TAX INDEMNITY AGREEMENT
Dated as of July 1, 1996
between
OLD DOMINION ELECTRIC COOPERATIVE
and
EPC CORPORATION,
as Owner Participant
CLOVER UNIT 2 GENERATING FACILITY
AND
COMMON FACILITIES
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS......................................... 1
SECTION 2. TAX ASSUMPTIONS..................................... 2
SECTION 3. TAX REPRESENTATIONS, WARRANTIES AND COVENANTS....... 4
SECTION 4. INDEMNITY........................................... 6
SECTION 5. TAX SAVINGS......................................... 14
SECTION 6. CONTESTS............................................ 15
SECTION 7. CERTAIN ADJUSTMENTS................................. 17
SECTION 8. MISCELLANEOUS....................................... 17
i
TAX INDEMNITY AGREEMENT
This TAX INDEMNITY AGREEMENT, dated as of July 1, 1996 (this
"Tax Indemnity Agreement" or this "Agreement"), between OLD DOMINION ELECTRIC
COOPERATIVE, a wholesale power supply cooperative organized under the laws of
the Commonwealth of Virginia (together with its successors and assigns, "Old
Dominion"), and EPC CORPORATION, a Delaware corporation (together with its
successors and assigns, the "Owner Participant").
WITNESSETH:
WHEREAS, in entering into the transactions contemplated by the
Operative Documents, the Owner Participant made the assumption that it would be
entitled to certain income tax benefits identified in Section 2 of this
Agreement, and Old Dominion has agreed to indemnify the Owner Participant under
certain circumstances for the loss of certain of such benefits.
NOW, THEREFORE, as an inducement to the Owner Participant to
enter into the transactions contemplated by the Operative Documents and in
consideration of the mutual covenants contained in this Agreement and in the
other Operative Documents, the parties agree as follows:
SECTION 1. DEFINITIONS.
Unless the context otherwise requires, capitalized terms used
in this Tax Indemnity Agreement and not otherwise defined herein shall have the
respective meanings specified in Appendix A to the Participation Agreement,
dated as of July 1, 1996 (the "Participation Agreement"), among Old Dominion,
Clover Unit 2 Generating Trust, a Delaware business trust created pursuant to
the Trust Agreement, Wilmington Trust Company (in the capacities specified
therein), EPC Corporation and Utrecht-America Finance Co. For purposes of this
Agreement:
"Basic Payments" shall mean the Basic Payments plus the
Foundation Basic Payments;
"Head Agreements Consideration" shall mean the Head Equipment
Agreement Consideration plus the Head Foundation Agreement
Consideration;
"Old Dominion Person" shall mean Old Dominion, any Person in
possession of the Undivided Interest or any portion thereof, the
Pollution Control Assets Lessor, Virginia Power or any Affiliate of any
thereof and "Old Dominion Group" shall mean Old Dominion Persons
collectively;
"Operating Agreements" shall mean the Operating Equipment
Agreement together with the Operating Foundation Agreement;
"Owner Participant" includes the affiliated group of
corporations of which the Owner Participant is, was or shall become, a
member and each member thereof if consolidated returns are or shall be
filed for such affiliated group for federal income tax purposes;
"Purchase Option Price" shall mean the Purchase Option Price
together with the Foundation Purchase Option Price;
"True Lease Representation" shall mean any of the
representations, warranties or covenants, as the case may be, set forth
in the sections of the Operative Documents listed on Annex A to this
Tax Indemnity Agreement;
"Undivided Interest" shall mean the Equipment Interest
together with the Foundation Interest; and
"Undivided Interest Consideration" shall mean the sum of the
Head Equipment Agreement Consideration plus the Head Foundation
Agreement.
All references to sections herein are to sections of this Tax Indemnity
Agreement unless otherwise indicated and the words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Tax Indemnity
Agreement as a whole and not to any particular section or other subdivision.
SECTION 2. TAX ASSUMPTIONS.
Old Dominion acknowledges that the Owner Participant entered
into the transactions contemplated by the Operative Documents on the basis of
certain income tax assumptions, including, among others, the following
assumptions for federal, state and local income tax purposes (the "Tax
Assumptions"):
(a) The Head Agreements will be treated as a current sale of
the Undivided Interest by Old Dominion to the Exchangor and the
Undivided Interest Consideration will be treated as the proceeds of
such sale and the purchase price for the Undivided Interest.
(b) The Operating Agreements will be "true leases", the Owner
Participant will be treated as the purchaser, owner and lessor of the
Undivided Interest and Old Dominion will be treated as the lessee
thereof.
(c) The obligations evidenced by the Loans will constitute
indebtedness of the Facility Owner, and the Owner Participant will be
entitled to current deductions under section 163 of the Code for
interest accrued thereon (the "Interest Deductions").
(d) The Undivided Interest will be treated as "tax-exempt use
property" as defined in section 168 of the Code.
(e) The Owner Participant's tax basis in the Undivided
Interest on the Closing Date will be determined pursuant to section
1031 of the Code and will be equal to the excess of the Undivided
Interest Consideration over the amount (the "Exchange Gain") as of the
date hereof between EPC Corporation and Old Dominion; the Owner
Participant will be entitled to cost
2
recovery deductions in respect of each tax basis beginning in the
taxable year of the Owner Participant that includes the Closing Date
under section 168(g)(2) of the Code on a straight-line basis using a
"half-year" convention (or the "mid-month convension" in the case of
caluse (iii)) and a recovery period equal to (i) 125% of the Term [in
the case of the portion of the Undivided Interest which constitutes
ADR "electric utility steam production plant" assets, (ii) 30
years in the case of the portion of the Undivided Interest which
constitutes ADR "electric utility transmission and distribution
plant" assets and (iii) 40 years in the case of the portion of the
Undivided Interest which constitutes non-residential real property
under section 168 of the Code (the "Depreciation Deductions"); and
such tax basis will be allocated among such asset depreciation clauses
in the same proportion as the Undivided Interest Consideration is
allocated in the Appraisal.
(f) The Owner Participant will be entitled to amortize the
Transaction Costs paid by it attributable to (i) the Operating
Agreements on a straight-line basis over the Term and (ii) the Loans on
a straight-line basis over the term of the Loans (collectively, the
"Amortization Deductions").
(g) The Owner Participant's marginal federal income tax rate
at all times during the Term will be 35% and its combined effective
federal, state and local tax rate will be 36.3% (the "Effective Rate")
and the Owner Participant will always have sufficient taxable income to
utilize the Interest Deductions, Depreciation Deductions and
Amortization Deductions.
(h) The Owner Participant's accrual of Basic Payments will not
be computed by reference to, and Owner Participant will not be subject
to the application of, section 467(b)(2) of the Code, and the Owner
Participant's accrual of Basic Payments will not be required to be
computed under the "proportional rent" or "constant rent" rules of the
proposed regulations promulgated under section 467 of the Code,
published June 3, 1996, or of any successor proposed, temporary or
final regulations under section 467 of the Code during the Term.
(i) The Basic Payments and all other amounts received under
the Operating Agreements or with respect to the transactions
contemplated by the Operative Documents and the Interest Deductions,
Amortization Deductions and Depreciation Deductions will be treated as
income or deductions, as applicable, derived from, or allocable to,
sources within the United States pursuant to section 861 of the Code.
(j) The Undivided Interest will be treated as "placed in
service" by the Owner Participant within the meaning of section 168 of
the Code on the Closing Date.
(k) The Facility Owner will be treated as a grantor trust, and
the Owner Participant, as owner of the Facility Owner, will be entitled
and required to take into account, in computing its taxable income, all
items of income, gain, loss or deduction with respect to the Undivided
Interest.
(l) As a result of entering into or in connection with the
performance of the transactions contemplated by the Operative
Documents, the Owner Participant will not be required to include any
amount in gross income other than (i) Basic Payments in the amounts and
at the times such payments are accrued (with respect to payments in
arrears) or at the time such payments
3
are made (with respect to payments in advance) pursuant to the
terms of the Operating Agreements, (ii) gain upon the receipt of
Termination Value (or other amounts based on Termination Value) on the
date such amount is determined to be paid and in the amount equal to
the excess of the payment over the Owner Participant's adjusted
basis in the Undivided Interest or the relevant portion thereof,
(iii) gain upon the receipt of the Purchase Option Price at the time
such payment is required to be made, (iv) any amount payable to the
Owner Participant on an After-Tax Basis on the date such amount is
payable, (v) any other amount to the extent it results in an equal and
offsetting deduction of the same (other than the Depreciation
Deductions, the Amortization Deductions or the Interest Deductions)
character in the same taxable year as the inclusion and (vi) amounts
expressly identified as interest under the Operative Documents at the
time received.
(m) The Owner Participant will be treated as having acquired
the Undivided Interest in exchange for (i) certain other property, (ii)
the assumption (or taking subject to) indebtedness equal to the amounts
advanced pursuant to the Loans, and (iii) cash, pursuant to a
transaction qualified for non-recognition of gain under section 1031 of
the Code and will be entitled to non-recognition of the Exchange Gain
on such exchange property (the "Exchange Non-Recognition").
Old Dominion does not make any representation, warranty or covenant with respect
to any of the foregoing assumptions (except to the extent set forth in Section 3
hereof). Except as expressly provided herein, Old Dominion has no obligation to
indemnify the Owner Participant by reason of any of the above assumptions
proving to be incorrect. If the Owner Participant shall suffer a Loss (as such
term is defined in Section 4 below) with respect to which Old Dominion is
required to pay an indemnity hereunder or in the event of any rental adjustment
under Section 3.4 of the Operating Agreements involving a change in the Tax
Assumptions, then the Tax Assumptions, without further act of the parties
hereto, shall thereafter be and be deemed to be amended, if and to the extent
appropriate, to reflect such Loss or change in Tax Assumptions.
SECTION 3. TAX REPRESENTATIONS, WARRANTIES AND COVENANTS.
Old Dominion represents, warrants and covenants for the purposes of
this Tax Indemnity Agreement that:
(a) All written information supplied by or on behalf of Old
Dominion to the Appraiser or the Engineer and identified in an appendix
to the Appraisal or the Engineering Report as relied upon by the
Appraiser or the Engineer, as the case may be, was accurate in all
material respects as of the date so supplied and as of the Closing
Date, and Old Dominion did not omit to supply any other information,
which in light of the circumstances in which the supplied information
was provided, would render such supplied information misleading in any
material respect.
(b) Neither Old Dominion, the Pollution Control Assets Lessor,
nor any Affiliate of either, will take any position in any filing by it
for United States federal, state or local income tax purposes that is
inconsistent with the Tax Assumptions (unless consistent with a
contrary Final Determination) to which the Owner Participant is a party
or, in connection with an event described
4
in clause (3) of the definition of Final Determination in respect
of a claim for refund by the Owner Participant.
(c) Neither Old Dominion, nor any of its Affiliates, will
acquire directly or indirectly any interest in the Loan Certificates
other than as permitted or required under the Operative Documents.
(d) On the Closing Date, there will not be any agreements,
side letters or other arrangements not disclosed in writing to the
Owner Participant prior to Closing between any Old Dominion Person and
any Person pertaining to either (i) the exercise or non-exercise by Old
Dominion of any of the options set forth in Section 15 of the Operating
Agreements or (ii) the Loan Certificates.
(e) On the Closing Date, Clover Unit 2 will not require any
improvement, modification or addition (other than ancillary items of
removable equipment of a kind that are customarily selected and
furnished by purchasers and lessees of similar equipment) in order for
the Undivided Interest to be rendered complete for its use by any Old
Dominion Person.
(f) After payment of the Undivided Interest Consideration, Old
Dominion and each of its Affiliates will have been fully reimbursed for
the cost of its investment in the Undivided Interest.
(g) The Undivided Interest will have been "placed in service"
within the meaning of section 168 of the Code on or prior to the
Closing Date.
(h) Old Dominion will treat the Head Agreements as effecting a
sale of the Undivided Interest by Old Dominion to the Owner Participant
for all United States federal, state and local income tax purposes.
(i) Old Dominion and Virginia Power have effectively elected
to be excluded from the provisions of subchapter K of the Code with
respect to Clover Unit 2 pursuant to section 761(a) of the Code, and
such exclusion election is in full force and effect as of the Closing
Date.
(j) Old Dominion is not subject to any law, regulation or
charter restriction which will compel it to exercise the purchase
option set forth in Section 15 of the Operating Agreements, and other
than the Operative Documents, Clover Agreements, Old Dominion Indenture
and the Pollution Control Assets Lease Documents, Old Dominion is not
subject to any contract which requires the exercise of such purchase
option or imposes substantial damages if such purchase option is not
exercised.
(k) The allocation of the Undivided Interest Consideration
among the asset depreciation classes for federal income tax purposes is
as set forth in the Appraisal (this is not a representation that the
Owner Participant is the owner of the Undivided Interest for federal
income tax purposes).
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(l) No Old Dominion Person owns directly or indirectly more
than 5% of any Lender and no Lender owns more than 5% of any Old
Dominion Person.
(m) Old Dominion will report as income the payments by the
Bank under Section 3.1 of the Payment Undertaking Agreement (other than
amounts representing a return of capital) and will report as an expense
Old Dominion's obligation for Basic Payments and Foundation Basic
Payments under Section 3.2 of the Operating Equipment Agreement and
Section 3.2 of the Operating Foundation Agreement, provided that there
is no change in Applicable Law affecting the federal income tax
treatment of these items.
(n) Each of the Clover Agreements, the Pollution Control Asset
Lease Documents and the Old Dominion Indenture is legal, valid and
binding on the parties thereto and enforceable in accordance with its
terms.
SECTION 4. INDEMNITY.
(a)(1) If as a result of:
(i) any act or failure to act by an Old Dominion Person
other than (w) the execution and delivery of the Operative Documents,
the Clover Agreements, the Old Dominion Indenture or the Pollution
Control Assets Lease, (x) any act required or expressly permitted by
any Operative Document (other than refinancing pursuant to Section 10
of the Participation Agreement and modifications and substitutions
pursuant to Section 7 or 8 of the Operating Agreements), (y) any
omission to perform any act, which omission is required or expressly
permitted by any Operative Document and (z) any act or failure to act
taken or not taken at the express written request of the Owner
Participant; or
(ii) the breach or inaccuracy of any representation, warranty
or covenant set forth in Section 3(a) through 3(n) of this Agreement or
any True Lease Representation; or
(iii) any Event of Loss or other loss, damage, destruction,
casualty, theft, taking, confiscation, requisition, seizure,
condemnation, requisition of title, requisition of use, removal,
replacement, or substitution of or to Clover Xxxx 0, the Undivided
Interest or any portion or component thereof or interest therein; or
(iv) any payment to Old Dominion or any other Person of any
damages, refunds, warranty, indemnity or other similar amounts with
respect to Clover Unit 2, the Undivided Interest or any portion thereof
to the extent such payment is not paid over to or retained by the
Facility Owner or the Owner Participant; or
(v) any bankruptcy or insolvency of any Old Dominion Person
or any foreclosure or remedies taken under any Transaction Document
while an event of default under any such document shall have occurred
and be continuing;
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the Owner Participant shall for federal income tax purposes lose, shall not
have, or shall suffer a disallowance of the right to claim, shall suffer a
disallowance, elimination, reduction, disqualification or deferral of, or shall
be required to recapture all or any portion of, or shall not claim (based on a
written opinion of independent tax counsel selected by the Owner Participant and
reasonably acceptable to Old Dominion not less than 30 days prior to the date on
which the tax return is filed on which such claim will not be made, to the
effect that there is no Reasonable Basis to make such claim) the Interest
Deductions, Depreciation Deductions, Amortization Deductions or the Exchange
Non-Recognition (any of the events so resulting being referred to hereinafter as
a "Loss of Deductions"); or
(2) if as a result of:
(i) any failure of the Owner Participant to be treated as
the owner of the Undivided Interest as a result of an event described
in clauses (i) or (ii) of Section 4(a)(1);
(ii) any (x) Event of Loss to the extent the actual date on
which the income tax consequences thereof are required to be taken into
account is different from the date assumed in calculating the income
tax consequences reflected in the applicable Termination Value or (y)
alterations, modifications or improvements of Clover Unit 2 or the
Undivided Interest or any portion thereof (an "Improvement") or
refinancing of the Loans; or
(iii) any payment to Old Dominion or any other Person of any
damages, refunds, warranty, indemnity or other similar amounts with
respect to Clover Unit 2, the Undivided Interest or any portion thereof
to the extent such payment is not paid over to or retained by the
Facility Owner or the Owner Participant; or
(iv) the prepayment of Basic Payments, or any Old Dominion
Person's taking of a deduction for Basic Payments with respect to a
period that is inconsistent with the allocation of Basic Payments under
the Operating Agreements (unless consistent with a contrary Final
Determination to which the Owner Participant is a party or, in
connection with an event described in clause (3) of the definition of
Final Determination, in respect of a claim for ______ by the Owner
Participant); or
(v) a change, adjustment or modification of the schedule of
Basic Payments following an Event of Default; or
(vi) the payment by any Old Dominion Person of any costs or
expenses of the Owner Trustee, Owner Participant, Facility Owner, Trust
Company, Lender, Agent or any other Person in respect of the
transactions contemplated by the Operative Documents; or
(vii) any bankruptcy or insolvency of any Old Dominion Person
or any foreclosure or other pursuit of remedies taken under any
Transaction Document while an event of default under any such document
shall have occurred and be continuing; or
7
(viii) any loss, damage, destruction, casualty, theft, taking,
confiscation, requisition, seizure or condemnation of the Undivided
Interest or Clover Unit 2 or any portion or component thereof or
interest therein not constituting an Event of Loss (an "Other Loss");
or
(ix) the breach or inaccuracy of any representation, warranty
or covenant set forth in clauses (b), (c), (d), (e), (l) or (m) of
Section 3.
the Owner Participant shall be required to include in gross income for federal
income tax purposes any amount at any time other than as set forth in Section
2(l) (an "Income Inclusion", any "Loss of Deductions" or "Income Inclusion"
being referred to herein as a "Loss"), then Old Dominion will pay to the Owner
Participant an indemnity determined pursuant to Section 4(b) below. If a Loss
shall occur, the Loss shall be deemed to include a corresponding loss of tax
benefits for state and local income tax purposes, as follows: (x) state and
local income tax deductions shall be treated as allowable or lost in the same
amounts, at the same time and to the same extent as the corresponding federal
income tax deduction are allowable or lost, and (y) an Income Inclusion shall be
treated as requiring an inclusion in gross income for state and local income tax
purposes corresponding in timing and amounts to the inclusion for federal income
tax purposes.
(b) If a Loss shall occur, then Old Dominion will pay to the
Owner Participant as an indemnity an amount, at the election of Old Dominion,
determined in accordance with paragraph (1), (2) or (3) below:
(1) So long as no Event of Default has occurred and is
continuing and subject to Old Dominion complying with Sections 7.6 and
7.8 of the Participation Agreement in respect of any increases in Basic
Payments, Equity Exposure Amounts and Termination Values occasioned by
the adjustment to Basic Payments described in this clause (1), Old
Dominion may elect to make indemnity payments in the form of upward
adjustments in the amount of Basic Payments (with corresponding
adjustments to the Termination Values) payable by Old Dominion pursuant
to the Operating Agreements, commencing on the next Payment Date after
the date the payment obligation commences under Section 4(c) below and
continuing on each Payment Date occurring thereafter during the Term,
in amounts such that, on an After-Tax Basis, the sum of all such
payments provided by this paragraph (1) shall be at least sufficient to
preserve the Net Economic Return of the Owner Participant as if such
Loss had not occurred. The computation thereof shall be made utilizing
the methodology and assumptions, including the Tax Assumptions,
utilized by the Owner Participant in determining Basic Payments and
Termination Values, except as such assumptions shall be varied to take
into account such Loss and any prior Loss. The computation of such
adjustment to Basic Payments under this paragraph (1) also shall take
into account any past, current and anticipated interest, penalties and
additions to tax imposed by the IRS or any state or local taxing
authority and payable by the Owner Participant as a result of such Loss
(other than penalties or additions to tax payable under the Code or
applicable state or local tax law, together with interest imposed
thereon, caused by negligence or disregard of rules or regulations by
the Owner Participant (other than negligence or disregard of rules
or regulations based upon the Owner Participant's compliance
with its obligations under this Agreement, including its
obligations under Section 6 hereof, or by reason of reporting the
transaction in a manner consistent with the assumptions set forth in
Section 2 hereof)). Such computation shall be made assuming that at
all
8
times (I) the Owner Participant has sufficient taxable income to
make full use of such Loss in the current year in which all of the Tax
Benefits that are the subject of such Loss (or result from the Loss
or the events giving rise thereto) were assumed (or, in the case
of benefits that result from the Loss or the events giving rise
thereto, are reasonably anticipated) to be available, and (II)
with respect to a Loss of Deductions, the Owner Participant shall be
deemed to pay income taxes at a combined effective rate equal to the
Effective Rate, and with respect to an Income Inclusion, the
Owner Participant shall be deemed to pay income taxes at the highest
combined effective marginal corporate federal income tax rate and
comparable state and local tax rates (calculated by taking into
account the deductibility of state and local tax for federal
income tax purposes) (the "Highest Rate").
(2) If Old Dominion has not elected to pay, or cannot elect to
pay, an indemnity pursuant to either paragraph (1) above or paragraph
(3) below by providing written notice of such election to the Owner
Participant prior to the date that Old Dominion's payment obligation
commences under Section 4(c) below, then Old Dominion shall pay to the
Owner Participant as an indemnity a lump-sum amount which, on an
After-Tax Basis, shall be sufficient to preserve the Net Economic
Return of the Owner Participant as if such Loss had not occurred. The
computation of such lump-sum amount shall be made by the Owner
Participant utilizing the methodology and assumptions, including the
Tax Assumptions, utilized by the Owner Participant in determining Basic
Payments and Termination Values, except as such assumptions shall be
varied to take into account such Loss and any prior Loss. For the
purpose of calculating the amount of income taxes presumed to be
payable by the Owner Participant as a result of such Loss, (I) the
Owner Participant shall be deemed to have sufficient taxable income to
make full use of such Loss in the current year in which all of the Tax
Benefits that are the subject of such Loss (or result from the Loss or
the events giving rise thereto) were assumed (or, in the case of
benefits that result from the Loss or the events giving rise thereto,
are reasonably anticipated) to be available, and (II) with respect to a
Loss of Deductions, the Owner Participant shall be deemed to pay income
taxes at a combined effective rate equal to the Effective Rate and with
respect to an Income Inclusion, the Owner Participant shall be deemed
to pay income taxes at a combined effective rate equal to the Highest
Rate. The computation of such lump-sum amount under this paragraph (2)
also shall take into account any past, current and anticipated
interest, penalties and additions to tax imposed by the IRS or any
state or local taxing authority and payable by the Owner Participant as
a result of such Loss (other than penalties or additions to tax payable
under the Code or applicable state or local tax law, together with
interest imposed thereon, caused by negligence or disregard of rules or
regulations by the Owner Participant (other than negligence or
disregard of rules or regulations based upon the Owner Participant's
compliance with its obligations under this Agreement, including its
obligations under Section 6 hereof, or by reason of reporting the
transaction in a manner consistent with the assumptions set forth in
Section 2 hereof)).
(3) So long as no Event of Default has occurred and is
continuing and subject to Old Dominion complying with Sections 7.6 and
7.8 of the Participation Agreement in respect of any increases in Basic
Payments, Equity Exposure Amounts and Termination Values occasioned by
the adjustment to Basic Payments described in this clause (3), Old
Dominion may elect to pay to the Owner Participant as an indemnity from
time to time on an After-Tax Basis such amount or amounts as shall be
equal to the additional income taxes assumed to be payable by the Owner
9
Participant as a result of such Loss as provided in this paragraph (3).
For the purpose of calculating the amount of income taxes presumed to
be payable by the Owner Participant as a result of such Loss, (I) the
Owner Participant shall be deemed to have sufficient taxable income to
make full use of such Loss in the current year in which all of the Tax
Benefits that are the subject of such Loss (or result from the Loss or
the events giving rise thereto) were assumed (or, in the case of
benefits that result from the Loss or the events giving rise thereto,
are reasonably anticipated) to be available, and (II) with respect to a
Loss of Deductions, the Owner Participant shall be deemed to pay income
taxes at a combined effective rate equal to the Effective Rate, and
with respect to an Income Inclusion, the Owner Participant shall be
deemed to pay income taxes at a combined effective rate equal to the
Highest Rate. The computation of such amount under this paragraph (3)
also shall take into account any past, current or anticipated interest,
penalties and additions to tax imposed by the IRS or any state or local
taxing authority and payable by the Owner Participant as a result of
such Loss (other than penalties or additions to tax payable under the
Code or applicable state or local tax law, together with interest
imposed thereon, caused by negligence or disregard of rules or
regulations by the Owner Participant (other than negligence or
disregard of rules or regulations based upon the Owner Participant's
compliance with its obligations under this Agreement, including its
obligations under Section 6 hereof, or by reason of reporting the
transaction in a manner consistent with the assumptions set forth in
Section 2 hereof)).
(c) Any amount payable by Old Dominion to the Owner
Participant pursuant to Section 4(b) shall be paid not later than (or, in the
case of a Basic Payments increase under Section 4(b)(1) hereof, shall commence
not later than the next Payment Date after) the latest to occur of (i) 30 days
following Old Dominion's receipt of the Owner Participant's written notice to
Old Dominion pursuant to Section 6 hereof, (ii) if any such indemnity payment
relates to a Loss that is contested pursuant to Section 6 hereof, 30 days
following the date of a Final Determination with respect to such Loss, and (iii)
if Old Dominion shall elect to indemnify the Owner Participant pursuant to
paragraph (3) of Section 4(b) hereof, the date which is five Business Days prior
to the date on which the Owner Participant shall be required to pay the
additional federal income taxes in question (such date to be determined based on
the assumptions set forth in Section 4(b)(3) hereof); PROVIDED, HOWEVER, that
the date required for payment (or commencement of a Basic Payment increase under
Section 4(b)(1) hereof) shall not be earlier than 10 days following the delivery
to Old Dominion of the Officer's Certificate required pursuant to Section 4(d)
hereof, or, if Old Dominion shall seek verification pursuant to Section 4(d)
hereof, 10 days following the completion of such verification; PROVIDED,
FURTHER, Old Dominion shall pay interest on the amount ultimately determined to
be due pursuant to such verification from the date such payment otherwise would
have been due at the rate applicable to underpayments of federal income taxes
for the period in question; and PROVIDED, FURTHER, if Old Dominion shall elect
payment under either paragraph (1) or (3) of Section 4(b) above, it shall
provide a Qualifying Deposit, Qualifying Surety Bond or Qualifying Letter of
Credit with respect to any increase in Basic Payments or Equity Exposure Amounts
resulting therefrom on or before the date the initial indemnity payment
hereunder is required to be made. If Old Dominion shall elect to pay such sum
prior to the latest of the dates described in clauses (i), (ii) and (iii) of the
preceding sentence, then Old Dominion shall not be required to pay the Owner
Participant the amount of any interest, penalties or additions to tax that shall
be attributable to the period following such payment by Old Dominion if there is
a procedure whereby the Owner Participant can make a payment or deposit only
with respect to the Loss that will stop the accumulation of such interest,
penalties or additions to tax and that in Owner Participant's judgment will not
have any unindemnified or material adverse financial effect on the Owner
Participant or its business
10
operations or adversely affect the Owner Participant's right to contest
vigorously any claims the IRS may have with respect to matters other than
matters related to the transactions contemplated by the Operative
Documents for which Old Dominion is providing full indemnification
(and the Owner Participant will promptly return any such sum to Old Dominion at
its written request therefor if no such procedure is available).
(d) When requesting payment by Old Dominion pursuant to this
Section 4, the Owner Participant shall, not less than 10 days prior to the
latest of the dates described in clauses (i), (ii) and (iii) of Section 4(c),
deliver to Old Dominion an Officer's Certificate setting forth the amount
payable by Old Dominion and computing in reasonable detail such amount under
Section 4(b); provided that the failure to provide such Certificate on a timely
basis will not affect Owner Participant's rights hereunder. If Old Dominion
shall disagree with the Owner Participant's calculation of the amount to be paid
by Old Dominion under Section 4(b), such amount shall be verified by independent
nationally recognized accountants selected by the Owner Participant and
reasonably acceptable to Old Dominion (the "Independent Public Accountants").
The costs of such verification shall be borne by Old Dominion unless such
verification shall result in an adjustment in Old Dominion's favor of five
percent or more of the net present value (using a discount rate equal to the
rate applicable to underpayments of federal income taxes for the period in
question and calculating such value as of the date such payment becomes due and
payable or commences under this Agreement) of the indemnity payment or payments
computed by the Owner Participant, in which case such costs shall be borne by
the Owner Participant. The Owner Participant agrees to cooperate with such
Independent Public Accountants and to supply them with all information
reasonably necessary to permit them to accomplish such review and determination,
subject to the execution by such Independent Public Accountants of a
confidentiality agreement reasonably acceptable to Owner Participant which shall
provide that such information shall be for the confidential use of the
Independent Public Accountants and shall not be disclosed to Old Dominion or to
any other Person. Old Dominion and the Owner Participant agree that the sole
responsibility of the Independent Public Accountants shall be to verify the
calculation of payments pursuant to paragraphs (1), (2) or (3) of Section 4(b)
(setting forth fully the assumptions on which such verification is based) and
that matters of interpretation of this Agreement are not within the scope of the
Independent Public Accountants' responsibility. Neither the Independent Public
Accountants nor Old Dominion will have any right to examine the tax returns of
the Owner Participant in connection with the verification procedure described in
this Section 4(d) or otherwise. The review and determination of such
calculations by the Independent Public Accountants pursuant to this procedure
shall be final.
(e) Notwithstanding the foregoing and any other provision of
this Agreement or the other Operative Documents, Old Dominion shall not have any
liability to the Owner Participant for indemnification under this Section 4 for
any Loss (or any interest, penalties or additions to tax with respect to such
Loss) if such Loss results from one or more of the following:
(i) any voluntary or involuntary sale, transfer or other
disposition by the Facility Owner or the Owner Participant or an
Affiliate of either (each a "member of the Facility Owner Group", and
collectively, the "Facility Owner Group") of (x) any interest in or
arising under the Operative Documents, (y) the Undivided Interest or
any interest therein or (z) any interest in the Owner Participant or
the Facility Owner unless in each case, such sale, transfer or other
disposition occurs while an Event of Default is continuing or is the
result of any Event of Loss, Other Loss,
11
Improvement, refinancing, sublease or other transfer resulting
from any action of any Old Dominion Person;
(ii) any Event of Loss or any other event whereby Old
Dominion is required to pay, and shall have paid in full, Termination
Value and any other amounts owing under the Operative Documents or an
amount determined by reference thereto, except to the extent that the
Termination Value or such amount determined by reference thereto, as
the case may be, does not properly reflect the timing of the Loss
resulting from such event;
(iii) the failure of a member of the Facility Owner Group to
have sufficient taxable income to benefit from any of the benefits
described in the Tax Assumptions;
(iv) any amendment to or change in the Code, Treasury
Regulations or, provided taxpayers are permitted to rely thereon,
administrative pronouncements and executive orders which shall occur
after the Closing Date, other than in respect of any Event of Loss,
Other Loss, Improvement (other than any required Improvement) or
refinancing;
(v) the failure for federal income tax purposes of (x) the
Head Agreements to be treated as a sale of the Undivided Interest or
the prepaid rent under the Head Agreements to be treated as the
proceeds of such sale, (y) the Operating Agreements to be treated as a
"true lease" or (z) the Facility Owner to be considered the borrower
under the Loans or the owner of the Undivided Interest, unless, in each
case, the loss arising from any such failure is the result of any event
described in clause (i), (ii) or (v) of Section 4(a)(1) hereof;
(vi) the failure of a member of the Facility Owner Group to
claim the Interest Deductions, the Depreciation Deductions, or the
Amortization Deductions in a timely and proper manner unless (x) such
failure shall be due to the failure of a member of the Old Dominion
Group timely to provide Owner Participant with information within the
control of such Person requested in writing by Owner Participant, (y)
the claiming of such Tax Benefit would be inconsistent with a Final
Determination with respect to which there was a prior unsuccessful
contest pursuant to Section 6, or (z) Owner Participant shall have
furnished Old Dominion with an opinion of tax counsel to the effect
that Owner Participant does not have a reasonable basis for claiming
such Tax Benefit;
(vii) the failure of the appropriate member of the Facility
Owner Group to contest a proposed adjustment in accordance with, and to
the extent required by, Section 6 of this Agreement, if such failure
effectively precludes the initiation or continuation of such contest;
(viii) the failure of the Facility Owner to be treated as a
pass-through entity or otherwise disregarded for federal income tax
purposes;
(ix) any member of the Facility Owner Group being or becoming
for federal income tax purposes a charitable organization, a tax-exempt
entity within the meaning of section 168(h) of the Code, an agency or
instrumentality of the United States, a state or political subdivision
thereof or an international organization or the status of a member of
the Facility Owner Group as an entity
12
subject to the provisions of sections 55, 56, 57, 58, 59, 168(f)(2),
465, 469, 501, 542, 552, 851, 856 or 1361 of the Code;
(x) the application of sections 59A, 168(d)(3) or 291 of the
Code other than as a result of an event described in Section 4(a)(2)
hereof;
(xi) the application of Section 467 of the Code other than as
a result of an event described in Section 4(a)(2) hereof (except
Improvements required or permitted under the Operating Agreements and
events described in clause (iii), (vi) (but only with respect to costs
or expenses required to be paid under the Operative Documents), or
(viii) of Section 4(a)(2));
(xii) a change in the Owner Participant's taxable year or the
Owner Participant having a short taxable year;
(xiii) unless the Owner Participant exercises the option under
Section 15.3(a) of the Operating Agreements, the inclusion in income by
the Owner Participant upon termination of the Operating Agreements,
modifications or additions to the Undivided Interest;
(xiv) the failure of the Owner Participant to have an initial
tax basis in the Undivided Interest equal to the excess of the
Undivided Interest Consideration over the Exchange Gain, other than as
a result of an event described in clause (i), (ii), (iii) or (iv) of
Section 4(a)(1) hereof;
(xv) any failure of (a) the Owner Participant's acquisition
of the leasehold interest in the Undivided Interest created by the Head
Agreements to constitute "like kind exchange" property under section
1031 of the Code (as assumed by Section 2(m) hereof with respect to the
exchanged property) or (b) such exchange to qualify for nonrecognition
treatment under section 1031 of the Code, in each case other than as a
result of an event described in Section 4(a)(1) hereof;
(xvi) an amendment, supplement, modification or waiver to any
Operative Document to which any member of the Facility Owner Group is a
party and to which Old Dominion is not a party, which is not requested
by or consented to by Old Dominion in writing unless (x) it may be
necessary or appropriate to, and is in conformity with, any such
amendment, supplement, modification or waiver requested by or consented
to by Old Dominion in writing or (y) it is required by the terms of the
Operative Documents;
(xvii) penalties or additions to tax under section 6662 or 6663
of the Code or relating to estimated tax, in either case to the extent
resulting from or measured by matters unrelated to the transactions
contemplated by the Operative Documents; and
(xviii) a determination that the Facility Owner is not holding
the Undivided Interest in the ordinary course of a trade or business or
that the Owner Participant did not enter into the leasing transaction
completed by the Participant Agreement for profit, in each case other
than as a result of an event described in clause (i) or (ii) of Section
4(a)(1) hereof.
13
SECTION 5. TAX SAVINGS.
If Old Dominion indemnifies the Owner Participant with respect
to any Loss pursuant to Section 4(a) hereof, and the Owner Participant shall
realize with respect to any year federal income tax savings that would not have
been realized but for such Loss or the events giving rise thereto and which tax
savings were not taken into account in calculating Old Dominion's indemnity
payment (or adjustment to Basic Payments payable) to the Owner Participant, then
the Owner Participant shall pay to Old Dominion an amount equal to the sum of
(i) such federal income tax savings and (ii), in the case of an Income
Inclusion, the amount of any state and local income tax savings and (iii) any
tax benefit realized by the Owner Participant from the payment contemplated by
clauses (i) and (ii) above. For the purpose of calculating the amount of the
federal, state and local income tax savings realized by the Owner Participant,
(A) the Owner Participant shall be deemed to have sufficient federal, state and
local taxable income to make full use in the current year of all of the tax
benefits that would not have been realized but for such Loss or the events
giving rise thereto, (B) the Owner Participant shall be deemed to have state and
local income tax consequences that correspond to the Owner Participant's federal
income tax consequences, and (C) with respect to tax savings related to a Loss
of Deductions, the Owner Participant shall be deemed to have paid income taxes
at the Effective Rate, and with respect to tax savings related to an Income
Inclusion or a tax benefit realized from a payment hereunder, the Owner
Participant shall be deemed to have paid income taxes at the Highest Rate. The
amount payable by the Owner Participant to Old Dominion pursuant to clauses (i)
and (ii) of this Section 5 shall not exceed the excess of the amount of all
prior payments made to the Owner Participant by Old Dominion pursuant to Section
4 hereof with respect to the Loss that gave rise to such tax savings (net of any
amount necessary to make such prior payments on an After-Tax Basis) over the
amounts previously paid by the Owner Participant to Old Dominion pursuant to
clauses (i) and (ii) of this Section 5 with respect to such Loss; PROVIDED, that
any such excess shall be carried forward and shall offset, to the extent
thereof, any future liability of Old Dominion under Sections 4 and 8 hereof with
respect to such Loss. The loss of any tax savings subsequent to the year the
Owner Participant realized such tax savings shall be treated as a Loss that is
indemnifiable pursuant to Section 4, but without regard to Section 4(d) and only
to the extent of any payment by the Owner Participant pursuant to this Section 5
with respect to such lost tax savings. Any payment due to Old Dominion pursuant
to this Section 5 shall be paid promptly and in any event within 30 days after
the Owner Participant shall realize the tax savings as determined in accordance
with the calculation methods and assumptions set forth in this Section 5;
PROVIDED, HOWEVER, that the amount of tax savings payable to Old Dominion
pursuant to this Section 5 shall not be payable during the continuation of a
Payment Default, Bankruptcy Default, or Event of Default or before such time as
Old Dominion shall have made all payments or indemnities then due pursuant to
this Agreement.
14
SECTION 6. CONTESTS.
(a) If an adjustment shall be proposed by the IRS in writing
that, if sustained, would result in a Loss for which Old Dominion could be
required to indemnify the Owner Participant under this Agreement, the Owner
Participant agrees promptly to notify Old Dominion in writing of such proposed
adjustment; PROVIDED, HOWEVER, that any failure to provide such notice shall not
relieve Old Dominion of any obligation to indemnify the Owner Participant
hereunder unless such failure effectively precludes the initiation or
continuation of the contest of such adjustment. If (i) within 30 days after
receipt of such notice Old Dominion shall request in writing that the Owner
Participant contest such proposed adjustment and (ii) the Owner Participant
shall have received, at the commencement of the contest and before each level of
judicial proceeding, an opinion of Independent Tax Counsel, to the effect that
there is a Reasonable Basis for contesting the proposed adjustment (and, in the
case of an appeal from an adverse judicial determination, an opinion from such
counsel to the effect that it is more likely than not) that such adverse
determination will be reversed or substantially modified upon appeal in a manner
favorable to the taxpayer) (which opinions (a) will be furnished at Old
Dominion's expense, and (b) the Owner Participant will assist in good faith and
with diligence in promptly procuring), the Owner Participant shall contest such
proposed adjustment; PROVIDED, HOWEVER, that the Owner Participant may, in its
sole discretion, either pay the tax proposed and xxx for a refund or contest the
proposed adjustment in any permissible forum considering, however, in good faith
such requests as Old Dominion may make concerning the most appropriate forum in
which to proceed. Notwithstanding the foregoing, the Owner Participant shall not
be required to pursue any such contest unless (v) Old Dominion shall have agreed
in writing to pay and shall be paying on demand all reasonable costs and
expenses that the Owner Participant shall incur in connection with contesting
such proposed adjustment, including, without limitation, reasonable attorneys',
accountants' and investigatory fees and disbursements; (w) the proposed
adjustment that could result in a payment by Old Dominion (if a lump-sum amount
were to be paid pursuant to Section 4(b)(2) hereof) in connection with such
proposed adjustment, taking into account the amount of all similar and logically
related adjustments with respect to the transactions contemplated by the
Operative Documents that could be raised in an audit of any other taxable year
of the Owner Participant (including any future taxable year) not barred by the
statute of limitations shall be at least $100,000 and at least $250,000 with
respect to any judicial appeal; (x) no Event of Default shall have occurred and
be continuing; and (y) if the Owner Participant shall determine to pay the tax
proposed and xxx for a refund, Old Dominion shall advance to the Owner
Participant on an interest-free basis and with no additional net after-tax cost
to the Owner Participant sufficient funds to pay the tax and interest, penalties
and additions to tax payable with respect thereto (to the extent such amount is
indemnified against pursuant to Section 4 hereof (an "Advance")); and PROVIDED,
HOWEVER, that the Owner Participant shall not be required to pursue any appeal
to the United States Supreme Court.
(b) In connection with any proposed adjustment described in
Section 6(a) hereof, the Owner Participant shall not make payment of such
proposed adjustment for at least 30 days after the giving of written notice of
such proposed adjustment to Old Dominion (except that if the Owner Participant
shall be required by law or regulation to take action with respect to any such
adjustment prior to the end of such 30-day period, the Owner Participant shall,
in such notice to Old Dominion, so inform Old Dominion, and the Owner
Participant shall not take any action with respect to such adjustment without
the consent of Old Dominion (not unreasonably to be withheld) before the date
on which the Owner Participant shall be required by law or regulation to take
action). Notwithstanding anything herein to the contrary, the Owner
15
Participant shall have full control over any contest pursuant to this Section
6 and shall determine in its sole discretion the nature of all actions to
be taken in connection with any contest including the right to pursue or
forego any administrative proceedings; PROVIDED, HOWEVER, that the Owner
Participant shall contest such claim at the administrative level if the
failure to do so would preclude the availability of all judicial remedies; and
PROVIDED, FURTHER, the Owner Participant shall consult in good faith with Old
Dominion and its counsel in the contest of any claim and shall keep such
counsel reasonably informed regarding such contest. Nothing contained in
this Section 6 shall require the Owner Participant to contest a proposed
adjustment that it would otherwise be required to contest pursuant to this
Section 6 if the Owner Participant (i) waives the payment by Old Dominion of
any amount that might otherwise be payable by Old Dominion under this
Agreement by way of indemnity in respect of such proposed adjustment and (ii)
pays to Old Dominion any amount of taxes, interest, penalties and additions
to tax previously paid or advanced by Old Dominion pursuant to this
Agreement with respect to such proposed adjustment, plus interest on such
amounts at the IRS rate for refunds, payable from the date of payment by Old
Dominion to the Owner Participant of such amounts to (but excluding) the
date of repayment of such amounts by the Owner Participant to Old Dominion;
PROVIDED, HOWEVER, that if the Owner Participant settles a proposed adjustment
such that Old Dominion is precluded as a matter of law from initiating
or continuing a contest hereunder of any adjustment for any other taxable
period, the Owner Participant shall be deemed to have waived the payment by Old
Dominion under this Agreement of any indemnity amounts in respect of such other
adjustment.
(c) If Old Dominion shall have requested the Owner Participant
to contest a proposed adjustment as above provided and shall have duly complied
with all the terms of this Section 6, Old Dominion's liability for
indemnification due under Section 4 hereof shall, at Old Dominion's election
(except for amounts provided for under Section 6(a) hereof), be deferred until
Final Determination of the liability of the Owner Participant. At such time, Old
Dominion shall become obligated for the payment of any indemnification due under
Section 4 hereof resulting from the outcome of such contest. Upon payment in
full by Old Dominion of any indemnity amounts due under this Agreement, the
Owner Participant shall become obligated to refund to Old Dominion an amount
equal to any amount received as a refund of income taxes by the Owner
Participant or credited to the Owner Participant (including any refund or credit
that would have been received but for a counterclaim or other claim not
indemnified by Old Dominion hereunder) that is fairly attributable to advances
or indemnity payments made by Old Dominion under this Agreement, together with
any interest received (or that would have been received) by the Owner
Participant on such refund (after reduction by any tax incurred by Owner
Participant by reason of the receipt or accrual of such interest), plus an
amount equal to any tax benefit realized by the Owner Participant as the result
of the payment contemplated by this sentence. Such obligations of the Owner
Participant and Old Dominion will first be set off against each other, and any
difference owing by either party shall be paid within 30 days after such Final
Determination but not prior to the date determined in accordance with Section
4(b) hereof.
16
SECTION 7. CERTAIN ADJUSTMENTS.
If Old Dominion shall become obligated to make payments under
this Agreement, the Owner Participant shall, if appropriate, make adjustments to
the schedules of Equity Exposure Amounts, Termination Value and the Purchase
Option Price in accordance with the methods, and subject to the constraints,
with which such amounts were originally computed to reflect such Loss and,
subject to the verification rules set forth in Section 3.4 of the Operating
Agreements, in a manner which will preserve its Net Economic Return and prevent
any duplication of payments or any payment for Losses previously paid. If an
event giving rise to the payment of an amount determined by reference to a
schedule of Termination Values shall occur and the date as of which the Owner
Participant shall be affected for tax purposes shall be earlier than the date
taken into account in computing such schedule, such values shall be
appropriately adjusted based otherwise on the same methodology and assumptions
previously used by the Owner Participant in calculating such schedule.
SECTION 8. MISCELLANEOUS.
(a) PAYMENTS. Any payments to be made to the Owner Participant
pursuant to this Agreement, including any increase in Basic Payments pursuant to
Section 4(b)(1) hereof, shall constitute Supplemental Payments and shall (unless
paid by way of set-off as provided for herein) be made directly to the Owner
Participant. All payments to be made hereunder shall be made by wire transfer of
immediately available funds to a bank account of the Owner Participant or Old
Dominion, as the case may be, in the continental United States as specified by
the recipient thereof in written directions to the payor, or if no such
direction shall have been given, by check of the payor or any Affiliate thereof
payable to the order of the recipient thereof and mailed to the recipient
thereof by certified mail, postage prepaid, at its address as set forth in the
Participation Agreement.
(b) LATE PAYMENTS. Any late payment by either party of any of
its obligations under this Agreement shall result in the obligation on the part
of such party promptly to pay an amount equal to interest at the Overdue Rate.
(c) EFFECT OF OTHER INDEMNITIES. Old Dominion's obligations
under the indemnities provided for in this Agreement shall be those of a primary
obligor whether or not the Owner Participant shall also be indemnified with
respect to the same matter under the terms of the Participation Agreement, the
Trust Agreement or any other document or instrument, and the Owner Participant
may in seeking indemnification from Old Dominion pursuant to any provisions of
this Agreement proceed directly against Old Dominion without first seeking to
enforce any other right of indemnification.
(d) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Agreement shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
17
(e) SURVIVAL. All warranties, representations and covenants
made by either party hereto, herein or in any certificate or other instrument
delivered by either such party or on the behalf of either such party under this
Agreement, shall be considered to have been relied upon by the other party
hereto and shall survive the consummation of the transactions contemplated
hereby on the Closing Date regardless of any investigation made by either party
or on behalf of either party. The obligations and liabilities of the parties
arising under this Agreement shall continue in full force and effect,
notwithstanding the assignment, expiration or other termination of the Operating
Agreements, until all such obligations have been met and such liabilities have
been paid in full, whether by expiration of time, by operation of law or
otherwise.
(f) AMENDMENTS AND WAIVERS. No term, covenant, agreement or
condition of this Agreement may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by the
party against whom enforcement of such change is sought.
(g) COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together only one instrument.
(h) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of, and shall be enforceable by, the parties
hereto and their respective successors and assigns as permitted by and in
accordance with the terms hereof, including each successive holder of the
Beneficial Interest permitted under Section 5.1 of the Participation Agreement.
In the event of an indemnity that was not fully paid or a tax savings that was
not fully repaid before the transfer, the transferee shall be entitled to
receive such indemnity or shall repay such savings (or shall be required to pay
such indemnity or be entitled to receive such repayment) at the same times and
in the same amounts as would have been payable had there been no transfer.
Except as expressly provided herein or in the other Operative Documents, neither
party hereto may assign its rights or delegate its obligations hereunder without
the consent of the other party hereto.
(i) HEADINGS AND TABLE OF CONTENTS. The headings of the
sections of this Agreement and the Table of Contents are inserted for purposes
of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE IN ALL RESPECTS
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
(k) NOTICES. Unless otherwise expressly specified or permitted
by the terms of this Tax Indemnity Agreement, all communications and notices
provided for herein to a party hereto shall be in writing or by a
telecommunications device capable of creating a written record, and any such
notice shall become effective (i) upon personal delivery thereof, including,
without limitation, by overnight mail or courier service, (ii) in the case of
notice by United States mail, certified or registered, postage prepaid, return
receipt requested, upon receipt thereof, or (iii) in the case of notice by such
a telecommunications device, upon transmission thereof, PROVIDED such
transmission is promptly confirmed by either of the methods set forth in clauses
(i) or (ii) above, in each case addressed to such party at its address set forth
in
18
the Participation Agreement or at such other address as such party may
from time to time designate by written notice to the other party hereto.
(l) RECORDS. Old Dominion covenants that it will maintain or
cause to be maintained and retain sufficient factual records (to the extent such
records are maintained by Old Dominion, any sublessee, or any trustee for or
Affiliate of any thereof, in the ordinary course of their respective businesses
or as Owner Participant shall reasonably request) to enable the Owner
Participant to prepare required United States federal, state and local income
tax returns. Upon the request of the Owner Participant and as promptly as
practicable upon receipt of such request, Old Dominion shall deliver such
records to the Owner Participant at the expense of Old Dominion. In addition, as
soon as practicable, Old Dominion shall provide or cause to be provided (at the
expense of Old Dominion) to the Owner Participant such information (in form and
substance reasonably satisfactory to the Owner Participant) as the Owner
Participant may reasonably request from and as shall be reasonably available to
Old Dominion or any sublessee, trustee or Affiliate to enable the Owner
Participant to fulfill its tax return filing obligations, to respond to requests
for information, to verify information in connection with any income tax audit
and to participate effectively in any tax contest.
(m) EFFECTIVENESS OF AGREEMENT. This Agreement has been dated
as of the date first above written for convenience only. This Agreement shall be
effective on the date of execution and delivery by each of Old Dominion and the
Owner Participant.
19
IN WITNESS WHEREOF, the parties hereto have caused this Tax
Indemnity Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized.
OLD DOMINION ELECTRIC COOPERATIVE
By: /s/ XXXXXX X. XXXXXX
---------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
Date: July 31, 1996
EPC CORPORATION,
as Owner Participant
By: /s/ XXXXXX X. XXXXXXXXXX
---------------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: Vice President
Date: July 31, 1996
ANNEX A TO
TAX INDEMNITY AGREEMENT
Specified Representations, Warranties and Covenants
The representations, warranties or covenants, as the case may be, set
forth in the following sections of the Participation Agreement: 3.3(b), 3.3(c),
3.3(e), 3.3(f), 3.3(g), 3.3(k), 3.3(m), 3.3(p), 3.3(q), 3.3(r), 3.3(s) and 7.4.
Annex-1
