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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
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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, 0000 XXXXXXX XXXXX
XXXXXX 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
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
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
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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.......... X-0-0
Xxxxxxx X-0 - Description of Retained Assets...................... X-0-0
Xxxxxxx X-0 - 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
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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 Xxxx 0 Foundation
constructed on the Xxxx 0 Xxxx, (x) the Xxxx 0 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
Xxxx 0 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;
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:
2
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.
3
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
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
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
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 Xxx Xxxxxxxxxxxxx Xxxxx, Xxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000,
Account No.: 0000-000-0, 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
(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.
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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
10
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
11
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;
12
(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 Xxxx 0, 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.
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.
15
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
16
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
17
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.
18
9 NET LEASE.
19
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
20
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.
21
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
Xxxxxxxxxx & Xxxxx 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
26
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 Xxxxxx Xxxxx 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.
27
(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
29
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.
30
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
31
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
32
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;
35
(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;
36
(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
37
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):
39
(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
40
(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
41
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);
42
(d) hold, keep idle or lease to others the Lessor's Xxxx
0 Xxxxxxxx xx Xxxxxx Xxxx 0 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 Xxxx 0 Xxxxxxxx xx
Xxxxxx Xxxx 0, 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 Xxxx 0 Xxxxxxxx xx Xxxxxx Xxxx 0 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
43
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.
44
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
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
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
If to the Lessor State Street Bank and Trust Company
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Manager-Corporate Trust
Fax No.: (000) 000-0000
Confirmation No.: (000) 000-0000
With a copy to the Owner
Participant: First Union National Bank of Florida
000 Xxxxx Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Leasing Group
Fax No.: (000) 000-0000
Confirmation No.: (000) 000-0000
If to the Lessee: Old Dominion Electric Cooperative
P. O. Xxx
0000 Xxxx Xxxxx, Xxxxxxxx 00000-0000
Attention: Vice President of Accounting and Finance Fax
No.: (000) 000-0000
Confirmation No.: (000)000-0000
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
X.X. Xxx 00000
Xxxxxxxx, Xxxxxxxx 00000
Attention: President
48
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
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
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
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, 0000, XXXXXXX XXXXX XXXXXX
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
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
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/ X. XXXXXX XXXXX
---------------------------
X. Xxxxxx Xxxxx
Vice President
Date: March 1, 1996
OLD DOMINION ELECTRIC COOPERATIVE,
as Lessee
By:/s/ XXXXXX X. XXXXXX
------------------------
Xxxxxx X. Xxxxxx
Vice President of Accounting and Finance
Date: Xxxxx 0, 0000
XXXXXXX 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:
___________________________
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.
X-0
XXXXXXX X-0
TO
EQUIPMENT
OPERATING LEASE
DESCRIPTION OF UNIT 1 EQUIPMENT
All those certain assets at or on the Xxxx 0 Xxxx xx Xxxxxx
Xxxx 0 (excluding the Transmission Assets described on Schedule 1-A attached
hereto, and the Xxxx 0 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.
X-0-0
XXXXXX X-0
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 Xxxx 0 Xxxxxxxxx, xxx Xxxx 0 Equipment, the Xxxx
0 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.
X-0-0
XXXXXXX X-0
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.
X-0-0
XXXXXXX X-0
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
EXHIBIT B
TO
EQUIPMENT
OPERATING LEASE
FORM OF POWER SALES AGREEMENT
B-1
EXHIBIT C
TO
EQUIPMENT
OPERATING LEASE
FORM OF MANAGEMENT AGREEMENT
C-1
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%
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%
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%
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%
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%
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%
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%
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
(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
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
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
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
