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AMENDMENT NO. 1
Dated December 17, 1997
To The
TAX INDEMNIFICATION AGREEMENT NO. 2
Dated December 30, 1985
Between
OWNER PARTICIPANT
And
OGLETHORPE POWER CORPORATION
(AN ELECTRIC MEMBERSHIP CORPORATION),
Lessee
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Undivided Interest in Plant Robert W. Scherer Unit
No. 2 818 MW (nameplate capacity) Coal-Fired Electric
Generating Unit
Located in Monroe County, Georgia
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AMENDMENT NO. 1 TO TAX INDEMNIFICATION AGREEMENT NO. 2
AMENDMENT NO. 1 TO THE TAX INDEMNIFICATION AGREEMENT NO. 2, dated
December 17, 1997, between DFO PARTNERSHIP, a New York general partnership,
as successor in interest to Ford Motor Credit Company (the "Owner
Participant"), the beneficiary under a Trust Agreement dated December 30,
1985, as amended and supplemented, with NATIONSBANK, N.A. a national banking
association and successor by merger to The Citizens and Southern National
Bank, acting through its agent THE BANK OF NEW YORK, a state banking
corporation organized under the laws of the State of New York, not in its
individual capacity but solely as Owner Trustee (the "Lessor"), and
OGLETHORPE POWER CORPORATION (AN ELECTRIC MEMBERSHIP CORPORATION), an
electric membership corporation organized and operating under the laws of the
State of Georgia and formerly known as Oglethorpe Power Corporation (An
Electric Membership Generation and Transmission Corporation) (the "Lessee").
Capitalized terms not otherwise defined herein shall have the respective
meanings specified in Appendix A to the Participation Agreement dated
December 30, 1985 among Lessee, Owner Trustee, Indenture Trustee, Loan
Participant and Owner Participant, as modified, amended or supplemented
pursuant to the terms thereof.
W I T N E S S E T H:
WHEREAS, pursuant to the Deed and Bill of Sale, Lessee set over,
sold and delivered all of its right, title and interest in and to the
Undivided Interest to the Lessor as of the Closing Date;
WHEREAS, immediately subsequent to the purchase of the Undivided
Interest, Lessor and Lessee executed the Lease pursuant to which Lessor
agreed to lease to the Lessee and the Lessee agreed to lease from the Lessor
the Undivided Interest;
WHEREAS, in connection with the transactions consummated as of the
Closing Date, Owner Participant and Lessee entered into the Tax
Indemnification Agreement setting forth each of their respective rights and
obligations as to certain tax matters;
WHEREAS, it is contemplated that, on the 1997 Refinancing Date, the
Lessor will be issuing the Series 1997 Refunding Lessor Note , the proceeds
of which will be used to repay the Refunding Lessor Note in full;
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WHEREAS, the parties hereto desire to amend the terms of the Tax
Indemnification Agreement to reflect their agreement as to various tax
matters relating to the transactions being effected on the 1997 Refinancing
Date;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree that:
1. Section 1.1(e) of the Tax Indemnification Agreement shall be
amended in its entirety to read as follows:
"The Secured Note, the Refunding Lessor Note and the Series 1997
Refunding Lessor Note (collectively, the "Lease Notes") will bear
interest pursuant to their terms and at the rates applicable from time
to time, and will be amortized by certain payments of principal and
interest as provided by the terms of the Lease Notes. The
indebtedness evidenced by the Lease Notes will constitute loans made
to Lessor; all amounts paid as interest with respect thereto (the
"Interest Deductions") will be deductible, when paid or accrued,
pursuant to Section 163 of the Code and the Regulations promulgated
thereunder, in accordance with the method of tax accounting on the
basis of which Owner Participant regularly computes its income; and
Owner Participant, as owner of the Owner Trust, will be entitled to
take the Interest Deductions into account in computing the Federal
income tax liability of its members."
2. Section 1.1(g) of the Tax Indemnification Agreement shall be
amended in its entirety to read as follows:
"Owner Participant's (or, as appropriate, the Owner Participant's
partners) effective marginal rate of Federal income tax (without
giving effect to any credits against such tax) from the Closing Date
through and including December 31, 1986 was 46%; from January 1, 1987
through and including December 31, 1987 was 39.950685%; from January
1, 1988 through and including December 31, 1992 was 34%; and from and
after January 1, 1993 was 35%."
3. Section 1.1(h) of the Tax Indemnification Agreement shall be
amended by the deletion of "Basic Term" and the substitution, in lieu
thereof, of the following:
"Basic Term and will be entitled to deductions for amortization of the
1997 Refinancing Transaction
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Expenses on a straight-line basis over the period of the Series 1997
Refunding Lessor Note ."
4. Section 1.1(j) of the Tax Indemnification Agreement shall be
amended by the deletion of the concluding period and the substitution, in
lieu thereof, of:
"(in arrears, as provided in section F of Schedule I to the
Participation Agreement, as in effect from time to time)."
5. Section 1.1(o) shall be added to the Tax Indemnification
Agreement, reading in its entirety as set forth below:
"(o) Owner Participant, as owner of the Owner Trust, will be
allowed a current deduction in the taxable year of the Owner
Participant that includes the 1997 Refinancing Date in an amount equal
to the excess of the prepayment price of the Refunding Lessor Note (it
being understood that the prepayment price does not include any
interest accrued through and including the 1997 Refinancing Date) over
the unpaid principal of the Refunding Lessor Note, in each case as of
the 1997 Refinancing Date (the "Premium Deduction"); and interest on
the Refunding Lessor Note will cease to accrue on the 1997 Refinancing
Date and interest on the Series 1997 Refunding Lessor Note will begin
to accrue on the 1997 Refinancing Date."
6. Section 1.2(e) shall be amended by the deletion of "Secured Notes"
and the substitution, in lieu thereof, of "Lease Notes".
7. Section 1.2(i) shall be added to the Tax Indemnification
Agreement, reading in its entirety as set forth below:
"(i) Assuming that the Owner Participant is properly treated as
the owner of the Undivided Interest and the obligor under the Lease
Notes for Federal income tax purposes, the Owner Participant will be
entitled to the Premium Deduction."
8. Sections 3.2(a), 6(a), 6(b), 6(g) and 6(k) of the Tax
Indemnification Agreement shall each be amended by the deletion of "ACRS
Deductions, the Interest Deductions or the Amortization Deductions" and the
substitution, in lieu thereof, of "ACRS Deductions, the Interest Deductions,
the Premium Deduction or the Amortization Deductions"; Section 1.1(i) of the
Tax Indemnification Agreement shall be amended by the deletion of
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"ACRS Deductions, the Interest Deductions and the Amortization Deductions"
and the substitution, in lieu thereof, of "ACRS Deductions, the Interest
Deductions, the Premium Deduction and the Amortization Deductions"; and
Section 1.2 (e) of the Tax Indemnification Agreement shall be amended by the
deletion of "ACRS Deductions, the Interest Deductions, the Amortization
Deductions" and the substitution, in lieu thereof, of "ACRS Deductions, the
Interest Deductions, the Premium Deduction, the Amortization Deductions".
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IN WITNESS WHEREOF, Owner Participant and Lessee have caused this
Amendment No. 1 to the Tax Indemnification Agreement No. 2 to be duly
executed by their respective officers thereunto duly authorized as of the
date set forth above.
OGLETHORPE POWER CORPORATION
(AN ELECTRIC MEMBERSHIP
CORPORATION)
By: /s/ T.D. Kilgore
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Name: T.D. Kilgore
Title: President and Chief Executive
Officer
DFO PARTNERSHIP
By: /s/ Steven M. Jacobs
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Name: Steven M. Jacobs
Title: Vice President
Pursuant to Section 11.3 of Participation Agreement No. 2, the
undersigned hereby executes this Amendment No. 1 to the Tax Indemnification
Agreement No. 2.
UNITED STATES OF AMERICA,
acting through the
Administrator of the RURAL
UTILITIES SERVICE
By: /s/ Thomas L. Eddy
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Name: Thomas L. Eddy
Title: Director, Power Supply Division
EXPLANATORY STATEMENT TO AMENDMENT NO. 1
TO TAX INDEMNIFICATION AGREEMENT NO. 2
Except as described below, the following agreements are
substantially similar in all material respects to Amendment No. 1 to the Tax
Indemnification Agreement No. 2, dated December 17, 1997, between DFO
Partnership, as assignee of Ford Motor Credit Company, and Oglethorpe Power
Corporation (An Electric Membership Corporation) ("Tax Indemnification
Agreement No. 2"):
1. Amendment No. 1 to the Tax Indemnification Agreement No. 1, dated
December 17, 1997, between IBM Credit Financing Corporation and
Oglethorpe Power Corporation (An Electric Membership Corporation) ("Tax
Indemnification Agreement No. 1");
2. Amendment No. 1 to the Tax Indemnification Agreement No. 3, dated
December 17, 1997, between Chrysler Financial Corporation and
Oglethorpe Power Corporation (An Electric Membership Corporation) ("Tax
Indemnification Agreement No. 3"); and
3. Amendment No. 1 to the Tax Indemnification Agreement No. 4, dated
December 17, 1997, between HEI Investment Corp. and Oglethorpe Power
Corporation (An Electric Membership Corporation) ("Tax Indemnification
Agreement No. 4").