EXHIBIT 10.32.8
THE PURPOSE OF THIS INSTRUMENT IS TO MAKE
This instrument, when recorded, TECHNICAL CORRECTIONS TO THE "FACILITY
should be returned to: SUBLEASE" REFERRED TO IN THE SHORT FORM OF
FACILITY SUBLEASE AGREEMENT (P1), DATED
Robert N. Farrar DECEMBER 30, 1996, RECORDED IN DEED BOOK
Attorney at Law ____, PAGE ____, AND THE LONG FORM OF SUCH
The Carnegie Building FACILITY SUBLEASE RECORDED IN DEED BOOK ____,
607 Broad Street, Suite 141 PAGE ____, OF THE RECORDS OF THE CLERK OF
Rome, Georgia 30161-3059 SUPERIOR COURT OF FLOYD COUNTY, GEORGIA. IT
IS THE INTENTION OF THE PARTIES THAT THIS
DOCUMENT SUPERCEDE SUCH OTHER DOCUMENTS IN
THEIR ENTIRETY.
=======================================
FACILITY SUBLEASE AGREEMENT
(P1)
Dated as of December 30, 1996
between
ROCKY MOUNTAIN LEASING CORPORATION
and
OGLETHORPE POWER CORPORATION
(AN ELECTRIC MEMBERSHIP GENERATING
& TRANSMISSION CORPORATION)
ROCKY MOUNTAIN
PUMPED STORAGE HYDROELECTRIC PROJECT
=======================================
ALL THE RIGHT, TITLE AND INTEREST OF ROCKY MOUNTAIN LEASING CORPORATION IN
AND TO THIS FACILITY SUBLEASE AGREEMENT (P1) HAVE BEEN ASSIGNED TO AND ARE
SUBJECT TO A FIRST PRIORITY SECURITY TITLE, LIEN AND SECURITY INTEREST IN FAVOR
OF SUNTRUST BANK, ATLANTA, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS
CO-TRUSTEE, UNDER A DEED TO SECURE DEBT, ASSIGNMENT OF SURETY BOND AND SECURITY
AGREEMENT (P1), DATED AS OF DECEMBER 30, 1996 AND CERTAIN OF SUCH RIGHT, TITLE
AND INTEREST HAVE BEEN FURTHER ASSIGNED TO UTRECHT-AMERICA FINANCE CO., AS
LENDER UNDER THE LOAN AGREEMENT AND THE DEED TO SECURE DEBT, EACH DATED AS OF
DECEMBER 30, 1996. THIS FACILITY SUBLEASE HAS BEEN EXECUTED IN SEVERAL
COUNTERPARTS. ONLY THE ORIGINAL COUNTERPART CONTAINS THE RECEIPT THEREFOR
EXECUTED BY THE LENDER ON THE SIGNATURE PAGE THEREOF. SEE SECTION 24 FOR
INFORMATION CONCERNING THE RIGHTS OF THE HOLDERS OF THE VARIOUS COUNTERPARTS
HEREOF.
1
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS.................................................. 2
SECTION 2. LEASE OF THE UNDIVIDED INTEREST.............................. 2
SECTION 3. FACILITY SUBLEASE TERM AND SUBLEASE RENT..................... 2
Section 3.1 Sublease Basic Term.............................. 2
Section 3.2 Sublease Basic Rent.............................. 3
Section 3.3 Sublease Supplemental Rent....................... 3
Section 3.4 Adjustment of Sublease Basic Rent................ 3
Section 3.5 Manner of Payments............................... 3
Section 3.6 Business Day..................................... 4
SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET
ENJOYMENT.................................................... 4
Section 4.1 Disclaimer of Warranties......................... 4
Section 4.2 Quiet Enjoyment.................................. 5
SECTION 5. RETURN OF UNDIVIDED INTEREST................................. 6
Section 5.1 Return........................................... 6
Section 5.2 Condition Upon Return............................ 6
Section 5.3 Environmental Reports............................ 8
Section 5.4 Expenses......................................... 8
SECTION 6. LIENS........................................................ 8
SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS...................... 9
Section 7.1 Maintenance; Compliance with Rocky Mountain
Agreements....................................... 9
Section 7.2 Replacement of Components........................ 9
Section 7.3 Records.......................................... 10
SECTION 8. MODIFICATIONS................................................ 10
Section 8.1 Required Modifications........................... 10
Section 8.2 Optional Modifications........................... 10
Section 8.3 Title to Modifications; Subjection to Head
Lease............................................ 10
Section 8.4 Report of Modifications.......................... 11
SECTION 9. NET LEASE.................................................... 11
i
Page
----
TABLE OF CONTENTS, Continued
SECTION 10. EVENTS OF LOSS............................................... 12
Section 10.1 Occurrence of Events of Loss.................... 12
Section 10.2 Payment of Sublease Termination Value;
Termination of Sublease Basic Rent.............. 13
Section 10.3 Rebuild......................................... 14
Section 10.4 Eminent Domain.................................. 16
SECTION 11. INSURANCE.................................................... 17
Section 11.1 Property Insurance.............................. 17
Section 11.2 Liability Insurance............................. 17
Section 11.3 Provisions With Respect to Insurance............ 17
Section 11.4 Reports......................................... 18
Section 11.5 Additional Insurance by Facility Sublessor...... 18
SECTION 12. INSPECTION................................................... 19
SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS..................... 19
Section 13.1 Election to Terminate........................... 19
Section 13.2 Procedure for Exercise of Termination Option.... 20
SECTION 14. TERMINATION FOR OBSOLESCENCE................................. 21
Section 14.1 Termination..................................... 21
Section 14.2 Solicitation of Offers.......................... 21
Section 14.3 Procedure for Exercise of Termination Option.... 22
SECTION 15. END OF SUBLEASE BASIC TERM OPTIONS........................... 23
Section 15. The Facility Sublessee's Sublease Purchase
Option and Sublease Return Option............... 23
Section 15.2 Sublease Renewal Term........................... 24
Section 15.3 Refinancing of Loan Certificate in Connection
with Sublease Return Option..................... 25
SECTION 16. EVENTS OF DEFAULT............................................ 26
SECTION 17. REMEDIES..................................................... 29
Section 17.1 Remedies for Sublease Event of Default.......... 29
Section 17.2 Cumulative Remedies............................. 31
Section 17.3 No Delay or Omission to be Construed as Waiver.. 32
SECTION 18. TERMINATION OPTIONS FOR APPEAL OF FERC ORDERS................ 32
ii
Page
----
TABLE OF CONTENTS, Continued
Section 18.1 Options to Terminate............................ 32
Section 18.2 Procedure for Exercise of Termination Options... 33
SECTION 19. THE FACILITY SUBLESSEE'S RIGHT TO SUBLEASE................... 33
SECTION 20. FURTHER ASSURANCES........................................... 34
SECTION 21. FACILITY SUBLESSOR'S RIGHT TO PERFORM........................ 35
SECTION 22. NOTICES...................................................... 35
SECTION 23. SECURITY INTEREST AND INVESTMENT OF SECURITY
FUNDS........................................................ 37
SECTION 24. SECURITY FOR FACILITY SUBLESSOR'S OBLIGATION TO THE
FACILITY LESSOR.............................................. 37
SECTION 25. MISCELLANEOUS................................................ 38
Section 25.1 Governing Law................................... 38
Section 25.2 Severability.................................... 38
Section 25.3 Headings and Table of Contents.................. 38
Section 25.4 Successors and Assigns.......................... 38
Section 25.5 "True Lease".................................... 38
Section 25.6 Amendments and Waivers.......................... 38
Section 25.7 Survival........................................ 38
Section 25.8 Counterparts.................................... 39
Section 25.9 Effectiveness................................... 39
ATTACHMENTS TO FACILITY SUBLEASE:
Appendix A - Definitions............................................. A-1
Exhibit A - Description of the Facility
Exhibit A-1 - Description of the Entire Rocky Mountain Property
Exhibit A-2 - Project Boundary Drawing of the Rocky Mountain Project
Exhibit A-3 - Powertunnel and Powerhouse General Plan and Profile
of the Rocky Mountain Project No. RM-00-CL-0013 R1
Exhibit A-4 - Equipment
iii
Page
----
TABLE OF CONTENTS, Continued
Schedule 1 - Sublease Basic Rent.................................... S1-1
Schedule 2 - Sublease Termination Values............................ S2-1
iv
FACILITY SUBLEASE AGREEMENT
(P1)
This FACILITY SUBLEASE AGREEMENT (P1), dated as of December 30, 1996 (as
amended, supplemented or otherwise modified from time to time and in accordance
with the provisions hereof, this "Facility Sublease"), between ROCKY MOUNTAIN
LEASING CORPORATION, a corporation organized and existing under the laws of the
State of Delaware (together with its successors and permitted assigns, the
"Facility Sublessor"), and OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP
GENERATION & TRANSMISSION CORPORATION), an electric membership corporation
organized under the laws of the State of Georgia (together with its successors
and permitted assigns, the "Facility Sublessee").
WHEREAS, the Facility Sublessee and Georgia Power Company, a corporation
organized under the laws of the State of Georgia (together with its successors
and assigns, "Georgia Power") own the Rocky Mountain Site (as hereinafter
defined) as tenants in common under the laws of the State of Georgia;
WHEREAS, the Facility Sublessee and Georgia Power own the Facility (as
hereinafter defined) as tenants in common under the laws of the State of
Georgia;
WHEREAS, pursuant to the Ground Lease (as hereinafter defined) the
Co-Trustee has acquired from the Facility Sublessee a leasehold interest in the
Ground Interest;
WHEREAS, pursuant to the Head Lease (as hereinafter defined) the
Co-Trustee has acquired from the Facility Sublessee the Undivided Interest for a
term equal to 120% of the estimated remaining useful life of the Facility,
subject to renewal as provided in the Head Lease;
WHEREAS, pursuant to the Ground Sublease (as hereinafter defined) the
Co-Trustee will lease the Ground Interest leased to it by the Facility Sublessee
pursuant to the Ground Lease to RMLC, as Ground Sublessee, for the term provided
therein;
WHEREAS, pursuant to the Facility Lease (as hereinafter defined), the
Co-Trustee will lease the Undivided Interest to RMLC, as Facility Lessee, for
the term provided therein;
WHEREAS, pursuant to the Ground Sub-sublease (as hereinafter defined),
RMLC, as Ground Sub-sublessor, will lease the Ground Interest leased to it by
the Co-Trustee pursuant to the Ground Sublease to the Facility Sublessee, for a
term equal to that of the Ground Sublease; and
WHEREAS, pursuant to this Facility Sublease, the Facility Sublessor will
lease the Undivided Interest leased to it by the Facility Lessor pursuant to the
Facility Lease to the Facility Sublessee, for a term equal to that of the
Facility Lease.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
Capitalized terms used in this Facility Sublease, including the recitals,
and not otherwise defined herein shall have the respective meanings set forth in
Appendix A hereto. The general provisions of Appendix A shall apply to terms
used in this Facility Sublease and specifically defined herein.
SECTION 2. LEASE OF THE UNDIVIDED INTEREST
The Facility Sublessor hereby leases the Undivided Interest, upon the
terms and conditions set forth herein, to the Facility Sublessee for the
Sublease Basic Term and Sublease Renewal Term, if any, and the Facility
Sublessee hereby leases the Undivided Interest, upon the terms and conditions
set forth herein, from the Facility Sublessor. The Facility Sublessee and the
Facility Sublessor understand and agree that (a) this lease of the Undivided
Interest is subject to the interest of the Head Lessee under the Head Lease, the
interest of the Facility Lessee under the Facility Lease and the interests
identified in the definition of Undivided Interest, (b) legal title to the
Facility remains vested in Oglethorpe and Georgia Power as tenants-in-common,
(c) this lease of the Undivided Interest is subject and subordinate to the Lien
of the Oglethorpe Mortgage and (d) this lease is subject to those encumbrances
set forth in the Title Report. The Undivided Interest shall be subject to the
terms of this Facility Sublease from the date on which this Facility Sublease is
executed and delivered.
SECTION 3. FACILITY SUBLEASE TERM AND SUBLEASE RENT
Section 3.1 Sublease Basic Term. The term of this Facility Sublease shall
commence on the Closing Date and shall terminate at 11:57 p.m. (New York City
time) on the Expiration Date (the "Sublease Basic Term"), subject to earlier
termination pursuant to Section 10, 13, 14, 17 or 18 hereof and extension for a
Sublease Renewal Term pursuant to Section 15.2 hereof; provided, however, that
notwithstanding anything to the contrary set forth herein, in no event shall the
Sublease Basic Term terminate so long as the Facility Sublessor's interest under
this Facility Sublease shall be subject to the Lien of the Facility Sublease
Assignment Agreement.
2
Section 3.2 Sublease Basic Rent. The Facility Sublessee hereby agrees to
pay to the Facility Sublessor Sublease Basic Rent for the lease of the Undivided
Interest for each Rent Payment Period throughout the Sublease Basic Term and the
Sublease Renewal Term, if applicable, in the amounts payable in advance or in
arrears or both, as the case may be, on each Rent Payment Date as indicated on
Schedule 1 hereto under the caption "Advance Rent" in the case of Rent Payment
Periods immediately following such Rent Payment Date and/or "Arrears Rent" in
the case of Rent Payment Periods ending on such Rent Payment Date. Each such
payment of Sublease Basic Rent shall be in the amount set forth opposite such
Rent Payment Date on Schedule 1 hereto, in each case, subject to Section 3.4
hereof.
Section 3.3 Sublease Supplemental Rent. The Facility Sublessee also agrees
to pay to the Facility Sublessor, or to any other Person entitled thereto as
expressly provided herein or in any other Operative Document, as appropriate,
any and all Sublease 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
Facility Sublessee to pay any Sublease Supplemental Rent, the Facility Sublessor
shall have all rights, powers and remedies provided for herein or by law or
equity or otherwise for the failure to pay Sublease Basic Rent. The Facility
Sublessee will also pay as Sublease Supplemental Rent to the extent permitted by
Applicable Law, an amount equal to interest at the applicable Overdue Rate on
any part of any payment of Sublease Basic Rent not paid when due for any period
for which the same shall be overdue and on any Sublease 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 Sublease Supplemental Rent to be paid pursuant
to this Section 3.3 shall be payable (i) if to the Facility Sublessor in the
manner set forth in Section 3.5 or (ii) if to other Persons in the manner set
forth in the first sentence of Section 3.5.
Section 3.4 Adjustment of Sublease Basic Rent. The Facility Sublessee and
the Facility Sublessor agree that Sublease Basic Rent (including Sublease Basic
Rent for the Renewal Term, if any), Sublease Termination Values and Equity
Exposure Amounts shall be adjusted, either upwards or downwards, to reflect
adjustments in Basic Rent payable under the Facility Lease. All adjustments
pursuant to the preceding sentence shall be equal to adjustments made for any
Rent Payment Date pursuant to Section 3.4 of the Facility Lease.
Section 3.5 Manner of Payments. (a) All Sublease Rent (whether Sublease
Basic Rent or Sublease Supplemental Rent) shall be paid by the Facility
Sublessee in lawful currency of the United States of America in immediately
available funds to the recipient not later than 11:00 a.m. (New York City time)
on the date due. All Sublease Rent payable to the Facility Sublessor shall be
paid by the Facility Sublessee to the Facility Sublessor at its account at
SunTrust Bank, Atlanta (ABA Account No. 061-0001-04) Credit - Rocky Mountain
Leasing Corporation (Account No. 8840611373), or to such other place as the
Facility Sublessor shall notify the Facility Sublessee in writing.
3
(b) Payments made to the Facility Sublessor or its assignee under the
Qualifying Sublease Surety Bond shall satisfy the Facility Sublessee's
obligation to pay amounts of Sublease Basic Rent or Sublease Supplemental Rent,
as the case may be, to the extent of such payments. Amounts paid to the Owner
Participant from the Qualifying Head Lease Surety Bond in satisfaction of the
Special Equity Head Lease Remedy shall not satisfy or be treated as performance
of any of the Facility Sublessee's obligations under this Facility Sublease or
any other Operative Document (other than its obligations under Section 16.2 of
the Participation Agreement) or in any way limit or offset any amounts payable
by the Facility Sublessee.
Section 3.6 Business Day. Notwithstanding anything herein or in any other
Operative Document to the contrary, if the date on which any payment is to be
made pursuant to this Facility Sublease or any other Operative Document is not a
Business Day, the payment otherwise payable on such date shall be payable on the
next succeeding Business Day with the same force and effect as if made on such
scheduled date and, provided such payment is made on such succeeding Business
Day, no interest shall accrue on the amount of such payment from and after such
scheduled date to the time of such payment on such next succeeding Business Day.
SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT
Section 4.1 Disclaimer of Warranties. (a) WITHOUT WAIVING ANY CLAIM THE
FACILITY SUBLESSEE MAY HAVE AGAINST ANY MANUFACTURER, VENDOR OR CONTRACTOR UNDER
THE ROCKY MOUNTAIN AGREEMENTS, THE FACILITY SUBLESSEE ACKNOWLEDGES AND AGREES
SOLELY FOR THE BENEFIT OF THE FACILITY SUBLESSOR THAT (i) THE FACILITY AND EACH
COMPONENT THEREOF ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE ACCEPTABLE TO
THE FACILITY SUBLESSEE, (ii) THE FACILITY SUBLESSEE IS SATISFIED THAT THE
FACILITY AND EACH COMPONENT THEREOF ARE SUITABLE FOR THEIR RESPECTIVE PURPOSES,
(iii) THE FACILITY SUBLESSOR IS NOT A MANUFACTURER OR A DEALER IN PROPERTY OF
SUCH KIND, (iv) THE UNDIVIDED INTEREST IS LEASED HEREUNDER TO THE EXTENT
PROVIDED HEREBY FOR THE SUBLEASE BASIC TERM AND THE SUBLEASE RENEWAL TERM, IF
ANY, SPECIFIED HEREIN SUBJECT TO ALL APPLICABLE LAWS NOW IN EFFECT OR HEREAFTER
ADOPTED INCLUDING WITHOUT LIMITATION (1) ZONING REGULATIONS, (2) ENVIRONMENTAL
LAWS OR (3) BUILDING RESTRICTIONS, AND IN THE STATE AND CONDITION OF EVERY PART
THEREOF WHEN THE SAME FIRST BECAME SUBJECT TO THIS FACILITY SUBLEASE WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND BY THE FACILITY SUBLESSOR AND (v) THE
FACILITY SUBLESSOR LEASES FOR THE SUBLEASE BASIC TERM AND SUBLEASE RENEWAL TERM,
IF ANY, SPECIFIED HEREIN AND THE FACILITY SUBLESSEE TAKES THE UNDIVIDED INTEREST
UNDER THIS FACILITY SUBLEASE "AS-IS", "WHERE-IS" AND "WITH ALL FAULTS", AND THE
4
FACILITY SUBLESSEE ACKNOWLEDGES THAT THE FACILITY SUBLESSOR MAKES NO, NOR SHALL
BE DEEMED TO HAVE MADE, AND EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS,
WARRANTIES OR REPRESENTA TIONS, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE,
CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION,
MERCHANTABILITY THEREOF OR AS TO THE TITLE OF THE FACILITY, 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
REPRESEN TATION OR WARRANTY WHATSOEVER WITH RESPECT THERETO, except that the
Facility Sublessor represents and warrants that on the Closing Date, the
Undivided Interest will be free of Facility Sublessor's Liens. It is agreed that
all such risks, as between the Facility Sublessor on the one hand and the
Facility Sublessee on the other hand are to be borne by the Facility Sublessee.
The Facility Sublessor, shall not have any responsibility or liability to the
Facility Sublessee or any other Person with respect to any of the following: (w)
any liability, loss or damage caused or alleged to be caused directly or
indirectly by the Facility or any Component or by any inadequacy thereof or
deficiency or defect therein or by any other circumstances in connection
therewith; (x) the use, operation or performance of the Facility or any
Component or any risks relating thereto; (y) any interruption of service, loss
of business or anticipated profits or consequential damages; or (z) the
delivery, operation, servicing, maintenance, repair, improvement, replacement or
decommissioning of the Facility or any Component. The provisions of this
paragraph (a) of this Section 4.1 have been negotiated, and, except to the
extent otherwise expressly stated, the foregoing provisions are intended to be a
complete exclusion and negation of any representations or warranties of the
Facility Sublessor, express or implied, with respect to the Facility or any
components of either thereof or the Undivided Interest that may arise pursuant
to any Applicable Law now or hereinafter in effect, or otherwise.
(b) During the Facility Sublease Term, so long as no Sublease Event of
Default shall have occurred and be continuing, the Facility Sublessor hereby
appoints irrevocably and constitutes the Facility Sublessee its agent and
attorney-in-fact, coupled with an interest, to assert and enforce, from time to
time, in the name and for the account of the Facility Sublessor and the Facility
Sublessee, as their interests may appear, but in all cases at the sole cost and
expense of the Facility Sublessee, whatever claims and rights the Facility
Sublessor may have in respect of the Undivided Interest against the
manufacturers of the Facility, or vendors or contractors under the Rocky
Mountain Agreements or under any express or implied warranties relating to the
Facility or the Undivided Interest.
Section 4.2 Quiet Enjoyment. The Facility Sublessor agrees that,
notwithstanding any provision of any other Operative Document, so long as no
Sublease Event of Default shall have occurred and be continuing, it shall not
itself interfere with or interrupt the quiet
5
enjoyment of the use, operation and possession by the Facility Sublessee of the
interest in the Facility or the Undivided Interest conveyed by this Facility
Sublease subject to the terms of this Facility Sublease; provided that the
Facility Sublessor's covenant does not relate to actions of the Facility Lessor
or the Lender.
SECTION 5. RETURN OF UNDIVIDED INTEREST
Section 5.1 Return. Upon the expiration of the Facility Sublease Term
unless the Facility Sublessee shall have purchased the Facility Sublessor's
interest in the Undivided Interest pursuant to Section 15.1, or upon any early
termination of this Facility Sublease other than a termination in accordance
with Section 10, 13 or 18, the Facility Sublessee, at its own expense, shall
return the Undivided Interest by delivering possession of the same to the
Facility Sublessor at the location of the Facility on the Rocky Mountain Site
near Rome, Georgia.
Section 5.2 Condition Upon Return. At the time of any return of the
Undivided Interest by the Facility Sublessee in accordance with Section 5.1, the
following conditions shall be complied with, all at the Facility Sublessee's
sole cost and expense:
(a) the right to use the Undivided Interest granted hereunder for
the benefit of the Facility Sublessee shall cease and terminate;
(b) the Facility will be in at least as good condition as if it had
been maintained, rebuilt and operated during the Facility Sublease Term in
compliance with the provisions of this Facility Sublease, reasonable wear
and tear excepted, and there shall be no deferred maintenance in respect
of the Facility;
(c) the Facility Sublessee shall cooperate with all reasonable
requests of the Facility Sublessor, at the expense of the Facility
Sublessee, for purposes of obtaining, or enabling the Facility Sublessor
or its designee to obtain, any and all licenses, permits, approvals and
consents of any Governmental Entities or other Persons that are or will be
required to be obtained by the Facility Sublessor or its designee in
connection with its use, operation or maintenance of the Undivided
Interest on or after such return in compliance with Applicable Law and in
the manner contemplated by the Rocky Mountain Agreements;
(d) the Facility Sublessee shall return and surrender possession of
the Undivided Interest to the Facility Sublessor (or its designee) free
and clear of all Liens (other than Liens described in clauses (iv), (v),
(vi), (viii), (x) and (xi) of the definition of "Permitted Liens" and
Permitted Post-Term Encumbrances);
6
(e) the Facility shall have (ordinary wear and tear excepted) at
least the capability and functional ability, including the existence of
sufficient water flows in contributing streams, to perform substantially
at the ratings for which it was designed, on a continuing basis in normal
commercial operation, all functions for which it was designed;
(f) the Facility shall be in compliance with all requirements of
manufacturers required for the maintenance in full force and effect of any
material warranty then in effect with respect to the Facility; and
(g) no Component shall be a temporary Component and any replacement
Component shall satisfy the standards of Section 7.2. Prior to redelivery
of the Undivided Interest under this Section 5.2, upon not less than 40
days' prior request of the Facility Sublessor, the Facility Sublessee
shall perform such maintenance on the Facility which is in addition to
that otherwise required to be performed by the Facility Sublessee
hereunder as the Facility Sublessor may reasonably specify (using its best
efforts on a time-available basis for such work). If the Facility
Sublessee is unable to perform such requested maintenance, it will use its
best efforts to arrange to have such maintenance performed by another
Person acceptable to the Facility Sublessor at rates comparable to those
the Facility Sublessee obtains for maintenance performed on its own
facilities. The Facility Sublessor shall either promptly reimburse the
Facility Sublessee for the Facility Sublessee's cost or pay such rates
charged by any such Person acceptable to the Facility Sublessor in
connection with such requested maintenance. The Facility Sublessee shall
also surrender to the Facility Sublessor originals or copies of all
documents, instruments, plans, maps, specifications, manuals, drawings and
other documentary materials relating to the installation, operation,
maintenance, construction, design, modification and repair of the
Facility, as shall be in the Facility Sublessee's or any Affiliate of the
Facility Sublessee's possession and shall be reasonably appropriate or
necessary for the continued operation of the Facility. The Facility
Sublessee shall effect delivery of the Undivided Interest at its own cost
and expense by executing and delivering to the Facility Sublessor an
instrument or instruments in form and substance reasonably satisfactory to
the Facility Sublessor evidencing surrender by the Facility Sublessee of
the Facility Sublessee's rights to the Undivided Interest under this
Facility Sublease and to the possession thereof. At least 60 but not more
than 120 days prior to redelivery of the Undivided Interest pursuant to
this Section 5.2, the Facility Sublessee shall perform the Return
Acceptance Tests and shall promptly provide the results to the Facility
Sublessor. If the Facility shall not pass such tests, the Facility
Sublessee shall, at its own expense, take such actions as may be necessary
to enable the Facility to pass such tests and certify to the Owner
Participant such passage of such tests prior to such delivery date. At the
Facility Sublessor's request, if possible and commercially reasonable, the
Facility Sublessee shall provide insurance in accordance with Section 11
hereof for three months following the date of return of the Undivided
Interest at the Facility Sublessor's sole
7
cost and expense which costs and expense shall equal Facility Sublessee's
actual cost and expense for such insurance;
(h) the FERC License shall have been renewed for a term of not less
than 17 years from the Expiration Date on terms not materially more
burdensome than those under the existing FERC License and shall be in full
force and effect.
At the time of any return of the Undivided Interest by the Facility Sublessee in
circumstances where the Facility Lessor has elected its option pursuant to
Section 14.3 of the Facility Lease, the condition set forth in clauses (a), (b),
(c), (d) and (g) of this Section 5.2 shall be complied with at the Facility
Sublessee's sole cost and expense.
Section 5.3 Environmental Reports. In connection with a return pursuant to
Section 5.2, the Facility Sublessee shall provide the Facility Sublessor, no
later than 270 days prior to the Expiration Date, or in connection with a return
other than on the Expiration Date, no later than the date of return, an
inspection report prepared by a reputable environmental consulting firm
(selected by the Facility Sublessor and reasonably acceptable to the Facility
Sublessee) as to the environmental condition of the Facility and the Rocky
Mountain Site and the compliance or non-compliance with applicable Environmental
Laws, in form, scope and substance reasonably satisfactory to the Facility
Sublessor. The cost and expense of preparing and providing such report shall all
be for the account of the Facility Sublessee. The provisions of such report
shall not relieve the Facility Sublessee of liability with respect to
environmental conditions, known or unknown, in respect of the Facility and the
Rocky Mountain Site and the Facility Sublessee will take any and all actions
necessary to ensure that the Facility and the Rocky Mountain Site comply with
all such Environmental Laws. If such report shall indicate that either the
Facility or the Rocky Mountain Site is not in compliance with applicable
Environmental Laws, the Facility Sublessee shall, within 90 days of the Facility
Sublessor having received such inspection report, (a) provide the Facility
Sublessor with a remediation plan approved by the applicable Governmental Entity
designed to ensure that the Facility and the Rocky Mountain Site will be brought
into compliance with applicable Environmental Laws as promptly as is reasonably
practical and without materially adversely affecting the continued operation of
the Facility or the Rocky Mountain Site and (b) (i) place in escrow funds in an
amount corresponding to the Facility Sublessor'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 Facility
Sublessor), 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 Facility Sublessor, as determined in its sole discretion
acting in good faith, for such purposes. The obligations of the Facility
Sublessee set forth in this Section 5.3 shall survive the termination of this
Facility Sublease and the expiration of the Facility Sublease Term.
Section 5.4 Expenses. The Facility Sublessee agrees to pay or reimburse,
on an After-Tax Basis, on demand, all costs and expenses incurred by the
Facility Sublessor
8
(including costs and expenses of the Trustees, the Owner Participant and the
Lender incurred by the Facility Sublessor pursuant to Section 5.3 of the
Facility Lease) in connection with any return contemplated by this Section 5.
SECTION 6. LIENS
The Facility Sublessee will not directly or indirectly create, incur,
assume or suffer to exist any Lien on or with respect to the Undivided Interest
or the Facility Sublessor's Rocky Mountain Interest or any interest therein or
in, to or on its interest in this Facility Sublease, except Permitted Liens, and
the Facility Sublessee shall promptly notify the Facility Sublessor of the
imposition of any such Lien of which the Facility Sublessee is aware and shall
promptly, at its own expense, take such action as may be necessary duly to
discharge such Lien.
SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS
Section 7.1 Maintenance; Compliance with Rocky Mountain Agreements. The
Facility Sublessee, at its own cost and expense, will cause the Facility to be
maintained in good condition (ordinary wear and tear excepted), repair and
working order in accordance with Prudent Utility Practice and in compliance with
all Applicable Laws of any Governmental Entity having jurisdiction, and will
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, (a) all as in the reasonable judgment of the Facility
Sublessee may be necessary so that the business carried on in connection with
the Undivided Interest may be properly and advantageously conducted by the
Facility Sublessee at all times and (b) in accordance with the Rocky Mountain
Agreements and the Oglethorpe Mortgage. The Facility Sublessee will perform all
of its obligations under the Rocky Mountain Agreements the failure to perform
which would have a material adverse effect on the Facility Lessor's Rocky
Mountain Interest or the Facility Sublessor's Rocky Mountain Interest or the
current or residual value, utility or remaining useful life of the Facility.
Notwithstanding any provision contained in this Facility Sublease or in any of
the Operative Documents, the Facility Sublessee has the right to perform any and
all acts required by an order of the FERC or its successor affecting the
Facility or the Rocky Mountain Site without the prior approval of the Facility
Sublessor.
Section 7.2 Replacement of Components. In the ordinary course of
maintenance, service, repair or testing, the Facility Sublessee, at its own cost
and expense, may remove or cause to be removed from the Facility any Component;
provided, however, that the Facility Sublessee 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
9
least the condition and repair required to be maintained in accordance with the
terms of this Facility Sublease (each such replacement Component being herein
referred to as a "Replacement Component") as promptly as practicable. An
undivided interest equal to the Facility Sublessor's Percentage in each
Component at any time removed from the Facility shall remain subject to the Head
Lease, the Facility Lease and this Facility Sublease, wherever located, until
such time as such Component shall be replaced by a Replacement Component which
has been incorporated in the Facility and which meets the requirements for
Replacement Components specified above. Immediately upon any Replacement
Component becoming incorporated in the Facility, without further act (and at no
cost to the Facility Sublessor and with no adjustment to Sublease Basic Rent)
(i) the replaced Component shall no longer be subject to the Head Lease, the
Facility Lease or this Facility Sublease, (ii) title to such Replacement
Component shall vest in the Co-Owners and Oglethorpe's undivided interest
therein shall become subject to the Oglethorpe Mortgage, (iii) an undivided
interest equal to the Facility Lessor's Percentage in the Replacement Component
shall thereupon become subject to the Head Lease and the Facility Lease, and
(iv) an undivided interest equal to the Facility Sublessor's Percentage in such
Replacement Component shall become subject to this Facility Sublease and be
deemed a part of the Facility for all purposes hereof. Notwithstanding anything
in this Section 7.2 or elsewhere in this Facility Sublease to the contrary, if
the Facility Sublessee or the Facility 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 by more
than a de minimis amount, or diminish the remaining useful life or utility of
the Facility or cause the Facility to become "limited use" property within the
meaning of Rev. Proc. 76-30, 1976-1, 647.
Section 7.3 Records. The Facility Sublessee shall maintain logs of the
Facility's operation and keep maintenance and repair reports in sufficient
detail to indicate the nature and date of major work completed on the Facility,
including, without limitation, the cost of maintenance and repair to the extent
that such records are kept as a normal part of the Facility Sublessee's
operations. Such records shall be made available upon the Facility Sublessor's
request during any inspection of the Facility by the Facility Sublessor and
shall be deemed the property of the Facility Sublessor upon the expiration or
earlier termination of the Facility Sublease; provided, however, that the
Facility Sublessee shall be entitled to keep copies of such records.
SECTION 8. MODIFICATIONS
Section 8.1 Required Modifications. Subject to the Rocky Mountain
Agreements, the Facility Sublessee, at its own cost and expense, shall make or
cause to be made all Modifications to the Facility as it relates to the
Undivided Interest as are required by the Rocky Mountain Agreements and by
Applicable Law (each, a "Required Modification").
10
Section 8.2 Optional Modifications. So long as no Sublease Bankruptcy
Default, Sublease Payment Default or Sublease Event of Default exists, the
Facility Sublessee at any time may, at its own cost and expense, make or cause
to be made any Modification to the Facility as the Facility Sublessee considers
desirable in the proper conduct of its business (an "Optional Modification");
provided that, no Optional Modification to the Facility shall impair the
operation of the Facility or diminish the current or residual value, remaining
useful life or utility of the Facility below the current or residual value,
remaining useful life or utility thereof immediately prior to such Optional
Modification, assuming the Facility was then in the condition required to be
maintained by the terms of this Facility Sublease or cause the Undivided
Interest to become "limited use" property within the meaning of Rev. Proc.
76-30, 1976-1, 647.
Section 8.3 Title to Modifications; Subjection to Head Lease. Title to all
Modifications to the Facility shall immediately vest in the Co-Owners, and
Oglethorpe's undivided interest therein shall become subject to the Lien of the
Oglethorpe Mortgage and be deemed part of the Facility for all purposes of this
Facility Sublease. An undivided interest equal to the Facility Sublessor's
Percentage in all Modifications shall immediately become subject to the Head
Lease, the Facility Lease and this Facility Sublease (at no cost to the Facility
Sublessor and with no adjustment to Sublease Basic Rent) and be deemed a part of
the Undivided Interest for all purposes hereof, and the Facility Sublessee, at
its own cost and expense, shall take such steps as the Facility Sublessor may
require from time to time to confirm that the foregoing Modifications are
subject to the Head Lease, the Facility Lease and this Facility Sublease.
Section 8.4 Report of Modifications. On or before March 1 of each year
(commencing March 1, 1998) and on the expiration of the Facility Sublease Term,
the Facility Sublessee shall furnish to the Facility Sublessor a report stating
the total cost of all Modifications and describing separately and in reasonable
detail each Modification having a value in excess of $5,000,000 made during the
period from the Closing Date to December 31, 1997 for the first report and
annually thereafter based on a calendar year period for subsequent reports.
SECTION 9. NET LEASE
This Facility Sublease is a "net lease" and, notwithstanding anything
herein to the contrary, the Facility Sublessee's obligation to pay all Sublease
Rent payable hereunder (and all amounts, including without limitation, Sublease
Termination Value, payable in lieu of Sublease Rent following termination of
this Facility Sublease) shall be absolute and unconditional under any and all
circumstances and shall not be terminated, extinguished, diminished, lost or
otherwise impaired nor shall the Facility Sublessee's other obligations
hereunder or the Facility Sublessor's rights hereunder be terminated,
extinguished, diminished, lost or otherwise impaired, by any circumstance of any
character, or for any
11
reason whatsoever, whether or not the same involves the loss of all or any part
of the leasehold estate granted by this Facility Sublease including, without
limitation, (i) any setoff, counterclaim, recoupment, defense or other right
which the Facility Sublessee may have against the Facility Sublessor or any
other Person, including, without limitation, any breach by any of said parties
of any covenant or provision under this Facility Sublease or under any other
Operation Document, (ii) any lack or invalidity of title or any defect in the
title, condition, design, operation, merchantability or fitness for use of the
Facility or any Component, or any termination of this Facility Sublease as a
result thereof by operation of law or contract, or any foreclosure or deed in
lieu of foreclosure of the Oglethorpe Mortgage or deed in lieu of foreclosure or
any eviction by paramount title or otherwise or any unavailability of the
Facility, the Rocky Mountain Site, any Component, any other portion of the
Facility Sublessee's Rocky Mountain Interest or the interest of any other Person
or any part of the foregoing after its delivery and acceptance by the Facility
Sublessee hereunder, for any reason, (iii) any loss or destruction of, or damage
to, the Facility or any Component or interruption or cessation in the use or
possession thereof or any part of the foregoing by the Facility Sublessee for
any reason whatsoever and of whatever duration, (iv) the condemnation,
requisitioning, expropriation, seizure or other taking of title to or use of the
Facility, the Rocky Mountain Site, any Component, any other portion of the
Facility Sublessee's Rocky Mountain Interest or any part of the foregoing by any
Governmental Entity or otherwise, (v) the invalidity or unenforceability or lack
of due authorization or other infirmity of this Facility Sublease or any other
Operative Document, (vi) the lack of right, power or authority of the Facility
Sublessor to enter into this Facility Sublease or any other Operative Document,
(vii) any ineligibility of the Facility or any Component for any particular use,
whether or not due to any failure of the Facility Sublessee or the Facility
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
Facility Sublessee or any other Person, (xi) any Lien of any Person with respect
to the Facility, the Rocky Mountain Site, any Component, any other portion of
the Facility Sublessee's Rocky Mountain Interest or any part of the foregoing,
(xii) the existence of the Qualifying Sublease Surety Bond (other than to the
extent of the Sublease Rent discharged from any remittance from the Qualifying
Sublease Surety Bond) or (xiii) any other cause, whether similar or dissimilar
to the foregoing, any present or future law notwithstanding, except as expressly
set forth herein or in any other Operative Documents, it being the intention of
the parties hereto that all Rent payable by the Facility Sublessee hereunder
(and all amounts, including without limitation, Sublease Termination Value,
payable in lieu of Sublease Rent following Termination of the Facility Sublease)
shall continue to be payable in all events in the manner and at times provided
for herein. Such Sublease 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 Facility Sublessee
against the Facility Sublessor or any other Person under this Facility Sublease
or otherwise. To the extent permitted by Applicable Law, the Facility Sublessee
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
12
otherwise, to terminate, cancel, quit or surrender this Facility Sublease with
respect to the Undivided Interest, except in accordance with Section 10, 13, 14,
15 or 18. If for any reason whatsoever this Facility Sublease shall be
terminated in whole or in part by operation of law or otherwise, except as
specifically provided herein, the Facility Sublessee nonetheless agrees to the
extent permitted by Applicable Law, to pay to the Facility Sublessor an amount
equal to each installment of Sublease Basic Rent and all Sublease Supplemental
Rent due and owing, at the time such payment would have become due and payable
in accordance with the terms hereof had this Facility Sublease not been so
terminated. The provisions of this Section 9 shall survive the termination of
the leasehold interest created by this Facility Sublease for any reason
whatsoever upon and after the termination of the leasehold hereby granted for
any reason whatsoever, the Facility Sublessee shall pay to the Facility
Sublessor, in lieu of the Sublease Rent payable hereunder, an amount equal to
such Sublease Rent, and this obligation is expressly agreed to be a covenant of
the Facility Sublessee that is independent of this existence of such leasehold.
The obligations of the Facility Sublessee to pay all amounts hereunder other
than Sublease Rent are also covenants that are independent of the existence of
such leasehold and shall survive the termination thereof for any reason
whatsoever.
SECTION 10. EVENTS OF LOSS
Section 10.1 Occurrence of Events of Loss. The Facility Sublessee will
notify the Facility Sublessor of any damage to the Facility, which the Facility
Sublessee reasonably anticipates may cause an Event of Loss described in clause
(i), (ii), (iii) or (v) of the definition of Event of Loss within 8 Business
Days of such event. The Facility Sublessor will promptly notify the Facility
Sublessee if it shall be notified by the Owner Participant or the Facility
Lessor pursuant to Section 10.1 of the Facility Lease of any event of which upon
election of the Owner Participant would result in an Event of Loss described in
clause (iv) of the definition of Event of Loss. If an Event of Loss described in
clauses (i) or (ii) of the definition of Event of Loss shall occur, then no
later than six months following such occurrence the Facility Sublessee shall
notify the Facility Sublessor in writing of its election to either (a) if no
Sublease Event of Default has occurred and is continuing and subject to the
satisfaction of the conditions set forth in Section 10.3, rebuild and restore
the Facility in accordance with the provisions of the Rocky Mountain Agreements
so that the Facility shall have a fair market value (present and residual),
remaining useful life and utility at least equal to that of the Facility prior
to such rebuilding, assuming the Facility was in the condition and repair
required to be maintained by this Facility Sublease or (b) terminate this
Facility Sublease pursuant to Section 10.2 hereof. The Facility Sublessee may
elect the option provided in clause (b) of the preceding sentence regardless of
whether the Facility is to be rebuilt. If the Facility Sublessee fails to make
an election as provided above, an Event of Loss shall be deemed to occur as of
the end of the six month period referred to in the third sentence of this
Section 10.1.
13
Section 10.2 Payment of Sublease Termination Value; Termination of
Sublease Basic Rent. (a) If (x) the Facility Sublessee shall elect not to
rebuild the Facility pursuant to Section 10.3 hereof following an Event of Loss
described in clause (i) or (ii) of the definition of Event of Loss or an Event
of Loss shall be deemed to occur pursuant to the last sentence of Section 10.1,
or (y) an Event of Loss described in clause (iii), (iv) or (v) of the definition
of Event of Loss shall occur, then, on the next Termination Date following the
Facility Sublessee's notice of its election referred to in the third sentence of
Section 10.1 or the occurrence of a deemed Event of Loss pursuant to the last
sentence of Section 10.1 in the case of clause (x) above, or on the next
Termination Date occurring at least three months after such occurrence of such
Event of Loss in the case of clause (y) above, the Facility Sublessee shall
terminate this Facility Sublease and pay to the Facility Sublessor (A) the
Sublease Termination Value determined as of the relevant Termination Date, plus
(B) all amounts of Sublease Supplemental Rent (including, without limitation,
all costs and expenses of the Facility Sublessor, including costs and expenses
of the Co-Trustee, the Owner Trustee, the Owner Participant and the Lender
incurred by the Facility Sublessor pursuant to Section 10.2 of the Facility
Lease), and all sales, use, value added and other Taxes required to be
indemnified by the Facility Sublessee pursuant to Section 11.2 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 Sublease Basic Rent due before such Termination Date
and, if such Termination Date shall be a Rent Payment Date, the Sublease Basic
Rent (to the extent payable in arrears) due and payable on such Rent Payment
Date.
(b) Concurrently with the payment of all sums required to be paid pursuant
to this Section 10.2, (1) Sublease Basic Rent for the Undivided Interest shall
cease to accrue, (2) the Facility Sublessee shall cease to have any liability to
the Facility Sublessor with respect to the Undivided Interest except for
Sublease Supplemental Rent or other obligations (including, without limitation,
those under Sections 11.1 and 11.2 of the Participation Agreement and the Tax
Indemnity Agreement) surviving pursuant to the express provisions of any
Operative Document, (3) the Facility Sublessor will at the Facility Sublessee's
cost and expense execute and deliver to the Facility Sublessee a release or
termination of this Facility Sublease, (4) the Facility Sublessor shall transfer
the Facility Sublessor's Rocky Mountain Interest to the Facility Sublessee
pursuant to this Section 10.2 and Section 6 of the Ground Sub-sublease on an "as
is", "where is" and "with all faults" basis, without representations or
warranties other than a warranty as to the absence of Facility Sublessor's Liens
and (5) this Facility Sublease shall terminate and the Facility Sublessor shall
execute and deliver appropriate releases and other documents or instruments
necessary or desirable to effect the foregoing, all to be prepared, filed and
recorded (as appropriate) at the cost and expense of the Facility Sublessee.
(c) Any payments with respect to the Undivided Interest received at any
time by the Facility Sublessor (including, without limitation, payments received
by the Facility Sublessor from the Facility Lessor pursuant to paragraph (c) of
Section 10.2 of the Facility Lease) or the Facility Sublessee from any
Governmental Entity as a result of the occurrence of
14
an Event of Loss described in clause (iii) of the definition of Event of Loss
shall be applied as follows:
(i) so much of such payments as shall not exceed the amount
required to be paid by the Facility Sublessee pursuant to clause (A)
of paragraph (a) of this Section 10.2 shall be applied in reduction
of the Facility Sublessee's obligation to pay such amount if not
already paid by the Facility Sublessee or, if already paid by the
Facility Sublessee, shall be applied to reimburse the Facility
Sublessee for its payment of such amount; and
(ii) the balance, if any, of such payments remaining
thereafter shall be apportioned between the Facility Sublessor and
the Facility Sublessee in the proportion that the value of the
Facility Sublessor's Rocky Mountain Interest bears to the value of
the Facility Sublessee's Rocky Mountain Interest.
Section 10.3 Rebuild. The Facility Sublessee's right to rebuild the
Facility pursuant to clause (a) of Section 10.1 hereof shall be subject to the
fulfillment, at the Facility Sublessee's sole cost and expense, in addition to
the conditions contained in said clause (a), of the following conditions:
(a) on the date the Facility Sublessee shall notify the Facility Sublessor
pursuant to Section 10.1 of its election to rebuild the Facility, in accordance
with this Section 10.3, the Facility Sublessee shall deliver to the Facility
Sublessor a tax opinion of counsel (such counsel to be selected by the Facility
Sublessor and reasonably acceptable to the Facility Sublessee) to the same
effect as the opinion required by paragraph (a) of Section 10.3 of the Facility
Lease;
(b) on the date the Facility Sublessee shall notify the Facility Sublessor
pursuant to Section 10.1 of its election to rebuild the Facility, in accordance
with this Section 10.3, the Facility Sublessee shall deliver to the Facility
Sublessor the report of an independent engineer (such independent engineer to be
reasonably satisfactory to the Facility Sublessor) to the same effect as the
report required by paragraph (b) of Section 10.3 of the Facility Lease;
(c) on the date the Facility Sublessee shall notify the Facility Sublessor
pursuant to Section 10.1 of its election to rebuild the Facility, in accordance
with this Section 10.3, the Facility Sublessee shall demonstrate to the
reasonable satisfaction of the Facility Sublessor adequate financial resources,
from insurance proceeds or otherwise, to complete such rebuilding, and that the
provisions of the Rocky Mountain Agreements will not impede such rebuilding of
the Facility or adversely affect the Facility Sublessor's interest therein;
(d) the Facility Sublessee shall cause the rebuilding of the Facility to
commence as soon as practicable after the occurrence of such Event of Loss and
in all events within 18 months of the occurrence of the event that caused such
Event of Loss and will cause work on such rebuilding to proceed diligently
thereafter. As the rebuilding of the Facility progresses,
15
title to an undivided interest in such rebuilt facilities shall immediately vest
in Oglethorpe as a tenant in common with Georgia Power, subject to the Lien of
the Oglethorpe Mortgage, and an undivided interest equal to the Facility
Sublessor's Percentage in such rebuilt facilities shall become subject to the
Head Lease, the Facility Lease and this Facility Sublease, automatically, for
all purposes hereof, without any further act by any Person; and
(e) on the date of the completion of such rebuilding of the Facility (the
"Rebuilding Closing Date") the following documents shall be duly authorized,
executed and delivered and, if appropriate, filed for recordation by the
respective party or parties thereto and shall be in full force and effect, and
an executed counterpart of each thereto shall be delivered to the Facility
Sublessor, the Facility Lessor, the Owner Participant and the Lender: (1)
supplements to the Head Lease, the Facility Lease and this Facility Sublease
subjecting an undivided interest equal to the Facility Sublessor's Percentage in
the rebuilt facilities to the Head Lease, the Facility Lease and this Facility
Sublease (with no change in Sublease Basic Rent as a result of such
replacement), (2) supplements to the Loan Agreement, the Deed to Secure Debt and
the Facility Sublease Assignment Agreement subjecting the Facility Lessor's
Rocky Mountain Interest in such rebuilt facilities to the Lien of the Loan
Agreement, the security title of the Deed to Secure Debt and the Lien of the
Assignment of Facility Sublease Agreement, (3) a supplement to the Subordinated
Deed to Secure Debt and Security Agreement, subjecting the Facility Lessor's
Rocky Mountain Interest in such rebuilt facilities to the Lien of the
Subordinated Deed to Secure the Debt and Security Agreement, (4) such recordings
and filings as may be reasonably requested by the Owner Participant or the
Lender to be made or filed, (5) an opinion of counsel of the Facility Sublessee,
such counsel and such opinion to be reasonably satisfactory to the Facility
Sublessor, to the effect that (w) the supplements to the Head Lease, the
Facility Lease and this Facility Sublease referred to in clause (1) above
constitute effective instruments for subjecting such rebuilt facilities to the
Head Lease, the Facility Sublease and this Facility Sublease, (x) the
supplements to the Loan Agreement, the Deed to Secure Debt and the Facility
Sublease Assignment Agreement referred to in clause (2) above constitute an
effective instrument, for subjecting the Facility Lessor's Rocky Mountain
Interest in such rebuilt facilities to the Lien of the Loan Agreement, the
security title of the Deed to Secure Debt, and the Lien of the Assignment of
Facility Sublease, (y) the supplement to the Subordinated Deed to Secure Debt
and Security Agreement referred to in clause (3) above constitutes an effective
instrument for subjecting the Facility Lessor's Rocky Mountain Interest in such
rebuilt facilities to the Lien of the Subordinated Deed to Secure Debt and
Security Agreement, and (z) all filings and other actions necessary to perfect
and protect the Facility Sublessor's interest in an undivided interest equal to
the Facility Sublessor's Percentage in the rebuilt facilities and to subject the
Facility Lessor's Rocky Mountain Interest in such rebuilt facilities to the Lien
of the Loan Agreement and Facility Sublease Assignment Agreement, security title
of the Deed to Secure Debt and the Lien of the Subordinated Deed to Secure Debt
and Security Agreement have been accomplished and (5) satisfactory evidence as
to the compliance with Section 11 of this Facility Sublease with respect to the
Facility, as so rebuilt.
16
Whether or not the transactions contemplated by this Section 10.3 are
consummated, the Facility Sublessee agrees to pay or reimburse, on an After-Tax
Basis, any costs or expenses (including reasonable legal fees and expenses and
all costs and expenses incurred by the Facility Sublessor pursuant to the last
sentence of paragraph (a) of Section 10.3 of the Facility Lease) incurred by the
Facility Sublessor, in connection with the transactions contemplated by this
Section 10.3.
Section 10.4 Eminent Domain. In the event that during the Facility
Sublease Term the use of all or any portion of the Undivided 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 Facility Sublessee's obligation to pay all
installments of Sublease Basic Rent shall continue for the duration of such
requisitioning or taking. The Facility Sublessee 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
Facility Sublessee shall not be paid to the Facility Sublessee, or if it has
been previously paid directly to the Facility Sublessee, shall not be retained
by the Facility Sublessee, if at the time of such payment a Sublease Payment
Default, Sublease Bankruptcy Default or Sublease Event of Default shall have
occurred and be continuing, but shall be paid to and held by the Facility
Sublessor as security for the obligations of the Facility Sublessee under this
Facility Sublease, and upon the earlier of (a) 180 days after the Facility
Sublessor shall have received such amount; provided the Facility Sublessor 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 Sublease Payment Default, Sublease
Bankruptcy Default or Sublease Event of Default, such amount shall be paid to
the Facility Sublessee.
SECTION 11. INSURANCE
Section 11.1 Property Insurance.
Subject to availability on commercially reasonable terms, the Facility
Sublessee will maintain (or cause to be maintained) all risk property insurance
in amounts and with deductibles not to exceed $25,000,000 per occurrence as is
customarily carried by prudent operators of hydroelectric facilities of
comparable size and risk, and against loss or damage from such causes as are
customarily insured against, which includes coverage for flood and earthquake
and includes (subject to sublimits of $50,000,000 and $100,000,000,
respectively) boiler and machinery (subject to a sublimit of $100,000,000)
coverage to cover mechanical breakdown, and as required under, and to the extent
required by, the Oglethorpe Mortgage and the Rocky Mountain Agreements in an
amount not less than $302,000,000.
17
Section 11.2 Liability Insurance.
Subject to availability on commercially reasonable terms, the Facility
Sublessee will maintain liability insurance, including contractual liability
insurance, insuring against claims for bodily injury (including death) and
property damage to third parties arising out of the ownership, operation,
maintenance, condition and use of the Facility and the Rocky Mountain Site, in
an amount and with deductibles customarily carried by prudent operators of
hydroelectric facilities of comparable size and risk, but not less than $35
million per occurrence. Such liability insurance may be purchased either in a
single limit or in combination with a general and an excess policy. In the event
of a material increase in the development of the property adjacent to the Rocky
Mountain Site or changes in product liability exposure or laws during the
Facility Sublease Term, the Facility Sublessee will periodically review the
liability insurance maintained by it or on its behalf. In connection with any
such review, the Facility Sublessee will consult with the Facility Sublessor,
the Owner Participant and the Lender. Following such review and consultation, if
appropriate, the Facility Sublessee will increase such coverage and limits in
order that the liability insurance maintained by it or on its behalf is
consistent with that maintained by prudent operators of hydroelectric facilities
of comparable size and risk taking into account such increased development,
subject to the availability of such insurance in such amounts on commercially
reasonable terms.
Section 11.3 Provisions With Respect to Insurance. Subject to availability
on commercially reasonable terms, the Facility Sublessee will place the
insurance maintained pursuant to this Section 11 with companies having an A.M.
Best rating of at least "A-" or, if not so rated, of comparable financial
strength. All insurance policies required to be maintained pursuant to this
Section 11.2 shall name the Trustees (both in their individual capacities and as
trustees), the Owner Participant and the Lender as additional insureds, as their
interest may appear. All insurance policies required to be maintained pursuant
to this Section 11 shall also provide for at least 30 days' prior written notice
(10 days for non-payment) by the insurance carrier to the Facility Sublessor,
the Trustees, the Owner Participant and the Lender in the event of cancellation,
non-renewal, termination, expiration or amendment. The Facility Sublessee will
place the insurance required by this Section 11 with insurance companies which
agree to waive all claims for premiums from, and all subrogation rights against,
the Facility Sublessor, the Trustees, the Owner Participant and the Lender. All
the insurance maintained pursuant to this Section 11 shall be primary without
right of contribution of any other insurance carried by or on behalf of the
Facility Sublessor, the Trustees, the Owner Participant or the Lender with
respect to their respective interests in the Facility and the Rocky Mountain
Site.
To the extent available on commercially reasonable terms, the Facility
Sublessee will use its best efforts to provide that the respective interests of
the Facility Sublessor, the Trustees, the Owner Participant and the Lender shall
not be invalidated by any act or neglect of the Facility Sublessee, or any
breach or violation by the Facility Sublessee of any
18
warranties, declarations or conditions contained in such policies, or by the use
of the Facility and the Rocky Mountain Site for purposes more hazardous than
permitted by such policies. To the extent available on commercially reasonable
terms, the Facility Sublessee will use its best efforts to provide that such
policies shall also be endorsed to: (i) provide that coverage will not be
invalidated by any foreclosure or other proceeding or notice of sale relating to
the Facility or the Rocky Mountain Site or any change in title or ownership of
the Facility or the Rocky Mountain Site, (ii) provide that, inasmuch as the
policies are written to cover more than one insured, all terms, conditions,
insuring agreements and endorsements, with the exception of limits of liability,
shall operate in the same manner as if there were a separate policy covering
each insured and (iii) provide that the coverage afforded by such policies shall
not be affected by the performance of any work in or about any Modification. The
Facility Sublessee shall, at its own expense, make all proofs of loss and take
all other steps necessary to collect the proceeds of such insurance.
Section 11.4 Reports. On or prior to December 1 of each year commencing on
December 1, 1997, the Facility Sublessee shall furnish the Facility Sublessor,
the Owner Participant and the Lender with a report signed by a Responsible
Officer of the Facility Sublessee identifying all insurance coverages in place
and certifying that all premiums in respect of such policies are paid in full.
Such report shall also identify any significant change in coverage, limits or
change in carriers and will include a review of any significant changes in the
development of the property adjacent to the Rocky Mountain Site, product
liability exposure and laws. The Facility Sublessee shall use its best efforts
prior to expiration and renewal, but in no event more than 5 Business Days after
expiration and renewal of any policy required by this Section 11, to provide the
Facility Sublessor, the Owner Participant and the Lender certificates from
insurance brokers or carriers to the effect that such policy is in effect and
indicating their status as additional insureds.
Section 11.5 Additional Insurance by Facility Sublessor. At any time the
Facility Sublessor (either directly or in the name of the Owner Participant) may
at its own expense and for its own account carry insurance with respect to its
interest in the Undivided Interest; provided, that such insurance does not in
any way interfere with the Facility Sublessee's ability to obtain insurance with
respect to the Undivided Interest described in Section 11.1. Any insurance
payments received from policies maintained by the Facility Sublessor pursuant to
the previous sentence shall be retained by the Facility Sublessor without
reducing or otherwise affecting the Facility Sublessee's obligations hereunder.
SECTION 12. INSPECTION
During the Facility Sublease Term, the Facility Sublessor, and its
representatives (along with the Facility Sublessor, the Trustees, the Owner
Participant or the Lender) may, at reasonable times, on reasonable notice to the
Facility Sublessee and the Facility Operator and at their own risk and expense
(except, at the expense, but not risk, of the Facility Sublessee
19
when a Sublease Event of Default, Sublease Bankruptcy Default or Sublease
Payment Default has occurred and is continuing), inspect the Facility (together
with the records of the Facility Operator with respect to the operations and
maintenance thereof) and the Rocky Mountain Site; provided, however, that any
such inspection will not interfere with the Facility Operator's normal
commercial operation of the Facility and will be in accordance with the Facility
Operator's or the Facility Sublessee's safety and insurance programs. Upon
request of the Facility Sublessor (but no more often than annually, provided no
Sublease Event of Default has occurred and is continuing) the Facility Sublessee
shall make available a Responsible Officer to discuss the business, financial
condition or accounts of the Facility Sublessee. In no event shall the Facility
Sublessor, the Trustees, the Owner Participant or the Lender have any duty or
obligation to make any such inspection and such Persons shall not incur any
liability or obligation by reason of not making any such inspection.
SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS
Section 13.1 Election to Terminate. After the occurrence and during the
continuance of any of the events specified below, the Facility Sublessee shall
have the right, at its option, so long as (a) no Sublease Event of Default shall
have occurred and be continuing and (b) the Facility Sublessee shall
simultaneously exercise its election to terminate each Other Facility Sublease
pursuant to Section 13.1 thereof to the extent such event constitutes a
burdensome event under Section 13.1 of such Other Facility Subleases, upon at
least 30 days' prior written notice to the Facility Sublessor, (a) cause the
Facility Sublessor to purchase the Facility Lessor's Rocky Mountain Interest
pursuant to Section 13 of the Facility Lease, (b) purchase the Facility Lessor's
Rocky Mountain Interest purchased by the Facility Sublessor pursuant to Section
13 of the Facility Lease from the Facility Sublessor and (c) terminate this
Facility Sublease on the Termination Date specified in such notice (which shall
be a date occurring not more than 90 days after such notice) if:
(i) it shall have become illegal for the Facility Sublessee to
continue this Facility Sublease or for the Facility Sublessee to make
payments under this Facility Sublease and the transactions contemplated by
the Operative Documents cannot be restructured in a manner acceptable to
the Transaction Parties;
(ii) one or more events outside the control of the Facility
Sublessee shall have occurred which will give rise to an obligation by the
Facility Sublessee to pay or indemnify under Section 11.1 or 11.2 of the
Participation Agreement or the Tax Indemnity Agreement (other than costs
and expenses resulting from a replacement of the Payment Undertaking
Agreement pursuant to Section 17.4 of the Participation Agreement or a
refinancing of the Loan Certificate pursuant to Section 15 of the
Participation Agreement); provided, however, that (a) the indemnity
obligation (and the underlying cost or Tax) can be avoided in whole or in
part by such termination and (b) the amount of such avoided payments would
exceed (on a present value basis,
20
discounted annually at the Loan Rate, to the date of the termination)
three percent of the Undivided Interest Cost. If the Owner Participant
shall waive its right to, or arrange for payment of (without reimbursement
by the Facility Sublessee), amounts of indemnification payments under
Section 11.1 or 11.2 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 three
percent of the Undivided Interest Cost, no such termination option in
favor of the Facility Sublessee shall exist; or
(iii) on or after the eleventh anniversary of the Closing Date, (a)
the Facility Sublessee shall be advised by independent tax counsel
selected by the Facility Sublessee and reasonably acceptable to the
Facility Sublessor, which advice shall be in the form of an opinion and
shall be based on facts, circumstances, events, or conditions occurring
after the Closing Date, that deductions will not be available to it to
reduce income realized by the Facility Sublessee in connection with the
Overall Transaction discounted to such Termination Date and (b) the income
tax which will be payable by the Facility Sublessee in consequence of the
loss of such deductions from such Termination Date to the Expiration Date,
at the Loan Rate, will exceed the greater of (x) the Equity Exposure
Amount for such Termination Date and (y) three percent of the Undivided
Interest Cost.
If the Facility Sublessee does not give notice of its exercise of the
termination option under this Section 13.1 within six months of the date the
Facility Sublessee receives notice or Actual Knowledge of the events or
conditions described above (or in the case of the event or condition described
in clause (iii) of this Section 13.1, in circumstances where the Facility
Sublessee shall have Actual Knowledge on or prior to such eleventh anniversary,
within six months of such eleventh anniversary), the Facility Sublessee will
lose its rights to terminate this Facility Sublease pursuant to this Section
13.1 as a result of such event or condition.
Section 13.2 Procedure for Exercise of Termination Option. If the Facility
Sublessee shall have exercised its option under Section 13.1, on the Termination
Date specified in the Facility Sublessee's notice of such exercise, the Facility
Sublessee shall pay to the Facility Sublessor (a) the amount which the Facility
Sublessor is obligated to pay to the Facility Lessor pursuant to clause (a) of
the first sentence of Section 13.2 of the Facility Lease plus (b) all amounts of
Sublease Supplemental Rent (including all costs and expenses of the Facility
Sublessor (including costs and expenses of the Trustees, the Owner Participant
and the Lender incurred by the Facility Sublessor pursuant to Section 13.2 of
the Facility Lease) and all sales, use, value added and other Taxes covered by
Section 11.2 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 Sublease Basic Rent due before such
Termination Date and, if such Termination Date shall be a Rent Payment Date, the
Sublease 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 13.2, (1) Sublease
21
Basic Rent for the Undivided Interest shall cease to accrue, (2) the Facility
Sublessee shall cease to have any liability to the Facility Sublessor with
respect to the Undivided Interest, except for Sublease Supplemental Rent and
other obligations (including those under Sections 11.1 and 11.2 of the
Participation Agreement and the Tax Indemnity Agreement) surviving pursuant to
the express terms of any Operative Document, (3) the Facility Sublessor will
execute and deliver to the Facility Sublessee, to be prepared (and where
appropriate recorded and filed), at the Facility Sublessee's cost and expense, a
release or termination of this Facility Sublease, (4) the Facility Sublessor
will transfer, pursuant to this Section 13.2 and Section 6 of the Ground
Sub-sublease, the Facility Lessor's Rocky Mountain Interest purchased by the
Facility Sublessor pursuant to Section 13 of the Facility Lease to the Facility
Sublessee on an "as is", "where is" and "with all faults" basis, without
representations or warranties other than a warranty as to the absence of
Facility Sublessor's Liens and (5) this Facility Sublease shall terminate and
the Facility Sublessor shall execute and deliver appropriate releases and other
documents or instruments necessary or desirable to effect the foregoing, all to
be prepaid, filed and recorded (if appropriate) at the cost and expense of the
Facility Sublessee. It shall be a condition of the termination of this Facility
Sublease pursuant to this Section 13, that the Facility Sublessee shall pay all
amounts it is obligated to pay under this Section 13.2 and all other amounts due
under this Facility Sublease and the other Operative Documents.
SECTION 14. TERMINATION FOR OBSOLESCENCE
Section 14.1 Termination. Upon at least 280 days' prior written notice to
the Facility Sublessor which notice shall contain certification by the Board of
Directors of the Facility Sublessee to the effect that the Facility is
economically or technologically obsolete or that the Facility is surplus to the
Facility Sublessee's needs, the Facility Sublessee shall have the option, so
long as no Sublease Payment Default, Sublease Bankruptcy Default or Sublease
Event of Default shall have occurred and be continuing, to cause the Facility
Sublessor to terminate the Facility Lease pursuant to Section 14 thereof and to
terminate this Facility Sublease 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.
Section 14.2 Solicitation of Offers. If the Facility Sublessee shall give
the Facility Sublessor notice pursuant to Section 14.1, the Facility Sublessee
may, as non-exclusive agent for the Facility Sublessor and the Facility Lessor,
use its best efforts to obtain bids for the cash purchase of the Facility
Lessor's Rocky Mountain Interest. The Facility Sublessor shall also have the
right to obtain bids for the cash purchase of the Facility Lessor's Rocky
Mountain Interest either directly or through agents other than the Facility
Sublessee. At least 120 days prior to the Obsolescence Termination Date, the
Facility Sublessee shall certify to the Facility Lessor and the Facility
Sublessor each bid or offer, the amount and terms thereof and the name and
address of the party (which shall not be the Facility Sublessee, any member
cooperative of Oglethorpe or any Affiliate of any thereof) submitting such bid
or offer.
22
Section 14.3 Procedure for Exercise of Termination Option. On the
Obsolescence Termination Date the Facility Sublessor will cause the Facility
Lessor to sell the Facility Lessor's Rocky Mountain Interest under this Section
14.3, Section 14.4 of the Facility Lease, Section 6 of the Ground Sublease and
Section 6 of the Ground Sub-sublease and Section 9 of the Head Lease to the
bidder or bidders (which shall not be the Facility Sublessee, Oglethorpe or a
cooperative member of Oglethorpe or any Affiliate of any thereof), that shall
have submitted the highest cash bid or bids with respect to the Facility
Lessor's Rocky Mountain Interest before the Obsolescence Termination Date. On
the Obsolescence Termination Date, the Facility Sublessee shall pay to the
Facility Sublessor (a) the amount which the Facility Sublessor is obligated to
pay the Facility Lessor pursuant to clause (a) of the second sentence of Section
14.4 of the Facility Lease in connection with such sale, plus (b) any unpaid
Sublease Basic Rent due before such Obsolescence Termination Date and, if such
Obsolescence Termination Date shall be a Rent Payment Date, any Sublease Basic
Rent (to the extent payable in arrears) due and payable on such Rent Payment
Date, and (c) all amounts of Sublease Supplemental Rent (including all costs and
expenses of the Facility Lessor, the Trustees or the Lender incurred by the
Facility Sublessor pursuant to Section 14.4 of the Facility Lease), and all
sales, use, value added and other Taxes covered by Section 11.2 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 14.3, (i) Sublease Basic Rent for the Undivided Interest shall
cease to accrue, (ii) the Facility Sublessee shall cease to have any liability
hereunder to the Facility Sublessor with respect to the Undivided Interest,
except for Sublease Supplemental Rent and other obligations (including Sections
11.1 and 11.2 of the Participation Agreement and the Tax Indemnity Agreement)
surviving pursuant to the express terms of any Operative Document and (iii) this
Facility Sublease shall terminate and the Facility Sublessor shall execute and
deliver appropriate releases and other documents or instruments necessary or
desirable to effect the foregoing, all to be prepaid, filed and recorded (if
appropriate) at the cost and expense of the Facility Sublessee. Unless the
Facility Lessor shall have elected to retain the Undivided Interest pursuant to
Section 14.3 of the Facility Lease or the Facility Lessor with the consent of
the Facility Sublessor shall have entered into a legally binding contract to
sell the Facility Lessor's Rocky Mountain Interest, the Facility Sublessee may,
at its election, revoke its notice of termination on at least 35 days' prior
notice to the Facility Sublessor, in which event this Facility Sublease shall
continue with respect to the Undivided Interest; provided, however, that a
notice of termination may be revoked on not more than two occasions during the
Facility Sublease Term and the Facility Sublessee shall not be permitted to
initiate a notice to terminate pursuant to Section 14.1 following a second
revocation in accordance with this sentence. The Facility Sublessor shall be
under no duty to solicit bids, to inquire into the efforts of the Facility
Sublessee to obtain bids or otherwise take any action in arranging any such sale
of the Facility Lessor's Rocky Mountain Interest. It shall be a condition of the
Facility Sublessor's obligation to consummate a sale of the Facility Lessor's
Rocky Mountain Interest in accordance this Section 14.3 that the Facility
Sublessee shall pay all amounts it is obligated to pay under this Section 14.3.
If no sale shall occur on the Obsolescence Termination Date, the notice of
termination shall be deemed revoked and
23
this Facility Sublease shall continue as to the Undivided Interest in full force
and effect in accordance with its terms (without prejudice to the Facility
Sublessee's right to exercise its rights under this Section 14). The Facility
Sublessee will be obligated to pay any expenses or damages of the Facility
Sublessor (including expenses or damages of the Facility Lessor incurred by the
Facility Sublessor pursuant to the last sentence of Section 14.4 of the Facility
Lease) resulting from the failure to consummate a sale of the Facility Lessor's
Rocky Mountain Interest for any reason not other than an act of bad faith or
gross negligence by the Facility Sublessor.
SECTION 15. END OF SUBLEASE BASIC TERM OPTIONS
Section 15.1 The Facility Sublessee's Sublease Purchase Option and
Sublease Return Option. Unless this Facility Sublease shall have been previously
terminated pursuant to Section 10, 13, 14, 17 or 18 hereof, at any time not more
than forty-eight months nor less than eighteen months prior to the Expiration
Date, the Facility Sublessee shall have the option, upon giving written notice
to the Facility Sublessor, (A) to irrevocably elect to cause the Facility
Sublessor to exercise the Purchase Option pursuant to Section 15.1 of the
Facility Lease and to purchase the Undivided Interest from the Facility
Sublessor on the Expiration Date for the amount determined in accordance with
this Section 15.1 (the "Sublease Purchase Option") or (B) to irrevocably elect
to return the Undivided Interest to the Facility Sublessor in accordance with
Section 5 (the "Sublease Return Option"). If the Facility Sublessee shall elect
the Sublease Purchase Option, the Facility Sublessor shall forthwith exercise
the Purchase Option in accordance with Section 15.1 of the Facility Lease. If
the Facility Sublessee shall elect or is deemed to have elected the Sublease
Return Option, the Facility Sublessor shall elect the Return Option pursuant to
Section 15.1 of the Facility Lease. If the Facility Sublessee shall have elected
or is deemed to have elected the Return Option, on the Expiration Date it shall
return the Undivided Interest to the Facility Sublessor in accordance with the
provisions of Section 5 of this Facility Sublease. If the Facility Sublessee
shall have exercised the Purchase Option, the Facility Sublessee shall become
unconditionally obligated to pay to the Facility Sublessor (a) on the Expiration
Date (i) the initial installment of the Purchase Option Price in the amount of
$302,435,484.77, (ii) all amounts of Sublease Supplemental Rent (including,
without limitation, all costs and expenses of the Facility Sublessor including
all amounts payable by the Facility Sublessor to the Trustees, the Owner
Participant and the Lender pursuant to Section 15.1 of the Facility Lease and
all sales, use, value added and other Taxes covered by Section 11.2 of the
Participation Agreement associated with the Purchase Option) due and payable on
the Expiration Date, and (iii) any unpaid Sublease Basic Rent due before the
Expiration Date and the Sublease Basic Rent due and payable on the Expiration
Date and (b) subsequent installments of the Purchase Option Price in the amounts
and on the dates set forth in clause (b) of the third sentence of Section 15.1
of the Facility Lease. The covenant to pay the subsequent installments of the
Purchase Option Price in accordance with the preceding sentence shall survive
the termination of this Facility Sublease. Concurrently with the payment of the
sums specified in clause (a) of this
24
Section 15.1, (w) Sublease Basic Rent for the Undivided Interest shall cease to
accrue, (x) the Facility Sublessee shall cease to have any liability to the
Facility Sublessor with respect to the Undivided Interest, except for Sublease
Supplemental Rent and other obligations (including those under Sections 11.1 and
11.2 of the Participation Agreement, the Tax Indemnity Agreement and the
additional installments of the Purchase Option Price payable in accordance with
the fifth sentence of this Section 15.1) surviving pursuant to the express terms
of any Operative Document, (y) the Facility Sublessor will, by documents and
instruments in form and substance reasonably satisfactory to the Facility
Sublessee, transfer the Facility Lessor's Rocky Mountain Interest purchased by
the Facility Sublessor pursuant to Section 15.1 of the Facility Lease to the
Facility Sublessee in accordance with this Section 15.1 and Section 6 of the
Ground Sub-sublease on an "as is", "where is" and "with all faults" basis,
without representations or warranties other than a warranty as to the absence of
Facility Sublessor's Liens and (z) this Facility Sublease shall terminate and
the Facility Sublessor shall execute and deliver appropriate releases and all
other documents or instruments necessary or desirable to effect the foregoing,
all to be prepared, filed and recorded (as appropriate) at the cost and expense
of the Facility Sublessee. The Facility Sublessor agrees that it will not
exercise its options pursuant to Section 15.1 of the Facility Lease in a manner
which will preclude the exercise of the Facility Sublessee's Purchase or Return
Options under this Section 15.1. If the Facility Sublessee shall fail to
exercise the Sublease Purchase Option or the Sublease Return Option by the date
eighteen months prior to the Expiration Date, it will be deemed to have elected
the Sublease Return Option on such date eighteen months prior to the Expiration
Date.
Section 15.2 Sublease Renewal Term.
(a) If the Facility Lessor shall have elected or shall be deemed to
have elected the Renewal Term Option, pursuant to the provisions of Section 15.2
or Section 15.6 of the Facility Lease, the term of this Facility Sublease will
be automatically extended for a renewal term that begins on the Expiration Date
and extends for a period equal to that of the Renewal Term under the Facility
Lease (the "Sublease Renewal Term"). Sublease Basic Rent during the Sublease
Renewal Term will be payable on Rent Payment Dates in amounts equal to the Basic
Rent payable under the Facility Lease on the corresponding Rent Payment Date (as
such amounts may be adjusted in accordance with paragraph (b) of Section 15.4 of
the Facility Lease). Sublease Termination Values during the Sublease Renewal
Term will be equal to those for the corresponding Termination Dates under the
Facility Lease.
(b) If on the Expiration Date, the Facility Lessee or Facility
Sublessee is unable to arrange for a Loan Extension in accordance with Section
15.3(a), the Facility Sublessee may exercise the Purchase Option in accordance
with Section 15.1 (except that the Facility Sublessee's purchase of the
Undivided Interest may be consummated on the Business Day next following the
Expiration Date so long as Facility Sublessee shall pay interest on the initial
installment of the Purchase Option Price to (but not including) such Business
Day at the Overdue Rate.
25
(c) The Facility Sublessee shall pay or reimburse, on demand, all
costs and expenses (including reasonable legal fees and expenses) incurred by
the Facility Sublessor, including costs and expenses of the Owner Participant,
the Trustees, the Lender and any third party lender incurred by the Facility
Sublessor pursuant to Section 15.2 of the Facility Lease, in connection with the
exercise of the Renewal Term Option, including without limitation, the costs and
expenses in connection with the Loan Extension, whether or not any of such
transactions are consummated.
Section 15.3 Refinancing of Loan Certificate in Connection with Sublease
Return Option.
(a) If the Facility Lessor shall have elected or shall have been deemed to
have elected the Renewal Term Option the Facility Sublessee shall (i) satisfy
the requirements of Section 15.4(c) of the Facility Lease and (ii) arrange a
Loan Extension from third parties. If the Facility Lessee has exercised
reasonable efforts to arrange for a Loan Extension with one or more third party
lenders and if third party lenders cannot be arranged for 100% of the principal
amount of the Loan Certificate then outstanding under the Loan Agreement (other
than as a result of an Event of Default that is not a Sublease Event of Default
or Head Lessor Event of Default), and the Facility Sublessor is not in default
of any obligations to purchase the Loan Certificates under Section 15.5 of the
Facility Lease, the Facility Sublessee at the request of the Facility Lessor or
the Owner Participant shall purchase up to 49% of the principal amount of the
Loan Certificate then outstanding under the Loan Agreement from the Lender in
accordance with Section 2.11 of the Loan Agreement. Loan Certificates purchased
by the Facility Sublessee pursuant to the preceding sentence shall be secured on
a pari passu basis with all other outstanding Loan Certificates other than with
respect to the granting of consents, waivers or amendments or exercising
remedies following a default under the security documents securing the Loan
Certificates.
(b) If the Facility Lessor shall have elected the Replacement Lease
Option, the Facility Lessor shall arrange for a Loan Extension, provided that if
on the last day of the Basic Term a Replacement Facility Lessee shall be
prepared to enter into a Replacement Facility Lease but the Facility Lessor has
not been able to arrange for a Loan Extension by such date (other than as a
result of an Event of Default that is not a Sublease Event of Default or Head
Lessor Event of Default) and the Facility Sublessor is not in default of any
obligations to purchase the Loan Certificates under Section 15.5 of the Facility
Lease, the Facility Sublessee at the request of the Facility Lessor or the Owner
Participant shall purchase the Loan Certificates from the Lender in accordance
with Section 2.11 of the Loan Agreement.
SECTION 16. EVENTS OF DEFAULT
The following events shall constitute "Sublease Event of Defaults"
hereunder (whether any such event shall be voluntary or involuntary or come
about or be effected by operation of
26
law or pursuant to or in compliance with any judgment, decree or order of any
court or any order, rule or regulation of any Governmental Entity):
(a) the Facility Sublessee shall fail to make any payment of Sublease
Basic Rent or the Purchase Option Price within five Business Days after the same
shall have become due; or
(b) the Facility Sublessee shall fail to make any payment of Sublease
Termination Value required by Section 10, 13 or 14 within ten Business Days
after the same shall have become due; or
(c) the Facility Sublessee shall fail to make any payment of Sublease
Supplemental Rent (other than the Purchase Option Price or as described in
clause (a) or (b) of this Section 16), after the same shall have become due and
such failure shall continue unremedied for a period of 30 Business Days after
receipt by the Facility Sublessee of written notice of such failure from the
Facility Sublessor; or
(d) any representation or warranty made by the Facility Sublessee in the
Operative Documents (other than the Tax Indemnity Agreement) or any written
certificate 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 Facility Sublessee is
diligently pursuing such cure, such action has not succeeded within a period of
180 days after such notice; or
(e) the Facility Sublessee shall have failed to perform or observe any
covenant, obligation or agreement to be performed or observed by it under any
Operative Document (other than any covenant, obligation or agreement contained
in the Tax Indemnity Agreement or Section 16 of the Participation Agreement or
any covenants, obligations or agreements referred to in clauses (a), (b), (c),
(f), (g), (h) and (i) of this Section 16) 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 Facility Sublessee 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 Facility
Sublessee's obligation set forth in the first sentence of Section 7.1 of this
Facility Sublease as it relates to compliance with Applicable Law, 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 Facility Sublessee or
the Facility Operator, the failure by the Facility Sublessee to comply with such
requirement shall not constitute a Sublease Event of Default hereunder if, but
only if, such test, challenge, appeal or proceeding shall not involve any danger
of (i) the foreclosure, sale, forfeiture or loss of, or imposition of a Lien on,
any part of the Facility, the Rocky Mountain Site or the impairment of the use,
operation or maintenance of the Facility or the Rocky Mountain Site in any
material respect or the value, utility or useful life of the Facility or the
Rocky Mountain Site, (ii) the loss of the security interest of the Lender in the
Collateral, or (iii) any criminal liability being incurred or any material
adverse effect on, the Facility Sublessor, the Facility Lessor, the Owner
27
Participant or the Lender in the reasonable opinion of such Person including,
without limitation, subjecting the Facility Lessor, the Owner Trustee, or the
Owner Participant to regulation as a public utility under Applicable Law; and
provided, further, in the case of the Facility Sublessee's obligation set forth
in the first sentence of Section 7.1 of this Facility Sublease as it relates to
compliance with Applicable Law, if the noncompliance is not of a type that can
be immediately remedied, the failure to comply shall not be a Sublease Event of
Default hereunder if the Facility Sublessee is taking all reasonable action to
remedy such noncompliance and if, but only if, such noncompliance shall not
involve any danger in the reasonable opinion of such Person described in clause
(i), (ii) or (iii) of the preceding proviso; and provided, further, such
noncompliance, or such test, challenge, appeal or proceeding to review shall
not, unless the Facility Sublessee has irrevocably elected the Sublease Purchase
Option pursuant to Section 15.1, extend beyond a date that is 18 months prior to
the Expiration Date; or
(f) the Facility Sublessee shall fail to observe or perform its obligation
to maintain the insurance required by Section 11; or
(g) the Facility Sublessee shall fail to observe or perform its
obligations under Section 5, Section 15 or Section 19 of this Facility Sublease;
or
(h) the Facility Sublessee shall have failed to observe or perform its
obligations under Section 8.2 or Section 8.12 of the Participation Agreement; or
(i) the Facility Sublessee shall have failed to observe or perform its
obligations set forth in Section 8.5, Section 8.6, Section 8.7, Section 8.8 or
Section 8.16 of the Participation Agreement; or
(j) Oglethorpe's right to the output of capacity and energy from the
Facility, or any of its other rights as a "Participant," under the Rocky
Mountain Operating Agreement, shall be suspended pursuant to Section 6.02 of the
Rocky Mountain Operating Agreement and such suspension shall not be cured within
30 days; or
(k) Oglethorpe shall be removed as "agent" under the Rocky Mountain
Operating Agreement pursuant to Section 8.02 and 8.03 of such Agreement; or
(l) the principal and interest on the bonds issued under the Oglethorpe
Mortgage shall have been declared to be immediately due and payable; or
(m) the Head Lease, the Ground Lease or the Rocky Mountain Agreements
Assignment shall become invalid or unenforceable; or
(n) the Facility Sublessee shall (i) commence a voluntary case or other
proceeding seeking relief under Title 11 of the Bankruptcy Code or liquidation,
reorganization or other
28
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect, or apply for or consent to the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or (ii) consent to, or
fail to controvert in a timely manner, any such relief or the appointment of or
taking possession by any such official in any voluntary case or other proceeding
commenced against it, (iii) file an answer admitting the material allegations of
a petition filed against it in any such proceeding or (iv) fail to pay its debts
generally as they become due or admit in writing its inability to do so or take
any corporate steps with respect to any of the foregoing; or
(o) an involuntary case or other proceeding shall be commenced against the
Facility Sublessee seeking (i) liquidation, reorganization or other relief with
respect to it or its debts under Title 11 of the Bankruptcy Code or any
bankruptcy, insolvency or other similar law now or hereafter in effect, or (ii)
the appointment of a trustee, receiver, liquidator, custodian or other similar
official over it or any substantial part of its property, or (iii) the
winding-up or liquidation of the Facility Sublessee; and such involuntary case
of other proceeding shall remain undismissed and unstayed for a period of 60
days; or
(p) the obligees or any trustee under the Oglethorpe Mortgage shall have
(i) given the notice contemplated by Section 1(b) or Section 4 of the
Intercreditor Agreement, or shall have commenced or taken action to foreclose or
otherwise dispossess the Facility Sublessee or the Head Lessee from the Facility
or otherwise taken an action referred to in Section 4 of the Intercreditor
Agreement or (ii) exercised any dispossessing remedy pursuant to the remedy
provisions of the Oglethorpe Mortgage or pursuant to Applicable Law; or
(q) the obligees or any trustee under the Oglethorpe Mortgage shall have
commenced a foreclosure action under the relevant remedy provisions following an
"event of default" under the Oglethorpe Mortgage; or
(r) the Qualifying Sublease Surety Bond (or the Qualifying Letter of
Credit in replacement thereof) or any Qualifying Additional Security securing
the Facility Sublessor's obligations under the Facility Sublease shall cease to
be valid and enforceable obligations of the issuer thereof (regardless whether
such Bond or Letter of Credit meets the requirements for a "Qualifying Sublease
Surety Bond" or a "Qualifying Letter of Credit" or "Qualifying Additional
Security"); or
(s) the Facility Sublessee shall have failed to perform or observe its
covenant set forth in Section 8.15 of the Participation Agreement, and, if
capable of remedy, no action to cure is commenced within 30 days after notice,
or, if such action has been taken and the Facility Sublessee is diligently
pursuing such cure, such action has not succeeded within a period of 60 days
after such notice.
29
SECTION 17. REMEDIES
Section 17.1 Remedies for Sublease Event of Default. Upon the occurrence
of any Sublease Event of Default and at any time thereafter so long as the same
shall be continuing, this Facility Sublease shall automatically be deemed to be
in default without the need for giving any notice (the giving of which is waived
to the fullest extent permitted by Applicable Law); and at any time thereafter,
so long as the Facility Sublessee shall not have remedied all outstanding
Sublease Events of Default, the Facility Sublessor may do one or more of the
following as the Facility Sublessor 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 Facility Sublessee, at the Facility
Sublessee's sole cost and expense, of the applicable covenants and terms of this
Facility Sublease, provided, however, that the liquidated damages amount set
forth in paragraphs (e) and (f) below shall be the sole and exclusive money
damages remedy available to the Facility Sublessor for a Sublease Event of
Default;
(b) by notice in writing to the Facility Sublessee, terminate this
Facility Sublease and the Facility Sublessee's Rocky Mountain Interest whereupon
all right of the Facility Sublessee to the possession and use of the Undivided
Interest under this Facility Sublease shall absolutely cease and terminate but
the Facility Sublessee shall remain liable as hereinafter provided; and
thereupon, the Facility Sublessor may demand that the Facility Sublessee, and
the Facility Sublessee shall, upon written demand of the Facility Sublessor and
at the Facility Sublessee's expense, forthwith return possession of the
Undivided Interest to the Facility Sublessor or its order in the manner and
condition required by, and otherwise in accordance with all of the provisions of
Section 5, except those provisions relating to periods of notice; and the
Facility Sublessor may thenceforth hold, possess and enjoy the same free from
any right of the Facility Sublessee, or its successor or assigns, to use the
Undivided Interest for any purpose whatsoever;
(c) sell the Facility Sublessor's Rocky Mountain Interest at public or
private sale, as the Facility Sublessor may determine, free and clear of any
rights of the Facility Sublessee under this Facility Sublease and without any
duty to account to the Facility Sublessee with respect to such sale or for the
proceeds thereof (except to the extent required by paragraph (f) below if the
Facility Sublessor elects to exercise its rights under said paragraph and by
Applicable Law), in which event the Facility Sublessee's obligation to pay
Sublease Basic Rent hereunder due for any periods subsequent to the date of such
sale shall terminate (except to the extent that Sublease Basic Rent is to be
included in computations under paragraph (f) below if the Facility Sublessor
elects to exercise its rights under said paragraph), provided, however, that if
the Facility Sublessor shall have exercised its rights under this paragraph (c),
the Facility Sublessor may not exercise any remedy set forth in paragraph (e) of
this Section 17.1;
30
(d) hold, keep idle or lease to others the Facility Sublessor's Rocky
Mountain Interest as the Facility Sublessor in its sole discretion may
determine, free and clear of any rights of the Facility Sublessee under this
Facility Sublease and without any duty to account to the Facility Sublessee with
respect to such action or inaction or for any proceeds with respect thereto,
except that the Facility Sublessee's obligation to pay Sublease Basic Rent with
respect to the Undivided Interest due for any periods subsequent to the date
upon which the Facility Sublessee shall have been deprived of possession and use
of the Undivided Interest pursuant to this Section 17 shall be reduced by the
net proceeds, if any, received by the Facility Sublessor from leasing the
Facility Sublessor's Rocky Mountain Interest to any Person other than the
Facility Sublessee;
(e) whether or not the Facility Sublessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under paragraph (b) above
with respect to the Facility Sublessor's Rocky Mountain Interest, the Facility
Sublessor, by written notice to the Facility Sublessee specifying a Termination
Date that shall be not earlier than 10 days after the date of such notice, may
demand that the Facility Sublessee pay to the Facility Sublessor, and the
Facility Sublessee shall pay to the Facility Sublessor, on the Termination Date
specified in such notice, any unpaid Sublease Basic Rent due before such
Termination Date and, if such Termination Date shall be a Rent Payment Date, any
Sublease Basic Rent (to the extent payable in arrears) due and payable on such
Rent Payment Date, any Sublease Supplemental Rent due and payable as of the
payment date specified in such notice, plus as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the Sublease Basic Rent due after the
Termination Date specified in such notice), (i) an amount equal to the excess,
if any, of the Sublease Termination Value computed as of the Termination Date
specified in such notice over the Fair Market Sales Value of the Facility
Sublessor's Rocky Mountain Interest as of the Termination Date specified in such
notice; or (ii) an amount equal to the Sublease Termination Value computed as of
the Termination Date specified in such notice and, upon payment of such Sublease
Termination Value by the Facility Sublessee pursuant to this clause (ii) and all
other Sublease Rent then due and payable by the Facility Sublessee, the Facility
Sublessor will forthwith transfer to the Facility Sublessee in accordance with
this Section 17.1(e) and Section 6 of the Ground Sub-sublease on an "as is",
"where is" and "with all faults" basis, without representation or warranty other
than a warranty as to the absence of Facility Sublessor's Liens, all of its
interest in the Facility Sublessor's Rocky Mountain Interest and, execute,
acknowledge and deliver, and record and file (as appropriate), appropriate
releases and all other documents or instructions necessary or desirable to
effect the foregoing, all in form and substance reasonably satisfactory to the
Facility Sublessor and at the cost and expense of the Facility Sublessee) and
upon payment of such amounts under clauses (i) or (ii) of this paragraph (e),
this Facility Sublease, and the Facility Sublessee's obligation to pay Sublease
Basic Rent hereunder due for any periods subsequent to the date of such payment
shall terminate; and
(f) if the Facility Sublessor shall have sold the Facility Sublessor's
Rocky Mountain Interest pursuant to paragraph (c) above, the Facility Sublessor
may, if it shall so elect,
31
demand that the Facility Sublessee pay to the Facility Sublessor, and the
Facility Sublessee shall pay to the Facility Sublessor, as liquidated damages
for loss of a bargain and not as a penalty (in lieu of the Sublease Basic Rent
due for any periods subsequent to the date of such sale), an amount equal to (A)
any unpaid Sublease Basic Rent due before the date of such sale and, (B)(i) if
that date is a Rent Payment Date, the Sublease Basic Rent due on that date (to
the extent payable in arrears), or, (ii) if that date is not a Rent Payment Date
or the Termination Date, the daily equivalent (based on a 30-day month) of
Sublease Basic Rent (to the extent payable in arrears) for the period from the
preceding Rent Payment Date to the date of such sale, plus (C) the amount, if
any, by which the Sublease Termination Value computed as of a Termination Date
next preceding the date of such sale or, if such sale occurs on a Termination
Date the Termination Value computed as of such Termination Date, exceeds the net
proceeds of such sale and, upon payment of such amount, this Facility Sublease
and the Facility Sublessee's obligation to pay Sublease Basic Rent for any
periods subsequent to the date of such payment shall terminate; or
(g) the Facility Sublessor or upon an Event of Default, the Facility
Lessor, as security assignee, may draw upon the Qualifying Sublease Surety Bond
and the proceeds of the Qualifying Sublease Surety Bond shall reduce the
Facility Sublessee's obligation to pay Sublease Termination Value to the extent
of any such proceeds received by the Facility Sublessor.
In addition, the Facility Sublessee shall be liable, except as otherwise
provided above, for any and all unpaid Sublease Rent due hereunder before,
during or after the exercise of any of the foregoing remedies (or for damages in
an amount equal to such Sublease Rent which would otherwise have accrued after
eviction of the Facility Sublessee or other termination of the leasehold created
hereby pursuant to or in the course of the Facility Sublessor's exercise of such
remedies), and, on an After-Tax Basis, for legal fees and other costs and
expenses incurred by reason of the occurrence of any Sublease Event of Default
or the exercise of the Facility Sublessor'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 Undivided Interest in accordance
with Section 5 hereof, including, without limitation, any costs and expenses
incurred by the Facility Sublessor (including the costs and expenses of the
Trustees, the Owner Participant or the Lender payable by the Facility Sublessor
pursuant to Section 17.1 of the Facility Lease) in connection with retaking
constructive possession of, or in repairing, the Undivided Interest in order to
cause it to be in compliance with all maintenance standards imposed by this
Facility Sublease. The provisions of this Section 17.1 shall survive the
termination of this Facility Sublease for any reason whatsoever and the
termination or cancellation of the Facility Sublessee's leasehold estate in the
Undivided Interest for any reason.
Section 17.2 Cumulative Remedies. The remedies in this Facility Sublease
provided in favor of the Facility Sublessor 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, and the
32
exercise or beginning of exercise by the Facility Sublessor of any one or more
of such remedies shall not preclude the simultaneous or later exercise by the
Facility Sublessor of any or all of such other remedies; provided, however, that
the liquidated damages amount set forth in paragraphs (e) and (f) above shall be
the sole and exclusive money damages remedy available to the Facility Sublessor
for a Sublease Event of Default. To the extent permitted by Applicable Law, the
Facility Sublessee hereby waives any rights now or hereafter conferred by
statute or otherwise which may require the Facility Sublessor to sell, lease or
otherwise use the Undivided Interest or any Component thereof in mitigation of
Facility Sublessor's damages as set forth in this Section 17 or which may
otherwise limit or modify any of Facility Sublessor's rights and remedies in
this Section 17.
Section 17.3 No Delay or Omission to be Construed as Waiver. No delay or
omission to exercise any right, power or remedy accruing to the Facility
Sublessor upon any breach or default by the Facility Sublessee under this
Facility Sublease shall impair any such right, power or remedy of the Facility
Sublessor, nor shall any such delay or omission be construed as a waiver of any
breach or default, or of any similar breach or default hereafter occurring; nor
shall any waiver of a single breach or default be deemed a waiver of any
subsequent breach or default.
SECTION 18. TERMINATION OPTIONS FOR APPEAL OF FERC ORDERS.
Section 18.1 Options to Terminate. If an appeal or request for a rehearing
shall be filed (including by post-order intervention) of the FERC Order, the
Facility Sublessee shall forthwith give notice of such appeal or request for
rehearing to the Facility Sublessor. If such an appeal or request for rehearing
shall be filed, the Facility Sublessor and the Facility Sublessee shall each
have the option, upon not less than four Business Days' prior written notice to
the other, given not later than March 1, 1997, to terminate this Facility
Sublease on the next succeeding Termination Date occurring at least ten days
following such notice on the terms set forth in this Section 18.1. If the
Facility Sublessee shall exercise its option provided by this Section 18.1 by
giving the notice contemplated by the preceding sentence, the Facility Sublessee
shall have the right to cause the Facility Sublessor to (i) exercise the option
provided in Section 18.1 of the Facility Lease and (ii) purchase the Facility
Lessor's Rocky Mountain Interest pursuant to Section 18 of the Facility Lease,
(b) purchase the Facility Lessor's Rocky Mountain Interest purchased by the
Facility Sublessor pursuant to Section 18 of the Facility Lease from the
Facility Sublessor and (c) terminate this Facility Sublease on the Termination
Date specified in such notice, upon payment to the Facility Lessor of the
Sublease Termination Value, determined as of such Termination Date. The Facility
Sublessee shall be permitted to exercise its option provided by this Section 18
only if the Facility Sublessee shall simultaneously exercise the termination
option provided by Section 18.1 of each Other Facility Lease. If the Facility
Sublessor shall exercise its option provided by this Section 18.1 giving the
notice contemplated by the second preceding sentence, the Facility Sublessor
shall have the right to cause the Facility Sublessee to (a) purchase from the
Facility Sublessor the Facility
33
Lessor's Rocky Mountain Interest purchased by the Facility Sublessor pursuant to
Section 18 of the Facility Lease for the Sublease Termination Value on the
Termination Date specified in such notice and (b) terminate this Facility
Sublease on such Termination Date.
Section 18.2 Procedure for Exercise of Termination Options. If the
Facility Sublessor or the Facility Sublessee shall have exercised its option
under Section 18.1, on the Termination Date specified in the Facility
Sublessor's or the Facility Sublessee's notice of such exercise, the Facility
Sublessee shall pay to the Facility Sublessor (a) the Sublease Termination Value
determined as of such Termination Date, plus (b) all amounts of Sublease
Supplemental Rent (including all costs and expenses of the Facility Sublessor,
the Owner Trustee, the Owner Participant and the Lender incurred by the Facility
Sublessor pursuant to Section 18.2 of the Facility Lease and all sales, use,
value added and other Taxes covered by Section 12.2 of the Participation
Agreement associated with the exercise of the termination option pursuant to
this Section 18) due and payable on or prior to the Termination Date, and (c)
any unpaid Sublease Basic Rent due before such Termination Date and, if such
Termination Date shall be a Rent Payment Date, the Sublease 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 18.2 (1)
Sublease Basic Rent for the Undivided Interest shall cease to accrue, (2) the
Facility Sublessee shall cease to have any liability to the Facility Sublessor
with respect to the Undivided Interest, except for Sublease Supplemental Rent
and other obligations (including those under Sections 11.1 and 11.2 of the
Participation Agreement and the Tax Indemnity Agreement) surviving pursuant to
the express terms of any Operative Document, (3) the Facility Sublessor will
execute and deliver to the Facility Sublessee to be prepared (and where
appropriate recorded and filed), at the Facility Sublessee's cost and expense, a
release and termination of this Facility Sublease, (4) the Facility Sublessor
will transfer, pursuant to this Section 18.2 and Section 6 of the Ground
Sub-sublease, the Facility Lessor's Rocky Mountain Interest acquired by the
Facility Sublessor pursuant to Section 18 of the Facility Lease to the Facility
Sublessee on an "as is," "where is," "with all faults" basis, without
representations or warranties other than a warranty as to the absence of
Facility Sublessor's Liens and (5) this Facility Sublease shall terminate and
the Facility Sublessor shall execute and deliver appropriate releases and other
documents or instruments necessary or desirable to effect the foregoing, all to
be prepaid, filed and recorded (if appropriate) at the cost and expense of the
Facility Sublessee.
SECTION 19. THE FACILITY SUBLESSEE'S RIGHT TO SUBLEASE.
The Facility Sublessee will not have the right to sublease the Undivided
Interest without the consent of the Facility Sublessor except under the
following conditions:
(a) the sublessee is (i) a solvent corporation not subject to
bankruptcy proceedings and (ii) the sublessee is, or its obligations under
the sublease are guaranteed by, an experienced, reputable operator of
electric utility assets;
34
(b) the sublease does not extend beyond the Expiration Date and is
expressly subject and subordinate to the Head Lease, the Facility Lease
and this Facility Sublease;
(c) RMLC and Oglethorpe remain fully and primarily liable for their
obligations under the Operative Documents and RMLC remains fully, and
Oglethorpe remains fully and primarily, liable for their obligations under
the Rocky Mountain Agreements;
(d) all terms and conditions of the Head Lease, the Facility Lease,
this Facility Sublease and the other Operative Documents remain in effect;
(e) the entering into such sublease is permitted by the Rocky
Mountain Agreements and the Oglethorpe Mortgage;
(f) no Sublease Payment Default, Sublease Bankruptcy Default or
Sublease Event of Default shall be continuing;
(g) the sublease prohibits further assignment or subletting;
(h) the sublease requires the sublessee to operate and maintain the
Undivided Interest in a manner consistent with this Facility Sublease;
(i) the sublease is collaterally assigned to the Facility Sublessor
and by the Facility Sublessor to the Facility Lessor as security for the
obligations of the Facility Sublessee and the Facility Lessee under the
Facility Sublease and Facility Lease, respectively, in a manner that is
reasonably acceptable to the Facility Sublessor;
(j) at the time of entering into such sublease the Oglethorpe
Mortgage Bonds shall be rated at least the minimum "investment grade" by
both Moody's and Standard & Poor's; and
(k) such sublease shall not cause the property to become "tax-exempt
use property" within the meaning of Section 168(h) of the Code.
SECTION 20. FURTHER ASSURANCES
The Facility Sublessee, at its own cost and expense, will duly execute and
deliver to the Facility Sublessor such further documents and assurances and take
such further action as the Facility Sublessor may from time to time reasonably
request in order to establish and protect the rights and remedies created in
favor of the Facility Sublessor hereunder.
35
SECTION 21. FACILITY SUBLESSOR'S RIGHT TO PERFORM
If the Facility Sublessee fails to make any payment required to be made by
it hereunder (other than Sublease Supplemental Rent in respect of the Purchase
Option Price) or fails to perform or comply with any of its other agreements
contained herein after notice to the Facility Sublessee and failure of the
Facility Sublessee to so perform or comply within 10 days thereafter, the
Facility Sublessor may itself make such payment or perform or comply with such
agreement in a reasonable manner, but shall not be obligated hereunder to do so,
and the amount of such payment and of the reasonable expenses of the Facility
Sublessor 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 Sublease Supplemental Rent, payable by the Facility Sublessee to
the Facility Sublessor on demand.
SECTION 22. NOTICES
Unless otherwise expressly specified or permitted by the terms hereof, all
communica tions 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 and copy party at its
address set forth below or at such other address as such party or copy party may
from time to time designate by written notice to the other parties:
36
If to the Facility Sublessor:
Rocky Mountain Leasing Corporation
c/o Corporation Trust Center
1209 Orange Street, Room 123
Wilmington, Delaware 19801
Facsimile No.: (302) 688-5459
Telephone No.: (302) 777-0250
with copies to:
Sutherland, Asbill & Brennan, L.L.P.
999 Peachtree Street, N.E.
Atlanta, Georgia 30309-3996
Facsimile No.: (404) 853-8806
Telephone No.: (404) 853-8000
Attention: Managing Attorney
and to:
Utrecht-America Finance Co.,
c/o Rabobank Nederland, New York Branch
245 Park Avenue
New York, New York 10167-0062
Facsimile No.: (212) 916-7880
Telephone No.: (212) 916-7864
Attention: General Counsel's Office
If to the Facility Sublessee:
Oglethorpe Power Corporation
2100 East Exchange Place
Tucker, Georgia 30085
Facsimile No.: (770) 270-7325
Telephone No.: (770) 270-7940
Attention: Vice President Finance
with a copy to the Lender at its address set forth above.
37
SECTION 23. SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS
Any moneys received by the Facility Sublessor pursuant to Section 10.4
shall, until paid to the Facility Sublessee as provided in Section 10.4, be held
by the Facility Sublessor as security for the Facility Sublessee's obligations
under this Facility Sublease and invested in Permitted Investments by the
Facility Sublessor (at the sole risk of the Facility Sublessee) from time to
time as directed in writing by the Facility Sublessee (and the Facility
Sublessor during the continuation of a Sublease Payment Default, Sublease
Bankruptcy Default or a Sublease Event of Default) 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 Facility Sublessee in
the same manner as the principal invested.
SECTION 24. SECURITY FOR FACILITY SUBLESSOR'S OBLIGATION TO THE FACILITY LESSOR
In order to secure all amounts payable by and all obligations to be
performed by the Facility Sublessor under the Facility Lease, the Facility
Sublessor will assign for security purposes its rights under this Facility
Sublease, including all Sublease Rent payable hereunder, to the Facility Lessor
pursuant to the Facility Sublease Assignment Agreement. In order to secure the
Secured Indebtedness, the Facility Lessor's right, title and interest in the
Facility Sublease Assignment Agreement will be assigned by the Facility Lessor
to the Lender pursuant to the Loan Agreement and the Deed to Secure Debt. The
Facility Sublessee hereby consents to such assignments and the creation of such
Liens and acknowledges receipt of copies of the Facility Sublease Assignment
Agreement, the Loan Agreement and the Deed to Secure Debt, it being understood
that such consent shall not affect any requirement or the absence of any
requirement for any consent under any other circumstances. Unless and until the
Facility Sublessee shall have received written notice from the Lender that the
assignment pursuant to the Loan Agreement and the Deed to Secure Debt have been
fully terminated the Lender shall have the right to exercise the rights of the
Facility Sublessor under this Facility Sublease to the extent set forth in the
Facility Sublease Assignment Agreement and subject in each case to the
exceptions set forth in the Loan Agreement.
TO THE EXTENT, IF ANY, THAT THIS FACILITY SUBLEASE 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 FACILITY SUBLEASE MAY
BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART HEREOF OTHER
THAN THE ORIGINAL COUNTERPART, WHICH SHALL BE IDENTIFIED AS THE
38
COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE LENDER ON THE
SIGNATURE PAGE THEREOF.
SECTION 25. MISCELLANEOUS
Section 25.1 Governing Law. This Facility Sublease 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 except
to the extent the law of the State of Georgia is mandatorily applicable.
Section 25.2 Severability. If any provision hereof shall be invalid,
illegal or unenforceable under Applicable Law, the validity, legality and
enforceability of the remaining provisions hereof shall not be affected or
impaired thereby.
Section 25.3 Headings and Table of Contents. The headings of the sections
of this Facility Sublease and the Table of Contents are inserted for purposes of
convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
Section 25.4 Successors and Assigns. (a) This Facility Sublease shall be
binding upon and shall inure to the benefit of, and shall be enforceable by, the
parties hereto and their respective successors and assigns as permitted by and
in accordance with the terms hereof.
(b) Except as expressly provided herein or in the other Operative
Documents, neither party hereto may assign its interests or transfer its
obligations herein without the consent of the other party hereto.
(c) This Facility Sublease conveys a leasehold estate and not a usufruct.
Section 25.5 "True Lease". It is the intent of the parties to this
Facility Sublease that it be, and this Facility Sublease shall be, a "true
lease," and that, recognizing the fact that legal title to the Undivided
Interest is vested in the Co-Owners as tenants-in-common, and the interest of
the Facility Sublessee is subject and subordinate to the interest of the
Facility Lessor under the Head Lease and the interest of the Facility Lessee
under the Facility Lease, this Facility Sublease conveys to the Facility
Sublessee no right, title or interest in the Undivided Interest except as
"sub-sublessee" of the Undivided Interest.
Section 25.6 Amendments and Waivers. No term, covenant, agreement or
condition of this Facility Sublease may be terminated, amended or compliance
therewith waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto.
39
Section 25.7 Survival. Except for Sections 3.3, 3.5, 3.6, 5,9, 15.1 and
17, the warranties and covenants made by each party hereto shall not survive the
expiration or termination of this Facility Sublease.
Section 25.8 Counterparts. This Facility Sublease may be executed by the
parties hereto in separate counterparts, each of which, subject to Section 24,
when so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
Section 25.9 Effectiveness. This Facility Sublease has been dated as of
the date first above written for convenience only. This Facility Sublease shall
be effective on the date of execution and delivery by each of the Facility
Sublessee and the Facility Sublessor.
Section 25.10 Measuring Life. If and to the extent that any of the rights
and privileges granted under this Facility Sublease, would, in the absence of
the limitation imposed by this sentence, be invalid or unenforceable as being in
violation of the rule against perpetuities or any other rule or law relating to
the vesting of interests in property or the suspension of the power of
alienation of property, then it is agreed that notwithstanding any other
provision of this Facility Sublease, such options, rights and privileges,
subject to the respective conditions herein governing the exercise of such
options, rights and privileges, will be exercisable only during (a) the longer
of (i) a period which will end twenty-one (21) years after the death of the last
survivor of the descendants living on the date of the execution of this Facility
Sublease of the following Presidents of the United States: Franklin D.
Roosevelt, Harry S. Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B.
Johnson, Richard M. Nixon, Gerald R. Ford, James E. Carter, Ronald W. Reagan,
George H. W. Bush and William J. Clinton or (ii) the period provided under the
Uniform Statutory Rule Against Perpetuities or (b) the specific applicable
period of time expressed in this Facility Sublease, whichever of (a) and (b) is
shorter.
40
IN WITNESS WHEREOF, the Facility Sublessor and the Facility Sublessee have
caused this Facility Sublease to be duly executed and delivered by their
respective officers thereunto duly authorized.
ROCKY MOUNTAIN LEASING
CORPORATION
By:/s/ Eugen Heckl
-----------------------------------
Name: Eugen Heckl
Title: Vice President
Date: 12/30/96
Signed and delivered
in the presence of:
/s/ Leonard Scott
- ---------------------------------------
Unofficial Witness
/s/ David M. Boehm
- ---------------------------------------
Notary Public
My Commission Expires: March 16, 1998
[Notary Seal]
OGLETHORPE POWER CORPORATION
(AN ELECTRIC MEMBERSHIP
GENERATING & TRANSMISSION
CORPORATION),
as Assignor
By:/s/ T. D. Kilgore
---------------------------------------
Name: T.D. Kilgore
Title: President and Chief Executive
Officer
Date: December 30, 1996
Signed and delivered
in the presence of:
/s/ Gary M. Bullock
- -------------------------------------
Unofficial Witness
/s/ David M. Boehm
- -------------------------------------
Notary Public
My Commission Expires: March 16, 1998
[Notary Seal]
CERTAIN OF THE RIGHT, TITLE AND INTEREST IN AND TO THIS FACILITY SUBLEASE
HAVE BEEN ASSIGNED TO AND ARE SUBJECT TO A FIRST PRIORITY SECURITY INTEREST IN
FAVOR OF THE UNDERSIGNED, AS ASSIGNEE OF THE FACILITY LESSOR, UNDER THE
ASSIGNMENT OF FACILITY SUBLEASE DATED AS OF DECEMBER 30, 1996. THIS AGREEMENT
HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. ONLY THE ORIGINAL COUNTERPART
CONTAINS THE RECEIPT THEREFOR EXECUTED BY THE UNDERSIGNED, ON THE SIGNATURE
PAGES THEREOF. SEE SECTION 24 HEREOF FOR INFORMATION CONCERNING THE RIGHTS OF
THE HOLDERS OF THE VARIOUS COUNTERPARTS THEREOF.
Receipt of this original counterpart of this Facility Sublease is hereby
acknowledged on this 30th day of December, 1996.
UTRECHT-AMERICA FINANCE CO.
By: __________________________________
Name:
Title:
Date:
SCHEDULE TO EXHIBIT 10.32.8
FACILITY SUBLEASE AGREEMENT (P1)
The following table indicates for each transaction the name of the
corresponding Owner Participant:
Agreement Date Owner Participant
------------- ----------------- -------------------------------------
P1 December 30, 1996 Philip Morris Capital Corporation
P2 January 3, 1997 Philip Morris Capital Corporation
F3 December 30, 1996 First Chicago Leasing Corporation
F4 December 30, 1996 First Chicago Leasing Corporation
N5 December 30, 1996 NationsBanc Leasing & R.E. Corporation
N6 January 3, 1997 NationsBanc Leasing & R.E. Corporation
Other than Appendix A, the Exhibits and Schedules to the Facility Sublease
(P1) are not filed herewith; however, the registrant hereby agrees that such
Exhibits and Schedules will be provided to the Commission upon request.
APPENDIX A
to
Facility Sublease
DEFINITIONS
Refer to Appendix A to Exhibit 10.32.1 of the Form 10-K.