified below, the Power Purchaser, may at its
option, and after 180 days advance written notice to the Facility Owner and the
Owner Participant, terminate the Power Sales Agreement; provided, however, any
temporary shut-down of the Facility by reason of any Uncontrollable Forces (as
such term is defined in the Operating Agency Agreement) or for repairs
(including repairs following major casualties or equipment failures),
maintenance or improvements shall not result in a failure of the Facility Owner
to perform its material obligations under the Power Sales Agreement so long as
the Facility Owner is (or its agents are) exercising reasonable diligence to
repair or restore the Facility to operation.
3. Capacity Payment: The Power Purchaser shall agree to pay to the
Facility Owner semi-annually on the Power Sales Payment Dates indicated on Annex
A hereto, until the termination of the Power Sales Agreement, the Power
Purchaser's Share of the Capacity Payment, in advance, and as the same may be
adjusted pursuant to Section 5 of this Exhibit.
4. Monthly Energy Charge: The Power Purchaser shall agree to pay the
Facility Owner monthly, commencing with the first day of the Power Sales
Agreement and continuing for the term of the Power Sales Agreement (and the
payment of all amounts due thereunder), the Power Purchaser's Share of the
Monthly Energy Charge, as adjusted in accordance with Section 6 below. The
Monthly Energy Charge for the Generating Facility Interest shall consist of:
(1) total monthly Operation and Maintenance Expenses (as
such term is defined in the Operating Agency Agreement);
plus
(2) total monthly Operating Fee (as such term is defined in
the Operating Agency Agreement); plus
(3) one-twelfth of the total annual property taxes, both
personal and real, and other Taxes described in Section
9.22 of the Operating Agency Agreement, imposed on the
Facility Owner; plus
(4) one-twelfth of the aggregate Taxes described in Section
8.2(b)(i) of the Participation Agreement ("Doing
Business Taxes") imposed on the Facility Owner and the
Owner Participant by any taxing authorities within or
B-3
<PAGE>
without the United States in excess of the amount of
Doing Business Taxes that would have been payable if the
net taxable income of the Facility Owner from the
ownership and operation of the Generating Facility
Interest were subject only to United States federal
income tax at the maximum marginal rate generally
applicable to corporations and to state income taxes at
the combined effective rate of state and local income
tax the Owner Participant would have been subject to
without regard to the Overall Transaction; plus
(5) total monthly Indemnity Amounts; plus
(6) one-twelfth of all other annual costs (other than
Capital Repairs or Construction Costs, but including all
Taxes other than property taxes or Doing Business Taxes
described in clauses (3) and (4) above) associated with
the provision of service under the Power Sales
Agreement.
One month prior to the first day of the first Contract Year of the
Power Sales Agreement and each succeeding Contract Year, the Owner Participant
shall estimate the Monthly Energy Charge for the next Contract Year. During the
course of the Contract Year, adjustments to the estimate of the Monthly Energy
Charge shall be made by the Owner Participant to reflect changes deemed by the
Owner Participant to be significant, and the Owner Participant shall inform the
Power Purchaser in writing of any such adjustments. The Owner Participant shall
use the estimated Monthly Energy Charges, as adjusted, for bills rendered for
service provided during the Contract Year. Copies of the estimate shall be
provided to the Power Purchaser.
5. Adjustment to Capacity Payment for Equivalent Availability: In any
Contract Year in which the Actual Available Hours exceed the Target Available
Hours, the Capacity Payment for that Contract Year shall be increased by the
amount determined by multiplying the Availability Make-Up Charge for that
Contract Year by such excess, up to a maximum adjustment during such Contract
Year equal to the Risk Amount.
In any Contract Year in which the Target Available Hours exceed the
Actual Available Hours, the Capacity Payment for that Contract Year shall be
decreased by the amount determined by multiplying the Availability Make-Up
Charge for that Contract Year by such excess, up to a maximum adjustment during
that Contract Year equal to the Risk Amount.
6. True-Up of Capacity Payment and Monthly Energy Charge: Within 120
days after the end of a Contract Year, the Owner Participant shall develop
actual data for the Contract Year and recompute the Capacity Payments and the
Monthly Energy Charge for the Contract Year using the actual data. The Owner
Participant shall within that 120 day period render a statement truing-up the
Monthly Energy Charge bills previously rendered on estimated data and the
Capacity Payment for the Contract Year to reflect such actual data. The Owner
B-4
<PAGE>
Participant shall refund the amount of any overcollections and the Power
Purchaser shall pay the amount of any undercollections. Interest at the Debt
Rate shall be paid on any refunds of overcollections and charged on any
additional payments for undercollections from the date that any bill involving
an overcollection or an undercollection was paid through the date that the
adjusted bill was rendered.
B-5
<PAGE>
ANNEX A
to Exhibit B
to
Operating
Equipment Agreement
MINIMUM CAPACITY PAYMENTS
Contract Year Commencing Power Sales Payment Date Minimum Capacity Payment
Jan 5, 2020 Jan 5, 2020
July 5, 2020
Jan 5, 2021 Jan 5, 2021
July 5, 2021
Jan 5, 2022 Jan 5, 2022
July 5, 2022
Jan 5, 2023 Jan 5, 2023
July 5, 2023
Jan 5, 2024 Jan 5, 2024
July 5, 2024
Jan 5, 2025 Jan 5, 2025
July 5, 2025
Jan 5, 2026 Jan 5, 2026
July 5, 2026
Jan 5, 2027 Jan 5, 2027
July 5, 2027
Jan 5, 2028 Jan 5, 2028
July 5, 2028
Jan 5, 2029 Jan 5, 2029
July 5, 2029
B-6
<PAGE>
Jan 5, 2030 Jan 5, 2030
July 5, 2030
Jan 5, 2031 Jan 5, 2031
July 5, 2031
Jan 5, 2032 Jan 5, 2032
July 5, 2032
Jan 5, 2033 Jan 5, 2033
July 5, 2033
Jan 5, 2034 Jan 5, 2034
July 5, 2034
Jan 5, 2035 Jan 5, 2035
July 5, 2035
Jan 5, 2036 Jan 5, 2036
July 5, 2036
B-7
<PAGE>
ANNEX B
TO Exhibit B
to
Operating
Equipment Agreement
POWER SALES STIPULATED LOSS VALUES
B-8
<PAGE>
SCHEDULE 1
to
Operating
Equipment Agreement
BASIC PAYMENTS
Payment Date Advance Payments Arrears Payments
S1-1
<PAGE>
SCHEDULE 2
to
Operating
Equipment Agreement
TERMINATION VALUES
Termination Date Termination Value
S2-1
<PAGE>
SCHEDULE 3
to
OPERATING
EQUIPMENT AGREEMENT
TERMS AND CONDITIONS OF NEW LOAN TO BE MADE UPON COMMENCE-
MENT OF SERVICE CONTRACT OPTION
26. BORROWER: The Facility Owner.
27. PURPOSE: To provide non-recourse debt which will be serviced by the
Capacity Purchase Price and energy payments afforded under one or more take if
tendered Power Sales Agreements as arranged as part of the Service Contract
Option as defined in the Operating Equipment Agreement.
28. LENDER: To be arranged by Old Dominion in accordance with Section
15.3 of the Operating Equipment Agreement.
29. AMOUNT: Such amount as shall be equal to the unpaid principal amount
of the Loans outstanding under the Loan Agreement on the Expiration Date.
30. MATURITY: 17 years.
31. INTEREST RATE: A fixed rate of interest for the term to be determined
based upon competitive bids obtained from not less than three prospective
Lenders.
32. AMORTIZATION: As set forth in Annex 1 to this Schedule 3.
33. SECURITY: A first priority deed of trust lien against all of the
Borrower's rights, title and interests in the Ground Interest and in the
Foundation Interest (to the extent the Foundation Interest is deemed to be real
estate for purposes of Article 2 of Chapter 14 of Title 55 of the Code of
Virginia 1950, as amended) and a first priority security interest in all
assets of the Borrower consisting of:
(a) the Borrower's interest in the Equipment Interest, the
Foundation Interest and the Clover Agreements Assignment;
(b) the Power Sales Agreement and all accounts receivable
arising thereunder, revenues therefrom, and other proceeds
thereof;
S3-1
<PAGE>
(c) the interest of the Borrower in, to and under all other
contracts and agreements relating to the Equipment Interest
and the Foundation Interest, the ownership and operation
thereof, the transmission of the output thereof, and the Power
Sales Agreement;
(d) all insurance proceeds relating to the Equipment Interest, the
Foundation Interest and the Power Sales Agreement, consistent,
however, with the Clover Agreements; and
(e) the New Loan shall be non-recourse to the Facility Owner,
payable only from the Facility Owner's interest in the Trust
Estate.
34. INDEMNITIES: Customary in loans of this nature, including,
without limitation, increased costs, capital adequacy, withholding tax and
other tax liabilities and other indemnities. The Borrower will indemnify
the Lender against all losses, liabilities, claims, damages or expenses,
including, without limitation, legal or other expenses incurred in connection
with investigating, preparing to defend or defending any claim, however
asserted, incurred in conjunction with the contemplated transactions. Such
indemnities will be secured by the security interest referred to in paragraph 8.
35. REPRESENTATIONS AND WARRANTIES: Customary in loans of this nature,
including, without limitation, those pertaining to the following:
o Organization, authority, due execution and validity;
o Title to properties, licenses and environmental and regulatory
compliance;
o No Liens other than Permitted Liens;
o Use of proceeds to pay Loan Certificates outstanding on the
Expiration Date;
o True and complete disclosure, no material litigation; and
o Absence of default.
36. COVENANTS: Customary in loans of this nature without limitation,
including, without limitation:
Additional Indebtedness. The Borrower shall not incur
additional indebtedness without the consent of the Lender.
Negative Pledge. The Borrower shall not create or suffer to
exist any Lien on the collateral except for Permitted Liens
except with the consent of the Lender.
S3-2
<PAGE>
Other Covenants. Including, but not limited to, the following
topics:
o Punctual payments, compliance with laws;
o Maintenance of properties and insurance, payment of
taxes;
o Maintenance of books and records;
o Compliance with environmental and regulatory laws and
regulations;
o Notices of default, material litigation;
o ERISA compliance;
o All loan and related documents to be kept in full force
and effect with no amendments;
o No change in fiscal year;
o Physical inspection of books and records by the Lender
or its designee, upon reasonable notice and subject to
reasonable limitations;
o Nature of business will remain substantially the same;
and
o All governmental licenses, approvals, permits, etc.
37. REPORTING REQUIREMENTS OF POWER PURCHASER:
Unaudited financial statements: Within 60 days of the close of
each quarter.
Compliance certificate: Within 90 days of the close of each quarter.
Annual audited financial statements: Within 90 days after the close of
each fiscal year.
38. EVENTS OF DEFAULT: Customary for loans of this nature, including, but
not limited to, the following:
o Payment defaults;
o Any representation or warranty made in connection with
the Loan being incorrect in any material respect when
made;
S3-3
<PAGE>
o Failure to comply with covenants;
o Failure to perform in other material respects under the
Loan;
o Voluntary or involuntary receivership or bankruptcy
filing; and
o Insolvency of Borrower.
39. CONDITIONS PRECEDENT: Those customarily found in loans of this nature,
including, but not limited to, the following:
o Loan agreement and other related documentation to be in
form and substance satisfactory;
o Legal opinions;
o Receipt of evidence of insurance coverage satisfactory
to the Lender;
o No material adverse change in financial and operating
condition of Power Purchaser;
o No default or event of default;
o Payment of all fees and expenses, including all legal
costs and expenses of the Lender;
o Compliance with environmental and regulatory laws and
regulations;
o Representations and warranties true and correct;
o Other documents reasonably requested.
40. GOVERNING LAW: The loan agreement will be subject to the laws of the
State of New York.
41. ASSIGNMENT/PARTICIPATION SALES: Assignments of interests in the Loan may
be made by the Lender with the consent of the Borrower, subject to a
minimum assignment amount of $10,000,000. Customary participation rights (with
customary voting limitations) will be available to assignees and participants).
S3-4
<PAGE>
SCHEDULE 1
to Operating
Equipment Agreement
BASIC PAYMENTS
Payment Date Advance Payment Arrears Payments
- - -----------------------------------------------------------------------------
05-Jan-97 0.00 7,817,130.68
05-Jul-97 0.00 2,299,440.00
05-Jan-98 0.00 14,153,678.55
05-Jul-98 0.00 2,299,440.00
05-Jan-99 0.00 14,038,321.27
05-Jul-99 0.00 2,299,440.00
05-Jan-00 0.00 14,040,943.04
05-Jul-00 0.00 2,299,440.00
05-Jan-01 0.00 14,040,883.44
05-Jul-01 0.00 2,299,440.00
05-Jan-02 0.00 14,040,884.80
05-Jul-02 0.00 2,299,440.00
05-Jan-03 0.00 14,040,884.77
05-Jul-03 0.00 2,299,440.00
05-Jan-04 0.00 14,040,884.77
05-Jul-04 0.00 2,299,440.00
05-Jan-05 13,779,963.77 14,040,884.77
05-Jul-05 0.00 0.00
05-Jan-06 14,040,884.77 2,299,440.00
05-Jul-06 2,299,440.00 0.00
05-Jan-07 14,040,884.77 0.00
05-Jul-07 2,299,440.00 0.00
05-Jan-08 15,856,476.41 0.00
05-Jul-08 2,299,440.00 0.00
05-Jan-09 17,672,068.05 0.00
05-Jul-09 2,299,440.00 0.00
05-Jan-10 17,672,068.05 0.00
05-Jul-10 2,299,440.00 0.00
05-Jan-11 17,672,068.05 0.00
05-Jul-11 2,299,440.00 0.00
05-Jan-12 17,672,068.05 0.00
05-Jul-12 2,299,440.00 0.00
05-Jan-13 17,672,068.05 0.00
05-Jul-13 2,299,440.00 0.00
05-Jan-14 17,672,068.05 0.00
05-Jul-14 2,299,440.00 0.00
05-Jan-15 17,672,068.05 0.00
05-Jul-15 2,299,440.00 0.00
05-Jan-16 17,672,068.05 0.00
05-Jul-16 2,299,440.00 0.00
05-Jan-17 17,672,068.05 0.00
<PAGE>
SCHEDULE 1
to
Operating
Equipment Agreement
BASIC PAYMENTS
Payment Date Advance Payment Arrears Payments
- - -------------------------------------------------------------------------------
05-Jul-17 2,299,440.00 0.00
05-Jan-18 17,672,068.05 0.00
05-Jul-18 2,299,440.00 0.00
05-Jan-19 11,044,183.59 0.00
05-Jul-19 9,077,958.21 0.00
04-Jan-20 0.00 0.00
<PAGE>
SCHEDULE 2
TO
OPERATING
EQUIPMENT
AGREEMENT
TERMINATION VALUES
DATE AMOUNT
------- --------------
7/31/96 312,475,638.75
8/5/96 316,077,643.61
9/5/96 321,057,837.72
10/5/96 324,429,224.09
11/5/96 327,849,910.27
12/5/96 331,321,227.36
1/5/97 325,325,866.37
2/5/97 327,156,206.38
3/5/97 328,994,207.98
4/5/97 330,840,078.02
5/5/97 332,672,553.87
6/5/97 334,512,748.99
7/5/97 334,039,956.70
8/5/97 335,920,350.81
9/5/97 337,808,510.98
10/5/97 339,683,171.83
11/5/97 341,565,443.93
12/5/97 343,455,532.80
1/5/98 331,178,495.87
2/5/98 333,032,384.71
3/5/98 334,894,145.26
4/5/98 336,763,990.03
5/5/98 338,619,904.14
6/5/98 340,483,744.64
7/5/98 340,034,052.36
8/5/98 341,938,370.44
9/5/98 343,850,657.91
10/5/98 345,748,896.80
11/5/98 347,654,940.95
12/5/98 349,569,001.10
1/5/99 337,430,739.27
2/5/99 339,309,649.70
3/5/99 341,196,626.61
4/5/99 343,091,887.78
5/5/99 344,972,586.60
6/5/99 346,861,400.19
7/5/99 346,436,037.32
8/5/99 348,365,567.84
9/5/99 350,303,248.61
10/5/99 352,226,229.38
11/5/99 354,157,183.55
12/5/99 356,096,326.42
1/5/00 343,979,865.73
2/5/00 345,884,076.24
3/5/00 347,796,517.10
4/5/00 349,717,410.50
5/5/00 351,623,009.78
6/5/00 353,536,876.90
7/5/00 353,135,820.18
8/5/00 355,090,557.36
9/5/00 357,053,585.50
10/5/00 359,001,153.58
11/5/00 360,956,819.06
12/5/00 362,920,800.57
1/5/01 350,828,464.31
2/5/01 352,757,643.77
3/5/01 354,695,166.40
4/5/01 356,641,257.48
5/5/01 358,571,195.65
6/5/01 360,509,497.48
7/5/01 360,131,996.09
8/5/01 362,111,188.61
9/5/01 364,098,748.80
10/5/01 366,069,949.86
11/5/01 368,049,302.82
<PAGE>
12/5/01 370,037,027.78
1/5/02 357,967,513.27
2/5/02 359,920,406.55
3/5/02 361,881,676.51
4/5/02 363,851,549.34
5/5/02 365,804,247.58
6/5/02 367,765,317.25
7/5/02 367,409,534.68
8/5/02 369,411,317.81
9/5/02 371,421,447.70
10/5/02 373,414,140.00
11/5/02 375,414,933.61
12/5/02 377,424,047.27
1/5/03 365,374,811.11
2/5/03 367,348,826.98
3/5/03 369,331,133.93
4/5/03 371,321,955.85
5/5/03 373,294,370.33
6/5/03 375,275,032.66
7/5/03 374,937,573.26
8/5/03 376,958,482.81
9/5/03 378,987,573.60
10/5/03 380,997,914.20
11/5/03 383,016,150.68
12/5/03 385,042,496.23
1/5/04 373,009,132.71
2/5/04 374,999,770.51
3/5/04 376,998,439.19
4/5/04 379,005,355.60
5/5/04 380,992,354.98
6/5/04 382,987,287.01
7/5/04 382,662,538.45
8/5/04 384,696,835.53
9/5/04 386,738,938.16
10/5/04 388,760,669.66
11/5/04 390,789,867.42
12/5/04 392,826,733.04
1/5/05 380,802,201.35
2/5/05 368,931,115.00
3/5/05 370,847,511.14
4/5/05 372,771,629.00
5/5/05 374,677,854.72
6/5/05 376,591,527.57
7/5/05 378,487,026.26
8/5/05 380,454,409.57
9/5/05 382,429,143.63
10/5/05 384,385,604.56
11/5/05 386,349,121.32
12/5/05 388,319,884.44
1/5/06 387,972,827.20
2/5/06 375,850,449.23
3/5/06 377,776,089.31
4/5/06 379,709,055.25
5/5/06 381,623,175.48
6/5/06 383,544,310.52
7/5/06 385,446,280.43
8/5/06 385,105,958.65
9/5/06 387,071,944.18
10/5/06 389,018,613.08
11/5/06 390,971,813.15
12/5/06 392,931,720.73
1/5/07 394,872,147.57
2/5/07 382,752,827.93
3/5/07 384,680,927.49
4/5/07 386,615,737.92
<PAGE>
5/5/07 388,529,694.95
6/5/07 390,449,981.01
7/5/07 392,349,021.51
8/5/07 392,006,011.75
9/5/07 393,968,528.27
10/5/07 395,909,549.95
11/5/07 397,856,241.87
12/5/07 399,808,757.14
1/5/08 401,739,507.54
2/5/08 387,782,978.62
3/5/08 389,688,464.65
4/5/08 391,599,638.75
5/5/08 393,495,168.77
6/5/08 395,396,118.05
7/5/08 397,281,147.19
8/5/08 396,923,941.65
9/5/08 398,871,450.51
10/5/08 400,802,890.45
11/5/08 402,739,313.34
12/5/08 404,680,853.73
1/5/09 406,606,164.04
2/5/09 390,816,644.95
3/5/09 392,704,141.43
4/5/09 394,596,719.02
5/5/09 396,479,795.78
6/5/09 398,367,834.31
7/5/09 400,246,249.46
8/5/09 399,882,308.39
9/5/09 401,822,773.79
10/5/09 403,753,620.65
11/5/09 405,689,308.38
12/5/09 407,629,967.68
1/5/10 409,561,013.67
2/5/10 393,777,444.42
3/5/10 395,670,920.31
4/5/10 397,569,507.69
5/5/10 399,458,397.10
6/5/10 401,352,274.16
7/5/10 403,236,326.07
8/5/10 402,878,235.62
9/5/10 404,824,573.33
10/5/10 406,761,086.44
11/5/10 408,702,457.14
12/5/10 410,648,816.59
1/5/11 412,585,352.02
2/5/11 396,807,484.52
3/5/11 398,706,674.44
4/5/11 400,610,988.42
5/5/11 402,505,370.57
6/5/11 404,404,746.97
7/5/11 406,294,058.22
8/5/11 405,941,435.75
9/5/11 407,893,241.77
10/5/11 409,834,976.72
11/5/11 411,781,562.92
12/5/11 413,733,131.39
1/5/12 415,674,622.35
2/5/12 399,901,913.48
3/5/12 401,806,248.16
4/5/12 403,715,692.65
5/5/12 405,614,923.87
6/5/12 407,519,127.12
7/5/12 409,412,975.57
8/5/12 409,065,084.84
9/5/12 411,021,591.13
<PAGE>
10/5/12 412,967,727.22
11/5/12 414,918,674.15
12/5/12 416,874,561.85
1/5/13 418,820,062.64
2/5/13 403,051,546.75
3/5/13 404,960,022.05
4/5/13 406,873,553.42
5/5/13 408,776,527.88
6/5/13 410,684,409.89
7/5/13 412,581,582.46
8/5/13 412,237,183.48
9/5/13 414,197,103.66
10/5/13 416,146,285.27
11/5/13 418,100,187.84
12/5/13 420,058,938.84
1/5/14 422,006,919.68
2/5/14 406,241,031.79
3/5/14 408,152,027.08
4/5/14 410,067,967.50
5/5/14 411,972,925.35
6/5/14 413,882,665.32
7/5/14 415,781,255.30
8/5/14 415,438,396.18
9/5/14 417,399,711.72
10/5/14 419,349,828.52
11/5/14 421,304,505.48
12/5/14 423,263,865.71
1/5/15 425,211,974.39
2/5/15 409,446,305.31
3/5/15 411,357,331.86
4/5/15 413,273,110.95
5/5/15 415,177,372.63
6/5/15 417,086,204.18
7/5/15 418,983,330.75
8/5/15 418,639,059.70
9/5/15 420,598,724.06
10/5/15 422,546,606.96
11/5/15 424,498,788.55
12/5/15 426,455,384.89
1/5/16 428,400,116.95
2/5/16 412,631,074.67
3/5/16 414,538,427.82
4/5/16 416,450,225.20
5/5/16 418,349,824.25
6/5/16 420,253,658.17
7/5/16 422,145,078.74
8/5/16 421,795,045.99
9/5/16 423,748,575.67
10/5/16 425,689,576.53
11/5/16 427,634,472.84
12/5/16 429,583,369.79
1/5/17 431,519,612.83
2/5/17 415,741,954.60
3/5/17 417,640,233.13
4/5/17 419,542,484.80
5/5/17 421,431,660.58
6/5/17 423,324,563.72
7/5/17 425,204,138.54
8/5/17 424,842,046.54
9/5/17 426,782,956.33
10/5/17 428,710,367.75
11/5/17 430,641,072.67
12/5/17 432,575,160.02
1/5/18 434,495,564.78
2/5/18 418,701,751.19
<PAGE>
3/5/18 420,583,193.81
4/5/18 422,467,910.64
5/5/18 424,338,408.08
6/5/18 426,211,884.22
7/5/18 428,070,837.47
8/5/18 427,687,682.05
9/5/18 429,606,705.63
10/5/18 431,510,960.18
11/5/18 433,417,628.92
12/5/18 435,326,777.07
1/5/19 437,220,889.53
2/5/19 428,071,932.21
3/5/19 429,969,356.64
4/5/19 431,869,038.59
5/5/19 433,752,547.31
6/5/19 435,637,937.83
7/5/19 437,506,769.25
8/5/19 430,311,070.52
9/5/19 432,194,855.60
10/5/19 434,061,715.80
11/5/19 435,929,685.82
12/5/19 437,798,795.64
1/4/20 439,650,584.40
CLOVER AGREEMENTS ASSIGNMENT AND
ASSUMPTION AGREEMENT
Dated as of July 1, 1996
between
OLD DOMINION ELECTRIC COOPERATIVE,
as Assignor
and
CLOVER UNIT 2 GENERATING TRUST
as Assignee
CLOVER UNIT 2 GENERATING FACILITY
AND
COMMON FACILITIES
<PAGE>
CLOVER AGREEMENTS ASSIGNMENT AND ASSUMPTION AGREEMENT
This CLOVER AGREEMENTS ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of
July 1, 1996 (this "Assignment and Assumption"), between OLD DOMINION ELECTRIC
COOPERATIVE, a wholesale power supply cooperative organized under the laws
of the Commonwealth of Virginia (the "Assignor"), and CLOVER UNIT 2 GENERATING
TRUST, a Delaware business trust created pursuant to the Trust Agreement,
dated as of July 1, 1996, between EPC Corporation and Wilmington Trust
Company (the "Assignee").
WHEREAS, the Clover Real Estate is more particularly described in
Schedule 1 to the Ground Lease and Sublease and is comprised of the Unit 1 Site
described in Schedule 2 thereto, the Unit 2 Site described in Schedule 3
thereto, the Common Facilities Site described in Schedule 4 thereto, and certain
other property, each such Schedule 1, Schedule 2, Schedule 3 and Schedule 4
being attached to, and recorded in the Halifax Clerk's Office with, the Ground
Lease and Sublease as part thereof;
WHEREAS, Old Dominion and Virginia Power own the Clover Real Estate as
tenants-in-common;
WHEREAS, by the Clover Agreements, Old Dominion and Virginia Power
established their respective rights and obligations as tenants-in-common of the
Clover Real Estate and of all improvements thereafter to be constructed, and all
personal property thereafter to be situated, on the Clover Real Estate. Such
improvements and personal property held by Old Dominion and Virginia Power as
tenants-in-common include (a) the Unit 1 Foundation constructed on the Unit 1
Site, (b) the Unit 2 Foundation constructed on the Unit 2 Site, (c) the Common
Facilities Foundation constructed on the Common Facilities Site, (d) the Unit 1
Equipment situated on the Unit 1 Site, (e) the Unit 2 Equipment situated on the
Unit 2 Site, and (f) the Common Facilities Equipment situated on the Common
Facilities Site;
WHEREAS, as tenants-in-common of such real and personal property, each
of Old Dominion and Virginia Power holds a 50% undivided interest in such real
and personal property, including the right to nonexclusive possession of all
such real and personal property, subject to (a) in the case of all such real and
personal property, the rights of the other to nonexclusive possession and the
terms and conditions of the Clover Agreements, (b) in the case of the Pollution
Control Assets, the rights, terms and conditions described above in clause (a)
and the rights of the Pollution Control Assets Facility Owner, and (c) in the
case of the Common Facilities, the Unit 1 Site, the Unit 1 Foundation and the
Unit 1 Equipment, the rights, terms and conditions described above in clause (a)
and the rights of the Unit 1 Parties;
WHEREAS, by the Ground Lease and Sublease, Old Dominion has leased the
Ground Interest to the Facility Owner, and the Facility Owner simultaneously has
subleased the Ground Interest back to Old Dominion upon the terms and conditions
of the Ground Lease and Sublease;
WHEREAS, Old Dominion has conveyed to the Facility Owner for a term of
years (a) the Foundation Interest by the Head Foundation Agreement and (b) the
Equipment Interest by the Head Equipment Agreement;
<PAGE>
WHEREAS, by the Operating Foundation Agreement, the Facility Owner will
convey the use and possession of the Foundation Interest back to Old Dominion
for a term of years which shall end prior to the expiration of the term of the
Head Foundation Agreement;
WHEREAS, by the Operating Equipment Agreement, the Facility Owner will
convey the use and possession of the Equipment Interest back to Old Dominion for
a term of years which shall end prior to the expiration of the term of the Head
Equipment Agreement;
WHEREAS, although Old Dominion and the Facility Owner intend that the
Foundation Interest at all times and in all respects be and remain personal
property under Virginia law, they have recorded the Head Foundation Agreement
and will record the Operating Foundation Agreement in the Halifax Clerk's Office
in order to satisfy the conditions of Section 55-96 of the Code of Virginia
1950, as amended, in the event that the Foundation Interest is deemed to be real
estate or an interest in real estate for purposes of such Section 55-96; and
WHEREAS, the Unit 1 Parties and the Unit 2 Parties shall share equally
all of those rights, and shall be subject equally to having all of those
responsibilities undertaken, which are granted to or imposed upon Old Dominion
with respect to the Common Facilities Site, the Common Facilities Foundation and
the Common Facilities Equipment, as (a) tenant-in-common with Virginia Power of
such property and (b) a party to the Clover Agreements.
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Assignment and Assumption and not
otherwise defined herein shall have the respective meanings specified in
Appendix A to the Participation Agreement, dated as of July 1, 1996, among the
Assignor, the Assignee, EPC Corporation, Wilmington Trust Company (in the
capacities set forth therein) and Utrecht-America Finance Co.
Where any provision in this Assignment and Assumption refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
SECTION 2. ASSIGNMENT OF ASSIGNED CLOVER INTERESTS TO ASSIGNEE.
The Assignor hereby assigns the Assigned Clover Interests to the
Assignee. The assignment effected by this Section 2 shall become effective on
and as of the Closing Date and shall terminate on the expiration or earlier
termination of the Head Equipment Agreement Term and the Head Foundation
Agreement Term.
2
<PAGE>
SECTION 3. ASSUMPTION BY ASSIGNEE.
The Assignee hereby assumes, and agrees to perform any and all
liabilities and obligations of the Assignor incurred with respect to, the
Assigned Clover Interests assigned pursuant to Section 2. This assumption shall
terminate (except with respect to any liability or obligation which has accrued
prior to such termination) on the expiration or earlier termination of the Head
Equipment Agreement Term and the Head Foundation Agreement Term. In accordance
with Section 5, the Assignor has assumed and agreed to perform any and all
liabilities of the Assignee incurred with respect to the Assigned Clover
Interests resulting from the Assignee's assumption of the liabilities and the
obligations of the Assignor under this Section 3 and, accordingly, during the
effective period of such assumption and agreement by the Assignor, (i) the
Assignee shall be relieved of any and all duties or obligations with respect to
the liabilities or obligations assumed or agreed to be performed by the Assignee
in respect of the Assigned Clover Interests in accordance with this Section 3,
(ii) any default by the Assignor in the performance of the liabilities and
obligations assumed and agreed to be performed by the Assignor in accordance
with Section 5 shall not be (or be deemed to be) a default by the Assignee in
the performance of the liabilities and obligations assumed and agreed to be
performed by the Assignee under this Section 3 and (iii) the consequences of any
action or inaction on the part of the Assignor (other than full and complete
performance) in the performance of the liabilities and obligations assumed and
agreed to be performed by the Assignor in accordance with Section 5 or otherwise
with respect to the Assigned Clover Interests shall not be attributed to the
Assignee (including, without limitation, any Liens, incurred, assumed or
suffered to exist by the Assignor on the Assigned Clover Interests).
SECTION 4. REASSIGNMENT OF ASSIGNED CLOVER INTERESTS TO ASSIGNOR.
The Assignee hereby reassigns to the Assignor all right, title, and
interest of the Assignee in the Assigned Clover Interests assigned to the
Assignee pursuant to Section 2 hereof. This assignment shall become effective on
and as of the Closing Date and shall terminate upon the expiration or earlier
termination of the Term of the Operating Equipment Agreement and the Operating
Foundation Agreement.
SECTION 5. ASSUMPTION BY ASSIGNOR.
The Assignor hereby assumes and agrees to perform any and all
liabilities and obligations of the Assignee incurred with respect to the
Assigned Clover Interests resulting from the Assignee's assumption of the
liabilities and obligations of the Assignor in Section 3 including the payments
referred to in Section 3.2. This assumption shall terminate (except with respect
to any liability or obligation which has accrued prior to such termination) upon
the expiration or termination of the Term of the Operating Equipment Agreement
and the Operating Foundation Agreement.
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<PAGE>
SECTION 6. LIMITATIONS ON AMENDMENTS TO CLOVER AGREEMENTS.
The Assignor agrees that it will not, without the prior written consent
of the Assignee which consent may not be unreasonably withheld, supplement or
amend, or permit any supplement or amendment of, the Clover Ownership Agreement
or the Clover Operating Agreement, which supplement or amendment (a)
discriminates against the Ground Interest, the Equipment Interest or the
Foundation Interest when compared with other undivided interests of Old
Dominion, Virginia Power or others in Clover Unit 2 or Clover Unit 1, (b)
discriminates against the beneficial ownership of the Equipment Interest or the
Foundation Interest in respect of the period subsequent to the Expiration Date
when compared with the period prior to the Expiration Date, (c) decreases the
Facility Owner's entitlement to Available Capacity from or in respect of the
Clover Unit 2 Generating Facility except in connection with a reduction of the
entire Available Capacity of the Clover Unit 2 Generating Facility, (d) is
entered into on or after the date eighteen months prior to the Expiration Date,
unless prior to entering such supplement or amendment the Assignor shall have
irrevocably elected the Purchase Option and the Foundation Purchase Option, (e)
except if required to operate or maintain Clover Unit 2 in accordance with
Applicable Law, individually or in the aggregate materially changes the
financial responsibilities or obligations of the Assignee, as the owner of an
"Ownership Interest" as such term is defined in the Clover Operating Agreement
and (f) impairs the ability or responsibility of the Clover Unit 2 Operator to
operate Clover Unit 2 in accordance with Prudent Utility Practice or interferes
with the Clover Unit 2 Operator's unfettered access to the Real Property.
SECTION 7. SECURITY FOR ASSIGNEE'S OBLIGATION TO THE LENDERS.
In order to secure the Secured Indebtedness, the Assignee will assign
in the Loan Agreement and the Leasehold Mortgage to the Agent for its benefit
and the ratable benefit of the Lenders its rights under this Assignment and
Assumption and grant security interests in favor of the Agent in all of the
Assignee's right, title and interest in and to the Facility Owner's Unit 2
Interest, including its interest in this Assignment and Assumption (other than
Excepted Payments and Excepted Rights). The Assignor hereby consents to such
assignment and to the creation of such security interests and acknowledges
receipt of copies of the Loan Agreement and the Leasehold Mortgage, it being
understood that such consent shall not affect any requirement or the absence of
any requirement for any consent under any other circumstances. The Assignor
hereby acknowledges receipt of due notice that the Assignee's interest in this
Assignment and Assumption will be assigned to the Agent as security pursuant
to the Loan Agreement to the extent provided in the Loan Agreement and the
Leasehold Mortgage. Unless and until the Assignor shall have received written
notice from the Agent that the Liens of the Loan Agreement and the Leasehold
Mortgage have been discharged, the Agent shall have the right to exercise the
rights of the Assignee under this Assignment and Assumption to the extent set
forth in and subject in each case to the exceptions set forth in the Loan
Agreement and the Leasehold Mortgage.
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<PAGE>
SECTION 8. MISCELLANEOUS.
SECTION 8.1. AMENDMENTS AND WAIVERS. No term, covenant, agreement or
condition of this Assignment and Assumption may be terminated, amended or
compliance therewith waived (either generally or in a particular instance,
retroactively or prospectively) except by an instrument or instruments in
writing executed by each party hereto and, also, in connection with any
termination of or amendment to those provisions for which Virginia Power is an
intended beneficiary, approved in writing by Virginia Power.
SECTION 8.2. NOTICES. Unless otherwise expressly specified or permitted
by the terms hereof, all communications and notices provided for herein to a
party hereto shall be in writing or by a telecommunications device capable of
creating a written record, and any such notice shall become effective (a) upon
personal delivery thereof, including, without limitation, by overnight mail or
courier service, (b) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt thereof, or
(c) in the case of notice by such a telecommunications device, upon transmission
thereof, provided such transmission is promptly confirmed by either of the
methods set forth in clauses (a) or (b) above, in each case addressed to such
party at its address set forth below or at such other address as such party may
from time to time designate by written notice to the other party hereto:
If to the Assignor:
Old Dominion Electric Cooperative
4201 Dominion Boulevard
Glen Allen, Virginia 23060
Facsimile No.: (804) 747-3742
Telephone No.: (804) 747-0592
Attention: Vice President of Accounting and Finance
If to the Assignee:
Clover Unit 2 Generating Trust
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Facsimile No.: (302) 651-8882
Telephone No.: (302) 651-1000
Attention: Corporate Trust Administration
5
<PAGE>
with a copy to the Owner Participant:
EPC Corporation
c/o Chrysler Capital Corporation
225 High Ridge Road
Stamford, Connecticut 06905
Facsimile No.: (203) 975-3911
Telephone No.: (203) 975-3500
Attention: President
A copy of all communications and notices provided for herein shall be sent by
the party giving such communication or notice to Virginia Power at:
Virginia Electric and Power Company
P.O. Box 26666
Richmond, Virginia 23261
Attention: President
SECTION 8.3. SURVIVAL. All warranties, representations, indemnities and
covenants made by either party hereto, herein or in any certificate or other
instrument delivered by either such party or on the behalf of either such party
under this Agreement, shall be considered to have been relied upon by the other
party hereto and shall survive the consummation of the transactions contemplated
hereby on the Closing Date regardless of any investigation made by either party
or on behalf of either party.
SECTION 8.4. SUCCESSORS AND ASSIGNS.
(a) This Assignment and Assumption shall be binding upon and
shall inure to the benefit of, and shall be enforceable by, the parties hereto
and their respective successors and assigns as permitted by and in accordance
with the terms hereof.
(b) Except as expressly provided herein or in the other
Operative Documents, the Assignor may not assign its interests herein without
the consent of the Assignee. The Assignor expressly agrees that the Assignee
shall be permitted to assign its rights under this Assignment and Assumption
without the written consent of the Assignor in connection with a transfer of the
Facility Owner's Unit 2 Interest pursuant to the terms of the Operating
Agreements and the Head Agreements. Except as expressly provided in this
Assignment and Assumption or in the other Operative Documents, the Assignee
may not assign its interest herein prior to the expiration or early
termination of the Term of the Operating Agreements without the consent of the
Assignor and Virginia Power.
SECTION 8.5. GOVERNING LAW. THIS ASSIGNMENT AND ASSUMPTION SHALL BE IN
ALL RESPECTS GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
6
<PAGE>
SECTION 8.6. SEVERABILITY. Whenever possible, each provision of this
Assignment and Assumption shall be interpreted in such manner as to be effective
and valid under Applicable Law, but if any provision of this Assignment and
Assumption shall be prohibited by or invalid under Applicable Law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Assignment and Assumption.
SECTION 8.7. COUNTERPARTS. This Assignment and Assumption may be
executed in any number of counterparts, each executed counterpart constituting
an original but all together only one instrument.
SECTION 8.8. HEADINGS. The headings of the sections of this
Assignment and Assumption are inserted for purposes of convenience only and
shall not be construed to affect the meaning or construction of any of the
provisions hereof.
SECTION 8.9. FURTHER ASSURANCES. Each party hereto will promptly and
duly execute and deliver such further documents to make such further assurances
for and take such further action reasonably requested by any party to whom such
first party is obligated, all as may be reasonably necessary to carry out more
effectively the intent and purpose of this Assignment and Assumption.
SECTION 8.10. EFFECTIVENESS OF ASSIGNMENT AND ASSUMPTION. This
Assignment and Assumption has been dated as of the date first above written for
convenience only. This Assignment and Assumption shall be effective on the date
of execution and delivery by each of the Assignee and the Assignor.
SECTION 8.11. LIMITATION OF LIABILITY. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is executed and delivered
by Wilmington Trust Company, not individually or personally but solely as
trustee of Clover Unit 2 Generating Trust (the "Trust") under the Trust
Agreement, in the exercise of the powers and authority conferred and vested in
it, (b) each of the representations, undertakings and agreements herein made on
the part of the Trust is made and intended not as personal representations,
undertakings and agreements by Wilmington Trust Company but is made and intended
for the purpose for binding only the Trust, (c) nothing herein contained shall
be construed as creating any liability on Wilmington Trust Company, individually
or personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties hereto
or by any Person claiming by, through or under the parties hereto and (d) under
no circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Trust or be liable for the
breach or failure of any obligation, representation, warranty or covenant
made or undertaken by the Trust under this Agreement or any other Operative
Documents.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Assumption to be duly executed by their respective officers
thereunto duly authorized.
OLD DOMINION ELECTRIC COOPERATIVE,
as Assignor
By:/s/ DANIEL M. WALKER
----------------------------------------
Name: Daniel M. Walker
Title: Vice President
Date: July 31, 1996
CLOVER UNIT 2 GENERATING TRUST,
as Assignee
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement
By:/s/ EMMETT R. HARMON
-----------------------------------------
Name: Emmett R. Harmon
Title: Vice President
Date: July 31, 1996
DEED OF GROUND LEASE AND SUBLEASE AGREEMENT
Dated as of July 1, 1996
between
OLD DOMINION ELECTRIC COOPERATIVE,
as Ground Lessor
To be indexed as both GRANTOR and GRANTEE
and
CLOVER UNIT 2 GENERATING TRUST,
as Ground Lessee
To be indexed as both GRANTEE and GRANTOR
-------------------------------------------------
Land Located
in Halifax County, Virginia
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS............................................ 2
SECTION 2. LEASE OF GROUND INTEREST............................... 3
2.1. LEASE OF GROUND INTEREST............................... 3
2.2. BASIC GROUND LEASE TERM................................ 3
2.3. RENEWAL GROUND LEASE TERM.............................. 3
2.4. SURRENDER OR TRANSFER OF GROUND INTEREST............... 3
2.5. TRANSFER OF GROUND INTEREST BY GROUND LESSEE........... 4
2.6. NONTERMINABILITY....................................... 4
SECTION 3. RENT FOR THE LEASE OF THE GROUND INTEREST.............. 4
3.1. ANNUAL RENT............................................ 4
3.2. TAXES AND ASSESSMENTS.................................. 4
SECTION 4. SUBLEASE OF GROUND INTEREST............................ 5
SECTION 5. RENT FOR THE SUBLEASE OF THE GROUND INTEREST........... 5
SECTION 6. QUIET ENJOYMENT IN FAVOR OF THE GROUND LESSEE.......... 5
SECTION 7. QUIET ENJOYMENT IN FAVOR OF THE GROUND LESSOR.......... 6
SECTION 8. USE OF THE GROUND INTEREST BY GROUND LESSEE............ 6
SECTION 9. USE OF THE GROUND INTEREST BY GROUND LESSOR............ 7
SECTION 10. SURRENDER OR TRANSFER OF GROUND LEASE INTEREST......... 7
SECTION 11. EARLY TERMINATION OF GROUND SUBLEASE TERM.............. 7
SECTION 12. LIENS.................................................. 8
SECTION 13. WAIVER OF PARTITION.................................... 8
SECTION 14. SECURITY FOR GROUND LESSEE'S OBLIGATION TO THE
LENDERS................................................ 8
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SECTION 15. NONMERGER.............................................. 9
SECTION 16. INSPECTION............................................. 9
SECTION 17. INDEMNIFICATION........................................ 9
SECTION 18. MISCELLANEOUS.......................................... 10
18.1. AMENDMENTS AND WAIVERS................................. 10
18.2. NOTICES................................................ 10
18.3. SURVIVAL............................................... 11
18.4. SUCCESSORS AND ASSIGNS................................. 11
18.5. BUSINESS DAY........................................... 12
18.6. GOVERNING LAW.......................................... 12
18.7. SEVERABILITY........................................... 12
18.8. COUNTERPARTS........................................... 12
18.9. HEADINGS AND TABLE OF CONTENTS......................... 12
18.10. FURTHER ASSURANCES..................................... 12
18.11. EFFECTIVENESS OF GROUND LEASE AND SUBLEASE............. 12
18.12. LIMITATION OF LIABILITY................................ 13
Appendix A - Definitions
Exhibit A - Clover Power Station Plat
Schedule 1 - Description of the Clover Real Estate
Schedule 2 - Description of the Unit 1 Site
Schedule 3 - Description of the Unit 2 Site
Schedule 4 - Description of the Common Facilities Site
ii
<PAGE>
DEED OF GROUND LEASE AND SUBLEASE AGREEMENT
This DEED OF GROUND LEASE AND SUBLEASE AGREEMENT, dated as of July 1,
1996 (this "Ground Lease and Sublease"), between OLD DOMINION ELECTRIC
COOPERATIVE, a wholesale power supply cooperative organized under the laws of
the Commonwealth of Virginia (the "Ground Lessor", to be indexed as both GRANTOR
and GRANTEE), and CLOVER UNIT 2 GENERATING TRUST, a Delaware business trust
created pursuant to the Trust Agreement, dated as of July 1, 1996, between EPC
Corporation and Wilmington Trust Company (the "Ground Lessee", to be indexed as
both GRANTEE and GRANTOR).
WHEREAS, the Clover Real Estate is more particularly described in
Schedule 1 and is comprised of the Unit 1 Site described in Schedule 2, the Unit
2 Site described in Schedule 3, the Common Facilities Site described in Schedule
4, and certain other property, each such Schedule 1, Schedule 2, Schedule 3 and
Schedule 4 being attached to, and being recorded in the Halifax Clerk's office
with, this Ground Lease and Sublease as part hereof;
WHEREAS, a copy of the Clover Power Station Plat was recorded in the
Halifax Clerk's Office in Plat Book 18, Page 50 and corrected by a re-recording
in such Clerk's Office in Plat Book 18, Pages 120-124, and is marked Exhibit A,
is attached hereto and is being recorded in the Halifax Clerk's Office as a part
hereof;
WHEREAS, Old Dominion and Virginia Power own the Clover Real Estate as
tenants-in-common;
WHEREAS, by the Clover Agreements, Old Dominion and Virginia Power
established their respective rights and obligations as tenants-in-common of the
Clover Real Estate and of all improvements thereafter to be constructed, and all
personal property thereafter to be situated, on the Clover Real Estate. Such
improvements and personal property held by Old Dominion and Virginia Power as
tenants-in-common include (a) the Unit 1 Foundation constructed on the Unit 1
Site, (b) the Unit 2 Foundation constructed on the Unit 2 Site, (c) the Common
Facilities Foundation constructed on the Common Facilities Site, (d) the Unit 1
Equipment situated on the Unit 1 Site, (e) the Unit 2 Equipment situated on the
Unit 2 Site, and (f) the Common Facilities Equipment situated on the Common
Facilities Site;
WHEREAS, as tenants-in-common of such real and personal property, each
of Old Dominion and Virginia Power holds a 50% undivided interest in such real
and personal property, including the right to nonexclusive possession of all
such real and personal property, subject to (a) in the case of all such real and
personal property, the rights of the other to nonexclusive possession and the
terms and conditions of the Clover Agreements, (b) in the case of the Pollution
Control Assets, the rights, terms and conditions described above in clause (a)
and the rights of the Pollution Control Assets Lessor, and (c) in the case of
the Common Facilities, the Unit 1 Site, the Unit 1 Foundation and the Unit 1
Equipment, the rights, terms and conditions described above in clause (a) and
the rights of the Unit 1 Parties;
<PAGE>
WHEREAS, simultaneously with the recordation of this Ground Lease and
Sublease, Old Dominion will convey to the Facility Owner for a term of years (a)
the Foundation Interest by the Head Foundation Agreement and (b) the Equipment
Interest by the Head Equipment Agreement;
WHEREAS, by the Operating Foundation Agreement, the Facility Owner will
convey the use and possession of the Foundation Interest back to Old Dominion
for a term of years which shall end prior to the expiration of the term of the
Head Foundation Agreement;
WHEREAS, by the Operating Equipment Agreement, the Facility Owner will
convey the use and possession of the Equipment Interest back to Old Dominion for
a term of years which shall end prior to the expiration of the term of the Head
Equipment Agreement;
WHEREAS, although Old Dominion and the Facility Owner intend that the
Foundation Interest at all times and in all respects be and remain personal
property under Virginia law, they are recording the Head Foundation Agreement
and will record the Operating Foundation Agreement in the Halifax Clerk's Office
in order to satisfy the conditions of Section 55-96 of the Code of Virginia
1950, as amended, in the event that the Foundation Interest is deemed to be real
estate or an interest in real estate for purposes of such Section 55-96; and
WHEREAS, the Unit 1 Parties and the Unit 2 Parties shall share equally
all of those rights, and shall be subject equally to having all of those
responsibilities undertaken, which are granted to or imposed upon Old Dominion,
with respect to the Common Facilities Site, the Common Facilities Foundation and
the Common Facilities Equipment, as (a) tenant-in-common with Virginia Power of
such property, and (b) a party to the Clover Agreements.
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Ground Lease and Sublease and not
otherwise defined herein shall have the respective meanings set forth in
Appendix A hereto unless the context hereof shall otherwise require.
Where any provision in this Ground Lease and Sublease refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
2
<PAGE>
SECTION 2. LEASE OF GROUND INTEREST.
2.1. LEASE OF GROUND INTEREST. The Ground Lessor hereby leases the
Ground Interest to the Ground Lessee, and the Ground Lessee hereby leases the
Ground Interest from the Ground Lessor. The Ground Lessor and the Ground Lessee
understand and agree that (a) this lease of the Ground Interest is subject to
the limitations identified in the definition of Ground Interest, (b) legal title
to the Clover Real Estate, including the Unit 2 Site and the Common Facilities
Site, remains vested in Old Dominion and Virginia Power as tenants-in-common,
and (c) this lease of the Ground Interest is subject and subordinate to the lien
of the Old Dominion Indenture (including any future amendments, supplements or
issuance of additional advances or indebtedness thereunder), Permitted
Encumbrances and the rights of Virginia Power under the Clover Agreements.
2.2. BASIC GROUND LEASE TERM. The term of the foregoing lease to the
Ground Lessee will commence on the Closing Date and shall terminate at 11:59
p.m. (New York City time) on January 5, 2060 (the "Basic Ground Lease Term");
PROVIDED, HOWEVER, that in no event shall the Basic Ground Lease Term terminate
so long as the Ground Lessee's leasehold interest in the Ground Interest shall
be subject to the Lien of the Leasehold Mortgage.
2.3. RENEWAL GROUND LEASE TERM. At the expiration of the Basic Ground
Lease Term or any Renewal Ground Lease Term (as hereinafter defined), the Ground
Lessee may extend the Basic Ground Lease Term or such existing Renewal Ground
Lease Term for an additional term of not less than one year (each a "Renewal
Ground Lease Term") by giving the Ground Lessor 180 days' prior written notice;
PROVIDED that, the Ground Lessee shall be permitted to renew the term of this
Ground Lease and Sublease for a Renewal Ground Lease Term only if (a)
concurrently with such renewal, the Head Equipment Agreement and the Head
Foundation Agreement are renewed for a Head Equipment Agreement Renewal Term and
Head Foundation Agreement Renewal Term, respectively, equal to the Renewal
Ground Lease Term, and (b) on the date that notice of such renewal is given and
at the commencement of such Renewal Ground Lease Term (i) the Clover Unit 2
Generating Facility continues to be used for the production of electric capacity
and energy and (ii) no determination has been made in accordance with Section
11.01(a) of the Clover Operating Agreement to retire the Clover Unit 2
Generating Facility prior to the expiration of such Ground Lease Renewal Term.
Notwithstanding the foregoing, if the Ground Lease Term is not earlier
terminated, it shall end on December 31, 2089.
2.4. SURRENDER OR TRANSFER OF GROUND INTEREST. Without limitation upon
Section 10, on the last day of the Ground Lease Term the Ground Lessee shall
surrender the Ground Interest to the Ground Lessor by returning the same unto
the possession of the Ground Lessor without representation or warranty other
than that the Ground Interest is free and clear of all Facility Owner's Liens
and Owner Participant's Liens. Upon surrendering the Ground Interest, the Ground
Lessee shall execute, acknowledge and deliver a release, surrender or conveyance
of the Ground Lease Interest to be prepared by the Ground Lessor at its expense
and in a form reasonably satisfactory to the Ground Lessee to be duly recorded
at the Ground Lessor's expense in the Halifax Clerk's Office. The
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<PAGE>
obligations of the Ground Lessee under this Section 2.4 shall survive the
termination of this Ground Lease and Sublease.
2.5. TRANSFER OF GROUND INTEREST BY GROUND LESSEE. The Ground Lessee
expressly agrees that the Ground Lessee may convey and transfer the Ground Lease
Interest only (i) as part of the Ground Lessee's transfer of the Facility
Owner's Unit 2 Interest pursuant to the Operative Documents or (ii) to Virginia
Power in connection with Virginia Power's exercise of its rights under Sections
6.2 and 6.3 of the Head Agreements.
2.6. NONTERMINABILITY. The Ground Lease Term shall not terminate, nor
shall any of the rights granted and conveyed hereunder to the Ground Lessee be
extinguished, lost or otherwise impaired, in whole or in part, by any cause or
for any reason whatsoever, including the following: (a) any damage to or loss or
destruction of all or any part of Clover Unit 2 for any reason whatsoever and of
whatever duration, (b) the condemnation, requisition (by eminent domain or
otherwise), seizure or other taking of title or use of Clover Unit 2 by any
Governmental Entity or otherwise, (c) any prohibition, limitation or restriction
on the use by any party of all or any part of its property or the interference
with such use by any Person, or any eviction by paramount title or otherwise,
(d) any inadequacy, incorrectness or failure of the description of the Clover
Real Estate or the Ground Interest or any part thereof or any rights or property
in which an interest is intended to be granted or conveyed by this Ground Lease
and Sublease, (e) the insolvency, bankruptcy, reorganization or similar
proceedings by or against the Ground Lessor, the Ground Lessee or any other
Person, (f) the failure by the Ground Lessee to comply with Section 2.4, 3 or 8
hereof, or (g) any other reason whatsoever, whether similar or dissimilar to any
of the foregoing.
SECTION 3. RENT FOR THE LEASE OF THE GROUND INTEREST.
3.1. ANNUAL RENT. As rent for the Ground Interest, the Ground Lessee
agrees to pay to the Ground Lessor annual rent of $30,000 per year, in advance
on January 5 of each year during that portion of the Ground Lease Term equal to
the Ground Sublease Term; PROVIDED that the first payment of rent shall be
payable on the Closing Date and shall be prorated from the beginning of the
Ground Lease Term to January 4, 1997. From and after the expiration or
termination of the Ground Sublease Term, as rent for the Ground Interest, the
Ground Lessee agrees to pay to the Ground Lessor rent equal to the fair market
rental value of the Ground Interest, such fair market rental value to be
determined at the expiration or termination of the Ground Sublease Term by an
appraiser mutually acceptable to the Ground Lessor and the Ground Lessee.
3.2. TAXES AND ASSESSMENTS. From and after the expiration or
termination of the Ground Sublease Term and until the expiration of the Ground
Lease Term or surrender of the Ground Interest to Old Dominion pursuant to
Section 10, the Ground Lessee agrees to pay to the Ground Lessor an amount equal
to 50% of all Taxes and assessments, general or special, taxed, charged, levied,
assessed or imposed upon the Unit 2 Site and 25% of all Taxes and assessments,
general or special, taxed, charged, levied, assessed or imposed upon the Common
Facilities Site. Such payment
4
<PAGE>
shall be due upon demand by the Ground Lessor, but in no event shall such
amounts be due prior to the date such Taxes and assessments are due and
payable to a taxing or assessing Governmental Entity.
SECTION 4. SUBLEASE OF GROUND INTEREST.
The Ground Lessee hereby subleases the Ground Interest to the Ground
Lessor, and the Ground Lessor hereby subleases the Ground Interest from the
Ground Lessee, for a term commencing on the Closing Date and terminating at
11:59 p.m. (New York City time) on the Expiration Date subject to early
termination pursuant to Section 11 hereof (the "Ground Sublease Term"). The
Ground Lessor and the Ground Lessee understand and agree that (a) this sublease
of the Ground Interest is subject to the limitations identified in the
definition of Ground Interest, (b) legal title to the Clover Real Estate,
including the Unit 2 Site and the Common Facilities Site, remains vested in Old
Dominion and Virginia Power as tenants-in-common, (c) this sublease of the
Ground Interest is subject and subordinate to the Lien of the Old Dominion
Indenture (including any future amendments, supplements or issuance of
additional advances or indebtedness thereunder), Permitted Encumbrances and the
rights of Virginia Power under the Clover Agreements and (d) this sublease of
the Ground Interest is subject and subordinate to the interest of the Ground
Lessee in the Ground Interest created pursuant to Section 2.1 of this Ground
Lease and Sublease.
SECTION 5. RENT FOR THE SUBLEASE OF THE GROUND INTEREST.
As rent for the sublease of the Ground Interest provided in Section 4,
the Ground Lessor agrees to pay to the Ground Lessee annual rent of $30,000 per
year, payable in advance on January 5 of each year during the Ground Sublease
Term; PROVIDED that the first payment of rent shall be payable on the Closing
Date and shall be prorated from the beginning of the Ground Sublease Term to
January 4, 1997.
SECTION 6. QUIET ENJOYMENT IN FAVOR OF THE GROUND LESSEE.
The Ground Lessor warrants that it has full right and authority to
lease the Ground Interest to the Ground Lessee pursuant to the terms of this
Ground Lease and Sublease and agrees that, notwithstanding any provision of any
other Operative Documents, so long as the Ground Lease Term has not been
terminated pursuant to the express provisions of Section 10 hereof, the Ground
Lessor shall not through its own actions or inactions interfere with or
interrupt the quiet enjoyment of the use, operation and possession by the Ground
Lessee of the leasehold interest in the Ground Interest subject to the terms
hereof; PROVIDED, HOWEVER, that the Ground Lessor makes no covenant with respect
to the interruptions of such enjoyment, use, operation or possession of the
Ground Interest arising from actions of any Lender or the Agent.
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<PAGE>
Notwithstanding anything in this Ground Lease and Sublease to the
contrary, the Ground Lessor shall have the right, without being deemed to breach
the foregoing covenant of quiet enjoyment, to (a) grant one or more rights of
way and easements over or in respect of any portion of the Clover Real Estate
and (b) lease or convey one or more portions of the Clover Real Estate;
PROVIDED, HOWEVER, that (i) each such grant, lease and conveyance shall be in
accordance with the Clover Agreements and (ii) no such grant, lease or
conveyance shall either impair the use or operation of, or the ability to
maintain, improve or rebuild the Clover Unit 2 as contemplated by the Clover
Agreements and the Operative Documents or reduce the value of Clover Unit 2 by
more than a DE MINIMIS amount.
SECTION 7. QUIET ENJOYMENT IN FAVOR OF THE GROUND LESSOR.
The Ground Lessee warrants that it has full right and authority to
sublease the Ground Interest to the Ground Lessor pursuant to the terms of this
Ground Lease and Sublease and agrees that, notwithstanding any provision of any
other Operative Documents, so long as the Ground Sublease Term has not been
terminated pursuant to the express provisions of Section 11 hereof, the Ground
Lessee shall not through its own actions or inactions interfere with or
interrupt the quiet enjoyment of the use, operation and possession by the Ground
Lessor of the subleasehold interest in the Ground Interest subject to the terms
hereof; PROVIDED, HOWEVER, that the Ground Lessee makes no covenant with respect
to the interruption of such enjoyment, use, operation and possession of the
Ground Interest arising from actions of any Lender or the Agent.
SECTION 8. USE OF THE GROUND INTEREST BY GROUND LESSEE.
The Ground Lessee's rights hereunder to use the Ground Interest shall
be limited to the right to use the Ground Interest in connection with the use,
operation and maintenance of Clover Unit 2 and in accordance with the terms and
provisions of the Clover Agreements, which shall include the right to construct,
install, operate, use, repair and relocate and remove facilities and structures
on or under the Unit 2 Site and the Common Facilities Site, including buildings,
roads, paths, walkways, sanitary sewers, storm drains, water and gas mains,
waste disposal systems, electric power lines, telephone, television and
telecommunication lines, fire protection systems, coal, water, limestone and
other commodity transport systems, safety sensor and monitoring systems, fuel
lines and other utility lines and systems, all as reasonably necessary or
advisable for the commercial operation of Clover Unit 2, but in each case, only
to the extent permitted by the Clover Agreements.
Notwithstanding anything herein to the contrary, during the Ground
Sublease Term, the Ground Lessee shall not be deemed to have exceeded its rights
granted hereunder as the result of any action by the Ground Lessor.
6
<PAGE>
SECTION 9. USE OF THE GROUND INTEREST BY GROUND LESSOR.
The Ground Lessor's rights hereunder to use the Ground Interest during
the Ground Sublease Term shall include the right to construct, install, operate,
use, repair and relocate facilities and structures on or under the Unit 2 Site
and the Common Facilities Site, including buildings, roads, paths, walkways,
sanitary sewers, storm drains, water and gas mains, waste disposal systems,
electric power lines, telephone, television and telecommunication lines, fire
protection systems, coal, water, limestone and other commodity transport
systems, safety sensor and monitoring systems, fuel lines and other utility
lines and systems, and any other uses as shall be permitted by the Clover
Agreements.
SECTION 10. SURRENDER OR TRANSFER OF GROUND LEASE INTEREST.
If (a) the Operating Equipment Agreement and the Operating Foundation
Agreement are terminated pursuant to Section 10, 13 or 18 of each thereof, (b)
the Purchase Option pursuant to Section 15.1 of the Operating Equipment
Agreement and the Foundation Purchase Option pursuant to Section 15.1 of the
Operating Foundation Agreement are exercised, (c) the Ground Lessee exercises
its right to terminate the Head Equipment Agreement and the Head Foundation
Agreement pursuant to Section 10.2 of each thereof or (d) the Ground Lessee
exercises its right to transfer the Facility Owner's Unit 2 Interest pursuant to
Section 17.1(e) of the Operating Agreements, either (I) in circumstances where
the transferee is the Ground Lessor, the Ground Lessee shall, upon satisfaction
of the requirements of the relevant sections of the Operating Equipment
Agreement, the Operating Foundation Agreement, the Head Equipment Agreement and
the Head Foundation Agreement, surrender all of the Ground Lessee's right, title
and interest in and to the Ground Interest to the Ground Lessor in accordance
with Section 2.4 or (II) in all other cases, the Ground Lessor expressly agrees
that the Ground Lessee may convey and transfer the Ground Lessee's right, title
and interest in the Ground Interest as part of the Ground Lessee's transfer of
the Facility Owner's Unit 2 Interest under the relevant sections of the
Operating Agreements and the Head Agreements. The Ground Lessor and the Ground
Lessee agrees to comply with the provisions of the applicable sections of the
Operating Equipment Agreement, the Operating Foundation Agreement, the Head
Equipment Agreement and the Head Foundation Agreement and Section 2.4 hereof in
connection with such surrender.
7
<PAGE>
SECTION 11. EARLY TERMINATION OF GROUND SUBLEASE TERM.
The Ground Sublease Term shall terminate prior to the scheduled
expiration of the Ground Sublease Term (a) upon satisfaction of the relevant
sections of the Operating Equipment Agreement and the Operating Foundation
Agreement, if the Operating Equipment Agreement and the Operating Foundation
Agreement shall be terminated pursuant to Section 10, 13, 14, 15.1, 15.2 or 18
of each thereof or (b) the Operating Equipment Agreement and the Operating
Foundation Agreement shall be terminated pursuant to Section 17 of each thereof.
Upon satisfaction of the requirements of Section 10, 13, 14, 15.1, 15.2 or 18 of
the Operating Equipment Agreement and the Operating Foundation Agreement or upon
termination of the Operating Equipment Agreement and the Operating Foundation
Agreement pursuant to Section 17 of each thereof, the Ground Sublease Term shall
terminate without any action of any Person whatsoever; PROVIDED, HOWEVER,
that, notwithstanding the foregoing, in every instance, the Ground Sublease
Term shall end prior to the expiration or earlier termination of the Ground
Lease Term. The Ground Lessor agrees to execute, acknowledge and deliver an
instrument, prepared at Ground Lessor's expense in a form reasonably
satisfactory to the Ground Lessee (or Virginia Power in the event it
exercises its rights under Section 6.3 of the Head Agreements), evidencing
the conveyance to the Ground Lessee (or Virginia Power in the event it
exercises its rights under Section 6.3 of the Head Agreements) of the
Ground Lessor's subleasehold interest in and to the Ground Interest for
recordation in the Halifax Clerk's Office at the Ground Lessor's expense (and
Ground Lessee shall execute, acknowledge and deliver an assignment of the
Ground Lessee's interest in the Ground Interest to Virginia Power if
Virginia Power exercises its rights under Section 6.3 of the Head Agreements).
SECTION 12. LIENS.
The Ground Lessee covenants and agrees that it will not create, incur,
assume or suffer to exist any Facility Owner's Liens on the Clover Real Estate
and the Ground Interest other than the Lien of Leasehold Mortgage.
8
<PAGE>
SECTION 13. WAIVER OF PARTITION.
As permitted by Section 56-90.1 of the Code of Virginia, each of the
Ground Lessor and the Ground Lessee, on its own behalf and on behalf of its
successors and assigns, hereby waives any right, whether pursuant to statute or
common law, to partition the Clover Real Estate, or any interest or portion
thereof, and such waiver will continue in effect until the earlier of (a)
termination of the Clover Ownership Agreement pursuant to Section 16.01 of the
Clover Ownership Agreement and Clover Operating Agreement pursuant to Section
14.01 of the Clover Operating Agreement in accordance with their terms or (b)
December 31, 2089. Each of the Ground Lessor and the Ground Lessee agrees not to
commence during such period any action of any kind seeking any form of partition
with respect thereto. Each of the Ground Lessor and the Ground Lessee agrees to
incorporate this waiver in all deeds, deeds of trust, and instruments of
conveyance relating to the Clover Real Estate (or any interest or portion
thereof), whether delivered at the Closing or thereafter.
SECTION 14. SECURITY FOR GROUND LESSEE'S OBLIGATION TO THE LENDERS.
In order to secure the Secured Indebtedness, the Ground Lessee will by
the Leasehold Mortgage grant a Lien to the Trustees for the benefit of the Agent
and the ratable benefit of the Lenders on all of the Ground Lessee's right,
title and interest in and to the Ground Interest. The Ground Lessor hereby
consents to the grant of such Lien and acknowledges receipt of copies of the
Leasehold Mortgage, it being understood that such consent shall not affect any
requirement or the absence of any requirement for any consent under any other
circumstances. Unless and until the Ground Lessor shall have received written
notice from the Agent that the Liens of the Loan Agreement and the Leasehold
Mortgage has been released, the Agent and the Trustees under the Leasehold
Mortgage shall have the rights of the Ground Lessee under this Ground Lease
and Sublease to the extent set forth in and subject in each case to the
exceptions set forth in the Loan Agreement and the Leasehold Mortgage.
SECTION 15. NONMERGER.
The remainder in the Ground Interest conveyed by this Ground Lease and
Sublease shall not merge into any interest in the Ground Interest conveyed by
the Ground Lease and Sublease even if such remainder and such interest are at
any time vested in or held directly or indirectly by the same Person, but this
Ground Lease and Sublease shall nonetheless remain in full force and effect in
accordance with its terms notwithstanding such vesting or holding.
9
<PAGE>
SECTION 16. INSPECTION
During the Ground Sublease Term, at such times as reasonably requested,
each of the Facility Owner, the Owner Participant, the Ground Lessee, the Owner
Trustee, the Agent, each Lender and their representatives may, at reasonable
times, on reasonable notice to the Co-Owners and at their own risk and
expense (except, at the expense, but not risk, of the Ground Lessor when an
Event of Default has occurred and is continuing), inspect the Clover Unit 2
Site and the Common Facilities Site; PROVIDED, HOWEVER, that any such
inspection will not interfere with the Co-Owners' normal commercial operation
of the Unit 2 Site or the Common Facilities Site and will be in accordance
with the Clover Unit 2 Operator's safety and insurance programs.
SECTION 17. INDEMNIFICATION
The Ground Lessor hereby shall indemnify, protect, save and hold
harmless the Ground Lessee, the Owner Trustee, the Owner Participant, each
Lender and the Agent and their respective Affiliates, successors, assigns,
agents, directors, officers or employees (each a "Ground Lease Indemnitee") from
and against, any and all Claims imposed on, incurred by or asserted against any
such Ground Lease Indemnitee, in any way relating to or arising out of:
(i) environmental conditions on Clover Real Estate on the
Closing Date;
(ii) the existence or presence at, on, in or under Clover
Unit 1, the Unit 1 Site or any part of the Clover Real Estate (other
than Clover Unit 2 or the Unit 2 Site) of any Environmental Material;
(iii) the disturbance, pollution, contamination or
interference with any wetland, body of water (whether surface or
subsurface), aquifer or watercourse due to the existence or presence
of a hazardous condition or any Environmental Material at, on, in
or under Clover Unit 1, the Unit 1 Site or any other property
described on the Clover Power Station Plat (other than Clover Unit 2 or
the Unit 2 Site);
(iv) the transportation, use, treatment, storage,
disposition, Release or disposal of any Environmental Material existing
at, on, in or under Clover Unit 1, the Unit 1 Site or any part of the
Clover Real Estate (other than Clover Unit 2 or the Unit 2 Site); and
(v) the Release of any Environmental Material from, at, on,
in or under Clover Unit 1, the Unit 1 Site or any part of the Clover
Real Estate (other than Clover Unit 2 or the Unit 2 Site) (including
any release into air, water vapor, surface water, groundwater, drinking
water or land (including surface or subsurface land) or any plant,
aquatic or other animal life).
10
<PAGE>
The foregoing provisions are in supplementation of, and are not in
derogation of, the provisions of Section 8.1 of the Participation Agreement but
the Ground Lessor's payment and performance of its obligations under this
Section 17 shall be governed by the provisions of paragraphs (c), (d), (e), (f)
and (g) of such Section 8.1.
SECTION 18. MISCELLANEOUS.
18.1. AMENDMENTS AND WAIVERS. No term, covenant, agreement or condition
of this Ground Lease and Sublease may be terminated, amended or compliance
therewith waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto and, also, in connection with any termination of, or amendment
to, those provisions for which Virginia Power is an intended beneficiary,
approval in writing by Virginia Power.
18.2. NOTICES. Unless otherwise expressly specified or permitted by the
terms hereof, all communications and notices provided for herein to a party
hereto shall be in writing or by a telecommunications device capable of creating
a written record, and any such notice shall become effective (a) upon personal
delivery thereof, including, without limitation, by overnight mail or courier
service, (b) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt thereof, or
(c) in the case of notice by such a telecommunications device, upon transmission
thereof, provided such transmission is promptly confirmed by either of the
methods set forth in clauses (a) or (b) above, in each case addressed to such
party at its address set forth below or at such other address as such party may
from time to time designate by written notice to the other party hereto:
If to the Ground Lessor:
Old Dominion Electric Cooperative
Innsbrook Corporate Center
4201 Dominion Boulevard
Glen Allen, Virginia 23060
Facsimile No.: (804) 747-3742
Telephone No.: (804) 747-0592
Attention: Vice President of Accounting and Financing
11
<PAGE>
If to the Ground Lessee:
Clover Unit 2 Generating Trust
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Facsimile No.: (302) 651-8882
Telephone No.: (302) 651-1000
Attention: Corporate Trust Administration
A copy of all communications and notices provided for herein shall be sent by
the party giving such communication or notice to Virginia Power at:
Virginia Electric and Power Company
P.O. Box 26666
Richmond, Virginia 23261
Attention: President
18.3. SURVIVAL. All warranties, representations, indemnities and
covenants made by either party hereto, herein or in any certificate or other
instrument delivered by either such party or on the behalf of such party under
this Ground Lease and Sublease, shall be considered to have been relied upon by
the other party hereto and shall survive the consummation of the transactions
contemplated hereby on the Closing Date regardless of any investigation made by
either party or on behalf of either party.
18.4. SUCCESSORS AND ASSIGNS.
(a) This Ground Lease and Sublease shall be binding upon and shall
inure to the benefit of, and shall be enforceable by, the parties hereto and
their respective successors and assigns as permitted by and in accordance with
the terms hereof.
(b) Except as expressly provided herein or in the Operative Documents,
the Ground Lessor may not assign its interests herein without the consent of the
other party hereto. Except as expressly provided herein or in the Operative
Documents, the Ground Lessee may not assign its interests in this Ground Lease
and Sublease prior to the expiration or early termination of the Ground Sublease
Term without the consent of the Ground Lessor.
18.5. BUSINESS DAY. Notwithstanding anything herein to the contrary, if
the date on which any payment is to be made pursuant to this Ground Lease and
Sublease is not a Business Day, the payment otherwise payable on such date shall
be payable on the next succeeding Business Day with the same force and effect as
if made on such scheduled date and (PROVIDED such payment is made on
12
<PAGE>
such succeeding Business Day) no interest shall accrue on the amount of such
payment from and after such scheduled date to the time of such payment on
such next succeeding Business Day.
18.6. GOVERNING LAW. THIS GROUND LEASE AND SUBLEASE SHALL BE IN ALL
RESPECTS GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
COMMONWEALTH OF VIRGINIA INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
18.7. SEVERABILITY. Whenever possible, each provision of this Ground
Lease and Sublease shall be interpreted in such manner as to be effective and
valid under Applicable Law, but if any provision of this Ground Lease and
Sublease shall be prohibited by or invalid under Applicable Law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Ground Lease and Sublease.
18.8. COUNTERPARTS. This Ground Lease and Sublease may be executed in
any number of counterparts, each executed counterpart constituting an original
but all together only one instrument.
18.9. HEADINGS AND TABLE OF CONTENTS. The headings of the sections of
this Ground Lease and Sublease and the Table of Contents are inserted for
purposes of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
18.10. FURTHER ASSURANCES. Each party hereto will promptly and duly
execute and deliver such further documents to make such further assurances for
and take such further action reasonably requested by any party to whom such
first party is obligated, all as may be reasonably necessary to carry out more
effectively the intent and purpose of this Ground Lease and Sublease.
18.11. EFFECTIVENESS OF GROUND LEASE AND SUBLEASE. This Ground Lease
and Sublease has been dated as of the date first above written for convenience
only. This Ground Lease and Sublease shall be effective on the date of
execution and delivery by each of the Ground Lessee and the Ground Lessor.
18.12. LIMITATION OF LIABILITY. It is expressly understood and agreed
by the parties hereto that (a) this Agreement is executed and delivered by
Wilmington Trust Company, not individually or personally but solely as trustee
of Clover Unit 2 Generating Trust (the "Trust") under the Trust Agreement, in
the exercise of the powers and authority conferred and vested in it, (b) each of
the representations, undertakings and agreements herein made on the part of the
Trust is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
for binding only the Trust, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company, individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto or by any Person
claiming by, through or under the parties hereto and (d) under no circumstances
shall Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Trust or be liable for the breach or failure of
any
13
<PAGE>
obligation, representation, warranty or covenant made or undertaken by the
Trust under this Agreement or any other Operative Documents.
14
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Ground Lease and
Sublease to be duly executed and delivered by their respective officers
thereunto duly authorized.
OLD DOMINION ELECTRIC COOPERATIVE,
a wholesale power supply cooperative organized
under the laws of the Commonwealth of Virginia
as Ground Lessor
By:/s/ DANIEL M. WALKER
------------------------------------ [Seal]
Name: Daniel M. Walker
Title: Vice President
Date: July 31, 1996
CLOVER UNIT 2 GENERATING TRUST,
as Ground Lessee
By: Wilmington Trust Company, not in its
individual capacity but solely as
Owner Trustee under the Trust Agreement
By:/s/ EMMETT R. HARMON
--------------------------------
Name: Emmett R. Harmon
Title: Vice President
Date: July 31, 1996
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
The foregoing instrument was acknowledged before me this __ day of
_______, 1996, by ________________ as ______________ of Old Dominion Electric
Cooperative, a wholesale power supply cooperative organized under the laws of
the Commonwealth of Virginia, on behalf of said cooperative.
/s/ SHARON MCKENZIE
----------------------------------
Name: Sharon McKenzie
Notary Public
(Notarial Seal)
My Commission expires: _________________________
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
The foregoing instrument was acknowledged before me this __ day of
_______, 1996, by _______________ as ______________ of Wilmington Trust Company,
a Delaware banking corporation, on behalf of such corporation as trustee of
Clover Unit 2 Generating Trust, a business trust organized under the laws of the
State of Delaware, on behalf of said business trust.
/s/ MILAGROS COLON-PADILLA
----------------------------------
Name: Milagros Colon-Padilla
Notary Public
(Notarial Seal)
My Commission expires: _______________________
<PAGE>
APPENDIX A
TO
GROUND LEASE
AND SUBLEASE
DEFINITIONS
This Appendix A has been filed separately. See Appendix A to Exhibit 10.46 to
Old Dominion's Form 10-K for the year ended December 31, 1996.
<PAGE>
EXHIBIT A
TO
GROUND LEASE
AND SUBLEASE
CLOVER POWER STATION PLAT
Recorded in the Halifax Clerk's Office in Plat Book 18, page 50, and corrected
by a rerecording in the Halifax Clerk's Office in Plat Book 18, pages 120-124.
Exh.A-1
<PAGE>
SCHEDULE 1
TO
GROUND LEASE
AND SUBLEASE
DESCRIPTION OF THE CLOVER REAL ESTATE
All that certain parcel of land belonging, lying and being in the Roanoke
Magisterial district of Halifax County, Virginia and all appurtenances thereto
belonging, and more particularly described as follows:
AND BEING a portion of the same land and appurtenances acquired by Old Dominion
Electric Cooperative ("Old Dominion") as tenant in common with Virginia Electric
and Power Company ("Virginia Power") by deeds which are recorded in the Halifax
Clerk's Office as follows:
Grantors Date of Deed Deed Book Page Number
- - --------------------------------------------------------------------------------
Clover Project Corp. May 30, 1990 550 465
Kenneth R. Wilborne, et al. October 1, 1990 556 367
William D. Gravitt, et al. July 3, 1991 570 8
William R. Watkins, et al. March 14, 1991 561 353
Walter Lacks, et al. July 24, 1991 569 844
Burlington Industries October 23, 1991 570 13
B. F. Blount, et al. May 22, 1992 579 412
Norfolk Southern Railway June 9, 1992 579 771
Company
LESS AND EXCEPT, however, those certain parcels of land conveyed by Old Dominion
and Virginia Power by deeds which are recorded in the Halifax Clerk's Office as
follows:
Grantees Date of Deed Deed Book Page Number
- - --------------------------------------------------------------------------------
William D. Gravitt, et al. October 7, 1991 570 10
Commonwealth of Virginia June 23, 1992 580 576
Commonwealth of Virginia December 1, 1994 627 57
Commonwealth of Virginia June 1, 1995 632 255
================================================================================
A-1
<PAGE>
SUBJECT, however, to all existing exceptions, reservations, easements,
conditions, restrictions, covenants, agreements, limitations and waivers of
record that may apply to the foregoing parcel of land.
A-2
<PAGE>
SCHEDULE 2
TO
GROUND LEASE
AND SUBLEASE
DESCRIPTION OF THE UNIT 1 SITE
ALL those two certain parcels of land lying and being in Roanoke Magisterial
district of Halifax County, Virginia, with all appurtenances thereunto
belonging, being those portions of the Clover Real Estate which are outlined and
marked on the Clover Power Station Plat as Parcel I and Parcel II of the Unit 1
Site.
B-1
<PAGE>
SCHEDULE 3
TO
GROUND LEASE
AND SUBLEASE
DESCRIPTION OF THE UNIT 2 SITE
ALL those certain parcels of land lying and being in Roanoke Magisterial
district of Halifax County, Virginia, with all appurtenances thereunto
belonging, being those portions of the Clover Real Estate which are outlined and
marked on the Clover Power Station Plat as Parcel I and Parcel II of the Unit 2
Site.
C-1
<PAGE>
SCHEDULE 4
TO
GROUND LEASE
AND SUBLEASE
DESCRIPTION OF THE COMMON FACILITIES SITE
ALL that certain parcel of land lying and being in Roanoke Magisterial district
of Halifax County, Virginia, with all appurtenances thereunto belonging,
outlined and marked as Parcel "B" on the Clover Power Station Plat, LESS AND
EXCEPT those parcels of real estate outlined and marked on the Clover Power
Station Plat as Parcel I and Parcel II of the Unit 1 Site and Parcel I and II of
the Unit 2 Site.
D-1
18
GUARANTY AGREEMENT
GUARANTY AGREEMENT dated as of July 1, 1996 by and between OLD DOMINION
ELECTRIC COOPERATIVE ("Old Dominion"), a wholesale power supply cooperative
organized under the laws of the Commonwealth of Virginia, and AMBAC INDEMNITY
CORPORATION ("AMBAC"), a Wisconsin-domiciled stock insurance company.
W I T N E S S E T H :
WHEREAS, pursuant to a Participation Agreement, dated as of July 1,
1996 (the "Participation Agreement"), by and among Old Dominion, Clover Unit
2 Generating Trust (the "Facility Owner"), Wilmington Trust Company, EPC
Corporation and Utrecht-America Finance Co., Old Dominion has arranged for the
parties thereto to take various actions in connection with the Transaction; and
WHEREAS, pursuant to an Operating Equipment Agreement, dated as of
July 1, 1996 (the "Operating Equipment Agreement"), by and between the
Facility Owner and Old Dominion, the Facility Owner has conveyed the Equipment
Interest to Old Dominion, subject to the terms of the Operating Equipment
Agreement; and
WHEREAS, pursuant to an Operating Foundation Agreement, dated as of July
1, 1996 (the "Operating Foundation Agreement"; the Participation Agreement, the
Operating Equipment Agreement and the Operating Foundation Agreement are
sometimes hereinafter referred to collectively as the "Subject Agreements"), by
and between the Facility Owner and Old Dominion, the Facility Owner has conveyed
the Foundation Interest to Old Dominion, subject to the terms of the Operating
Foundation Agreement; and
WHEREAS, AMBAC has agreed to issue its Surety Bond No. SB0457BE (the
"Surety Bond"), substantially in the form set forth in Annex A to this
Agreement, guaranteeing certain payments required to be made by Old Dominion
pursuant to the Subject Agreements, subject to the terms and conditions of the
Surety Bond; and
WHEREAS, to induce AMBAC to issue the Surety Bond, Old Dominion has
agreed to (i) pay the premium for such Surety Bond, (ii) reimburse AMBAC for all
payments made by AMBAC pursuant to the Surety Bond and (iii) to secure its
obligation to reimburse AMBAC pursuant to this Agreement in the manner
hereinafter set forth; and
WHEREAS, Old Dominion understands that AMBAC expressly requires the
delivery of this Agreement as part of the consideration for the execution by
AMBAC of the Surety Bond.
NOW, THEREFORE, in consideration of the premises and of the
agreements herein contained and of the execution of the Surety Bond, Old
Dominion and AMBAC agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS; SURETY BOND
Section 1.01. Definitions. Except as otherwise expressly provided
herein or unless the context otherwise requires, the terms which are
capitalized herein shall have the meanings specified in Annex B hereto.
Section 1.02. Surety Bond.
(a) The maximum liability of AMBAC under the Surety Bond and the
coverage and term thereof shall be subject to and limited by the Surety Bond
Coverage and the terms and conditions of the Surety Bond.
(b) Payments made under the Surety Bond shall reduce the Surety Bond
Coverage to the extent of each such payment.
Section 1.03. Premium. In consideration of AMBAC agreeing to issue the
Surety Bond hereunder, Old Dominion hereby agrees to pay, or cause to be paid, a
premium in the amount of $1,746,044.97.
Section 1.04. Certain Other Expenses. Old Dominion shall pay all
reasonable fees and disbursements of AMBAC's counsel related to any
modification of this Agreement or the Surety Bond requested by Old Dominion.
ARTICLE II
REIMBURSEMENT OBLIGATIONS OF OBLIGOR AND SECURITY THEREFOR
Section 2.01. Reimbursement for Payments Under the Surety Bond and
Expenses.
(a) Old Dominion will reimburse AMBAC immediately, without demand or
notice by AMBAC to Old Dominion or any other person, to the extent of each
Surety Bond Payment. If and to the extent that Old Dominion fails to reimburse
AMBAC immediately in respect of each such Surety Bond Payment, Old Dominion
shall pay on the first Business Day of each month interest on each such Surety
Bond Payment from and including the date made to the date of the reimbursement
by Old Dominion at the Default Rate. To the extent that interest payments due
<PAGE>
hereunder are not paid on the first Business Day of each month, or are not paid
as each principal repayment is made, interest shall accrue on such unpaid
interest at the Default Rate.
(b) Old Dominion also agrees to reimburse AMBAC immediately and
unconditionally upon demand for all reasonable expenses incurred by AMBAC in
connection with the Surety Bond and the enforcement by AMBAC of Old Dominion's
obligations under this Agreement together with interest on all such expenses
from and including the date which is 30 days from the date a statement for such
expenses is received by Old Dominion to the date of payment at the Default Rate.
(c) AMBAC agrees and acknowledges that any amounts paid to AMBAC under
or pursuant to the Investment Agreement shall be credited against the amounts
due to be paid by Old Dominion hereunder.
Section 2.02. Security for Payments; Instruments of Further Assurance.
(a) In order to secure its payment obligations to AMBAC hereunder,
Old Dominion has executed and delivered the Subordinated Mortgage, the
Subordinated Security Agreement and the Pledge Agreement. Old Dominion hereby
represents to AMBAC that (a) assuming that this Agreement, the Surety Bond, the
Subordinated Mortgage and the Subordinated Security Agreement have each been
duly executed and delivered by the parties thereto, each of the Subordinated
Mortgage and the Subordinated Security Agreement creates, subject to the rights
of Old Dominion to quiet enjoyment and to the Senior Documents and Rights (as
defined in the Subordinated Security Agreement and in the Subordinated Mortgage,
respectively) a valid lien in favor of the Subordinated Secured Parties in the
Subordinated Real Property (in the case of the Subordinated Mortgage) and in the
Subordinated Collateral (in the case of the Subordinated Security Agreement),
subject, subordinate and inferior in lien only to the Senior Documents and
Rights; and (b) the pledge of the Investment Agreement pursuant to the Pledge
Agreement vests in AMBAC (as Pledgee thereunder) a valid security interest in
the Investment Agreement, as contemplated thereby, subject to the provisions of
Section 9-306 of the Uniform Commercial Code as in effect in the State of New
York.
(b) Old Dominion agrees that it will, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
any and all deeds of trust, mortgages and/or financing statements, if
applicable, and all other further instruments as may be required by law or as
shall reasonably be requested by AMBAC for the perfection of the security
interests granted pursuant to the Subordinated Mortgage, the Subordinated
Security Agreement and the Pledge Agreement and for the preservation and
protection of all rights of AMBAC thereunder. Old Dominion further agrees that,
in the event that the Investment Agreement is terminated prior to the date on
which the Surety Bond terminates, it shall provide substitute collateral
satisfactory to AMBAC ("Substitute Collateral") to secure its obligations to
AMBAC under this Agreement and shall execute and deliver a security agreement
granting a perfected security interest in such Substitute Collateral to AMBAC.
<PAGE>
Section 2.03. Unconditional Obligation. The obligations of Old
Dominion hereunder are absolute and unconditional and will be paid or performed
strictly in accordance with this Agreement, irrespective of:
(a) any lack of validity or enforceability of, or any amendment or
other modification of, or waiver with respect to any of the Subject
Agreements;
(b) any exchange, release or nonperfection of any security interest in
property securing any obligations hereunder;
(c) any circumstances which might otherwise constitute a defense
available to, or discharge of, Old Dominion with respect to any of the Subject
Agreements.
In addition, Old Dominion hereby expressly waives (a) demand of payment,
presentment, protest, notice of dishonor, nonpayment or nonperformance on any
and all forms of the obligations hereunder; (b) all of its right to
indemnification; (c) notice of acceptance of this Guaranty Agreement and notice
of any liability to which it may apply; (d) all other notices and demands of any
kind and description relating to the obligations hereunder now or hereafter
provided for by any agreement, statute, law, rule or regulation; and (e) any and
all defenses pertaining to the obligations hereunder except for the defense of
discharge by payment. Old Dominion shall not be exonerated with respect to its
liabilities hereunder by any act or thing except irrevocable payment of the
obligations hereunder, it being the purpose and intent of this Guaranty
Agreement that the obligations hereunder constitute the direct and primary
obligations of Old Dominion and that the covenants, agreements and all
obligations of Old Dominion hereunder be absolute, unconditional and
irrevocable.
ARTICLE III
EVENTS OF DEFAULT; REMEDIES
Section 3.01. Events of Default. The following events shall constitute
Events of Default hereunder:
(a) Old Dominion shall fail to pay to AMBAC any amount payable under
Section 2.01 hereof within ten (10) days after the date due;
(b) Old Dominion shall fail to pay to AMBAC any amount payable under
Section 1.04 hereof within forty-five (45) days after receipt by Old Dominion
of a written demand from AMBAC in respect of any such payment;
<PAGE>
(c) Any material representation or warranty made by Old Dominion in any
of the Subject Agreements, in the Pledge Agreement, in the Investment
Agreement, in the Subordinated Mortgage, in the Subordinated Security Agreement
or under this Agreement, or any statement in the application for the Surety Bond
or any report, certificate, financial statement or other instrument heretofore
provided in connection with the Surety Bond or herewith shall have been
materially false at the time when made;
(d) Except as otherwise provided in this Section 3.01, Old Dominion
shall fail to perform any of its other obligations, in the Pledge Agreement,
in the Investment Agreement, in the Subordinated Mortgage, in the Subordinated
Security Agreement or under this Agreement, provided that such failure continues
for more than thirty (30) days after receipt by Old Dominion of notice of such
failure to perform and if capable of remedy, no action to cure has commenced
within thirty (30) after notice or, if such action has been taken and Old
Dominion is pursuing such cure, such action has not succeeded with 180 days
after such notice;
(e) Old Dominion shall (i) commence a voluntary case or other
proceeding seeking relief under Title 11 of the United States Bankruptcy
Code or liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect, or apply for or consent to the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or (ii) consent to, or fail to controvert in a timely manner, any
such relief or the appointment of or taking possession by any such official in
any voluntary case or other proceeding commenced against it, or (iii) file an
answer admitting the material allegations of a petition filed against it in any
such proceeding, or (iv) admit in writing its inability to pay its debts
generally as they come due, or (v) make a general assignment for the benefit of
creditors, or (vi) take any corporate action to authorize any of the foregoing;
or
(f) an involuntary case or other proceeding shall be commenced against
Old Dominion seeking (i) liquidation, reorganization or other relief with
respect to it or its debts under Title 11 of the United States Bankruptcy Code
or any bankruptcy, insolvency or other similar law now or hereafter in effect,
or (ii) seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official, or (iii) the winding-up or liquidation of Old Dominion;
and such involuntary case of other proceeding shall remain undismissed and
unstayed for a period of 60 days.
Section 3.02. Remedies. If an Event of Default shall occur and be
continuing, then AMBAC may take whatever action at law or in equity may appear
necessary or desirable to collect the amounts then due and thereafter to become
due under this Agreement and to enforce any obligation, agreement or covenant of
Old Dominion under this Agreement, including, without limitation, any and all
rights and remedies available to AMBAC pursuant to the Subordinated Mortgage,
the Subordinated Security Agreement and the Pledge Agreement. All rights and
remedies of AMBAC under this Section 3.02 are cumulative and the exercise of any
one remedy does not preclude the exercise of one or more of the other available
remedies.
<PAGE>
ARTICLE IV
SETTLEMENT
To the extent that AMBAC has received a claim or a demand for payment
under the Surety Bond, AMBAC shall have the exclusive right to decide and
determine whether any such claim or demand for payment, or any lawsuit or action
made or brought against AMBAC in respect thereof, shall or shall not be paid,
compromised, resisted, defended, tried or appealed, and AMBAC's decision
thereon, if made in good faith, shall be final and binding upon Old Dominion.
ARTICLE V
MISCELLANEOUS
Section 5.01. Computations. All computations of premium, interest
and fees hereunder shall be made on the basis of the actual number of days
elapsed over a year of 360 days.
Section 5.02. Exercise of Rights. No failure or delay on the part of
AMBAC to exercise any right, power or privilege under this Agreement and no
course of dealing between AMBAC and Old Dominion or any other party shall
operate as a waiver of any such right, power or privilege, nor shall any single
or partial exercise of any such right, power or privilege preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein expressly provided are cumulative and not
exclusive of any rights or remedies which AMBAC would otherwise have pursuant to
law or equity. No notice to or demand on any party in any case shall entitle
such party to any other or further notice or demand in similar or other
circumstances, or constitute a waiver of the right of the other party to any
other or further action in any circumstances without notice or demand.
Section 5.03. Amendment and Waiver. Any provision of this
Agreement may be amended, waived, supplemented, discharged or terminated
only with the prior written consent of Old Dominion and AMBAC.
Section 5.04. Successors and Assigns; Descriptive Headings.
(a) This Agreement shall bind, and the benefits thereof shall inure to,
Old Dominion and AMBAC and their respective successors and assigns; provided
<PAGE>
that Old Dominion may not transfer or assign any or all of its rights and
obligations hereunder without the prior written consent of AMBAC.
(b) The descriptive headings of the various provisions of this
Agreement are inserted for convenience of reference only and shall not be deemed
to affect the meaning or construction of any of the provisions hereof.
Section 5.05. Other Sureties. If AMBAC shall procure any other surety
to reinsure the Surety Bond, this Agreement shall inure to the benefit of such
other surety, its successors and assigns, so as to give to it a direct right of
action against Old Dominion to enforce this Agreement, and "AMBAC," wherever
used herein, shall be deemed to include such reinsuring surety, as its interests
may appear.
Section 5.06. Waiver. Old Dominion waives any defense that this
Agreement was executed subsequent to the date of the Surety Bond, admitting and
covenanting that such Surety Bond was executed pursuant to Old Dominion's
request and in reliance on Old Dominion's promise to execute this Agreement.
Section 5.07. Notices, Requests, Demands. Except as otherwise
expressly provided herein, all written notices, requests, demands or other
communications to or upon the respective parties hereto shall be deemed to have
been given or made when actually received, or in the case of telex or telecopier
notice sent over a telex or a telecopier machine owned or operated by a party
hereto, when sent, addressed as specified below or at such other address as
either of the parties hereto may hereafter specify in writing to the others:
If to Old Dominion: Old Dominion Electric Cooperative
4201 Dominion Boulevard
Glen Allen, Virginia 23060
Attention: Vice President of Accounting and Finance
If to AMBAC: AMBAC Indemnity Corporation
One State Street Plaza
17th Floor
New York, New York 10004
Attention: General Counsel
Section 5.08. Survival of Representations and Warranties. All
representations, warranties and obligations contained herein shall survive the
execution and delivery of this Agreement and the Surety Bond.
<PAGE>
Section 5.09. Governing Law. This Agreement and the rights and
obligations of the parties under this Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State.
Section 5.10. Counterparts. This Agreement may be executed in any
number of copies and by the different parties hereto on the same or separate
counterparts, each of which shall be deemed to be an original instrument.
Complete counterparts of this Agreement shall be lodged with Old Dominion and
AMBAC.
Section 5.11. Severability. In the event any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Agreement to be duly executed and delivered as of the date first above
written.
OLD DOMINION ELECTRIC COOPERATIVE
By /s/ DANIEL M. WALKER
--------------------------
Vice President of Accounting and Finance
AMBAC INDEMNITY CORPORATION
By /s/ T.S. TRAVERS
-----------------------
First Vice President
<PAGE>
ANNEX A
SURETY BOND
<PAGE>
AMBAC Indemnity Corporation
One State Street Plaza
New York, New York 10004
Telephone: (212) 668-0340
Effective Date: July 31, 1996 Policy No. SB0457BE
AMBAC Indemnity Corporation ("AMBAC"), in consideration of the payment of the
premium receipt of which is hereby acknowledged and subject to the terms of this
Surety Bond, hereby unconditionally and irrevocably guarantees the full and
complete payment of any and all amounts of (x) Basic Payment, Supplemental
Payment (including, in the event that the Purchase Option is Paymentexercised,
the initial installment of the Purchase Option Price but excluding all
subsequent installments of Purchase Option Price), Termination Value and amounts
computed by reference to Termination Value under the Operating Equipment
Agreement dated as of July 1, 1996 by and between Old Dominion Electric
Cooperative (together with its successors and assigns, "Old Dominion") and
Clover Unit 2 Generating Trust (together with its successors and assigns, the
"Facility Owner") (as amended, modified and supplemented and in effect from time
to time, the "Operating Equipment Agreement"), (y) Foundation Basic Payment,
Foundation Supplemental Payment (including, in the event that the Foundation
Purchase option is exercised, the initial andinstallment of Foundation Purchase
Option Price but excluding all subsequent installments of Foundation Purchae
Option Price), Termination Value and amounts computed by reference to
Termination Value under the Operating Foundation Agreement dated as of July 1,
1996 by and between Old Dominion and the Facility Owner (as amended, modified
and supplemented and in effect from time to time, the "Operating Foundation
Agreement", and, together with the Operating Equipment Agreement, the "Operating
Agreements") and (z) the Special Equity Remedy Amount under the Participation
Agreement dated as of July 1, 1996 by and among Old Dominion, the Facility
Owner, EPC Corporation (together with its successors and assigns, the "Owner
Participant") and certain other parties (as amended, modified and supplemented
and in effect from time to time, the "Participation Agreement"; the Operating
Agreements and the Participation Agreement are sometimes hereinafter referred to
as the "Subject Agreements") (the amounts set forth in clauses (x), (y) and (z)
above, the "Covered Obligations") as at any time or from time to time such
payments are due by Old Dominion but shall not be so paid; provided that the
amount available at any particular time to be paid by AMBAC hereunder shall not
exceed the Surety Bond Coverage. The Surety Bond Coverage shall, for any date
set forth on the schedule attached hereto as Schedule A, be the amount shown
opposite such date reduced by any amounts previously paid hereunder, and for any
date not set forth on such Schedule A, the amount shown on such Schedule A
opposite the date most recently following such date reduced by any amounts
previously paid hereunder.
1. Upon receipt by AMBAC of a demand for payment in the form attached
hereto as Attachment 1 (a "Demand for Payment"), duly executed by the Facility
Owner and the Owner Participant certifying that (i) at least five (5) days prior
to the date of such Demand for Payment, the Facility Owner or the Owner
Participant (or in the case of Covered Obligations referred to in clause (x)
above, to the extent (if any) the right to demand payment from Old Dominion
under the Operating Agreements has been assigned by the Facility Owner to
Utrecht-America Finance Co., as agent (together with its successors and assigns
in such capacity, the "Agent"), the Agent) demanded payment of the claimed
amount from Old Dominion (or, in the event that the Facility Owner or the Owner
Participant (or, in the case of Covered Obligations referred to in clause (x)
above, to the extent (if any) the right to demand payment from Old Dominion
under the Operating Agreements has been assigned by the Facility Owner to the
Agent, the Agent) is stayed (as a consequence of an Insolvency Proceeding (as
hereinafter defined or otherwise) or is otherwise legally prohibited from
demanding payment of the claimed amount from Old Dominion, at least five (5)
days after payment of the claimed amount would have been due from Old Dominion
had such demand for payment been so made) and (ii) as of such date, Old Dominion
has failed to make such payment as required by the Subject Agreements, AMBAC
will pay in immediately available funds to the Facility Owner or the Owner
Participant (as specified in such Demand for Payment and at the place of payment
set forth in such Demand for Payment), the amount set forth in the Demand for
Payment, up to but not in excess of the Surety Bond Coverage, on the Business
Day such Demand for Payment is so received. Any Demand for Payment so received
by AMBAC after 2:00 p.m. New York City time on any Business Day or an any day
that is not a Business Day shall be deemed to have been received by AMBAC prior
to 2:00 p.m. New York City time on the next succeeding Business Day. As used
herein, the term "Business Day" shall mean any day other than a Saturday, a
Sunday or any day on which banking institutions in New York, New York are
authorized or required by law to be closed.
2. A Demand for Payment hereunder may be personally delivered or made by
telecopy of the executed Demand for Payment c/o the General Counsel of AMBAC at
the "Address for Notice" to AMBAC set forth in paragraph 7 hereof. If a Demand
for Payment made hereunder does not, in any instance, conform to the terms and
conditions of this Surety Bond, AMBAC shall give notice to the Facility Owner
and the Owner Participant, as promptly as reasonably practicable, that such
Demand for Payment was not effected in accordance with the terms and conditions
of this Surety Bond and briefly state the reason(s) therefor. Upon being
notified that such Demand for Payment was not effected in accordance with this
Surety Bond, the Facility Owner and the Owner Participant may attempt to correct
any such nonconforming Demand for Payment. Multiple Demands for Payment are
permitted under this Surety Bond.
3. The amount payable by AMBAC under this Surety Bond pursuant to a Demand for
Payment shall be limited to the Surety Bond Coverage. The Surety Bond Coverage
shall be reduced automatically to the extent of each payment made by AMBAC
hereunder.
4. Any service of process on AMBAC may be made to AMBAC or the office of the
General Counsel of AMBAC at AMBAC's "Address for Notice" set forth in paragraph
7 hereof, and such service of process shall be valid and binding as to AMBAC.
The General Counsel will act as agent for the acceptance of service of process
on AMBAC.
5. This Surety Bond is noncancelable for any reason. This Surety Bond and the
obligations of AMBAC hereunder shall terminate on the earlier of December 20,
2020 or five (5) days after the Surety Bond Coverage is reduced to zero dollars.
6. Notwithstanding the provisions of paragraph 5 hereof, if the payment of any
amount in respect of the Covered Obligations is voided (an "Avoidance Event")
under any applicable Insolvency Proceedings, and, as a result of such Avoidance
Event, the Facility Owner or the Owner Participant is required to return such
voided payment, or any portion of such voided payment (an "Avoided Payment"),
AMBAC will pay the amount of the Avoided Payment out of the funds of AMBAC when
due to be paid pursuant to the Order referred to below, but in any event no
earlier than the second Business Day following receipt by AMBAC of (i) a
certified copy of a final, non-appealable order of a court or other body
exercising jurisdiction in such Insolvency Proceeding to the effect that the
Facility Owner or the Owner Participant, as the case may be, is required to
return such Avoided Payment paid during the term of this Surety Bond because
such payments were avoided as a preferential transfer or otherwise rescinded or
required to be restored by the Facility Owner or the Owner Participant (the
"Order"), (ii) a certificate by or on behalf of the Facility Owner and the Owner
Participant, that the Order has been entered and is not subject to any stay,
(iii) an assignment, in form and substance satisfactory to AMBAC, duly executed
and delivered by the Facility Owner and the Owner Participant, irrevocably
assigning to AMBAC all rights and claims of the Facility Owner and the Owner
Participant relating to or arising under the Subject Agreements against the
estate of Old Dominion or otherwise with respect to such Avoided Payment and
(iv) a Demand for Payment appropriately completed and executed by the Facility
Owner and the Owner Participant. Such payment shall be disbursed to the
receiver, conservator, debtor-in-possession or trustee in bankruptcy named in
the Order, and not to the Facility Owner or the Owner Participant directly,
unless the Facility Owner or the Owner Participant, as the case may be, has made
a payment of the Avoided Amount to the court or such receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order, in which case
AMBAC will pay the Facility Owner or the Owner Participant, as applicable,
subject to the delivery of (a) the items referred to in clauses (i), (ii), (iii)
and (iv) above to AMBAC and (b) evidence satisfactory to AMBAC that payment has
been made to such court or receiver, conservator, debtor-in-possession or
trustee in bankruptcy named in the Order. "Insolvency Proceeding" means the
commencement, after the date hereof, of any bankruptcy, insolvency, readjustment
or debt, reorganization, marshalling of assets and liabilities or similar
proceedings by or against any person, or the commencement, after the date
hereof, of any proceedings by or against any person for the winding up or the
liquidation of its affairs, or the consent after the date hereof to the
appointment of a trustee, conservator, receiver or liquidator in any bankruptcy,
insolvency, readjustment of debt, reorganization, marshalling of assets and
liabilities or similar proceedings relating to any person.
Notwithstanding the foregoing, in no event shall AMBAC be obligated to
make any payment in respect of any Avoided Payment, which payment, when added to
all prior payments made under this Surety Bond, would exceed the Surety Bond
Coverage.
The premium on this Surety Bond is not refundable for any reason,
including the payment prior to maturity of Old Dominion's obligations under the
Covered Agreements or the termination of this Surety Bond prior to the
termination of the Covered Agreements.
7. All notices, requests and other communications provided for herein shall be
given or made in writing (including, without limitation, by telecopy) delivered
to the intended recipient at the "Address for Notices" specified below or, as to
AMBAC, the Owner Participant, the Facility Owner or Old Dominion, at such other
address as shall be designated by such Person in a notice to each other such
Person. All such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid. Each
"Address for Notice" is as follows:
AMBAC
AMBAC Indemnity Corporation
One State Street Plaza
New York, New York 10004
Attention: General Counsel
Telecopier No.: (212) 344-5297
Confirmation No.: (212) 668-0430
Facility Owner
Clover Unit 2 Generating Trust
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Department
Telecopier No.: (302) 651-8882
Confirmation No.: (302) 651-1000
Owner Participant
EPC Corporation
c/o Chrysler Capital Corporation
225 High Ridge Road
Stamford, Connecticut 06095-3032
Attention: President
Telecopier No.: (203) 975-3911
Confirmation No.: (203) 975-3500
8. AMBAC's obligations under this Surety Bond are irrevocable, absolute and
unconditional, irrespective of the value, genuineness, validity, regularity or
enforceability of any of the Subject Agreements or any other Operative Document
(as defined in the Subject Agreements) or any other agreement or instrument
referred to herein or therein, or any substitution, release or exchange of any
other guarantee if or security for the Covered Obligations, and, to the fullest
extent permitted by applicable law, irrespective of any other circumstance
whatsoever which might otherwise constitute a legal or equitable discharge or
defense of a surety or guarantor. AMBAC's obligations under this Surety Bond
shall not be subject to any abatement, reduction, limitation, impairment,
termination, setoff, defense, counterclaim or recoupment whatsoever or any right
to any thereof, and shall not be released or discharged. Without limiting the
generality of the foregoing, it is agreed that the occurrence of any one or more
of the following (with or without notice to AMBAC) shall not alter or impair
AMBAC's liability hereunder, which shall remain absolute and unconditional as
described above:
(a) at any time or from time to time, the time for any performance of or
compliance with the Covered Obligations or any other obligations of any Person
under the Subject Agreements, any of the other Operative Documents, or any other
agreement or instrument referred to herein or therein shall be extended, or such
performance or compliance shall be waived;
(b) any of the acts mentioned in any of the provisions of any of the
Subject Agreements, any of the other Operative Documents or any other agreement
or instrument referred to herein or therein shall be done or omitted;
(c) the maturity of any Covered Obligation shall be accelerated, or any
Covered Obligation shall be modified, supplemented or amended in any respect, or
any right under any of the Subject Agreements or any of the other Operative
Documents or any other agreement or instrument referred to herein or therein
shall be waived or any other guarantee of any Covered Obligation or any security
therefor shall be released or exchanged in whole or in part or otherwise dealt
with;
(d) any lien or security interest granted to, or in favor of, the
Facility Owner or the Owner Participant as security for any Covered Obligation
shall fail to be perfected;
(e) the bankruptcy or insolvency of Old Dominion, the Facility Owner,
the Owner Participant or AMBAC or any reorganization, arrangement, compromise,
composition or plan affecting Old Dominion, the Facility Owner, the Owner
Participant or AMBAC shall occur; or
(f) this Surety Bond, any documents relating to this Surety Bond between
AMBAC and Old Dominion, any Subject Agreement or any other Operative Document or
other agreement or instrument referred to herein or therein shall be rejected or
limited in any bankruptcy, insolvency or similar proceeding (nothing herein
being a concession that any obligation hereunder or thereunder is properly
classifiable as an executory obligation).
AMBAC hereby expressly waives diligence, presentment, protest and any
requirement that Old Dominion, the Owner Participant or any other Person exhaust
any right, power or remedy or proceed against Old Dominion or any other Person
under any Subject Agreement or any other Operative Document or any other
agreement or instrument referred to herein or therein, or against any other
Person under any other guarantee of, or security for, any of the Covered
Obligations, provided that the Owner Participant or Old Dominion shall be
required to demand payment from Old Dominion as contemplated by clause (ii) of
paragraph 1 of this Surety Bond.
9. This Surety Bond may be assigned and transferred by the Facility Owner or the
Owner Participant to any successor of the Facility Owner or the Owner
Participant upon delivery to AMBAC of a certificate of an authorized officer of
the transferor Facility Owner or Owner Participant and the transferee Facility
Owner or Owner Participant notifying AMBAC of such transfer.
10. This Surety Bond shall be governed by and interpreted under the laws of the
State of New York, and any suit hereunder in connection with any payment may be
brought only by the Facility Owner or the Owner Participant within one year
after a Demand for Payment, with respect to such payment, is made pursuant to
the terms of this Surety Bond and AMBAC has failed to make such payment in
accordance with the terms of the Surety Bond.
11. In the event that AMBAC were to become insolvent, any claims arising under
the Surety Bond would be excluded from coverage by the Connecticut Insurance
Guaranty Association.
<PAGE>
IN WITNESS WHEREOF, AMBAC has caused this Surety Bond to be executed and
attested on its behalf this 31st day of July, 1996.
AMBAC Indemnity Corporation
Attest: ____________________ By: _______________________
Assistant Secretary First Vice President
<PAGE>
SCHEDULE A
DATE Surety Coverage
7/31/96 81,899,766.65
1/5/97 82,973,738.12
7/5/97 84,009,802.95
1/5/98 85,051,449.80
7/5/98 86,048,285.72
1/5/99 87,044,501.93
7/5/99 87,986,654.16
1/5/00 88,919,515.46
7/5/00 89,786,164.29
1/5/01 90,631,645.04
7/5/01 91,394,858.02
1/5/02 92,120,653.22
7/5/02 92,742,843.32
1/5/03 93,305,398.99
7/5/03 93,735,849.22
1/5/04 94,076,295.38
7/5/04 94,300,335.69
1/5/05 94,454,909.34
7/5/05 94,492,670.01
1/5/06 94,366,089.25
7/5/06 94,113,872.25
1/5/07 93,661,972.36
7/5/07 93,041,914.91
1/5/08 92,163,838.48
7/5/08 91,086,177.50
1/5/09 89,790,397.26
7/5/09 88,367,611.46
1/5/10 86,796,381.84
7/5/10 85,097,018.39
1/5/11 83,229,195.28
7/5/11 81,214,912.55
1/5/12 79,011,694.78
7/5/12 76,641,137.51
1/5/13 74,058,059.88
7/5/13 71,282,342.41
1/5/14 68,266,646.35
7/5/14 65,028,922.27
1/5/15 61,518,491.95
7/5/15 57,751,019.30
1/5/16 53,671,731.33
7/5/16 49,293,255.37
1/5/17 44,555,733.87
7/5/17 39,467,744.03
1/5/18 33,963,036.18
7/5/18 28,044,763.46
1/5/19 21,638,544.63
7/5/19 14,738,326.67
1/5/20 7,254,320.14
4/15/20 7,254,320.14
6/15/20 7,254,320.14
9/15/20 7,254,320.14
12/15/20 0.00
<PAGE>
Attachment 1
Surety Bond No. SB0457BE
DEMAND FOR PAYMENT
AMBAC Indemnity Corporation [Date] ,19
One State Street Plaza
New York, New York 10004
Attention: General Counsel
Reference is made to the Surety Bond No. SB0457BE (the "Surety Bond")
issued by AMBAC Indemnity Corporation ("AMBAC"). The terms which are capitalized
herein and not otherwise defined have the meanings specified in the Surety Bond
unless the context otherwise requires.
The Facility Owner and the Owner Participant hereby certify that:
(a) Payment by Old Dominion to the [Facility Owner/Owner Participant] of
[ ] (the "Subject Payment" was due (or as contemplated by paragraph 1 of the
Surety Bond would have been due had demand for payment not been stayed) on _____
[a date not less than five (5) days prior to the date hereof] under the
Agreement, in an amount equal to $________ (the "Amount Due").
(b) $_______ has been paid to the [Facility Owner/Owner Participant] by
Old Dominion with respect to the Subject Payment, which amount is $________ less
than the Amount Due (the "Deficiency").
(c) The [Facility Owner/Owner Participant] has not heretofore made a
conforming demand under the Surety Bond for the Amount Due with respect to the
Subject Payment or any portion thereof.
The Facility Owner and the Owner Participant hereby request that payment
of the Deficiency (up to but not in excess of the Surety Bond Coverage) be made
by AMBAC under the Surety Bond and direct that payment under the Surety Bond be
made to the following account by bank wire transfer of federal or other
immediately available funds in accordance with the terms of the Surety Bond:
________________________________ [Facility Owner's/Owner Participant's Account]
CLOVER UNIT 2 GENERATING TRUST EPC CORPORATION
By: Wilmingtion Trust Company, not in
its individual capacity but solely as
Owner Trustee under the Trust Agreement
By: _________________________ By: _________________________
Its: Its: _________________________
<PAGE>
ANNEX B
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided herein or unless the context otherwise requires, all capitalized terms
shall have the meaning as set out below.
"Agreement" means this Guaranty Agreement.
"AMBAC" has the same meaning as set forth in the first paragraph of
this Agreement.
"Business Day" has the meaning given that term in the Surety Bond.
"Default Rate" means the lesser of the Reimbursement Rate or the maximum
rate of interest permitted by then applicable law.
"Equipment Interest" has the meaning given that term in the Operating
Equipment Agreement.
"Event of Default" means those events of default set forth in Section
3.01 of this Agreement.
"Foundation Interest" has the meaning given that term in the Operating
Foundation Agreement.
"Investment Agreement" means the Investment Agreement dated as of July
31, 1996 by and between AMBAC Capital Funding, Inc. and Old Dominion.
"Pledge Agreement" means the Investment Agreement Pledge Agreement dated
as of July 1, 1996 by and between Old Dominion and AMBAC.
"Reimbursement Rate" means Citibank N.A.'s prime rate plus two (2)
percent per annum, as of the date of such Surety Bond Payment, said "prime rate"
being the rate of interest announced from time to time by Citibank N.A., New
York, New York, as its prime rate.
"State" means the Commonwealth of Virginia.
"Subordinated Collateral" has the meaning given that term in the
Subordinated Security Agreement.
"Subordinated Mortgage" means the Subordinated Deed of Trust and
Security Agreement dated as of July 1, 1996 among Old Dominion, as grantor, and
Richard W. Gregory and Michael P. Drzal, as Subordinated Trustees.
"Subordinated Real Property" has the meaning given that term in the
Subordinated Mortgage.
<PAGE>
"Subordinated Secured Parties" has the meaning given that term in the
Subordinated Security Agreement.
"Subordinated Security Agreement" means the Subordinated Security
Agreement dated as of July 1, 1996 among Old Dominion, EPC Corporation, AMBAC
and Clover Unit 2 Generating Trust.
"Surety Bond Coverage" has the meaning given that term in the Surety
Bond.
"Surety Bond Payment" means the amount of each payment made by AMBAC
pursuant to the Surety Bond.
"Transaction" means the transaction contemplated by the Subject
Agreements.
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT dated as of July 31, 1996 by and among AMBAC
CAPITAL FUNDING, INC., a Delaware corporation ("ACFI"), OLD DOMINION ELECTRIC
COOPERATIVE ("Old Dominion"), a wholesale power supply cooperative organized
under the laws of the Commonwealth of Virginia, and AMBAC INDEMNITY CORPORATION
("AMBAC"), a Wisconsin-domiciled stock insurance corporation.
WHEREAS, pursuant to a Participation Agreement, dated as of July 1, 1996
(the "Participation Agreement"), by and among Old Dominion, Clover Unit 2
Generating Trust (the "Facility Owner"), Wilmington Trust Company (the "Owner
Trustee"), EPC Corporation (the "Owner Participant") and Utrecht-America Finance
Co. (the "Agent"), Old Dominion has arranged for the parties thereto to take
various actions in connection with the Transaction; and
WHEREAS, pursuant to an Operating Equipment Agreement, dated as of July
1, 1996 (the "Operating Equipment Agreement"), by and between the Facility Owner
and Old Dominion, the Facility Owner has conveyed the Equipment Interest (as
such term is defined in the Operating Equipment Agreement) to Old Dominion for a
term of years; and
WHEREAS, pursuant to a Operating Foundation Agreement, dated as of July
1, 1996 (the "Operating Foundation Agreement"; the Participation Agreement, the
Operating Equipment Agreement and the Operating Foundation Agreement are
sometimes hereinafter referred to collectively as the "Subject Agreements"), by
and between the Facility Owner and Old Dominion, the Facility Owner has conveyed
the Foundation Interest to Old Dominion for a term of years; and
WHEREAS, AMBAC has agreed to issue its Surety Bond No. SB0457BE (the
"Surety Bond") guaranteeing certain payments required to be made by Old Dominion
pursuant to the Subject Agreements, subject to the terms and conditions of the
Surety Bond; and
WHEREAS, to induce AMBAC to issue the Surety Bond, Old Dominion has
agreed to (i) pay the premium for such Surety Bond, (ii) reimburse AMBAC for all
payments made by AMBAC pursuant to the Surety Bond and (iii) to secure its
obligation to reimburse AMBAC for all such payments made pursuant to a Guaranty
Agreement, dated as of July 1, 1996 (the "Guaranty Agreement"), by and between
Old Dominion and AMBAC; and
WHEREAS, to secure its obligations to AMBAC under the Guaranty
Agreement, Old Dominion has agreed to invest certain monies with ACFI pursuant
to this Agreement and to grant to AMBAC a perfected security interest this
Investment Agreement pursuant to an Investment Agreement Pledge Agreement, dated
as of July 1, 1996 (the "Pledge Agreement"), by and among Old Dominion, the
Owner Participant, the Facility Owner and AMBAC; and
WHEREAS, ACFI is willing, on the terms and conditions set forth in this
Agreement, to accept the investment of Invested Monies (as hereinafter
defined).
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and set forth, ACFI, Old Dominion and AMBAC hereby
agree as follows:
<PAGE>
SECTION 1. DEFINITIONS
As used herein, the following terms have the following meanings:
1.1. "Agreement" means this Investment Agreement entered into by
and among ACFI, Old Dominion and AMBAC.
1.2. "Approved Wire Time" means no later than 1:30 p.m. New York
City Time.
1.3. "Business Day" means any day other than a Saturday or Sunday or
other day on which commercial banking institutions are authorized or required by
law, regulation or executive order to be closed in (i) Glen Allen, Virginia,
(ii) the city and state in which the principal corporate trust office of the
Owner Trustee is located, (iii) the city and state in which the principal office
of the Agent is located, (iv) the city and state in which the principal office
of AMBAC is located or (v) Amsterdam, The Netherlands. Any payment due hereunder
on a day that is not a Business Day shall be due and payable on the next
succeeding Business Day.
1.4. "Collateral" means cash, direct obligations of the Department of
the Treasury of the United States of America ("Treasuries"), and obligations of
the Government National Mortgage Association ("GNMA's), the Federal National
Mortgage Association ("FNMA's") or the Federal Home Loan Mortgage Corporation
("FHLMC's").
1.5 "Collateral Requirement" means (i) in the case of cash, 100% of
Invested Monies, (ii) in the case of Treasuries and GNMA's, 104% of Invested
Monies, and (iii) in the case of FNMA's or FHLMC's, 105% of Invested Monies.
1.6. "Custodian" has the meaning set forth in Section 4.2(a)(ii).
1.7. "Downgrade" means any reduction of the rating on the
Guarantor's claims-paying ability below the levels specified in Section 4.2 or
any withdrawal of a rating.
1.8. "Earnings" means interest earned in accordance with the
provisions of Section 2.2 hereof.
1.9. "Effective Date" means July 31, 1996.
1.10. "Event of Default" has the meaning given that term in
Section 5.1 hereof.
1.11. "Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to (a) the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York; or (b) if such rate is not so published for
any day which is a Business Day, the average of the quotations for such day on
such transactions received by Old Dominion from three federal funds brokers of
recognized standing selected by it.
<PAGE>
1.12. "Guarantee" means the financial guaranty insurance policy of
the Guarantor attached hereto as Exhibit B.
1.13. "Guarantor" means AMBAC Indemnity Corporation, a
Wisconsin-domiciled stock insurance company.
1.14. "Guaranty Agreement Deposit" means the amounts to be
invested hereunder (initially, $24,378,659.53) as contemplated by the Guaranty
Agreement.
1.15. "Interest Payment Date" means the fifth day of each
January and July (or the next succeeding Business Day if such fifth day is
not a Business Day) commencing January 5, 1997.
1.16. "Interest Payment Procedures" means that Earnings will be retained
hereunder and compounded until each Interest Payment Date and will be wire
transferred in immediately available funds to Old Dominion on each Interest
Payment Date in the amounts set forth in Exhibit C attached hereto.
1.17. "Invested Monies" means the Guaranty Agreement Deposit.
1.18. "Market Value" means, on any Business Day, with respect to
securities constituting Collateral one of the following three methods, which
method shall be consistently applied: (i) valuation of the Collateral computed
on the basis of the bid price last quoted by the Federal Reserve Bank of New
York on the valuation date and printed in The Wall Street Journal or the New
York Times; or (ii) valuation of the Collateral by a nationally recognized
pricing service whose valuation method consists of the composite average of
various bid price quotes on the valuation date; or (iii) valuation of the
Collateral based on the lower of two dealer bids on the valuation date. Such
dealers or their parent holding companies must be rated at least investment
grade by S&P and Moody's and must be market makers in the securities being
valued. In the event that the Custodian or such agent is unable to obtain the
price of a particular security from a pricing information service on any
Business Day, the market value of such securities shall be determined by the
Custodian or such agent in the exercise of its discretion based on information
furnished to the Custodian or such agent by one or more brokers in such
securities or the Custodian or such agent may price such securities using a
formula utilized by the Custodian or such agent for such purpose in the ordinary
course of its business.
1.19. "Moody's" means Moody's Investors Service, Inc. and its
successors.
1.20 "Permitted Withdrawal Purpose" means the payment to AMBAC of any
amounts payable by Old Dominion to AMBAC pursuant to the Guaranty Agreement
which have not been paid by Old Dominion prior to the expiration of the grace
period specified in clauses (a) or (b), as applicable, of Section 3.01 of the
Guaranty Agreement. Notwithstanding the foregoing, however, other than as
permitted under Sections 4.2, 4.3 or 5.3 hereof, in no event shall a withdrawal
for the purpose of reinvesting Invested Monies in another investment constitute
a "Permitted Withdrawal Purpose".
1.21. "Rate of Earnings" means 7.24% per annum calculated on a
30/360 day count basis.
<PAGE>
1.22. "S & P" means Standard & Poor's Ratings Group and its
successors.
1.23. "Termination Date" means January 4, 2020.
1.24. "Uniform Commercial Code" means the Uniform Commercial Code as in
effect in the State of New York on the date such law is applied; provided,
however, that, in the event that, by reason of mandatory provisions of law, any
or all of the attachment, perfection or priority of any security interest
granted under this Agreement is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State of New York, the term "Uniform
Commercial Code" means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions thereof relating to such attachment,
perfection or priority and for purposes of definitions related to such
provisions.
1.25. "Withdrawal Amount" means the amount specified by AMBAC in
the notice delivered pursuant to Section 2.3(b).
1.26. "Withdrawal Date" means (i) the date specified in the
notice delivered pursuant to Section 2.3(b) and (ii) any date on which the
Invested Monies are withdrawn pursuant to Sections 4.2 or 5.2.
SECTION 2. INVESTMENT OF FUNDS
2.1. Delivery of Funds. On the Effective Date, Old Dominion shall
deliver Invested Monies to ACFI for the credit of ACFI's account as specified in
Exhibit A hereto and ACFI shall accept the Invested Monies from Old Dominion.
2.2. Interest. Interest on the outstanding balance of the Invested
Monies shall accrue daily as of the close of business each day during the term
of this Agreement at the Rate of Earnings, from and including the Effective Date
to but excluding the Termination Date. No interest will accrue on or after the
Termination Date unless such Termination Date is not a Business Day in which
case interest will accrue to but excluding the next succeeding Business Day.
Earnings shall be paid on each Interest Payment Date, in arrears, in accordance
with the Interest Payment Procedure.
2.3. Withdrawals. (a) Except as provided in Sections 4.2, 4.3 or
5.2, the only withdrawals in respect of the Guaranty Agreement Deposit
which will be permitted are withdrawals made at the direction of AMBAC on a
Withdrawal Date in the applicable Withdrawal Amount for a Permitted Withdrawal
Purpose.
(b) Except as provided in Sections 4.2, 4.3 or 5.2, ACFI will only honor
a request for a withdrawal in respect of the Guaranty Agreement Deposit if AMBAC
delivers written notice via telecopy to ACFI two (2) Business Days prior to any
such withdrawal specifying the amount to be withdrawn and the Withdrawal Date
and certifying that (i) the withdrawal is only being made for a Permitted
Withdrawal Purpose, (ii) the amount to be paid by ACFI is to be applied by AMBAC
for such purpose within one Business Day following the withdrawal, and (iii) the
amount to be withdrawn is not greater than the amount to be so applied by AMBAC.
<PAGE>
2.4. Wire Transfers. The initial amount to be transferred by Old
Dominion to ACFI hereunder shall be transferred by the Approved Wire Time by
wire transfer of same day funds to ACFI's account as specified in Exhibit A
hereto. Amounts to be transferred hereunder by ACFI to either Old Dominion or
AMBAC shall be transferred by the Approved Wire Time by wire transfer of same
day funds to the account designated by the Old Dominion or AMBAC, as the case
may be, in Exhibit A hereto or to such other account as Old Dominion or AMBAC
shall so designate, such designation to be made in writing not less than seven
(7) Business Days prior to the date of transfer. Any fees or costs associated
with the transfer of funds hereunder shall be paid by the transferor of the
funds. Any expenses incurred as a result of delays or errors in the wire
transfer of funds shall be reimbursed to the prejudiced party pursuant to
Section 8 hereof.
2.5. Required Notices. ACFI hereby agrees to provide to Old Dominion and
AMBAC (i) monthly reports by the tenth Business Day of each month identifying
this Agreement and setting forth (A) the current balance of the Invested Monies,
(B) the amount of interest accrued on the Invested Monies in such month, and (C)
any Collateral held by the Custodian identifying such Collateral by type, and
the Market Value of such Collateral as of the most recent date of valuation
thereof and (ii) immediate written notice of any Downgrade.
SECTION 3. GUARANTEE
Old Dominion, in entering into this Agreement, is and will be relying
on the Guarantee of the Guarantor, a copy of which is attached hereto as
Exhibit B.
SECTION 4. TERMINATION; COLLATERALIZATION
4.1. Scheduled Termination. This Agreement shall terminate on the
Termination Date. At such time, all amounts not previously withdrawn pursuant to
the provisions of this Agreement, together with all accrued and unpaid Earnings
up to but excluding the Termination Date, as calculated as provided in this
Agreement, shall be paid to Old Dominion in immediately available funds.
4.2. Downgrade. If the claims-paying ability rating of the Guarantor is
at any time withdrawn or reduced below "AA" or "Aa2" by S&P or Moody's,
respectively, ACFI shall immediately notify the Old Dominion, and, at the
direction of Old Dominion, within ten (10) days after receipt of such notice,
ACFI shall:
(i) return the remaining Invested Monies and Earnings to Old
Dominion at no penalty,
(ii) deliver Collateral to the Custodian and grant to Old Dominion a
first and prior perfected security interest under the Uniform Commercial Code in
and to such Collateral, which Collateral shall at all times have a Market Value
at least equal to the Collateral Requirement; or
<PAGE>
(iii) obtain a new guarantor acceptable to Old Dominion, who is rated at
least "AA" and "Aa2" by S&P and Moody's, respectively.
4.3. Provisions With Respect to Collateral. In the event that ACFI
is required, pursuant to Section 4.2 hereof, to deliver Collateral, the
provisions of this Section 4.3 shall apply.
(a) Collateral Valuation. The Custodian shall, promptly
following the opening of business on each Tuesday, or if any such Tuesday is not
a Business Day, on the next following Business Day, determine the aggregate
Market Value of Collateral held by the Custodian pursuant to this Section 4.3,
and shall notify Old Dominion and ACFI by telephone on such date (such notice to
be confirmed in writing) of such amount and provide Old Dominion or ACFI any
information that either of them may reasonably request regarding the
determination thereof. If such amount is less than the Collateral Requirement on
such day, ACFI shall, before the close of business on the Business Day following
the date of such determination, deliver to the Custodian additional Collateral
having an aggregate Market Value on such day not less than the amount of such
deficiency.
(b) Withdrawal of Collateral. ACFI shall upon one (1) Business
Day's telephonic notice (such notice to be confirmed in writing) to the
Custodian and Old Dominion, be entitled to withdraw Collateral on any Business
Day to the extent that the Market Value of Collateral held by the Custodian
pursuant to this Section 4.3 exceeds the Collateral Requirement on such day.
Such notice shall specify such information as the Custodian or Old Dominion may
require with respect to the Collateral to be withdrawn. The Custodian shall
deliver to ACFI the Collateral so specified before the close of business on the
second Business Day following receipt of such notice; provided, however, that
only so much Collateral may be withdrawn as will not reduce the Market Value of
the Collateral on the day of withdrawal to less than the Collateral Requirement
on such day.
(c) Substitution of Collateral. ACFI shall, upon one (1)
Business Day's telephonic notice (such notice to be confirmed in writing) to the
Custodian and Old Dominion, be entitled on any Business Day to substitute for
any Collateral other Collateral having the same or a greater Market Value at the
time of substitution. Such notice shall specify the Collateral to be withdrawn
and the substitute Collateral to be delivered to the Custodian. The Custodian
shall as soon as practicable following receipt of such notice, but no later than
the second Business Day following receipt of such notice, deliver to ACFI the
Collateral so specified for withdrawal against delivery by ACFI of such
substitute Collateral.
(d) Registration and Repledge of Collateral. Except upon
the occurrence of an Event of Default, neither Old Dominion nor the Custodian
may sell, pledge or otherwise dispose of any Collateral or any interest therein
except for redelivery of Collateral to ACFI and except as pursuant to the Pledge
Agreement.
(e) Remedies. If any Event of Default shall occur and be
continuing, the Custodian shall, upon receipt of written instructions from
Old Dominion to do so (i) exercise such rights for the enforcement of ACFI's
obligations hereunder as are expressly provided herein or are otherwise provided
<PAGE>
under applicable law, (ii) exercise any of the rights and remedies of a secured
party with respect to the Collateral, including any such rights and remedies
under the Uniform Commercial Code, and (iii) to the extent permitted by
applicable law, without demand of performance and without notice to ACFI except
as provided below, take either or both of the following actions:
(i) sell the Collateral or any part thereof, in one lot or in
separate parcels, for cash or on credit or for future delivery, at the option
and at the sole discretion of Old Dominion, at any public or private sale, and
at such price or prices as Old Dominion may deem appropriate, upon two (2)
Business Days' prior notice to ACFI of its intention to sell and of the time and
place of sale. If the purchaser fails to take up and pay for the Collateral so
sold, such Collateral may again be similarly sold. Old Dominion or the Custodian
may be the purchaser of any or all of the Collateral sold and thereafter shall
hold such Collateral free from any right of redemption, stay or appraisal;
provided, however, that in the sale of securities neither Old Dominion nor the
Custodian shall be entitled to purchase any of the Collateral at any private
sale for less than the Market Value of such securities; or
(ii) give ACFI written notice of Old Dominion's proposal to
retain the Collateral in satisfaction of all of the outstanding payment
obligations of ACFI under this Agreement, and if ACFI does not give Old Dominion
notice of objection on or before the second Business Day after Old Dominion
gives such notice of its proposal to retain such Collateral, Old Dominion will
retain the Collateral free from any claim or right of any nature whatsoever of
ACFI, including any rights in equity or right of redemption. If ACFI provides
notices of objection, the Custodian will be obligated to take the actions
specified in Section 4.3(e) (i) above.
(f) Application of Proceeds. The proceeds of any sale of all
or any part of the Collateral pursuant to this Section 4.3 shall be applied by
Old Dominion first to all reasonable expenses and fees (including, without
limitation, fees and expenses of legal counsel) or taxes imposed upon or
incurred by Old Dominion and/or the Custodian after the occurrence of an Event
of Default in connection with (a) the custody, care, sale or collection of, or
realization upon, any of the Collateral or (b) the preservation or enforcement
of any rights of Old Dominion hereunder and second to the payment of the
obligations of ACFI hereunder. ACFI shall remain liable for any such obligations
remaining unpaid from the foregoing proceeds and shall be entitled to any
surplus after any application of such proceeds.
(g) Requirements of Custodian; Expenses of Custodian. All
Collateral delivered to the Custodian shall be segregated by the Custodian from
other assets of the Custodian, Old Dominion or any other person. The Custodian
shall prepare and deliver to Old Dominion and ACFI by the tenth Business Day of
each month a report specifying the identity and location of all Collateral as of
the end of the month preceding such report. Provided that the Collateral
Requirement is maintained and that no Event of Default shall have occurred and
be continuing, all payments of principal or interest on any Collateral received
by the Custodian shall be remitted to ACFI as promptly as possible after receipt
thereof. All fees, costs and expenses incurred by the Custodian shall be paid by
ACFI.
<PAGE>
SECTION 5. DEFAULT
5.1. Events of Default. Each of the following events shall
constitute events of default under this Agreement (each an "Event of
Default"):
(a) Failure by ACFI and the Guarantor on behalf of ACFI to (i) make any
payment of Invested Monies or Earnings when due pursuant to the provisions of
this Agreement or (ii) deliver or maintain Collateral at the times and in the
amounts required by Sections 4.2 and 4.3 hereof.
(b) If either ACFI or the Guarantor commences a case in bankruptcy
relating to it, is adjudicated an insolvent or bankrupt, petitions or
applies for the appointment of any receiver or trustee for itself or any
substantial part of its property or initiates any proceeding relating to it
under any reorganization, arrangement, or dissolution under applicable
bankruptcy or similar insolvency laws; or, if any such proceeding is initiated
against ACFI or the Guarantor and ACFI or the Guarantor, as the case may be,
indicates in any manner its consent thereto or such proceeding is not dismissed
within 60 days.
(c) A failure by ACFI to perform or observe any of its material
obligations under this Agreement (other than those described in Section 5.1(a)
hereof) when such failure continues for ten (l0) Business Days or more after
written notice thereof is given by Old Dominion to ACFI.
(d) The expiration, termination (other than pursuant to its terms), or
repudiation of the Guarantee or any other event which causes the Guarantee to
cease to be in full force and effect or any action by the Guarantor which
challenges the validity of the Guarantee.
5.2. Rights and Obligations of Parties upon an Event of Default. Upon
the occurrence of an Event of Default specified in Section 5.1(b) hereof, in
addition to the remedies set forth in Section 4.3(e) hereof, all Invested Monies
and Earnings thereon shall automatically become due and payable immediately
without notice, receipt of which is hereby waived by ACFI. Upon the occurrence
of any other Event of Default specified in Section 5.1 hereof, in addition to
the remedies set forth in Section 4.3(e) hereof, Old Dominion may declare all
Invested Monies and Earnings to be due and payable immediately. If, as a result
of the occurrence of an Event of Default specified in Section 5.1, all Invested
Monies and Earnings are withdrawn at the direction of Old Dominion, this
Agreement shall be terminated on the date of such withdrawal as if such date
were a Termination Date.
SECTION 6. REPRESENTATIONS AND WARRANTIES
6.1 Old Dominion represents and warrants to ACFI that: (i) it
understands that neither the Agreement nor the Guarantee has been or will be
registered under the Securities Act of l933, as amended (the "Securities Act")
or any other applicable securities law (including the Blue Sky laws of any
state) and, except in connection with an assignment hereof to the Guarantor upon
a payment by the Guarantor under the Guarantee, that neither the Agreement nor
the Guarantee may be offered, sold, transferred, pledged (except as pursuant to
the Pledge Agreement), hypothecated or otherwise disposed of, unless either
registered pursuant to, or exempt from registration under, the Securities Act
and any other applicable securities laws; (ii) it understands that neither ACFI
nor any person representing ACFI has made any representation to it with respect
<PAGE>
to ACFI or the offering or sale of this Agreement or the Guarantee other than as
set forth herein; (iii) the legend set forth in Section 9.10 hereof has been
called to its attention; (iv) it has had access to such financial and other
information concerning ACFI and the Guarantor as it has deemed necessary in
connection with its decision to invest the Invested Monies hereunder; (v) it is
duly authorized to enter into this Agreement and the transactions contemplated
hereby; (vi) this Agreement constitutes a legal, valid and binding obligation of
Old Dominion enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and subject as to enforceability to general principles of equity in a proceeding
at law or in equity; (vii) the execution, delivery and performance of this
Agreement by Old Dominion does not result in a breach or violation of, or cause
a default under any provision of any applicable law, regulation, order, license,
decree, judgment, indenture, contract or agreement binding upon the District or
its assets or cause the creation of any lien or encumbrance on any of its
properties; and (viii) it is not investing in this Agreement or the Guarantee
with a view to any distribution thereof in violation of the Securities Act.
6.2 ACFI represents and warrants to Old Dominion that: (i) it is
duly authorized to enter into this Agreement and the transactions
contemplated hereby; (ii) this Agreement constitutes a legal, valid and binding
obligation of ACFI enforceable against it in accordance with its terms, subject
to bankruptcy, insolvency and similar laws affecting creditors' rights generally
and subject as to enforceability to general principles of equity in a proceeding
at law or in equity; (iii) the execution, delivery and performance of this
Agreement by ACFI does not and will not result in a breach or violation of or
cause a default under, its charter or by-laws or any provision of any applicable
agreement, instrument, judgment, injunction or order applicable to or binding
upon ACFI or its assets, and (iv) on each occasion that ACFI delivers Collateral
to the Custodian, Old Dominion will have a valid first prior perfected and
enforceable lien on such Collateral, free from all claims of third parties.
SECTION 7. LIMITATION ON ACFI'S OBLIGATIONS
7.1. In performing its obligations hereunder, neither ACFI nor any of
its directors, officers, employees, agents or representatives shall be liable or
responsible for: (i) the payment of any amounts owing on or with respect to the
Surety Bond or the Guaranty Agreement; (ii) the use or application by Old
Dominion or AMBAC of any monies payable to AMBAC or Old Dominion hereunder;
(iii) any acts or omissions of Old Dominion under or with respect to the Surety
Bond or the Guaranty Agreement; (iv) the validity or enforceability of the
Surety Bond or the Guaranty Agreement; or (v) Old Dominion's or AMBAC's
performance of its obligations under this Agreement or the Surety Bond or the
Guaranty Agreement. Without limiting the foregoing, regardless of whether ACFI
has reviewed the Surety Bond or the Guaranty Agreement or is generally familiar
with the terms of agreements of a similar type, ACFI shall have no duty to
comply with the terms of the Surety Bond or the Guaranty Agreement or to
ascertain whether Old Dominion is in compliance therewith. For purposes of this
Agreement, it shall not be necessary for ACFI to segregate or otherwise
separately identify or account for the portion of the Invested Monies and ACFI
may aggregate all the invested funds for accounting purposes. ACFI shall
maintain complete and accurate records identifying the principal amount of
Invested Monies. ACFI shall furnish monthly statements to Old Dominion and AMBAC
identifying the amount of Invested Monies held hereunder and the amount of
<PAGE>
Earnings accrued on such Invested Monies in the preceding month as set forth in
Section 2.5 hereof.
7.2. The obligation of ACFI to pay the amounts due and payable under
this Agreement is absolute, irrevocable and unconditional and ACFI hereby waives
any right of recoupment, counterclaim, subrogation or setoff with respect to the
Invested Monies.
SECTION 8. REIMBURSEMENT
Delays caused by errors or failures in transfers of funds hereunder
shall be compensated by the party retaining the funds due to error and by the
prompt payment of interest for the loss of availability of such funds shall be
made to the party prejudiced thereby in accordance with the following formula:
Interest = [(amount of funds lost) x (Federal Funds Rate)] x (No. of days funds
lost)/360.
SECTION 9. MISCELLANEOUS
9.1. No Waiver. No failure or delay on the part of ACFI, Old Dominion or
AMBAC in exercising any right or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right or remedy
preclude any other right or remedy. The rights and remedies of ACFI, Old
Dominion or AMBAC hereunder are cumulative and are not exclusive of any rights
or remedies provided by law or equity. Any remedies set forth in any other
contract between Old Dominion and ACFI and/or AMBAC are separate and distinct
from those set forth in this Agreement. None of the terms or provisions of this
Agreement may be waived modified or amended, except in writing duly signed by
ACFI, Old Dominion and AMBAC.
9.2. Survival. All warranties and representations made by Old Dominion
or ACFI in this Agreement or in any of the instruments or documents delivered
pursuant to this Agreement regardless of any investigation made shall be
considered to have been relied upon by the other parties hereto and shall
survive the delivery of any instruments or documents.
9.3. Successors and Assigns. This Agreement and all obligations and
rights arising hereunder shall inure to the benefit of and be binding upon the
parties hereto and their respective successors, assigns and beneficiaries.
Notwithstanding the foregoing and subject to the Pledge Agreement, this
Agreement, and the obligations and rights arising out of this Agreement or any
part hereof, shall not be sold, pledged or assigned or otherwise transferred by
ACFI, Old Dominion or AMBAC without the prior written consent of the other
parties hereto, and any such attempted sale, pledge, assignment or transfer
shall be void ab initio; provided, however, that ACFI may transfer this
Agreement or any of its interests or obligations hereunder to any subsidiary of
AMBAC Inc. if from and after such transfer and the assumption by the transferee
of ACFI's obligations hereunder, the obligations of the transferee hereunder
shall be guaranteed by the Guarantor under terms at least as favorable to Old
Dominion as the terms of the Guarantee; and, provided further, that any
<PAGE>
successor to (i) Old Dominion under the Surety Bond, the Guaranty Agreement or
the Pledge Agreement and (ii) AMBAC under the Surety Bond, the Guaranty
Agreement or the Pledge Agreement shall be considered a successor in interest to
Old Dominion or AMBAC, as the case may be, with respect to this Agreement
without the necessity of obtaining the prior written consent of ACFI. No consent
shall be required for the transfer of this Agreement to any successor entity
appointed in accordance with this Agreement or the pledge of this Agreement
pursuant to the Pledge Agreement.
9.4. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in such State.
9.5. Severability of Provisions. If any one or more of the
provisions contained in this Agreement is declared invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
9.6. Counterparts. This Agreement may be executed in several
counterparts and, as so executed, shall constitute one agreement binding upon
the parties hereto.
9.7. Integration of Terms. This Agreement contains the entire
agreement between the parties relating to the subject matter hereof and
supersedes all oral statements and prior writings with respect thereto.
9.8. Interpretation. The headings of the articles and sections
hereof are for convenience of reference only and shall not affect the meaning
or construction of any provision hereof.
9.9. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given upon
delivery if delivered by hand (with receipt), or as of the date of delivery
shown on the receipt if mailed at a post office in the United States of America
by registered or certified mail, postage prepaid, return receipt requested, or
as of the date of acknowledgment if transmitted by telex, rapifax or other
telecommunication equipment, in any case addressed to the attention of the
person listed on Exhibit A hereto, or at such other address or to the attention
of such other person as such party shall have designated to the other party
hereto in a written notice. Any notices given by telex, rapifax or other
telecommunication equipment shall be orally confirmed by the sender immediately
after such notice is transmitted.
9.10. Legend. NEITHER THIS AGREEMENT NOR THE ATTACHED GUARANTEE HAVE
BEEN OR WILL BE REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND, EXCEPT IN CONNECTION WITH AN
ASSIGNMENT HEREOF TO THE GUARANTOR UPON A PAYMENT BY THE GUARANTOR UNDER THE
GUARANTY, THIS AGREEMENT AND THE GUARANTEE MAY BE SOLD, TRANSFERRED OR ASSIGNED
ONLY AS PERMITTED HEREUNDER AND ONLY IF REGISTERED PURSUANT TO THE SECURITIES
ACT OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE. BY ITS EXECUTION OF THIS
AGREEMENT, OLD DOMINION AND AMBAC AGREE THAT THE AGREEMENT AND THE GUARANTEE ARE
<PAGE>
BEING ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION
WITH, THE PUBLIC DISTRIBUTION THEREOF.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the date first above written.
AMBAC CAPITAL FUNDING, INC. AMBAC INDEMNITY CORPORATION
By: /s/ ILLEGIBLE By: /s/ ILLEGIBLE
------------------------------- -------------------------------
Title: Vice President Title: First Vice President
By: /s/ Robert Roseman
-------------------------------
Title: Managing Director
OLD DOMINION ELECTRIC COOPERATIVE
By: /s/ ILLEGIBLE
------------------------------
Title:
<PAGE>
EXHIBIT A
Notices and communications to the parties should be directed to:
IF TO ACFI: IF TO OLD DOMINION:
AMBAC Capital Funding, Inc. Old Dominion Electric Cooperative
300 Nyala Farms Road 4201 Dominion Boulevard
Westport, Connecticut 06831 Glen Allen , Virginia 23060
Telephone No.: (203) 341-2335 Telephone No.: 804-747-0592
Telecopier No. : (203) 341-2355 Telecopier No.: 804-747-3742
Attention: John Tsigakos Attention: Vice President of Accounting
and Finance
IF TO AMBAC:
AMBAC Indemnity Corporation
One State Street Plaza
New York, New York 10004
Attention: General Counsel
Telephone No.: (212) 668-0340
Telecopier No.: (212) 509-9190
Wire Transfer Information - unless otherwise designated as provided herein, wire
instructions and transfers shall be made as follows:
TO ACFI: TO OLD DOMINION:
Bank of New York Nationsbank
ABA Number 0210-0001-8 ABA No.: 051-0000-17
Beneficiary Bank: GLA 111-569 GSCS for the account of Old Dominion
Electric Cooperative
Account No. 20014290
Attention: Vinnette Simpson Reference: Clover Unit 2
FTC: ACF Attn: Carolyn Kilby
TO AMBAC:
Citibank, N.A.
ABA# 02100089
A/C# 40609486
<PAGE>
EXHIBIT B
FORM OF INSURANCE POLICY
<PAGE>
FINANCIAL GUARANTY INSURANCE POLICY
AMBAC Indemnity Corporation
One State Street Plaza
New York, New York 10004
(212) 668-0340
INVESTMENT AGREEMENT: POLICY NUMBER: FC0014BE
Investment Agreement dated as of July 31, 1996 by and among
AMBAC Capital Funding, Inc., Old Dominion
Electric Cooperative ("Old Dominion") and
AMBAC Indemnity Corporation
PREMIUM: $
AMBAC INDEMNITY CORPORATION (AMBAC) A Wisconsin Stock Insurance Company in
consideration of the payment of the premium and subject to the terms of this
Policy, hereby agrees to pay to Old Dominion that portion of repayments of
principal of and payments of interest on Invested Monies invested pursuant to
the above-described investment agreement (the "Investment Agreement") which
shall become Due For Payment but shall be unpaid by reason of Nonpayment.
AMBAC will make such payments to Old Dominion within one business day following
notification to AMBAC of Nonpayment.
AMBAC shall disburse repayments of principal of Invested Monies and payments of
interest on Invested Monies which are then Due for Payment but are unpaid to Old
Dominion only upon receipt of written notice from Old Dominion setting forth the
amount which is then Due for Payment. AMBAC shall, to the extent that it makes
repayments of principal of or payments of interest on Invested Monies, become
subrogated to the rights of Old Dominion in accordance with the terms hereof,
and to evidence such subrogation Old Dominion shall execute such assignments or
documents of transfer with respect to Old Dominion's rights under the Investment
Agreement as may be reasonably determined by AMBAC. To the extent that AMBAC
makes payments under this Policy to Old Dominion, Old Dominion shall be deemed
to have assigned to AMBAC its interests in the Investment Agreement and any
collateral pledged thereunder to the extent of the payments so made.
As used herein, the term "Old Dominion" shall have the meaning given that term
in the Investment Agreement. "Due for Payment" shall mean, with respect to
repayments of principal, that a "Withdrawal Date", as that term is defined in
the Investment Agreement, has been reached and, with respect to payments of
interest, shall mean that an "Interest Payment Date", as that term is defined in
the Investment Agreement, has been reached, in each instance subject to the
terms and conditions of the Investment Agreement. "Invested Monies" shall have
the meaning given that term in the Investment Agreement. "Nonpayment" shall mean
<PAGE>
the failure of Old Dominion to have received repayments of principal of and/or
payments of interest on Invested Monies from AMBAC Capital Funding, Inc. when
such payments have become Due for Payment.
In the event that any repayment of principal of or payment of interest on the
Invested Monies has been deemed to be a voidable transfer under the provisions
of the United States Bankruptcy Code, 11 U.S.C. Section 101 et seq., and
theretofore been disgorged or recovered from Old Dominion or any pledgee of Old
Dominion, AMBAC shall make payment to Old Dominion of such amounts, if
sufficient funds are not otherwise available for payment of such disgorgement or
recovery.
This Policy is noncancelable. The premium on this Policy is not refundable for
any reason. This Policy does not insure against loss other than Nonpayment. In
the event that AMBAC were to become insolvent, any claims arising under the
Policy would be excluded from coverage by the Connecticut Insurance Guaranty
Association.
IN WITNESS WHEREOF, AMBAC has caused this Policy to be executed and attested on
its behalf this 31st day of July, 1996.
Attest: _______________________ By: _______________________
Assistant Secretary Vice President
Effective Date: July 31, 1996
<PAGE>
EXHIBIT C
Old Dominion Electric Cooperative
DRAWS FROM GUARANTY AGREEMENT
GUARANTY AGREEMENT DEPOSIT FUND
DATE DEPOSIT FUND BALANCE
7/30/96 0.00 24,378,659.53
1/5/97 742,424.68 24,396,171.84
7/5/97 154,613.40 25,124,699.86
1/5/98 1,389,328.81 24,644,885.18
7/5/98 153,742.90 25,383,287.12
1/5/99 1,376,383.55 24,925,778.56
7/5/99 152,759.77 25,675,331.97
1/5/00 1,375,635.04 25,229,143.95
7/5/00 151,697.99 25,990,740.97
1/5/01 1,374,524.89 25,557,080.90
7/5/01 150,550.22 26,331,697.01
1/5/02 1,373,331.67 25,911,572.77
7/5/02 149,309.50 26,700,262.20
1/5/03 1,372,041.69 26,294,770.00
7/5/03 147,968.30 27,098,672.37
1/5/04 1,370,647.27 26,708,997.04
7/5/04 146,518.51 27,529,344.22
1/5/05 2,807,399.36 25,718,507.12
7/5/05 (90,014.78) 26,739,531.86
1/5/06 1,611,904.26 26,095,598.65
7/5/06 148,665.40 26,891,593.92
1/5/07 1,371,372.04 26,493,697.58
7/5/07 147,272.06 27,305,497.37
1/5/08 1,559,422.55 26,734,533.82
7/5/08 146,429.13 27,555,894.81
1/5/09 1,748,045.34 26,805,372.86
7/5/09 146,181.20 27,629,546.16
1/5/10 1,747,787.56 26,881,948.17
7/5/10 145,913.18 27,709,161.51
1/5/11 1,747,508.91 26,964,724.25
7/5/11 145,623.47 27,795,223.80
1/5/12 1,747,207.69 27,054,203.21
7/5/12 145,310.30 27,888,255.07
1/5/13 1,746,882.08 27,150,927.82
7/5/13 144,971.75 27,988,819.66
1/5/14 1,746,530.11 27,255,484.82
7/5/14 144,605.80 28,097,527.57
1/5/15 1,746,149.63 27,368,508.44
7/5/15 144,210.23 28,215,038.22
1/5/16 1,745,738.34 27,490,684.26
7/5/16 143,782.60 28,342,064.43
1/5/17 1,745,293.75 27,622,753.41
7/5/17 143,320.36 28,479,376.72
1/5/18 1,744,813.17 27,765,516.99
7/5/18 142,820.69 28,627,808.02
1/5/19 1,052,519.88 28,611,614.79
7/5/19 847,355.25 28,800,000.00
1/5/20 28,800,000.00 0.00
INVESTMENT AGREEMENT PLEDGE AGREEMENT
Dated as of July 1, 1996
among
OLD DOMINION ELECTRIC COOPERATIVE,
as Investment Agreement Pledgor,
AMBAC INDEMNITY CORPORATION,
EPC CORPORATION
and
CLOVER UNIT 2 GENERATING TRUST
CLOVER UNIT 2 GENERATING FACILITY
AND
COMMON FACILITIES
<PAGE>
INVESTMENT AGREEMENT PLEDGE AGREEMENT
This INVESTMENT AGREEMENT PLEDGE AGREEMENT, dated as of July
1, 1996 (this "Agreement"), among OLD DOMINION ELECTRIC COOPERATIVE, a wholesale
power supply cooperative, organized under the laws of the Commonwealth of
Virginia, as pledgor (the "Investment Agreement Pledgor"), AMBAC INDEMNITY
CORPORATION, a Wisconsin-domiciled stock insurance company ("AMBAC"), EPC
CORPORATION, a Delaware corporation (the "Owner Participant") and CLOVER UNIT 2
GENERATING TRUST, a Delaware business trust created pursuant to the Trust
Agreement (as defined pursuant to Section 1) (the "Facility Owner").
WHEREAS, the Investment Agreement Pledgor, the Owner
Participant, Wilmington Trust Company (in the capacities set forth therein), the
Facility Owner and Utrecht-America Finance Co., have entered into a
Participation Agreement dated as of July 1, 1996 (the "Participation
Agreement");
WHEREAS, the Investment Agreement Pledgor and the Facility
Owner have entered into the Operating Equipment Agreement and the Operating
Foundation Agreement;
WHEREAS, pursuant to the Participation Agreement, the
Investment Agreement Pledgor has obtained from AMBAC the Surety Bond;
WHEREAS, the Investment Agreement Pledgor and AMBAC have
entered into the AMBAC Guaranty, pursuant to which the Investment Agreement
Pledgor has agreed, among other things, to reimburse AMBAC for any payments made
under the Surety Bond; and
WHEREAS, the Investment Agreement Pledgor has entered into an
Investment Agreement with AMBAC Capital Funding, Inc. ("AMBAC Capital") and
AMBAC, dated as of July 1, 1996 (the "Investment Agreement"), and is willing to
pledge to AMBAC, the Owner Participant and the Facility Owner (collectively, the
"Secured Parties") substantially all of its rights under the Investment
Agreement to secure the Secured Obligations.
NOW, THEREFORE, in consideration of the mutual agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINED TERMS.
Capitalized terms used in this Agreement and not otherwise defined
herein shall have the respective meanings specified in Appendix A to the
Participation Agreement.
<PAGE>
SECTION 2. PLEDGE.
SECTION 2.1 PLEDGE OF INVESTMENT AGREEMENT. To secure the Secured
Obligations (as defined in Section 3 hereof) the Investment Agreement Pledgor
hereby transfers, assigns, pledges and grants a security interest in each and
all of its right, title and interest in the Investment Agreement (including,
without limitation, the right of the Investment Agreement Pledgor to receive all
amounts payable under the Investment Agreement in accordance therewith), but
excluding the Investment Agreement Pledgor's rights to elect remedies under
Sections 4.2, 4.3 and 5.3 thereof, all instruments or certificates evidencing
the Investment Agreement and all interest, cash, instruments or other property
from time to time received, receivable or otherwise distributed in respect of or
in exchange for, any or all of the Investment Agreement and all proceeds of the
Investment Agreement to the Secured Parties for their benefit; provided,
however, that so long as no event of default under any of the Secured
Obligations has occurred and is continuing, interest payable under the
Investment Agreement shall be paid to the Investment Agreement Pledgor, free and
clear of the Lien and security which is created hereunder. The Secured Parties
hereby accept such transfer, assignment, pledge and security interest.
SECTION 2.2 DISTRIBUTION OF PROCEEDS OF INVESTMENT AGREEMENT. Any
amounts received in respect of the Investment Agreement after an event of
default under the Guaranty Agreement shall have occurred and be continuing shall
be applied or distributed ratably among AMBAC, the Facility Owner and the Owner
Participant according to the Secured Obligations held by each, to the extent and
only to the extent that (A) AMBAC is obligated to pay such obligations in
accordance with the terms of the Surety Bond and (B) such obligations are not
paid by AMBAC in accordance with the terms of the Surety Bond.
The balance, if any, of such amounts remaining shall be distributed to
the Investment Agreement Pledgor.
SECTION 3. SECURED OBLIGATIONS.
The purpose of this pledge is to secure (a) the Investment Agreement
Pledgor's obligations to pay the Covered Obligations to the extent and only to
the extent that (x) AMBAC is obligated to pay such Covered Obligations under the
Surety Bond (y) a timely Demand for Payment is made in accordance with the terms
of the Surety Bond and (z) AMBAC shall have failed to honor such Demand for
Payment and (b) the Investment Agreement Pledgor's obligations under the AMBAC
Guaranty. All of the foregoing obligations shall be referred to as "Secured
Obligations."
Without limiting the generality of the foregoing, this Agreement
secures the payment of all amounts that constitute part of the Secured
Obligations and that would be payable to the Secured Parties under the Operative
Documents but for the fact that they are unenforceable or not allowable due to
(a) the existence of a bankruptcy, insolvency, reorganization, arrangement or
moratorium involving the Investment Agreement Pledgor or
2
<PAGE>
(b) other laws relating to or effecting the enforcement of creditor's rights
generally against the Investment Agreement Pledgor.
SECTION 4. REMEDIES.
SECTION 4.1 RIGHTS OF THE SECURED PARTIES. Upon the happening and
during the occurrence of any event of default under the Guaranty Agreement,
subject to the provisions of Section 4.2 hereof, the Secured Parties may (in
addition to any other actions permitted under the other Operative Documents or
by statute or at law or in equity) exercise any rights or remedies granted
hereunder. The Secured Parties may enforce the right of pledge created hereby to
the fullest extent possible in accordance with, and shall be entitled to all
rights, remedies and benefits afforded to pledgees under, the laws of the State
of New York. To the extent necessary to realize the benefit of the pledge of the
Investment Agreement effected by Section 3, the Investment Agreement Pledgor
authorizes the Secured Parties to exercise any of its rights under the
Investment Agreement other than the Investment Agreement Pledgor's rights under
the Investment Agreement to elect remedies pursuant to Sections 4.2, 4.3 and 5.2
thereof.
SECTION 4.2 CONTROL OF REMEDIES. Notwithstanding anything else
contained in this Agreement, upon the occurrence and during the continuance of
an event of default under the Guaranty Agreement, AMBAC shall be entitled to
control and direct the enforcement of all rights and remedies granted to the
Secured Parties for the benefit of all Secured Parties, and to give sole consent
wherever the consent of all Secured Parties is required in this Agreement;
PROVIDED, HOWEVER, that if (a) a Secured Obligation is covered under the Surety
Bond and (b) AMBAC fails to pay when due a claim properly made under the Surety
Bond, the Facility Owner and the Owner Participant shall have the right to
appoint a party to control and direct the enforcement of all rights and remedies
under this Agreement.
SECTION 4.3 FILINGS. The Investment Agreement Pledgor agrees that it
shall, at its own expense, execute and deliver all financing statements
necessary to perfect the Secured Parties' or any assignee's interest in the
Investment Agreement or any assignment or other document reasonably requested by
the Secured Parties to perfect, protect, enforce or otherwise give effect to the
Secured Parties' rights and remedies hereunder.
SECTION 4.4 ATTORNEY-IN-FACT. If the Investment Agreement Pledgor is
unable or unwilling to sign such assignments, financing statements or other
documents and to file financing statements or other public notices or recording
with the appropriate authorities, as and when reasonably requested by counsel to
the Secured Parties, the Investment Agreement Pledgor hereby authorizes the
Secured Parties to sign as the Investment Agreement Pledgor's true and lawful
agent and attorney-in-fact any such assignments, financing statement or other
documents and to make any such filings.
3
<PAGE>
SECTION 4.5 THE SECURED PARTIES' DUTIES. The powers conferred on the
Secured Parties hereunder are solely to protect their interests in the
Investment Agreement and shall not impose any duty upon any of them to exercise
any such powers. Except for the accounting for monies actually received by any
of them hereunder, the Secured Parties shall have no duty as to the
Investment Agreement or other matters relative to the Investment Agreement,
whether or not the Secured Parties have or are deemed to have knowledge of
such matters, or as to the taking of any necessary steps to preserve rights
against any parties or any other rights pertaining to the Investment
Agreement.
SECTION 4.6 RELEASE OF INVESTED MONIES. If the Investment Agreement
Pledgor pays the first installment of the Purchase Option Price or Foundation
Option Price on the Expiration Date pursuant to Section 15.1 of each of the
Operating Agreements, any remaining principal balance of the Invested Monies (as
defined in the Investment Agreement) shall be distributed to the Investment
Agreement Pledgor. So long as the Investment Agreement Pledgor is not in default
under its Secured Obligations, interest on the Invested Monies shall be
distributed to the Investment Agreement Pledgor as provided in the Investment
Agreement).
SECTION 5. DISCHARGE.
The Secured Parties agree that when the Secured Obligations shall have
been fully paid and discharged, the Secured Parties, at the written request and
cost of the Investment Agreement Pledgor, shall immediately confirm the release
of the Investment Agreement from any Lien created pursuant to this Agreement and
of all claims that the Secured Parties may have hereunder.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
SECTION 6.1 UNLIMITED HOLDER. The Investment Agreement Pledgor
represents and warrants that it is the legal and beneficial owner of the
Investment Agreement and that the Investment Agreement is not subject to any
Lien or to any other right of any third party, except as provided by the
Operative Documents.
SECTION 6.2 RIGHTS IN THE INVESTMENT AGREEMENT. The Investment
Agreement Pledgor represents and warrants that the pledge of the Investment
Agreement under this Agreement vests in the Secured Parties a valid security
interest in the Investment Agreement, as contemplated by this Agreement, subject
to the provisions, if applicable, of Section 9-306 of the Uniform Commercial
Code as in effect in New York.
4
<PAGE>
SECTION 7. COVENANT OF THE INVESTMENT AGREEMENT PLEDGOR.
The Investment Agreement Pledgor shall not, without the prior written
consent of the Secured Parties (a) sell, assign or otherwise dispose of, or
grant any option with respect to, the Investment Agreement or (b) create or
permit any Lien upon or with respect to the Investment Agreement, except for the
pledge created hereby.
SECTION 8. MISCELLANEOUS.
SECTION 8.1. AMENDMENTS AND WAIVERS. No term, covenant, agreement or
condition of this Agreement may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by the
party against whom enforcement of such change is sought.
SECTION 8.2. NOTICES. Unless otherwise expressly specified or permitted
by the terms hereof, all communications and notices provided for herein to a
party hereto shall be in writing or by a telecommunications device capable of
creating a written record, and any such notice shall become effective (a) upon
personal delivery thereof, including, without limitation, by overnight mail or
courier service, (b) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt thereof, or
(c) in the case of notice by such a telecommunications device, upon transmission
thereof, provided such transmission is promptly confirmed by either of the
methods set forth in clauses (a) or (b) above, in each case addressed to such
party at its address set forth below or at such other address as such party may
from time to time designate by written notice to the other parties hereto:
If to the Investment Agreement Pledgor:
Old Dominion Electric Cooperative
4201 Dominion Boulevard
Glen Allen, Virginia 23060
Facsimile No.: (804) 747-3742
Telephone No.: (804) 747-0592
Attention: Vice President of Accounting and Finance
5
<PAGE>
If to AMBAC:
AMBAC Indemnity Corporation
One State Street Plaza
New York, New York 10004
Facsimile No.: (212) 344-5297
Telephone No.: (212) 668-0340
Attention: General Counsel
If to the Owner Participant:
EPC Corporation
c/o Chrysler Capital Corporation
225 High Ridge Road
Stamford, Connecticut 06905
Facsimile No.: (203) 975-3911
Telephone No.: (203) 975-3500
Attention: President
If to the Facility Owner:
Clover Unit 2 Generating Trust
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Facsimile No.: (302) 651-8882
Telephone No.: (302) 651-1000
Attention: Corporate Trust Administration
SECTION 8.3 SURVIVAL. All warranties, representations, indemnities and
covenants made by either party hereto, herein or in any certificate or other
instrument delivered by either such party or on the behalf of either such party
under this Investment Agreement Pledge Agreement shall be considered to have
been relied upon by the other party hereto and shall survive the consummation of
the transactions contemplated hereby on the Closing Date regardless of any
investigation made by either party or on behalf of either party.
6
<PAGE>
SECTION 8.4 SUCCESSORS AND ASSIGNS.
(a) This Investment Agreement Pledge Agreement shall be binding upon
and shall inure to the benefit of, and shall be enforceable by, the parties
hereto and their respective successors and assigns as permitted by and in
accordance with the terms hereof.
(b) Except as expressly provided herein or in any other Operative
Document, the Investment Agreement Pledgor may not assign its interests herein
without the consent of the Secured Parties.
SECTION 8.5. BUSINESS DAY. Notwithstanding anything herein to the
contrary, if the date on which any payment is to be made pursuant to this
Agreement is not a Business Day, the payment otherwise payable on such date
shall be payable on the next succeeding Business Day with the same force and
effect as if made on such scheduled date and (provided such payment is made on
such succeeding Business Day) no interest shall accrue on the amount of such
payment from and after such scheduled date to the time of such payment on such
next succeeding Business Day.
SECTION 8.6. GOVERNING LAW. THIS AGREEMENT SHALL BE IN ALL RESPECTS
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
SECTION 8.7. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Agreement shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
SECTION 8.8. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together only one Agreement.
SECTION 8.9. HEADINGS. The headings of the sections of this Agreement
are inserted for purposes of convenience only and shall not be construed to
affect the meaning or construction of any of the provisions hereof.
SECTION 8.10. FURTHER ASSURANCES. Each party hereto will promptly and
duly execute and deliver such further documents to make such further assurances
for and take such further action reasonably requested by any party to whom such
first party is obligated, all as may be reasonably necessary to carry out more
effectively the intent and purpose of this Agreement.
SECTION 8.11. EFFECTIVENESS OF AGREEMENT. This Agreement has been dated
as of the date first above written for convenience only. This Agreement shall be
effective on the date of execution and delivery by each of the Secured Parties
and the Investment Agreement Pledgor.
7
<PAGE>
SECTION 8.12. LIMITATION OF LIABILITY. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is executed and delivered
by Wilmington Trust Company, not individually or personally but solely as
trustee of Clover Unit 2 Generating Trust (the "Trust") under the Trust
Agreement, in the exercise of the powers and authority conferred and vested in
it, (b) each of the representations, undertakings and agreements herein made on
the part of the Trust is made and intended not as personal
representations, undertakings and agreements by Wilmington Trust Company but is
made and intended for the purpose for binding only the Trust, (c) nothing herein
contained shall be construed as creating any liability on Wilmington Trust
Company, individually or personally, to perform any covenant either expressed or
implied contained herein, all such liability, if any, being expressly waived by
the parties hereto or by any Person claiming by, through or under the parties
hereto and (d) under no circumstances shall Wilmington Trust Company be
personally liable for the payment of any indebtedness or expenses of the Trust
or be liable for the breach or failure of any obligation, representation,
warranty or covenant made or undertaken by the Trust under this Agreement or any
other Operative Documents.
8
<PAGE>
IN WITNESS WHEREOF, the Investment Agreement Pledgor and the
Secured Parties have caused this Investment Agreement Pledge Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized.
OLD DOMINION ELECTRIC COOPERATIVE,
as Investment Agreement Pledgor
By: /s/ DANIEL M. WALKER
--------------------------------------
Name: Daniel M. Walker
Title: Vice President
Date: July 31, 1996
AMBAC INDEMNITY CORPORATION
By: /s/ T.S. TRAVERS
--------------------------------------
Name: T.S. Travers
Title: First Vice President
Date: July 31, 1996
CLOVER UNIT 2 GENERATING TRUST
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement
By: /s/ EMMETT R. HARMON
----------------------------------------
Name: Emmett R. Harmon
Title: Vice President
Date: July 31, 1996
EPC CORPORATION
By: /s/ WALTER F. GREENFIELD
----------------------------------------
Name: Walter F. Greenfield
Title: Vice President
Date: July 31, 1996
<PAGE>
Acknowledged and consented to by:
AMBAC CAPITAL FUNDING, INC.
By:
-------------------------------
Name:
Title:
Date:
EQUITY SECURITY PLEDGE AGREEMENT
Dated as of July 1, 1996
between
OLD DOMINION ELECTRIC COOPERATIVE,
as Pledgor
and
WILMINGTON TRUST COMPANY,
as Collateral Agent
CLOVER UNIT 2 GENERATING FACILITY
AND
COMMON FACILITIES
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINED TERMS................................................... 1
SECTION 2. PLEDGE.......................................................... 1
SECTION 3. SECURED CLAIMS.................................................. 2
SECTION 4. REMEDIES........................................................ 3
4.1. RIGHTS OF THE COLLATERAL AGENT.................................. 3
4.2. FILINGS......................................................... 4
4.3. ATTORNEY-IN-FACT................................................ 4
4.4. APPOINTMENT OF COLLATERAL AGENT; THE COLLATERAL AGENT'S DUTIES.. 4
4.5. MONTHLY REPORTS................................................. 5
5.1. RELEASE OF COLLATERAL........................................... 5
5.2. REINVESTMENT.................................................... 5
5.3. DISCHARGE....................................................... 5
SECTION 6. REPRESENTATIONS AND WARRANTIES.................................. 6
6.1. OWNER........................................................... 6
6.2. RIGHTS IN THE COLLATERAL........................................ 6
SECTION 7. COVENANTS OF THE PLEDGOR........................................ 6
SECTION 8. MISCELLANEOUS................................................... 6
8.1. AMENDMENTS AND WAIVERS.......................................... 6
8.2. NOTICES......................................................... 6
8.3. SURVIVAL........................................................ 7
8.4. SUCCESSORS AND ASSIGNS.......................................... 8
8.5. BUSINESS DAY.................................................... 8
8.6. GOVERNING LAW................................................... 8
8.7. SEVERABILITY.................................................... 8
8.8. COUNTERPARTS.................................................... 8
8.9. HEADINGS........................................................ 8
8.10. FURTHER ASSURANCES.............................................. 8
8.11. EFFECTIVENESS OF AGREEMENT...................................... 8
ii
<PAGE>
EQUITY SECURITY PLEDGE AGREEMENT
This EQUITY SECURITY PLEDGE AGREEMENT, dated as of July 1,
1996 (this "Pledge Agreement" or this "Agreement"), between OLD DOMINION
ELECTRIC COOPERATIVE, a wholesale power supply cooperative, organized under the
laws of the Commonwealth of Virginia, as pledgor (the "Pledgor"), and WILMINGTON
TRUST COMPANY, as collateral agent on behalf of EPC Corporation and Clover Unit
2 Generating Trust (in such capacity, the "Collateral Agent").
WHEREAS, the Pledgor, the Clover Unit 2 Generating Trust (the
"Facility Owner"), Wilmington Trust Company (in the capacities set forth
therein), EPC Corporation (the "Owner Participant") and Utrecht-America Finance
Co., have entered into a Participation Agreement dated as of July 1, 1996 (the
"Participation Agreement");
WHEREAS, the Pledgor and the Facility Owner have entered into
the Operating Equipment Agreement and the Operating Foundation Agreement;
WHEREAS, the Pledgor has deposited the Collateral (as defined
in Section 2 hereof) with Wilmington Trust Company, as Collateral Agent pursuant
to this Agreement, for the benefit of the Facility Owner and the Owner
Participant to secure payment of the Secured Claims.
NOW, THEREFORE, in consideration of the mutual agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINED TERMS.
Capitalized terms used in this Agreement and not otherwise
defined herein shall have the respective meanings specified in Appendix A to the
Participation Agreement. Notwithstanding the foregoing, except as otherwise
defined or indicated by the context herein, all terms that are defined in the
Uniform Commercial Code as in effect in the State of New York from time to time
("Uniform Commercial Code") shall have their respective meanings as used in
Articles 8 and 9 of the Uniform Commercial Code.
<PAGE>
SECTION 2. PLEDGE.
To secure its obligation to pay the Secured Claims (defined in
Section 3 hereof), the Pledgor hereby grants, bargains, pledges, sells, assigns,
transfers, conveys, mortgages, warrants and confirms to the Collateral Agent,
for the benefit of the Facility Owner and the Owner Participant, a security
interest in, mortgage on, and pledge of, all of the Pledgor's rights, title and
interest in and to all securities, cash, instruments and other property
delivered to the Collateral Agent on the Closing Date and described below
and all interest, securities, cash, instruments and other property from
time to time received, receivable or otherwise distributed to it in respect
thereto; all property into which such right, title and interest may be
exchanged or converted or reinvested; and all proceeds of any and all of the
foregoing and, to the extent not otherwise included, all cash in respect
of such securities (the "Collateral"). The Collateral delivered on the
Closing Date shall consist of the securities, cash, instruments and other
property described in Schedule 1 hereto. All securities and instruments
delivered from time to time hereunder shall be registered in the name of, or
book-entry notations in respect thereof shall be made for the benefit of, the
Collateral Agent.
The Pledgor hereby represents that the Collateral described in
Schedule 1 are Qualifying Securities. The Collateral Agent acknowledges receipt
of the Collateral in accordance with this Agreement and agrees to hold such
Collateral and to apply such Collateral, including the proceeds thereof, in
accordance with the terms of this Agreement.
The Pledgor shall have the right to replace the Collateral,
from time to time, with replacement Qualifying Securities, but only in
accordance with the provisions of Section 5 hereof.
The Collateral Agent shall, at the written direction of the
Pledgor, reinvest cash balances, including cash proceeds from maturing
securities and from payments of interest and premiums on securities, as provided
herein.
SECTION 3. SECURED CLAIMS.
The purpose of this pledge is to secure all of the Pledgor's
obligations to pay any and all amounts of (i) Basic Payments, Supplemental
Payments (including, in the event that the Purchase Option or Foundation
Purchase Option is exercised, each installment of the Purchase Option Price),
Termination Value and amounts computed by reference to Termination Value under
the Operating Equipment Agreement, (ii) Foundation Basic Payments, Foundation
Supplemental Payments (including, in the event that the Purchase Option or
Foundation Purchase Option is exercised, each installment of Foundation Purchase
Option Price), Termination Value and amounts computed by reference to
Termination Value under the Operating Foundation Agreement and (iii) the Special
Equity Remedy Amount under the Participation Agreement. All of the obligations
described in the immediately preceding sentence shall be referred to herein as
"Secured Claims."
Without limiting the generality of the foregoing, this
Agreement secures the payment of all amounts that constitute part of the Secured
Claims and that would be payable to the Facility Owner
2
<PAGE>
or the Owner Participant, as the case may be, under the Operating Equipment
Agreement, the Operating Foundation Agreement or Section 12 of the
Participation Agreement but for the fact that they are unenforceable or not
allowable due to (a) the existence of a bankruptcy, insolvency, reorganization,
arrangement or moratorium involving the Pledgor or (b) other laws relating
to, or effecting the enforcement of, creditor's rights generally against the
Pledgor.
SECTION 4. REMEDIES.
4.1. RIGHTS OF THE COLLATERAL AGENT. If (a) any Event of
Default under the Operating Equipment Agreement or the Operating Foundation
Agreement shall have occurred and be continuing, whether or not the Operating
Equipment Agreement or the Operating Foundation Agreement has been declared in
default pursuant to the terms thereof, or (b) (i) a Special Equity Event shall
have occurred and be continuing, (ii) the Owner Participant has given the notice
contemplated by Section 12 of the Participation Agreement to exercise the
Special Equity Remedy and (iii) the Pledgor has not paid all amounts required by
Section 12 of the Participation Agreement by the date set forth in the Owner
Participant's notice:
(i) the Collateral Agent, at the written direction of
the Owner Participant, shall exercise in respect of the
Collateral, in addition to other rights and remedies provided
for herein or otherwise available to it, all the rights and
remedies of a secured party upon default under the Uniform
Commercial Code and, if so directed in writing by the Owner
Participant, shall, without notice except as specified below,
sell the Collateral or any part thereof at public or private
sale, at any of the Collateral Agent's offices or elsewhere,
for cash, on credit or for future delivery, and upon such
other terms as the Collateral Agent may deem commercially
reasonable. The Collateral Agent shall provide 10 calendar
days' written notice to the Pledgor at the Pledgor's address
specified in the Participation Agreement by (i) registered
mail, (ii) hand delivery, or (iii) special courier service
(such as DHL, TNT, Worldcourier or similar courier) and if the
purchaser fails to take up and pay for the Collateral so sold,
such Collateral may again be similarly sold. The Owner
Participant or the Collateral Agent may be the purchaser of
any or all of the Collateral sold and thereafter shall hold
such Collateral free from any right of redemption, stay or
appraisal; provided, however, that in the sale of securities
neither the Owner Participant nor the Collateral Agent shall
be entitled to purchase any of the Collateral at any private
sale for less than the current market value of such
securities;
(ii) Without limitation of the foregoing, the
Collateral Agent may exercise, in its own name or in the name
of the Owner Participant and the Facility Owner or in the name
and on behalf of the Pledgor, all of the Pledgor's rights
under and in respect of the Collateral and the documentation
evidencing or governing the Collateral; and
(iii) All cash proceeds received by the Collateral
Agent with respect to the Collateral or in respect of any sale
of, collection from, or other realization upon all or any part
of the Collateral shall be held by the Collateral Agent as
collateral for, and then
3
<PAGE>
or at any time thereafter, at the written direction of the
Owner Participant, shall be applied in whole or in part by
the Collateral Agent against, all or any part of the
Secured Claims in such order as the Owner Participant
shall direct. Any surplus of such cash or cash proceeds
held by the Collateral Agent and remaining after payment
in full of all the Secured Claims shall be paid over to the
Pledgor or to whomsoever may be lawfully entitled to
receive such surplus.
4.2. FILINGS. The Pledgor agrees that it shall, at its own
expense, execute and deliver all financing statements necessary to perfect the
Collateral Agent's interest in the Collateral or any assignment or other
document reasonably requested by the Collateral Agent or the Owner Participant
to perfect, protect, enforce, or otherwise give effect to the Collateral Agent's
rights and remedies hereunder.
4.3. ATTORNEY-IN-FACT. The Pledgor hereby irrevocably
appoints, effective and during the continuance of any Event of Default or a
Special Equity Event, the Collateral Agent as the Pledgor's attorney-in-fact,
with full authority in the place and stead of the Pledgor and in the name of the
Pledgor or otherwise, from time to time, to take any action and to execute any
instrument that the Collateral Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation:
(a) to ask for, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for monies due
and to become due under or in respect of any of the Collateral,
(b) to receive, endorse and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (a)
above, and
(c) to file any claims or take any action or institute any
proceedings that the Collateral Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce
compliance with the terms and conditions of any Collateral.
4.4. APPOINTMENT OF COLLATERAL AGENT; THE COLLATERAL AGENT'S
DUTIES. The Owner Participant and the Facility Owner each hereby appoints
Wilmington Trust Company to act as its Collateral Agent hereunder. The powers
conferred on the Collateral Agent hereunder are solely to protect its interest
in the Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the safe custody of the Collateral in its possession and the
accounting for monies actually received by it hereunder, the Collateral Agent
shall have no duty as to the Collateral or other matters relative to the
Collateral, whether or not the Collateral Agent has or is deemed to have
knowledge of such matters, or as to the taking of any necessary steps to
preserve rights against any parties or any other rights pertaining to the
Collateral; PROVIDED, HOWEVER, that, if delivery or presentment of the
Collateral to any other Person is required in connection with any distribution
in respect of the Collateral, the Collateral Agent shall, at the Pledgor's
expense, cooperate to effect such delivery.
The liability of the Collateral Agent to transfer or to apply
funds for the payment of Secured Claims shall be limited to the proceeds of the
Collateral and the cash balances from time to
4
<PAGE>
time received by the Collateral Agent in respect of the Collateral, and the
Collateral Agent shall not have any liability whatsoever for any insufficiency
of funds required to pay Secured Claims except to notify the Owner
Participant, the Pledgor and the Facility Owner of such insufficiency.
The Collateral Agent shall never be required to use or to
advance its own funds or otherwise to incur personal financial liability in the
performance of any of its duties or in the exercise of any of its rights and
powers hereunder. The Collateral Agent shall be not be liable for any action
taken or not taken by it in good faith in any exercise of reasonable care and
belief by it to be within the discretion or power conferred upon it by this
Agreement, nor shall the Collateral Agent be responsible for the consequences of
any error or judgment arising out of the exercise of reasonable care in
performing the duties of the Collateral Agent under this Agreement.
The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if such Collateral is accorded treatment equal to that which the
Collateral Agent accords its own property.
4.5. MONTHLY REPORTS. All Collateral delivered to the
Collateral Agent shall be segregated by the Collateral Agent from other assets
of the Collateral Agent, Old Dominion, the Facility Owner and the Owner
Participant or any other Person. The Collateral Agent shall prepare and deliver
to Old Dominion and the Owner Participant by the tenth Business Day of each
month a report specifying the identity and location of all Collateral as of the
end of the month preceding such report.
SECTION 5. RELEASE OF COLLATERAL; REINVESTMENT; DISCHARGE.
5.1. RELEASE OF COLLATERAL. Provided no Payment Default,
Bankruptcy Default or Event of Default under either Operating Agreement shall
have occurred and be continuing and no Special Equity Event shall have occurred
and be continuing, the Collateral Agent agrees that for the purpose of paying
Secured Claims, the Pledgor shall be entitled to receive all amounts of
principal and interest received by the Collateral Agent on the dates and in the
amounts set forth in Schedule 2 hereof. Collateral shall also be released by the
Collateral Agent against delivery by the Pledgor of a replacement Qualifying
Security or Qualifying Securities in full compliance with Section 7.6 of the
Participation Agreement.
5.2. REINVESTMENT. At the written direction of the Pledgor,
the Collateral Agent shall reinvest cash balances, including cash proceeds from
maturing securities and from payments of interest and premiums on securities, if
not needed immediately to pay Secured Claims, in Qualifying Securities that are
stated to mature or that are subject to redemption at the option of the holder
thereof, in a principal amount at least equal to their purchase price, on or
before the dates set forth in Schedule 2 hereof. Any remaining cash balances not
so reinvested shall be held by the Collateral Agent in trust as part of the
Collateral.
5.3. DISCHARGE. Provided that no Payment Default,
Bankruptcy Default or Event of Default under either Operating Agreement shall
have occurred and be continuing and no Special Equity Event shall have occurred
and be continuing, the Collateral Agent agrees that when the Secured
5
<PAGE>
Claims shall have been fully paid and discharged and the Operating Equipment
Agreement and the Operating Foundation Agreement have expired or been
earlier terminated in accordance with their terms, the Collateral Agent,
at the written request and cost of the Pledgor, shall immediately
transfer the Collateral to or at the direction of the Pledgor and confirm in
writing the release of the Collateral of any pledge, Lien and security
interest created pursuant to this Agreement and of all claims that the
Collateral Agent may have hereunder.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
6.1. OWNER. The Pledgor represents and warrants as of the
date hereof that it is the legal and beneficial owner of the Collateral and that
the Collateral is not subject to any pledge, lien or security interest or any
other right of any third party, except as provided by this Agreement.
6.2. RIGHTS IN THE COLLATERAL. The Pledgor represents and
warrants that, assuming that the Collateral Agent maintains possession and
control over the Collateral in accordance with the applicable provisions of the
Uniform Commercial Code, the pledge and assignment of the Collateral and the
grant of a security interest therein under this Agreement vests in the
Collateral Agent a valid and perfected security interest in the Collateral as
contemplated by this Agreement, subject to the provisions of Section 9-306 of
the Uniform Commercial Code.
SECTION 7. COVENANTS OF THE PLEDGOR.
The Pledgor shall not, without the prior written consent of
the Collateral Agent, (a) sell, assign or otherwise dispose of, or grant any
option with respect to, the Collateral or (b) create or permit to exist any
Lien, upon or with respect to the Collateral, except for the Lien created
hereby.
SECTION 8. MISCELLANEOUS.
8.1. AMENDMENTS AND WAIVERS. No term, covenant, agreement or
condition of this Agreement may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto.
8.2. NOTICES. Unless otherwise expressly specified or
permitted by the terms hereof, all communications and notices provided for
herein to a party hereto shall be in writing or by a telecommunications device
capable of creating a written record, and any such notice shall become effective
(a) upon personal delivery thereof, including, without limitation, by overnight
mail or courier service, (b) in the case of notice by United States mail,
certified or registered, postage prepaid, return receipt requested, upon receipt
thereof, or (c) in the case of notice by such a telecommunications device, upon
transmission thereof, provided such transmission is promptly confirmed by either
of the methods set forth in clauses (a) or (b) above, in each case addressed to
such party at its address set
6
<PAGE>
forth below or at such other address as such party may from time to time
designate by written notice to the other parties hereto:
If to the Pledgor:
Old Dominion Electric Cooperative
4201 Dominion Boulevard
Glen Allen, Virginia 23060
Facsimile No.: (804) 747-3742
Telephone No.: (804) 747-0592
Attention: Vice President of Accounting and Finance
If to the Collateral Agent:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Facsimile No.: (302) 651-8882
Telephone No.: (302) 651-1000
Attention: Corporate Trust Administration
with a copy to the Owner Participant:
EPC Corporation
c/o Chrysler Capital Corporation
225 High Ridge Road
Stamford, Connecticut 06905
Facsimile No.: (203) 975-3911
Telephone No.: (203) 975-3500
Attention: President
8.3. SURVIVAL. All warranties, representations, indemnities
and covenants made by either party hereto, herein or in any certificate or other
instrument delivered by either such party or on the behalf of either such party
under this Agreement shall be considered to have been relied upon by the other
party hereto and shall survive the consummation of the transactions contemplated
hereby on the Closing Date regardless of any investigation made by either party
or on behalf of either party.
8.4. SUCCESSORS AND ASSIGNS. (a) This Agreement shall be
binding upon and shall inure to the benefit of, and shall be enforceable by, the
parties hereto and their respective successors and assigns as permitted by and
in accordance with the terms hereof.
7
<PAGE>
(b) Except as expressly provided herein or in any other
Operative Document, the Pledgor may not assign its interests herein without the
consent of the Collateral Agent. Except as expressly provided in the Operative
Documents, the Collateral Agent may not assign its interests herein during the
Term of the Operating Agreements without the consent of the Pledgor.
8.5. BUSINESS DAY. Notwithstanding anything herein to the
contrary, if the date on which any payment is to be made pursuant to this
Agreement is not a Business Day, the payment otherwise payable on such date
shall be payable on the next succeeding Business Day with the same force and
effect as if made on such scheduled date and (provided such payment is made on
such succeeding Business Day) no interest shall accrue on the amount of such
payment from and after such scheduled date to the time of such payment on such
next succeeding Business Day.
8.6. GOVERNING LAW. THIS AGREEMENT SHALL BE IN ALL
RESPECTS GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
8.7. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Agreement shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
8.8. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together only one Agreement.
8.9. HEADINGS. The headings of the sections of this
Agreement are inserted for purposes of convenience only and shall not be
construed to affect the meaning or construction of any of the provisions hereof.
8.10. FURTHER ASSURANCES. Each party hereto will promptly and
duly execute and deliver such further documents to make such further assurances
for and take such further action reasonably requested by any party to whom such
first party is obligated, all as may be reasonably necessary to carry out more
effectively the intent and purpose of this Agreement.
8.11. EFFECTIVENESS OF AGREEMENT. This Agreement has been
dated as of the date first above written for convenience only. This Agreement
shall be effective on the date of execution and delivery by each of the
Collateral Agent and the Pledgor.
8
<PAGE>
IN WITNESS WHEREOF, the Pledgor and the Collateral Agent have
caused this Pledge Agreement to be duly executed and delivered by their
respective officers thereunto duly authorized.
OLD DOMINION ELECTRIC COOPERATIVE,
as Pledgor
By: /s/ DANIEL M. WALKER
------------------------------
Name: Daniel M. Walker
Title: Vice President
Date: July 31, 1996
WILMINGTON TRUST COMPANY,
as Collateral Agent
By: /s/ EMMETT R. HARMON
------------------------------
Name: Emmett R. Harmon
Title: Vice President
Date: July 31, 1996
9
<PAGE>
Agreed, acknowledged and consented to by:
CLOVER UNIT 2 GENERATING TRUST
By: Wilmington Trust Company,
not in its individual capacity
but solely as Owner Trustee
under the Trust Agreement
By: /s/ EMMETT R. HARMON
-------------------------------
Name: Emmett R. Harmon
Title: Vice President
Date: July 31, 1996
EPC CORPORATION
By: /s/ WALTER F. GREENFIELD
-------------------------------
Name: Walter F. Greenfield
Title: Vice President
Date: July 31, 1996
10
<PAGE>
SCHEDULE 1
TO
EQUITY SECURITY PLEDGE AGREEMENT
DESCRIPTION OF COLLATERAL
Cash collateral in the amount of $29,480,263.22 deposited with Wilmington Trust
Company, as collateral agent (account no.: 403520 ref. Generating Trust).
S1-1
<PAGE>
SCHEDULE 2
TO
EQUITY SECURITY PLEDGE AGREEMENT
DATES AND PAYMENTS
1/5/2020 39,288,119.88
4/15/2020 30,038,958.54
6/15/2020 30,038,958.54
9/15/2020 30,038,958.54
12/15/2020 30,038,958.54
S2-1
PAYMENT UNDERTAKING AGREEMENT
Dated as of July 1, 1996
between
OLD DOMINION ELECTRIC COOPERATIVE,
and
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH
CLOVER UNIT 2 GENERATING FACILITY
AND
COMMON FACILITIES
<PAGE>
PAYMENT UNDERTAKING AGREEMENT
This PAYMENT UNDERTAKING AGREEMENT, dated as of July 1, 1996
(this "Agreement"), between OLD DOMINION ELECTRIC COOPERATIVE, a wholesale power
supply cooperative organized under the laws of the Commonwealth of Virginia
(herein together with its successors and assigns, called "Old Dominion"), and
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", New
York Branch (herein in such capacity, together with its successors and assigns,
called the "Bank").
WITNESSETH:
WHEREAS, Old Dominion has entered into the Participation
Agreement referred to below with the Facility Owner; and
WHEREAS, in consideration for the payment by Old Dominion of a
certain amount, the Bank is willing to make certain payments to the Facility
Owner on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the
payment of a fee to the Bank, it is HEREBY AGREED:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Agreement and not otherwise defined
herein shall have the respective meanings specified in Appendix A to the
Participation Agreement, dated as of July 1, 1996, among Old Dominion, Clover
Unit 2 Generating Trust, Wilmington Trust Company (in the capacities set forth
therein), EPC Corporation and Utrecht-America Finance Co.
Where any provision in this Agreement refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person.
"Confirmation Certificate" shall have the meaning ascribed thereto in
Section 6.6 hereof.
"Old Dominion Creditor" means any creditor of Old Dominion, Old
Dominion as debtor in possession, or any trustee, receiver, liquidator,
custodian or other similar official of Old Dominion appointed as such in an
involuntary case, voluntary case or other proceeding seeking liquidation,
reorganization or other similar relief to Old Dominion or its assets.
"Payment Undertaking Payment Date" means any date listed on Schedule A
hereto.
<PAGE>
"Scheduled Payments" means at any time the amounts payable by the Bank
pursuant to Section 3.1 by reference to Schedule A.
"Specified Sum" means $219,407,935.73.
SECTION 2. SPECIFIED SUM.
SECTION 2.1. SPECIFIED SUM. Old Dominion and the Bank hereby
agree that subject to and in consideration for the payment by Old Dominion to
the Bank on the Closing Date of the Specified Sum at such account as the Bank
may specify in payment instructions to Old Dominion on or prior to the Closing
Date, the Bank shall make any and all of the payments required under Section 3
hereof. Old Dominion acknowledges that payment of the Specified Sum is absolute
and unconditional and shall not be refundable to Old Dominion under any
circumstance or for any reason, including, for the reason that Old Dominion is
not required in fact to meet in whole or in part said payment obligations under
the Operating Agreements. Old Dominion agrees that (i) it will not have any
right, title or interest in or to the Specified Sum and upon payment of the
Specified Sum to the Bank, the Specified Sum will cease to be an asset of Old
Dominion and will become an asset solely of the Bank, (ii) such payment of the
Specified Sum will be irrevocable once made and will not be subject to avoidance
or recapture by Old Dominion or any Old Dominion Creditor and (iii) neither Old
Dominion nor any Old Dominion Creditor will be entitled to assert any Lien or
claim, or to exercise remedies, with respect to such payment.
SECTION 3. PAYMENTS.
SECTION 3.1. SCHEDULED PAYMENTS. The Bank, in
consideration for payment by Old Dominion of the Specified Sum, shall make
payments to the Facility Owner or its assignee in the amounts and on the dates
specified on Schedule A hereto.
SECTION 3.2. SPECIAL REPAYMENTS.
(a) Subject to Section 3.6, the Bank shall pay to the Facility
Owner or its assignee on the dates specified in Section 13.1 of the
Participation Agreement an amount equal to the discounted present value
(computed using a discount rate equal to the Series A Loan Rate) on such date of
the unpaid amounts of Scheduled Payments that would thereafter have become
payable under Section 3.1 hereof. The Bank agrees to make the payments required
of it by this Section 3.2 in accordance with Sections 13.1 and 13.2 of the
Participation Agreement in the circumstances contemplated thereby.
(b) Upon payment in full of amounts pursuant to Section
3.2(a), the Bank shall be released from the payment of any future Scheduled
Payments under Section 3.1, PROVIDED, HOWEVER, that if the date of payment
pursuant to Section 3.2(a) is a Payment Undertaking Payment Date, the Bank shall
also pay to the Facility Owner or its assignee the Scheduled Payment payable on
such Payment Undertaking Payment Date.
2
<PAGE>
(c) In consideration for payment by Old Dominion to the Bank
of the Specified Sum, the Bank shall be obligated to make payment under this
Agreement regardless of whether Old Dominion is required to make payments of
Equipment Payments and Foundation Payments under the Operating Agreements.
SECTION 3.3. OVERDUE INTEREST. Any amount payable by the Bank
hereunder which shall not be paid when due shall bear interest at the Overdue
Rate from the due date of such amount until the date of its payment.
SECTION 3.4. NO OTHER PAYMENTS. Except as expressly
provided in this Section 3, the Bank shall have no obligation to make any
payment hereunder.
SECTION 3.5. TIME, PLACE AND METHOD OF MAKING PAYMENTS. All
payments required to be made hereunder shall be made to the Facility Owner or
its assignee in immediately available funds prior to 10:00 A.M., New York City
time, on the date on which such payment is due at the Facility Owner's address
for payments specified on Schedule B hereto (or at such other place as the
Facility Owner or its assignee may designate in writing to the Bank by two
Business Days' notice prior to the date on which such payment is due).
SECTION 3.6. PAYMENT UPON WRITTEN NOTICE. Scheduled payments
under Section 3.1 shall be made by the Bank without further act or notice by any
Person. Other payments hereunder shall be made only upon delivery of a written
notice (given at least two Business Days prior to the payment dates specified in
Section 13.1 of the Participation Agreement) from either of Old Dominion or the
Facility Owner, accompanied by an Officer's Certificate of either such Person
stating that the circumstances requiring such payment hereunder have occurred
and including a sufficient description of such circumstances as shall
satisfactorily evidence the requirements of the subject payment to be made
hereunder.
SECTION 3.7. USE OF PAYMENTS. It is understood and agreed that
the Bank will have no responsibility or obligation with respect to the
applications of monies upon their payment to the Person entitled thereto
pursuant to the provisions hereof.
SECTION 3.8. BUSINESS DAY CONVENTION. Unless otherwise
specified herein, any relevant date for a payment to be made by the Bank that
would otherwise fall on a day that is not a Business Day will be made on the
first succeeding day that is a Business Day, without additional interest on such
payment.
3
<PAGE>
SECTION 4. REPRESENTATIONS OF THE BANK.
The Bank represents and warrants that:
(a) Organization. It has full power and authority to conduct
its business as presently conducted, to own or hold under lease its properties
and to execute, deliver and perform this Agreement.
(b) Due Authorization. Its execution, delivery and performance
of this Agreement have been duly authorized by all necessary action on its part
and do not require any stockholder approval, or any approval or consent of, or
notice to, any trustee or holder of any indebtedness or obligation of the Bank.
(c) Legal, Valid and Binding Obligations. This Agreement has
been duly executed and delivered by it and constitutes its legal, valid and
binding obligation enforceable against it in accordance with its terms except as
such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, and other similar laws affecting the rights of creditors generally
and by general principles of equity regardless of whether enforcement is
pursuant to a proceeding in equity or at law.
SECTION 5. PLEDGE AND RE-PLEDGE.
The parties acknowledge that Old Dominion has assigned and pledged any
right, title and interest it may have in this Agreement to the Facility Owner
pursuant to the Payment Undertaking Pledge Agreement to secure its obligations
under the Operating Agreements and that the Facility Owner will pledge its right
hereunder and repledge its rights under the Payment Undertaking Pledge Agreement
to the Agent on behalf and for the benefit of the Series A Lender under the Loan
Agreement as security for the Facility Owner's obligations under the Series A
Loan Certificate. The Bank hereby consents to such pledge and repledge.
SECTION 6. MISCELLANEOUS.
SECTION 6.1. RELEASE OF BANK. Any payment in accordance with the
provisions hereof by the Bank to the Facility Owner or the Agent on behalf and
for the benefit of the Series A Lender as its assignee shall release the Bank
from any further liability hereunder to the Facility Owner in respect of such
payment.
SECTION 6.2. NOTICES. All notices, demand or other communications
hereunder shall be given or made in writing and shall be delivered personally,
or sent by certified or registered mail or overnight delivery service, return
receipt requested, postage prepaid, or telecopy to the party to whom they are
directed at the respective addresses therefor set forth in Section 13.4 of the
Participant Agreement, or at such other address as may be designated
4
<PAGE>
by notice from such party to all other parties. Any notice, demand or other
communication given in a manner prescribed in this Section 6.2 shall be deemed
to have been delivered on receipt.
SECTION 6.3. AMENDMENT AND WAIVER. Neither this Agreement, or any
provision hereof may be changed, waived, discharged or terminated orally, but
only by a writing signed by the Bank and Old Dominion and, if directly or
indirectly relevant to the Bank's obligations or the rights of the Facility
Owner hereunder, the Facility Owner (and, if rights under this Agreement shall
have been assigned, pledged or repledged, by the assignee thereof).
SECTION 6.4. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
including all matters of construction, validity and performance.
SECTION 6.5. INTERPRETATION. The headings of the sections hereof are
for convenience of reference only and shall not affect the meaning or
construction of any provision hereof.
SECTION 6.6. CHATTEL PAPER. To the extent, if any, that this Agreement
constitutes chattel paper (as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction), no security interest in this
Agreement may be created through the transfer or possession of any counterpart
hereof other than the original counterpart, which shall be identified as the
counterpart containing the receipt therefor executed by the Agent on the
signature page thereof.
SECTION 6.7. NO SET-OFF. All payments to be made by the Bank hereunder
shall be paid without deduction, set-off or counterclaim of any kind whatsoever
except that if any taxes are required under Applicable Law to be deducted or
withheld from any payment hereunder, the Bank shall duly deduct or withhold such
tax and such payment hereunder shall be made net of any such deduction or
withholding.
SECTION 6.8. THIRD-PARTY BENEFICIARY. The obligations of the Bank
hereunder are intended to be for the benefit of the Facility Owner which shall
be a third-party beneficiary hereof.
SECTION 6.9. COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 6.10. SEVERABILITY. Any provision of this 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.
5
<PAGE>
SECTION 6.11. SURVIVAL. All warranties, representations, indemnities
and covenants made by either party hereto, herein or in any certificate or other
instrument delivered by either such party or on the behalf of such party under
this Agreement, shall be considered to have been relied upon by the other party
hereto and shall survive the consummation of the transactions contemplated
hereby on the Closing Date regardless of any investigation made by either party
or on behalf of such party.
SECTION 6.12. FURTHER ASSURANCES. Each party hereto will promptly and
duly execute and deliver such further documents to make such further assurances
for and take such further action reasonably requested by any party to whom such
first party is obligated, all as may be reasonably necessary to carry out more
effectively the intent and purpose of this Agreement and the other Operative
Documents.
SECTION 6.13. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. Each of
the parties hereto (i) hereby irrevocably submits to the nonexclusive
jurisdiction of the Supreme Court of the State of New York, New York County
(without prejudice to the rights of any party to remove to the United States
District Court for the Southern District of New York) and to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York, for the purposes of any suit, action or other proceeding arising out
of this Agreement, or the subject matter hereof or any of the transactions
contemplated hereby or thereby brought by any of the parties hereto or their
successors or assigns, (ii) hereby irrevocably agrees that all claims in respect
of such action or proceeding may be heard and determined in such New York State
court or, to the fullest extent permitted by Applicable Law, in such Federal
court, and (iii) to the extent permitted by Applicable Law, hereby irrevocably
waives, and agrees not to assert, by way of motion, as a defense, or otherwise,
in any such suit, action or proceeding any claim that it is not personally
subject to the jurisdiction of the above-named courts, that the suit, action or
proceeding is improper or that this Agreement, or the subject matter hereof may
not be enforced in or by such court. A final judgment obtained in respect of any
action, suit or proceeding referred to in this Section 6.13 shall be conclusive
and may be enforced in other jurisdictions by suit or judgment or in any manner
as provided by Applicable Law. Each of the parties hereto hereby consents to
service of process by registered mail, Federal Express, DHL or similar courier
at the address to which notices to are to be given, it being agreed that service
in such manner shall constitute valid service upon such party or its respective
successors or assigns in connection with any such action or proceeding only;
PROVIDED, HOWEVER, that nothing in this Section 6.13 shall affect the right of
any of such parties or their respective successors or assigns to serve legal
process in any other manner permitted by Applicable Law or affect the right of
any of such parties or its respective property in the courts of other
jurisdictions.
SECTION 6.14. U. S. DOLLARS. This Agreement relates to an
international financing transaction in accordance with which the specification
of U.S. Dollars is of the essence, and U.S. Dollars shall be the currency of
account in the case of all obligations under this Agreement.
6
<PAGE>
SECTION 6.15. EFFECTIVENESS OF AGREEMENT. This Agreement has been dated
as of the date first above written for convenience only. This Agreement shall be
effective on the date of execution and delivery by Old Dominion and the Bank.
7
<PAGE>
IN WITNESS WHEREOF, each of Old Dominion and the Bank has caused this
Agreement to be duly executed and delivered by their respective officers thereto
duly authorized.
OLD DOMINION ELECTRIC COOPERATIVE
By: /s/ DANIEL M. WALKER
----------------------------------
Name: Daniel M. Walker
Title: Vice President
Date: July 31, 1996
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND",
NEW YORK BRANCH
By: /s/ JOSEPH A. INSINGA
----------------------------------
Name: Joseph A. Insinga
Title: Vice President
Date: July 31, 1996
By: /s/ CHRIS G. KORTLANDT
----------------------------------
Name: Chris G. Kortlandt
Title: Vice President
Date: July 31, 1996
<PAGE>
CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS AGREEMENT AND
THE PAYMENT OBLIGATIONS OF THE BANK HAVE BEEN ASSIGNED, PLEDGED AND/OR REPLEDGED
TO AND ARE SUBJECT TO A FIRST PRIORITY SECURITY INTEREST IN FAVOR OF THE
UNDERSIGNED, AS AGENT ON BEHALF AND FOR THE BENEFIT OF THE SERIES A LENDER,
UNDER THE LOAN AGREEMENT DATED AS OF JULY 1, 1996. THIS AGREEMENT HAS BEEN
EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE ORIGINAL COUNTERPART CONTAINS THE
RECEIPT THEREFOR EXECUTED BY THE UNDERSIGNED ON THE SIGNATURE PAGE THEREOF. SEE
SECTION 6.6 HEREOF FOR INFORMATION CONCERNING THE RIGHTS OF THE HOLDERS OF THE
VARIOUS COUNTERPARTS THEREOF.
Receipt of this original counterpart of this Agreement is hereby
acknowledged on this 31st day of July, 1996.
UTRECHT-AMERICA FINANCE CO.,
as Agent
By: _______________________
Name:
Title:
By: _______________________
Name:
Title:
<PAGE>
SCHEDULE A
TO
PAYMENT UNDERTAKING
AGREEMENT
PAYMENT UNDERTAKING
PAYMENT DATE PAYMENT AMOUNT
------------ --------------
7/31/96 0.00
1/5/97 7,343,093.21
7/5/97 2,160,000.00
1/5/98 13,295,387.43
7/5/98 2,160,000.00
1/5/99 13,187,025.52
7/5/99 2,160,000.00
1/5/00 13,189,488.29
7/5/00 2,160,000.00
1/5/01 13,189,432.32
7/5/01 2,160,000.00
1/5/02 13,189,433.59
7/5/02 2,160,000.00
1/5/03 13,189,433.56
7/5/03 2,160,000.00
1/5/04 13,189,433.56
7/5/04 2,160,000.00
1/5/05 26,133,768.60
7/5/05 0.00
1/5/06 15,349,433.56
7/5/06 2,160,000.00
1/5/07 13,189,433.56
7/5/07 2,160,000.00
1/5/08 14,894,926.18
7/5/08 2,160,000.00
1/5/09 16,600,418.79
7/5/09 2,160,000.00
1/5/10 16,600,418.79
7/5/10 2,160,000.00
1/5/11 16,600,418.79
7/5/11 2,160,000.00
1/5/12 16,600,418.79
7/5/12 2,160,000.00
1/5/13 16,600,418.79
7/5/13 2,160,000.00
1/5/14 16,600,418.79
7/5/14 2,160,000.00
1/5/15 16,600,418.79
7/5/15 2,160,000.00
<PAGE>
1/5/16 16,600,418.79
7/5/16 2,160,000.00
1/5/17 16,600,418.79
7/5/17 2,160,000.00
1/5/18 16,600,418.79
7/5/18 2,160,000.00
1/5/19 10,374,454.89
7/5/19 8,527,463.09
1/4/20 269,490,240.00
<PAGE>
SCHEDULE B
TO
PAYMENT UNDERTAKING AGREEMENT
ADDRESS OF FACILITY OWNER AND/OR ITS
ASSIGNEES FOR PAYMENT
Facility Owner
Clover Unit 2 Generating Trust
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Assignee for Payment
Utrecht-America Finance Co.
c/o Rabobank Nederland
245 Park Avenue
New York, New York 10167-0062
11
PAYMENT UNDERTAKING PLEDGE AGREEMENT
Dated as of July 1, 1996
between
OLD DOMINION ELECTRIC COOPERATIVE,
as Payment Undertaking Pledgor
and
CLOVER UNIT 2 GENERATING TRUST,
as Payment Undertaking Pledgee
CLOVER UNIT 2 GENERATING FACILITY
AND
COMMON FACILITIES
<PAGE>
PAYMENT UNDERTAKING PLEDGE AGREEMENT
This PAYMENT UNDERTAKING PLEDGE AGREEMENT, dated as of July 1,
1996 (this "Agreement"), between OLD DOMINION ELECTRIC COOPERATIVE, a wholesale
power supply cooperative, organized under the laws of the Commonwealth of
Virginia, as pledgor (the "Payment Undertaking Pledgor"), and CLOVER UNIT 2
GENERATING TRUST, a Delaware business trust created pursuant to the Trust
Agreement, dated as of July 1, 1996, between EPC Corporation and Wilmington
Trust Company (the "Payment Undertaking Pledgee").
WHEREAS, the Payment Undertaking Pledgor, the Payment
Undertaking Pledgee, EPC Corporation, Wilmington Trust Company (in the
capacities set forth therein) and Utrecht-America Finance Co., have entered into
a Participation Agreement dated as of July 1, 1996 (the "Participation
Agreement");
WHEREAS, the Payment Undertaking Pledgor and the Payment
Undertaking Pledgee have entered into the Operating Equipment Agreement and the
Operating Foundation Agreement, each of even date herewith; and
WHEREAS, the Payment Undertaking Pledgor has entered into a
Payment Undertaking Agreement with Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch (the
"Bank"), dated as of July 1, 1996 (the "Payment Undertaking Agreement"), the
Payment Undertaking Pledgor's rights, if any, in which, the Payment Undertaking
Pledgor is willing to pledge to the Payment Undertaking Pledgee to secure its
obligations under the Operating Equipment Agreement and the Operating Foundation
Agreement.
NOW, THEREFORE, in consideration of the mutual agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINED TERMS.
Capitalized terms used in this Agreement and not otherwise defined
herein shall have the respective meanings specified in Appendix A to the
Participation Agreement.
<PAGE>
SECTION 2. PLEDGE.
SECTION 2.1 PLEDGE OF PAYMENT UNDERTAKING AGREEMENT. The Payment
Undertaking Pledgor hereby transfers, assigns, pledges and grants a first
priority security interest in each and all of its right, title and interest, if
any, in the Payment Undertaking Agreement (including, without limitation, the
right of the Payment Undertaking Pledgor to receive all amounts payable under
the Payment Undertaking Agreement in accordance therewith and the Payment
Instruction, to give and receive any notice, consent, waiver or approval or
take any other action under the Payment Undertaking Agreement), all
instruments or certificates evidencing the Payment Undertaking Agreement and all
interest, cash, instruments or other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for, any or all
of the Payment Undertaking Agreement and all proceeds of the Payment Undertaking
Agreement to the Payment Undertaking Pledgee for its benefit, and the Payment
Undertaking Pledgee hereby accepts such transfer, assignment, pledge and
security interest.
SECTION 3. NETHERLANDS LAW.
To the extent that a court would hold that Netherlands law is
applicable to the assignment, transfer and pledge of the right, title and
interest, if any, of the Payment Undertaking Pledgor in the Payment Undertaking
Agreement or to the creation of another security right on the Payment
Undertaking Agreement and that such assignment, transfer, pledge or other
security right is invalid and/or unenforceable in The Netherlands, the Payment
Undertaking Pledgor hereby creates a right of pledge ("vestigt een pandrecht")
in favor of the Payment Undertaking Pledgee, pursuant to articles 3:94,
paragraph 1 and 3:236, paragraph 2 of the Netherlands Civil Code on the rights
of the Payment Undertaking Pledgor against the Bank, as such rights may exist or
come to exist hereafter against the Bank pursuant to or under the Payment
Undertaking Agreement, as security for the Secured Amounts, which right of
pledge the Payment Undertaking Pledgee hereby accepts.
In accordance with article 3:242 of the Netherlands Civil Code, the
Payment Undertaking Pledgee is hereby irrevocably authorized to repledge
("herverpanden") the rights of the Payment Undertaking Pledgor pursuant to or
under the Payment Undertaking Agreement in favor of Utrecht-America Finance Co.,
as Agent on behalf and for the benefit of the Series A Lender under the Loan
Agreement, to secure the Payment Undertaking Pledgee's obligations under the
Series A Loan Certificate.
2
<PAGE>
SECTION 4. SECURED AMOUNTS.
The purpose of this pledge is to secure the Payment Undertaking
Pledgor's obligation (whether now or hereafter existing) under the Operating
Equipment Agreement and the Operating Foundation Agreement to pay Basic
Payments, Foundation Basic Payments and Termination Value or amounts computed by
reference to Termination Value. All of the foregoing obligations shall be
referred to as "Secured Amounts."
Without limiting the generality of the foregoing, this Agreement
secures the payment of all amounts that constitute part of the Secured Amounts
and would be payable to the Payment Undertaking Pledgee under the Operating
Equipment Agreement and the Operating Foundation Agreement but for the fact that
they are unenforceable or not allowable due to (a) the existence of a
bankruptcy, insolvency, reorganization, arrangement or moratorium involving the
Payment Undertaking Pledgor or (b) other laws relating to or effecting the
enforcement of creditor's rights generally against the Payment Undertaking
Pledgor.
SECTION 5 REMEDIES.
SECTION 5.1 RIGHTS OF THE PAYMENT UNDERTAKING PLEDGEE. Upon the
happening and during the occurrence of any Event of Default under the Operating
Equipment Agreement or the Operating Foundation Agreement, the Payment
Undertaking Pledgee may (in addition to any other actions permitted under the
other Operative Documents or by statute or at law or in equity) exercise any
rights or remedies granted hereunder. The Payment Undertaking Pledgee may
enforce the right of pledge created hereby to the fullest extent possible in
accordance with, and shall be entitled to all rights, remedies and benefits
afforded to pledgees under, the laws of the State of New York. To the extent
necessary to realize the benefit of the pledge of the Payment Undertaking
Agreement effected by Section 4, the Payment Undertaking Pledgor authorizes the
Payment Undertaking Pledgee to exercise any of its rights under the Payment
Undertaking Agreement.
SECTION 5.2 FILINGS. The Payment Undertaking Pledgor agrees that it
shall, at its own expense, execute and deliver all financing statements
necessary to perfect the Payment Undertaking Pledgee's or any assignee's
interest in the Payment Undertaking Agreement or any assignment or other
document reasonably requested by the Payment Undertaking Pledgee or the Holder
of the Series A Loan Certificate to perfect, protect, enforce, or otherwise give
effect to the Payment Undertaking Pledgee's rights and remedies hereunder.
SECTION 5.3 ATTORNEY-IN-FACT. If the Payment Undertaking Pledgor is
unable or unwilling to sign such assignments, financing statements or other
documents and to file financing statements or other public notices or recording
with the appropriate authorities, as and when reasonably requested by counsel to
the Payment Undertaking Pledgee or by counsel to the Holder of the Series A Loan
Certificate, the Payment Undertaking Pledgor hereby authorizes the Payment
3
<PAGE>
Undertaking Pledgee to sign as the Payment Undertaking Pledgor's true and lawful
agent and attorney-in-fact any such assignments, financing statement or other
documents and to make any such filings.
SECTION 5.4 THE PAYMENT UNDERTAKING PLEDGEE'S DUTIES. The powers
conferred on the Payment Undertaking Pledgee hereunder are solely to protect its
interest in the Payment Undertaking Agreement and shall not impose any duty upon
it to exercise any such powers. Except for the accounting for monies actually
received by it hereunder, the Payment Undertaking Pledgee shall have no duty as
to the Payment Undertaking Agreement or other matters relative to the Payment
Undertaking Agreement, whether or not the Payment Undertaking Pledgee has or is
deemed to have knowledge of such matters, or as to the taking of any necessary
steps to preserve rights against any parties or any other rights pertaining to
the Payment Undertaking Agreement.
SECTION 6. DISCHARGE.
The Payment Undertaking Pledgee agrees that when the Secured Amounts
shall have been fully paid and discharged, the Payment Undertaking Pledgee, at
the written request and cost of the Payment Undertaking Pledgor, shall
immediately confirm the release of the Payment Undertaking Agreement from any
Lien created pursuant to this Agreement and of all claims that the Payment
Undertaking Pledgee may have hereunder.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
SECTION 7.1 UNLIMITED HOLDER. The Payment Undertaking Pledgor
represents and warrants that it is the legal and beneficial owner of the Payment
Undertaking Agreement and that the Payment Undertaking Agreement is not subject
to any Lien or any other right of any third party, except as provided by the
Operative Documents.
SECTION 7.2 RIGHTS IN THE PAYMENT UNDERTAKING AGREEMENT. The Payment
Undertaking Pledgor represents and warrants that the pledge of the Payment
Undertaking Agreement under this Agreement vests in the Payment Undertaking
Pledgee a valid first priority security interest in the Payment Undertaking
Agreement, as contemplated by this Agreement, subject to the provisions, if
applicable, of Section 9-306 of the Uniform Commercial Code as in effect in New
York.
4
<PAGE>
SECTION 8. COVENANT OF THE PAYMENT UNDERTAKING PLEDGOR.
The Payment Undertaking Pledgor shall not, without the prior written
consent of the Payment Undertaking Pledgee (a) sell, assign or otherwise dispose
of, or grant any option with respect to, the Payment Undertaking Agreement or
(b) create or permit any Lien upon or with respect to the Payment Undertaking
Agreement, except for the pledge created hereby and the Loan Agreement.
SECTION 9. MISCELLANEOUS.
SECTION 9.1. AMENDMENTS AND WAIVERS. No term, covenant, agreement or
condition of this Agreement may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by the
party against whom enforcement of such change is sought.
SECTION 9.2. NOTICES. Unless otherwise expressly specified or permitted
by the terms hereof, all communications and notices provided for herein to a
party hereto shall be in writing or by a telecommunications device capable of
creating a written record, and any such notice shall become effective (a) upon
personal delivery thereof, including, without limitation, by overnight mail or
courier service, (b) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt
thereof, or (c) in the case of notice by such a telecommunications device,
upon transmission thereof, provided such transmission is promptly confirmed by
either of the methods set forth in clauses (a) or (b) above, in each case
addressed to such party at its address set forth below or at such other
address as such party may from time to time designate by written notice to
the other parties hereto:
If to the Payment Undertaking Pledgor:
Old Dominion Electric Cooperative
4201 Dominion Boulevard
Glen Allen, Virginia 23060
Facsimile No.: (804) 747-3742
Telephone No.: (804) 747-0592
Attention: Vice President of Accounting and Finance
If to the Payment Undertaking Pledgee:
Clover Unit 2 Generating Trust
c/o Wilmington Trust Company
5
<PAGE>
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Facsimile No.: (302) 651-8882
Telephone No.: (302) 651-1000
Attention: Corporate Trust Administration
with copies to Utrecht-America:
Utrecht-America Finance Co.
c/o Rabobank Nederland
245 Park Avenue
New York, New York 10167
Facsimile No.: (212) 922-0969
Telephone No.: (212) 916-7800
Attention: Corporate Finance Department
and General Counsel's Office
SECTION 9.3 SURVIVAL. All warranties, representations, indemnities and
covenants made by either party hereto, herein or in any certificate or other
instrument delivered by either such party or on the behalf of either such
party under this Payment Undertaking Pledge Agreement shall be considered to
have been relied upon by the other party hereto and shall survive the
consummation of the transactions contemplated hereby on the Closing Date
regardless of any investigation made by either party or on behalf of either
party.
SECTION 9.4 SUCCESSORS AND ASSIGNS.
(a) This Payment Undertaking Pledge Agreement shall be binding upon and
shall inure to the benefit of, and shall be enforceable by, the parties hereto
and their respective successors and assigns as permitted by and in accordance
with the terms hereof.
(b) Except as expressly provided herein or in any other Operative
Document, the Payment Undertaking Pledgor may not assign its interests herein
without the consent of the Payment Undertaking Pledgee. Except as expressly
provided in the Operative Documents, the Payment Undertaking Pledgee may not
assign its interests herein during the Term of the Operating Equipment Agreement
without the consent of the Payment Undertaking Pledgor other than pursuant to
the Loan Agreement.
SECTION 9.5. BUSINESS DAY. Notwithstanding anything herein to the
contrary, if the date on which any payment is to be made pursuant to this
Agreement is not a Business Day, the payment otherwise payable on such date
shall be payable on the next succeeding Business Day with the
6
<PAGE>
same force and effect as if made on such scheduled date and (provided such
payment is made on such succeeding Business Day) no interest shall accrue on
the amount of such payment from and after such scheduled date to the time of
such payment on such next succeeding Business Day.
SECTION 9.6. GOVERNING LAW. THIS AGREEMENT SHALL BE IN ALL RESPECTS
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
SECTION 9.7. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Agreement shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
SECTION 9.8. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together only one Agreement.
SECTION 9.9. HEADINGS. The headings of the sections of this Agreement
are inserted for purposes of convenience only and shall not be construed to
affect the meaning or construction of any of the provisions hereof.
SECTION 9.10. FURTHER ASSURANCES. Each party hereto will promptly and
duly execute and deliver such further documents to make such further assurances
for and take such further action reasonably requested by any party to whom such
first party is obligated, all as may be reasonably necessary to carry out more
effectively the intent and purpose of this Agreement.
SECTION 9.11. EFFECTIVENESS OF AGREEMENT. This Agreement has been dated
as of the date first above written for convenience only. This Agreement shall be
effective on the date of execution and delivery by each of the Payment
Undertaking Pledgee and the Payment Undertaking Pledgor.
SECTION 9.12 LIMITATION OF LIABILITY. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is executed and delivered
by Wilmington Trust Company, not individually or personally but solely as
trustee of Clover Unit 2 Generating Trust (the "Trust") under the Trust
Agreement, in the exercise of the powers and authority conferred and vested in
it, (b) each of the representations, undertakings and agreements herein made on
the part of the Trust is made and intended not as personal representations,
undertakings and agreements by Wilmington Trust Company but is made and intended
for the purpose for binding only the Trust, (c) nothing herein contained shall
be construed as creating any liability on Wilmington Trust Company, individually
or personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties hereto
or by any Person claiming by, through or under the parties hereto and (d) under
no circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Trust or be liable for the
7
<PAGE>
breach or failure of any obligation, representation, warranty or covenant
made or undertaken by the Trust under this Agreement or any other Operative
Documents.
8
<PAGE>
IN WITNESS WHEREOF, the Payment Undertaking Pledgor and the
Payment Undertaking Pledgee have caused this Payment Undertaking Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized.
OLD DOMINION ELECTRIC COOPERATIVE,
as Payment Undertaking Pledgor
By: /s/ DANIEL M. WALKER
--------------------------------
Name: Daniel M. Walker
Title: Vice President
Date: July 31, 1996
CLOVER UNIT 2 GENERATING TRUST,
as Payment Undertaking Pledgee
By: Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the
Trust Agreement
By: /s/ EMMETT R. HARMON
--------------------------------
Name: Emmett R. Harmon
Title: Vice President
Date: July 31, 1996
Acknowledged and consented to by:
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND", NEW YORK BRANCH,
as the Bank referred to herein
By: /s/ JOSEPH A. INSINGA
------------------------------
Name: Joseph A. Insinga
Title: Vice President
Date: July 31, 1996
By: /s/ CHRIS G. KORTLANDT
------------------------------
Name: Chris G. Kortlandt
Title: Vice President
Date: July 31, 1996
9
SUBORDINATED DEED OF TRUST
AND SECURITY AGREEMENT
Dated as of July 1, 1996
among
OLD DOMINION ELECTRIC COOPERATIVE,
RICHARD W. GREGORY, TRUSTEE
of Henrico County, Virginia
and
MICHAEL P. DRZAL, TRUSTEE
of Henrico County, Virginia
Clover Unit 2 Generating Facility
and
Common Facilities
<PAGE>
SUBORDINATED DEED OF TRUST
AND SECURITY AGREEMENT
This SUBORDINATED DEED OF TRUST AND SECURITY AGREEMENT (this
"Subordinated Deed of Trust") dated as of July 1, 1996, among OLD DOMINION
ELECTRIC COOPERATIVE, a wholesale power supply cooperative organized and
existing under the laws of the Commonwealth of Virginia ("Grantor"), Richard W.
GREGORY of Henrico County, Virginia, and Michael P. DRZAL of Henrico County,
Virginia, as Subordinated Trustees (together, "Subordinated Trustees").
WHEREAS, capitalized terms used herein and not otherwise defined shall
have the meanings given them in Appendix A - Definitions which is attached
hereto as part hereof;
WHEREAS, the Clover Real Estate is more particularly described in
Schedule 1 attached hereto and is comprised of, among other things, the Unit 2
Site described in Schedule 2 attached hereto;
WHEREAS, a copy of the Clover Power Station Plat is recorded in the
Halifax Clerk's Office in Plat Book 50, page 18, as corrected in Plat Book __,
page __;
WHEREAS, Grantor and Virginia Power own the Clover Real Estate as
tenants-in-common;
WHEREAS, by the Clover Agreements, Grantor and Virginia Power
established their respective rights and obligations as tenants-in-common of the
Clover Real Estate and of all improvements thereafter to be constructed, and all
personal property thereafter to be situated, on the Clover Real Estate. Such
improvements and personal property held by Grantor and Virginia Power as
tenants-in-common include (a) the Unit 1 Foundation constructed on the Unit 1
Site, (b) the Unit 2 Foundation constructed on the Unit 2 Site, (c) the Common
Facilities Foundation constructed on the Common Facilities Site, (d) the Unit 1
Equipment situated on the Unit 1 Site, (e) the Unit 2 Equipment situated on the
Unit 2 Site, and (f) the Common Facilities Equipment situated on the Common
Facilities Site;
WHEREAS, as tenants-in-common of such real and personal property, each
of Grantor and Virginia Power holds a 50% undivided interest in such real and
personal property, including the right to nonexclusive possession of all such
real and personal property, subject to (a) in the case of all such real and
personal property, the rights of the other to nonexclusive possession and the
terms and conditions of the Clover Agreements, (b) in the case of the Pollution
Control Assets, the rights, terms and conditions described above in clause (a)
and the rights of the Pollution Control Assets Facility Owner, and (c) in the
case of the Common Facilities, the Unit 1 Site, the Unit 1 Foundation and the
Unit 1 Equipment, the rights, terms and conditions described above in clause (a)
and the rights of the Unit 1 Parties;
<PAGE>
WHEREAS, by the Ground Lease and Sublease, Grantor is leasing the
Ground Interest to the Facility Owner, and the Facility Owner simultaneously has
subleased the Ground Interest back to Grantor, upon the terms and conditions of
the Ground Lease and Sublease;
WHEREAS, Grantor has conveyed to the Facility Owner for a term of years
the use and possession of (a) the Foundation Interest by the Head Foundation
Agreement and (b) the Equipment Interest by the Head Equipment Agreement;
WHEREAS, by the Operating Foundation Agreement, the Facility Owner has
conveyed use and possession of the Foundation Interest back to Grantor for a
term of years which shall end prior to the expiration of the term of the Head
Foundation Agreement;
WHEREAS, by the Operating Equipment Agreement, the Facility Owner has
conveyed use and possession of the Equipment Interest back to Grantor for a term
of years which shall end prior to the expiration of the term of the Head
Equipment Agreement;
WHEREAS, although Grantor and the Facility Owner intend that the
Foundation Interest at all times and in all respects be and remain personal
property under Virginia law, they have recorded the Head Foundation Agreement
and are recording the Operating Foundation Agreement in the Halifax Clerk's
Office in order to satisfy the conditions of Section 55-96 of the Code of
Virginia 1950, as amended, in the event that the Foundation Interest is deemed
to be real estate or an interest in real estate for purposes of such Section
55-96;
WHEREAS, the Unit 1 Parties and the Unit 2 Parties shall share equally
all of those rights, and shall be subject equally to having all of those
responsibilities undertaken, which are granted to or imposed upon Grantor with
respect to the Common Facilities Site, the Common Facilities Foundation and the
Common Facilities Equipment, as (a) tenant-in-common with Virginia Power of such
property and (b) a party to the Clover Agreements;
WHEREAS, by the Old Dominion Indenture, as amended and supplemented
from time to time, Grantor granted to Crestar Bank, as Trustee, a Lien and
security interest in, among other things, all of Grantor's rights, title and
interest in, to and under the Clover Real Estate and Clover Unit 2;
WHEREAS, pursuant to the Participation Agreement, Grantor has obtained
from AMBAC the Surety Bond to support its Covered Obligations;
WHEREAS, pursuant to the Guaranty Agreement, Grantor has agreed to
reimburse AMBAC for any payments made under the Surety Bond; and
WHEREAS, Grantor has agreed to secure on a subordinated basis the
Secured Obligations (as defined below) by this Subordinated Deed of Trust as
provided below.
NOW, THEREFORE, THIS SUBORDINATED DEED OF TRUST WITNESSETH, that to
secure (a) Old Dominion's obligations to pay the Covered Obligations to the
extent and only to the extent (x) AMBAC is obligated to pay such Covered
Obligations, (y) a timely
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<PAGE>
Demand for Payment is made in accordance with the terms of the Surety Bond, and
(z) AMBAC shall have failed to honor such Demand for Payment, and (b) Old
Dominion's obligations under the AMBAC Guaranty, (items (a) and (b) collectively
referred to hereinafter as the "Secured Obligations"), Grantor does hereby
assign, transfer, grant and convey, with special warranty unto the Subordinated
Trustees, all of Grantor's right, title and interest in Real Property.
PROVIDED, HOWEVER, the foregoing grant and conveyance is, in all
respects, subject, subordinate and inferior in priority, to the following:
(1) the Lien of the Old Dominion Indenture (including, without
limitation, any amendment, supplement, future advance or issuance of additional
indebtedness thereunder);
(2) any indenture, mortgage, deed of trust or similar instrument given
a substitution or replacement of the Old Dominion Indenture;
(3) the Lien of Permitted Encumbrances;
(4) the Lien of the Leasehold Mortgage (including any amendment,
supplement, substitution or replacement thereto);
(5) the Clover Agreements (including any amendment, supplement,
substitution or replacement thereto) and the rights of the parties thereto;
(6) the Clover 1 Documents (including any amendment, supplement,
substitution or replacement thereto) and the rights of the parties thereto
(including, without limitation, respective rights of the parties to quit
enjoyment thereunder);
(7) other than the Subordinated Security Agreement, the other Operative
Documents (including any amendment, supplement, substitution or replacement
thereto) and the rights of the parties thereto (including the respective rights
of the parties to quiet enjoyment thereunder); and
(8) the Pollution Control Assets Lease Documents (including, without
limitation, any amendment, supplement, substitution or replacement thereto) and
the rights of the parties thereto (including, without limitation the respective
rights of the parties to quiet enjoyment thereunder).
The foregoing items 1-8 hereinafter collectively referred to as the "Senior
Documents and Rights."
BUT IN TRUST, NEVERTHELESS, with power of sale, to secure the Secured
Obligations ratably without any such Secured Obligation having priority over any
other Secured Obligation.
3
<PAGE>
UPON CONDITION that until a Subordinated Deed of Trust Event of Default
(as hereinafter defined in Article VI), neither the Subordinated Trustees nor
any beneficiary hereof shall disturb Grantor's quiet possession and use of the
Subordinated Real Property, and Grantor shall have the further right, without
any release from or consent by the Substituted Trustees or any beneficiary
hereof, to (a) grant one or more rights of way and easements over or in respect
of any portion of the Subordinated Real Estate free and clear of the Lien of
this Subordinated Deed of Trust, or (b) lease or convey one or more portions or
parcels of the Subordinated Real Estate free and clear of the Lien of this
Subordinated Deed of Trust; PROVIDED, HOWEVER, that each grant, lease or
conveyance shall be in accordance with the Clover Agreements.
PROVIDED FURTHER Grantor shall have the right to convey, free and clear
of the Lien of this Subordinated Deed of Trust, legal title to the Subordinated
Real Property to a Person in a transaction characterized as a sale (or lease)
and leaseback, or similar transaction, (the "Permitted Transaction") for United
States commercial law purposes; provided, however, Grantor shall assign,
transfer, grant and convey to the Subordinated Trustees a Lien on the leaseback
interest (or similar interest) granted to Grantor in connection with the
Permitted Transaction which shall be subject, subordinate and inferior in
priority to the Senior Documents and Rights.
PROVIDED ALWAYS, that upon the full payment by Grantor of all amounts
then due and payable under the Guaranty Agreement, or upon the termination of
the Guaranty Agreement in accordance with its terms, Subordinated Trustees
shall, at Grantor's sole cost and expense, execute in recordable form a release
and reconveyance of the Subordinated Real Property unto Grantor.
GRANTOR FURTHER COVENANTS AND AGREES as follows:
ARTICLE I
Incorporation of Recitals
The Recitals set forth above are incorporated in this Article I as if
set forth in this Article I in their entirety.
ARTICLE II
Rules of Construction
All references to Articles and Sections herein are to Articles and
Sections of this Subordinated Deed of Trust unless otherwise indicated. The
words "herein," "hereof" and "hereunder," and other words of similar import,
shall refer to this Subordinated Deed of Trust as a whole and not to any
particular Article, Section or Subsection.
4
<PAGE>
ARTICLE III
Security Agreement
Section 3.01 SUBORDINATED DEED OF TRUST CONSTITUTES A SECURITY
AGREEMENT. This Subordinated Deed of Trust constitutes a security agreement
under, and in accordance with, the Uniform Commercial Code of Virginia (the
"Virginia UCC") for the benefit of the Subordinated Secured Parties as secured
parties.
Section 3.02 SECURITY AGREEMENT. Grantor grants to the Subordinated
Secured Parties a security interest in the Subordinated Real Property. This
Subordinated Deed of Trust, in addition to constituting a Lien on real estate,
is a security agreement as to any portion of the Subordinated Property that is
deemed to be personal property and shall support any financing statement showing
the Subordinated Secured Parties' subordinated interest as secured parties with
respect thereto.
ARTICLE IV
Incorporation of Statute
This Subordinated Deed of Trust, unless otherwise specified herein,
shall be construed under and in accordance with, and be deemed to incorporate by
reference, the terms of Section 55-59 through Section 55-60 of the Code of
Virginia 1950, as amended (the "Virginia Code"), as in force and in effect on
the date of this Subordinated Deed of Trust, with the following and further
understandings as in such sections provided:
EXEMPTIONS WAIVED.
SUBJECT TO ALL UPON DEFAULT.
RENEWAL, EXTENSION OR REINSTATEMENT PERMITTED.
5
<PAGE>
ARTICLE V
Any Subordinated Trustee May Act; Substitution of Subordinated Trustees
Any one of Subordinated Trustees hereunder may act at any time upon
designation by the Subordinated Secured Parties. If the Subordinated Secured
Parties, in their sole and absolute discretion, shall desire to have a
substitute trustee or substitute trustees appointed, the Subordinated Secured
Parties are hereby authorized and empowered to appoint, at any time and from
time to time, by an instrument duly executed and acknowledged and filed for
recordation in the Halifax Clerk's Office, a substitute trustee or substitute
trustees, in the name, place and stead of one or more of Subordinated Trustees
initially named herein or subsequently appointed by the Subordinated Secured
Parties, which substitute trustee or trustees shall have all of the rights,
powers and authority, and be charged with all of the duties and
responsibilities, which are conferred or charged upon Subordinated Trustees
initially named herein.
ARTICLE VI
Subordinated Deed of Trust Events of Default
The occurrence of any one or more of the "Subordinated Security
Agreement Events of Default" under Section 3.1 of the Subordinated Security
Agreement shall constitute a Subordinated Deed of Trust Event of Default.
6
<PAGE>
ARTICLE VII
Foreclosure
If (a) a Subordinated Deed of Trust Event of Default shall have
occurred and be continuing, (b) the Subordinated Secured Parties shall have
commenced the exercise of any remedy under Section 3.2 of the Subordinated
Security Agreement, and (c) the conditions precedent described in Article VIII
hereof shall have been satisfied, the Subordinated Secured Parties may, at their
option and in addition to any other rights and remedies the Subordinated Secured
Parties may have at law or in equity, direct Subordinated Trustees to take
possession of all or any portion of the Subordinated Real Property and proceed
to sell the same as a whole or in parts or parcels, at public auction, for cash
or credit, upon any terms Subordinated Trustees shall deem appropriate. Grantor
consents that such sale may be made of the Subordinated Real Property as a whole
or in parcels, all as Subordinated Trustees in their discretion may determine,
and further consents that the sale may be conducted on or off the Subordinated
Real Property. A bidder's deposit of not more than ten percent (10%) of the sale
price may be required (which, as to any Subordinated Secured Party, may be in
the form of a credit against the unpaid Secured Obligations). Before such sale
at public auction is made, there shall first be advertisement of the time, place
and terms of such sale at least once a week for three successive weeks in the
legal notice section of a newspaper published or having a general circulation in
Halifax County, Virginia. Such advertisements shall set forth all matters
required by the Virginia Code. This is the "advertisement required" by this
Subordinated Deed of Trust and no other or different advertisement shall be
necessary. Subordinated Trustees may act hereunder although they, or either or
them, may have been, may now be or may hereafter be attorney or agent of the
Subordinated Secured Parties as to all or any part of the Secured Obligations or
as to any matter of business whatsoever. Any Subordinated Secured Party may
become the purchaser of all or any portion of the Subordinated Property so sold
and no purchaser shall be required to see to the proper application of the
purchase money. Unless otherwise required by law, Subordinated Trustees shall
apply the proceeds of any such sale as follows: first, to discharge the expenses
of executing the trust, including a reasonable commission to Subordinated
Trustees which shall not exceed two and one-half percent (2 1/2%) of the gross
proceeds of sale; second, to discharge all taxes, levies and assessments,
with costs and interest if they have priority over the Lien of this Subordinated
Deed of Trust, including the due pro rata portion thereof for the current year;
third, to discharge equally and ratably the remaining Secured Obligations,
if any, secured by this Subordinated Deed of Trust pursuant to Section 2 of
the Subordinated Security Agreement, and any Liens of record inferior to this
Subordinated Deed of Trust, with lawful interest; and, fourth, the residue of
the proceeds shall be paid to Grantor or its successors or assigns; PROVIDED,
HOWEVER, that as to such residue Subordinated Trustees shall not be bound by
any conveyance, assignment or Lien of or upon Grantor's equity, without
actual notice thereof prior to distribution. If the Subordinated Secured
Parties instruct Subordinated Trustees to proceed to sell all or any portion of
the Subordinated Property in accordance with the procedure set forth above and
such procedure is terminated prior to such sale by Subordinated Trustees, the
Subordinated Secured Parties shall pay a commission to Subordinated Trustees
in an amount which is customarily paid in Virginia as compensation for such
services rendered by Subordinated Trustees, but not exceeding one quarter
percent (1/4%) of the outstanding balance of the Secured Obligations, and
the amount of such commission paid shall be added to the Secured Obligations
and shall earn interest at the Debt Rate. Subordinated Trustees shall have the
right exercisable in their discretion to postpone such sale of the
Subordinated Property and shall advertise the terms of such postponement
as required by law, but not less than once a week for three successive
weeks in the newspaper or newspapers in which the notice of sale had been
published.
8
<PAGE>
ARTICLE VIII
Condition Precedent to Remedies
Until (i) all Subordinated Real Property is released from the Lien of
the Old Dominion Indenture and (ii) all obligations under the Operating
Agreements are paid or discharged in full, the Operating Agreements are
terminated and the Liens of the Loan Agreement and the Leasehold Mortgage are
discharged, the Subordinated Secured Parties shall not (x) exercise any rights
or enforce any remedies or assert any claim with respect to the Subordinated
Property under this Subordinated Deed of Trust or the Subordinated Security
Agreement, (y) seek to foreclose the Liens arising pursuant to this Subordinated
Deed of Trust or the Subordinated Security Agreement or sell the Subordinated
Real Property, or (z) take any action, directly or indirectly, or institute any
proceedings, directly or indirectly, with respect to any of the foregoing.
ARTICLE IX
Modification of Senior Documents and Rights
Grantor and the other parties to the Senior Documents may, without
affecting in any manner the subordination of the Lien of this Subordinated Deed
of Trust to the Senior Documents and Rights, at any time or from time to time
and in their absolute discretion, change the manner, place or terms of payment
of amounts due under the Senior Documents and Rights, or amend, modify or
supplement in any way the Senior Documents and Rights to which they are a party,
or exercise or refrain from exercising any other of their rights pursuant
thereto, all without notice to or consent of Subordinated Trustees or the
Subordinated Secured Parties. At Grantor's request, Subordinated Trustees and
the Subordinated Secured Parties shall join in any document, in form and
substance reasonably satisfactory to them, which confirms such subordination.
9
<PAGE>
ARTICLE X
Control of Remedies
Notwithstanding anything else contained in this Subordinated Deed of
Trust, upon the occurrence and during the continuance of a Subordinated Deed of
Trust Event of Default, AMBAC shall be entitled to control and direct the
enforcement of all rights and remedies granted to the Subordinated Secured
Parties hereunder for the benefit of all Subordinated Secured Parties; PROVIDED,
HOWEVER, that if (a) a Subordinated Obligation is covered under the Surety Bond
and (b) AMBAC fails to pay when due a claim made under the Surety Bond, the
Facility Owner and the Owner Participant shall have the right to appoint a party
to control and direct the enforcement of all rights and remedies under this
Subordinated Deed of Trust.
Subordinated Trustees are entitled to rely on directions given by AMBAC
until they receive written notice from the Subordinated Secured Parties (other
than AMBAC) that the Subordinated Secured Parties have appointed a new party to
control and direct enforcement of rights hereunder.
ARTICLE XI
Waiver of Partition
As permitted by Section 56-90.1 of the Virginia Code, Grantor, on its
behalf and on behalf of its successors and assigns, hereby waives any right,
whether pursuant to statute or common law, to partition the Clover Real Estate,
or any interest therein or portion thereof, and such waiver will continue in
effect until the earlier of (a) termination of the Clover Ownership Agreement
pursuant to Section 16.01 thereof and the Clover Operating Agreement pursuant to
Section 14.01 thereof, in accordance with their respective terms, or (b)
December 31, 2089. Grantor agrees not to commence any action of any kind during
such period seeking any form of partition of the foregoing.
ARTICLE XII
Miscellaneous.
Section 12.1 AMENDMENTS AND WAIVERS. No term, covenant, agreement or
condition of this Subordinated Deed of Trust may be terminated or amended, or
compliance therewith waived (either generally or in a particular instance,
retroactively or prospectively), except by an instrument or instruments in
writing executed by the party against whom enforcement of such change is sought.
10
<PAGE>
Section 12.2 NOTICES. Unless otherwise expressly specified or permitted
by the terms hereof, all communications and notices provided for herein to a
party hereto shall be in writing or by a telecommunications device capable of
creating a written record, and any such notice shall become effective (a) upon
personal delivery thereof, including, without limitation, by overnight mail and
courier service, (b) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt thereof, or
(c) in the case of notice by such a telecommunications device, upon transmission
thereof, provide such transmission is promptly confirmed by either of the
methods set forth in clauses (a) or (b) above, in each case addressed to such
party at its address set forth below or, at such other address as such party may
from time to time designate by written notice to the other parties hereto:
If to Grantor:
Old Dominion Electric Cooperative
P.O. Box 2310
Glen Allen, Virginia 23058-2310
Facsimile No.: (804) 747-3742
Telephone No.: (804) 747-0592
Attention: Vice President of Accounting and Finance
if to the Owner Participant:
EPC Corporation
c/o Chrysler Capital Corporation
225 High Ridge Road
Stamford, Connecticut 06905
Facsimile No.: (203) 975-3911
Telephone No.: (203) 975-3500
Attention: President
If to AMBAC:
AMBAC Indemnity Corporation
One State Street Plaza
New York, New York 10004
Facsimile No.: (212) 344-5297
Telephone No.: (212) 668-0340
Attention: General Counsel
11
<PAGE>
If to the Facility Owner:
Clover Unit 2 Generating Trust
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Facsimile No.: (302) 651-8882
Telephone No.: (302) 651-1000
Attention: Corporate Trust Administration
Section 12.3 SURVIVAL. All warranties, representations, indemnities and
covenants made by any party hereto, herein or in any certificate or other
instrument delivered by either such party or on the behalf of such party under
this Subordinated Deed of Trust, shall be considered to have been relied upon by
the other parties hereto and shall survive the consummation of the transactions
contemplated hereby on the Closing Date regardless of any investigation made by
any such party or on behalf of any such party.
Section 12.4 SUCCESSORS AND ASSIGNS. This Subordinated Deed of Trust
shall be binding upon and shall inure to the benefit of, and shall be
enforceable by, the parties hereto and their respective successors and assigns
as permitted by and in accordance with the terms hereof. Except as expressly
provided herein or in the Subordinated Security Agreement, no party hereto may
assign its interests herein without the consent of the other parties hereto.
Section 12.5 BUSINESS DAY. Notwithstanding anything herein to the
contrary, if the date on which any payment is to be made pursuant to this
Subordinated Deed of Trust is not a Business Day, the payment otherwise payable
on such date shall be payable on the next succeeding Business Day with the same
force and effect as if made on such scheduled date and (PROVIDED such payment is
made on such succeeding Business Day) no interest shall accrue on the amount of
such payment from and after such scheduled date to the time of such payment on
such next succeeding Business Day.
Section 12.6 GOVERNING LAW. THIS SUBORDINATED DEED OF TRUST SHALL IN
ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF VIRGINIA INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
Section 12.7 SEVERABILITY. Whenever possible, each provision of this
Subordinated Deed of Trust shall be interpreted in such manner as to be
effective and valid under Applicable Law, but if any provision hereof shall be
prohibited by or invalid under Applicable Law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions hereof.
12
<PAGE>
Section 12.8 HEADINGS. The headings of the Articles and Sections of
this Subordinated Deed of Trust are inserted for purposes of convenience only
and shall not be construed to affect the meaning or construction of any of the
provisions hereof.
Section 12.9 FURTHER ASSURANCE. Each party hereto will promptly and
duly execute and deliver such further documents to make such further assurances
for and take such further action reasonably requested by any party to whom
Grantor is obligated, all as may be reasonably necessary to carry out more
effectively the intent and purpose of this Subordinated Deed of Trust.
Section 12.10 OTHER ACTIONS BY SUBORDINATED TRUSTEES.
Although the parties hereto intend that the Lien of this Subordinated
Deed of Trust be subject to, subordinate and inferior in priority to the Senior
Documents and Rights without further action or writing by the Subordinated
Trustees or the Subordinated Secured Parties, upon the written request of
Grantor or any other party to an Operative Document, the Subordinated Trustees
shall confirm in writing, in recordable form, that this Subordinated Deed of
Trust is subject to, subordinate and inferior in priority to the Senior
Documents and Rights.
Although the parties intend that Grantor has the right to (a) grant one
or more rights of way and easements over or in respect of any portion of the
Real Property and (b) lease or convey one or more portions or parcels of the
Real Property as provided above without further action or writing by the
Subordinated Trustees or the Subordinated Secured Parties, upon the written
request of Grantor, the Subordinated Trustees shall confirm in writing, in
recordable form, that such grant, lease or conveyance is released from, or
otherwise not subject to, the Lien of this Subordinated Deed of Trust. In
connection with executing such release, the Subordinated Trustees are entitled
to rely on a certificate executed by a Responsible Officer of Grantor stating
that such grant, lease or conveyance is in accordance with the Clover Agreements
and this Subordinated Deed of Trust.
Section 2.11 EFFECTIVENESS. This Subordinated Deed of Trust has
been dated as of the date first above written for convenience only. This
Subordinated Deed of Trust shall be effective on the date of execution of
delivery by the Grantor.
13
<PAGE>
WITNESS the following signature.
OLD DOMINION ELECTRIC COOPERATIVE,
as Grantor
By: /s/ DANIEL M. WALKER
---------------------------------
Name: Daniel M. Walker
Title: Vice President
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this 31 day
July, 1996, by ____________, as ___________________ of Old Dominion
Electric Cooperative, a wholesale power supply cooperative organized and
existing under the laws of the Commonwealth of Virginia on behalf of such
Cooperative.
/s/ SHARON MCKENZIE
----------------------------------
-------------------
Notary Public
My commission expires:______________________________________
[NOTARIAL SEAL]
<PAGE>
APPENDIX A
DEFINITIONS
This Appendix A has been filed separately. See Appendix A to Exhibit 10.46 to
Old Dominion's Form 10-K for the year ended December 31, 1996.
16
<PAGE>
SCHEDULE 1
TO
SUBORDINATED
MORTGAGE
DESCRIPTION OF THE CLOVER REAL ESTATE
All that certain parcel of land belonging, lying and being in the Roanoke
Magisterial district of Halifax County, Virginia and all appurtenances thereto
belonging, and more particularly described as follows:
AND BEING a portion of the same land and appurtenances acquired by Old Dominion
Electric Cooperative ("Old Dominion") as tenant in common with Virginia Electric
and Power Company ("Virginia Power") by deeds which are recorded in the Halifax
Clerk's Office as follows:
Grantors Date of Deed Deed Book Page Number
Clover Project Corp. May 30, 1990 550 465
Kenneth R. Wilborne, et al. October 1, 1990 556 367
William D. Gravitt, et al. July 3, 1991 570 8
William R. Watkins, et al. March 14, 1991 561 353
Walter Lacks, et al. July 24, 1991 569 844
Burlington Industries October 23, 1991 570 13
B. F. Blount, et al. May 22, 1992 579 412
Norfolk Southern Railway June 9, 1992 579 771
Company
LESS AND EXCEPT, however, those certain parcels of land conveyed by Old Dominion
and Virginia Power by deeds which are recorded in the Halifax Clerk's Office as
follows:
Grantees Date of Deed Deed Book Page Number
William D. Gravitt, et al. October 7, 1991 570 10
Commonwealth of Virginia June 23, 1992 580 576
Commonwealth of Virginia December 1, 1994 627 57
Commonwealth of Virginia June 1, 1995 632 255
SUBJECT, however, to all existing exceptions, reservations, easements,
conditions, restrictions, covenants, agreements, limitations and waivers of
record that may apply to the foregoing parcel of land.
A-1
<PAGE>
SCHEDULE 2
TO
SUBORDINATED
MORTGAGE
DESCRIPTION OF THE UNIT 2 SITE
ALL those certain parcels of land lying and being in Roanoke Magisterial
district of Halifax County, Virginia, with all appurtenances thereunto
belonging, being those portions of the Clover Real Estate which are outlined and
marked on the Clover Power Station Plat as Parcel I and Parcel II of the Unit 2
Site.
C-1
SUBORDINATED SECURITY AGREEMENT
Dated as of July 1, 1996
among
OLD DOMINION ELECTRIC COOPERATIVE,
EPC CORPORATION,
AMBAC INDEMNITY CORPORATION
and
CLOVER UNIT 2 GENERATING TRUST
CLOVER UNIT 2 GENERATING FACILITY
AND
COMMON FACILITIES
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
SECTION 1. DEFINITIONS................................................................................... 5
SECTION 2. DISTRIBUTION OF PROCEEDS FROM SALE OF SUBORDINATED
COLLATERAL.................................................................................... 5
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF OLD
DOMINION; EVENTS OF DEFAULT; REMEDIES......................................................... 5
SECTION 3.1. SUBORDINATED SECURITY AGREEMENT EVENT OF DEFAULT....................... 5
SECTION 3.2. OTHER RIGHTS OF SUBORDINATED SECURED PARTIES........................... 5
SECTION 3.3. DELAY OR OMISSION NOT A WAIVER......................................... 6
SECTION 3.4. RESTORATION OF RIGHTS AND REMEDIES..................................... 7
SECTION 4. ATTORNEY-IN-FACT; FINANCING STATEMENTS; CONTROL OF
REMEDIES...................................................................................... 7
SECTION 4.1. SUBORDINATED SECURED PARTIES AS ATTORNEY-IN-FACT....................... 7
SECTION 4.2. CONTROL OF REMEDIES.................................................... 7
SECTION 5. CONDITION PRECEDENT TO REMEDIES............................................................... 8
SECTION 6. MODIFICATION OF SENIOR DOCUMENTS AND RIGHTS................................................... 8
SECTION 7. MISCELLANEOUS................................................................................. 8
SECTION 7.1. TERMINATION OF AGREEMENT; RELEASE OF COMPONENTS........................ 8
SECTION 7.2. NO LEGAL TITLE TO SUBORDINATED COLLATERAL IN
SUBORDINATED SECURED PARTIES.................................................................. 9
SECTION 7.3. NOTICES................................................................ 9
SECTION 7.4. SURVIVAL............................................................... 10
SECTION 7.5. SUCCESSORS AND ASSIGNS................................................. 10
SECTION 7.6. BUSINESS DAY........................................................... 11
SECTION 7.7. GOVERNING LAW.......................................................... 11
SECTION 7.8. SEVERABILITY........................................................... 11
SECTION 7.9. COUNTERPARTS........................................................... 11
SECTION 7.10. HEADINGS AND TABLE OF CONTENTS......................................... 11
SECTION 7.11. FURTHER ASSURANCES..................................................... 11
SECTION 7.12. NO ORAL MODIFICATIONS OR CONTINUING WAIVERS............................ 11
SECTION 7.13. LIMITATION OF LIABILITY................................................ 12
SECTION 7.14. SPECIAL SUBSTITUTION OF SUBORDINATED COLLATERAL........................ 12
SECTION 7.15. EFFECTIVENESS OF THIS AGREEMENT........................................ 12
</TABLE>
i
<PAGE>
SUBORDINATED SECURITY AGREEMENT
This SUBORDINATED SECURITY AGREEMENT, dated as of July 1, 1996
(this "Subordinated Security Agreement" or this "Agreement"), among OLD DOMINION
ELECTRIC COOPERATIVE, a wholesale power supply cooperative organized and
existing under the laws of the Commonwealth of Virginia ("Old Dominion"), EPC
CORPORATION, a Delaware corporation (the "Owner Participant"), AMBAC INDEMNITY
CORPORATION, a Wisconsin-domiciled stock insurance corporation ("AMBAC"), and
CLOVER UNIT 2 GENERATING TRUST, a Delaware business trust created pursuant to
the Trust Agreement (as defined pursuant to Section 1) (the "Facility Owner").
WHEREAS, the Clover Real Estate is more particularly described in
Schedule 1 to the Ground Lease and Sublease and is comprised of the Unit 1 Site
described in Schedule 2 thereto, the Unit 2 Site described in Schedule 3
thereto, the Common Facilities Site described in Schedule 4 thereto, and certain
other property, each such Schedule 1, Schedule 2, Schedule 3, and Schedule 4
being attached to, and recorded in the Halifax Clerk's Office with, the Ground
Lease and Sublease as part thereof;
WHEREAS, a copy of the Clover Power Station Plat is marked Exhibit A
and attached to, and recorded in the Halifax Clerk's Office with, the Ground
Lease and Sublease as a part thereof;
WHEREAS, Old Dominion and Virginia Power own the Clover Real Estate as
tenants-in-common;
WHEREAS, by the Clover Agreements, Old Dominion and Virginia Power
established their respective rights and obligations as tenants-in-common of the
Clover Real Estate and of all improvements thereafter to be constructed, and all
personal property thereafter to be situated, on the Clover Real Estate. Such
improvements and personal property held by Old Dominion and Virginia Power as
tenants-in-common include (a) the Unit 1 Foundation constructed on the Unit 1
Site, (b) the Unit 2 Foundation constructed on the Unit 2 Site, (c) the Common
Facilities Foundation constructed on the Common Facilities Site, (d) the Unit 1
Equipment situated on the Unit 1 Site, (e) the Unit 2 Equipment situated on the
Unit 2 Site, and (f) the Common Facilities Equipment situated on the Common
Facilities Site;
WHEREAS, as tenants-in-common of such real and personal property, each
of Old Dominion and Virginia Power holds a 50% undivided interest in such real
and personal property, including the right to nonexclusive possession of all
such real and personal property, subject to (a) in the case of all such real and
personal property, the rights of the other to nonexclusive possession and the
terms and conditions of the Clover Agreements, (b) in the case of the Pollution
Control Assets, the rights, terms and conditions described above in clause (a)
and the rights of the Pollution Control Assets Lessor, and (c) in the case of
the Common Facilities, the Unit 1 Site, the Unit 1 Foundation and the Unit 1
<PAGE>
Equipment, the rights, terms and conditions described above in clause (a) and
the rights of the Unit 1 Parties;
WHEREAS, by the Ground Lease and Sublease, Old Dominion has leased the
Ground Interest to the Facility Owner, and the Facility Owner simultaneously has
subleased the Ground Interest back to Old Dominion, upon the terms and
conditions of the Ground Lease and Sublease;
WHEREAS, Old Dominion has conveyed to the Facility Owner for a term of
years (a) the Foundation Interest by the Head Foundation Agreement and (b) the
Equipment Interest by the Head Equipment Agreement;
WHEREAS, by the Operating Foundation Agreement, the Facility Owner has
conveyed the use and possession of the Foundation Interest back to Old Dominion
upon a term which shall end prior to the expiration of the term of the Head
Foundation Agreement;
WHEREAS, by the Operating Equipment Agreement, the Facility Owner has
conveyed the use and possession of the Equipment Interest back to Old Dominion
upon a term which shall end prior to the expiration of the term of the Head
Equipment Agreement, with the Head Equipment Agreement and the Operating
Equipment Agreement not being recorded;
WHEREAS, although Old Dominion and the Facility Owner intend that the
Foundation Interest at all times and in all respects be and remain personal
property under Virginia law, they have recorded the Head Foundation Agreement
and the Operating Foundation Agreement in the Halifax Clerk's Office in order to
satisfy the conditions of Section 55-96 of the Code of Virginia 1950, as
amended, in the event that the Foundation Interest is deemed to be real estate
or an interest in real estate for purposes of such Section 55-96;
WHEREAS, the Unit 1 Parties and the Unit 2 Parties shall share equally
all of those rights, and shall be subject equally to having all of those
responsibilities undertaken, which granted to or are imposed upon Old Dominion
with respect to the Common Facilities Site, the Common Facilities Foundation and
the Common Facilities Equipment, as (a) tenant-in-common with Virginia Power of
such property and (b) a party to the Clover Agreements;
WHEREAS, by the Old Dominion Indenture, as amended and supplemented
from time to time, Old Dominion granted to Crestar Bank, as Trustee, a Lien on
and security interest in, among other things, all of Old Dominion's rights,
title and interest in, to and under the Clover Real Estate and Clover Unit 2;
WHEREAS, Old Dominion, the Owner Participant, the Facility Owner,
Wilmington Trust Company (in the capacities specified therein) and
Utrecht-America have entered into the Participation Agreement, dated as of July
1, 1996 (the "Participation Agreement");
2
<PAGE>
WHEREAS, pursuant to the Participation Agreement, Old Dominion has
obtained from AMBAC the Surety Bond to support its Covered Obligations;
WHEREAS, pursuant to the AMBAC Guaranty, Old Dominion has agreed to
reimburse AMBAC for any payments made under the Surety Bond;
WHEREAS, Old Dominion has agreed to secure on a subordinated basis the
Covered Obligations by this Subordinated Security Agreement as provided below;
and
WHEREAS, simultaneously with the execution and delivery of this
Subordinated Security Agreement, Old Dominion has executed and delivered the
Subordinated Mortgage to the Subordinated Trustees to further secure the Covered
Obligations.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
GRANTING CLAUSE
To secure (a) Old Dominion's obligations to pay the Covered
Obligations to the extent and only to the extent (x) AMBAC is obligated to pay
such Covered Obligations under the Surety Bond, (y) a timely Demand for Payment
is made in accordance with the terms of the Surety Bond, and (z) AMBAC shall
have failed to honor such Demand for Payment, and (b) Old Dominion's obligations
under the AMBAC Guaranty (items (a) and (b) collectively referred to hereinafter
as the "Secured Obligations"), Old Dominion hereby pledges and mortgages unto
AMBAC, the Owner Participant and the Facility Owner (collectively, the
"Subordinated Secured Parties") all rights, title and interests of Old Dominion
in, to and under, and grants to the Subordinated Secured Parties a security
interest in, the following described property, rights and privileges
(collectively, the "Subordinated Collateral"):
1. its 50% undivided interest as tenant in common with Virginia
Power in the Unit 2 Equipment other than Pollution Control Assets;
2. its leasehold interest as lessee under the Pollution Control
Assets Lease in the Pollution Control Assets comprising a part of the Unit 2
Equipment;
3. its 50% undivided interest as tenant in common with Virginia
Power in the Unit 2 Foundation;
3
<PAGE>
4. all proceeds of paragraphs 1, 2 and 3, above, of whatever kind
or nature including, without limitation, all claims against third parties for
destruction, loss or damage to any of the foregoing or otherwise.
PROVIDED, HOWEVER, the foregoing pledge and mortgage is, in all
respects, subject, subordinate and inferior in priority, to the following:
1. the Lien of the Old Dominion Indenture (including any
amendment, supplement, future advance or issuance of additional indebtedness
thereunder);
2. any indenture, mortgage, deed of trust or similar instrument
given as substitution or replacement of the Old Dominion Indenture;
3. the Lien of Permitted Encumbrances;
4. the Lien of the Leasehold Mortgage (including any amendment,
supplement, substitution or replacement thereto);
5. the Clover Agreements (including any amendment, supplement,
substitution or replacement thereto) and the rights of the parties thereto;
6. the Clover 1 Documents (including any amendment, supplement,
substitution or replacement thereto) and the rights of the parties thereto
(including, without limitation the respective rights of the parties to quiet
enjoyment thereunder);
7. other than the Subordinated Mortgage, the other Operative
Documents (including any amendment, supplement, substitution or replacement
thereto) and the rights of the parties thereto (including, without limitation
the respective rights of the parties to quiet enjoyment thereunder); and
8. the Pollution Control Assets Lease Documents (including any
amendment, supplement, substitution or replacement thereto) and the rights of
the parties thereto (including, without limitation the respective rights of the
parties to quiet enjoyment thereunder).
The foregoing items 1-8 hereinafter collectively referred to as the "Senior
Documents and Rights."
TO HAVE AND TO HOLD the Subordinated Collateral unto the
Subordinated Secured Parties for the uses and purposes and subject to the terms
and provisions set forth in this Agreement, to remain in full force and effect
until terminated as provided in Section 7.1.
4
<PAGE>
IT IS HEREBY FURTHER COVENANTED AND AGREED by and among the
parties hereto as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, capitalized terms used and not
otherwise defined herein shall have the meanings assigned to them in Appendix A
to the Participation Agreement.
SECTION 2. DISTRIBUTION OF PROCEEDS FROM SALE OF SUBORDINATED
COLLATERAL
Any amounts received in respect of a sale of any of the Subordinated
Collateral after a Subordinated Event of Default shall have occurred and be
continuing shall be applied or distributed ratably among AMBAC, the Facility
Owner and the Owner Participant according to the Covered Obligations held by
each.
Upon payment in full of the Covered Obligations, the balance, if any,
of such amounts remaining shall be distributed to Old Dominion.
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF OLD
DOMINION; EVENTS OF DEFAULT; REMEDIES
SECTION 3.1. SUBORDINATED SECURITY AGREEMENT EVENT OF DEFAULT.
The term "Subordinated Security Agreement Event of Default," wherever used
herein, shall mean a default in the payment of any of the Secured Obligations
when and as the same shall become due and payable, which default shall continue
unremedied for more than five days.
SECTION 3.2. OTHER RIGHTS OF SUBORDINATED SECURED PARTIES. Old
Dominion agrees that when any Subordinated Security Agreement Event of Default
has occurred and is continuing, the Subordinated Secured Parties may, subject to
the provisions of Section 3.4, Section 4 and only upon satisfaction of the
conditions precedent described in Section 5 hereof, without limitation of all
other rights and remedies available at law or in equity in such event, exercise
any one or more or all, and in any order, of the following remedies, it being
expressly understood that no remedy herein conferred is intended to be exclusive
of any other remedy or remedies, but that each and every remedy is cumulative
and is in addition to every other remedy given herein or now or hereafter
existing at law or in equity or by statute:
5
<PAGE>
(a) directly, or by agents or attorneys, and subject to
compliance with Applicable Law, to take possession of all or any part
of the Subordinated Collateral, and having and holding the same to use,
operate, manage and control the Subordinated Collateral and to conduct
the business thereof and collect and receive all earnings,
revenues, rents, issues, proceeds and income of the Subordinated
Collateral and every part thereof, all for the sole purpose of
providing for the payment of amounts secured hereunder and, for such
purpose, to maintain, repair and renew the Subordinated Collateral and
make replacements, alterations, additions and improvements thereto and
remove and dispose of any portion of the Subordinated Collateral and
otherwise to exercise any and all of the rights and powers of Old
Dominion in respect thereof;
(b) proceed to exercise all rights, privileges and remedies of
Old Dominion under the Head Equipment Agreement and the Head Foundation
Agreement either in the name of the Subordinated Secured Parties or in
the name of Old Dominion for the use and benefit of the Subordinated
Secured Parties;
(c) if at the time such action is lawful and always subject to
compliance with Applicable Law, either with or without taking
possession, and either before or after taking possession, and without
instituting any legal proceedings whatsoever, sell and dispose of the
Subordinated Collateral, or any part thereof, or interest therein, at
any private sale or public auction to the highest bidder, with or
without demand, advertisement or notice (except as herein required or
as may be required by Applicable Law) of the date, time and place of
sale and either for cash or on credit and on such terms as the
Subordinated Secured Parties may determine. It is agreed that thirty
days' notice to the Owner Participant, the Owner Trustee and Old
Dominion of the date, time and place (and terms, in the case of a
private sale) of any proposed sale by the Subordinated Secured Parties
of the Subordinated Collateral or any part thereof or interest therein
is reasonable. Any such sale or sales may be adjourned from time to
time by announcement at the time and place appointed for such sale or
sales, or for any such adjourned sale or sales, without further notice,
and the Owner Participant, the Owner Trustee, Old Dominion and/or AMBAC
may bid and become the purchaser at any such sale; and
(d) proceed to protect and enforce this Agreement and the
Secured Obligations held by it by suit or suits or proceedings in
equity, at law or in bankruptcy, and for the specific performance of
any covenant or agreement herein or therein contained or in execution
or aid of any power herein granted, or for foreclosure hereunder or
thereunder, or for the appointment of a receiver or receivers for the
Subordinated Collateral or any part thereof, or for the recovery of
judgment for the Secured Obligations or for the enforcement of any
other proper, legal or equitable remedy available under Applicable Law.
SECTION 3.3. DELAY OR OMISSION NOT A WAIVER. No delay or
omission by the Subordinated Secured Parties in the exercise of any right or
remedy accruing upon any Subordinated Security Agreement
6
<PAGE>
Event of Default will impair any such right or remedy or constitute a
waiver of any Subordinated Security Agreement Event of Default or be deemed to
be an acquiescence therein. Every right and remedy given by this Section 3 or by
law to the Subordinated Secured Parties may be exercised from time to time, and
as often as may be deemed expedient, by the Subordinated Secured Parties.
SECTION 3.4. RESTORATION OF RIGHTS AND REMEDIES. If the
Subordinated Secured Parties have instituted any proceeding to enforce any
right, power or remedy under this Agreement and such proceeding has been
discontinued or abandoned or for any reason has been determined adverse to the
Subordinated Secured Parties, then the Owner Trustee and Old Dominion shall,
subject to any determination in such proceeding, be restored to their former
positions hereunder and all rights, remedies and powers of the Subordinated
Secured Parties shall continue as if no such proceeding has been instituted.
SECTION 4. ATTORNEY-IN-FACT; FINANCING STATEMENTS; CONTROL OF
REMEDIES
SECTION 4.1. SUBORDINATED SECURED PARTIES AS ATTORNEY-IN-FACT.
Old Dominion hereby appoints and constitutes, subject to Section 4.2 hereof, the
Subordinated Secured Parties as the true and lawful attorney-in-fact of Old
Dominion for the purpose of taking any action permitted by this Agreement in
connection with the enforcement of the Lien of this Agreement, with full power
(in the name of Old Dominion or otherwise), at any time following a Subordinated
Security Agreement Event of Default and during the continuance thereof, to ask,
require, demand and receive any and all amounts and claims for amounts due and
to become due under or arising out of the Operative Documents (to the extent
that such moneys and claims constitute part of the Subordinated Collateral), to
endorse any check or other instrument or order in connection therewith and to
file any claim or take any action or institute any proceeding to collect any
portion of the Subordinated Collateral. Upon the written instructions of the
Subordinated Secured Parties, Old Dominion shall execute any financing statement
(and any continuation statement with respect to any such financing statement),
or any other document necessary for the Subordinated Secured Parties to obtain
the full benefits of the Lien of this Agreement and as may be specified in such
instructions.
SECTION 4.2. CONTROL OF REMEDIES. Notwithstanding anything
else contained in this Agreement, upon the occurrence and during the continuance
of a Subordinated Security Agreement Event of Default, AMBAC shall be entitled
to control and direct the enforcement of all rights and remedies granted to the
Subordinated Secured Parties for the benefit of all Subordinated Secured
Parties; PROVIDED, HOWEVER, that if (a) a Covered Obligation is covered under
the Surety Bond and (b) AMBAC fails to pay when due a claim made under the
Surety Bond, the Facility Owner and the Owner Participant shall have the right
to appoint a party to control and direct the enforcement of all rights and
remedies under this Agreement.
7
<PAGE>
SECTION 5. CONDITION PRECEDENT TO REMEDIES
Until (i) all Subordinated Collateral is released from the
Liens of the Old Dominion Indenture and (ii) all obligations under the Operating
Agreements are paid or discharged in full and the Operating Agreements are
terminated and the Liens of the Loan Agreement and the Leasehold Mortgage have
been discharged, the Subordinated Secured Parties shall not (x) exercise any
rights or enforce any remedies or assert any claim with respect to the
Subordinated Collateral and Subordinated Real Property granted to the
Subordinated Secured Parties under this Agreement or the Subordinated Mortgage,
(y) seek to foreclose the Liens granted pursuant to this Agreement or the
Subordinated Mortgage or sell the Subordinated Collateral, or (z) take any
action, directly or indirectly, or institute any proceedings, directly or
indirectly, with respect to any of the foregoing.
SECTION 6. MODIFICATION OF SENIOR DOCUMENTS AND RIGHTS
Subject to the provisions of the Operative Documents, Old
Dominion and the other parties to the Senior Documents and Rights may, without
affecting in any manner the subordination of the Covered Obligations to the
Senior Document and Rights at any time or from time to time and in their
absolute discretion, change the manner, place or terms of payment of amounts due
under the Senior Documents and Rights, or amend in any way the Senior Documents
and Rights to which they are a party, or exercise or refrain from exercising any
other of their rights pursuant thereto, all without notice to or consent of the
Subordinated Secured Parties.
SECTION 7. MISCELLANEOUS
SECTION 7.1. TERMINATION OF AGREEMENT; RELEASE OF COMPONENTS.
(a) Upon payment in full by Old Dominion of all amounts then due and payable
under the AMBAC Guaranty and the termination of the AMBAC Guaranty in accordance
with its terms, this Agreement will terminate and the Liens created by this
Agreement upon the Subordinated Collateral and Subordinated Real Property will
be released. Upon such termination and release, the Subordinated Secured Parties
shall (i) promptly deliver to Old Dominion a written notice stating that the
Liens created by this Agreement have been discharged pursuant to this Section
6.1 and (ii) execute and deliver to, or as directed in writing by, Old Dominion,
an instrument in form and substance satisfactory to Old Dominion evidencing the
termination of this Agreement and the release of the Subordinated Collateral
from the Liens created by this Agreement.
(b) All Components that no longer constitute part of the
Equipment Interest or the Foundation Interest in accordance with Section 7.2 of
the Operating Equipment Agreement or Section 7.2 of the Operating Foundation
Agreement, respectively, shall be automatically released from
8
<PAGE>
the Lien of this Agreement. The Subordinated Secured Parties, if requested by
Old Dominion, shall execute and deliver such instruments in form and
substance satisfactory to Old Dominion evidencing such release.
SECTION 7.2. NO LEGAL TITLE TO SUBORDINATED COLLATERAL IN
SUBORDINATED SECURED PARTIES. (a) The Subordinated Secured Parties shall not,
except as may result from its exercise of remedies hereunder, have legal title
to any part of the Subordinated Collateral. No transfer, by operation of law or
otherwise, of any Secured Obligations or other right, title and interest of the
Subordinated Secured Parties in and to the Subordinated Collateral or hereunder
shall operate to terminate this Agreement or entitle the Subordinated Secured
Parties to an accounting or to the transfer to it of any legal title to any part
of the Subordinated Collateral.
(b) Each Subordinated Secured Party shall have no further
interest in, or right with respect to, the Subordinated Collateral under this
Agreement when and if the principal and interest on all Secured Obligations held
by such Subordinated Secured Party and all sums payable to such Subordinated
Secured Party hereunder and under such Secured Obligations shall have been paid
in full.
SECTION 7.3. NOTICES. Unless otherwise expressly specified or
permitted by the terms hereof, all communications and notices provided for
herein shall be in writing or by a telecommunications device capable of creating
a written record, and any such notice shall become effective (a) upon personal
delivery thereof, including, without limitation, by overnight mail or courier
service, (b) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt thereof, or
(c) in the case of notice by such a telecommunications device, upon transmission
thereof, PROVIDED such transmission is promptly confirmed by either of the
methods set forth in clauses (a) or (b) above, in each case addressed to each
party hereto at its address set forth below or, in the case of any such party
hereto, at such other address as such party may from time to time designate by
written notice to the other parties hereto:
If to the Owner Participant:
EPC Corporation
c/o Chrysler Capital Corporation
225 High Ridge Road
Stamford, Connecticut 06905
Facsimile No.: (203) 975-3911
Telephone No.: (203) 975-3500
Attention: President
9
<PAGE>
If to AMBAC:
AMBAC Indemnity Corporation
One State Street Plaza
New York, New York 10004
Facsimile No.: (212) 344-5297
Telephone No.: (212) 668-0340
Attention: General Counsel
If to Old Dominion:
Old Dominion Electric Cooperative
4201 Dominion Boulevard
Glen Allen, Virginia 23060
Facsimile No.: (804) 747-3742
Telephone No.: (804) 747-0592
Attention: Vice President of Accounting and Finance
If to the Facility Owner:
Clover Unit 2 Generating Trust
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Facsimile No.: (302) 651-8882
Telephone No.: (302) 651-1000
Attention: Corporate Trust Administration
SECTION 7.4. SURVIVAL. All warranties, representations,
indemnities and covenants made by any party hereto, herein or in any certificate
or other instrument delivered by any party or on the behalf of any party under
this Agreement shall be considered to have been relied upon by the other party
hereto and shall survive the consummation of the transactions contemplated
hereby on the Closing Date regardless of any investigation made by either party
or on behalf of either party.
10
<PAGE>
SECTION 7.5. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and shall inure to the benefit of, and shall be enforceable by, the
parties hereto and their respective successors and assigns as permitted by and
in accordance with the terms hereof. Except as expressly provided herein or
in the other Operative Documents, no party hereto may assign its interests
herein without the consent of the other parties hereto.
SECTION 7.6. BUSINESS DAY. Notwithstanding anything herein or
in any other Operative Document to the contrary, if the date on which any
payment is to be made pursuant to this Agreement or any other Operative Document
is not a Business Day, the payment otherwise payable on such date shall be
payable on the next succeeding Business Day with the same force and effect as if
made on such scheduled date and (PROVIDED such payment is made on such
succeeding Business Day) no interest shall accrue on the amount of such payment
from and after such scheduled date to the time of such payment on such next
succeeding Business Day.
SECTION 7.7. GOVERNING LAW. THIS AGREEMENT SHALL BE IN ALL
RESPECTS GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
SECTION 7.8. SEVERABILITY. Whenever possible, each provision
of this Agreement shall be interpreted in such manner as to be effective and
valid under Applicable Law, but if any provision of this Agreement shall be
prohibited by or invalid under Applicable Law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
SECTION 7.9. COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each executed counterpart constituting an original
but all together only one Agreement.
SECTION 7.10. HEADINGS AND TABLE OF CONTENTS. The headings of
the sections of this Agreement and the Table of Contents are inserted for
purposes of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
SECTION 7.11. FURTHER ASSURANCES. Each party hereto shall
promptly and duly execute and deliver such documents and provide such further
assurances for and take such further action reasonably requested by any party to
whom such first party is obligated, all as may be reasonably necessary to carry
out more effectively the intent and purpose of this Agreement.
SECTION 7.12. NO ORAL MODIFICATIONS OR CONTINUING WAIVERS. No
term or provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party or
the Person against whom enforcement of the change, waiver, discharge or
termination is sought.
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SECTION 7.13. LIMITATION OF LIABILITY. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is executed
and delivered by Wilmington Trust Company, not individually or personally but
solely as trustee of Clover Unit 2 Generating Trust (the "Trust") under the
Trust Agreement, in the exercise of the powers and authority conferred and
vested in it, (b) each of the representations, undertakings and agreements
herein made on the part of the Trust is made and intended not as personal
representations, undertakings and agreements by Wilmington Trust Company but is
made and intended for the purpose for binding only the Trust, (c) nothing herein
contained shall be construed as creating any liability on Wilmington Trust
Company, individually or personally, to perform any covenant either expressed or
implied contained herein, all such liability, if any, being expressly waived by
the parties hereto or by any Person claiming by, through or under the parties
hereto and (d) under no circumstances shall Wilmington Trust Company be
personally liable for the payment of any indebtedness or expenses of the Trust
or be liable for the breach or failure of any obligation, representation,
warranty or covenant made or undertaken by the Trust under this Agreement or any
other Operative Documents.
SECTION 7.14. SPECIAL SUBSTITUTION OF SUBORDINATED COLLATERAL.
Old Dominion shall have the right to convey free and clear of the Lien created
by this Subordinated Security Agreement legal title to (or a leasehold interest
in) the Subordinated Collateral to a Person in a transaction characterized as a
sale (or lease) and leaseback, or similar transaction ("Permitted Transaction")
for United States commercial law purposes; provided, however, Old Dominion shall
subject and subordinate to the Senior Documents and Rights, grant to the
Subordinated Secured Parties a security interest in the leaseback interest (or
similar interest) granted to Old Dominion in connection with the Permitted
Transaction.
SECTION 7.15. EFFECTIVENESS OF THIS AGREEMENT. This Agreement
has been dated as of the date first above written for convenience only. This
Agreement shall be effective on the date of execution and delivery by each of
the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this
Subordinated Security Agreement to be duly executed and delivered by their
respective officers thereunto duly authorized, as of the day and year first
above written.
OLD DOMINION ELECTRIC COOPERATIVE
By: /s/ DANIEL M. WALKER
------------------------------
Name: Daniel M. Walker
Title: Vice President
Date: July 31, 1996
CLOVER UNIT 2 GENERATING TRUST
By:Wilmington Trust Company,
not in its individual capacity
but solely as Owner Trustee
under the Trust Agreement
By: /s/ EMMETT R. HARMON
------------------------------
Name: Emmett R. Harmon
Title: Vice President
Date: July 31, 1996
AMBAC INDEMNITY CORPORATION
By: /s/ T.S. TRAVERS
-------------------------------
Name: T.S. Travers
Title: First Vice President
Date: July 31, 1996
EPC CORPORATION
By: /s/ WALTER F. GREENFIELD
-------------------------------
Name: Walter F. Greenfield
Title: Vice President
Date: July 31, 1996
<PAGE>
TAX INDEMNITY AGREEMENT
Dated as of July 1, 1996
between
OLD DOMINION ELECTRIC COOPERATIVE
and
EPC CORPORATION,
as Owner Participant
CLOVER UNIT 2 GENERATING FACILITY
AND
COMMON FACILITIES
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS......................................... 1
SECTION 2. TAX ASSUMPTIONS..................................... 2
SECTION 3. TAX REPRESENTATIONS, WARRANTIES AND COVENANTS....... 4
SECTION 4. INDEMNITY........................................... 6
SECTION 5. TAX SAVINGS......................................... 14
SECTION 6. CONTESTS............................................ 15
SECTION 7. CERTAIN ADJUSTMENTS................................. 17
SECTION 8. MISCELLANEOUS....................................... 17
i
<PAGE>
TAX INDEMNITY AGREEMENT
This TAX INDEMNITY AGREEMENT, dated as of July 1, 1996 (this
"Tax Indemnity Agreement" or this "Agreement"), between OLD DOMINION ELECTRIC
COOPERATIVE, a wholesale power supply cooperative organized under the laws of
the Commonwealth of Virginia (together with its successors and assigns, "Old
Dominion"), and EPC CORPORATION, a Delaware corporation (together with its
successors and assigns, the "Owner Participant").
WITNESSETH:
WHEREAS, in entering into the transactions contemplated by the
Operative Documents, the Owner Participant made the assumption that it would be
entitled to certain income tax benefits identified in Section 2 of this
Agreement, and Old Dominion has agreed to indemnify the Owner Participant under
certain circumstances for the loss of certain of such benefits.
NOW, THEREFORE, as an inducement to the Owner Participant to
enter into the transactions contemplated by the Operative Documents and in
consideration of the mutual covenants contained in this Agreement and in the
other Operative Documents, the parties agree as follows:
SECTION 1. DEFINITIONS.
Unless the context otherwise requires, capitalized terms used
in this Tax Indemnity Agreement and not otherwise defined herein shall have the
respective meanings specified in Appendix A to the Participation Agreement,
dated as of July 1, 1996 (the "Participation Agreement"), among Old Dominion,
Clover Unit 2 Generating Trust, a Delaware business trust created pursuant to
the Trust Agreement, Wilmington Trust Company (in the capacities specified
therein), EPC Corporation and Utrecht-America Finance Co. For purposes of this
Agreement:
"Basic Payments" shall mean the Basic Payments plus the
Foundation Basic Payments;
"Head Agreements Consideration" shall mean the Head Equipment
Agreement Consideration plus the Head Foundation Agreement
Consideration;
"Old Dominion Person" shall mean Old Dominion, any Person in
possession of the Undivided Interest or any portion thereof, the
Pollution Control Assets Lessor, Virginia Power or any Affiliate of any
thereof and "Old Dominion Group" shall mean Old Dominion Persons
collectively;
"Operating Agreements" shall mean the Operating Equipment
Agreement together with the Operating Foundation Agreement;
"Owner Participant" includes the affiliated group of
corporations of which the Owner Participant is, was or shall become, a
member and each member thereof if consolidated returns are or shall be
filed for such affiliated group for federal income tax purposes;
<PAGE>
"Purchase Option Price" shall mean the Purchase Option Price
together with the Foundation Purchase Option Price;
"True Lease Representation" shall mean any of the
representations, warranties or covenants, as the case may be, set forth
in the sections of the Operative Documents listed on Annex A to this
Tax Indemnity Agreement;
"Undivided Interest" shall mean the Equipment Interest
together with the Foundation Interest; and
"Undivided Interest Consideration" shall mean the sum of the
Head Equipment Agreement Consideration plus the Head Foundation
Agreement.
All references to sections herein are to sections of this Tax Indemnity
Agreement unless otherwise indicated and the words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Tax Indemnity
Agreement as a whole and not to any particular section or other subdivision.
SECTION 2. TAX ASSUMPTIONS.
Old Dominion acknowledges that the Owner Participant entered
into the transactions contemplated by the Operative Documents on the basis of
certain income tax assumptions, including, among others, the following
assumptions for federal, state and local income tax purposes (the "Tax
Assumptions"):
(a) The Head Agreements will be treated as a current sale of
the Undivided Interest by Old Dominion to the Exchangor and the
Undivided Interest Consideration will be treated as the proceeds of
such sale and the purchase price for the Undivided Interest.
(b) The Operating Agreements will be "true leases", the Owner
Participant will be treated as the purchaser, owner and lessor of the
Undivided Interest and Old Dominion will be treated as the lessee
thereof.
(c) The obligations evidenced by the Loans will constitute
indebtedness of the Facility Owner, and the Owner Participant will be
entitled to current deductions under section 163 of the Code for
interest accrued thereon (the "Interest Deductions").
(d) The Undivided Interest will be treated as "tax-exempt use
property" as defined in section 168 of the Code.
(e) The Owner Participant's tax basis in the Undivided
Interest on the Closing Date will be determined pursuant to section
1031 of the Code and will be equal to the excess of the Undivided
Interest Consideration over the amount (the "Exchange Gain") as of the
date hereof between EPC Corporation and Old Dominion; the Owner
Participant will be entitled to cost
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<PAGE>
recovery deductions in respect of each tax basis beginning in the
taxable year of the Owner Participant that includes the Closing Date
under section 168(g)(2) of the Code on a straight-line basis using a
"half-year" convention (or the "mid-month convension" in the case of
caluse (iii)) and a recovery period equal to (i) 125% of the Term [in
the case of the portion of the Undivided Interest which constitutes
ADR "electric utility steam production plant" assets, (ii) 30
years in the case of the portion of the Undivided Interest which
constitutes ADR "electric utility transmission and distribution
plant" assets and (iii) 40 years in the case of the portion of the
Undivided Interest which constitutes non-residential real property
under section 168 of the Code (the "Depreciation Deductions"); and
such tax basis will be allocated among such asset depreciation clauses
in the same proportion as the Undivided Interest Consideration is
allocated in the Appraisal.
(f) The Owner Participant will be entitled to amortize the
Transaction Costs paid by it attributable to (i) the Operating
Agreements on a straight-line basis over the Term and (ii) the Loans on
a straight-line basis over the term of the Loans (collectively, the
"Amortization Deductions").
(g) The Owner Participant's marginal federal income tax rate
at all times during the Term will be 35% and its combined effective
federal, state and local tax rate will be 36.3% (the "Effective Rate")
and the Owner Participant will always have sufficient taxable income to
utilize the Interest Deductions, Depreciation Deductions and
Amortization Deductions.
(h) The Owner Participant's accrual of Basic Payments will not
be computed by reference to, and Owner Participant will not be subject
to the application of, section 467(b)(2) of the Code, and the Owner
Participant's accrual of Basic Payments will not be required to be
computed under the "proportional rent" or "constant rent" rules of the
proposed regulations promulgated under section 467 of the Code,
published June 3, 1996, or of any successor proposed, temporary or
final regulations under section 467 of the Code during the Term.
(i) The Basic Payments and all other amounts received under
the Operating Agreements or with respect to the transactions
contemplated by the Operative Documents and the Interest Deductions,
Amortization Deductions and Depreciation Deductions will be treated as
income or deductions, as applicable, derived from, or allocable to,
sources within the United States pursuant to section 861 of the Code.
(j) The Undivided Interest will be treated as "placed in
service" by the Owner Participant within the meaning of section 168 of
the Code on the Closing Date.
(k) The Facility Owner will be treated as a grantor trust, and
the Owner Participant, as owner of the Facility Owner, will be entitled
and required to take into account, in computing its taxable income, all
items of income, gain, loss or deduction with respect to the Undivided
Interest.
(l) As a result of entering into or in connection with the
performance of the transactions contemplated by the Operative
Documents, the Owner Participant will not be required to include any
amount in gross income other than (i) Basic Payments in the amounts and
at the times such payments are accrued (with respect to payments in
arrears) or at the time such payments
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<PAGE>
are made (with respect to payments in advance) pursuant to the
terms of the Operating Agreements, (ii) gain upon the receipt of
Termination Value (or other amounts based on Termination Value) on the
date such amount is determined to be paid and in the amount equal to
the excess of the payment over the Owner Participant's adjusted
basis in the Undivided Interest or the relevant portion thereof,
(iii) gain upon the receipt of the Purchase Option Price at the time
such payment is required to be made, (iv) any amount payable to the
Owner Participant on an After-Tax Basis on the date such amount is
payable, (v) any other amount to the extent it results in an equal and
offsetting deduction of the same (other than the Depreciation
Deductions, the Amortization Deductions or the Interest Deductions)
character in the same taxable year as the inclusion and (vi) amounts
expressly identified as interest under the Operative Documents at the
time received.
(m) The Owner Participant will be treated as having acquired
the Undivided Interest in exchange for (i) certain other property, (ii)
the assumption (or taking subject to) indebtedness equal to the amounts
advanced pursuant to the Loans, and (iii) cash, pursuant to a
transaction qualified for non-recognition of gain under section 1031 of
the Code and will be entitled to non-recognition of the Exchange Gain
on such exchange property (the "Exchange Non-Recognition").
Old Dominion does not make any representation, warranty or covenant with respect
to any of the foregoing assumptions (except to the extent set forth in Section 3
hereof). Except as expressly provided herein, Old Dominion has no obligation to
indemnify the Owner Participant by reason of any of the above assumptions
proving to be incorrect. If the Owner Participant shall suffer a Loss (as such
term is defined in Section 4 below) with respect to which Old Dominion is
required to pay an indemnity hereunder or in the event of any rental adjustment
under Section 3.4 of the Operating Agreements involving a change in the Tax
Assumptions, then the Tax Assumptions, without further act of the parties
hereto, shall thereafter be and be deemed to be amended, if and to the extent
appropriate, to reflect such Loss or change in Tax Assumptions.
SECTION 3. TAX REPRESENTATIONS, WARRANTIES AND COVENANTS.
Old Dominion represents, warrants and covenants for the purposes of
this Tax Indemnity Agreement that:
(a) All written information supplied by or on behalf of Old
Dominion to the Appraiser or the Engineer and identified in an appendix
to the Appraisal or the Engineering Report as relied upon by the
Appraiser or the Engineer, as the case may be, was accurate in all
material respects as of the date so supplied and as of the Closing
Date, and Old Dominion did not omit to supply any other information,
which in light of the circumstances in which the supplied information
was provided, would render such supplied information misleading in any
material respect.
(b) Neither Old Dominion, the Pollution Control Assets Lessor,
nor any Affiliate of either, will take any position in any filing by it
for United States federal, state or local income tax purposes that is
inconsistent with the Tax Assumptions (unless consistent with a
contrary Final Determination) to which the Owner Participant is a party
or, in connection with an event described
4
<PAGE>
in clause (3) of the definition of Final Determination in respect
of a claim for refund by the Owner Participant.
(c) Neither Old Dominion, nor any of its Affiliates, will
acquire directly or indirectly any interest in the Loan Certificates
other than as permitted or required under the Operative Documents.
(d) On the Closing Date, there will not be any agreements,
side letters or other arrangements not disclosed in writing to the
Owner Participant prior to Closing between any Old Dominion Person and
any Person pertaining to either (i) the exercise or non-exercise by Old
Dominion of any of the options set forth in Section 15 of the Operating
Agreements or (ii) the Loan Certificates.
(e) On the Closing Date, Clover Unit 2 will not require any
improvement, modification or addition (other than ancillary items of
removable equipment of a kind that are customarily selected and
furnished by purchasers and lessees of similar equipment) in order for
the Undivided Interest to be rendered complete for its use by any Old
Dominion Person.
(f) After payment of the Undivided Interest Consideration, Old
Dominion and each of its Affiliates will have been fully reimbursed for
the cost of its investment in the Undivided Interest.
(g) The Undivided Interest will have been "placed in service"
within the meaning of section 168 of the Code on or prior to the
Closing Date.
(h) Old Dominion will treat the Head Agreements as effecting a
sale of the Undivided Interest by Old Dominion to the Owner Participant
for all United States federal, state and local income tax purposes.
(i) Old Dominion and Virginia Power have effectively elected
to be excluded from the provisions of subchapter K of the Code with
respect to Clover Unit 2 pursuant to section 761(a) of the Code, and
such exclusion election is in full force and effect as of the Closing
Date.
(j) Old Dominion is not subject to any law, regulation or
charter restriction which will compel it to exercise the purchase
option set forth in Section 15 of the Operating Agreements, and other
than the Operative Documents, Clover Agreements, Old Dominion Indenture
and the Pollution Control Assets Lease Documents, Old Dominion is not
subject to any contract which requires the exercise of such purchase
option or imposes substantial damages if such purchase option is not
exercised.
(k) The allocation of the Undivided Interest Consideration
among the asset depreciation classes for federal income tax purposes is
as set forth in the Appraisal (this is not a representation that the
Owner Participant is the owner of the Undivided Interest for federal
income tax purposes).
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<PAGE>
(l) No Old Dominion Person owns directly or indirectly more
than 5% of any Lender and no Lender owns more than 5% of any Old
Dominion Person.
(m) Old Dominion will report as income the payments by the
Bank under Section 3.1 of the Payment Undertaking Agreement (other than
amounts representing a return of capital) and will report as an expense
Old Dominion's obligation for Basic Payments and Foundation Basic
Payments under Section 3.2 of the Operating Equipment Agreement and
Section 3.2 of the Operating Foundation Agreement, provided that there
is no change in Applicable Law affecting the federal income tax
treatment of these items.
(n) Each of the Clover Agreements, the Pollution Control Asset
Lease Documents and the Old Dominion Indenture is legal, valid and
binding on the parties thereto and enforceable in accordance with its
terms.
SECTION 4. INDEMNITY.
(a)(1) If as a result of:
(i) any act or failure to act by an Old Dominion Person
other than (w) the execution and delivery of the Operative Documents,
the Clover Agreements, the Old Dominion Indenture or the Pollution
Control Assets Lease, (x) any act required or expressly permitted by
any Operative Document (other than refinancing pursuant to Section 10
of the Participation Agreement and modifications and substitutions
pursuant to Section 7 or 8 of the Operating Agreements), (y) any
omission to perform any act, which omission is required or expressly
permitted by any Operative Document and (z) any act or failure to act
taken or not taken at the express written request of the Owner
Participant; or
(ii) the breach or inaccuracy of any representation, warranty
or covenant set forth in Section 3(a) through 3(n) of this Agreement or
any True Lease Representation; or
(iii) any Event of Loss or other loss, damage, destruction,
casualty, theft, taking, confiscation, requisition, seizure,
condemnation, requisition of title, requisition of use, removal,
replacement, or substitution of or to Clover Unit 2, the Undivided
Interest or any portion or component thereof or interest therein; or
(iv) any payment to Old Dominion or any other Person of any
damages, refunds, warranty, indemnity or other similar amounts with
respect to Clover Unit 2, the Undivided Interest or any portion thereof
to the extent such payment is not paid over to or retained by the
Facility Owner or the Owner Participant; or
(v) any bankruptcy or insolvency of any Old Dominion Person
or any foreclosure or remedies taken under any Transaction Document
while an event of default under any such document shall have occurred
and be continuing;
6
<PAGE>
the Owner Participant shall for federal income tax purposes lose, shall not
have, or shall suffer a disallowance of the right to claim, shall suffer a
disallowance, elimination, reduction, disqualification or deferral of, or shall
be required to recapture all or any portion of, or shall not claim (based on a
written opinion of independent tax counsel selected by the Owner Participant and
reasonably acceptable to Old Dominion not less than 30 days prior to the date on
which the tax return is filed on which such claim will not be made, to the
effect that there is no Reasonable Basis to make such claim) the Interest
Deductions, Depreciation Deductions, Amortization Deductions or the Exchange
Non-Recognition (any of the events so resulting being referred to hereinafter as
a "Loss of Deductions"); or
(2) if as a result of:
(i) any failure of the Owner Participant to be treated as
the owner of the Undivided Interest as a result of an event described
in clauses (i) or (ii) of Section 4(a)(1);
(ii) any (x) Event of Loss to the extent the actual date on
which the income tax consequences thereof are required to be taken into
account is different from the date assumed in calculating the income
tax consequences reflected in the applicable Termination Value or (y)
alterations, modifications or improvements of Clover Unit 2 or the
Undivided Interest or any portion thereof (an "Improvement") or
refinancing of the Loans; or
(iii) any payment to Old Dominion or any other Person of any
damages, refunds, warranty, indemnity or other similar amounts with
respect to Clover Unit 2, the Undivided Interest or any portion thereof
to the extent such payment is not paid over to or retained by the
Facility Owner or the Owner Participant; or
(iv) the prepayment of Basic Payments, or any Old Dominion
Person's taking of a deduction for Basic Payments with respect to a
period that is inconsistent with the allocation of Basic Payments under
the Operating Agreements (unless consistent with a contrary Final
Determination to which the Owner Participant is a party or, in
connection with an event described in clause (3) of the definition of
Final Determination, in respect of a claim for ______ by the Owner
Participant); or
(v) a change, adjustment or modification of the schedule of
Basic Payments following an Event of Default; or
(vi) the payment by any Old Dominion Person of any costs or
expenses of the Owner Trustee, Owner Participant, Facility Owner, Trust
Company, Lender, Agent or any other Person in respect of the
transactions contemplated by the Operative Documents; or
(vii) any bankruptcy or insolvency of any Old Dominion Person
or any foreclosure or other pursuit of remedies taken under any
Transaction Document while an event of default under any such document
shall have occurred and be continuing; or
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<PAGE>
(viii) any loss, damage, destruction, casualty, theft, taking,
confiscation, requisition, seizure or condemnation of the Undivided
Interest or Clover Unit 2 or any portion or component thereof or
interest therein not constituting an Event of Loss (an "Other Loss");
or
(ix) the breach or inaccuracy of any representation, warranty
or covenant set forth in clauses (b), (c), (d), (e), (l) or (m) of
Section 3.
the Owner Participant shall be required to include in gross income for federal
income tax purposes any amount at any time other than as set forth in Section
2(l) (an "Income Inclusion", any "Loss of Deductions" or "Income Inclusion"
being referred to herein as a "Loss"), then Old Dominion will pay to the Owner
Participant an indemnity determined pursuant to Section 4(b) below. If a Loss
shall occur, the Loss shall be deemed to include a corresponding loss of tax
benefits for state and local income tax purposes, as follows: (x) state and
local income tax deductions shall be treated as allowable or lost in the same
amounts, at the same time and to the same extent as the corresponding federal
income tax deduction are allowable or lost, and (y) an Income Inclusion shall be
treated as requiring an inclusion in gross income for state and local income tax
purposes corresponding in timing and amounts to the inclusion for federal income
tax purposes.
(b) If a Loss shall occur, then Old Dominion will pay to the
Owner Participant as an indemnity an amount, at the election of Old Dominion,
determined in accordance with paragraph (1), (2) or (3) below:
(1) So long as no Event of Default has occurred and is
continuing and subject to Old Dominion complying with Sections 7.6 and
7.8 of the Participation Agreement in respect of any increases in Basic
Payments, Equity Exposure Amounts and Termination Values occasioned by
the adjustment to Basic Payments described in this clause (1), Old
Dominion may elect to make indemnity payments in the form of upward
adjustments in the amount of Basic Payments (with corresponding
adjustments to the Termination Values) payable by Old Dominion pursuant
to the Operating Agreements, commencing on the next Payment Date after
the date the payment obligation commences under Section 4(c) below and
continuing on each Payment Date occurring thereafter during the Term,
in amounts such that, on an After-Tax Basis, the sum of all such
payments provided by this paragraph (1) shall be at least sufficient to
preserve the Net Economic Return of the Owner Participant as if such
Loss had not occurred. The computation thereof shall be made utilizing
the methodology and assumptions, including the Tax Assumptions,
utilized by the Owner Participant in determining Basic Payments and
Termination Values, except as such assumptions shall be varied to take
into account such Loss and any prior Loss. The computation of such
adjustment to Basic Payments under this paragraph (1) also shall take
into account any past, current and anticipated interest, penalties and
additions to tax imposed by the IRS or any state or local taxing
authority and payable by the Owner Participant as a result of such Loss
(other than penalties or additions to tax payable under the Code or
applicable state or local tax law, together with interest imposed
thereon, caused by negligence or disregard of rules or regulations by
the Owner Participant (other than negligence or disregard of rules
or regulations based upon the Owner Participant's compliance
with its obligations under this Agreement, including its
obligations under Section 6 hereof, or by reason of reporting the
transaction in a manner consistent with the assumptions set forth in
Section 2 hereof)). Such computation shall be made assuming that at
all
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<PAGE>
times (I) the Owner Participant has sufficient taxable income to
make full use of such Loss in the current year in which all of the Tax
Benefits that are the subject of such Loss (or result from the Loss
or the events giving rise thereto) were assumed (or, in the case
of benefits that result from the Loss or the events giving rise
thereto, are reasonably anticipated) to be available, and (II)
with respect to a Loss of Deductions, the Owner Participant shall be
deemed to pay income taxes at a combined effective rate equal to the
Effective Rate, and with respect to an Income Inclusion, the
Owner Participant shall be deemed to pay income taxes at the highest
combined effective marginal corporate federal income tax rate and
comparable state and local tax rates (calculated by taking into
account the deductibility of state and local tax for federal
income tax purposes) (the "Highest Rate").
(2) If Old Dominion has not elected to pay, or cannot elect to
pay, an indemnity pursuant to either paragraph (1) above or paragraph
(3) below by providing written notice of such election to the Owner
Participant prior to the date that Old Dominion's payment obligation
commences under Section 4(c) below, then Old Dominion shall pay to the
Owner Participant as an indemnity a lump-sum amount which, on an
After-Tax Basis, shall be sufficient to preserve the Net Economic
Return of the Owner Participant as if such Loss had not occurred. The
computation of such lump-sum amount shall be made by the Owner
Participant utilizing the methodology and assumptions, including the
Tax Assumptions, utilized by the Owner Participant in determining Basic
Payments and Termination Values, except as such assumptions shall be
varied to take into account such Loss and any prior Loss. For the
purpose of calculating the amount of income taxes presumed to be
payable by the Owner Participant as a result of such Loss, (I) the
Owner Participant shall be deemed to have sufficient taxable income to
make full use of such Loss in the current year in which all of the Tax
Benefits that are the subject of such Loss (or result from the Loss or
the events giving rise thereto) were assumed (or, in the case of
benefits that result from the Loss or the events giving rise thereto,
are reasonably anticipated) to be available, and (II) with respect to a
Loss of Deductions, the Owner Participant shall be deemed to pay income
taxes at a combined effective rate equal to the Effective Rate and with
respect to an Income Inclusion, the Owner Participant shall be deemed
to pay income taxes at a combined effective rate equal to the Highest
Rate. The computation of such lump-sum amount under this paragraph (2)
also shall take into account any past, current and anticipated
interest, penalties and additions to tax imposed by the IRS or any
state or local taxing authority and payable by the Owner Participant as
a result of such Loss (other than penalties or additions to tax payable
under the Code or applicable state or local tax law, together with
interest imposed thereon, caused by negligence or disregard of rules or
regulations by the Owner Participant (other than negligence or
disregard of rules or regulations based upon the Owner Participant's
compliance with its obligations under this Agreement, including its
obligations under Section 6 hereof, or by reason of reporting the
transaction in a manner consistent with the assumptions set forth in
Section 2 hereof)).
(3) So long as no Event of Default has occurred and is
continuing and subject to Old Dominion complying with Sections 7.6 and
7.8 of the Participation Agreement in respect of any increases in Basic
Payments, Equity Exposure Amounts and Termination Values occasioned by
the adjustment to Basic Payments described in this clause (3), Old
Dominion may elect to pay to the Owner Participant as an indemnity from
time to time on an After-Tax Basis such amount or amounts as shall be
equal to the additional income taxes assumed to be payable by the Owner
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Participant as a result of such Loss as provided in this paragraph (3).
For the purpose of calculating the amount of income taxes presumed to
be payable by the Owner Participant as a result of such Loss, (I) the
Owner Participant shall be deemed to have sufficient taxable income to
make full use of such Loss in the current year in which all of the Tax
Benefits that are the subject of such Loss (or result from the Loss or
the events giving rise thereto) were assumed (or, in the case of
benefits that result from the Loss or the events giving rise thereto,
are reasonably anticipated) to be available, and (II) with respect to a
Loss of Deductions, the Owner Participant shall be deemed to pay income
taxes at a combined effective rate equal to the Effective Rate, and
with respect to an Income Inclusion, the Owner Participant shall be
deemed to pay income taxes at a combined effective rate equal to the
Highest Rate. The computation of such amount under this paragraph (3)
also shall take into account any past, current or anticipated interest,
penalties and additions to tax imposed by the IRS or any state or local
taxing authority and payable by the Owner Participant as a result of
such Loss (other than penalties or additions to tax payable under the
Code or applicable state or local tax law, together with interest
imposed thereon, caused by negligence or disregard of rules or
regulations by the Owner Participant (other than negligence or
disregard of rules or regulations based upon the Owner Participant's
compliance with its obligations under this Agreement, including its
obligations under Section 6 hereof, or by reason of reporting the
transaction in a manner consistent with the assumptions set forth in
Section 2 hereof)).
(c) Any amount payable by Old Dominion to the Owner
Participant pursuant to Section 4(b) shall be paid not later than (or, in the
case of a Basic Payments increase under Section 4(b)(1) hereof, shall commence
not later than the next Payment Date after) the latest to occur of (i) 30 days
following Old Dominion's receipt of the Owner Participant's written notice to
Old Dominion pursuant to Section 6 hereof, (ii) if any such indemnity payment
relates to a Loss that is contested pursuant to Section 6 hereof, 30 days
following the date of a Final Determination with respect to such Loss, and (iii)
if Old Dominion shall elect to indemnify the Owner Participant pursuant to
paragraph (3) of Section 4(b) hereof, the date which is five Business Days prior
to the date on which the Owner Participant shall be required to pay the
additional federal income taxes in question (such date to be determined based on
the assumptions set forth in Section 4(b)(3) hereof); PROVIDED, HOWEVER, that
the date required for payment (or commencement of a Basic Payment increase under
Section 4(b)(1) hereof) shall not be earlier than 10 days following the delivery
to Old Dominion of the Officer's Certificate required pursuant to Section 4(d)
hereof, or, if Old Dominion shall seek verification pursuant to Section 4(d)
hereof, 10 days following the completion of such verification; PROVIDED,
FURTHER, Old Dominion shall pay interest on the amount ultimately determined to
be due pursuant to such verification from the date such payment otherwise would
have been due at the rate applicable to underpayments of federal income taxes
for the period in question; and PROVIDED, FURTHER, if Old Dominion shall elect
payment under either paragraph (1) or (3) of Section 4(b) above, it shall
provide a Qualifying Deposit, Qualifying Surety Bond or Qualifying Letter of
Credit with respect to any increase in Basic Payments or Equity Exposure Amounts
resulting therefrom on or before the date the initial indemnity payment
hereunder is required to be made. If Old Dominion shall elect to pay such sum
prior to the latest of the dates described in clauses (i), (ii) and (iii) of the
preceding sentence, then Old Dominion shall not be required to pay the Owner
Participant the amount of any interest, penalties or additions to tax that shall
be attributable to the period following such payment by Old Dominion if there is
a procedure whereby the Owner Participant can make a payment or deposit only
with respect to the Loss that will stop the accumulation of such interest,
penalties or additions to tax and that in Owner Participant's judgment will not
have any unindemnified or material adverse financial effect on the Owner
Participant or its business
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operations or adversely affect the Owner Participant's right to contest
vigorously any claims the IRS may have with respect to matters other than
matters related to the transactions contemplated by the Operative
Documents for which Old Dominion is providing full indemnification
(and the Owner Participant will promptly return any such sum to Old Dominion at
its written request therefor if no such procedure is available).
(d) When requesting payment by Old Dominion pursuant to this
Section 4, the Owner Participant shall, not less than 10 days prior to the
latest of the dates described in clauses (i), (ii) and (iii) of Section 4(c),
deliver to Old Dominion an Officer's Certificate setting forth the amount
payable by Old Dominion and computing in reasonable detail such amount under
Section 4(b); provided that the failure to provide such Certificate on a timely
basis will not affect Owner Participant's rights hereunder. If Old Dominion
shall disagree with the Owner Participant's calculation of the amount to be paid
by Old Dominion under Section 4(b), such amount shall be verified by independent
nationally recognized accountants selected by the Owner Participant and
reasonably acceptable to Old Dominion (the "Independent Public Accountants").
The costs of such verification shall be borne by Old Dominion unless such
verification shall result in an adjustment in Old Dominion's favor of five
percent or more of the net present value (using a discount rate equal to the
rate applicable to underpayments of federal income taxes for the period in
question and calculating such value as of the date such payment becomes due and
payable or commences under this Agreement) of the indemnity payment or payments
computed by the Owner Participant, in which case such costs shall be borne by
the Owner Participant. The Owner Participant agrees to cooperate with such
Independent Public Accountants and to supply them with all information
reasonably necessary to permit them to accomplish such review and determination,
subject to the execution by such Independent Public Accountants of a
confidentiality agreement reasonably acceptable to Owner Participant which shall
provide that such information shall be for the confidential use of the
Independent Public Accountants and shall not be disclosed to Old Dominion or to
any other Person. Old Dominion and the Owner Participant agree that the sole
responsibility of the Independent Public Accountants shall be to verify the
calculation of payments pursuant to paragraphs (1), (2) or (3) of Section 4(b)
(setting forth fully the assumptions on which such verification is based) and
that matters of interpretation of this Agreement are not within the scope of the
Independent Public Accountants' responsibility. Neither the Independent Public
Accountants nor Old Dominion will have any right to examine the tax returns of
the Owner Participant in connection with the verification procedure described in
this Section 4(d) or otherwise. The review and determination of such
calculations by the Independent Public Accountants pursuant to this procedure
shall be final.
(e) Notwithstanding the foregoing and any other provision of
this Agreement or the other Operative Documents, Old Dominion shall not have any
liability to the Owner Participant for indemnification under this Section 4 for
any Loss (or any interest, penalties or additions to tax with respect to such
Loss) if such Loss results from one or more of the following:
(i) any voluntary or involuntary sale, transfer or other
disposition by the Facility Owner or the Owner Participant or an
Affiliate of either (each a "member of the Facility Owner Group", and
collectively, the "Facility Owner Group") of (x) any interest in or
arising under the Operative Documents, (y) the Undivided Interest or
any interest therein or (z) any interest in the Owner Participant or
the Facility Owner unless in each case, such sale, transfer or other
disposition occurs while an Event of Default is continuing or is the
result of any Event of Loss, Other Loss,
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Improvement, refinancing, sublease or other transfer resulting
from any action of any Old Dominion Person;
(ii) any Event of Loss or any other event whereby Old
Dominion is required to pay, and shall have paid in full, Termination
Value and any other amounts owing under the Operative Documents or an
amount determined by reference thereto, except to the extent that the
Termination Value or such amount determined by reference thereto, as
the case may be, does not properly reflect the timing of the Loss
resulting from such event;
(iii) the failure of a member of the Facility Owner Group to
have sufficient taxable income to benefit from any of the benefits
described in the Tax Assumptions;
(iv) any amendment to or change in the Code, Treasury
Regulations or, provided taxpayers are permitted to rely thereon,
administrative pronouncements and executive orders which shall occur
after the Closing Date, other than in respect of any Event of Loss,
Other Loss, Improvement (other than any required Improvement) or
refinancing;
(v) the failure for federal income tax purposes of (x) the
Head Agreements to be treated as a sale of the Undivided Interest or
the prepaid rent under the Head Agreements to be treated as the
proceeds of such sale, (y) the Operating Agreements to be treated as a
"true lease" or (z) the Facility Owner to be considered the borrower
under the Loans or the owner of the Undivided Interest, unless, in each
case, the loss arising from any such failure is the result of any event
described in clause (i), (ii) or (v) of Section 4(a)(1) hereof;
(vi) the failure of a member of the Facility Owner Group to
claim the Interest Deductions, the Depreciation Deductions, or the
Amortization Deductions in a timely and proper manner unless (x) such
failure shall be due to the failure of a member of the Old Dominion
Group timely to provide Owner Participant with information within the
control of such Person requested in writing by Owner Participant, (y)
the claiming of such Tax Benefit would be inconsistent with a Final
Determination with respect to which there was a prior unsuccessful
contest pursuant to Section 6, or (z) Owner Participant shall have
furnished Old Dominion with an opinion of tax counsel to the effect
that Owner Participant does not have a reasonable basis for claiming
such Tax Benefit;
(vii) the failure of the appropriate member of the Facility
Owner Group to contest a proposed adjustment in accordance with, and to
the extent required by, Section 6 of this Agreement, if such failure
effectively precludes the initiation or continuation of such contest;
(viii) the failure of the Facility Owner to be treated as a
pass-through entity or otherwise disregarded for federal income tax
purposes;
(ix) any member of the Facility Owner Group being or becoming
for federal income tax purposes a charitable organization, a tax-exempt
entity within the meaning of section 168(h) of the Code, an agency or
instrumentality of the United States, a state or political subdivision
thereof or an international organization or the status of a member of
the Facility Owner Group as an entity
12
<PAGE>
subject to the provisions of sections 55, 56, 57, 58, 59, 168(f)(2),
465, 469, 501, 542, 552, 851, 856 or 1361 of the Code;
(x) the application of sections 59A, 168(d)(3) or 291 of the
Code other than as a result of an event described in Section 4(a)(2)
hereof;
(xi) the application of Section 467 of the Code other than as
a result of an event described in Section 4(a)(2) hereof (except
Improvements required or permitted under the Operating Agreements and
events described in clause (iii), (vi) (but only with respect to costs
or expenses required to be paid under the Operative Documents), or
(viii) of Section 4(a)(2));
(xii) a change in the Owner Participant's taxable year or the
Owner Participant having a short taxable year;
(xiii) unless the Owner Participant exercises the option under
Section 15.3(a) of the Operating Agreements, the inclusion in income by
the Owner Participant upon termination of the Operating Agreements,
modifications or additions to the Undivided Interest;
(xiv) the failure of the Owner Participant to have an initial
tax basis in the Undivided Interest equal to the excess of the
Undivided Interest Consideration over the Exchange Gain, other than as
a result of an event described in clause (i), (ii), (iii) or (iv) of
Section 4(a)(1) hereof;
(xv) any failure of (a) the Owner Participant's acquisition
of the leasehold interest in the Undivided Interest created by the Head
Agreements to constitute "like kind exchange" property under section
1031 of the Code (as assumed by Section 2(m) hereof with respect to the
exchanged property) or (b) such exchange to qualify for nonrecognition
treatment under section 1031 of the Code, in each case other than as a
result of an event described in Section 4(a)(1) hereof;
(xvi) an amendment, supplement, modification or waiver to any
Operative Document to which any member of the Facility Owner Group is a
party and to which Old Dominion is not a party, which is not requested
by or consented to by Old Dominion in writing unless (x) it may be
necessary or appropriate to, and is in conformity with, any such
amendment, supplement, modification or waiver requested by or consented
to by Old Dominion in writing or (y) it is required by the terms of the
Operative Documents;
(xvii) penalties or additions to tax under section 6662 or 6663
of the Code or relating to estimated tax, in either case to the extent
resulting from or measured by matters unrelated to the transactions
contemplated by the Operative Documents; and
(xviii) a determination that the Facility Owner is not holding
the Undivided Interest in the ordinary course of a trade or business or
that the Owner Participant did not enter into the leasing transaction
completed by the Participant Agreement for profit, in each case other
than as a result of an event described in clause (i) or (ii) of Section
4(a)(1) hereof.
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<PAGE>
SECTION 5. TAX SAVINGS.
If Old Dominion indemnifies the Owner Participant with respect
to any Loss pursuant to Section 4(a) hereof, and the Owner Participant shall
realize with respect to any year federal income tax savings that would not have
been realized but for such Loss or the events giving rise thereto and which tax
savings were not taken into account in calculating Old Dominion's indemnity
payment (or adjustment to Basic Payments payable) to the Owner Participant, then
the Owner Participant shall pay to Old Dominion an amount equal to the sum of
(i) such federal income tax savings and (ii), in the case of an Income
Inclusion, the amount of any state and local income tax savings and (iii) any
tax benefit realized by the Owner Participant from the payment contemplated by
clauses (i) and (ii) above. For the purpose of calculating the amount of the
federal, state and local income tax savings realized by the Owner Participant,
(A) the Owner Participant shall be deemed to have sufficient federal, state and
local taxable income to make full use in the current year of all of the tax
benefits that would not have been realized but for such Loss or the events
giving rise thereto, (B) the Owner Participant shall be deemed to have state and
local income tax consequences that correspond to the Owner Participant's federal
income tax consequences, and (C) with respect to tax savings related to a Loss
of Deductions, the Owner Participant shall be deemed to have paid income taxes
at the Effective Rate, and with respect to tax savings related to an Income
Inclusion or a tax benefit realized from a payment hereunder, the Owner
Participant shall be deemed to have paid income taxes at the Highest Rate. The
amount payable by the Owner Participant to Old Dominion pursuant to clauses (i)
and (ii) of this Section 5 shall not exceed the excess of the amount of all
prior payments made to the Owner Participant by Old Dominion pursuant to Section
4 hereof with respect to the Loss that gave rise to such tax savings (net of any
amount necessary to make such prior payments on an After-Tax Basis) over the
amounts previously paid by the Owner Participant to Old Dominion pursuant to
clauses (i) and (ii) of this Section 5 with respect to such Loss; PROVIDED, that
any such excess shall be carried forward and shall offset, to the extent
thereof, any future liability of Old Dominion under Sections 4 and 8 hereof with
respect to such Loss. The loss of any tax savings subsequent to the year the
Owner Participant realized such tax savings shall be treated as a Loss that is
indemnifiable pursuant to Section 4, but without regard to Section 4(d) and only
to the extent of any payment by the Owner Participant pursuant to this Section 5
with respect to such lost tax savings. Any payment due to Old Dominion pursuant
to this Section 5 shall be paid promptly and in any event within 30 days after
the Owner Participant shall realize the tax savings as determined in accordance
with the calculation methods and assumptions set forth in this Section 5;
PROVIDED, HOWEVER, that the amount of tax savings payable to Old Dominion
pursuant to this Section 5 shall not be payable during the continuation of a
Payment Default, Bankruptcy Default, or Event of Default or before such time as
Old Dominion shall have made all payments or indemnities then due pursuant to
this Agreement.
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SECTION 6. CONTESTS.
(a) If an adjustment shall be proposed by the IRS in writing
that, if sustained, would result in a Loss for which Old Dominion could be
required to indemnify the Owner Participant under this Agreement, the Owner
Participant agrees promptly to notify Old Dominion in writing of such proposed
adjustment; PROVIDED, HOWEVER, that any failure to provide such notice shall not
relieve Old Dominion of any obligation to indemnify the Owner Participant
hereunder unless such failure effectively precludes the initiation or
continuation of the contest of such adjustment. If (i) within 30 days after
receipt of such notice Old Dominion shall request in writing that the Owner
Participant contest such proposed adjustment and (ii) the Owner Participant
shall have received, at the commencement of the contest and before each level of
judicial proceeding, an opinion of Independent Tax Counsel, to the effect that
there is a Reasonable Basis for contesting the proposed adjustment (and, in the
case of an appeal from an adverse judicial determination, an opinion from such
counsel to the effect that it is more likely than not) that such adverse
determination will be reversed or substantially modified upon appeal in a manner
favorable to the taxpayer) (which opinions (a) will be furnished at Old
Dominion's expense, and (b) the Owner Participant will assist in good faith and
with diligence in promptly procuring), the Owner Participant shall contest such
proposed adjustment; PROVIDED, HOWEVER, that the Owner Participant may, in its
sole discretion, either pay the tax proposed and sue for a refund or contest the
proposed adjustment in any permissible forum considering, however, in good faith
such requests as Old Dominion may make concerning the most appropriate forum in
which to proceed. Notwithstanding the foregoing, the Owner Participant shall not
be required to pursue any such contest unless (v) Old Dominion shall have agreed
in writing to pay and shall be paying on demand all reasonable costs and
expenses that the Owner Participant shall incur in connection with contesting
such proposed adjustment, including, without limitation, reasonable attorneys',
accountants' and investigatory fees and disbursements; (w) the proposed
adjustment that could result in a payment by Old Dominion (if a lump-sum amount
were to be paid pursuant to Section 4(b)(2) hereof) in connection with such
proposed adjustment, taking into account the amount of all similar and logically
related adjustments with respect to the transactions contemplated by the
Operative Documents that could be raised in an audit of any other taxable year
of the Owner Participant (including any future taxable year) not barred by the
statute of limitations shall be at least $100,000 and at least $250,000 with
respect to any judicial appeal; (x) no Event of Default shall have occurred and
be continuing; and (y) if the Owner Participant shall determine to pay the tax
proposed and sue for a refund, Old Dominion shall advance to the Owner
Participant on an interest-free basis and with no additional net after-tax cost
to the Owner Participant sufficient funds to pay the tax and interest, penalties
and additions to tax payable with respect thereto (to the extent such amount is
indemnified against pursuant to Section 4 hereof (an "Advance")); and PROVIDED,
HOWEVER, that the Owner Participant shall not be required to pursue any appeal
to the United States Supreme Court.
(b) In connection with any proposed adjustment described in
Section 6(a) hereof, the Owner Participant shall not make payment of such
proposed adjustment for at least 30 days after the giving of written notice of
such proposed adjustment to Old Dominion (except that if the Owner Participant
shall be required by law or regulation to take action with respect to any such
adjustment prior to the end of such 30-day period, the Owner Participant shall,
in such notice to Old Dominion, so inform Old Dominion, and the Owner
Participant shall not take any action with respect to such adjustment without
the consent of Old Dominion (not unreasonably to be withheld) before the date
on which the Owner Participant shall be required by law or regulation to take
action). Notwithstanding anything herein to the contrary, the Owner
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Participant shall have full control over any contest pursuant to this Section
6 and shall determine in its sole discretion the nature of all actions to
be taken in connection with any contest including the right to pursue or
forego any administrative proceedings; PROVIDED, HOWEVER, that the Owner
Participant shall contest such claim at the administrative level if the
failure to do so would preclude the availability of all judicial remedies; and
PROVIDED, FURTHER, the Owner Participant shall consult in good faith with Old
Dominion and its counsel in the contest of any claim and shall keep such
counsel reasonably informed regarding such contest. Nothing contained in
this Section 6 shall require the Owner Participant to contest a proposed
adjustment that it would otherwise be required to contest pursuant to this
Section 6 if the Owner Participant (i) waives the payment by Old Dominion of
any amount that might otherwise be payable by Old Dominion under this
Agreement by way of indemnity in respect of such proposed adjustment and (ii)
pays to Old Dominion any amount of taxes, interest, penalties and additions
to tax previously paid or advanced by Old Dominion pursuant to this
Agreement with respect to such proposed adjustment, plus interest on such
amounts at the IRS rate for refunds, payable from the date of payment by Old
Dominion to the Owner Participant of such amounts to (but excluding) the
date of repayment of such amounts by the Owner Participant to Old Dominion;
PROVIDED, HOWEVER, that if the Owner Participant settles a proposed adjustment
such that Old Dominion is precluded as a matter of law from initiating
or continuing a contest hereunder of any adjustment for any other taxable
period, the Owner Participant shall be deemed to have waived the payment by Old
Dominion under this Agreement of any indemnity amounts in respect of such other
adjustment.
(c) If Old Dominion shall have requested the Owner Participant
to contest a proposed adjustment as above provided and shall have duly complied
with all the terms of this Section 6, Old Dominion's liability for
indemnification due under Section 4 hereof shall, at Old Dominion's election
(except for amounts provided for under Section 6(a) hereof), be deferred until
Final Determination of the liability of the Owner Participant. At such time, Old
Dominion shall become obligated for the payment of any indemnification due under
Section 4 hereof resulting from the outcome of such contest. Upon payment in
full by Old Dominion of any indemnity amounts due under this Agreement, the
Owner Participant shall become obligated to refund to Old Dominion an amount
equal to any amount received as a refund of income taxes by the Owner
Participant or credited to the Owner Participant (including any refund or credit
that would have been received but for a counterclaim or other claim not
indemnified by Old Dominion hereunder) that is fairly attributable to advances
or indemnity payments made by Old Dominion under this Agreement, together with
any interest received (or that would have been received) by the Owner
Participant on such refund (after reduction by any tax incurred by Owner
Participant by reason of the receipt or accrual of such interest), plus an
amount equal to any tax benefit realized by the Owner Participant as the result
of the payment contemplated by this sentence. Such obligations of the Owner
Participant and Old Dominion will first be set off against each other, and any
difference owing by either party shall be paid within 30 days after such Final
Determination but not prior to the date determined in accordance with Section
4(b) hereof.
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SECTION 7. CERTAIN ADJUSTMENTS.
If Old Dominion shall become obligated to make payments under
this Agreement, the Owner Participant shall, if appropriate, make adjustments to
the schedules of Equity Exposure Amounts, Termination Value and the Purchase
Option Price in accordance with the methods, and subject to the constraints,
with which such amounts were originally computed to reflect such Loss and,
subject to the verification rules set forth in Section 3.4 of the Operating
Agreements, in a manner which will preserve its Net Economic Return and prevent
any duplication of payments or any payment for Losses previously paid. If an
event giving rise to the payment of an amount determined by reference to a
schedule of Termination Values shall occur and the date as of which the Owner
Participant shall be affected for tax purposes shall be earlier than the date
taken into account in computing such schedule, such values shall be
appropriately adjusted based otherwise on the same methodology and assumptions
previously used by the Owner Participant in calculating such schedule.
SECTION 8. MISCELLANEOUS.
(a) PAYMENTS. Any payments to be made to the Owner Participant
pursuant to this Agreement, including any increase in Basic Payments pursuant to
Section 4(b)(1) hereof, shall constitute Supplemental Payments and shall (unless
paid by way of set-off as provided for herein) be made directly to the Owner
Participant. All payments to be made hereunder shall be made by wire transfer of
immediately available funds to a bank account of the Owner Participant or Old
Dominion, as the case may be, in the continental United States as specified by
the recipient thereof in written directions to the payor, or if no such
direction shall have been given, by check of the payor or any Affiliate thereof
payable to the order of the recipient thereof and mailed to the recipient
thereof by certified mail, postage prepaid, at its address as set forth in the
Participation Agreement.
(b) LATE PAYMENTS. Any late payment by either party of any of
its obligations under this Agreement shall result in the obligation on the part
of such party promptly to pay an amount equal to interest at the Overdue Rate.
(c) EFFECT OF OTHER INDEMNITIES. Old Dominion's obligations
under the indemnities provided for in this Agreement shall be those of a primary
obligor whether or not the Owner Participant shall also be indemnified with
respect to the same matter under the terms of the Participation Agreement, the
Trust Agreement or any other document or instrument, and the Owner Participant
may in seeking indemnification from Old Dominion pursuant to any provisions of
this Agreement proceed directly against Old Dominion without first seeking to
enforce any other right of indemnification.
(d) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Agreement shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
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(e) SURVIVAL. All warranties, representations and covenants
made by either party hereto, herein or in any certificate or other instrument
delivered by either such party or on the behalf of either such party under this
Agreement, shall be considered to have been relied upon by the other party
hereto and shall survive the consummation of the transactions contemplated
hereby on the Closing Date regardless of any investigation made by either party
or on behalf of either party. The obligations and liabilities of the parties
arising under this Agreement shall continue in full force and effect,
notwithstanding the assignment, expiration or other termination of the Operating
Agreements, until all such obligations have been met and such liabilities have
been paid in full, whether by expiration of time, by operation of law or
otherwise.
(f) AMENDMENTS AND WAIVERS. No term, covenant, agreement or
condition of this Agreement may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by the
party against whom enforcement of such change is sought.
(g) COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together only one instrument.
(h) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of, and shall be enforceable by, the parties
hereto and their respective successors and assigns as permitted by and in
accordance with the terms hereof, including each successive holder of the
Beneficial Interest permitted under Section 5.1 of the Participation Agreement.
In the event of an indemnity that was not fully paid or a tax savings that was
not fully repaid before the transfer, the transferee shall be entitled to
receive such indemnity or shall repay such savings (or shall be required to pay
such indemnity or be entitled to receive such repayment) at the same times and
in the same amounts as would have been payable had there been no transfer.
Except as expressly provided herein or in the other Operative Documents, neither
party hereto may assign its rights or delegate its obligations hereunder without
the consent of the other party hereto.
(i) HEADINGS AND TABLE OF CONTENTS. The headings of the
sections of this Agreement and the Table of Contents are inserted for purposes
of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE IN ALL RESPECTS
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
(k) NOTICES. Unless otherwise expressly specified or permitted
by the terms of this Tax Indemnity Agreement, all communications and notices
provided for herein to a party hereto shall be in writing or by a
telecommunications device capable of creating a written record, and any such
notice shall become effective (i) upon personal delivery thereof, including,
without limitation, by overnight mail or courier service, (ii) in the case of
notice by United States mail, certified or registered, postage prepaid, return
receipt requested, upon receipt thereof, or (iii) in the case of notice by such
a telecommunications device, upon transmission thereof, PROVIDED such
transmission is promptly confirmed by either of the methods set forth in clauses
(i) or (ii) above, in each case addressed to such party at its address set forth
in
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the Participation Agreement or at such other address as such party may
from time to time designate by written notice to the other party hereto.
(l) RECORDS. Old Dominion covenants that it will maintain or
cause to be maintained and retain sufficient factual records (to the extent such
records are maintained by Old Dominion, any sublessee, or any trustee for or
Affiliate of any thereof, in the ordinary course of their respective businesses
or as Owner Participant shall reasonably request) to enable the Owner
Participant to prepare required United States federal, state and local income
tax returns. Upon the request of the Owner Participant and as promptly as
practicable upon receipt of such request, Old Dominion shall deliver such
records to the Owner Participant at the expense of Old Dominion. In addition, as
soon as practicable, Old Dominion shall provide or cause to be provided (at the
expense of Old Dominion) to the Owner Participant such information (in form and
substance reasonably satisfactory to the Owner Participant) as the Owner
Participant may reasonably request from and as shall be reasonably available to
Old Dominion or any sublessee, trustee or Affiliate to enable the Owner
Participant to fulfill its tax return filing obligations, to respond to requests
for information, to verify information in connection with any income tax audit
and to participate effectively in any tax contest.
(m) EFFECTIVENESS OF AGREEMENT. This Agreement has been dated
as of the date first above written for convenience only. This Agreement shall be
effective on the date of execution and delivery by each of Old Dominion and the
Owner Participant.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Tax
Indemnity Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized.
OLD DOMINION ELECTRIC COOPERATIVE
By: /s/ DANIEL M. WALKER
---------------------------------------
Name: Daniel M. Walker
Title: Vice President
Date: July 31, 1996
EPC CORPORATION,
as Owner Participant
By: /s/ WALTER F. GREENFIELD
---------------------------------------
Name: Walter F. Greenfield
Title: Vice President
Date: July 31, 1996
<PAGE>
ANNEX A TO
TAX INDEMNITY AGREEMENT
Specified Representations, Warranties and Covenants
The representations, warranties or covenants, as the case may be, set
forth in the following sections of the Participation Agreement: 3.3(b), 3.3(c),
3.3(e), 3.3(f), 3.3(g), 3.3(k), 3.3(m), 3.3(p), 3.3(q), 3.3(r), 3.3(s) and 7.4.
Annex-1
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF OLD DOMINION ELECTRIC COOPERATIVE IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 835,561
<OTHER-PROPERTY-AND-INVEST> 183,429
<TOTAL-CURRENT-ASSETS> 98,718
<TOTAL-DEFERRED-CHARGES> 27,412
<OTHER-ASSETS> 11,226
<TOTAL-ASSETS> 1,156,346
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 184,753<F1>
<TOTAL-COMMON-STOCKHOLDERS-EQ> 0
0
0
<LONG-TERM-DEBT-NET> 664,490
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 17,928
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 289,175
<TOT-CAPITALIZATION-AND-LIAB> 1,156,346
<GROSS-OPERATING-REVENUE> 366,909
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 299,129
<TOTAL-OPERATING-EXPENSES> 299,129
<OPERATING-INCOME-LOSS> 67,780
<OTHER-INCOME-NET> 1,627
<INCOME-BEFORE-INTEREST-EXPEN> 69,407
<TOTAL-INTEREST-EXPENSE> 57,167
<NET-INCOME> 12,240
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 92,770
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Old Dominion is organized and operated as a cooperative. Patronage capital
is the retained net margins of Old Dominion which have been allocated
to its members based on their respective power purchases in accordance
with Old Dominion's bylaws.
</FN>
</TABLE>
