EXECUTION COPY
NEW
PARTICIPATION AGREEMENT
AMONG
BIG RIVERS ELECTRIC CORPORATION,
LG&E ENERGY MARKETING INC.,
WESTERN KENTUCKY LEASING CORP.,
WKE STATION TWO INC.
AND
WESTERN KENTUCKY ENERGY CORP.
APRIL 6, 1998
[* REDACTED = Omitted pursuant to confidentiality request. Material filed
separately with SEC.]
TABLE OF CONTENTS
Page
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ARTICLE 1 DEFINITIONS, WHOLE AGREEMENT AND PAYMENTS...........................4
ARTICLE 2 PARTICIPATION EFFECTIVE DATE........................................4
ARTICLE 3 PHASE I EFFECTIVE DATE AND PHASE II EFFECTIVE DATE..................5
ARTICLE 4 CLOSING.............................................................5
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BIG RIVERS........................8
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF LG&E PARTIES.....................15
ARTICLE 7 COVENANTS OF BIG RIVERS............................................16
ARTICLE 8 COVENANTS OF CERTAIN LG&E PARTIES..................................19
ARTICLE 9 TRANSFERS AND ASSIGNMENTS TO OCCUR ON THE EFFECTIVE DATE...........20
ARTICLE 10 TRANSFERRED EMPLOYEE MATTERS......................................25
ARTICLE 11 TAXES.............................................................28
ARTICLE 12 ACCOUNTING........................................................31
ARTICLE 13 INSURANCE COVERAGE................................................32
ARTICLE 14 ENVIRONMENTAL LIABILITIES AND INDEMNITIES.........................34
ARTICLE 15 DISPUTE RESOLUTION AND ARBITRATION................................38
ARTICLE 16 TRANSFERS AND ASSIGNMENTS.........................................41
ARTICLE 17 TERMINATION.......................................................43
ARTICLE 18 WAIVER; LG&E INDEMNITIES..........................................48
ARTICLE 19 SEVERAL OBLIGATIONS...............................................49
ARTICLE 20 MUTUAL COVENANTS..................................................50
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Page
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ARTICLE 21 GENERAL PROVISIONS................................................52
ARTICLE 22...................................................................58
ARTICLE 23 MISCELLANEOUS.....................................................60
ARTICLE 24 GENERAL PROVISIONS................................................61
ii
Participation Agreement
[*All Exhibits REDACTED.]
Exhibit A Cost Sharing Agreement
Exhibit B Facilities Operating Agreement
Exhibit C Lease and Operating Agreement
Exhibit D Power Purchase Agreement
Exhibit E Transmission Services and Interconnection Agreement
Exhibit F Tax Indemnification Agreement
Exhibit G Mortgage and Security Agreement
Exhibit H Non-Disturbance Agreement
Exhibit I [RESERVED]
Exhibit J [RESERVED]
Exhibit K Settlement Promissory Note
Exhibit L Form of Smelter Undertaking
Exhibit M Station Two Agreement
Exhibit N Settlement Mortgage
Exhibit O Promissory Note (LEM Advances)
Exhibit P Capitalization Guidelines
Exhibit X Definitions
Schedules [*All Schedules REDACTED.]
2.1 CCAP Calculation
3.1 Conditions Precedent to Phase I
3.2 Conditions Precedent to Phase II
3.3 Conditions Precedent to Phase II (Phase I pre Phase II)
5.1.3 Consents
5.1.5 Output
5.1.6 Real Property
5.1.7 Rights-of-Way
5.1.8 Station Two Contracts
5.1.9 Real Property Leases
5.1.10 Water Supply
5.1.11 Personal Property
5.1.12 Equipment Leases
5.1.13 Contracts
5.1.14 Permits
5.1.15 Condition of Tangible Assets
5.1.16 SO(2) Allowances
5.1.17 Litigation and Insurance Claims
5.1.18 Compliance with Laws
5.1.19 Environmental Matters
5.1.20 Benefit Plans
5.1.21 Labor
5.1.22 Transferred Employees
5.1.23 No Condemnation
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5.1.26 Intellectual Property
6.1.3 No Violation
9.1 Inventory Procedures
9.2 Assignment and Assumption Agreement
9.2.1 Big Rivers' Fuel Supply Agreements
9.3 Excluded Assets
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NEW PARTICIPATION AGREEMENT
THIS NEW PARTICIPATION AGREEMENT ("Agreement") is dated this 6th day
of April, 1998 (the "Execution Date") among BIG RIVERS ELECTRIC CORPORATION, a
Kentucky rural electric cooperative ("Big Rivers"), LG&E ENERGY MARKETING INC.,
an Oklahoma corporation ("LEM"), WESTERN KENTUCKY LEASING CORP., a Kentucky
corporation and agent of the LG&E Parties (as hereinafter defined) for purposes
of this Agreement ("Leaseco"), WKE STATION TWO INC., a Kentucky corporation
formerly known as LG&E Station Two Inc. ("Station Two Subsidiary") and WESTERN
KENTUCKY ENERGY CORP., a Kentucky corporation ("WKEC") (hereinafter, LEM,
Leaseco, Station Two Subsidiary and WKEC are collectively referred to as the
"LG&E Parties" and together with Big Rivers, the "Parties").
RECITALS
A. Big Rivers owns or operates certain Generating Plants which
generate electric capacity and energy and it sells power to its Members and to
other third parties. On September 25, 1996, Big Rivers filed for relief under
Chapter 11 of the Bankruptcy Code.
B. Big Rivers and the LG&E Parties desire to enter into a
transaction (the "Phase II Transaction") pursuant to which, inter alia, one of
the LG&E Parties, or an affiliate thereof, will lease from Big Rivers its
Facilities and certain other Assets and will operate the Facilities and obtain
title to the electric energy and capacity produced by such Generating Plants,
supply power to Big Rivers and certain Members and market excess power, in
exchange for such consideration as agreed upon by Big Rivers and the LG&E
Parties.
C. Big Rivers and the LG&E Parties also desire to enter into such
agreements and instruments of assignment that would permit one or more of the
LG&E Parties, or an affiliate thereof, either directly or as agent for Big
Rivers, to operate and sell power from Station Two.
D. Big Rivers and the LG&E Parties recognize that certain regulatory
approvals and other preconditions must be met before the contemplated Phase II
Transactions can be consummated.
E. The Parties therefore desire to enter into the Phase I
Agreements, whereby Big Rivers and the LG&E Parties would begin to receive the
economic benefits of the contemplated transactions at an earlier date than
otherwise would be feasible.
F. The Parties desire that such Phase I Agreements continue until
the earlier of approximately twenty-five years after the Effective Date or such
time as Big Rivers and the LG&E Parties are able to implement the Phase II
Transaction, at which time the Phase I Agreements will terminate and the Phase
II Agreements will become effective and will remain in effect until such time as
the duration of Phase I and Phase II equals approximately twenty-five years, as
defined more specifically in the Operative Documents.
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G. On June 9, 1997, the Parties entered into the Original
Participation Agreement which set forth the circumstances and conditions under
which the agreements relating to the above-referenced transactions would be
executed and become effective, various other matters of interest and agreements
of Big Rivers and the LG&E Parties and common provisions relating to certain of
the Operative Documents.
H. On the same date, LEC executed and delivered the Original
Guaranty to Big Rivers.
I. On June 9, 1997, Big Rivers filed its First Amended Plan of
Reorganization Proposed by Debtor Big Rivers Electric Corporation under Chapter
11 of the Bankruptcy Code as Modified and Restated June 9, 1997 which
contemplated the Original Participation Agreement, certain of the Operative
Documents and the transactions contemplated thereby.
J. A confirmation hearing concerning the above-referenced plan was
held and said plan was confirmed. The Bankruptcy Court order confirming said
plan approved the transactions contemplated by the form of Operative Documents
as filed therewith.
K. Subsequently, Big Rivers and certain of the LG&E Parties applied
to the Kentucky Public Service Commission ("KPSC") for approval of certain
aspects of the plan, including approval of the rates to be charged by Big Rivers
to its Members for electric power service for resale to their customers.
L. The KPSC set the matter for hearing and at the conclusion of the
hearing directed the Parties to try to reach a resolution on the treatment of
unforeseen costs affecting the operation of the Generating Plants with the
intention that unforeseen costs would be allocated among the classes of Members'
customers in a manner other than as contemplated in the plan.
M. In response to the KPSC directive, Big Rivers and the LG&E
Parties have agreed to modify the transactions as contemplated in the Original
Participation Agreement and the form of the Operative Documents attached
thereto.
N. On March 18, 1998, Big Rivers and the LG&E Parties executed an
Amended and Restated Participation Agreement, the effectiveness of which was
conditioned on certain events which failed to occur, thus rendering such
document of no effect.
O. In order to effectuate the contemplated modifications, to assure
compatibility among all of the forms of Operative Documents, including the
Station Two Agreement, to make certain technical corrections to the form of the
existing Operative Documents prior to their execution, and to create certain
additional Operative Documents that will be required to effectuate a transaction
on modified terms from those contemplated in the Original Participation
Agreement, the Parties have agreed to enter into this Agreement, and to suspend
their obligations under the Original Participation Agreement until such time as
it is determined if the transactions contemplated in this Agreement can be
effectuated in accordance with the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants set forth
below, the Parties agree as follows:
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ARTICLE 1
DEFINITIONS, WHOLE AGREEMENT AND PAYMENTS
1.1 Terms Defined in this Agreement. All capitalized terms used
herein and not otherwise defined herein shall have the meanings set forth in
Exhibit X hereto.
1.2 Whole Agreement. The schedules and exhibits to this Agreement
constitute an integral part of this Agreement, and all references to this
Agreement shall include all such schedules, attachments and exhibits.
1.3 Method of Payment. All payments required to be made by a Party
to the other Party under the terms of this Agreement or any other Operative
Document, unless otherwise provided herein or in such other Operative Document,
shall be made in immediately available United States funds no later than 2:00
p.m. eastern time on the due date therefor. A Party desiring to receive any such
payment by wire transfer shall provide written notice to the other Party not
less than five (5) business days prior to the due date indicating the wire
instructions and applicable account information. A written notice shall be
applicable to all future payments unless revoked or modified by that notice or
any subsequent written notice.
1.4 Late and Partial Payments. All amounts payable under this
Agreement or any other Operative Document by a Party, if not paid when due, will
bear interest from the due date until paid at the Default Rate. No receipt by
the Party to whom a payment is due of an amount less than the full amount due
will be deemed to be other than payment on account, nor will any endorsement or
statement on any check or any accompanying letter effect or evidence an accord
or satisfaction. The receiving Party may accept such check or payment without
prejudice to its right to recover the balance or pursue any right hereunder.
ARTICLE 2
PARTICIPATION EFFECTIVE DATE
2.1 This Agreement will be effective on the date on which all of the
following have occurred (the "Participation Effective Date"): (a) this Agreement
is executed and delivered by the Parties hereto; (b) the Bankruptcy Court has
entered an order, which order approves (i) this Agreement and the other
Operative Documents in substantially the form attached hereto, and (ii)
modifications to the Plan, as contemplated herein, in accordance with Section
1127 of the Bankruptcy Code; and (c) the RUS has accepted such modifications to
the Plan and this Agreement (including the Exhibits hereto), which acceptance
shall be evidenced by the RUS failing to notify Big Rivers that it has changed
its acceptance of the Plan by the date established by the Bankruptcy Court for
such notifications, under Bankruptcy Code Section 1127(d).
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ARTICLE 3
PHASE I EFFECTIVE DATE AND PHASE II EFFECTIVE DATE
3.1 The Phase I Agreements will become effective on the Phase I
Effective Date; provided, however, that LEC has not determined, in its
discretion, based upon advice of its tax advisors, that it would incur
unacceptable liabilities by reason of the Tax Indemnification Agreement, in
which case the Parties agree that Phase I shall not commence and the Parties
shall proceed with Phase II in accordance with Section 3.2 hereof.
3.2 In the event that (a) the regulatory conditions set forth in
Schedule 3.2 are satisfied (or waived by the applicable Parties) prior to the
commencement of Phase I or (b) the determination set forth in the proviso
described in Section 3.1 has been made by LEC, the Parties agree that the Phase
I Agreements shall never become effective and that the Closing referred to below
shall consummate the transactions contemplated by the Phase II Agreements rather
than the transactions contemplated by the Phase I Agreements.
3.3 At any time subsequent to the occurrence of the Phase I
Effective Date, upon the satisfaction (or waiver by the applicable Parties) of
all conditions set forth in Schedule 3.3, (i) the Phase II Agreements will
become effective and (ii) the Phase I Agreements (other than those which are
also Phase II Agreements) will terminate (subject to survival of specific
provisions as provided therein). Such date shall hereinafter be referred to as
the "Phase II Effective Date." At such time as either Big Rivers or Leaseco (as
agent for the LG&E Parties) in good faith believes that each of the conditions
precedent set forth in Schedule 3.3 have been satisfied or waived by the
relevant Party, the Party having that belief may, in its discretion, notify the
other Party of its belief. For purposes of this Section 3.3 only "Party" shall
refer to (i) Big Rivers or (ii) Leaseco, acting as agent for all the LG&E
Parties. The Party receiving such notice agrees to notify the first Party of
whether it agrees with or disputes the first Party's belief within ten (10)
Business Days after delivery of the initial notice. In the event a Party fails
to respond within that ten-day period, it shall be deemed to have agreed with
the initial Party's belief. The Phase II Effective Date shall, for purposes of
this Agreement, be deemed to have commenced two (2) Business Days following the
expiration of the ten-day notice period described above or, if the initial
Party's belief shall have been disputed by the other Party as contemplated
above, two (2) Business Days after a determination that such conditions
precedent have been so satisfied or waived is made (i) by the mutual agreement
of the disputing Parties, or (ii) pursuant to a final, non-appealable decision
rendered pursuant to Article 15.
ARTICLE 4
CLOSING
4.1 The Closing. The consummation of the transactions contemplated
in this Agreement and the Phase I Agreements or the Phase II Agreements, as the
case may be (the "Closing"), other than the transactions which are required by
this Agreement to be consummated prior to the Closing, shall take place at the
offices of Sullivan, Mountjoy, Stainback & Miller, P. S. C., Owensboro, Kentucky
(or at such other location as the parties may agree) at 10:00 a.m.,
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local time, on the date (the "Effective Date") that is 10 business days
following the earlier to occur of (i) the date on which all conditions set forth
in Schedule 3.1 of this Agreement have been fulfilled or waived in writing or
(ii) the date on which all conditions set forth in Schedule 3.2 of this
Agreement have been fulfilled or waived in writing.
4.2 Actions Simultaneous. Notwithstanding the order of the
deliveries by the Parties set forth below, all deliveries shall occur
simultaneously and shall not be deemed to have been completed until each of the
steps set forth in this Article 4 has been completed or has been waived by the
Party who is required to waive the same.
4.3 Big Rivers Deliveries. Subject to fulfillment or waiver of the
conditions set forth in Schedule 3.1 or Schedule 3.2, as the case may be, at the
Closing, Big Rivers shall deliver to the LG&E Parties all of the following (duly
executed where appropriate):
4.3.1 Copies of Big Rivers' Articles of Incorporation
certified as of a date no more than thirty (30) calendar days prior to the
Effective Date by the Secretary of the Commonwealth of Kentucky.
4.3.2 Certificate of Existence of Big Rivers issued as of a
recent date by the Secretary of the Commonwealth of Kentucky.
4.3.3 Certificate of the Secretary or an Assistant Secretary
of Big Rivers, dated the Effective Date, in form and substance reasonably
satisfactory to the LG&E Parties, as to (i) no amendments to the Articles
of Incorporation of Big Rivers since the certification date referred to in
Section 4.3.1, (ii) the By-laws of Big Rivers, and (iii) the resolutions
of the Board of Directors of Big Rivers authorizing the execution and
performance of the Operative Documents, the Debt Restructuring Documents,
Big Rivers' obligations with respect to the letters of credit described
therein, the Baseline Study Agreement between Big Rivers and WKEC, the
Member Contracts and the Station Two Agreement and the transactions
contemplated thereby.
4.3.4 The Operative Documents (including, without limitation,
the Settlement Note) duly executed by an authorized officer of Big Rivers,
and copies of the executed Debt Restructuring Documents.
4.3.5 The opinions of each of Sullivan, Mountjoy, Stainback &
Miller, P. S. C. and Long Aldridge Norman LLP referenced in Item I (17) of
Schedule 3.1.
4.3.6 A certificate of an authorized officer of Big Rivers,
stating that (i) the representations and warranties set forth in Article 5
hereof are true and correct in all material respects on the Effective
Date, except to the extent that such representations and warranties
expressly relate to an earlier date, in which case such representations
and warranties shall be true and correct as of such earlier date and (ii)
the conditions precedent to Big Rivers' obligations set forth in Schedule
3.1 or Schedule 3.2, as the case may be, have been satisfied or waived by
Big Rivers, provided that the foregoing shall
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not relieve any other party to any Operative Document for any
misrepresentation by such party in such Operative Document.
4.3.7 Such bills of sale and other appropriate documents of
transfer, conveyance and assignment (in form reasonably satisfactory to
Big Rivers and the LG&E Parties) as shall be necessary or appropriate in
order for the assignment by Big Rivers to Leaseco of the Inventory, the
Personal Property, the Intangible Assets and the SO(2) Allowances as
contemplated in Sections 9.1, 9.2, 9.3 and 9.4, including, without
limitation, the Assignment and Assumption Agreement.
4.3.8 All amounts required to be paid by Big Rivers to any
LG&E Party pursuant to the Operative Documents on such date.
4.3.9 The "Marketing Payment" payable by Big Rivers to LEM as
contemplated in the Interim Wholesale Marketing Assistance Agreement,
dated June 18, 1997, as amended.
4.4 LG&E Parties' Deliveries. Subject to fulfillment or waiver of
the conditions set forth in Schedule 3.1 or Schedule 3.2, as the case may be, at
the Closing, the LG&E Parties shall deliver to Big Rivers all of the following
(duly executed where appropriate):
4.4.1 Copies of the Articles of Incorporation of each LG&E
Party, each certified as of a date no more than thirty (30) calendar days
prior to the Effective Date by the Secretary of State of the state of
their respective incorporation.
4.4.2 Certificate of Existence or Certificate of Good
Standing, as appropriate, each issued as of a recent date by the Secretary
of State of the state of their incorporation and an Authorization to
Transact Business in the Commonwealth of Kentucky, to the extent an LG&E
Party is not a Kentucky Corporation, of each LG&E Party.
4.4.3 Certificate of the Secretary or an Assistant Secretary
of each LG&E Party, each dated the Effective Date, in form and substance
reasonably satisfactory to Big Rivers, as to (i) no amendments to the
Articles of Incorporation of any LG&E Party since the certification date
referred to in Section 4.4.1, (ii) their By-laws and (iii) their
resolutions of the Board of Directors authorizing the execution and
performance of the Operative Documents to which each is a party, if any,
the transactions contemplated thereby, and all other documents executed in
connection therewith.
4.4.4 The Operative Documents, duly executed by an authorized
officer of the relevant LG&E Party.
4.4.5 The Initial Fixed Payment, as defined in Section 3.3 of
the Power Purchase Agreement, or the Initial Rental Payment under Section
2.3.1 of the Lease, as the case may be.
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4.4.6 A payment in consideration of transfer of Inventory and
Personal Property as contemplated by Sections 9.1 and 9.3, respectively.
4.4.7 A payment in the amount of $[REDACTED], representing the
Closing Date enhancement payment.
4.4.8 All other amounts required to be paid by any LG&E Party
to Big Rivers pursuant to the Operative Documents on such date.
4.4.9 The opinions of each of Dewey Ballantine LLP and
Greenebaum Doll & McDonald PLLC referenced in Item II (14) of Schedule
3.1.
4.4.10 Commitments or other evidence of insurance referenced
in, and in accordance with, Article 13.
4.4.11 A certificate of an authorized officer of each LG&E
Party stating that (i) the representations and warranties set forth in
Article 6 hereof are true and correct in all material respects on the
Effective Date, except to the extent that such representations and
warranties expressly relate to an earlier date, in which case such
representations and warranties shall be true and correct as of such
earlier date and (ii) the conditions precedent to the LG&E Parties'
obligations set forth in Schedule 3.1 or Schedule 3.2, as the case may be,
have been satisfied or waived by the LG&E Parties, provided that the
foregoing shall not relieve any other party to any Operative Document for
any misrepresentation by such party in such Operative Document.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BIG RIVERS
5.1 Representations and Warranties of Big Rivers. Big Rivers hereby
represents and warrants to the LG&E Parties as follows:
5.1.1 Organization and Powers of Big Rivers. Big Rivers is a
rural electric cooperative, duly organized and existing under the laws of
the Commonwealth of Kentucky. Big Rivers has all requisite cooperative
power and authority to own the Facilities and all other assets and
properties held by it, and to carry on its business as now being
conducted.
5.1.2 Authority Relative to Agreement. No further cooperative
or member authorization is necessary for the execution, delivery and
performance of this Agreement.
5.1.3 No Violation. Except as set forth in Schedule 5.1.3, the
execution and delivery of the Operative Documents and the consummation by
Big Rivers of the transactions contemplated thereby, including performance
in all material respects of all of its obligations thereunder (a) will not
violate any statute or law or any rule, regulation, order, writ,
injunction or decree of any court or governmental authority, (b) will not
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require any authorization, consent, approval, exemption or other action by
or notice to any court, administrative or governmental agency,
instrumentality, commission, authority, board or body, except to the
extent such authorization, consent, approval, exemption, notice or other
action is required solely as a result of actions taken by any LG&E Party
after the Effective Date and (c) subject to obtaining the consents
referred to in Schedule 5.1.3, will not violate or conflict with, or
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or result in the termination of,
or accelerate the performance required by, or result in the creation of
any Lien upon any of the Assets (other than a Permitted Lien), under any
term or provisions of the Articles of Incorporation or By-laws of Big
Rivers or of any material contract, commitment, understanding,
arrangement, agreement or restriction of any kind or character to which
Big Rivers is a party or by which Big Rivers or any of the Assets may be
bound or affected.
5.1.4 Effect of Agreement. This Agreement has been, and each
of the other Operative Documents will be, duly and validly authorized,
executed and delivered by Big Rivers, subject to Bankruptcy Court
approval, and constitutes, or will constitute when executed, a valid and
legally binding agreement enforceable against Big Rivers in accordance
with its terms, except as the foregoing may be limited by (a) general
principles of equity or (b) bankruptcy, insolvency, reorganization,
arrangement, moratorium, or other laws or equitable principles relating to
or affecting creditors' rights generally.
5.1.5 Output. Except as disclosed on Schedule 5.1.5, there are
no contracts or other arrangements in place by which any of the electrical
output of the Facilities or Station Two has been sold, dedicated or
committed. Except as set forth on Schedule 5.1.5 and for Permitted Liens,
the output of the Facilities and Station Two is free and clear of any
claims and Liens.
5.1.6 Real Property. Schedule 5.1.6 contains a complete
description of all Real Property. The Real Property includes all real
property (and improvements and fixtures thereon) owned by Big Rivers and
used or currently held exclusively for use by Big Rivers in connection
with the operation of the Facilities or Station Two. Except as disclosed
on Schedule 5.1.6 and for Permitted Liens, Big Rivers owns the Real
Property free and clear of any claims and Liens.
5.1.7 Rights-of-Way. Schedule 5.1.7 contains a complete
description of all material Rights-of-Way. The Rights-of-Way include all
rights-of-way, easements, licenses and other rights owned by Big Rivers
and used or currently held exclusively for use by Big Rivers in connection
with the operation of the Facilities or Station Two. Except as disclosed
on Schedule 5.1.7 and for Permitted Liens, Big Rivers owns all
Rights-of-Way free and clear of any claims and Liens.
5.1.8 Station Two Contracts. Schedule 5.1.8 contains a list of
all agreements relating to, or affecting, Station Two to which Big Rivers
is a party. Big Rivers has not received notice from any third party to the
effect that any such agreement
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is not in full force and effect. Neither Big Rivers nor, to the best of
Big Rivers' knowledge, Henderson, is in material default thereunder and
Big Rivers holds its interest in each such agreement free and clear of any
Liens (other than Permitted Liens).
5.1.9 Real Property Leases. Schedule 5.1.9 lists all Real
Property Leases. Except as disclosed on Schedule 5.1.9, (i) each Real
Property Lease is in full force and effect, (ii) Big Rivers is not in
material default under any Real Property Lease, and (iii) Big Rivers holds
the lessee's interest in each Real Property Lease free and clear of any
Liens (other than Permitted Liens).
5.1.10 Water Supply. Except as disclosed on Schedule 5.1.10,
Big Rivers currently has rights in or to a water supply and Permits for
waste water disposal sufficient for the operation of the Facilities at a
Capacity of 1459 net MW and for the operation of Station Two at a capacity
of 312 net MW, and, as of the date hereof, no permit, license or other
governmental or private action or permission is required to utilize such
water supply (provided WKEC, Station Two Subsidiary or Leaseco, as the
case may be, pays the ordinary charges for consumption or disposition).
Big Rivers has no knowledge of any pending or threatened impediment to the
continuation of such water supply and waste water disposal as set forth
above for the duration of the Term.
5.1.11 Personal Property. Schedule 5.1.11 lists each item of
Personal Property with a book value in excess of $100,000. Except as
disclosed on Schedule 5.1.11, Big Rivers owns such Personal Property free
and clear of any Liens (other than Permitted Liens).
5.1.12 Equipment Leases. Schedule 5.1.12 lists each of the
Equipment Leases requiring Big Rivers to make lease payments in excess of
$20,000 annually under such lease. Except as disclosed on Schedule 5.1.12,
(i) each Equipment Lease is in full force and effect, (ii) Big Rivers is
not in material default under any Equipment Lease, and (iii) Big Rivers
holds the lessee's interest in each Equipment Lease free and clear of any
Liens (other than Permitted Liens).
5.1.13 Contracts. Schedule 5.1.13 contains a listing of all
Contracts that involve obligations of Big Rivers in excess of $100,000 or
extend beyond six months after the Effective Date and any amendments or
modifications to any such Contract. Except as disclosed on Schedule 5.1.13
attached hereto (i) each such Contract, the Hoosier Contracts, the
Oglethorpe Contract, the HMP&L Contract, the Member Contracts and each
fuel supply agreement listed on Schedule 9.2.1 (collectively the
"Representation Contracts") is in full force and effect, (ii) Big Rivers
is not in material default under any Representation Contract and (iii) Big
Rivers holds its interests in each Representation Contract free and clear
of any Liens (other than Permitted Liens).
5.1.14 Permits. Schedule 5.1.14 contains a listing of all
material Permits currently required to operate the Facilities at a
Capacity of 1459 net MW and Station Two at a capacity of 312 net MW (in
accordance with the Station Two Contracts) and specifically identifies
those material Permits that expire prior to the end of the Term.
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Except as disclosed on Schedule 5.1.14, (i) each such Permit is in full
force and effect, (ii) Big Rivers is in material compliance with the terms
of each such Permit, (iii) Big Rivers holds its interest in each such
Permit free and clear of any Liens (other than Permitted Liens) and (iv)
each such Permit is assignable to WKEC, Station Two Subsidiary or Leaseco
without the consent or approval of, or payment to, any person,
governmental authority or regulatory body, which has not yet been obtained
or made.
5.1.15 Condition of Tangible Assets. Except as disclosed on
Schedule 5.1.15, each of the Tangible Assets and the tangible assets
comprising Station Two is in all material respects in good condition and
state of repair consistent with Prudent Utility Practice, subject only to
ordinary wear and tear.
5.1.16 SO(2) Allowances. Schedule 5.1.16 discloses all SO(2)
Allowances allocated by the Environmental Protection Agency by year
through December 31, 2023 or otherwise attributable to the Facilities and
Station Two and such allowances (or Big Rivers' interest in such
allowances, with respect to Station Two) are free of all Liens, including
but not limited to claims of brokers (other than Permitted Liens).
5.1.17 Litigation and Insurance Claims. Schedule 5.1.17
contains a description of (i) all pending or, to the best of Big Rivers'
knowledge, threatened suits, actions, arbitrations, claims, administrative
proceedings or other proceedings or, to the best of Big Rivers' knowledge,
governmental investigations related in any way to the ownership or
operation of the Facilities or Station Two, and (ii) any claim, demand or
notice tendered to an insurer by Big Rivers with respect to any matter
related in any way to the ownership or operation of the Facilities or
Station Two.
5.1.18 Compliance with Laws. Except as disclosed on Schedule
5.1.18, to Big Rivers' knowledge, Big Rivers' operation of the Facilities
and Station Two and use of the Assets and the Station Two Assets are in
material compliance with all applicable laws, rules, orders, regulations,
or restrictions, except (a) any noncompliance that has been cured and (b)
noncompliance that does not and will not materially interfere with the
operation of the Facilities or Station Two nor result in the imposition of
any material civil or criminal fines or penalties on Big Rivers or any
LG&E Party. Except as disclosed on Schedule 5.1.18, Big Rivers has
received no notice of material violation or notice of material
noncompliance which has not been cured.
5.1.19 Environmental Matters. To the knowledge of Big Rivers,
except as disclosed in Schedule 5.1.19 or in the Baseline Environmental
Audit Report, there is no pending administrative or judicial
investigation, proceeding or action or any outstanding claim, demand,
order, administrative or legal proceeding or settlement or consent decree
or order under or relating to any Environmental Law and relating to or
involving the Facilities or Station Two, nor is there now, nor has there
been, any pattern of violations that would lead to any of the foregoing.
To the knowledge of Big Rivers, except as disclosed on Schedule 5.1.19 or
identified in the Baseline Environmental Audit Report, (i) no Hazardous
Substance or other waste (including without limitation garbage and refuse)
have been disposed of, spilled, leaked or otherwise released at, on, under
or
11
from the Facilities, Station Two, the Real Property, or the land subject
to the Rights-of-Way, the Real Property Leases, or any other properties
and (ii) there are no underground storage tanks at the Facilities or at
Station Two or on the Real Property or the land subject to the
Rights-of-Way or the Real Property Leases.
5.1.20 Benefit Plans.
5.1.20.1 Schedule 5.1.20 lists all plans, policies, agreements
and other arrangements concerning remuneration, including, but not limited
to, employee compensation, pension or welfare benefits of Big Rivers. As
applicable, such plans have been maintained in compliance in all material
respects with ERISA and the applicable provisions of the Code, except (a)
any noncompliance that has been cured and (b) noncompliance that does not
materially interfere with the rights of any Transferred Employee. Except
as disclosed on Schedule 5.1.20, Big Rivers has received no notice of
material violation or notice of material noncompliance which has not been
cured.
5.1.20.2 Big Rivers Electric Corporation Bargaining Employees'
Thrift and 401(k) Savings Plan, Big Rivers Electric Corporation Salaried
Employees' Thrift and 401(k) Savings Plan, Big Rivers Electric Corporation
Bargaining Employees' Retirement Plan, and Big Rivers Electric Corporation
Salaried Employees' Retirement Plan (collectively, the "Big Rivers
Qualified Plans") have been determined by the Internal Revenue Service to
be qualified under the Code 401(a), and nothing has occurred which has
resulted or is likely to result in the revocation of such qualification.
Big Rivers has heretofore delivered to the LG&E Parties a copy of the most
recent determination letter for each of the Big Rivers Qualified Plans,
and each of the Big Rivers Qualified Plans has been administered in all
material respects in accordance with ERISA and applicable provisions of
the Code.
5.1.20.3 Full payment will be made as of the Effective Date of
all amounts which Big Rivers is required, under applicable law and/or the
Big Rivers Qualified Plans, to have paid as a contribution to each of the
Big Rivers Qualified Plans as of the last day of the most recent fiscal
year of such plan, and no accumulated funding deficiency (as defined in
ERISA ss. 312 or Code ss. 412), whether or not waived, exists with respect
to the Big Rivers Qualified Plans. All contributions to the Big Rivers
Qualified Plans that are defined contribution plans owed by Big Rivers
with respect to compensation for periods up to the Effective Date will
have been paid to such Big Rivers Qualified Plans as of the Effective
Date.
5.1.20.4 No reportable event (as such term is defined in ERISA
ss. 4043, but not including an event described in ERISA ss. 4043(c)(9) or
any event for which the requirement of notice within 30 days to the
Pension Benefit Guaranty Corporation has been waived) has occurred with
respect to any of the Big Rivers Qualified Plans within the preceding 36
months. Neither Big Rivers nor any other Person has engaged in any
transaction with respect to any of the Big Rivers Qualified Plans which
would subject Big Rivers or such Person to a Tax, penalty or liability for
12
prohibited transactions under ERISA or the Code within the preceding 36
months. To the best of Big Rivers' knowledge, no director, officer or
employee of Big Rivers, to the extent he/she is a fiduciary with respect
to any of the Big Rivers Qualified Plans, has breached any of his/her
responsibilities or obligations imposed upon fiduciaries under Title I of
ERISA or which would result in any claim being made under, by or on behalf
of any of the Big Rivers Qualified Plans, or a participant or beneficiary
under any of the Big Rivers Qualified Plans.
5.1.21 Labor. Except as disclosed on Schedule 5.1.21, no
employee of Big Rivers is represented for purposes of collective
bargaining by any labor organization of any type and within the last five
years Big Rivers has not experienced any material labor disputes or any
work stoppages due to labor agreements. Except as disclosed on Schedule
5.1.21, Big Rivers is not obligated under the terms of any labor agreement
to negotiate with, or seek approval from, any labor organization regarding
any term or condition of this Agreement. Except as disclosed on Schedule
5.1.21, there are no pending claims, and to Big Rivers' knowledge no
threatened claims, related to the Transferred Employees under any federal,
state or local labor or employment laws or regulations, including but not
limited to, the Fair Labor Standards Act, National Labor Relations Act,
Labor Management Relations Act, Civil Rights Act of 1964, Walsh-Healy Act,
Davis Bacon Act, Civil Rights Act of 1866, Age Discrimination in
Employment Act, Older Workers Benefit Protection Act, Equal Pay Act of
1963, Executive Order No. 11246, Federal Unemployment Tax Act, Vietnam Era
Veterans Readjustment Act, Occupational Safety and Health Act, Civil
Rights Act of 1991, American With Disabilities Act, Rehabilitation Act of
1973, Family and Medical leave Act, Worker Adjustment and Retraining
Notification Act ("WARN"), ERISA, applicable workers' and unemployment
compensation laws, all as amended, or any applicable contract, tort or
other common law theories; and no claim under any such laws or regulations
is pending or, to the best of Big Rivers' knowledge, threatened against
Big Rivers.
5.1.22 Employment Compensation and Credit Service. Schedule
5.1.22 contains a true and correct list of all Transferred Employees. Big
Rivers shall provide on or before the Effective Date, a schedule of all
sick leave, vacation pay or retiree medical obligations with respect to
each Transferred Employee, and except as provided on such schedule there
are no other obligations for these benefits. Big Rivers shall, on or as
soon as administratively practicable after the Effective Date, provide a
listing of all such employees which identifies the "Compensation Rate" of
each such employee as of the date immediately preceding the Effective Date
as calculated pursuant to Section 1.11 of Big Rivers Severance Plan and
which identifies the service credited as of the date immediately preceding
the Effective Date under the applicable Big Rivers pension plans for all
such employees.
5.1.23 No Condemnation, Expropriation or Restrictions. Neither
the whole nor any portion of the Facilities or Station Two is subject to
any governmental decree or order to be sold or is being condemned,
expropriated or otherwise taken by any public authority with or without
payment of compensation therefor, nor to Big Rivers' knowledge, has any
such condemnation, expropriation, taking or material new
13
assessment been proposed. Except as set forth in Schedule 5.1.23, Big
Rivers has received no notice of any zoning, land use or other
governmental proceeding specific to a Facility or Station Two pending, nor
to the best of Big Rivers' knowledge proposed, which would materially
adversely affect the Facilities or Station Two including without
limitation any of the Facilities or Station Two for their present uses.
5.1.24 Taxes. Big Rivers has timely filed all Tax Returns
required to be filed by Big Rivers on or before the date upon which this
representation is being made, taking into account extensions of time for
filing. All Taxes that are or were due and payable by Big Rivers on or
before the date upon which this representation is being made, with or
without a Return, have been timely paid. Big Rivers has complied with all
material requirements of the Code relating to the payment and withholding
of Taxes, and Big Rivers has, within the time and in the manner prescribed
by applicable law, paid over to the proper Taxing authorities all amounts
required to be so withheld and paid over. Big Rivers has received no
written notification of any Tax deficiency, proposal for the assessment of
a Tax, or the intention of any Taxing authority to audit any Big Rivers'
Tax Return. None of the Assets is subject to a Lien for Taxes, except
Permitted Liens.
5.1.25 No Brokers. Big Rivers has not employed any broker or
finder in connection with the transactions contemplated by the Operative
Documents, and it has taken no action that would give rise to a valid
claim against any party for a brokerage commission, finder's fee, or other
like payment.
5.1.26 Intellectual Property. Schedule 5.1.26 lists each item
of Intellectual Property. Except as disclosed on Schedule 5.1.26, Big
Rivers owns or has valid rights to use such Intellectual Property free and
clear of any Liens (other than Permitted Liens).
5.1.27 Disclaimer of Other Representations and Warranties. THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE 5 ARE IN LIEU OF
ALL OTHER REPRESENTATIONS AND WARRANTIES OF BIG RIVERS WHETHER WRITTEN,
ORAL OR IMPLIED, WITH RESPECT TO THIS AGREEMENT, ANY OTHER OPERATIVE
DOCUMENT OR THE ASSETS, EXCEPT AS EXPRESSLY PROVIDED IN THIS ARTICLE 5 OR
IN THE STATION TWO AGREEMENT. THE LG&E PARTIES HEREBY ACKNOWLEDGE AND
AGREE THAT BIG RIVERS SHALL NOT BE DEEMED TO HAVE MADE ANY OTHER
REPRESENTATION OR WARRANTY, EITHER EXPRESSED OR IMPLIED, AS TO ANY MATTER
WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE DESIGN OR CONDITION OF THE
ASSETS OR ANY PART THEREOF, THE MERCHANTABILITY THEREOF OR THE FITNESS
THEREOF FOR ANY PARTICULAR PURPOSE. THE PROVISIONS OF THIS ARTICLE 5 HAVE
BEEN NEGOTIATED, AND, EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY PROVIDED IN
THIS ARTICLE 5 OR IN THE STATION TWO AGREEMENT, THE FOREGOING PROVISIONS
ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY
REPRESENTATIONS OR
14
WARRANTIES BY BIG RIVERS, EXPRESS OR IMPLIED, WITH RESPECT TO THE ASSETS,
OR OTHERWISE.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF LG&E PARTIES
6.1 Representations and Warranties of Each LG&E Party. Each LG&E
Party represents and warrants to Big Rivers as follows:
6.1.1 Organization and Powers of LG&E Parties. Each LG&E Party
is duly organized, existing and in good standing under the laws of its
jurisdiction of organization and, in the case of LEM, is duly qualified to
do business as a foreign corporation in the Commonwealth of Kentucky. Each
LG&E Party has all requisite corporate power and authority and holds all
material approvals, permits, authorizations, consents, licenses, orders
and restrictions required to own, operate, and lease its properties, and
to carry on its business as now being conducted and, subject to
satisfaction of all conditions set forth in Schedules 3.1, 3.2 and 3.3
hereof (as applicable), as proposed to be conducted pursuant to the terms
of this Agreement and the other Operative Documents.
6.1.2 Authority Relative to Operative Documents. The
execution, delivery, and performance of each Operative Document by the
relevant LG&E Party has been duly authorized by all necessary corporate
and shareholder action.
6.1.3 No Violation. Except as set forth in Schedule 6.1.3, the
execution and delivery of the Operative Documents by the relevant LG&E
Parties, and the consummation by the LG&E Parties of the transactions
contemplated thereby, including performance in all material respects of
all of their obligations thereunder (a) will not violate any statute or
law or any rule, regulation, order, writ, injunction or decree of any
court or governmental authority, (b) will not require any authorization,
consent, approval, exemption or other action by or notice to any court,
administrative or governmental agency, instrumentality, commission,
authority, board or body, and (c) will not violate or conflict with, or
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or result in the termination of,
or accelerate the performance required by, or result in the creation of
any Lien upon any of the assets of the relevant LG&E Party, under any term
or provisions of the Articles of Incorporation, By-Laws or other
constituent documents of such LG&E Party or of any contract, commitment,
understanding, arrangement, agreement or restriction of any kind or
character to which such LG&E Party is a party or by which such LG&E Party
or any of its assets or properties may be bound or affected.
6.1.4 Effect of Agreement. This Agreement has been, and each
of the other Operative Documents will be, duly and validly authorized,
executed and delivered by the relevant LG&E Party and constitutes, or will
constitute when executed, a valid and legally binding agreement of such
LG&E Party enforceable against such LG&E Party in
15
accordance with its terms, except as the foregoing may be limited by (a)
general principles of equity or (b) bankruptcy, insolvency,
reorganization, arrangement, moratorium or other laws or equitable
principles relating to or affecting creditors' rights generally.
6.1.5 No Brokers. No LG&E Party, nor any Affiliate thereof,
has employed any broker or finder in connection with the transactions
contemplated by the Operative Documents, and it has taken no action that
would give rise to a valid claim against any party for a brokerage
commission, finder's fee, or other like payment.
6.1.6 Staffing. WKEC or Leaseco, as the case may be, will
maintain, or acquire, adequate personnel to operate the Assets and perform
their respective obligations pursuant to the terms and conditions of the
Facilities Operating Agreement and the Lease, as the case may be.
6.1.7 Disclaimer of Other Representations and Warranties. THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE 6 ARE IN LIEU OF
ALL OTHER REPRESENTATIONS AND WARRANTIES OF THE LG&E PARTIES WHETHER
WRITTEN, ORAL OR IMPLIED, WITH RESPECT TO THIS AGREEMENT, ANY OTHER
OPERATIVE DOCUMENT OR THE ASSETS, EXCEPT AS EXPRESSLY PROVIDED IN THIS
ARTICLE 6 OR IN THE STATION TWO AGREEMENT. THE PROVISIONS OF THIS ARTICLE
6 HAVE BEEN NEGOTIATED, AND, EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY
PROVIDED IN THIS ARTICLE 6 OR IN THE STATION TWO AGREEMENT, THE FOREGOING
PROVISIONS ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY
REPRESENTATIONS OR WARRANTIES BY THE LG&E PARTIES, EXPRESS OR IMPLIED,
WITH RESPECT TO THE ASSETS, OR OTHERWISE.
ARTICLE 7
COVENANTS OF BIG RIVERS
7.1 Access to Properties, Books and Records. Prior to the Effective
Date (and with respect to Section 7.1.2 on and after the Effective Date), Big
Rivers shall, at the request of any LG&E Party to Big Rivers' President and
Chief Executive Officer:
7.1.1 Afford or cause to be afforded to the agents, attorneys,
accountants and other authorized representatives of such LG&E Party
reasonable access during normal business hours to all employees,
properties, books, records, data, contracts and documents relating to the
Assets and Transferred Employees and shall permit such persons, at such
LG&E Party's expense, to make copies of such books, records, data,
contracts and documents. In particular, Big Rivers shall afford such LG&E
Party and its authorized representatives reasonable access to the Real
Property and Station Two for the purpose of conducting investigations and
examinations thereof and for preparation of surveys, making appraisals and
ascertaining the condition thereof.
16
7.1.2 For the purpose of protecting the common interest of Big
Rivers and the LG&E Parties in identifying and avoiding tax liability that
would be subject to indemnification pursuant to the Tax Indemnification
Agreement, permit access by any LG&E Party and its advisors to Big Rivers'
employees, agents, independent accountants and accounting firms
(including, but not limited to, Mr. James Howard Smith of Arthur Andersen
LLP), and other advisors (other than legal counsel associated with law
firms) and require such persons (whether an individual or entity) (i) to
provide to such LG&E Party, in a timely manner, access to all Big Rivers'
Tax Returns, and all workpapers, schedules, memoranda, financial
projections, and other written materials that relate to Big Rivers' income
Tax liabilities (or potential liabilities) for any past, present, or
future taxable year and (ii) to disclose their work product (whether or
not such work product is in written form and whether or not subject to
privilege) concerning Big Rivers' expected or potential income Tax
consequences of the transactions contemplated by the Phase I Agreements
and the Phase II Agreements including, but not limited to, their work
product relating to any actual or potential Phase I Tax Detriment Item (as
such term is defined in the Tax Indemnification Agreement). All costs,
fees, and expenses incurred by Big Rivers (either directly or indirectly
through its independent attorneys, accountants, or other advisors) in
connection with Big Rivers' compliance with this Section 7.1.2 for periods
ending on or before the Effective Date shall be borne by Big Rivers, and
all such costs, fees, and expenses for periods beginning after the
Effective Date shall be borne by the LG&E Parties.
7.1.3 Each LG&E Party shall treat, and shall cause all of its
agents, attorneys, accountants, and other authorized representatives to
treat, all information obtained pursuant to this Section 7.1 as
confidential.
7.1.4 No investigation by any LG&E Party or any of its
authorized representatives pursuant to this Section 7.1 shall affect any
representation, warranty, or closing condition of any party hereto.
7.2 Negative Covenants. Except as otherwise permitted by this
Agreement or the other Operative Documents or with the prior written consent of
Leaseco, as agent for the LG&E Parties (not to be unreasonably withheld), prior
to the Closing, Big Rivers shall not:
7.2.1 No Liens. Directly or indirectly create, incur, assume
or suffer to exist any Lien on or with respect to the Assets, except for
Permitted Liens.
7.2.2 No Disposal. Dispose of, or agree to dispose of, any of
the Assets or any Station Two Contract (or any portion thereof) or Station
Two Asset outside the ordinary course of business.
7.2.3 No New Contracts. Enter into any power sale,
maintenance, fuel supply or transportation contracts or make any
commitment to do the same in each case, involving the payment of an amount
in excess of $500,000 annually or having a termination date after May 31,
1998. Notwithstanding the foregoing, Big Rivers shall be entitled to enter
into Pre-Closing Development Agreements with Henderson as
17
contemplated in the "1998 Amendments" (as defined in the Station Two
Agreement) for Economic Development Opportunities, provided, that such
agreements do not specifically commit Power from any of the Generating
Plants from and after the Closing.
7.2.4 No Increase. Implement any general wage increases, but
may continue normal salary administration practices, with such changes
subject to the review by WKEC prior to Closing.
7.2.5 WARN. Temporarily or permanently close or shut down any
"single site of employment" or any "facility" or any "operating unit,"
department or service within a single site of employment, as such terms
are used in WARN within the ninety (90) day period ending on the day
before the Effective Date.
7.2.6 No Implementation. Implement or agree to any
implementation of or amendment or supplement to any employee profit
sharing, stock option, stock purchase, pension, bonus, commission,
incentive, retirement medical reimbursement, life insurance, deferred
compensation or any other employee compensation or benefit plan or
arrangement applicable to any Transferred Employee except for (i)
non-material modifications or amendments, (ii) modifications or amendments
which are required to be made by applicable law or pursuant to a
determination letter request, (iii) modifications or amendments required
by written employment agreements, employment policies or applicable
collective bargaining agreements existing on March 19, 1997, and (iv) any
amendments or modifications which (1) are reasonable given the
circumstances, (2) do not result in a substantial increase in benefits,
and (3) are approved in writing in advance by the LG&E Parties (such
approval not to be unreasonably withheld). The exercise of discretion by
Big Rivers under an existing employment agreement, policy or other
arrangement that does not increase or alter the liability of the LG&E
Parties shall not be considered a violation of Section 7.2.6.
7.2.7 Contracts. Terminate, which termination shall have a
material adverse effect on the LG&E Parties' collective rights under the
Operative Documents, taken as a whole, or materially modify or amend, or
suffer such termination, modification or amendment of any of the
Contracts, the Member Contracts, the Hoosier Contract, the Oglethorpe
Contract, the HMP&L Contract or the Station Two Contracts (other than
pursuant to the 1998 Amendments contemplated in the Station Two
Agreement), or any tariffs relating to any of the foregoing; provided,
however, that Big Rivers shall be permitted to amend its Member Contracts
as necessary to satisfy the conditions to closing set forth in Schedule
3.1, Items (I)(10) and (II)(15).
7.2.8 No Commitment. Agree or commit to do any of the
foregoing.
7.3 Affirmative Covenants. Except as otherwise permitted by this
Agreement or the other Operative Documents or with the prior written consent of
Leaseco, as agent for the LG&E Parties (not to be unreasonably withheld), prior
to Closing, Big Rivers shall:
18
7.3.1 Ordinary Course. Operate its business as presently
operated and only in the ordinary course and consistent with past
practices and with the 1998 Amendments.
7.3.2 Adverse Changes. Advise Leaseco, as agent for the LG&E
Parties, in writing of any litigation or administrative proceeding (other
than in the Bankruptcy Court) that challenges or otherwise materially
affects the transactions contemplated by this Agreement or the remaining
Operative Documents and of any material adverse change in the Assets or
the Station Two Assets.
7.3.3 Maintain Assets. Use its reasonable best efforts to
maintain all of the Tangible Assets in good operating condition,
reasonable wear and tear excepted, consistent with Prudent Utility
Practice and past practices.
7.3.4 Cancellation. Maintain at all times prior to the Closing
policies of insurance relating to the Assets providing substantially the
same coverage as is in effect on the Participation Effective Date.
7.3.5 Comply with Laws. Operate and maintain the Assets in
substantial compliance with all applicable Laws.
7.3.6 Additional Employee Matters. Fully vest accrued benefits
related to all of the "benefit liabilities" (as defined in ERISA ss.
4001(a)(16)) ("Benefit Liabilities") as of the Effective Date under each
Big Rivers Qualified Plan with respect to all Transferred Employees who
have been hired by WKEC or its Affiliates as of the Effective Date, cause
the Big Rivers Qualified Plans to be funded so that the assets of such
plans are sufficient to provide all Benefit Liabilities under such plans
with respect to each participant and each beneficiary of a deceased
participant under such plans.
7.4 Station Two Contracts. Perform all of its duties and
obligations under all Station Two Contracts (as amended by the 1998
Amendments, where applicable) in all material respects thereunder,
consistent with the terms and provisions thereof.
ARTICLE 8
COVENANTS OF CERTAIN LG&E PARTIES
8.1 Use by Other LG&E Parties. Leaseco hereby agrees to make
available to all other LG&E Parties during Phase I, for such other LG&E Party's
use in the operation, maintenance, management and upkeep of the Facilities and
Station Two, the following:(i) the Inventories; (ii) the Personal Property;
(iii) the Intangible Assets and the (iv) SO(2) Allowances, in each case at and
after such time as such assets and properties have been assigned or otherwise
made available to Leaseco in accordance with Article 9, below. Each such LG&E
Party hereby agrees to reimburse Leaseco for its proportionate share of all
out-of-pocket costs incurred by
19
Leaseco in connection with any of the foregoing assets or the replacement
thereof. Leaseco hereby covenants and agrees that it will not transfer, assign,
sell or otherwise dispose of any of the Intangible Assets (other than the SO(2)
Allowances, the disposition of which is addressed in Section 9.4), to the extent
that such Intangible Asset is necessary to the operation and maintenance of the
Facilities or Station Two.
8.2 LG&E Party Cross Defaults. Notwithstanding anything to the
contrary contained in this Agreement or any other Operative Document, (i) Big
Rivers shall not be deemed to have breached or be in default under this
Agreement or any other Operative Document as the result of any act or omission
of any LG&E Party or any of its Affiliates (which act or omission is itself not
the direct result of an act or omission by Big Rivers), provided such act or
omission by any LG&E Party or any of its Affiliates (A) is in breach of or
default under any Operative Document or (B) constitutes negligence or willful
misconduct on the part of such LG&E Party or any of its Affiliates, (ii) any
waiver or consent granted or action taken by any LG&E Party with respect to this
Agreement or any other Operative Document shall be binding on all LG&E Parties
with respect to all Operative Documents, and (iii) a failure on the part of any
LG&E Party to perform its obligations under any Operative Document shall not be
excused (unless otherwise expressly provided for in such Operative Document) to
the extent performance is prevented or frustrated by any action or inaction of
any other LG&E Party, which action or inaction on the part of such other LG&E
Party is in breach of the provisions of such other Operative Document(s) to
which such other LG&E Party is a party.
8.3 Big Rivers Defaults. Notwithstanding anything to the contrary
contained in this Agreement or any other Operative Document, no LG&E Party shall
be deemed to have breached or be in default under this Agreement or any other
Operative Document as the result of any act or omission of Big Rivers (which act
or omission is itself not the direct result of an act or omission by any LG&E
Party or any of its Affiliates), provided such act or omission by Big Rivers (A)
is in breach of or default under any Operative Document or (B) constitutes
negligence or willful misconduct on the part of Big Rivers.
ARTICLE 9
TRANSFERS AND ASSIGNMENTS TO OCCUR ON THE EFFECTIVE DATE
9.1 Inventories. On the Effective Date, Big Rivers shall sell and
assign to Leaseco, free and clear of all Liens, all of Big Rivers' rights, title
and interest under, in and to the Inventory in Big Rivers' possession or
control. Pursuant to the procedures set forth on Schedule 9.1 hereto, the
Parties shall jointly conduct an inventory survey and agree upon the fair market
value of the Inventory sold to Leaseco pursuant to this Section 9.1 prior to the
Effective Date. Leaseco shall pay Big Rivers for the fair market value as so
determined on the Effective Date or, if the parties are unable to agree on such
fair market value and either party submits the issue of fair market value to the
arbitration procedure described in Section 15, then within five days after final
determination pursuant to that procedure. On the Termination Date, Leaseco shall
immediately sell and assign to Big Rivers, free and clear of all Liens all of
Leaseco's rights, title
20
and interest under, in and to the fuel and scrubber reagent inventory, spare
parts and materials and supplies held exclusively for use by any of the LG&E
Parties at that time in connection with its operation of the Assets, and in the
LG&E Parties' possession or control. Within 30 days after such assignment, the
parties shall utilize the procedures set forth above and on Schedule 9.1 and Big
Rivers shall pay Leaseco the fair market value of such inventories, parts,
materials and supplies. If as of the Termination Date, any portion of such
inventories, parts, materials and supplies has been paid for by Big Rivers as
Incremental Environmental O&M (determined on a first in, first out basis) either
pursuant to the Cost Sharing Agreement or the Lease, Big Rivers shall receive a
credit against the fair market value of such inventories, parts, materials and
supplies in an amount equal to that portion of such Incremental Environmental
O&M that was paid by Big Rivers (determined by reference to the Lease or the
Cost Sharing Agreement, as applicable). If the Parties are unable to agree upon
the fair market value of inventories, parts, materials and supplies, the issue
shall be submitted to the arbitration procedure described in Section 15.
9.2 Assignment of Certain Intangible Assets. On the Effective Date,
and pursuant to an Assignment and Assumption Agreement in the form attached
hereto as Schedule 9.2 (the "Assignment and Assumption Agreement"), Big Rivers
shall assign or transfer to Leaseco all of Big Rivers' right, title and interest
in and to all of its obligations under, the Intangible Assets (except the SO(2)
Allowances, which are subject to Section 9.4 of this Agreement and except to the
extent such Intangible Assets are Excluded Assets), free and clear of all Liens,
and Leaseco shall assume and agree to perform and discharge Big Rivers'
performance obligations under those Intangible Assets which first arise or
accrue on or after the Effective Date. Leaseco shall maintain and replace the
Intangible Assets as necessary, in its reasonable discretion, in order to
operate the Assets in a manner consistent with Prudent Utility Practice. Leaseco
shall inform the Oversight Committee or the Operating Committee, as applicable,
of any material change in the status of any Intangible Assets, of any pending
applications for new Permits, and of the receipt of new material Intangible
Assets. On the Termination Date, Leaseco shall (subject to the receipt of all
third-party consents and approvals required therefor, if any) assign or transfer
to Big Rivers, free and clear of all Liens, Leaseco's rights, title and interest
under, in and to the remaining Intangible Assets (exclusive of SO(2) Allowances,
which are addressed in Section 9.4) and any additions, modifications or
replacements of the Intangible Assets (exclusive of SO(2) Allowances) previously
approved by Big Rivers in writing, and Big Rivers shall assume all of Leaseco's
obligations thereunder arising after the Termination Date. Leaseco shall utilize
its best efforts to obtain the third-party consents and approvals referred to in
the parenthetical in the prior sentence and agrees, to the extent such consents
or approvals are not obtained, to utilize its best efforts to provide Big Rivers
with its benefits and rights in, to and under such Intangible Assets at no
expense to Big Rivers. To the extent that any Permit constituting an Intangible
Asset is not assignable by Big Rivers, Big Rivers agrees to make such Permit
otherwise available at no additional cost, to the greatest extent possible, to
Leaseco and WKEC in connection with the performance of their respective
obligations under the Operative Documents. Leaseco agrees (i) to the extent
permitted by Law, to take any and all actions necessary to maintain or renew
such non-transferable Permits and (ii) to reimburse Big Rivers for any
out-of-pocket expenses incurred in connection with the renewal or maintenance of
such non-transferable Permits to the extent action by Big Rivers is required by
applicable Law.
21
Notwithstanding the above assignment provision, the Parties agree
that during Phase I, no fuel supply agreements will be assigned by Big Rivers to
Leaseco and any additional fuel supply agreements required during Phase I shall
be entered into by Big Rivers in its own name. WKEC, as operator, will pursuant
to the Facilities Operating Agreement arrange for the acquisition and delivery
of all fuel to the Generating Plants and will, as agent to Big Rivers, make all
payments required under all fuel supply agreements, subject to reimbursement for
such expenditure as provided in Sections 5.7 and 9.1 of the Facilities Operating
Agreement. On the Phase II Effective Date, the Parties agree to execute an
Assignment and Assumption Agreement with respect to the fuel supply agreements,
provided that Leaseco shall not be obligated to assume any fuel supply
agreements entered into by Big Rivers during Phase I to the extent Big Rivers
did not receive Leaseco's written approval prior to executing such fuel supply
agreement. On the Termination Date, Big Rivers shall not be obligated to assume
any fuel supply agreements entered into by Leaseco during Phase II to the extent
Leaseco did not receive Big Rivers' written approval prior to executing such
fuel supply agreement. Subject to Section 18.3, Section 5.7 of the Facilities
Operating Agreement, and any comparable provisions of the Station Two Agreement,
Big Rivers shall, during Phase I, make available to WKEC for use at the
Facilities, and to Station Two Subsidiary for use at Station Two, all fuel which
is available under each of Big Rivers' fuel supply agreements as identified on
Schedule 9.2.1.
9.3 Personal Property. On the Effective Date, Big Rivers shall
sell to Leaseco, free and clear of all Liens, and Leaseco shall purchase from
Big Rivers, all of Big Rivers' rights, title and interest under, in and to
the Personal Property in Big Rivers' possession, including, without
limitation, the Personal Property listed in Schedule 5.1.11 hereto, but
excluding the property identified as Excluded Assets on Schedule 9.3 hereto.
Leaseco shall pay Big Rivers an amount equal to [REDACTED] of the Personal
Property as so determined on the Effective Date (the "PP Price"). Upon such
payment, (a) in the event that the Effective Date is the Phase I Effective
Date, the Initial Fixed Payment referenced in Section 3.3(a) of the Power
Purchase Agreement shall be reduced by an amount equal to [REDACTED] percent
([REDACTED]%) of the PP Price and the remaining monthly fixed installments
payable pursuant to such Section 3.3 shall each be reduced by an amount equal
to [REDACTED]% of the PP Price, (b) in the event that the Effective Date is
the Phase II Effective Date, the Initial Rental Payment referenced in Section
2.3.1 of the Lease shall be reduced by an amount equal to [REDACTED] percent
([REDACTED]%) of the PP Price and the remaining monthly rental installments
payable pursuant to Section 2.3.2 of the Lease shall each be reduced by an
amount equal to [REDACTED]% of the PP Price and (c) in the event that Phase
II follows Phase I, all remaining monthly rental installments payable on and
after the Phase II Effective Date pursuant to Section 2.3.2 of the Lease
shall each be reduced by an amount equal to [REDACTED]% of the PP Price. On
the Termination Date, Leaseco shall immediately sell to Big Rivers, free and
clear of all Liens, all of Leaseco's rights, title and interest under, in and
to all tangible personal property (other than fuel and scrubber reagent,
inventory, spare parts and materials, and supplies) then in any LG&E Party's
possession and used or held at that time exclusively for use in connection
with Leaseco's and/or WKEC's use and operation of the Assets, and Big Rivers
shall pay Leaseco [REDACTED] of such personal property as so determined on
the Termination Date. If as of the Termination Date, any portion of such
personal property has been paid for by Big Rivers as Incremental
Environmental O&M (determined on a first in, first out basis) either pursuant
to the Cost Sharing Agreement or the Lease, Big Rivers shall receive a credit
against the [REDACTED]
22
[REDACTED] of such personal property in an amount equal to that portion of
such Incremental Environmental O&M that was paid by Big Rivers (determined by
reference to the Lease or the Cost Sharing Agreement, as applicable).
9.4 SO(2) Allowances
9.4.1 Except as provided in Section 9.4.2, and except those
allowances used by Big Rivers to comply with emissions standards
applicable to the Facilities for the period beginning on January 1
immediately preceding the Effective Date and ending on the Effective Date,
Leaseco shall, without further compensation to Big Rivers, be entitled to
the full and exclusive use, enjoyment and benefit (free of all Liens
arising prior to such use, enjoyment or benefit) including the right to
sell, exchange or otherwise dispose of, for Leaseco's account, all of the
SO(2) Allowances identified on Schedule 5.1.16 hereof (other than those
specifically excluded as contemplated by Section 9.1 and the allowances
allocated to Station Two, the use of which SO(2) Allowances by the LG&E
Parties shall be governed by the Station Two Agreement), and all other
SO(2) Allowances that are allocated by the Environmental Protection Agency
to the Facilities for any calendar year falling within Phase I and Phase
II. Subject to Section 9.4.2, on the Termination Date, Leaseco shall
immediately return (free of all Liens) to Big Rivers all of the SO(2)
Allowances allocated by the Environmental Protection Agency to the
Facilities for all years beginning on or after the Termination Date and a
pro rata portion of the SO(2) Allowances allocated by the Environmental
Protection Agency to the Facilities for the remainder of the year in which
the Termination Date occurs. To the extent Leaseco previously disposed of
any such SO(2) Allowances which must otherwise be returned to Big Rivers
on the Termination Date, Leaseco shall have the obligation on the
Termination Date to replace, at its sole expense, such SO(2) Allowances
and to transfer such replacement SO(2) Allowances to Big Rivers (free of
all Liens). Bonus, extension or transfer SO(2) Allowances not allocated by
the Environmental Protection Agency to the Facilities for a particular
year shall be deemed allocated ratably to the period commencing on the
Effective Date and ending December 31, 1999. Leaseco shall have sole
discretion during Phase I and Phase II of this transaction over the sale,
exchange or other disposition of bonus, extension and transfer SO(2)
Allowances but shall be obligated to return immediately (free of all
Liens) to Big Rivers a pro rata portion of such bonus, extension or
transfer S02 Allowances (or replacements thereof) if the Termination Date
occurs prior to December 31, 1999. Big Rivers shall designate (and shall
cause the City of Henderson to designate) a Leaseco nominee as its
designated representative for all matters related to SO(2) Allowances and
shall execute all documents needed to implement the foregoing entitlement.
9.4.2 If the Termination Date occurs prior to the December
31st that is closest to the twenty-fifth anniversary of the Effective
Date, this Section 9.4.2 shall apply and the year of termination shall be
called the "Final Year of Agreement." In the event SO(2) emissions from
the Facilities during the portion of the Final Year of Agreement prior to
the Termination Date exceed the pro rata amount of the SO(2) Allowances
allocated by the Environmental Protection Agency to the Facilities for the
entire Final Year of Agreement, Leaseco shall transfer to Big Rivers SO(2)
Allowances equal to the amount by
23
which SO(2) emissions from the Facilities exceed the pro rata amount of
the SO(2) Allowances for the Final Year of Agreement. In the event SO(2)
emissions from the Facilities during the portion of the Final Year of
Agreement prior to the Termination Date are less than the pro rata amount
of the SO(2) Allowances allocated by the Environmental Protection Agency
to the Facilities for the entire Final Year of Agreement, Big Rivers shall
transfer to Leaseco SO(2) Allowances equal to the amount by which SO(2)
emissions from the Facilities are less than the pro rata amount of the
SO(2) Allowances for the Final Year of Agreement. The pro rata allocation
contemplated by this paragraph 9.4.2 shall be calculated based upon the
ratio of the number of days prior to termination to the total number of
days in the Final Year of Agreement.
9.5 [RESERVED]
9.6 Transmission Use Payment Compensation Adjustment. LEM and
certain of its Affiliates have contracted with Big Rivers pursuant to the
Transmission Services and Interconnection Agreement for certain services as
specified therein for which they will pay Big Rivers according to the rates
set forth in Rate Schedules FTS, STNF, and HNF of Big Rivers' Open Access
Tariff. In the event the annual total charge for transmission services
rendered by Big Rivers to LEM or its Affiliates does not equal or exceed
$[REDACTED], LEM shall credit Big Rivers, pursuant to Section 6.6(c) of the
Power Purchase Agreement, the difference between $[REDACTED] and the total
charge for transmission services billed LEM and its Affiliates by Big Rivers
during such Year ("Transmission Use Credit"). In making the determination
required by the immediately preceding sentence and in each subsequent
calculation pursuant to this Section 9.6, payments made by LEM or its
Affiliates to Big Rivers, if any, for the transmission of power to [REDACTED]
shall be excluded if such power is for resale to [REDACTED] and (a) is
transmitted during or prior to [REDACTED] or [REDACTED], respectively, and
constitutes Tier 1 Energy or Tier 2 Energy (as defined in the Smelter Power
Purchase Agreements) or (b) is transmitted during or prior to [REDACTED] and
constitutes Tier 3 Energy ("Member Transmission Exclusion"). Subject to the
Member Transmission Exclusion, in the event that the annual total charge for
transmission services rendered to LEM and its Affiliates by Big Rivers
pursuant to the Transmission Services and Interconnection Agreement is in
excess of $[REDACTED] and the average rate per megawatt hour for non-firm
transmission service under the Transmission Services and Interconnection
Agreement during such Year exceeded $[REDACTED] per megawatt-hour, escalated
at the rate of [REDACTED]% per annum from January 1, [REDACTED], Big Rivers
shall credit LEM and its Affiliates pursuant to Section 10 of the
Transmission Services and Interconnection Agreement an amount equal to the
number of megawatt hours of non-firm transmission service provided during the
Year to LEM multiplied by the amount by which the average rate for such
service exceeded $[REDACTED] per megawatt-hour escalated at [REDACTED]% per
annum from January 1, [REDACTED]("Non-Firm Transmission Use Credit");
provided, in no event shall such credit exceed the difference between (1) the
annual total charge for transmission services rendered by Big Rivers pursuant
to the Transmission Services and Interconnection Agreement to LEM and its
Affiliates with respect to Power purchased or sold by LEM and its Affiliates
(subject to the Member Transmission Exclusion) (i) to fulfill LEM's or such
Affiliate's
24
obligations under the Operative Documents or (ii) which is produced by the
Generating Plants and (2) $[REDACTED]. For purposes of this Section 9.6, the
annual total charge for service shall be calculated on January 15 of the
subsequent Year and shall be calculated based upon total transmission charges
billed to LEM and its Affiliates by Big Rivers for services provided from
January 1 through December 31 of the preceding Year pursuant to the
Transmission Services and Interconnection Agreement. Any credit owing
pursuant to this Section 9.6 shall be made on February 1 of the year
following the Year in which it accrues. Any such credit due on the February 1
subsequent to any Partial Year during the Term of this Agreement shall be
calculated on a pro-rated basis. Subject to the Member Transmission
Exclusion, purchases of transmission service from Big Rivers made by LEM or
any of its Affiliates will be credited toward the $[REDACTED] annual minimum
payment, such that if the cumulative purchases of LEM and its Affiliates of
transmission service from Big Rivers exceeds $[REDACTED]annually, LEM will
not owe Big Rivers any further payment under this paragraph, provided that
(1) for the purposes of this paragraph, the term "Affiliates" does not
include Kentucky Utilities Company and (2) no Non-Firm Transmission Credit
shall be due with respect to any Power transmitted under the Transmission
Services and Interconnection Agreement for LEM or its Affiliates other than
with respect to Power purchased or sold by LEM or its Affiliates (i) to
fulfill LEM's or such Affiliate's obligations under the Operative Documents
or (ii) which is produced by the Generating Plants. The Parties intend that
the credit obligations set forth in this Section 9.6 remain unchanged over
the Term of this Agreement. In addition to the agreement of the Parties set
forth in Section 8 of the Power Purchase Agreement, the Parties agree that
the rates set forth in this Section 9.6 shall not increase or decrease over
the Term of the Transmission Services and Interconnection Agreement by reason
of regulatory action including but not limited to any filing by Big Rivers
with FERC pursuant to Order No. 888. Big Rivers agrees that it will take such
measures as necessary to assure that the rights, obligations and economic
benefits of LEM and its affiliates under this paragraph remain unchanged. LEM
agrees that it waives any rights it may have to seek rates lower than those
required by this Section 9.6.
ARTICLE 10
TRANSFERRED EMPLOYEE MATTERS
10.1 Treatment of Employees. In order to permit the LG&E Parties to
perform their respective obligations set forth in the Operative Documents, Big
Rivers shall permit WKEC or any of its Affiliates to employ such of Big Rivers'
Transferred Employees, as WKEC, in its sole discretion, deems necessary in this
connection. WKEC or its Affiliates shall promptly notify Big Rivers of any
Transferred Employee who, as of 12:01 a.m. on the day immediately following the
Effective Date, is not offered employment by WKEC or its Affiliates in a
position substantially similar to that held with Big Rivers, with compensation
not less than substantially equivalent to that provided by Big Rivers to such
Transferred Employees and with benefits not less than substantially equivalent
to those provided by WKEC to its other employees generally.
10.2 Service Credit to Transferred Employees. The Transferred
Employees whom WKEC or any of its Affiliates retains and who agree to become
employees of WKEC or
25
such Affiliate shall be offered participation in the employee benefit plans and
programs available to similarly situated employees of WKEC or such Affiliate, as
applicable, upon terms and conditions which are generally no less favorable in
the aggregate than those afforded other similarly situated employees of WKEC or
such Affiliate, as applicable. Transferred Employees shall receive credit for
their service with Big Rivers for purposes of (i) determining their
participation and vesting (but not benefit accrual except to the extent
expressly provided in this Section 10) under, and (ii) determining eligibility
for early retirement or any subsidized benefit provided under, the tax-qualified
retirement plans available to employees of WKEC, Leaseco or their Affiliates.
For purposes of computing deductible amounts (or like adjustments or limitations
on coverage) under any employee benefit plan or program of WKEC or such
Affiliate, as applicable, expenses and claims previously recognized for similar
purposes under the applicable similar plan or program of Big Rivers shall be
credited or recognized under the comparable plan or program maintained after the
Effective Date by WKEC or such Affiliate, as applicable, and any preexisting
condition requirements under any such plan or program that may otherwise be
applicable to such Transferred Employees shall be waived (to the extent such
condition would be covered under Big Rivers' plan or program). Transferred
Employees shall also receive credit for their service with Big Rivers for
purposes of determining future accruals of sick leave, vacation and any other
service-based employee welfare benefit plans or programs of WKEC or such
Affiliate, as applicable.
10.3 Collective Bargaining Agreement. WKEC shall not adopt, assume
or undertake any responsibility for the currently existing collective bargaining
agreement of Big Rivers with the International Brotherhood of Electrical
Workers, Local 1701, which had an original term extending through October 14,
1997, and which was extended by Big Rivers and the Union through October 14,
1998.
10.4 Benefit Claims. Big Rivers shall retain responsibility for all
workers' compensation, health, life insurance, dependent care, and disability
benefit claims of Transferred Employees pending as of the Effective Date, or
made after the Effective Date, but relating to events occurring on or prior to
the Effective Date. Following the Effective Date, WKEC or its Affiliate (as
applicable) shall have responsibility for all workers' compensation, health,
life insurance, dependent care, and disability benefit claims of Transferred
Employees made after the Effective Date or its Affiliate (as applicable) which
relate to events occurring after the Effective Date.
10.5 Severance for Certain Employees of Big Rivers. As contemplated
by Section 1.9 of Big Rivers Severance Plan as in effect on August 31, 1996, and
as subsequently amended and restated on May 27, 1997 as modified by resolution
dated July 11, 1997 and as further amended on March 13, 1998 (the "Big Rivers
Severance Plan"), following the Effective Date, Big Rivers shall remain liable
for any benefits which become payable under such plan, but WKEC shall reimburse
Big Rivers for severance benefits paid by Big Rivers pursuant to Sections 3.4
and 3.5 of Big Rivers Severance Plan, but only to any Transferred Employee not
hired by WKEC or such Affiliate or, if hired by WKEC or such Affiliate,
subsequently terminated under conditions that require Big Rivers to provide
severance benefits pursuant to Big Rivers
26
Severance Plan. Within 60 days following the Effective Date, WKEC shall also
reimburse Big Rivers for (i) the severance benefits paid by Big Rivers pursuant
to Big Rivers Severance Plan to Transferred Employees whose employment with Big
Rivers was terminated as part of a workforce reduction between September 1, 1996
and the Effective Date, (ii) one-half of the cost of outplacement assistance
provided by Big Rivers to any employees whose employment was terminated by Big
Rivers as part of a workforce reduction between September 1, 1996 and the
Effective Date, (iii) one-half of the costs of the outplacement assistance
provided by Big Rivers to any employees who are terminated during the period
from September 1, 1996 through the one-year anniversary of the Effective Date,
and (iv) the full cost of the $150 retiree medical subsidy paid by Big Rivers
under the terms of the Big Rivers Severance Plan, under conditions that require
Big Rivers to provide severance benefits pursuant to the Big Rivers Severance
Plan. This Agreement is not intended to, and shall not be construed to, make any
employee of Big Rivers a third-party beneficiary of this Subsection or of any
other provision of this Agreement. Big Rivers shall not be responsible for
compliance with the Older Workers' Benefit Protection Act in conjunction with
the offer and payment of severance benefits to applicable Transferred Employees.
The release of claims provided for under the Big Rivers Severance Plan to
applicable Transferred Employees terminated on or after the Execution Date shall
specifically include WKEC and its Affiliates within the scope of the release of
claims, and WKEC shall indemnify and hold harmless Big Rivers and all other
fiduciaries of the Big Rivers Severance Plan on and against all liability
arising from the inclusion of WKEC or its Affiliates within the scope of the
release of claims, if any.
10.6 WARN Act. As of the Effective Date, Big Rivers shall terminate
the employment of Transferred Employees (certain of whom in turn may be hired by
WKEC or its Affiliates). WKEC agrees to indemnify and hold harmless Big Rivers
from and against all liability arising under WARN with respect to the
Transferred Employees, whose termination of employment occurs on the Effective
Date. This indemnification shall survive the Effective Date and shall remain
effective concurrent with the legal limitations period applicable to such WARN
liability. In the event it becomes necessary, Big Rivers agrees to reasonably
cooperate with WKEC and its relevant Affiliates (if any) in their efforts to
comply with WARN in connection with the transactions contemplated by the
Operative Documents including, without limitation, the actions to be taken on or
after the Effective Date.
10.7 Certain Benefit Obligations. As of the Effective Date, WKEC
shall assume the obligation of Big Rivers to provide to each Transferred
Employee employed by WKEC or its Affiliates immediately following the Effective
Date the amount of unused sick leave and vacation time credited to such employee
by Big Rivers as of the Effective Date. Such unused sick leave and vacation
shall be provided in accordance with WKEC or its Affiliate's sick leave and
vacation policies as in effect from time to time, except that WKEC shall allow
non-bargaining Transferred Employees who are age 50 or over on the Effective
Date the right to take a cash-out of such unused sick leave credited as of the
Effective Date, in accordance with Big Rivers' policy on cash-outs of unused
sick leave as set forth in Big Rivers Severance Plan. WKEC shall provide medical
benefits to the Transferred Employees upon their retirement in accordance with
the retiree medical plan or program of WKEC or its Affiliate, as the case may
be, as in effect at the time of such retirement and such retiree medical
benefits provided by WKEC or its Affiliate, as the case may be, shall have an
aggregate present value as of the Effective Date determined in accordance with
Financial Accounting Standard ("FAS") 106 that is no less than the present value
as of such date of Big Rivers' obligation to provide retiree
27
medical benefits to the Transferred Employees as determined in accordance with
FAS 106. The items described in 10.8.1, 10.8.2 and 10.8.3 below shall be paid by
Big Rivers to WKEC in cash on the Effective Date, and if not so paid shall, in
the case of any such payment owed to WKEC, be applied as an offset to the
Initial Fixed Payment or the Initial Rental Payment (as defined in the Lease),
as applicable.
10.7.1 Sick Leave. The following cost of the obligation to
provide sick leave to the Transferred Employees shall be paid by Big
Rivers. Such cost shall be the sum of (i) and (ii) below based on the
product resulting from multiplying the number of sick leave hours for each
Transferred Employee as of the Effective Date, times the employee's hourly
pay rate with Big Rivers on that date:(i) the entire resulting product
times [REDACTED] percent; plus (ii) the portion of the resulting product
attributable to accumulations of over [REDACTED] hours of sick leave for
non-bargaining Transferred Employees over the age of 50 on the Effective
Date, times [REDACTED] percent.
10.7.2 Vacation. The following cost of the obligation to
provide vacation to the Transferred Employees shall be paid by Big Rivers.
Such cost shall be determined by multiplying the number of vacation hours
for each Transferred Employee as of the Effective Date, times the
employee's hourly pay rate with Big Rivers on that date.
10.7.3 Retiree Medical Benefits. The following cost of the
obligation to provide retiree medical benefits to the Transferred
Employees shall be paid by Big Rivers. Such cost shall be the present
value as of the Effective Date, of Big Rivers' obligation to provide
retiree medical benefits to the Transferred Employees under Financial
Accounting Standard 106, minus $[REDACTED].
ARTICLE 11
TAXES
11.1 Sales and Use Taxes. Notwithstanding anything in the Operative
Documents to the contrary, (i) Big Rivers shall pay any and all sales and use
Taxes imposed on (A) its transfer of Inventory and Personal Property to Leaseco
pursuant to Sections 9.1 and 9.3 hereof, (B) its lease of the Facilities
pursuant to the Lease and Operating Agreement, and (C), if the Phase I
Agreements become effective, its sale of power to LEM pursuant to the Power
Purchase Agreement to the extent of the lesser of (1) the sales Tax imposed on
Big Rivers with respect to the consideration described in Section 3.3(a) thereof
and (2) the sales Tax that would have been imposed on Big Rivers if the Phase II
Agreements (rather than the Phase I Agreements) were effective as of the
Effective Date, and (ii) an LG&E Party shall pay any and all sales and use Taxes
imposed on (A) Leaseco's transfer of fuel and scrubber reagent inventory, spare
parts, materials, supplies and other tangible personal property (as required by
Sections 9.1 and 9.3 of this Agreement) to Big Rivers on the Termination Date
and (B), if the Phase I Agreements become effective, Big Rivers' sale of power
to LEM pursuant to the Power Purchase Agreement to the extent that the amount of
such sales Tax exceeds the amount of the Tax described in clause (i)(C) of this
sentence. The allocation of sales and use Tax pursuant to this Section 11.1 also
shall apply to any Tax enacted after the date hereof in replacement of any such
sales or use Tax.
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11.2 Property Taxes. Big Rivers shall pay when due all property
Taxes assessed, levied, or exacted on the Assets, but Leaseco shall,
following the Effective Date, reimburse Big Rivers for [REDACTED] percent of
such Taxes that are allocable to the period beginning on the Effective Date
and ending on the Termination Date, provided, however, that the [REDACTED]
percent sharing ratio shall be changed to [REDACTED]% for the year [REDACTED]
and to [REDACTED]% as of January 1, [REDACTED] and remain at [REDACTED]%
throughout the remainder of the Term. In the event that Big Rivers elects to
reduce the Contract Limits pursuant to Section 4.3(e) of the Power Purchase
Agreement, the property Tax sharing ratio shall be adjusted by multiplying
Big Rivers' then-applicable percentage share of property Taxes by the sum of
one (1) plus the CCAP in effect on the date of assessment of such Taxes. Any
adjustments to the property Tax sharing ratio made pursuant to the preceding
sentence shall be effective for taxable periods (or portions thereof)
beginning on the effective date for the Reduction in Contract Limits set
forth in Section 4.3(e) of the Power Purchase Agreement. For purposes of this
Section 11.2, property Taxes imposed on the Assets for a taxable period shall
be allocated to each day in such period on a pro rata basis. Leaseco shall
reimburse Big Rivers for Leaseco's portion of such Taxes within thirty (30)
days of receiving notice from Big Rivers showing the nature and amount of
such Taxes, proof of Big Rivers' payment of such Taxes, and the computation
of Leaseco's share of such Taxes. The allocation of property Tax pursuant to
this Section 11.2 also shall apply to any Tax enacted after the date hereof
in replacement of such Tax.
11.3 Unidentified Asset-Related Taxes. Following the Effective Date,
the LG&E Parties shall pay when due all Taxes that are imposed upon Big Rivers
in connection with the lease, operation, or maintenance of the Assets and not
described in Section 11.1 or 11.2 of this Agreement, provided, however, that
this Section 11.3 shall not apply to (i) any income or franchise Tax (except to
the extent that LEC assumes an income or franchise Tax pursuant to the Tax
Indemnification Agreement) or (ii) any utility gross receipts license Tax.
11.4 Change of Law. Except as provided in Sections 11.1 and 11.2
concerning replacement Taxes, Big Rivers shall pay any Tax imposed on Big Rivers
that is attributable to a change in law or regulation (or any interpretation
thereof) after the Effective Date to the extent that the amount of such Tax does
not exceed the amount of the Tax that would have been imposed on Big Rivers if
the Phase II Agreements (rather than the Phase I Agreements) had been in effect
as of the Effective Date, and the LG&E Parties shall pay any Tax imposed on Big
Rivers following the Effective Date that is attributable to a change in law or
regulation (or any interpretation thereof) after the Effective Date to the
extent that such Tax exceeds the amount of the Tax that would have been imposed
on Big Rivers if the Phase II Agreements (rather than the Phase I Agreements)
had been in effect as of the Effective Date. Nothing in this Section 11.4 shall
relieve Big Rivers of its obligations under Section 8 of the Power Purchase
Agreement or Big Rivers or any LG&E Party of their respective obligations under
Article 8 of the Lease or Article 7 of the Cost Sharing Agreement.
11.5 Other Taxes. Any Tax imposed on a Party during the term of this
Agreement and that is not specifically allocated between the Parties (either by
direct payment or reimbursement) pursuant to Sections 11.1, 11.2, 11.3, or 11.4
of this Agreement, Section 8 of the Power Purchase Agreement, or the Tax
Indemnification Agreement shall be borne by the Party that is primarily
obligated to pay such Tax.
29
11.6 IRS Ruling Request. The LG&E Parties shall have the right, but
not the obligation, to require Big Rivers to join LEC in jointly submitting to
the IRS a request for a private letter ruling to the effect that the
transactions contemplated by the Phase I Agreements, for Federal income tax
purposes, should be treated as a lease (or, if reasonably acceptable to Big
Rivers, as an arrangement the income taxation of which is substantially
identical to that of a lease) of the Assets by Big Rivers to the LG&E Parties
(such request, together with any exhibits, attachments, and supplements thereto,
the "Ruling Request"). The Parties shall request that the IRS issue the ruling
to both Big Rivers and the LG&E Parties but, if the IRS will not agree to such
joint ruling, then the Parties shall request that the IRS issue the ruling
solely to Big Rivers. The Ruling Request may solicit additional rulings that
relate to ancillary issues concerning the Federal income tax consequences of the
transactions arising from the Phase I Agreements subject to the express written
consent of Big Rivers, which consent shall not be unreasonably withheld. The
LG&E Parties shall draft the Ruling Request and submit such draft to Big Rivers
for its review and comment, and the Parties shall work expeditiously to file the
Ruling Request with the IRS as promptly as possible. The LG&E Parties and Big
Rivers shall cooperate in taking all reasonable actions necessary to secure the
requested rulings, including the execution of powers of attorney and
declarations of the accuracy of the statements made in the Ruling Request. The
LG&E Parties shall have the ultimate decision-making authority with respect to
the preparation, submission, filing, and negotiations for the requested rulings,
but the LG&E Parties shall consult in good faith with Big Rivers to reasonably
resolve any disagreement concerning any matter relating to the Ruling Request.
Each Party shall have the right to participate in all negotiations and
communications with the IRS concerning any matter relating to the Ruling
Request. The LG&E Parties shall pay the costs and expenses that the LG&E Parties
incur in connection with the Ruling Request and, if Big Rivers retains Arthur
Andersen LLP to represent Big Rivers in connection with the Ruling Request, then
the LG&E Parties shall pay the fees and expenses charged Big Rivers by Arthur
Andersen LLP for such representation to the extent that such fees and expenses
exceed those that Arthur Andersen LLP charges Big Rivers in connection with Big
Rivers obligations pursuant to Section 7.1.2 hereof. The Parties further agree
that a Ruling Request may be submitted to the IRS under the provisions of this
section a second time if the LG&E Parties determine, in their sole discretion,
and notify Big Rivers of such determination by April 15, 1998, that
modifications to the transaction could be deemed to raise the question of
whether a material change in facts has occurred such that an IRS response to a
prior Ruling Request could no longer be relied upon.
11.7 Kentucky Tax Rulings. At the request of Big Rivers or the LG&E
Parties, the Parties shall request, in writing, that the KRC determine, or issue
a certificate or other statement to each Party to the effect, that (i) no Party
is liable for any sales or use Tax pursuant to the transactions contemplated by
the Operative Documents, (ii) no Party is required to withhold any portion of
the payments made thereunder on account of any sales or use Tax, and/or (iii) an
exemption and/or a reduced rate of property Tax are allowable with respect to
all or any portion of the Assets for any taxable period; provided, however,
that, if the KRC determines that any party hereto has any obligation to pay or
withhold any sales or use Tax, or that an exemption or reduced rate of Tax is
not allowable for a taxable period with respect to all or any portion of the
Assets, then the parties also shall request that the KRC determine the amount of
such liability, obligation, exemption, or rate and advise each party of the
nature and
30
computation of the amount of Tax in controversy. Each party shall have the right
to participate in the preparation and filing of any and all written and oral
submissions to the KRC for purposes of obtaining the determination, certificate,
and/or statement described in this Section 11.7, and each party shall have the
right to join in all negotiations and communications with the KRC for such
purpose. Each party shall execute all necessary waivers of confidentiality of
Tax and other information that is or may be reasonably related to the subject
matter of the determinations, statements, and certificates described in this
Section 11.7.
11.8 Appeal of Tax Assessment. Except as otherwise provided in the
Tax Indemnification Agreement, each Party shall have the right to appeal and
contest the assessment of any Tax that is imposed upon such Party by operation
of law or that is allocated to such Party (either by direct payment or
reimbursement) pursuant to this Article 11 or pursuant to Section 8 of the Power
Purchase Agreement.
ARTICLE 12
ACCOUNTING
12.1 Maintenance of Books and Records. Leaseco shall keep up-to-date
books and records of financial transactions and other arrangements that carry
out the terms of the Operative Documents, which books and records shall be
sufficiently detailed to allow the Parties to fulfill their respective
obligations under applicable law. Leaseco shall retain these books and records
until the Termination Date (unless otherwise approved by the Operating Committee
or unless Leaseco delivers the records it desires to destroy to Big Rivers) and
shall make these books and records available for inspection and audit by Big
Rivers at any reasonable time pursuant to Section 12.3 of this Agreement.
12.2 Accounting Practices. Leaseco shall keep all accounts
consistent with the Accounting Practices.
12.3 Audit. At the request of Big Rivers, Leaseco shall cause the
books and records pertaining to operations under the Annual Capital Budget and
the Annual O&M Budget for any year to be audited by independent Certified Public
Accountants of national reputation acceptable to both Parties. Copies of such
audits shall be supplied to each Party. The cost of such audits shall be shared
equally by the Parties.
12.4 Statements and Reports. Leaseco shall furnish to the Parties
monthly statements of costs incurred and expenditures made pursuant to the
Annual Capital Budget and the Annual O&M Budget and copies of all material
reports, notice or filings made to any governmental or other regulatory
authority. Leaseco shall also furnish to the Parties such other reports as may
from time to time reasonably be requested.
12.5 Access to Records. Each of Leaseco and Big Rivers reserves the
right to inspect, copy or perform audits of financial records and operations of
the Assets. Leaseco shall allow reasonable access to records, reports and
supporting documentation regarding the operation of the Assets. From time to
time, requirements of Federal or state tax and regulatory
31
agencies of a Party may necessitate access to records held by the other Party
and such access shall not be denied unreasonably.
12.6 Confidentiality of Books and Records. Each Party shall treat as
confidential books, records and other information developed or acquired by that
Party in connection with the Assets and no Party shall reveal or otherwise
disclose such confidential information to third parties without the prior
written consent of the other Party. These restrictions shall not apply to the
disclosure of confidential information (i) to any Affiliate of the disclosing
Party; (ii) to each Party and its employees, attorneys, agents and auditors;
(iii) to any public or private financing agency or institution which has either
lent money, committed to lend money to any Party hereto or is considering such
action; (iv) to any third party to which a Party contemplates a permitted
transfer under Section 16 provided, however, that in any such case only such
confidential information as such third party shall have a legitimate business
need to know shall be disclosed; provided, in the case of any disclosure
pursuant to (i), (ii), (iii) and (iv), that the Party receiving the disclosure
first agrees to keep the information confidential; (v) that otherwise comes into
the public domain unless as a result of a breach by such Party of its
obligations under this Section 12.6; or (vi) that is required, in the opinion of
either Party's counsel, to be disclosed to the RUS or any other federal, state
or local government or appropriate regulatory agencies and departments of such
agencies or that is required, in the opinion of either Party's counsel, to be
publicly announced, to the extent required by law. Each Party shall be
responsible to the other Party to this Agreement for any disclosures of
confidential information by its employees, attorneys, agents and auditors in
violation of this Section 12.6.
ARTICLE 13
INSURANCE COVERAGE
13.1 Leaseco to Obtain and Maintain Assets Insurance. Leaseco, at
its own expense, shall have in place on the Effective Date, and thereafter
maintain in effect at all times during the Term, in accordance with standards
prevailing in the electric power industry (including the independent power
industry) for assets of similar size and nature, insurance coverage for the
Assets with responsible insurers, for the benefit of the parties as their
interests may appear, to protect and insure against third party liability for
bodily injury and property damage, all risks of physical damage to property or
equipment, including transportation and installation perils, catastrophic losses
due to either third party liability or damage to first party property and such
other insurance as Leaseco deems necessary, with reasonable limits and subject
to appropriate exclusions, and deductibles/retentions. In addition to, and not
in any way limiting the foregoing, Leaseco shall have in place on the Effective
Date and maintain in effect at all times during the Term, insurance coverage of
the type and in the minimum amounts set forth on Schedule 13.1 or as required in
any Debt Restructuring Documents, whichever is greater.
13.2 Notice of Claims. Leaseco shall notify the other parties of
the assertion of any claim in excess of $[REDACTED] relating to the Assets
immediately upon assertion of the same, or of the occurrence of an event
likely to result in the assertion of such a claim. Leaseco shall report
annually to the Operating Committee all claims asserted in the amount of
$[REDACTED] or
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more, and shall provide such Operating Committee with all notices provided to
insurers with respect to any claim.
13.3 General Provisions Affecting Assets Insurance. The following
provisions shall apply to the Assets Insurance obtained by Leaseco in compliance
with this Article 13.3:
13.3.1 Named Insureds. Leaseco shall be named as the first
named insured and each of Big Rivers and WKEC shall also be named as named
insureds on all policies of Assets Insurance (except for the crime policy
and the workers' compensation and employers' liability policy) and such
policies that do not carry a "separation of insureds" provision shall
carry cross-liability endorsements.
13.3.2 Primary Insurance. Assets Insurance policies shall be
primary insurance for all purposes and shall be so endorsed. Any other
insurance carried by the parties individually shall not participate with
insurance for the Assets as to any loss or claim for which valid and
collectible Assets Insurance shall apply. Such other insurance shall apply
solely as to the individual interest of the parties; provided, however,
the parties shall accept any reasonably restrictive endorsement to their
separate insurance policies as may be required by an insurer as a
condition precedent to the issuance of a policy of Assets Insurance.
13.3.3 Certificates of Insurance. Leaseco shall furnish the
parties with Certificates of Insurance evidencing the existence of the
Assets Insurance required by this Article 13. Upon request of Big Rivers,
Leaseco shall make available for inspection and copying a certified copy
of each of the policy forms of Assets Insurance, together with a line
sheet therefor (and any subsequent amendments) naming the insurers and
underwriters and the extent of their participation.
13.3.4 Notice of Cancellation or Material Change. Each of the
Assets Insurance policies shall be endorsed so as to provide that the
parties shall be given the same advance notice of cancellation or material
change as that required to be given to Leaseco.
13.3.5 Insurers. Leaseco shall obtain Assets Insurance from
such responsible insurers or underwriters, including stock companies,
mutuals and pools or groups of insurers or underwriters, as it in its sole
discretion may select, provided that the insurance carriers have a
policyholder's rating of "A-" or better and a financial size of "Class
VII" or better, as published in the latest edition of Best's Insurance
Reports.
13.3.6 Refunds. Any refunds of premiums or dividends received
by Leaseco on any Assets Insurance shall be retained by Leaseco.
13.3.7 Combined Coverage. Nothing in any Operative Document
shall prohibit Leaseco from combining the coverage required by this
Agreement with coverage outside the scope of that required by this
Agreement as long as such combining of coverage in no way adversely
affects the coverage required hereunder.
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13.4 Relations with Insurers. Leaseco shall assist any insurer in
the investigation, adjustment and settlement of any loss or claim covered by
Assets Insurance. Leaseco shall present and prosecute claims against insurers
and indemnitors providing Assets Insurance or indemnities in respect of any loss
of or damage to the Assets or liability of either Party to third parties covered
by any indemnity agreement, and to the extent that any such loss, damage or
liability is not covered by Assets Insurance or by any indemnity agreement,
present and prosecute claims therefor against any parties who may be liable
therefor.
13.5 Station Two Insurance Proceeds. Notwithstanding anything
contained in this Agreement or any other Operative Document to the contrary, but
subject to the provisions of the Station Two Agreement, in the event any Station
Two Improvement is damaged or destroyed following the Effective Date and any
insurance proceeds are paid or payable to Big Rivers and/or any LG&E Party as a
result thereof, and in the event such Station Two Improvement is not repaired or
replaced in compliance with the Station Two Agreement and the Station Two
Contracts, and Big Rivers and/or Station Two Subsidiary are entitled to retain
those proceeds for their account in accordance with those agreements (or such
Station Two Improvement is so repaired or replaced using only a portion of the
insurance proceeds, and the remaining portion of those proceeds may be so
retained by Big Rivers and/or Station Two Subsidiary), then all such insurance
proceeds that are not so used for the repair or replacement of such Station Two
Improvement shall be divided between Big Rivers and Station Two Subsidiary (with
appropriate payments between those Parties) within 30 days after the later of
(a) the decision is made not to repair or replace the Station Two Improvement or
(b) insurance proceeds have been received (in the case of (a) and (b), together
with any interest that may have accrued on those proceeds since their receipt),
based on the respective Station Two Improvement Sharing Ratios of Big Rivers and
Station Two Subsidiary that applied to the Station Two Improvement at the time
of its original construction, purchase or installation.
ARTICLE 14
ENVIRONMENTAL LIABILITIES AND INDEMNITIES
14.1 Big Rivers' Environmental Liabilities and Indemnities. Except
as set forth in Section 14.2 and Sections 14.7, Big Rivers shall bear, at its
sole cost, and, following the Effective Date shall indemnify and hold harmless
Leaseco, the other LG&E Parties and their respective Affiliates from and against
(i) all costs of responding to a release or threat of release of a Hazardous
Substance or other waste (including, without limitation, garbage and refuse)
whether (y) on, under or from the Facilities or the Real Property on which the
Facilities are located or (z) on, under or from any off-site disposal locations
utilized by Big Rivers, but in the case of subclause (y) alone, only to the
extent disclosed on Schedule 5.1.19, stipulated by the Parties in writing or
identified in the Baseline Environmental Audit Report (or to the extent not
first identified in the End Of Term Baseline Audit (as defined in Section 14.5))
and, in the case of subclause (y) and (z), only to the extent that the response
is required by Environmental Law, and (ii) any claims, demands, losses, damages,
liabilities, costs, expenses, obligations and deficiencies (including, without
limitation, costs of corrective or remedial actions, fines, civil or criminal
penalties, settlements and attorney's fees) asserted or imposed against, or
incurred by,
34
Leaseco, its directors, members of governing bodies, agents, officers,
Affiliates, partners and employees, directly or indirectly, in connection with
the presence of Hazardous Substances or other waste (including, without
limitation, garbage and refuse) whether (X) on, under or from the Facilities or
the Real Property on which the Facilities are located or (Y) on, under or from
any off-site disposal location utilized by Big Rivers, but in the case of
subparagraph (X) alone, only to the extent disclosed on Schedule 5.1.19,
stipulated by the Parties in writing or identified in the Baseline Environmental
Audit Report (or to the extent not identified in the End Of Term Baseline
Audit). Except as provided above, the indemnities contained in this Article 14
shall not apply to incidental, consequential and other special damages that may
be incurred by Leaseco or its Affiliates, including lost profits. Without
limiting the generality of the foregoing, Big Rivers hereby waives all claims
and causes of action against Leaseco whether arising under statute, common law,
or otherwise at law or in equity with respect to items (i) and (ii) of this
Section, except to the extent covered by Leaseco's indemnity set forth in
Section 14.2 below. In the event that a condition covered by this Article 14 is
identified in the Baseline Environmental Audit Report or elsewhere as described
above, but is contributed to or exacerbated by the action or inaction of Leaseco
during Phase II or WKEC during Phase I, Leaseco and Big Rivers shall share
equitably in any losses, liabilities, costs or expenses associated with that
condition. Notwithstanding anything contained in this Section 14.1 to the
contrary, the obligation of Big Rivers to indemnify and hold harmless Leaseco
and its Affiliates shall not apply to costs and expenses which constitute
Incremental Environmental O&M or costs and expenses for Capital Assets that are
necessary to comply with any requirement of any Environmental Law or any
environmental regulatory authority.
14.2 Leaseco's and WKEC's Environmental Liabilities and Indemnities.
Except as set forth in Section 14.1, Leaseco and WKEC shall, following the
Effective Date, bear, at their sole cost, and indemnify and hold harmless Big
Rivers from and against (i) all costs of responding to a release or threat of
release of a Hazardous Substance or other waste (including, without limitation,
garbage and refuse) whether (y) on, under or from the Facilities or the Real
Property on which the Facilities are located, or (z) on, under or from any
off-site locations utilized by Leaseco or WKEC, but in the case of subclause (y)
alone, only to the extent not disclosed on Schedule 5.1.19, not stipulated by
the Parties in writing or not identified in the Baseline Environmental Audit
Report (including any Hazardous Substance or other waste to the extent first
identified in the End Of Term Baseline Audit) and in the case of subclause (y)
and (z) to the extent that the response is required by Environmental Law, and
(ii) any claims, demands, losses, damages, liabilities, costs, expenses,
obligations and deficiencies (including, without limitation, costs of corrective
or remedial actions, fines, civil or criminal penalties, settlements and
attorney's fees) asserted or imposed against, or incurred by, Big Rivers, its
directors, members, agents, officers, partners and employees, directly or
indirectly, in connection with the presence of Hazardous Substances or other
waste (including, without limitation, garbage and refuse) whether (x) on, under
or from the Facilities or the Real Property on which the Facilities are located,
(y) on, under, or from any off-site disposal location used by Leaseco or WKEC,
but in the case of subparagraph (x) alone, to the extent not disclosed on
Schedule 5.1.19 or not stipulated by the Parties in writing or identified in the
Baseline Environmental Audit Report (including any Hazardous Substance to the
extent first identified in the End Of Term Baseline Audit). Nothing contained in
this Section 14.2 shall limit Big Rivers' rights (if any) to indemnity
35
from Leaseco or any of its Affiliates under any Operative Documents by reason of
any of their failure to exercise Prudent Utility Practices. Without limiting the
generality of the foregoing, Leaseco and WKEC hereby waive all claims and causes
of action against Big Rivers whether arising under statute, common law, or
otherwise at law or in equity with respect to items (i) and (ii) of this Section
except to the extent covered by Big Rivers' indemnity set forth in Section 14.1.
In the event that a condition covered by this Section 14.2 is identified in the
End Of Term Baseline Audit or elsewhere as described above, but is contributed
to or exacerbated by the action or inaction of Big Rivers after the Effective
Date, Big Rivers, Leaseco, and WKEC shall share equitably in any losses,
liabilities, costs or expenses associated with that condition. Except as
provided elsewhere in this Agreement, the indemnities contained in this Article
14 shall not apply to incidental, consequential and other special damages that
may be incurred by Big Rivers, including lost profits. Notwithstanding anything
contained in this Section 14.2 to the contrary, the obligation of Leaseco and
its Affiliates to indemnify and hold harmless Big Rivers shall not apply to
costs and expenses which constitute Incremental Environmental O&M or costs and
expenses for Capital Assets that are necessary to comply with any requirement of
any Environmental Law or any environmental regulatory authority.
14.3 Minimizing Costs, Expenses and Liabilities. Leaseco and WKEC
shall during Phases I and II and Big Rivers shall after the Termination Date,
use reasonable efforts to minimize costs, expenses and liabilities of the type
described in Sections 14.1, 14.2 and 14.7, below.
14.4 No Effect on Insurance. The provisions of this Article 14 shall
not be construed to relieve any insurer of its obligation to pay any insurance
proceeds in accordance with the terms and conditions of valid and collectible
Assets Insurance policies.
14.5 End Of Term Baseline Environmental Audit. As soon as
possible following the Termination Date, the parties shall promptly conduct
an environmental survey of the Assets utilizing the same guidelines
established in the Baseline Environmental Audit performed in advance of the
Closing and on the three additional quarterly dates post-closing on which
certain supplemental groundwater testing was performed, to the study reported
in the Baseline Environmental Audit Report, pursuant to the same terms as the
Baseline Study Agreement between Big Rivers and Leaseco or such other terms
as the parties may mutually agree upon. The results of that end of term study
shall be referred to as the "End Of Term Baseline Audit." Leaseco's share of
the expense of the End Of Term Baseline Audit shall not exceed $[REDACTED],
adjusted to reflect the change in the preliminary index value of the Implicit
Price Deflators for Gross Domestic Product as published in Economic
Indicators prepared for the Joint Economic Committee by the Council of
Economic Advisers (or any successor index mutually agreed upon by the
parties) for the calendar quarter most recently then ended (at the time the
contract for such study is executed) from its preliminary value for the third
quarter of 1996.
14.6 Areas Expressly Excluded from Scope of Baseline Environmental
Audit Report. Notwithstanding anything to the contrary, Big Rivers and Leaseco
agree that the provisions of Section 14.1 and Section 14.2 shall not apply to
any release or threat of release of Hazardous Substances in or beneath the Green
River or the Ohio River (as measured by the
36
ordinary high water mark), whether occurring before or after the Effective Date.
With regard to any such releases or threats of releases of Hazardous Substances
in or beneath the Green River or the Ohio River, Big Rivers and Leaseco hereby
reserve all rights, whether at law or in equity, each may have against the other
or against any third party.
14.7 Opacity Indemnity. Notwithstanding anything contained elsewhere
in this Article 14 to the contrary, and in lieu of any indemnification and hold
harmless covenants set forth in Section 14.1 and 14.2, above:
(a) Big Rivers agrees that it shall bear at its sole cost and,
following the Effective Date, shall indemnify and hold harmless Leaseco, the
other LG&E Parties and their respective Affiliates from and against, any claims,
demands, losses, damages, liabilities, costs, expenses, obligations and
deficiencies (including without limitation, costs of corrective or remedial
actions, fines, civil or criminal penalties, settlements and attorneys fees)
(collectively "Opacity Damages"), asserted or imposed against, or incurred by,
Leaseco, the other LG&E Parties, their Affiliates, or their respective
directors, agents, officers and employees, directly or indirectly, in connection
with: (i) any failure of any one or more of the Generating Plants to comply with
applicable opacity limitations prior to the Effective Date; (ii) any failure of
the Green and Wilson facilities of Big Rivers to comply with applicable opacity
limitations at any time from the Effective Date through and including the date
on which Big Rivers has received its final Title V Air Quality Permits for the
Green and Wilson facilities from the KNREPC (exclusive of violations resulting
from the operation of the Green and Wilson facilities by the relevant LG&E
Parties during that period in a manner that is materially different than the
operation of those facilities by Big Rivers immediately prior to the Effective
Date); and (iii) following the receipt by Big Rivers of its Title V Air Quality
Permits for the Green and Wilson facilities, (A) any failure by those permits to
comply with applicable Environmental Laws at the time of their issuance, (B) any
failure by Big Rivers to have obtained those permits in compliance with
applicable Environmental Laws at the time of their issuance (including without
limitation, any defect in those permits attributable to the compliance
certifications included by Big Rivers in its applications for those permits),
(C) any challenge to the Title V Air Quality Permits for the Green and Wilson
facilities by any Person or governmental or regulatory authority based on the
compliance certifications described in (B) above, (D) any operation by any of
the LG&E Parties of the Green or Wilson facilities in reliance upon (and in
compliance with) those permits where it is determined that any of the
circumstances described in (A) or (B), above, existed or (E) any failure of the
Title V Air Quality Permits for the Green and Wilson facilities to shield or
protect the LG&E Parties, their Affiliates or such other Persons, from and
against all such Opacity Damages that may arise following the issuance of those
permits by reason of or resulting from the operation of the Green or Wilson
facility by the relevant LG&E Parties in compliance with those permits and in a
manner that is materially consistent with the operation of those facilities by
Big Rivers prior to the Effective Date, and such failure to shield or protect is
based upon the circumstances described in (A) or (B) above; including in the
case of (i), (ii) and (iii), above, without limitation, any Opacity Damages
incurred by any of the LG&E Parties or other Persons identified above following
the Effective Date, or following the issuance of the Title V Air Quality Permits
for the Green and Wilson facilities, arising out of acts or omissions on the
part of Big Rivers, its employees, agents or representatives, occurring prior to
the Effective Date or the issuance of those permits (as applicable).
37
(b) Leaseco and WKEC shall, following the Effective Date, bear, at
their sole cost, and indemnify and hold harmless Big Rivers from and against any
Opacity Damages asserted or imposed against, or incurred by, Big Rivers or its
directors, members of governing bodies, agents, officers and employees, directly
or indirectly, in connection with any failure of the Generating Plants to comply
with applicable opacity limitations subsequent to the Effective Date, other than
the Opacity Damages resulting from or under the circumstances described in
Section 14.7(a)(ii) or Section 14.7(a)(iii), above.
(c) Without limiting the generality of the foregoing, Big Rivers
hereby waives all claims and causes of action against the LG&E Parties, whether
arising under statute, common law or otherwise at law or in equity, with respect
to the Opacity Damages for which Big Rivers is responsible as described in (a),
above, and the LG&E Parties hereby waive all claims and causes of action against
Big Rivers, whether arising under statute, common law or otherwise at law or in
equity, with respect to the Opacity Damages for which Leaseco and WKEC are
responsible as described in (b), above. The indemnities contained in this
Section 14.7 shall not apply to (y) incidental, consequential and other special
damages that may be incurred by the LG&E Parties, Big Rivers or the other
Persons identified in (a) or (b) above, including lost profits, or (z) costs and
expenses which constitute Incremental Environmental O&M or costs and expenses
for Capital Assets that are necessary to comply with any requirement of any
Environmental Law or any environmental regulatory authority (including without
limitation, any change in position of the KNREPC regarding compliance with
applicable opacity limitations based on concurrent measurement of particulate
matter emissions affecting the Green and Wilson facilities).
ARTICLE 15
DISPUTE RESOLUTION AND ARBITRATION
15.1 Dispute Resolution. If during the term of this Agreement, any
issue, dispute or controversy ("Dispute") should arise hereunder or under any of
the Operative Documents, then representatives of the affected parties shall
promptly confer and exert their best efforts in good faith to reach a reasonable
and equitable resolution of such Dispute. If such representatives are unable to
resolve such Dispute within five (5) business days, the Dispute shall be
referred within two (2) business days of the lapse of the aforementioned five
(5) business day period to the responsible senior management of the affected
parties for resolution. No party shall seek any other means of resolving any
Dispute arising in connection with any Operative Document until all parties'
responsible senior managements have had at least five (5) business days to
resolve the Dispute following referral of the Dispute to such responsible senior
management. Each party shall have the right to join in any such proceeding any
other party or entity having an interest therein. If the parties are unable to
resolve the Dispute in accordance with the foregoing procedure, either party may
then, at any time, initiate mediation of the Dispute, as described in Section
15.2 below.
15.2 Mediation.
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15.2.1 If either Party initiates mediation, such mediation
shall proceed in accordance with the Commercial Mediation Rules of the
American Arbitration Association then in effect on the date of this
Agreement by a mediator who (x) has the qualifications and experience set
forth in Section 15.2.2 below, and (y) is selected as provided in 15.2.3.
15.2.2 Unless the parties agree otherwise, the mediator shall
be a lawyer with excellent academic and professional credentials who (w)
is familiar with contracts governing the operation of electric generating
plants and is otherwise qualified in the subject area of the issue in
dispute, (x) is or has been a partner in or counsel to a highly respected
law firm for at least 10 years as a practicing attorney specializing in
either general commercial litigation or general corporate and commercial
matters, (y) has had both training and experience as a mediator in the
federal or state courts or with a reputable commercial ADR firm or
non-profit ADR organization, and (z) is impartial.
15.2.3 Either Party may initiate mediation of the Dispute by
giving the other party a written notice setting forth the list of the
names and resumes of three persons who that party ("Initiating Party")
believes would be qualified as a mediator. Within 15 days after delivery
of this notice, the Recipient Party shall give a counter-notice to the
Initiating Party in which the Recipient Party may designate a person to
serve as the mediator from among the three persons listed by the
Initiating Party, or if no such selection is made, the Recipient Party may
set forth a list of names and resumes of three persons who the Recipient
Party believes to be qualified as a mediator. Within 10 days after
delivery of the counter-notice the Initiating Party may designate a person
to serve as mediator from among the three persons listed by the Recipient
Party. If the parties cannot agree on a mediator from the three nominees
submitted by each party, the mediator shall be selected by the American
Arbitration Association.
15.2.4 Within thirty (30) days after the mediator has been
selected, both parties and their respective attorneys shall meet with the
mediator for one mediation session of at least four hours. Each party's
representative attending the mediation session shall have authority to
settle the Dispute. If the Dispute cannot be settled at such mediation
session or at any mutually agreed upon continuation thereof, either party
may give the other and the mediator written notice declaring the mediation
process to be at an end, in which case the Dispute shall be resolved by
arbitration as provided in Section 15.3 below.
15.2.5 All conferences and discussions which occur in
connection with the mediation conducted pursuant to this Agreement shall
be deemed settlement discussions and nothing said or disclosed nor any
document produced which is not otherwise independently discoverable shall
be offered or received as evidence or used for impeachment or for any
other purpose in any current or future arbitration or litigation.
15.2.6 The cost of the mediation shall be shared equally by
the Parties.
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15.3 Arbitration.
15.3.1 If the Parties are unable to resolve the Dispute in
accordance with the mediation procedure set forth in Section 15.2 within
60 days of the initiation of such procedure, or if either Party refuses to
participate in the mediation procedure, either Party may then, at any
time, deliver notice to the other party of its intent to submit the
Dispute to arbitration, which notice shall include the specific issues
concerning the Dispute which must be resolved (the "Arbitration Notice").
At any time following the 10th day after delivery of an Arbitration
Notice, either party (for purposes of this Section 15.3, the "First
Party") may give notice to the other party (for purposes of this Section
15.3, the "Second Party") that it has designated an arbitrator. Within 15
days of the delivery of the aforesaid notice of designation the Second
Party shall be required to designate a second arbitrator and to notify the
First Party of such designation. Within 15 days of the designation of the
second arbitrator, the two designated arbitrators shall meet and shall
jointly designate a third arbitrator, who shall be neutral and impartial.
Arbitrators shall be qualified by education and experience in the subject
matter of the Dispute and issues to be arbitrated. The arbitrator
designated by the party-appointed arbitrators shall be the Chairman of the
arbitration panel. A determination by a majority of the panel shall be
binding upon and enforceable against each party.
15.3.2 If for any reason (i) the Second Party shall fail
timely to designate an arbitrator after notice of designation is delivered
by the First Party or (ii) the two party-appointed arbitrators fail timely
to designate a third arbitrator, or the third arbitrator shall fail for
any reason to serve, said arbitrator(s) shall be designated by the
American Arbitration Association upon the demand of either Party.
15.3.3 All proceedings before the arbitrators shall be held at
such place as the affected Parties may agree. Failing such agreement, such
proceedings shall be held in Louisville, Kentucky in a location other than
an office of a Party or counsel to a Party.
15.3.4 The parties agree that any Dispute being resolved by
arbitration hereunder shall be determined pursuant to the provisions set
forth herein and pursuant to the applicable Commercial Arbitration Rules
of the American Arbitration Association then in effect insofar as such
rules are not inconsistent with the provisions set forth herein.
15.3.5 The authority of the arbitrators shall be limited to
the specific Dispute and related issue(s) in controversy as designated by
the parties.
15.3.6 Notwithstanding any provision to the contrary contained
in this Section 15.3, the Parties agree that if an Arbitration Notice
identifies as the sole issue a determination as to a particular dollar
amount owing under this Agreement and does not involve a request for any
form of equitable relief, then (a) at the commencement of the arbitration
hearing, each Party shall submit a proposed arbitration award and the
arbitrators shall be required to adopt in full the proposed arbitration
award of one of the
40
Parties and (b) the Party whose proposed arbitration award is not selected
shall pay all the costs of the arbitration, including the reasonable
attorney's fees of the prevailing Party.
15.3.7 If the Arbitration Notice identifies one or more issues
that do not fit the criteria described in Section 15.3.6, then the
arbitration panel shall award such relief as they determine appropriate
and otherwise in accordance with the terms of this Agreement. If Section
15.3.6 is not applicable, then (i) if a single Party prevails in the
arbitration, then the Party that does not prevail in the arbitration shall
pay all the costs of the arbitration, including the costs and reasonable
attorneys' fees of the prevailing Party and (ii) in the event that no
single Party prevails in all respects, the arbitration panel shall
determine the appropriate allocation of costs (other than attorneys' fees,
in which case each Party will pay their own counsel) in accordance to the
extent reasonably possible with the intentions of the Parties, as
expressed in 15.3.7(i), that the non-prevailing Party with respect to each
issue should bear a proportionate share of the costs imposed on the
Parties by arbitration of that issue.
15.3.8 Any decision or award of the arbitrators shall be final
and binding upon the Parties. Judgment upon the award rendered may be
entered in any court having jurisdiction, or application may be made to
such court for a judicial acceptance of the award or any order of
enforcement, as the case may be.
15.4 Exclusiveness of Procedures. Subject to the retained
jurisdiction of the Bankruptcy Court to resolve disputes between the Parties,
the procedures specified in this Section 15, shall be the sole and exclusive
procedures for the resolution of disputes between the Parties arising out of or
relating to this Agreement and each of the other Operative Documents; provided,
that a Party may seek a preliminary injunction or other preliminary judicial
relief if in its judgment such action is necessary to avoid irreparable damage.
Despite such action the Parties will continue to participate in good faith in
the procedures specified in this Section 15. All applicable statutes of
limitation shall be tolled while the procedures specified in this Section 15 are
pending. The Parties will take such action, if any, required to effectuate such
tolling.
ARTICLE 16
TRANSFERS AND ASSIGNMENTS
16.1 Permitted Assignments. No party shall assign any of its rights
or obligations under any Operative Document without the prior written consent of
the other Parties, however that no prior consent shall be required with respect
to an assignment:
(1) to any Person into which or with which the Party making the
assignment is merged or consolidated or to which the Party transfers
substantially all of its assets.
(2) with respect to each LG&E Party, to any Affiliate.
(3) with respect to each LG&E Party, to any third party which is
authorized by all appropriate regulatory authorities to fulfill such LG&E
Party's obligations under
41
the Operative Documents to which such LG&E Party is a Party and which
provides assurances of payment and performance of equal or greater value
to that provided in such Operative Documents, as reasonably determined by
Big Rivers; provided, however, and notwithstanding Section 16.2, that
following such assignment, the Guaranty provided by LEC shall remain in
full force and effect, unless and until a replacement guaranty, acceptable
to Big Rivers and the RUS, is provided to Big Rivers.
(4) in the case of either Big Rivers or any LG&E Party, to any (a)
creditor holding a Permitted Lien as security for the underlying
obligation, (b) other mortgagee or other secured party as security for
indebtedness incurred for borrowed money by such party to fund its
acquisition of a Capital Asset pursuant to Article 7 of the Cost Sharing
Agreement or Article 8 of the Lease, as applicable, or (c) other entity as
security for indebtedness for borrowed money loaned to Big Rivers or any
LG&E Party, provided that each such secured party of Big Rivers or any
LG&E Party referenced herein executes a Non-Disturbance Agreement in
substantially the form attached hereto as Exhibit H (or, in the case of an
assignment by an LG&E Party, in a form reasonably acceptable to Big
Rivers), and such secured party may transfer or assign the interest given
as security pursuant to, or in lieu of, a foreclosure of the Lien (or the
exercise of power of sale) held by such secured party, provided that the
transferee or assignee assumes all of the duties and obligations of the
pledging Party under the Operative Documents, including without limitation
the obligation to enter into a Non-Disturbance Agreement, and all other
agreements that relate to the interest being transferred or assigned.
The rights of Big Rivers and the LG&E Parties (exclusive of WKEC) to
assign any of their rights or obligations under the Station Two Agreement are
further subject to the limitations on assignment set forth therein. Subject to
the foregoing restrictions in this Section, the Operative Documents shall be
binding upon, inure to benefit of and be enforceable by the Parties that are
signatories thereto and their respective successors and assigns.
16.2 Assignment and Assumption of Related Agreements. No transfer or
assignment of any interest in the Assets or in the Operative Documents, or any
part thereof pursuant to subsections 16.1(1), 16.1(2) or 16.1(3) may be made
unless, simultaneously, the transferring party's rights under all Operative
Documents and all other agreements that relate to such interest are similarly
transferred or assigned to the same Person or Persons, and such Person or
Persons assumes in writing all the duties and obligations of the Party making
such transfer or assignment under such agreements that relate to the interest
being transferred or assigned. Unless the provisions of subsections 16.1(1),
16.1(2) or 16.1(3) and the immediately preceding sentence are satisfied, no such
assignment or transfer shall release the transferring or assigning Party from
any of its obligations pursuant to any Operative Document or such other
agreements.
16.3 Noncomplying Assignment. Any attempted or purported assignment
or transfer made other than in accordance with this Article 16 either
voluntarily or by operation of law (including, without limitation, by merger or
consolidation) shall be void and of no effect.
16.4 Regulatory Approvals. Assignments or transfers under any
Operative Document may be subject to the jurisdiction of state or federal
regulatory agencies. Such
42
transfers shall not be effective until all required approvals and all other
required action by such agencies having jurisdiction shall have been obtained.
16.5 Liens. No Party shall directly or indirectly create, incur,
assume or suffer to exist any Lien on or with respect to the Assets, except
Permitted Liens. Leaseco agrees to pay before delinquency all costs for work,
services or materials furnished for use in connection with the Assets, the
non-payment of which could result in any Lien against the Assets. Leaseco will
keep title to the Assets free and clear of any and all Liens other than
Permitted Liens. Leaseco will immediately notify Big Rivers of the filing of any
such Lien or any pending claims or proceedings related to any such Lien as and
when it comes to the attention of Leaseco, and will indemnify and hold Big
Rivers harmless from and against all loss, damages and expenses (including
reasonable attorneys' fees) suffered or incurred by Big Rivers as a result of
such Lien (regardless of whether or not Leaseco knew of the existence of such
Lien). In case any such Lien attaches, Leaseco agrees to cause it to be
immediately released and removed of record (failing which Big Rivers may do so
at Leaseco's sole expense). Notwithstanding anything herein to the contrary,
Leaseco shall have the right to contest in good faith any such Lien even if such
contest prolongs or permits the existence of such Lien, and (i) Big Rivers shall
not be responsible or liable for the removal or release of any Lien on or with
respect to the Assets which is created or imposed by the actions of any of the
LG&E Parties, or in connection with any services performed for or materials
furnished to any of the LG&E Parties, or for the costs or expenses of such
removal or release, or for any losses, damages or expenses incurred by any of
the LG&E Parties in connection therewith and (ii) the LG&E Parties shall not be
responsible or liable for the removal or release of any Lien on or with respect
to the Assets which is created or imposed by the actions of Big Rivers, or in
connection with any services performed for or materials furnished to Big Rivers,
or for the costs or expenses of such removal or release, or for any losses,
damages, or expenses incurred by Big Rivers in connection therewith.
ARTICLE 17
TERMINATION
17.1 Right of Parties to Terminate.
17.1.1 Termination Prior to the Effective Date. This Agreement
may be terminated prior to the Effective Date:
(a) Subject to Section 20.5, by Leaseco, on behalf of all LG&E
Parties, if any of the authorizations, consents, approvals, filings or
registrations required as a condition to both Phase I and Phase II in Schedule
3.1 and Schedule 3.2 hereof shall have been denied, not permitted to go into
effect or obtained on terms not reasonably satisfactory to the LG&E Parties and
all reasonable final appeals shall have been exhausted;
(b) Subject to Section 20.5, by Big Rivers, if any of the
authorizations, consents, approvals, filings or registrations required as a
condition to both Phase I and Phase II in Schedule 3.1 and Schedule 3.2 hereof
shall have been denied, not permitted to go into effect or obtained on
43
terms not reasonably satisfactory to Big Rivers and all reasonable final appeals
shall have been exhausted;
(c) By Leaseco, on behalf of all LG&E Parties, if Big Rivers shall
have breached or defaulted under any of its obligations hereunder in any
material respect and such breach or default, if curable, is not cured by the
defaulting Party within the period prescribed in Section 17.2;
(d) By Big Rivers, if any of the LG&E Parties shall have breached or
defaulted under any of its obligations hereunder in any material respect, and
such breach or default, if curable, is not cured by the defaulting Party within
the period prescribed in Section 17.2;
(e) By either Big Rivers or Leaseco, on behalf of all LG&E Parties,
by written notice to the other Party, if the Closing shall not have occurred on
or prior to December 31, 1998;
(f) [RESERVED]
(g) By Big Rivers, if, after notice to Leaseco, as agent for the
LG&E Parties, and a hearing, the Bankruptcy Court determines, after taking into
consideration the Parties obligations under Section 20.5, that it is reasonably
certain that any of the conditions precedent to Big Rivers' obligations to close
the Phase I transaction or, if it is to precede the Phase I transaction, the
Phase II transaction, will not occur or be satisfied prior to December 31, 1998;
or
(h) By Leaseco, as agent for the LG&E Parties, if, after notice to
Big Rivers, and a hearing, the Bankruptcy Court determines, after taking into
consideration the Parties obligations under Section 20.5, that it is reasonably
certain that any of the conditions precedent to Big Rivers' obligations to close
the Phase I transaction or, if it is to precede the Phase I transaction, the
Phase II transaction, will not occur or be satisfied prior to December 31, 1998.
17.1.2 Termination After the Effective Date. After the
Effective Date, the occurrence of any of the following events shall
constitute a default under this Agreement:
(1) Failure by a Party to pay when due any and all amounts payable
to other Party in accordance with the terms of this Agreement;
(2) Any attempt by a Party to transfer an interest in this Agreement
in breach of Article 16;
(3) Failure of a Party to perform any material obligation set forth
herein;
(4) Except with respect to the Chapter 11 Case, any filing by a
Party of a petition in bankruptcy or insolvency, or for reorganization or
arrangement under any bankruptcy or insolvency laws, or voluntarily taking
advantage of any such laws by answer or otherwise or the commencement of
involuntary proceedings under any such laws if such proceedings are not
withdrawn or dismissed within 60 days after such institution;
44
(5) Assignment by a Party for the benefit of creditors;
(6) Allowance by a Party of the appointment of a receiver or trustee
of all or a material part of its property if such receiver or trustee is not
discharged within 60 days after appointment;
(7) Any breach of a representation or warranty made by a Party in
this Agreement, provided that such breach would have a material adverse effect
on the Non-Defaulting Party or its rights under this Agreement or any other
Operative Document taken as a whole; provided, however, the Parties acknowledge
and agree that any breach occurring on or after the Effective Date of any
representation or warranty made by a Party as of the Effective Date in this
Agreement shall give rise to the right of the other Party to damages or
availability of other remedies provided for hereunder arising from such breach
only if the claim for damages or other relief is made within one (1) year
following the Effective Date;
(8) Failure, inability or refusal of a Party to cure a default or
breach under (a) during Phase I, the Power Purchase Agreement, the Cost Sharing
Agreement, the Transmission Service and Interconnection Agreement or the
Facilities Operating Agreement which gives rise to a termination of such other
Phase I Agreement and (b) during Phase II, the Lease, the Transmission Service
and Interconnection Agreement or the Power Purchase Agreement which gives rise
to a termination of such Phase II Agreement, or any termination by that Party of
any of the foregoing agreements in breach or in default thereof; or
(9) Failure by Big Rivers to pay to LEM, when due, an amount owed
pursuant to the Settlement Promissory Note.
(10) The Party in default under any provision of this Section 17.1.2
shall be referred to as the "Defaulting Party" and the other Party shall be
referred to as the "Non-Defaulting Party."
17.2 Pre-Effective Date Remedies. If either the LG&E Parties or Big
Rivers decides to terminate this Agreement pursuant to Section 17.1.1, such
Party shall promptly give written notice to the other Party to this Agreement of
such decision. In the event such notice relates to termination due to a breach
of a covenant of the other Party contained in this Agreement or any other
Operative Document, such notice shall state a date by which such breach must be
cured, which shall be at least 30 days after receipt of the notice. If within
the 30-day period, the breaching Party cures the breach or if the breach is one
that cannot in good faith be corrected within such period and the breaching
Party begins to correct the breach within the 30-day period and (a) continues
corrective efforts with diligence until a cure is effected and (b) produces
reasonably satisfactory evidence that such breach can be cured by December 31,
1998, the notice of termination shall be inoperative and the breaching Party
shall lose no rights under this Agreement, provided, that the breaching Party
shall remain liable to the other Parties for any damages incurred by them
resulting from that breach or default. In the event of a termination pursuant to
Section 17.1.1, the Parties shall be released from all liabilities and
obligations arising under this Agreement, other than for damages arising from a
breach of this Agreement, provided, however, that the Parties acknowledge and
agree that notwithstanding any provision to the
45
contrary in this Agreement any breach or default occurring prior to the
Effective Date of any representation or warranty made by a Party as of the date
hereof in this Agreement or any other Operative Document (other than, in the
case of Big Rivers, those representations made in Sections 5.1.1, 5.1.2, 5.1.3
and 5.1.4 of this Agreement and, in the case of the LG&E Parties, in Sections
6.1.1, 6.1.2, 6.1.3 and 6.1.4 of this Agreement) shall not give rise to the
right of the other Party to damages, and the non-breaching Party's sole remedy
in the event of such a breach or default shall be the right to refuse to
consummate the transactions contemplated by this Agreement.
17.3 Post-Effective Date Defaults; Remedies.
17.3.1 Notice of Default. The Non-Defaulting Party shall have
the right to give the Defaulting Party a written notice of default ("Notice of
Default"), which shall describe the default in reasonable detail and state the
date by which the default must be cured, which shall be at least 30 days after
receipt of the notice, except as to a breach or default under Subsection (1) of
Section 17.1.2 which shall be three days after receipt of notice, and under
Subsections (2), (4), (5), (6), (7), (8) or (9) of Section 17.1.2, as to which
there will be no cure right.
17.3.2 Opportunity to Cure. If within the three day period
with respect to a breach or default under Subsection (1) of Section 17.1.2 the
Defaulting Party cures the breach or default, or if within the 30 day period
with respect to breaches or defaults under Subsection (3) of Section 17.1.2
(which are not also defaults under Subsections (2), (4), (5), (6), (7), (8) or
(9) of Section 17.1.2) the Defaulting Party cures the breach or default or if
the failure is one that cannot in good faith be corrected within such period and
the Defaulting Party certifies to the Non-Defaulting Party that it agrees to
cure such breach or default and begins to correct the breach or default within
the 30 day period and continues corrective efforts with diligence until a cure
is effected, the notice of default shall be inoperative and the rights of the
Non-Defaulting Party under Section 17.3.4 shall not be triggered. Subject to the
Defaulting Party's right to contest under Section 17.3.3, if the Defaulting
Party does not cure or begin (and diligently continue) to cure the breach or
default as provided above, the Non-Defaulting Party shall have the rights
specified in Section 17.3.4. A Non-Defaulting Party's right to damages or other
relief resulting from a breach by a Defaulting Party hereunder shall begin to
accrue as of the first day of the breach without regard to the availability of
any cure rights hereunder, and without regard to whether the breach or default
is cured.
17.3.3 Contest. If the Defaulting Party disputes the existence
or nature of a default asserted in a Notice of Default, then the Defaulting
Party shall pay the disputed payment or perform the disputed obligation, but may
do so under protest. The protest shall be in writing, shall accompany the
disputed payment or precede the performance of the disputed obligation, and
shall specify the reasons upon which the protest is based. The Defaulting Party
shall deliver copies of the protest to the Non-Defaulting Party. If it is later
determined pursuant to the dispute resolution, mediation or arbitration under
Section 15 that a protesting party is entitled to a refund of all or any portion
of a disputed payment or payments or is entitled to the reasonable equivalent in
money of nonmonetary performance of a disputed obligation theretofore made,
then, upon such determination, the nonprotesting Party shall pay such amount to
the
46
protesting Party, together with interest thereon at a rate equal to the Prime
Rate from the date of payment or from the date of completion of performance of a
disputed obligation to the date of reimbursement.
17.3.4 Remedies. If the Defaulting Party's breach or default
is one for which there is no cure right, or if the Defaulting Party fails or
refuses to cure the breach or default under Section 17.3 for which a cure right
is available within the time described hereunder, the Non-Defaulting Party shall
have, in addition to any other rights and remedies that a Party may have at law,
in equity (including, without limitation, to pursue recovery of damages from the
Defaulting Party, subject to any limitations on remedies set forth in this
Agreement) or otherwise, the following remedies:
17.3.4.1 If Big Rivers, on the one hand, or any of the LG&E
Parties, on the other hand, ("X") shall fail to make any payment or shall
fail to perform any obligation under this Agreement or the Settlement
Promissory Note, then the other Party ("Y") or any of its Affiliates will
have the right (but not the obligation) without prior notice to X to
perform such obligation and set-off the costs of such performance or the
amount of any such past due payment owing to Y against any obligation of Y
or any of its Affiliates owing to X or any of its Affiliates hereunder or,
in the event the breach or default shall occur during Phase II, under any
other Operative Document (whether or not matured).
17.3.4.2 The Non-Defaulting Party may terminate this Agreement
upon 30 days' notice to the Defaulting Party of its intent to do so.
17.3.4.3 Notwithstanding anything contained herein or in any
Operative Document to the contrary, Big Rivers may also terminate this
Agreement at any time that the Guaranty provides Big Rivers with the right
to terminate this Agreement.
17.3.4.4 The termination rights provided for in this Section
17.3 are in addition to, and not in lieu of, any rights to terminate this
Agreement as are set forth in the Station Two Agreement or the Guaranty,
which termination rights shall be cumulative.
17.4 Automatic Termination. This Agreement shall terminate
automatically on December 31, 1998 and the Parties hereto shall subsequently
have no duties or obligations under this Agreement or the other Operative
Documents (except for any breach or default hereunder by the Parties occurring
prior to the termination, and except for indemnity claims that have accrued
hereunder prior to the termination) unless, prior to December 31, 1998, all
conditions to the effectiveness of a confirmed plan of reorganization filed by
Big Rivers, which plan incorporates the LG&E Transaction (as defined in the
Plan) and which plan is consented to by (i) that number of the Members whose
action is required under Section 279.140 of the Kentucky Revised Statutes in
order to constitute an action by the membership of Big Rivers, (ii) each of the
Banks, (iii) the RUS, (iv) each of the Smelters and (v) Big Rivers, shall have
been satisfied or duly waived in accordance with the provisions of such plan.
47
17.5 Condemnation Termination. Upon the occurrence of a total
condemnation with respect to all or substantially all of the Tangible Assets,
which condemnation causes, during Phase I, the termination of the Cost Sharing
Agreement or, during Phase II, the termination of the Lease, all provisions of
this Agreement except Section 9.6 hereof shall automatically terminate at such
time, and the Settlement Promissory Note shall become immediately payable in
full. Section 9.6 shall be treated from that time forward as a part of the
Transmission Services and Interconnection Agreement and shall be governed by the
provisions thereof.
17.6 Monthly Margin Payments. No provision of this Agreement or any
other Operative Document purporting to limit special, incidental and
consequential damages that may be recoverable by Big Rivers shall bar or
constitute any waiver of any claim by Big Rivers for any Monthly Margin Payments
as its damages arising by reason of a default by Leaseco under the Lease or by
LEM under the Power Purchase Agreement (including without limitation under
Section 2.2(a)(ix) of the Power Purchase Agreement and Section 11.1(8) of the
Lease); provided, that nothing contained herein shall be deemed to be an
admission by Leaseco that the loss of such payments by Big Rivers is or shall be
an actual or direct damage incurred by Big Rivers arising out of such a default
by Leaseco or LEM.
ARTICLE 18
WAIVER; LG&E INDEMNITIES
18.1 Waiver. Except to the extent caused by the willful or grossly
negligent act or omission by Big Rivers, its Affiliates, successors and assigns,
or their respective officers, employees, consultants or agents (the "Protected
Parties") or by the breach of this Agreement or any other Operative Document by
Big Rivers (which act or omission is itself not the direct result of an act or
omission of any LG&E Party or any of its Affiliates, successors or assigns or
their respective officers, employees, consultants or agents), and except for
losses, injuries and damages specifically assumed by Big Rivers or covered by
any indemnification or hold harmless covenant of Big Rivers in this Agreement or
any of the other Operative Documents, Big Rivers and the Protected Parties will
not be liable or in any way responsible for, and following the Effective Date,
Leaseco and WKEC waive all claims against Big Rivers and the Protected Parties
for, any liability, loss, damage, claim or cost (including attorneys' fees)
suffered by Leaseco or WKEC or any of their Affiliates, successors, or assigns,
or their respective officers, employees, consultants or agents in connection
with the use and/or operation of the Assets by Leaseco or WKEC or any of their
Affiliates, successors, or assigns, or their respective officers, employees,
consultants or agents.
18.2 General Indemnity. Except to the extent limited pursuant to
Section 10.2.1 of the Lease or Section 9.2 of the Cost Sharing Agreement, as
applicable, in the event that insurance proceeds are insufficient to restore the
Facilities, and notwithstanding the limitations set forth with respect to WKEC
in Sections 13.2 and 13.3 of the Facilities Operating Agreement, following the
Effective Date, Leaseco shall indemnify and reimburse Big Rivers and the
Protected Parties for any and all claims, losses, liabilities, damages, costs
(including court costs) and expenses (including reasonable attorneys' and
accountants' fees) (collectively, "Damages") suffered or incurred by Big Rivers
or the Protected Parties as a result of, or with respect to,
48
Leaseco's and/or WKEC's or any of their Affiliates, successors or assigns or
their respective officers, employees, consultants or agents, operation and/or
use of the Assets, except to the extent that any of the foregoing Damages arise
as a result of (a) the gross negligence or willful misconduct of, or breach of
any Operative Document by, Big Rivers or the Protected Parties seeking
indemnification (which act or omission is itself not the direct result of an act
or omission of any LG&E Party or any of their Affiliates, successors or assigns
or their respective officers, employees, consultants or agents) or (b) any
action, event or circumstance for which Big Rivers has an indemnification and
hold harmless obligation pursuant to Article 14 (environmental indemnity) or
pursuant to any other Operative Document, or for which Big Rivers has expressly
assumed responsibility in any Operative Document. Nothing in this Section 18.2
shall be construed to impose an additional or different indemnification
obligation upon any of the Parties resulting from, or respecting, any
environmental matters than such Party's obligations under Article 14 hereof.
18.3 Fuel Indemnity. During Phase I, Leaseco shall indemnify, defend
and hold harmless Big Rivers, and its directors, officers, employees,
consultants and agents for any liability, loss, damage, claim, and cost
(including attorneys' fees) arising in connection with each and every fuel
supply contract held by Big Rivers as of the Effective Date for use in the
Generating Plants, and all other fuel supply contracts entered into by Big
Rivers after the Effective Date with Leaseco's prior written consent, in each
case including liabilities, losses, damages, claims, and costs (including
attorneys' fees) arising from any act or omission of Big Rivers, provided that,
if such liability, loss, damage, claim or cost (including attorneys' fees)
arises from an action of Big Rivers that constitutes breach, default, gross
negligence or willful misconduct by Big Rivers under any such fuel supply
contract (which breach, default, gross negligence or willful misconduct by Big
Rivers under any such fuel supply contract is not related to or caused by any
act or omission of any LG&E Party or any of their Affiliates, successors or
assigns or their respective officers, employees, consultants or agents), then
Leaseco shall have no obligation under this provision unless an LG&E Party
requested or concurred in such action by Big Rivers (in which case Leaseco's
obligations under this paragraph shall not be excused).
ARTICLE 19
SEVERAL OBLIGATIONS
Nothing contained in this Agreement or the remaining Operative
Documents shall ever be construed to create an association, joint venture, trust
or partnership, or to impose a trust or partnership covenant, obligation or
liability on or with regard to the Parties. Except as otherwise provided herein
or in the other Operative Documents with respect to the LG&E Parties, each Party
shall be individually responsible for its own covenants, obligations and
liabilities as herein or therein provided.
49
ARTICLE 20
MUTUAL COVENANTS
Big Rivers and the LG&E Parties covenant and agree that they will
act in accordance with the following, and shall bear their own costs and
expenses in doing so:
20.1 Governmental Consents. Promptly following the execution of this
Agreement, the Parties will proceed to prepare and file with the appropriate
governmental authorities any requests for approval or waiver that are required
(or that the Parties otherwise agree to seek) from governmental authorities in
connection with the transactions contemplated hereby or in the other Operative
Documents (including the Phase II Agreements), and the Parties shall diligently
and expeditiously prosecute and cooperate fully in the prosecution of such
requests for approval or waiver and all proceedings necessary to secure such
approvals and waivers.
20.2 Third Party Consents. Promptly following the execution of this
Agreement, the Parties will use reasonable best efforts to procure all consents
that are required from third parties, including the Members, in connection with
the transactions contemplated hereby or in the other Operative Documents, and
the Parties shall diligently and expeditiously seek such consents and cooperate
fully in the procurement of such consents.
20.3 Reasonable Efforts. Each party will use its reasonable best
efforts to effect the transactions contemplated by this Agreement and the
remaining Operative Documents and to fulfill the conditions to the obligations
of the parties set forth in Schedules 3.1, 3.2 and 3.3 to this Agreement.
20.4 Wholesale Power Contracts. From and after the Execution Date,
Big Rivers shall use its commercially reasonable efforts to maintain the Member
Contracts (as amended in accordance with this Agreement), the Hoosier Contracts,
the Oglethorpe Contract and the HMP&L Contract in full force and effect, to
exercise Big Rivers' rights and entitlements thereunder to the fullest extent
permissible under those agreements and applicable laws, and to fully and timely
perform and discharge its duties and obligations thereunder, in each case
throughout the remaining terms of those agreements. In addition, Big Rivers
shall not attempt to assign or convey to any other Person (other than an LG&E
Party or its Affiliate) any rights or interests that it may have under or
pursuant to the Member Contracts, the Hoosier Contracts, the Oglethorpe Contract
or the HMP&L Contract throughout the remaining terms of those agreements.
20.5 Further Assurances. Prior to December 31, 1998, the LG&E
Parties and Big Rivers will execute such further documents and instruments and
take such further actions as may be reasonably requested by Big Rivers or the
LG&E Parties, respectively, in order to cause the Closing to occur in accordance
with the terms hereof. The LG&E Parties and Big Rivers expressly acknowledge and
agree that, although it is their intention to effect a transaction among
themselves in the form contemplated by this Agreement and by the Operative
Documents in the form attached hereto on the date hereof, it may be preferable
to effectuate such a transaction by
50
means of an alternative structure in light of the conditions set forth in
Schedule 3.1, 3.2 and 3.3. Accordingly, if (x) a condition to the Effective Date
which is not yet satisfied or waived is the receipt of any one or more of the
governmental approvals referred to in those provisions of Schedule 3.1, 3.2 or
3.3 entitled "Commission Approval," "Hart Scott Rodino," "Consents,"
"Governmental Approvals," "FERC Approval" and "Securities and Exchange
Approvals", (y) Big Rivers or the LG&E Parties believe that such condition(s)
will not be satisfied through the continued use of the transaction structure
contemplated by the Operative Documents in the form attached hereto, and (z) Big
Rivers or the LG&E Parties believe that the adoption of an alternative structure
(that otherwise substantially preserves for each of the LG&E Parties, on the one
hand, and Big Rivers, on the other hand, the relative risks and economic
benefits contemplated by the Operative Documents in the form attached hereto on
the date hereof) would result in such conditions being satisfied or waived, then
the LG&E Parties and Big Rivers shall use their respective reasonable best
efforts to effect a transaction among themselves by means of a mutually agreed
upon structure other than the structure contained in the Operative Documents in
the form attached hereto on the date hereof or with mutually agreed upon
revisions to the currently contemplated structure, that in either case so
preserves such benefits; provided that, prior to the Closing of any such
restructured or revised transaction, (A) all Affected Parties (as defined below)
shall have consented to such restructured or revised transaction and all
governmental authority declarations, filings, registrations, notices,
authorizations, consents or approvals necessary for the effectuation of such
alternative structure or revisions to the currently contemplated structure shall
have been obtained and (B) all other conditions to the Effective Date, as
applied to such alternative structure or revisions, shall have been satisfied or
waived. For purposes of this Section 20.5, the term "Affected Party" shall mean
(i) that number of the Members whose action is required under Section 279.140 of
the Kentucky Revised Statutes in order to constitute an action by the membership
of Big Rivers, (ii) each of the Smelters, (iii) each of the Banks and (iv) the
RUS, but, in each case, only if the restructured or revised transaction
contemplated by this Section 20.5 materially adversely affects (X) such party's
rights under, or relating to, the Plan or (Y) such party's rights, if any,
under, or relating to, the Operative Documents in the form attached hereto. In
the event that Big Rivers and the LG&E Parties disagree as to whether or not a
party identified in clauses (i) through (iv) above is an "Affected Party," the
Parties agree to present such issue to the Bankruptcy Court for determination.
20.6 Operating Committee; Budget Preparation. The Parties agree,
notwithstanding the date upon which the Closing occurs, that they will continue
to work together to (i) develop an Annual O&M Budget and an Annual Capital
Budget with respect to the "Initial Budget Period" (as defined in the Facilities
Operating Agreement or the Lease (as applicable), and (ii) consider matters of
concern relating to the operation of the Assets and Station Two following the
Closing with respect to which the Operating Committee is given a role pursuant
to the terms of the Lease or the Facilities Operating Agreement. The applicable
provisions contained in the Phase I or Phase II Agreements, as applicable, shall
replace this provision on and after the Effective Date. Notwithstanding the
preceding sentence, the Parties hereby agree that the Annual Capital Budgets for
the Initial Budget Period to be agreed to by the Parties as contemplated in
Schedule 3.1 attached to this Agreement shall include as the aggregate budgeted
amount for the relevant Year (or portion thereof) the following amounts which
amounts shall not be increased or decreased without the written approval of the
Parties (but subject to Section 6.5
51
of the Facilities Operating Agreement and Section 7.5 of the Lease dealing
with budget deviations): (i) First Partial Year following the Effective Date
(assuming there are five full months then remaining in that Year) --
$[REDACTED]; (ii) First full Year following the Effective Date -- $[REDACTED]
; and (iii) Second full Year following the Effective Date -- $[REDACTED].
Notwithstanding the foregoing, in the event an item or expense included in
any Annual Capital Budget that is a part of the Initial Period Budgets is
determined to be an Enhancement or Major Capital Improvement, or is
determined not to be a Capital Asset or Station Two Improvement that Big
Rivers would otherwise have an obligation to fund a portion thereof, then Big
Rivers will not be responsible for a share of such expenditure,
notwithstanding the provisions of Articles 7 or 8 of the Lease, Article 7 of
the Cost Sharing Agreement or Article 6 of the Facilities Operating Agreement
to the contrary or the inclusion of such item in the Initial Period Budgets.
ARTICLE 21
GENERAL PROVISIONS
21.1 Notices. All notices, payments and other communications to each
Party under this Agreement or any other Operative Document must be in writing,
and shall be addressed respectively as follows:
Addressed to:
Big Rivers Electric Corporation
201 Third Street
Post Office Box 24
Henderson, Kentucky 42419
Phone No. (502) 827-2561
Telecopy No. (502) 827-2558
Attn: Michael Core
David Spainhoward
With a copy to:
James M. Miller, Esq.
Sullivan, Mountjoy, Stainback & Miller, P. S. C.
100 St. Ann Building
Post Office Box 727
Owensboro, Kentucky 42302-0727
Phone No. (502) 926-4000
Telecopy No. (502) 683-6694
Addressed to:
Western Kentucky Energy Corp.
c/o LG&E Energy Corp.
220 West Main Street
52
Louisville, KY 40202
Phone: (502) 627-3665
Facsimile: (502) 627-4622
Attn: President
Addressed to:
LG&E Energy Marketing Inc.
c/o LG&E Energy Corp.
220 West Main Street
Louisville, KY 40202
Phone: (502) 627-3665
Facsimile: (502) 627-4622
Attn: President
Addressed to:
Western Kentucky Leasing Corp.
c/o LG&E Energy Corp.
220 West Main Street
Louisville, KY 40202
Phone: (502) 627-3665
Facsimile: (502) 627-4622
Attn: President
Addressed to:
LG&E Station Two, Inc.
c/o LG&E Energy Corp.
220 West Main Street
Louisville, KY 40202
Phone: (502) 627-3665
Facsimile: (502) 627-4622
Attn: President
In the case of all LG&E Parties, with a copy to:
Richard S. Miller, Esq.
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
Phone: (212) 259-7070
Facsimile: (212) 259-6333
53
John R. McCall
Executive Vice President, General Counsel
and Secretary
LG&E Energy Corp.
220 West Main Street
Louisville, KY 40202
Phone: (502) 627-3665
Facsimile: (502) 627-2585
Daniel E. Fisher, Esq.
Greenebaum Doll & McDonald PLLC
3300 National City Tower
Louisville, Kentucky 40202-3197
Phone No. (502) 587-3620
Telecopy No. (503) 587-3695
Each Party may change such address by notice given to the other Parties in the
manner set forth above. All notices shall be effective (i) if sent by messenger
or courier service, when delivered, (ii) if sent by mail, three days after
posting, and (iii) if sent by telecopy, when sent (provided that, if sent by
telecopy, a duplicate copy thereof is promptly sent by mail); provided that if a
provision hereof specifies that a period shall be measured by a fixed number of
days after receipt of a notice, notice shall be effective when received,
irrespective of the means of delivery.
21.2 Waiver. The failure of a Party to insist on the strict
performance of any provision of this Agreement or to exercise any right, power
or remedy upon a breach of any provision of this Agreement shall not constitute
a waiver of any provision of this Agreement or limit the Party's right
thereafter to enforce any provision or exercise any right.
21.3 Amendment and Modification. No amendment or modification of
this Agreement shall be valid unless made in writing and duly executed by the
Parties; provided, however, subject to the LG&E Parties' rights pursuant to
Schedule 3.1(I)(8), Big Rivers shall be permitted, at any time prior to the
Effective Date, without the consent of the LG&E Parties, to update or amend any
disclosure schedule referred to in Article 5, which disclosure schedule is
attached hereto on the date hereof, solely to the extent necessary to make its
representations and warranties on the Effective Date true and correct in all
material respects. Notwithstanding the foregoing proviso, updates or amendments
made by Big Rivers to Schedule 5.1.19 shall not in any way diminish or otherwise
reduce Big Rivers' indemnification obligations pursuant to Section 14.1, as
established by reference to Schedule 5.1.19 as provided on the Execution Date.
Updates and amendments to such Schedule 5.1.19 made by Big Rivers pursuant to
the foregoing proviso following the Execution Date, shall, however, to the
extent identifying new or increased liabilities, serve to increase Big Rivers'
indemnification obligations under Section 14.1.
21.4 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the internal laws of the Commonwealth of
Kentucky.
54
21.5 Additional Actions. Each Party shall take, from time to time,
for no additional consideration, such actions and execute such additional
instruments as may be reasonably necessary or convenient to implement and carry
out the intent and purpose of this Agreement and the remaining Operative
Documents.
21.6 Survival of Terms and Conditions; Phase I Adjustments. The
provisions of this Agreement, other than those which specifically address the
period of time prior to the Closing, shall survive the Closing. The Parties
hereby agree that notwithstanding the termination of the Phase I Agreements, any
of the following adjustments to the extent made during Phase I and existing as
of the Phase II Termination shall survive and be carried forward to Phase II
(the "Phase I Adjustments"):
21.6.1 Any adjustments previously made to the payments made by
LEM to Big Rivers pursuant to Section 3.3 of the Power Purchase Agreement
resulting from a change in Contract Limits, application of a portion of
the PP Price reduction or reductions relating to condemnation or
destruction of the Assets.
21.6.2 A reconciliation of Actual Environmental O&M with the
Environmental Rent Reduction under the Lease.
21.6.3 A continuation, without adjustment, of balances and
other accounting with respect to the Capital Account and a continuation of
allocation of Capital Assets funded in accordance with the Cost Sharing
Agreement.
21.6.4 Any adjustments in the rental payments, Annual Fixed
Payments, Tax sharing ratios or Monthly Margin Payments as contemplated in
Section 11.2 of this Agreement and Sections 2.3 and 3.3(a) of the Lease
and the Power Purchase Agreement, respectively.
21.6.5 A continuation of the effectiveness of any Annual
Capital Budget or Annual O&M Budget in effect during any such transitional
year, without change.
21.6.6 A continuation of the relative percentages of Shared
Costs.
21.7 Termination Date True Up. On the Termination Date, the Parties
agree that all amounts due and owing (other than any amounts owed pursuant to
Section 21.8), or any outstanding credits, in each case, pursuant to the
Operative Documents by Big Rivers to any LG&E Party or LEC and/or any LG&E Party
or LEC to Big Rivers shall be so paid on the Termination Date after netting all
such amounts and credits owed by the respective Parties. The Parties agree that
all credits shall be converted to a cash amount for purposes of this provision.
21.8 Refund Obligation. Without in any way limiting a Non-Defaulting
Party's or Performing Party's rights and remedies hereunder or under applicable
law, in the event that this Agreement and the other Operative Documents
terminate prior to the second anniversary of the Effective Date, which
termination does not result from an exercise by Big Rivers of its rights
55
pursuant to this Agreement or such other Operative Document by reason of a
breach or default by any LG&E Party thereunder, Big Rivers agrees to refund to
Leaseco, as agent for the LG&E Parties, an amount equal to (i) the amount of
Initial Fixed Payment or the Initial Rental Payment, as the case may be, paid to
Big Rivers on the Effective Date multiplied by (ii) the ratio of (A) the number
of days between such Termination Date and the second anniversary of the
Effective Date over (B) 730. Such refund amount shall be payable by Big Rivers,
free of interest, in twenty-four equal monthly installments commencing on the
one-month anniversary of the Termination Date.
21.9 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the Parties and their respective successors and permitted
assigns.
21.10 Counterparts. This Agreement may be executed in counterparts,
both of which taken together shall constitute a single Agreement.
21.11 Entire Agreement. This Agreement, including all attached
Exhibits and Schedules, together with the Operative Documents (when executed)
and all other agreements referred to in this Agreement or in the other Operative
Documents, contains the entire and final understanding of the Parties and
supersedes all prior agreements and understandings between the Parties related
to the subject matter of those agreements.
21.12 Construction. This Agreement was the product of negotiations
between the Parties and, therefore, the rule of contract construction that an
agreement shall be construed against the drafter shall not be applied to this
Agreement.
21.13 Rights and Obligations Under the Original Participation
Agreement. (a) Upon the Participation Effective Date, and for so long thereafter
as this Agreement shall remain in effect, the provisions of the Original
Participation Agreement, and the rights and obligations of Big Rivers and each
of the LG&E Parties pursuant to the Original Participation Agreement, shall be
immediately suspended and held in abeyance, and neither Big Rivers nor any of
the LG&E Parties shall have any duty to perform its obligations nor any right to
receive its benefits or exercise its rights thereunder until the earlier of (i)
the termination of this Agreement or (ii) the occurrence of the Phase I
Effective Date or the Phase II Effective Date pursuant to Article 3 of this
Agreement. Upon the first to occur of the Phase I Effective Date or the Phase II
Effective Date pursuant to Article 3 of this Agreement, if such date occurs
prior to termination of this Agreement, the Original Participation Agreement
shall terminate. In the event that this Agreement terminates pursuant to Section
17.1.1 or 17.4 then the suspension of the Original Participation Agreement and
the Parties' rights and obligations thereunder caused by the first sentence of
this paragraph will be reversed, and the Original Participation Agreement, as
amended, including the rights and obligations of each of the LG&E Parties and
Big Rivers thereunder will be restored and thereafter will continue in full
force and effect in accordance with the terms of that Original Participation
Agreement.
(b) Any and all rights and obligations of the Parties pursuant to
the Original Participation Agreement, including pursuant to each amendment to
such agreement, which had accrued or been received prior to or as of the
Participation Effective Date of this Agreement,
56
shall be carried forward and continued under this Agreement such that the rights
and obligations of the Parties which were received or performed under the
Original Participation Agreement will be deemed to have been received or
performed under this Agreement as if this Agreement had been executed as of June
9, 1997. No Party shall be held to have breached this Agreement or be in default
of this Agreement for failure to perform prior to the execution date of this
Agreement an obligation under this Agreement which was not also an obligation
under the Original Participation Agreement, as amended. Nothing contained in
this Agreement shall be deemed to release any Party from any breach or default
by that Party under the Original Participation Agreement occurring prior to the
date of this Agreement.
(c) In the event that pursuant to Section 21.13(a) of this
Agreement, the Original Participation Agreement is suspended and then restored
to full force and effect, all rights and obligations of the Parties pursuant to
this Agreement, including pursuant to each amendment to the Agreement (if any),
which had accrued or been received prior to or as of the date on which the
Original Participation Agreement is restored to its full force and effect, shall
be carried forward and continued under the Original Participation Agreement such
that the rights and obligations of the Parties which were received or performed
under this Agreement will be deemed to have been received or performed under the
Original Participation Agreement as if the Parties' rights and obligations
thereunder had not been suspended. No Party shall be held to have breached the
Original Participation Agreement or be in default of the Original Participation
Agreement for failure to perform during the period of suspension an obligation
under that agreement which was not also an obligation under this Agreement.
Nothing in this Section 21.13 shall be deemed to release any Party from any
breach or default by that Party under this Agreement occurring prior to its
termination.
21.14 Survival of Certain Obligations
(a) Notwithstanding anything contained in this Agreement or in any other
Operative Document to the contrary: (i) Big Rivers shall not at any time be
entitled to terminate, cancel or otherwise nullify the Settlement Promissory
Note, the Settlement Mortgage, the Mortgage and Security Agreement, or the
Non-Disturbance Agreement or its payment or performance obligations under those
agreements or instruments, by reason of any breach or default by any of the LG&E
Parties under the other of those Operative Documents, or under any other
Operative Documents not identified above, or by reason of the expiration or
termination of any of such other Operative Documents for any reason, to the
extent that Big Rivers has any continuing obligations or liabilities under those
Operative Documents, including without limitation, where this Agreement, the
Guaranty or any such other Operative Document otherwise expressly provides Big
Rivers with the right to terminate all or any portion of the Operative Documents
under the circumstances described therein; and (ii) in the event any of the LG&E
Parties shall, under the terms of any Operative Document, be required to
terminate all of the Operative Documents as a condition to their exercising any
termination rights with respect to that or any other Operative Document, Big
Rivers agrees that the LG&E Parties shall not be required to terminate, cancel
or surrender the Settlement Promissory Note, the Settlement Mortgage, the
Mortgage and Security Agreement or the Non-Disturbance Agreement as a condition
to its right to so terminate all or any of the other Operative Documents.
57
(b) Notwithstanding anything contained in this Agreement or in any other
Operative Document to the contrary: (i) neither LEC nor any of the LG&E Parties
shall at any time be entitled to terminate, cancel or otherwise nullify the
Guaranty or the payment or performance obligations of LEC thereunder, by reason
of any breach or default by Big Rivers under any of the other Operative
Documents, or by reason of the expiration or termination of any of such other
Operative Documents for any reason, to the extent that any of the LG&E Parties
have any continuing obligations or liabilities under those Operative Documents,
including without limitation, where this Agreement or any such other Operative
Document otherwise expressly provides LEC or any of the LG&E Parties with the
right to terminate all or any portion of the Operative Documents under the
circumstances described therein; and (ii) in the event Big Rivers shall, under
the terms of any Operative Document, be required to terminate all of the
Operative Documents as a condition to its exercising any termination rights with
respect to that or any other Operative Document, the LG&E Parties agree that Big
Rivers shall not be required to terminate, cancel or surrender the Guaranty as a
condition to its right to so terminate all or any of the other Operative
Documents.
(c) The provisions of this Section 21.14 shall survive any expiration or
termination of this Agreement for any reason, and shall continue to be binding
on the Parties. The Parties agree and acknowledge that adequate separate
consideration is being provided which would support the Parties' continuing
obligations under Section 21.14 despite an earlier termination of the Operative
Documents.
21.15 SO(2) Issue
The Parties each agree that, from and after the Participation Effective Date
they shall reasonably cooperate with each other in good faith, and shall use
their commercially reasonable efforts, to obtain at the earliest possible time a
Title V Air Quality Permit for the Coleman facility that contains a maximum
permit limit of 5.2 lbs/mmbtu Sulfur Dioxide (SO(2)), and, upon the election of
the LG&E Parties, a separate affirmative ruling or decision from the KNREPC that
the current permit limit of 5.2 lbs/mmbtu SO(2) for the Coleman facility will be
maintained following the Effective Date and for the foreseeable future.
Consistent with the foregoing, Big Rivers and the LG&E Parties agree that none
of them shall conduct any oral or written communications with the KNREPC
regarding the maximum permit limit for SO(2) for the Coleman facility without
first offering in writing to the other Party(s) a reasonable opportunity to
participate in those written or oral communications.
ARTICLE 22
22.1 LEM Advances. During the first twelve months following the
Effective Date, LEM shall advance to Big Rivers the sum of $[REDACTED] in 11
monthly installments of $[REDACTED] each and a final installment in the sum
of $[REDACTED]. During the second twelve months following the Effective Date,
LEM shall advance to Big Rivers the sum of $[REDACTED] in 12 equal monthly
installments of $[REDACTED] each. The first of such installments shall be
delivered to Big Rivers on the first day of the first month following the
Effective Date
58
and the successive installments shall be delivered on the first day of the next
23 succeeding months. Big Rivers' obligation to repay such advances shall be
evidenced by the Promissory Note from Big Rivers payable to LEM in the form of
Exhibit O attached to this Agreement (the "Promissory Note (LEM Advances)"),
which shall be executed and delivered by Big Rivers at the Closing; provided,
that, LEM and the LG&E Parties acknowledge and agree that LEM's sole recourse
for the collection of amounts owing by Big Rivers thereon shall (during Phase I)
be a set-off by LEM against the Monthly Margin Payments that are or may be owing
by LEM to Big Rivers pursuant to Section 3.3 of the Power Purchase Agreement,
and shall (during Phase II) be a set-off-by Leaseco, on behalf of LEM, against
the Monthly Margin Payments that are or may be owing by LEM to Big Rivers
pursuant to Section 2.3.2 of the Lease, which set-off, Big Rivers acknowledges
and agrees, shall be an unqualified right of LEM or Leaseco (as applicable)
under the provisions of those Operative Documents.
22.2 Big Rivers' Reimbursement Obligations. LEM covenants and
agrees, and Big Rivers acknowledges and agrees, that on the Closing Date and
in the event the Marketing Payment contemplated in Section 4.3.9 exceeds
$[REDACTED], LEM will execute and deliver to the RUS a Demand Promissory note
in a principal amount equal to the amount by which such Marketing Payment so
exceeds $[REDACTED], which Demand Promissory Note will be payable on demand
("the Demand Note"). The Demand Note, if one is so delivered, will provide
that following a default by Big Rivers under either of the two Promissory
Notes to be issued by Big Rivers to the RUS pursuant to the New RUS Agreement
(as defined in the Non-Disturbance Agreement) (together, the "RUS Notes"),
RUS may demand payment by LEM in an amount equal to the amount then due and
owing by Big Rivers under the RUS Notes, provided such amounts, in the
aggregate, do not exceed the principal amount of such Demand Note. Big Rivers
acknowledges and agrees that in the event that LEM is required to make one or
more payments to the RUS pursuant to the Demand Note, Big Rivers will
reimburse LEM the amounts so paid by LEM (each a "Big Rivers' Reimbursement
Obligation") on the dates so paid by LEM to RUS (the "Demand Dates"). In the
event that Big Rivers' Reimbursement Obligation(s) is not paid on the
applicable Demand Dates, interest at the Default Rate will begin to accrue as
of such Demand Date on Big Rivers' Reimbursement Obligation(s).
Notwithstanding the foregoing, so long as any amount remains outstanding
under either of the RUS Notes or the "1983 Reimbursement Agreement" or the
"1985 Reimbursement Agreement" or the "AMBAC Notes" (each with AMBAC as
referred to in Recital A of the Non-Disturbance Agreement), or Big Rivers'
pollution control bonds as outstanding on the Effective Date, Big Rivers
shall have no obligation to pay any amount with respect to Big Rivers'
Reimbursement Obligation(s), provided however, that interest at the Default
Rate will continue to accrue during all such periods during which Big Rivers
has no payment obligation. Within 30 days, following such suspension period,
Big Rivers must satisfy its Big Rivers' Reimbursement Obligations (and
accrued and unpaid interest thereon).
22.3 Upon receipt by Big Rivers of notice of any event of default
with respect to the RUS Notes, Big Rivers must, as soon as practical, but in any
event within two days of receipt, provide written notice to LEM of the same and,
if notice from the RUS was provided in written form, Big Rivers must enclose in
its written notice to LEM a copy of the same.
59
ARTICLE 23
MISCELLANEOUS
23.1 Sale/Leaseback Transactions.
Notwithstanding anything to the contrary contained in this Agreement
or any of the other Operative Documents (including, without limitation the
restrictions on transfers and assignments set forth in Article 16 hereof and the
right of first refusal set forth in Article 24 hereof), Big Rivers shall have
the right to enter into a sale, lease, or other similar transaction with respect
to any of the Assets and any improvements, modifications or additions thereto
(including any such improvements, modifications, or additions paid for, in whole
or in part, by any of the LG&E Parties) if, substantially contemporaneous
therewith, Big Rivers enters into a leaseback of the Assets subject to such
transaction from the transferee, and maintains the absolute right and obligation
following the expiration or termination of that sale/leaseback transaction (and
agrees with the LG&E Parties that it will exercise that right if it accrues
during the Term), to repurchase all such Assets; provided, however, that no such
transaction(s) shall be consummated by Big Rivers without providing the LG&E
Parties at least 30 days prior written notice thereof (together with a
description in reasonable detail of the nature of the transaction), nor shall
they be consummated if such consummation would: (a) have a material adverse
effect on any of the LG&E Parties or their respective rights and interests under
this Agreement or any of the other Operative Documents; (b) impose duties or
obligations on any of the LG&E Parties which are materially more burdensome than
the duties and obligations set forth in the Operative Documents; (c) impair in
any material respect the rights and remedies of the LG&E Parties under or
pursuant to the Settlement Note, the Settlement Mortgage, the Mortgage and
Security Agreement or the Non-Disturbance Agreement, or their security interests
and mortgage interests created thereby; (d) or, in the opinion of counsel to the
LG&E Parties, place in jeopardy the Exempt Wholesale Generator status of WKEC or
the public utility status of Station Two Subsidiary, or the status of LEC as a
holding company exempt from registration under the Public Utility Holding
Company Act (or any successor Laws that may require such status). In addition to
the foregoing, no such transactions may be consummated by Big Rivers unless the
assignee or transferee of the Assets executes and delivers to the LG&E Parties a
Non-Disturbance and Attornment Agreement in a form reasonably satisfactory to
the LG&E Parties. Any such transaction, provided it meets the conditions and
limitations described above, shall not constitute a transfer or assignment of
this Agreement or any of the other Operative Documents, and Big Rivers shall
remain liable for all obligations of Big Rivers to the LG&E Parties under this
Agreement and the other Operative Documents. The LG&E Parties shall cooperate
with Big Rivers, at Big Rivers' expense, to accomplish any such transaction,
including, without limitation, by entering into such modifications and
amendments to this Agreement and the other Operative Documents as Big Rivers may
reasonably request in order to accomplish such transaction, consistent with the
conditions and limitations described above.
60
ARTICLE 24
GENERAL PROVISIONS
24.1 Residual Value Payment
(a) General. Following the Effective Date, and upon the occurrence
of:
(i) (A) the expiration or termination for any reason (other
than as expressly provided below) of this Agreement (during Phase I only), the
Power Purchase Agreement (during Phase I only), the Facility Operating Agreement
(other than a termination coincident with the Phase II Effective Date), the
Lease or the Station Two Agreement, or (B) the expiration or termination for any
reason (other than as expressly provided below) of the Transmission Services and
Interconnection Agreement (unless Big Rivers shall at that time have in place an
effective Open Access Transmission Tariff ("OATT"), then upon any later
expiration, termination or withdrawal of the OATT, whether or not voluntary);
provided, that the expirations and terminations identified in (A) and (B), above
shall specifically exclude (1) any wrongful termination by an LG&E Party of
those agreements or instruments, (2) any rejection by an LG&E Party of those
agreements or instruments in any bankruptcy proceeding involving that LG&E
Party, and (3) any termination by an LG&E Party of this Agreement, the Power
Purchase Agreement, the Facility Operating Agreement, the Lease or the
Transmission Services and Interconnection Agreement in accordance with its terms
which is not followed by a termination of the other of those Operative Documents
that remain in effect by one or more LG&E Parties in accordance with their
respective terms or by Big Rivers in breach or default thereof (each such
expiration, termination or withdrawal identified in (A) and (B), above,
individually and collectively, being hereinafter referred to as a "Transaction
Termination"); or
(ii) any "Transfers" from time-to-time by Big Rivers of the
"Subject Assets" (each as defined in Section 24.2 below) or of any of them,
whether alone or together with any other assets or properties of Big Rivers,
including without limitation, any Transfers to WKEC or Station Two Subsidiary
pursuant to Section 24.2, or any involuntary sales, assignments or transfers of
any of the Subject Assets such as a foreclosure sale, a deed or sale in lieu of
foreclosure or a condemnation action, whether or not such Transfers or
involuntary sales, assignments or transfers are permissible under the terms of
the Operative Documents, but specifically excluding (A) a Transfer of any
Station Two Contracts other than the "Station Two Operating Agreement", the
"Station Two Power Sales Agreement" and the "Joint Facilities Agreement" (each
as defined in the Station Two Agreement), and (B) any foreclosure under the
Restated Mortgage (as defined in the Non-Disturbance Agreement) in circumstances
in which this Agreement and the other Operative Documents remain in effect (each
such Transfer or involuntary sale, assignment or transfer being hereinafter
referred to as a "Triggering Transfer");
then an LG&E Parties' Residual Value Payment, calculated in the manner set forth
in Subsection (e), below (if any shall result from that calculation) shall be
due and owing by Big Rivers to Station Two Subsidiary; provided, that in the
case of an involuntary sale, assignment or transfer of the Subject Assets as
described in (ii), above, the Triggering Transfer that results from the
61
same shall be deemed to have occurred on the date immediately prior to the date
of the involuntary sale, assignment or transfer, so that the LG&E Parties'
Residual Value Payment associated with those Subject Assets shall accrue and
become owing by Big Rivers prior to that involuntary sale, assignment or
transfer. Big Rivers, Leaseco and, in the case of the tangible Station Two
Assets or the Station Two Agreement, Station Two Subsidiary, shall, as soon as
is reasonably practicable after the Transaction Termination or Triggering
Transfer, jointly commission the completion of a fair market valuation (on a
going-concern basis where possible) of all Capital Assets (including without
limitation, Enhancements and Major Capital Improvements, if any) and all Station
Two Improvements, that are at the time of such valuation included in,
incorporated in or constituting a part of (x) all of the Tangible Assets (in the
case of a Transaction Termination regarding this Agreement, the Power Purchase
Agreement, the Facilities Operating Agreement, the Lease, the Transmission
Services and Interconnection Agreement and/or the OATT), (y) the Station Two
Assets (as defined in the Station Two Agreement) (in the case of a Transaction
Termination regarding the Station Two Agreement or any Triggering Transfer of
the Station Two Power Sales Agreement, the Station Two Operating Agreement or
the Joint Facilities Agreement (collectively, the "Key Station Two Contracts")
(or any material portion thereof)), or (z) the relevant Subject Assets (in the
case of a Triggering Transfer of any Subject Assets other than the Key Station
Two Contracts) (collectively, the "Relevant Assets").
(b) Valuation. The fair market valuation of such Relevant Assets
shall be determined pursuant to the process described in this Subsection (b)
and, as applicable, Subsection (c) below. The valuation shall be conducted by a
reputable, independent and impartial appraisal or valuation firm having
substantial experience in the field of power facility appraisal or valuation
("Appraiser"), and the results of the valuation by the Appraiser shall be set
forth in a written valuation report (the "Valuation Report") made available to
all Parties. In the case of any Subject Assets (other than the Key Station Two
Contracts) that have been transferred by Big Rivers, Big Rivers shall ensure
that the transferee(s) affords the representatives of the Appraiser reasonable
access to those Subject Assets and all other assets to which they are affixed or
with which they are operated in order to complete the valuation of those Subject
Assets; provided, that in the event an LG&E Party or any of its Affiliates is
that transferee, then that LG&E Party (or Affiliate) shall itself afford such
access to the Subject Assets to the representatives of the Appraiser. The
Parties agree to use commercially reasonable efforts to expedite the completion
of the relevant valuation, and the Valuation Report of the Appraiser selected
shall be made available to all the Parties. The fair market valuation shall
consider the age, condition and remaining useful life of the Relevant Assets,
the usefulness and importance of the Relevant Assets in the operation or
maintenance of the other assets and facilities to which they relate or are
affixed, the "going concern" value (if any) of the Relevant Assets, and such
other factors or criteria as are customary in the industry for such valuations.
Notwithstanding the immediately preceding sentence, in the case of a Triggering
Transfer of any of the Relevant Assets, the purchase price paid or payable to
Big Rivers (or its successors or permitted assigns) for those Relevant Assets
shall be deemed for the purposes of this Section 24.1 to be determinative of
their fair market value, unless: (i) such Triggering Transfer shall have been
made by Big Rivers in breach or default under Section 24.2 of this Agreement; or
(ii) WKEC and/or Station Two Subsidiary (as applicable) shall have been
prevented by legal process
62
(including without limitation, any injunction, restraining order or stay imposed
in connection with a bankruptcy proceeding involving Big Rivers), by a wrongful
termination of this Agreement by Big Rivers, or by a rejection of this Agreement
in any bankruptcy proceeding involving Big Rivers, from exercising their
respective rights to purchase the Relevant Assets pursuant to Section 24.2 of
this Agreement; or (iii) such Triggering Transfer shall have taken the form of
an involuntary sale, assignment or transfer of the Relevant Assets of the type
contemplated in Subsection (a)(ii), above (including without limitation, a
foreclosure of the type described in Subclause (a)(ii)(B) above); in which event
the purchase price so paid or payable shall, at the election of Leaseco and/or
Station Two Subsidiary (as applicable), not be determinative of the fair market
value of the Relevant Assets but shall instead be only one of the factors
considered by the Appraiser in its valuation of those assets. In the event such
purchase price is deemed to be determinative of the fair market value of the
Relevant Assets, then there shall be no valuation of those assets by the
Appraiser as contemplated above. Notwithstanding the foregoing, in the event a
Triggering Transfer of any Relevant Assets is effected together with a sale,
transfer, conveyance or assignment of any other Subject Assets, directly or
indirectly, in one transaction or a series of related transactions, to the same
Person(s), and (A) in the event any of the LG&E Parties reasonably believe that
the portion of the aggregate purchase price payable for the Subject Assets in
the transaction(s) that is proposed by Big Rivers to be allocated to or paid for
the Relevant Assets does not reflect the actual fair value of those Relevant
Assets, or (B) in the event the parties to the transaction(s) fail to designate
the portion of that aggregate purchase price that is allocated to or paid for
the Relevant Assets, then, upon the written election of that LG&E Party
delivered not later than ten (10) days after its receipt of notice of the
relevant Triggering Transfer from Big Rivers (including reasonable details of
the allocation (if any) of the aggregate purchase price among the Subject
Assets), the fair market value of the Relevant Assets shall be determined for
purposes of this Section 24.1 pursuant to the dispute resolution and arbitration
procedures described in Subsection (c), below (determined as if the purchase
price allocation proposed by Big Rivers were the Valuation Report) or, if no
such purchase price allocation shall have been made, pursuant to the fair market
valuation processes described in this Subsection (b) and Subsection (c), below
(but without regard to the sixth and seventh sentences of this Subsection (b)).
Subject to the foregoing, the Appraiser shall be selected by the mutual
agreement of Big Rivers, on the one hand, and Leaseco and/or Station Two
Subsidiary (as applicable), on the other hand, as soon after the relevant
Transaction Termination or Triggering Transfer as is reasonably possible, and
the Parties each agree to promptly inform the other Parties in the event they
shall be informed of or shall cause such a Transaction Termination or Triggering
Transfer; provided, that in the event the Parties described above have not
mutually selected the Appraiser within 30 days after first commencing their
discussion regarding the selection, either Big Rivers, Leaseco or Station Two
Subsidiary shall be entitled to refer the matter for resolution pursuant to the
dispute resolution provisions of Article 15 of this Agreement. Big Rivers and
Station Two Subsidiary (for itself and on behalf of Leaseco) shall share equally
in the costs, expenses and fees associated with the Appraiser and its valuation,
and shall jointly retain (or be deemed to have jointly retained) the Appraiser.
(c) Dispute Over Valuations. In the event, following the completion
of the valuation and the issuance of the Appraiser's Valuation Report, either
Big Rivers, on the one hand, or Station Two Subsidiary (on behalf of the LG&E
Parties), on the other hand, in good
63
faith believes that the Valuation Report regarding the Relevant Assets does not
adequately reflect the true fair market value of those assets at that time, or
that the Valuation Report is otherwise defective or deficient, that Party shall
notify the other Party of its belief within ten (10) days following its receipt
of the Valuation Report. Failure to so notify the other Party of that belief
shall be deemed to be the acceptance by that Party (and, in the case of Station
Two Subsidiary, by all of the LG&E Parties) of the results of the Valuation
Report for purposes of this Section 24.1. If such a notice is so delivered to
the other Party, then representatives of those Parties shall promptly meet to
review the Valuation Report and attempt to confirm the accuracy and completeness
of the Valuation Report or, if the Parties shall agree that the Valuation Report
is inaccurate, defective or deficient, attempt to rectify the defect or
deficiency or to assign a more accurate value to the Relevant Assets. If the
Parties are unable to resolve their differences and settle upon a valuation of
the Relevant Assets within 30 days after the issuance of the Valuation Report,
then either Party shall be entitled to refer the matter directly to arbitration
pursuant to the relevant provisions pertaining to the arbitration of disputes in
Article 15 of this Agreement (exclusive of Section 15.3.6), for the purpose of
determining whether the Valuation Report represented a valuation of the Relevant
Assets that was within five percent (5%), above or below, of the actual fair
market value of those assets. If, pursuant to that dispute resolution process,
the Valuation Report is determined to fall within that range of values, then the
Valuation Report shall be deemed to be determinative of the fair market value of
the Relevant Assets for purposes of this Section 24.1. If the Valuation Report
is determined to fall outside that range of values, then the actual fair market
value shall be determined pursuant to arbitration under Article 15 (but without
regard to the provisions of Section 15.3.6 of this Agreement).
(d) Accounting. Throughout the Term, Big Rivers, on the one hand,
and the relevant LG&E Parties, on the other hand, shall separately account for
all Capital Assets (including without limitation, Enhancements and Major Capital
Improvements) and Station Two Improvements that may be funded by them and/or by
Henderson during the Term, including, in the case of the tangible Station Two
Assets, without limitation, any Station Two Improvements that may be directly
funded by Henderson, Big Rivers or Station Two Subsidiary, that may be
indirectly funded by any of them or LEM through reimbursement payments made
between those parties, that may be funded through the capacity charge payments
made by them, directly or indirectly, pursuant to the Station Two Agreement or
the Key Station Two Contracts, and that may be funded by them indirectly through
withdrawals from any reserve accounts established pursuant to the Station Two
Agreement or the Key Station Two Contracts. Such accounting by the Parties shall
include, without limitation, the maintenance of records regarding the original
cost and estimated useful lives of the Capital Assets and Station Two
Improvements, and their respective contributions to those costs. For purposes of
this Section 24.1 only and the calculations to be made hereunder, and to
facilitate those calculations, the Capital Assets and Station Two Improvements
that may be funded by any of the LG&E Parties, Big Rivers and/or Henderson,
directly or indirectly, shall be deemed to be depreciated by each of those
Parties and Henderson on a straight-line basis over the entire estimated useful
lives of those assets, and otherwise on a consistent basis (regardless of any
other methodology for the depreciation or amortization of those assets that may
be utilized by the LG&E Parties, Big Rivers or Henderson for internal, tax
64
or accounting purposes, and regardless of whether those assets are assets that
may be capitalized, or are characterized as leasehold improvements or otherwise
for internal, tax or accounting purposes). In the event the Parties cannot agree
on the estimated useful life of one or more Capital Assets or Station Two
Improvements, that determination shall be made pursuant to the dispute
resolution procedures set forth in Article 15 of this Agreement. At least
annually, representatives of Big Rivers, Leaseco and Station Two Subsidiary
shall meet to compare their respective records regarding the Capital Assets and
Station Two Improvements previously funded, in whole or in part, by Big Rivers,
any of the LG&E Parties or, in the case of the tangible Station Two Assets,
Henderson, and they shall attempt to resolve any discrepancies that may exist
between their respective records. Those Parties shall also consult with
Henderson on a periodic basis for the same purpose. In the event of a dispute
between the Parties over which party funded which portion of any Capital Assets
or Station Two Improvements, over the costs to purchase or install the same,
over the estimated useful lives of those assets, or over whether an expenditure
was properly characterized as a Capital Asset or Station Two Improvement, that
dispute shall be resolved pursuant to the dispute resolution procedures set
forth in Article 15 of this Agreement.
(e) Payments. At such time following any Transaction Termination or
Triggering Transfer as the valuation of the Relevant Assets has been completed
and the Valuation Report has been issued by the Appraiser (or at such other time
as the fair market value of the Relevant Assets shall be determined or deemed to
be determined as contemplated above), Big Rivers shall pay to Station Two
Subsidiary, on behalf of all the LG&E Parties, the amounts determined as set
forth in (i), (ii) or (iii), as applicable, below (each an "LG&E Parties'
Residual Value Payment"). All such amounts, if they shall not have been
determined and paid in full by Big Rivers to Station Two Subsidiary within 180
days after the relevant Transaction Termination or Triggering Transfer, shall
bear interest payable by Big Rivers at a rate per annum equal to 135 percent of
the then current market yield on U.S. Treasury obligations having a remaining
maturity of one year, from the 90th day after the Transaction Termination or
Triggering Transfer through and including the date on which payment is
eventually made. Such interest amounts shall be paid in arrears at the time of
and together with the relevant LG&E Parties' Residual Value Payment.
Notwithstanding the foregoing, in the event the relevant Triggering Transfer
takes the form of a foreclosure, a deed in lieu of foreclosure or any other
involuntary Transfer, Station Two Subsidiary shall be entitled to participate in
that Triggering Transfer, and to make a claim for any of the proceeds thereof,
to secure and recover its LG&E Parties' Residual Value Payment (if any)
resulting from that Triggering Transfer or from any other Transaction
Termination or Triggering Transfer, without regard to any other provision that
may allow payment of that amount by Big Rivers at a later date.
(i) In the case of (x) a Transaction Termination regarding
this Agreement, the Power Purchase Agreement, the Facilities Operating
Agreement, the Lease and the Transmission Services and Interconnection Agreement
(or the OATT, as applicable), or regarding any of those agreements, instruments
or tariff, or (y) a Triggering Transfer of any of the Subject Assets other than
the Key Station Two Contracts, in either case, that occurs on or after the
December 31st that is closest to the twenty-fifth anniversary of the Effective
Date, then the LG&E Parties' Residual Value Payment with respect to that
Transaction Termination or Triggering Transfer shall be an amount equal to the
greater of (A) the amount determined by reference to the following formula, or
(B) the LG&E Parties' Residual Plant Value (as defined below) for the Relevant
Assets:
65
[REDACTED]
Where:
M = The aggregate fair market value of the Relevant Assets set forth in the
Valuation Report (or otherwise determined as provided above);
L = The LG&E Parties' Residual Plant Value (as defined below) for the Relevant
Assets;
B = Big Rivers' Depreciated Book Value (as defined below) for the Relevant
Assets; and
E = The Depreciated Book Value of all Enhancements and Major Capital
Improvements (as defined below) included in the Relevant Assets.
For the avoidance of doubt, the Parties agree that no LG&E Parties' Residual
Value Payments shall become owing under this Subsection 24.1(e)(i) in respect of
any Enhancements, Major Capital Improvements or Station Two Improvements.
(ii) In the case of (x) a Transaction Termination regarding
the agreements, instruments or tariff described in (i), above, or any of them,
or (y) a Triggering Transfer of any of the Subject Assets other than the Key
Station Two Contracts, in either case that occurs prior to the December 31st
that is closest to the twenty-fifth anniversary of the Effective Date, then the
LG&E Parties' Residual Value Payment with respect to that Transaction
Termination or Triggering Transfer shall be an amount equal to the greater of
(A) the amount determined by reference to the following formula, or (B) the sum
of the LG&E Parties' Residual Plant Value (as defined below) for the Relevant
Assets, plus the Depreciated Book Value of all Enhancements and Major Capital
Improvements (as defined below) for the Relevant Assets:
[REDACTED]
Where: M, L, B and E have the meanings set forth in (i) above; and "ET" means
the Depreciated Book Value of all Enhancements and Major Capital Improvements
calculated as though the Term had continued through the December 31st that is
closest to the twenty-fifth anniversary of the Effective Date.
(iii) In the case of: (x) a Transaction Termination regarding
the Station Two Agreement; or (y) any Triggering Transfer of the Key Station Two
Contracts (or any material portion thereof) (A) without the prior consent of the
LG&E Parties and Henderson as required by the Station Two Agreement or the Key
Station Two Contracts, or (B) to any Person that does not simultaneously assume
and agree to perform Big Rivers' obligations under all such Key Station Two
Contracts and the Station Two Agreement with those agreements remaining in full
force and effect following the Triggering Transfer in accordance with their
respective terms; then the LG&E Parties' Residual Value Payment regarding that
Transaction Termination or Triggering Transfer, as applicable, shall be an
amount equal to the greater of (1) the amount
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determined by reference to the following formula, or (2) the LG&E Parties'
Residual Plant Value (as defined below) for the Relevant Assets (it being
understood that so long as the consents described in (A), above, have been
obtained and the Person(s) described in (B), above, have so assumed and are
performing Big Rivers' obligations described therein, no LG&E Parties' Residual
Value Payment with respect to that Triggering Transfer as contemplated in this
Subsection (iii) shall become due and owing):
[REDACTED]
Where LT, BT and HT have the meanings set forth in subsection (f), below, and:
M = The aggregate fair market value of the Relevant Assets set forth in the
Valuation Report (or otherwise determined as provided above);
L = The LG&E Parties' Residual Plant Value for the Relevant Assets; and
B = Big Rivers' Depreciated Book Value for the Relevant Assets.
Notwithstanding anything contained in this Subsection 24.1(e)(iii) to the
contrary, no LG&E Parties' Residual Value Payment shall become owing hereunder
by reason of a Transaction Termination regarding the Station Two Agreement if,
within 60 days after that Transaction Termination, Big Rivers shall have taken
such actions, in compliance with Section 13.8 of the Station Two Agreement, as
shall be necessary to prevent the LG&E Parties (or any of them) from having the
right, pursuant to Section 13.8 of that agreement, to an abatement against the
Annual Fixed Payments or the Rental Payments (as applicable) due by them to Big
Rivers, to a reimbursement of the Initial Fixed Payment or Initial Rental
Payment, to a reduction in the Contract Limits, or to terminate any of the
Operative Documents other than the Station Two Agreement, each as contemplated
in Section 13.8 of that agreement; provided, that in the event those LG&E
Parties shall at any time thereafter have the immediate right to take any of the
foregoing actions or exercise any of the foregoing rights or remedies in
accordance with Section 13.8, then the LG&E Parties' Residual Value Payment with
respect to that Transaction Termination shall become payable by Big Rivers to
Station Two Subsidiary under this Subsection 24.1(e)(iii).
(f) Definitions. As used in this Section 24.1:
(i) The "LG&E Parties' Residual Plant Value" shall mean the
aggregate amount derived from combining for all Capital Assets (excluding any
Enhancements or Major Capital Improvements) and Station Two Improvements of the
type described below the amounts determined as set forth below: (x) the sum of
the original Installed Costs, purchase price amounts and other costs incurred by
Big Rivers, each of the LG&E Parties and (in the case of Station Two
Improvements) Henderson, collectively, whether directly or indirectly, for each
Capital Asset or Station Two Improvement (as applicable), or portion thereof,
that has been incorporated into or made a part of the Relevant Assets during the
Term and through the Transaction Termination or Triggering Transfer (as
applicable), or that has been funded by Big
67
Rivers, any of the LG&E Parties and/or Henderson during the Term, directly or
indirectly, but has not been fully incorporated into or made a part of the
Relevant Assets as of the Termination Transaction or Triggering Transfer; minus
(y) the portion of those Installed Costs, purchase price amounts and other costs
that would have been depreciated or amortized by those parties through the
Transaction Termination or the Triggering Transfer assuming a straight line
depreciation or amortization of that Capital Asset or Station Two Improvement
over its estimated useful life; then multiplied by (z)(A) Leaseco's Capital
Asset Sharing Ratio that applied to that Capital Asset during the Term
(determined by reference to Section 7.4 of the Cost Sharing Agreement or Section
8.4, as of the Lease, as applicable), or (B) in the case of the Station Two
Improvements, Station Two Subsidiary's Station Two Improvement Sharing Ratio
that applied to that Station Two Improvement (determined by reference to Section
8.17(e) or Section 9.10(c) of the Station Two Agreement, as applicable);
(ii) "Big Rivers' Depreciated Book Value" shall mean (A) the
aggregate amount determined by reference to Section 24.1(f)(i), above, but after
substituting prior to the calculation the relevant Capital Asset Sharing Ratio
of Big Rivers (determined by reference to Section 7.4 of the Cost Sharing
Agreement or Section 8.4 of the Lease, as applicable) and Big Rivers' Station
Two Improvement Sharing Ratio (determined by reference to Section 8.17(e) or
Section 9.10(c) of the Station Two Agreement, as applicable) for Leaseco's
Capital Asset Sharing Ratio and Station Two Subsidiary's Station Two Improvement
Sharing Ratio, respectively, in Subclause (z) of that Section.
(iii) "Depreciated Book Value of all Enhancements and Major
Capital Improvements" shall mean the aggregate amount derived from combining for
all Enhancements and Major Capital Improvements (if any) that have been
incorporated into or made a part of the Relevant Assets during the Term and
through the Transaction Termination or Triggering Transfer (as applicable), or
that have been funded by any of the LG&E Parties during the Term but have not
been fully incorporated or made a part of the Relevant Assets as of the
Transaction Termination or Triggering Transfer, the amounts determined as set
forth below: (x) the sum of the original Installed Costs, purchase price amounts
and other costs incurred by any of the LG&E Parties for each such Enhancement or
Major Capital Improvement, minus (y) the portion of those Installed Costs,
purchase price amounts and other costs that would have been depreciated or
amortized by those LG&E Parties through the Transaction Termination or
Triggering Transfer assuming a straight line depreciation or amortization of
those assets over their estimated useful lives.
(iv) "LT" shall mean the aggregate amount of the original
Installed Costs, purchase price amounts and other costs incurred by any of the
LG&E Parties, whether directly or indirectly, for the construction, purchase or
installation of the Relevant Assets, including without limitation, any Relevant
Assets that have been funded by any of the LG&E Parties during the Term,
directly or indirectly, but that have not been installed or delivered as of the
Termination Transaction or Triggering Transfer, whether funded directly by the
LG&E Parties, funded indirectly by them through reimbursement payments made
between them and Big Rivers or Henderson, funded through capacity charge
payments made by them, directly or indirectly, pursuant to the Station Two
Agreement or the Key Station Two Contracts, or funded
68
by them indirectly through withdrawals from any reserve accounts established
pursuant to those agreements.
(v) "BT" shall mean the aggregate amount of the original
Installed Costs, purchase price amounts and other costs incurred by Big Rivers,
whether directly or indirectly, for the construction, purchase or installation
of the Relevant Assets, including without limitation, any Relevant Assets that
have been funded by Big Rivers during the Term, directly or indirectly, but that
have not been installed or delivered as of the Termination Transaction or
Triggering Transfer, whether funded directly by Big Rivers, funded indirectly by
it through reimbursement payments made between it and the LG&E Parties or
Henderson, funded through capacity charge payments made by it, directly or
indirectly, pursuant to the Station Two Agreement or the Key Station Two
Contracts, or funded by it indirectly through withdrawals from any reserve
accounts established pursuant to those agreements.
(vi) "HT" shall mean the aggregate amount of the original
Installed Costs, purchase price amounts and other costs incurred by Henderson,
whether directly or indirectly, for the construction, purchase or installation
of the Relevant Assets, including without limitation, any Relevant Assets that
have been funded by Henderson during the Term, directly or indirectly, but that
have not been installed or delivered as of the Termination Transaction or
Triggering Transfer, whether funded directly by Henderson, funded indirectly by
it through reimbursement payments made between it and Big Rivers or the LG&E
Parties, funded through capacity charge payments made by it, directly or
indirectly, pursuant to the Station Two Agreement or the Key Station Two
Contracts, or funded by it indirectly through withdrawals from any reserve
accounts established pursuant to those agreements.
(g) Security Interests. All LG&E Parties' Residual Value Payments
that may become due to any LG&E Party(s) under this Section 24.1 shall be
secured by the Settlement Mortgage, and shall be further subject to the
Non-Disturbance Agreement to be entered into by Big Rivers, RUS, the LC Issuer
and the LG&E Parties.
(h) Credit for Other Recoveries. Notwithstanding anything contained
in this Section 24.1 to the contrary, in the event the LG&E Parties receive from
Big Rivers an LG&E Parties' Residual Value Payment upon the condemnation of any
of the Tangible Assets as contemplated in Section 9.1 of the Cost Sharing
Agreement or Section 10.1 of the Lease, that payment by Big Rivers shall be
deemed to discharge its obligation under this Section 24.1 to make that payment
to the relevant LG&E Party. In addition, (i) in the event following the
destruction of any Enhancements or Major Capital Improvements the LG&E Parties
shall elect not to replace or rebuild the same, the LG&E Parties shall not
thereafter be entitled to any LG&E Parties' Residual Value Payments with respect
to those assets, and (ii) in the event any other Capital Asset or any Station
Two Improvement is destroyed but not replaced or rebuilt as contemplated in
Section 9.2.3 of the Cost Sharing Agreement, Section 10.2.3 of the Lease or
Section 13.5 of this Agreement (as applicable), and Leaseco or Station Two
Subsidiary (as applicable) receives its share of insurance proceeds relative to
those Capital Assets or Station Two Improvements as contemplated in those
Sections, then the LG&E Parties shall not thereafter be entitled to any LG&E
Parties' Residual Value Payments with respect to those assets.
69
24.2 Right of First Refusal.
(a) Restriction on Transfer of Assets or Station Two Contracts.
Except in the limited circumstances described in this Section 24.2, and then
only in accordance with the terms, conditions and provisions of this Section
24.2, Big Rivers agrees that it shall not, at any time during the Term or for a
period of one year following the expiration or termination thereof
(collectively, the "Option Period"), voluntarily sell, assign, pledge, give,
encumber, dispose of, or otherwise voluntarily transfer by operation of law
(including without limitation, by merger or consolidation) (each a "Transfer"),
any of Big Rivers' rights, title or interests under, in or to (i) the Tangible
Assets, any of the Tangible Assets, any other tangible assets or properties
relating to or comprising one or more Facilities (including without limitation,
any Capital Assets, Enhancements or Major Capital Improvements) or any Real
Property on which the Facilities are situated (or any portions(s) of the
Facilities or such Real Property), (ii) any tangible assets or properties
relating to or comprising the Station Two Assets or the real property on which
the Station Two Assets are situated and in which Big Rivers may own or acquire
an interest during the Term (including without limitation, any Station Two
Improvements), or (iii) the Station Two Contracts (or any material portion
thereof), other than a Transfer of the Assigned Station Two Contracts to Station
Two Subsidiary pursuant to Station Two Agreement (collectively, the "Subject
Assets"). Notwithstanding the foregoing, in the case of the Tangible Assets and
the tangible Station Two Assets, Big Rivers shall be entitled to so Transfer the
same free of the restrictions of this Section 24.2 if done so by Big Rivers in
the ordinary course of the business consistent with past practices (but subject
in all cases to any other restrictions on such Transfers set forth in this
Agreement or any other Operative Document).
(b) Sales or Other Voluntary Transfers. In the event Big Rivers
desires to Transfer in any manner all or any portion of the Subject Assets
during the Option Period, and has received a bona fide binding written offer to
purchase those assets from one or more other Persons (a "Bona Fide Offer")
during the Option Period, Big Rivers shall, by written notice to WKEC (in the
case of the Tangible Assets) or Station Two Subsidiary (in the case of the
Station Two Assets and the Station Two Contracts), including therewith a copy of
the Bona Fide Offer, and before any acceptance of that Bona Fide Offer or any
agreement to sell those Subject Assets to such other Person(s), first offer the
Subject Assets to WKEC or Station Two Subsidiary (as applicable) for purchase by
them at the price and upon and subject to the other terms and conditions set
forth in the Bona Fide Offer (but without any additional or different terms or
conditions), except as provided in (c) below. If it desires to so exercise the
same, WKEC or Station Two Subsidiary must, not later than midnight of the 60th
day following the date of its receipt of such notice, exercise its right to so
purchase all (but not less than all) of the relevant Subject Assets upon the
terms and subject to the conditions set forth in the Bona Fide Offer, by giving
written notice to Big Rivers of such exercise. In the event WKEC or Station Two
Subsidiary does not so exercise its right to purchase all of the Subject Assets
within the time period described above, Big Rivers shall thereafter be entitled
to Transfer all (but not less than all) of those Subject Assets to the Person(s)
who made the Bona Fide Offer, solely on the terms of that Bona Fide Offer,
without material modification, at any time during the period commencing on the
expiration of the foregoing 60-day period and expiring 210 days thereafter;
provided, that in the event such Transfer to that Person shall not have been
completed within that
70
210-day period, Big Rivers agrees that it shall not thereafter attempt to
Transfer all or any portion of those Subject Assets to that or any other Person
(other than WKEC or Station Two Subsidiary) without once again offering to
transfer the same to WKEC or Station Two Subsidiary (as applicable) pursuant to
this Section 24.2(b). In the event WKEC or Station Two Subsidiary shall so
exercise their right pursuant hereto, the closing of the resulting sale of the
Subject Assets by Big Rivers to that LG&E Party shall occur at the offices of
Leaseco (or Station Two Subsidiary) in Louisville, Kentucky, not later than
ninety (90) days following the delivery of the relevant exercise notice, or at
such other time and places as those Parties shall mutually agree to.
(c) Use of Residual Value Payments. In exercising its right to
purchase any Subject Assets pursuant to this Section 24.2, the relevant LG&E
Party shall be entitled, in its discretion, to elect to reduce the purchase
price payable by that Party for the Subject Assets by the amount of any unpaid
LG&E Parties' Residual Value Payment(s) that may then be owing by Big Rivers to
any LG&E Party pursuant to Section 24.1, whether or not in connection with the
Subject Assets that are being purchased by the relevant LG&E Party; provided,
that for purposes of calculating the LG&E Party's Residual Value Payment that
shall be available for reduction of that purchase price, the aggregate fair
market value of the Subject Assets for purposes of Section 24.1(d) shall be
deemed to be the purchase price set forth in the Bona Fide Offer. Any such
reduction shall, upon the consummation of that purchase transaction, and to the
extent of the reduction, be deemed to correspondingly reduce the obligation of
Big Rivers to make that LG&E Parties' Residual Value Payment.
24.3 Continuation of Agreement.
Big Rivers recognizes and acknowledges that the RUS, the Members and
the LG&E Parties have or will in good faith enter into the transactions to which
this Agreement and the other Operative Documents relate, and have agreed to
consummate those transactions, in specific reliance upon the fact that the
transactions contemplated in the Operative Documents shall continue for the
stated Term (i.e., approximately 25 years). Big Rivers has informed the RUS, the
Members and the LG&E Parties that Big Rivers has in good faith entered into this
Agreement and will enter into the other Operative Documents in reliance upon and
with the specific intent of continuing these transactions through the stated
Term (i.e., approximately 25 years). In order to enable Big Rivers to comply
with certain requirements of the KPSC related to approval of its proposed rates,
and to provide additional assurances of its good faith and commitment and
without in any way intending to reduce or otherwise avoid abiding by the
Operative Documents throughout their stated Term (i.e., approximately 25 years)
and without any implication by any of the Parties that Big Rivers is or would be
entitled to attempt to reduce or otherwise avoid the terms of the Operative
Documents, Big Rivers additionally commits and undertakes that for the period
prior to January 1, 2012, in the event of any filing by Big Rivers of a petition
or similar filing for bankruptcy or reorganization or arrangement under any
federal or state bankruptcy or insolvency or similar Law, or the commencement of
involuntary proceedings against Big Rivers under any such Law, neither Big
Rivers nor its successor or assigns, if any, shall file, direct the filing of,
join in, consent to, or otherwise support any other party to any such
proceedings in a motion, complaint, pleading, statement, testimony or otherwise
make any attempt to terminate, reject or modify any of the Operative Documents
under (other than in
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accordance with their respective terms) Section 365 of the United States
Bankruptcy Code, 11 U.S.C. ss. 101, et seq., as it subsequently may be amended,
modified or supplemented or any other similar, applicable federal or state
bankruptcy or insolvency laws (the "Insolvency Assurance"). Thereafter, Big
Rivers shall continue the Insolvency Assurance unless and until the RUS, in the
exercise of its discretion, were to consent to any of the foregoing. In all
events and throughout the Term, each of the RUS, the Members and the LG&E
Parties shall be entitled to rely upon the specific provisions of each of the
Operative Documents, including but not limited to their stated term (i.e.,
approximately 25 years), and shall be entitled to take whatever actions may
prove to be necessary or appropriate to maintain the benefit of their bargain in
the event that Big Rivers ever attempts to cause the rejection or termination of
any of the Operative Documents (other than in accordance with their respective
terms) in a subsequent bankruptcy or reorganization proceeding or otherwise.
24.4 LG&E Parties Commitment.
The LG&E Parties recognize and acknowledge that the RUS, the Members
and Big Rivers have in good faith entered into the transactions to which this
Agreement and the other Operative Documents relate, and have agreed to
consummate those transactions, in specific reliance upon the fact that the
transactions contemplated in the Operative Documents shall continue for their
stated term (i.e., approximately 25 years). The LG&E Parties have informed the
RUS, the Members and Big Rivers that the LG&E Parties have in good faith entered
into this Agreement in reliance upon and with specific intent of continuing this
transaction through the stated term (i.e., approximately 25 years). In order to
facilitate approval of the proposed rates of Big Rivers and to provide
additional assurances of their good faith and commitment, and without in any way
intending to reduce or otherwise avoid abiding by this Agreement and the other
Operative Documents throughout their stated term (i.e., approximately 25 years),
and without any implication by any of the Parties that the LG&E Parties are or
would be entitled to attempt to reduce or otherwise avoid the terms of this
Agreement or any other Operative Document, the LG&E Parties additionally commit
and undertake that for the period prior to January 1, 2012, in the event of any
filing by any of the LG&E Parties of a petition or similar filing for bankruptcy
or reorganization or arrangement under any federal or state bankruptcy or
insolvency or similar Law, or the commencement of involuntary proceedings
against any of the LG&E Parties under any such Law, none of the LG&E Parties nor
their respective successors or assigns, if any, shall file, direct the filing
of, join in, consent to, or otherwise support any other party to any such
proceedings in a motion, complaint, pleading, statement, testimony or otherwise
make any attempt to terminate, reject or modify this Agreement or any other
Operative Document (other than in accordance with their respective terms) under
Section 365 of the United States Bankruptcy Code, 11 U.S.C. ss.101, et seq., as
it subsequently may be amended, modified or supplemented or any other similar,
applicable federal or state bankruptcy or insolvency Laws (the "Insolvency
Assurance"). Thereafter, the LG&E Parties shall continue the Insolvency
Assurance unless and until the RUS, in the exercise of its discretion, were to
consent to any of the foregoing. In all events and throughout the Term, each of
the RUS, the Members and Big Rivers shall be entitled to rely upon the specific
provisions of this Agreement, including but not limited to the stated Term
(i.e., approximately 25 years), and shall be entitled to take whatever actions
may prove to be necessary or appropriate to maintain the benefit of their
bargain in the
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event that any of the LG&E Parties ever attempt to cause the rejection or
termination of this Agreement or any other Operative Document (other than in
accordance with their respective terms) in a subsequent bankruptcy or
reorganization proceeding or otherwise.
24.5 No Limitation on Rights Under New RUS Loan Documents.
Nothing in this Article 24 shall modify, reduce or diminish: (i) the
rights of the RUS under the New RUS Loan Documents (as defined in that certain
New RUS Loan Agreement between Big Rivers and the RUS to be executed and
delivered on the Effective Date); or (ii) the rights of the Mortgagees under the
New RUS Mortgage (as defined in said New RUS Loan Agreement), including without
limitation, any right to withhold consent with respect to any sale or
disposition of Big Rivers' property except on terms acceptable to the RUS and/or
such mortgagees; but subject, in the case of (i) and (ii), above, to the
Non-Disturbance Agreement of even date herewith among Big Rivers, RUS, AMBAC and
the LG&E Parties.
24.6 Survival; No Limitation on Remedies.
The provisions of this Article 24 shall survive the expiration or
termination of this Agreement following the Effective Date for any reason, and
shall continue to be binding on the Parties. The payments and other rights
provided for in this Article 24 shall be in addition to, and not in lieu of, all
other rights and remedies of the LG&E Parties provided for in this Agreement and
the other Operative Documents (including without limitation, any rights and
remedies in respect of any breach or default by Big Rivers hereunder or
thereunder), and all such rights and remedies shall be deemed to be cumulative
unless expressly provided otherwise in this Agreement or any other Operative
Document.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed as of the day and year first written above.
BIG RIVERS ELECTRIC CORPORATION
By: /s/ Michael H. Core
----------------------------
Printed Name: Michael H. Core
Title: President/CEO
WESTERN KENTUCKY ENERGY CORP.
By: /s/ John R. McCall
----------------------------
Printed Name: John R. McCall
Title: Vice President
LG&E ENERGY MARKETING INC.
By: /s/ John R. McCall
----------------------------
Printed Name: John R. McCall
Title: Vice President
WESTERN KENTUCKY LEASING CORP.
By: /s/ John R. McCall
----------------------------
Printed Name: John R. McCall
Title: Vice President
WKE STATION TWO INC.
By: /s/ John R. McCall
----------------------------
Printed Name: John R. McCall
Title: Vice President
[* All schedules and
Exhibits REDACTED]
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