Contract
Exhibit 10.16
This
Supplement No. 1 to the Joint Ownership Agreement has been filed to provide
investors with information regarding its terms. It is not intended to
provide any other factual information about the Tennessee Valley
Authority. The representations and warranties of the parties in this
Supplement No. 1 to the Joint Ownership Agreement were made to, and solely for
the benefit of, the other party to this Supplement No. 1 to the Joint Ownership
Agreement. The assertions embodied in the representations and
warranties may be qualified by information included in schedules, exhibits, or
other materials exchanged by the parties that may modify or create exceptions to
the representations and warranties. Accordingly, investors should not
rely on the representations and warranties as characterizations of the actual
state of facts at the time they were made or otherwise.
TVA
Contract No. 00069956, Supp. No. 1
AGREEMENT
Between
And
SEVEN
STATES POWER CORPORATION
THIS AGREEMENT, dated as of September
2, 2008 (Agreement), is entered into by and between SEVEN STATES POWER
CORPORATION (Seven States), a not-for-profit mutual benefit corporation created
and existing under the Laws of the State of Tennessee, and TENNESSEE VALLEY
AUTHORITY (TVA), a corporate agency and instrumentality of the United States
Government created and existing under and by virtue of the Tennessee Valley
Authority Act of 1933, as
amended, 16 U.S.C. §§ 831-831ee (2006).
W I T N E S S E T
H:
WHEREAS,
TVA and Seven States have entered into a Joint Ownership Agreement dated April
30, 2008, numbered as TVA Contract No. 00069956 (JOA); and
WHEREAS,
Section 3(c) of the JOA provides for discussions among TVA, Seven States, and
the Lenders of methods to secure Seven States’ obligations upon any exercise of
the Buy-Back Option; and
WHEREAS,
agreement has been reached on such security arrangements and, in accordance with
the last sentence of said Section 3(c) of the JOA, TVA and Seven States wish to
supplement and amend the JOA in the respects necessary and appropriate to
provide for the agreed-upon security;
NOW,
THEREFORE, for and in consideration of the premises, the mutual covenants and
agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, TVA and Seven States
agree as follows:
1. The
Designated Entity designated by Seven States pursuant to Section 3(b) of the
JOA:
(a) Shall
be a single-purpose entity organized for the benefit of Seven States and
controlled by Seven States’ members for the limited purposes of (i) owning and
leasing the Elected Percentage of the Purchased Assets, including any
Modifications and Replacement Components (Seven States’ Purchased Assets Share),
and (ii) potentially transferring ownership to another entity in
connection
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with the
implementation of the Long-Term Arrangements contemplated by the
JOA;
(b) Until
such time as Long-Term Arrangements are in place or until such time as there is
a consummation of a Buy-Back Closing, shall not have the power or authority
to:
(i) Borrow
any funds or otherwise incur any debt beyond the Lenders’ short-term loan
agreement (Loan) to finance the purchase of Seven States’ Purchased Assets Share
from TVA and to provide a line of credit (not to exceed $25 million) to finance
Capitalized Modifications and Capitalized Replacement Components;
(ii) Enter
into any Loan in which (A) the Borrowing Cost Rate for said Loan exceeds
five percent (5%) at the time of origination or (B) there are additional
penalties, charges, or fees for early Loan repayments or for early payoff of the
Loan, provided, however, that nothing in this Subsection 1(b)(ii)(B) shall apply
to customary LIBOR break charges for an early payoff so long as the LIBOR period
does not exceed thirty (30) days; or
(iii)
engage in any business or transactions other than those contemplated by the JOA,
as shall be stated in the Designated Entity’s charter;
(c) Until
such time as Long-Term Arrangements are in place or until such time as there is
a consummation of a Buy-Back Closing, shall not have the power or authority to
xxxxx x xxxx or other security interest on any of its property, other than the
TVA liens and security interests provided for below in this
Agreement;
(d) Shall
be organized under constituent documents, approved by TVA and the Lenders, that
include bankruptcy remoteness provisions including the Designated Entity lacking
corporate authority to seek bankruptcy relief;
(e) Shall
at all times observe the applicable legal requirements for the recognition of
the Designated Entity as a legal entity separate from each of its members and
from Seven States;
(f) Until
such time as Long-Term Arrangements are in place or until such time as there is
a consummation of a Buy-Back Closing, shall be governed by a governing Board
with five Directors, two appointed by Seven States or the members of Seven
States, two appointed by TVA, and a fifth elected by a majority vote of the
other four Directors;
(g) Shall
remit a portion of its net cash flow monthly to Seven States for the duration of
the Lease, said portion to be specified under a management agreement between
Seven States and the Designated Entity to be equal to the portion
of
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Basic
Rent described in Section 3.3(a) of the Lease; and
(h) Shall
meet all the requirements for the Designated Entity provided for by the
JOA.
2. In addition to the
Buy-Back Arrangements provided for in Section 5 of the JOA, TVA and the Lenders
shall enter into Separate Buy-Back Arrangements to provide for:
(a) Lenders
to give TVA concurrent notice of any default on the Loan when Lenders send
notice of such default to the Designated Entity;
(b) The
same repurchase by TVA of all of the Designated Entity’s right, title, and
interest in and to the Purchased Assets as is provided for under Section 5 of
the JOA, including Subsection (e) of said Section 5 as amended by Section 4 of
this Agreement below;
(c) The
Separate Buy-Back Arrangements between TVA and the Lenders to survive any
rejection of the JOA in a bankruptcy of the Designated Entity.
As used
below in this Agreement, “Buy-Back Arrangements” refers both to the arrangements
provided for in Section 5 of the JOA as amended by Section 4 of this Agreement
and to the Separate Buy-Back Arrangements to be entered into by TVA and the
Lenders under this Section 2.
3. Section
3 of the JOA is supplemented and amended in the respects necessary to provide
that if TVA conveys Seven States’ Purchased Assets Share at any Seven States
Closing pursuant to Section 3(b)(ii)(B) of the JOA, then:
(i) Seven
States’ Purchased Assets Share shall be subject to a TVA-reserved deed of trust
or mortgage interest and other appropriate security interest; and
(ii) Any
cash not remitted to Seven States in accordance with Section 1(g) above shall be
subject to an appropriate security interest and shall be placed in an escrow
account for the duration of the Lease, said escrow account to be used only
(A) to pay for Capitalized Modifications and Capitalized Replacement
Components or (B) to pay off the Loan or to complete a Buy-Back Closing as
provided for under Section 5(e) of the JOA as amended by Section 4 of this
Agreement.
The
security interests described in both (i) and (ii) above (referred to
collectively below as the “Lien”) shall be for the purpose of securing the
Designated Entity’s obligations to convey to TVA full, clear title to Seven
States’ Purchased Assets Share pursuant to the exercise of any Buy-Back
Arrangements. The Lien shall provide that, if, upon exercise of any
Buy-Back Arrangements, the Designated Entity should fail to convey such
full,
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clear
title as required under the JOA as amended by this agreement, TVA shall be
entitled to foreclose on the Lien, and to collect thereby the damages to TVA
(Actual Damages) that result from TVA not immediately receiving such full, clear
title, including the cost of temporarily or otherwise replacing the generation
resource represented by Seven States’ Purchased Assets Share and any amounts
paid by TVA to cure or to purchase the Loan. Further, it is expressly
recognized and agreed that said Actual Damages shall be equal to the full fair
market value of the Purchased Assets, including any Modifications and
Replacement Components and inclusive of the portion of said Purchased Assets
owned by TVA, which full fair market value shall be determined as of the date of
such failure.
4. Section
5(e) of the JOA is deleted and replaced in its entirety by the
following:
5(e) Upon exercise of a Buy-Back
Option under 5(a), 5(b), or 5(d) above, or upon a Buy-Back Option being deemed
to have been exercised under 5(c) above, the following steps shall be
taken:
(i) TVA
shall immediately purchase the Loan at par by paying to Lenders a sum equal
to:
(A) All
outstanding principal;
(B) All
accrued and unpaid interest, including default interest only to the extent TVA
was given prompt notice of the relevant default or defaults; and
(C) All
accrued and unpaid fees and unreimbursed expenses but, if these fees and
unreimbursed expenses result from any defaults, only to the extent TVA was given
prompt notice of the relevant default or defaults; provided, however, that
nothing in this Subsection 5(e)(i)(C) shall exclude customary LIBOR break
charges for an early payoff so long as the LIBOR period does not exceed thirty
(30) days.
(ii) Upon
TVA purchasing the Loan at par under (i) above:
(A) The
amount so paid by TVA to the Lenders shall be deducted from the Buy-Back Price
that TVA is to pay at the Buy-Back Closing, and
(B) TVA’s
obligation to pay Rent under the Lease shall cease; provided further, however,
that it is expressly recognized and agreed that the Lease shall otherwise
continue in full force and effect until the consummation of the Buy-Back
Closing.
(iii)
Within a reasonable time, but not to exceed thirty (30) days after TVA’s
purchase of the Loan at par under (i) above, Seven States shall
sell
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and TVA
shall buy all of Seven States’ rights, title, and interest (including transfer,
assignment, or other conveyance of any and all relevant contracts, warranties,
permits, licenses, and other approvals of Governmental Authorities) in the
Purchased Assets at the Buy-Back Price, as said Buy-Back Price is reduced under
(ii)(a) above.
It is
expressly recognized and agreed that step (i) above is a precondition to steps
(ii) and (iii).
5. It
is further expressly recognized and agreed that TVA, Seven States, and the
Designated Entity shall cooperate with each other and with the Lenders in
enforcing any
exercise
of the Buy-Back Arrangements and in consummating any Buy-Back Closing, including
cooperating in any bankruptcy proceedings in order to facilitate TVA obtaining
full, clear title to Seven States’ Purchased Assets Share. It is
further expressly recognized and agreed that said cooperation shall include
supporting any motion to lift the stay in any bankruptcy proceedings or any
other action that may be necessary to allow exercise of the Buy-Back
Arrangements and the consummation of the Buy-Back Closing.
6. Seven
States and the Designated Entity shall include in the documents relating to the
Loan:
(a) Provisions
acceptable to TVA requiring Lenders to designate a single Lender to act as the
agent for each of the Lenders for purposes of any purchase of the Loan by TVA
under Section 5(e) of the JOA as amended by Section 4 of this
Agreement;
(b) Provisions
acceptable to TVA requiring Lenders to cooperate with TVA in enforcing any
exercise of the Buy-Back Arrangements and in consummating any Buy-Back Closing,
by (i) promptly executing all documents necessary to confirm TVA’s purchase
of the Loan under Section 5(e) of the JOA as amended by Section 4 of this
Agreement, (ii) not opposing the exercise of the Buy-Back Arrangements and
the consummation of the Buy-Back Closing, and (iii) not opposing any motion
to lift the stay or any other action in bankruptcy to allow exercise of the
Buy-Back Arrangements and the consummation of the Buy-Back Closing;
and
(c)
Provisions expressly recognizing that TVA shall be a third-party beneficiary of
the provisions required by this Section 6.
7. Capitalized
terms used in this Agreement, including the recitals, and not otherwise defined
herein, shall have the respective meanings set forth in the JOA.
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IN
WITNESS WHEREOF, Seven States and TVA have caused this Agreement to be executed
by their duly authorized representatives as of September 2, 2008.
SEVEN
STATES POWER CORPORATION
By: /s/ Xxxx
Simmons_______________
Title:
President and CEO
By: /s/ Xxx X.
Kilgore______________
Title:
President and CEO
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