EXHIBIT B-2(c)(3)
METROPOLITAN EDISON COMPANY
s
LESSEE'S LETTER AGREEMENT
Regarding
TMI-1 FUEL CORP.
Dated as of --------- --, 1998
TABLE OF CONTENTS
Section Page
1.Definitions
2.Performance of Fuel Lease and Liens
▇.▇▇▇▇▇▇▇▇ Interest of Collateral
▇.▇▇▇▇ of Nuclear Material and Assignment of Rights under
Nuclear Material Contracts
5.Collateral Equivalence Test; No Additional Collateral or
Covenants; Condemnation Statements; Exercise of Rights of
Secured Parties
6.Fuel Management; Quiet Enjoyment
▇.▇▇▇▇▇▇▇▇▇
8.Representations and Warranties
9.General Covenants of the Lessee
10.GPU Events
▇▇.▇▇▇▇▇▇ Agreements and Notes
12.Consent to Assignments; Direct Payment of Payments Under
the Fuel Lease
13.Severabilty
14.Indemnification
▇▇.▇▇ Waiver; Amendments
16.Successors and Assigns
17.Notices
18.Set-Off
19.Waiver of Jury Trial
20.Governing Law
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THIS LESSEE'S LETTER AGREEMENT (the "Letter Agreement") is made as of
-------- --, 1998, by and between Metropolitan Edison Company, a Pennsylvania
corporation (the "Lessee"), TMI-1 Fuel Corp, a Delaware corporation (the
"Company"), and The First National Bank of Chicago, as Administrative Agent (the
"Administrative Agent"), for the Banks party to the Credit Agreement referred to
below (the "Banks").
WHEREAS, the Lessee has entered into the Second Amended and Restated
Nuclear Material Lease Agreement, dated as of -------- --, 1998 ("Fuel Lease"),
with the Company in order to enable the Company to obtain financing for the
acquisition, processing and use of Nuclear Material in the Generating Facility;
and
WHEREAS, pursuant to the Fuel Lease, the Company has agreed to make
payments due to Manufacturers and/or to reimburse the Lessee for payments
previously made to Manufacturers with respect to Nuclear Material; and
WHEREAS, in order to finance the cost of such Nuclear Material, the
Company proposes to (i) sell its Commercial Paper, and (ii) obtain the
Commitment of each Bank to make Loans from time to time as hereinafter provided;
and
WHEREAS, the Lessee has agreed to make payments under the Fuel Lease
sufficient to enable the Company to meet its obligations under the Company's
financing arrangements, including the Company's obligations under the Credit
Agreement, dated as of -------- --, 1998, among the Company, the Banks and the
Administrative Agent (the "Credit Agreement");
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained and other good and valuable consideration, so long as any of
the Loans or the Commercial Paper shall remain outstanding, or the Commitments
shall be continuing, notwithstanding any provision of the Fuel Lease or any
other agreement of the Lessee to the contrary, the Lessee, the Company, the
Administrative Agent and the Banks agree that:
1 Definitions. Unless the context otherwise specifies or requires, each
term defined in the Credit Agreement or Appendix A to the Fuel Lease, shall,
when used in this Letter Agreement, have the meaning indicated in the Credit
Agreement or Appendix A or set forth in the paragraph indicated therein.
2 Performance of Fuel Lease and Liens. The Lessee will perform and comply
with all the terms of the Fuel Lease to be performed or complied with by it and
will not omit to take an action the omission of which would cause a Lease Event
of Default. The Lessee acknowledges that, except as otherwise provided in the
Fuel Lease, its obligations as set forth under the Fuel Lease are absolute and
unconditional. The Lessee will not directly or indirectly create or permit to be
created or remain, and will promptly take such action as may be necessary to
discharge, any Lien on any Collateral except Permitted Liens.
3 Security Interest of Collateral. The Lessee represents that no effective
financing statement (other than those naming the Secured Parties as a secured
party) covering all or any part of the Collateral (as defined in the Security
Agreement relating to the Lessee) is on file in any public office. The Lessee
shall make, or shall cause to be made, all filings and recordings, and shall
take, or cause to be taken, such other actions, including filing all
continuation statements, necessary to establish, preserve and perfect the
Secured Parties' lien on and security interest in, the Collateral as a legal,
valid and enforceable first priority lien and security interest, or purchase
money security interest, as the case may be, therein, subject only to the
existence or priority of any Permitted Lien, and the Lessee represents that all
such filings, recordings and other actions have been duly made. The Lessee shall
deliver to
the Administrative Agent evidence of the due filings of any continuation
statements to be delivered to the Administrative Agent within the time period
specified in Section 7.05 of the Credit Agreement. In no event will the Lessee
permit the Nuclear Material to enter any jurisdiction in which all necessary
action has not been taken to establish, maintain and protect the Secured
Parties' first priority perfected lien and security interest in the Nuclear
Material under the Security Agreement, subject only to Permitted Liens.
4 Sale of Nuclear Material and Assignment of Rights under Nuclear
Material Contracts.
(a) In the event that the Lessee desires the Company, on behalf of
the Lessee, to purchase Nuclear Material or to have services performed on such
Nuclear Material pursuant to any Nuclear Material Contract, the Lessee shall
provide the Company with an Assignment Agreement and a Manufacturer's Consent,
both substantially in the form of Exhibit D to the Fuel Lease, with such changes
to Exhibit 2 to Exhibit D as the Administrative Agent in its reasonable
discretion may consent to in writing, which consent shall not be unreasonably
withheld, with respect to such Nuclear Material Contract not later than sixty
days following the date on which the Company is to purchase such Nuclear
Material or to have such services performed pursuant thereto. Notwithstanding
the foregoing, the Lessee shall not be required to have obtained a
Manufacturer's Consent in any instance where the Manufacturer's obligations
under the applicable Nuclear Material Contract have been fully discharged and
performed, and the Manufacturer's warranties with respect to such Nuclear
Material Contract have expired, and the Lessee has delivered to the Company and
the Collateral Agent a certificate to such effect.
(b) The Lessee at its expense will perform and comply with all the
terms and provisions of each Assigned Agreement to be performed or complied with
by it, will maintain each Assigned Agreement in full force and effect, will
enforce each of the Assigned Agreements in accordance with their respective
terms, and will take all such action to that end as from time to time may
reasonably be requested by the Majority Banks.
(c) The Lessee shall not enter into or consent to or permit any
cancellation, termination, amendment, supplement or modification of or waiver
with respect to any Assigned Agreement without the prior written consent of the
Majority Banks, unless such cancellation, termination, amendment, supplement or
modification could not reasonably be expected to have a Material Adverse Effect
on the Company or the Company has through one or more other Assigned Agreements
or otherwise arranged for the provision of comparable goods and services on
terms not materially more burdensome to the Company.
(d) The Lessee will from time to time, upon request of the
Administrative Agent, furnish to the Administrative Agent such information
concerning the Nuclear Material or any Assigned Agreement, as the Majority Banks
may reasonably request.
(e) The Lessee will not change its principal place of business or
chief executive offices from the location specified in paragraph 8(a) hereof or
remove therefrom its records concerning the Assigned Agreements unless it gives
the Administrative Agent at least 30 days' prior written notice thereof.
5 Collateral Equivalence Test; No Additional Collateral or Covenants;
Condemnation Statements; Exercise of Rights of Secured Parties.
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(a) The Lessee shall not permit the sum of aggregate Stipulated
Casualty Value of the Nuclear Material leased under the Fuel Lease and the
Lessee's Percentage of Cash Collateral to be less than the Lessee's Percentage
of Outstandings.
(b) The Lessee shall not provide to any Person (other than the
Banks), in order to induce such Person to extend credit to the Company, any
collateral or any guarantee or other assurance against loss or non-payment, nor
shall the Lessee consent to the provision thereof by the Company.
(c) The Lessee shall not agree to any affirmative or negative
covenant with respect to the condition, financial or otherwise, of the Lessee
with any Person in order to induce such Person to extend credit to the Company.
(d) The Lessee shall not sell, assign, convey, pledge or otherwise
dispose of or encumber in any manner any interest it may have in the Trust or
any rights it may have under the Trust Agreement. The Lessee shall not direct
the Owner Trustee to liquidate, dissolve, merge or consolidate the Company
except if such transaction is consented to in writing by the Banks. The Lessee
shall not direct the Owner Trustee to take any action under the Trust Agreement
which is inconsistent with the duties imposed upon the Company by the Basic
Documents and any other agreements, documents, instruments and articles executed
and delivered, and to be executed and delivered, by the Owner Trustee in
connection therewith.
(e) The Nuclear Material leased under the Fuel Lease shall
constitute the Lessee's entire ownership interest in the items used or to be
used by it as nuclear fuel in the Generating Facility. The Lessee agrees that
50% of the Lessor's ownership interest in any Nuclear Material which is subject
to the Fuel Lease will be leased to the Lessee. The Lessee further agrees not to
take any action under the terms of the Fuel Lease, including, but not limited
to, the delivery of any Leasing Record, which would result in less than 50% of
the Lessor's ownership interest in any such Nuclear Material being so leased.
(f) As provided in the Security Agreement, (i) the Secured Parties
may, on and after the occurrence of a Credit Agreement Default, Credit Agreement
Event of Default, Lessee Default or Lessee Event of Default, pursuant to Section
10 of the Security Agreement, exercise any and all of the Company's rights under
the Fuel Lease, the Assigned Agreements and each other Basic Document to which
the Lessee is a party, and (ii) if a Lease Event of Default occurs and is
continuing, the Secured Parties may, pursuant to Section 10 of the Security
Agreement, enforce and exercise any and all of the Company's rights under the
Fuel Lease, the Assigned Agreements and each other Basic Document to which the
Lessee is a party, or the rights and remedies granted to the Secured Parties
under the Security Agreement at their election and in their sole discretion,
and, in the event that any Secured Parties are permitted to exercise such rights
pursuant to Section 10 of the Security Agreement, the Lessee agrees that the
Collateral Agent may do so either in concert with or in place of the Company,
and the Lessee shall assist in, comply with and perform in accordance with all
rights or remedies so enforced or exercised by the Collateral Agent for the
ratable benefit of the Secured Parties.
6 Fuel Management; Quiet Enjoyment. The occurrence of a Credit Agreement
Default, a Credit Agreement Event of Default, Lease Event of Default, Lessee
Default, Lessee Event of Default or an event or condition which would, with the
lapse of time or the giving of notice or both, become a Lease Event of Default,
shall not affect the Lessee's sole obligation to engage in Fuel Management;
provided that, upon the occurrence of a Credit Agreement Event of
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Default, Lessee Event of Default or Lease Event of Default, the Majority Secured
Parties may, at their option, by written notice to the Lessee, elect to revoke
such power and authority, in which case the Person from time to time designated
by the Majority Secured Parties may (but shall not be obligated to), to the
extent that the Majority Secured Parties desire and to the extent permitted by
law, engage in Fuel Management and/or remove all or any part of the
responsibility for Fuel Management from the Lessee; provided, however, that,
subject to the right of the Secured Parties to exercise any or all rights
granted to the Secured Parties under the Security Agreement, the rights granted
to the Secured Parties under this Section 6 shall not be construed to include
the right to direct, whether directly or indirectly, the operation of the
Generating Facility. In the event the Majority Secured Parties, in accordance
with the preceding sentence, shall revoke the Lessee's power and authority to
engage in Fuel Management, all rights conferred by the Company to the Lessee
pursuant to Section 3 of the Fuel Lease shall be deemed to be automatically
reassigned to the Company and the Lessee shall execute such documents and
instruments as the Secured Parties shall request to further confirm such
assignment.
7 Insurance. Each year, the Lessee will furnish the Administrative Agent
and each Bank a detailed statement certified by an officer of Lessee setting
forth (i) the location of all Nuclear Material and (ii) the insurance policies
and indemnification agreements provided pursuant to Sections 14 and 17 of the
Fuel Lease and certifying that such insurance policies and indemnification
agreements comply with the requirements of the Fuel Lease. In addition, the
Lessee shall promptly furnish at any time to the Administrative Agent and any
Bank such information as any such Bank shall reasonably request concerning
location of Nuclear Material, insurance policies and indemnification agreements
and Manufacturers or other third parties with whom arrangements exist with
respect to transportation, storage or processing of Nuclear Material.
8 Representations and Warranties. The Lessee hereby represents and
warrants to the Company, the Administrative Agent and the Banks that as of the
date hereof:
(a) Organization and Standing. The Lessee is a corporation duly
incorporated, validly existing and subsisting under the laws of the Commonwealth
of Pennsylvania, and is qualified to do business in each state or other
jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so qualified would not have a material
adverse effect on its ability to perform its obligations under this Letter
Agreement or each other Basic Document to which the Lessee is a party. The
Lessee's chief executive office is located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
(b) Corporate Authority. The Lessee has the corporate power and
authority to execute and perform this Letter Agreement and the Fuel Lease and to
lease the Nuclear Material thereunder. The execution and delivery of this Letter
Agreement and the Fuel Lease and the lease of the Nuclear Material thereunder
will not have a material adverse effect on the financial condition, results of
operations, business, properties or operations of the Lessee.
(c) Compliance with Other Instruments, etc. The execution, delivery
and performance by the Lessee of this Letter Agreement and each Basic Document
to which the Lessee is a party, and other related instruments, documents and
agreements, and the compliance by the Lessee with the terms hereof and thereof,
(i) have been duly and legally authorized by appropriate corporate action taken
by the Lessee, (ii) are not in contravention of, and will not result in a
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violation or breach of, any of the terms of the Lessee's articles of
incorporation, its by-laws or of any provisions relating to shares of the
capital stock of the Lessee and (iii) will not violate or constitute a breach of
any provision of (x) any applicable law, order, rule or regulation, rule or
regulation of any governmental authority (except in those cases where
non-compliance with any such law, order, rule or regulation could not reasonably
be expected to have a material adverse effect on the financial condition,
results of operations, business, properties or operations of the Lessee or its
ability to perform its obligations hereunder or under each Basic Document) or
(y) any indenture, agreement or other instrument to which the Lessee is party,
or by or under which the Lessee or any of the Lessee's property is bound, or be
in conflict with, result in breach of, or constitute (with due notice and/or
lapse of time) a default under any such indenture, agreement or instrument, or
result in the creation or imposition of any Lien upon any of the Lessee's
property or assets or any Nuclear Material.
(d) Legal Obligations. This Letter Agreement and the Fuel Lease have
been executed by a duly authorized officer of the Lessee, and this Letter
Agreement and the Fuel Lease constitute, and each Leasing Record, when executed
by a duly authorized officer of the Lessee and delivered to the Company, will
constitute, the legal, valid and binding obligations of the Lessee, enforceable
against the Lessee in accordance with their respective terms, except as the
enforceability thereof may be limited by the Atomic Energy Act and the rules,
regulations or orders issued pursuant thereto, or by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights in general,
and except as the availability of the remedy of specific performance is subject
to general principles of equity (regardless of whether such remedy is sought in
a proceeding in equity or at law).
(e) Governmental Consents. Neither the execution and delivery of
this Letter Agreement, the Fuel Lease or any Leasing Record by the Lessee, nor
the performance by the Lessee of all of its obligations hereunder or thereunder,
requires the consent or approval of, the giving of notice to, or the
registration, filing or recording with, or the taking of any other action in
respect of, any Federal, state, local or foreign government or governmental
authority or agency or any other person except for the order of the Securities
and Exchange Commission (the "SEC"), dated October 25, 1995, the filing of the
supplemental order of the SEC dated -----------, 1998, the order of the PaPUC,
dated ------------, 1998, and the filing of any statement or other instrument
pursuant to Section 10(b) of the Fuel Lease, and except for the filing of
certificates by the Lessee with the SEC pursuant to SEC Rule 24 under the Public
Utility Holding Company Act to report on the transactions authorized by such SEC
order, the filing of which is not necessary to the execution or delivery of this
Letter Agreement, the Fuel Lease or any Leasing Record by the Lessee or for the
performance by the Lessee of any of its obligations hereunder or thereunder, and
the failure to file any of which will not affect the validity or enforceability
of any of this Letter Agreement, the Fuel Lease or any Leasing Record.
(f) Consents and Permits. The Lessee possesses all material
licenses, permits, franchises and certificates which are necessary or
appropriate to own or operate its material properties and assets and to conduct
its business as now conducted.
(g) Litigation. There is no litigation or other proceeding now
pending or, to the best of the Lessee's knowledge, threatened, against or
affecting the Lessee, before any court, arbitrator or administrative or
governmental agency (i) which would adversely affect or impair the title of the
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Company to the Nuclear Material, (ii) which questions the validity or
enforceability of this Letter Agreement, the Fuel Lease, the Assigned Agreements
or any other Basic Document to which the Lessee is a party or any action taken
or to be taken by the Lessee pursuant to or in connection with this Letter
Agreement, or (iii) except as disclosed in the Lessee's Annual Report on Form
10-K for the year ended December 31, 1997 and Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998, copies of which have previously been delivered
to the Administrative Agent and the Banks, which, if decided adversely to the
Lessee, would materially adversely affect the condition, financial or otherwise,
of the Lessee.
(h) Taxes. The Lessee has filed or caused to be filed all tax
returns which are required to be filed, and has paid or caused to be paid all
taxes as shown on said returns and all assessments received by it to the extent
that such taxes and assessments have become due, except for taxes and
assessments which are being contested in good faith and by appropriate
proceedings and as to which it has provided reserves which are adequate in
connection with generally accepted accounting principles.
(i) Reaffirmation and Restatement of Representations and Warranties.
The Lessee repeats and reaffirms as of the date hereof for the benefit of the
Administrative Agent and each Bank the representations and warranties made by
the Lessee in the Fuel Lease as though set forth in full herein with the same
effect as though such representations and warranties had been made on and as of
the date hereof. In addition, the Lessee represents and warrants that as of the
date hereof (i) the Lessee is in compliance with all the terms and provisions
set forth in the Fuel Lease on its part to be observed or performed, (ii) no
Terminating Event has occurred and no event has occurred which, with the lapse
of time or the giving of notice, or both, would constitute such a Terminating
Event, and (iii) no Lease Event of Default has occurred and is continuing and no
event has occurred and is continuing on such date which, with the lapse of time
or the giving of notice, or both, would constitute a Lease Event of Default.
(j) First Perfected Security Interest. Except for Permitted Liens,
upon the execution and delivery of this Letter Agreement and the Security
Agreement and the due filing of the Uniform Commercial Code financing statements
required to be executed and filed from time to time, the Secured Parties will
have a legal, valid and enforceable first priority security interest (i) in the
rights, titles and interests of the Company in and to the Fuel Lease and (ii) in
and to the other Collateral. Such security interest will constitute a perfected
security interest in the Collateral consisting of Nuclear Material Contracts and
the Collateral consisting of Nuclear Material located in the States of Illinois,
Kentucky, Ohio, Pennsylvania and Virginia, except for any such Collateral which
consists of cash, instruments (as defined in the New York Uniform Commercial
Code) and other items in which a security interest may only be perfected by
possession, enforceable against all third parties as security for the Secured
Obligations.
(k) No Material Adverse Change. Since June 30, 1998, there has been
no material adverse change in the financial condition, results of operations,
business, properties or operations of the Lessee or in its ability to perform
its obligations under the Basic Documents.
(l) No Defaults. The Lessee is not in default under any bond,
debenture, note or any other evidence of Obligations for Borrowed Money or
Deferred Purchase Price or any mortgage, deed of trust, indenture, loan
agreement or other agreement relating thereto, where the amount thereof is in
excess of $20,000,000.
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(m) Pension Plans. No accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived, exists
with respect to any plan (other than a multiemployer plan). No liability to the
Pension Benefit Guaranty Corporation has been, or is expected by the Lessee to
be, incurred with respect to any plan (other than a multiemployer plan) by the
Lessee which is or would be materially adverse to the Lessee. The Lessee has not
incurred and presently does not expect to incur any withdrawal liability under
Title IV of ERISA with respect to any multiemployer plan which is or would be
materially adverse to the Lessee. Neither the execution and delivery by the
Company of the Credit Agreement and the other Basic Documents, and the issuance
of the Commercial Paper, nor the execution and delivery by the Lessee of this
Letter Agreement, the Trust Agreement and each other Basic Document to which the
Lessee is a party, will involve any transaction which is subject to the
prohibitions of Section 406 of ERISA or in connection with which a tax could be
imposed pursuant to Section 4975. As used herein, the term "plan" shall mean an
"employee pension benefit plan" (as defined in Section 3 of ERISA) which is and
has been established or maintained, or to which contributions are or have been
made, by the Lessee or by any trade or business, whether or not incorporated,
which, together with the Lessee is under common control as described in Section
414(b) or (c) of the Code, and the term "multiemployer plan" shall mean any plan
which is a "multiemployer plan" (as such term is defined in Section 4001(a)(3)
of ERISA).
(n) Financial Statements. The audited balance sheet of the Lessee as
of December 31, 1997, and the related statements of income and cash flows
(including the notes thereto) of the Lessee for the year then ended, copies of
which have been delivered to the Company, the Administrative Agent and the
Banks, and all other annual or quarterly financial statements including, without
limitation, the quarterly statement dated as of June 30, 1998 so delivered
fairly present the financial condition of the Lessee on the dates for which, and
the results of its operations for the periods for which, the same have been
furnished and have been prepared in accordance with generally accepted
accounting principles consistently applied.
(o) Nuclear Material. The Nuclear Material is free and clear of any
Lien in favor of any Person claiming by, through or under the Lessee or any
Affiliate thereof, other than Permitted Liens. No default or event which with
the giving of notice or lapse of time would constitute a default has occurred
and is continuing under any Nuclear Material Contract.
(p) Disclosure. Neither the representations in this Letter
Agreement, or in any other document, certificate or statement furnished in
writing to the Administrative Agent or any Bank by or on behalf of the Lessee in
connection with the transactions contemplated hereby, nor the information
disclosed in the Lessee's Annual Report on Form 10-K for the year ended December
31, 1997 or Quarterly Report on Form 10-Q for the quarter ended June 30, 1998,
contained as of its date, any untrue statement of a material fact or omitted to
state a material fact necessary in order to make such representations or
information not misleading in light of the circumstances under which they were
made.
(q) Collateral Equivalence Test Met. The sum of the aggregate
Stipulated Casualty Value of the Nuclear Material leased under the Fuel Lease
and the Lessee's Percentage of the Cash Collateral equals or exceeds the
Lessee's Percentage of the Outstandings.
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(r) Year 2000. The Lessee has made a full and complete assessment of
its Year 2000 Issues and has a realistic and achievable Year 2000 Program. Based
on such assessment and on its Year 2000 Program, the Lessee does not reasonably
anticipate that Year 2000 Issues will have a Material Adverse Effect.
9 General Covenants of the Lessee.
(a) Information. The Lessee will furnish to the Company and the
Administrative Agent in sufficient copies for each Bank:
(i) Quarterly Statements. As soon as practicable after the end of
each of the first three quarterly fiscal periods in each fiscal year of
the Lessee, and in any event within 60 days thereafter, copies of:
(A) a balance sheet of the Lessee as at the end of such quarter, and
(B) statements of income and cash flows of the Lessee for such
quarter and for the twelve-month period ending as of the end of such
quarter and (in the case of the second and third quarters) for the
portion of the fiscal year ending with the end of such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail and certified as complete and correct, subject to changes
resulting from year-end adjustments, by a principal financial
officer of the Lessee; provided that it is understood that the
delivery of the Lessee's Quarterly Report on Form 10-Q shall be
deemed to satisfy the requirements with respect to such financial
statements;
(ii) Annual Statements. As soon as practicable after the end of each
fiscal year of the Lessee, and in any event within 120 days thereafter,
copies of:
(A) a balance sheet of the Lessee at the end of such fiscal year,
and (B) statements of income and cash flows of the Lessee for such
year, setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail and accompanied
by an opinion thereon of independent certified public accountants of
recognized national standing selected by the Lessee, which opinion
shall state that such financial statements have been prepared in
accordance with generally accepted accounting principles
consistently applied (except for changes in application in which
such accountants concur) and that the examination of such
accountants in connection with such financial statements has been
made in accordance with generally accepted auditing standards;
provided that it is understood that the delivery of the Lessee's
Annual Report on Form 10-K shall be deemed to satisfy the
requirement with respect to such financial statements;
(iii) Officer's Compliance Certificate. Simultaneously with the
financial statements referred to in Sections 9(a)(i) and (ii), a
certificate of an authorized officer of the Lessee stating that such
officer has reviewed the relevant terms and conditions of the Fuel Lease
and other Basic Documents to which the Lessee is a party, and has made, or
caused to be made, under such officer's supervision, a review of the
transactions and financial condition of the Lessee from the beginning of
the accounting period covered by the income statements being delivered
therewith to the date of the certificate, and that the Lessee has observed
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or performed all of its covenants and other agreements, and satisfied
every condition, contained in this Letter Agreement, the Fuel Lease and
any other Basic Document to which the Lessee is a party, and no
Terminating Event, Lessee Default, Lessee Event of Default, Lease Event of
Default or default or event of default under any such Basic Document has
occurred and is continuing and no event has occurred and is continuing
which, with the lapse of time or the giving of notice, or both, would
constitute a Terminating Event, Lessee Default, Lessee Event of Default,
Lease Event of Default or a default or event of default under any such
Basic Document or, if such condition or event has occurred and is
continuing, a statement as to the nature thereof and the action which is
proposed to be taken with respect thereto;
(iv) Auditor's Compliance Certificate. Simultaneously with the
financial statements referred to in Section 9(a)(ii), a certificate of the
independent public accountants who audited such statements stating that
such accountants have reviewed the relevant terms and conditions of the
Fuel Lease and other Basic Agreements to which the Lessee is a party, and
that, in making the examination necessary for the audit of such
statements, they have obtained no knowledge of any condition or event
which constitutes or which with notice or lapse of time or both would
constitute a Terminating Event, Lessee Default, Lessee Event of Default,
Lease Event of Default or default or event of default under any such Basic
Document, or if such accountants shall have obtained knowledge of any such
condition or event, specifying in such certificate each such condition or
event of which they have knowledge and the nature and status thereof;
(v) Notices Required under the Basic Documents. Immediately upon
delivery to the Lessee or the Company, all notices, consents, documents,
certificates or instruments of any kind relating to the Lessee required
pursuant to the Fuel Lease;
(vi)Defaults. (A) Promptly upon becoming aware of the occurrence
thereof, notice of any Terminating Event, Lessee Default, Lessee Event of
Default, Lease Event of Default or any event which, with the lapse of time
or the giving of notice, or both, would constitute a Terminating Event or
a Lease Event of Default, or of any other development, financial or
otherwise (including, without limitation, developments with respect to
Year 2000 Issues), which could reasonably be expected to have a Material
Adverse Effect, and (B) within 10 days of becoming aware of the occurrence
thereof, notice of any other material event affecting the Lessee's
obligations under any Basic Document or any Nuclear Material Contract
(except to the extent such event has previously been disclosed in the
Lessee's SEC reports delivered pursuant to clause (viii) below);
(vii) Notice of Claimed Default. Immediately upon becoming aware
that the holder or holders of any evidence of Obligations for Borrowed
Money or Deferred Purchase Price or other security of the Lessee or any
subsidiary exceeding $20,000,000 in the aggregate have given notice (or
taken any other action) with respect to a claimed default, breach or event
of default, a notice describing the notice given (or action taken) and the
nature of the claimed default, breach, or event of default;
(viii) SEC and Other Reports. Promptly after filing thereof, copies
of all regular and periodic reports and registration statements which the
Lessee may file with the SEC or any governmental agency substituted
9
therefor and, promptly upon written request therefor, copies of the
financial statements which the Lessee may file annually with any state
regulatory agency or agencies; and
(ix) Requested Information. With reasonable promptness, such other
data and information, including, without limitation, information regarding
Nuclear Material or any Nuclear Material Contract, with respect to the
Lessee as from time to time may be reasonably requested by the
Administrative Agent or any Bank.
(b) Notice of Litigation. Immediately upon the Lessee becoming aware
thereof, written notice of (i) any litigation or proceedings which would be
required to be disclosed as an exception to the representations and warranties
contained herein or in the Fuel Lease in order that such representations and
warranties would be true and correct on a continuing basis; and (ii) any dispute
between the Lessee and any governmental authority or other party relating to any
part of the transactions contemplated by this Letter Agreement or any of the
other Basic Documents to which the Lessee is a party which would have a material
adverse effect on the ability of the Lessee to carry out its obligations
hereunder or under any other Basic Document to which the Lessee is a party;
provided, however, that the notice requirement in this Section 9(b) shall be
satisfied if the Lessee furnishes the Company and the Administrative Agent in
sufficient copies for each Bank a Current Report on Form 8-K regarding the event
requiring notice by the time that the Current Report is required to be filed
with the Securities and Exchange Commission.
(c) General Obligations. Subject to the last sentence of this Section
9(c), the Lessee will:
(i) duly comply with all laws, rules, orders, regulations or
other valid requirements (including, without limitation, any
of the foregoing which are applicable to Nuclear Material or
the operation of the Generating Facility) of any
governmental authority necessary to the conduct of its
business or to its properties or assets, noncompliance with
which could reasonably be expected to have a material
adverse effect upon the transactions contemplated by this
Letter Agreement or any other Basic Document, or upon the
financial condition, results of operations, business,
properties or operations of the Lessee, or the ability of
the Lessee to carry out its obligations under any Basic
Document or this Letter Agreement);
(ii) continue to engage principally in the electric utility
business;
(iii) obtain, maintain and keep in full force and effect all
consents, permits, licenses and approvals, the absence of
which would have a material adverse effect upon the
transactions contemplated by this Letter Agreement or any
other Basic Document to which the Lessee is a party, or upon
the financial condition, results of operations, business,
properties or operations of the Lessee, or the ability of the
Lessee to carry out its obligations under this Letter
Agreement or any other Basic Document to which the Lessee is a
party;
10
(iv) maintain its material operating properties used or useful in
its business in good repair, working order and condition
consistent with prudent utility practice; provided, however,
that the Lessee shall not be prevented from discontinuing the
operation and maintenance of any of its properties if it shall
determine that the continued operation and maintenance of such
properties is no longer necessary, desirable or permissible;
(v) pay when due all fees, taxes, assessments and governmental
charges or levies imposed upon it or upon its income or
profits or upon any property belonging to it, and maintain
appropriate reserves for the accrual of the same in accordance
with generally accepted accounting principles;
(vi) except as permitted by clause (vii) below, at all times
maintain its corporate existence, privileges, franchises and
rights to carry on business, and duly procure all renewals and
extensions thereof, if and when any shall be necessary;
(vii) not consolidate or merge with, or sell or otherwise dispose of
all or substantially all of its properties and assets to any
Person unless (i) the surviving or resulting entity is the
Lessee hereunder, (ii) immediately after giving effect thereto
no Credit Agreement Event of Default, Credit Agreement
Default, Lease Event of Default, Lessee Default, Lessee Event
of Default or event which with the giving of notice or passage
of time would constitute a Lease Event of Default shall have
occurred and be continuing, and (iii) the senior unsecured
debt of the surviving or resulting Lessee shall be rated at
least investment grade by Standard & Poor's Ratings Group
("S&P") or ▇▇▇▇▇'▇ Investor Service, Inc. ("Moody's");
(viii)perform and comply with each of the material provisions of
each material indenture, credit agreement, contract or other
agreement by which the Lessee is bound, non-performance or
non-compliance with which would have a material adverse effect
upon its business or credit or in any way affect its ability
to perform its obligations hereunder except material contracts
or other agreements being contested in good faith;
(ix) preserve and maintain its corporate existence in the
jurisdiction of its incorporation, and qualify and remain
qualified as a foreign corporation in good standing in each
jurisdiction in which such qualification is necessary or
desirable in view of its business and operations or the
ownership of its properties, except where the failure to be
so qualified would not materially adversely affect its
financial condition, operations, properties or business, and
preserve its material rights, franchises and privileges to
conduct its business substantially as conducted on the date
hereof;
(x) maintain insurance in effect at all times in such amounts as
are available to the Lessee and covering such risks as is
usually carried by companies of a similar size, engaged in
similar businesses and owning similar properties (including,
without limitation, the operation and ownership of nuclear
generating facilities) in the same general geographical area
11
in which the Lessee operates, either with responsible and
reputable insurance companies or associations, or, in whole or
in part, by establishing reserves of one or more insurance
funds, either alone or with other corporations or
associations;
(xi) at any reasonable time and from time to time, permit the
Administrative Agent or any Bank or any agents or
representatives thereof to examine and make copies of and
abstracts from the records and books of account of, and visit
the properties of, the Lessee and discuss the affairs,
finances and accounts of the Lessee with any of its officers
or directors;
(xii) not sell, transfer, lease, assign or otherwise convey or
dispose of more than 25% of its assets (whether now owned or
hereafter acquired), in any single or series of transactions,
whether or not related, except for dispositions of its fossil
and hydroelectric generating stations and associated
facilities and dispositions of its current assets in the
ordinary course of business as presently conducted, if
immediately prior to such sale, transfer, lease, assignment,
conveyance or disposition or as a result of such sale,
transfer, lease, assignment, conveyance or disposition, the
senior unsecured debt of the Lessee shall not be rated at
least investment grade by S&P or Moody's.
(xiii)comply with this Letter Agreement and such other Basic
Documents to which the Lessee is a party in accordance with
the respective terms and conditions set forth herein and
therein; and
(xiv) except for Permitted Liens, permit the creation of any Liens
on the Collateral.
Notwithstanding the foregoing provisions of this Section 9(c), the Lessee may
contest by appropriate proceedings conducted in good faith and due diligence,
the amount, validity or application, in whole or in part of any fee, tax,
assessment or government charge or levy, or any legal requirement, provided that
the Lessee shall have set aside on its books adequate reserves, if required in
accordance with generally accepted accounting principles with respect thereto
and shall furnish such security, if any, as may be required in the proceeding.
10. GPU Events. It shall be a default hereunder if GPU, Inc. (a) fails to
maintain at all times beneficial ownership of at least 75% of all outstanding
shares of common stock of each of the Lessee, JCP&L and PE; or (b) pledges,
grants options on, creates any charge on or security interest in, or otherwise
subjects to any charge or encumbrance, any of the common stock of the Lessee,
JCP&L or PE unless the obligations hereunder are secured ratably and with equal
priority, in form and substance reasonably satisfactory to the Majority Banks.
11. Credit Agreement and Notes. The Lessee hereby acknowledges receipt of
executed counterparts of the Credit Agreement and photostatic copies of the
Notes evidencing the Loans, and consents to all of the terms and provisions of
the Credit Agreement and the Notes.
12
12. Consent to Assignment; Direct Payment of Payments Under the Fuel
Lease.
(a) Consent to Assignment. The Lessee hereby acknowledges notice of
and consents to all the terms and provisions of the Security Agreement and
hereby confirms to and agrees with the Secured Parties that all representations,
warranties, indemnities and agreements of the Lessee contained in this Letter
Agreement and each other Basic Document to which the Lessee is a party shall
inure to the benefit of, and shall be enforceable by, the Secured Parties to the
same extent as if such Secured Parties were originally parties to or named in
such documents and agreements. The Lessee further acknowledges and consents to
the assignment and transfer, and any future assignments and transfers, to the
Secured Parties by the Company of the Company's right to exercise any and all of
its rights, remedies, powers and privileges (but none of its obligations, duties
or liabilities) under the Fuel Lease, the Assigned Agreements and each other
Basic Document to which the Lessee is a party. The Lessee hereby agrees with the
Secured Parties to comply with any exercise by the Secured Parties, either
directly or through the Company, of any rights, remedies, powers or privileges
pursuant to the Security Agreement. The Secured Parties acknowledge that neither
the Security Agreement nor this Section 12 shall in any way add to the
obligations of the Lessee (except those obligations of the Lessee to any Person,
which, if not previously so, hereby become enforceable directly by the Secured
Parties) under the Fuel Lease, the Assigned Agreements and each other Basic
Document to which the Lessee is a party. Notwithstanding the foregoing, so long
as no Lease Event of Default shall have occurred and be continuing, the Lessee
shall have exclusive right to possession and use of the Nuclear Material in
accordance with the Fuel Lease and may use such Nuclear Material for any lawful
purpose consistent with the Fuel Lease.
(b) Direct Payment of Payments Under the Fuel Lease. The Lessee
acknowledges that it has been directed by the Company to, and agrees that it
will, make all payments of monies due and to become due to the Company under the
Fuel Lease, the Assigned Agreements and each other Basic Document to which the
Lessee is a party, directly to the Collateral Agent, including, without
limitation, Basic Rent, Additional Rent, the purchase price of Nuclear Material
pursuant to Section 8(c), 8(d), 8(e) and 8(g) of the Fuel Lease, payments
pursuant to Sections 9(e), 14, 17 and 18 of the Fuel Lease in the manner and to
the accounts of the Secured Parties as specified in Section 3.03 of the Credit
Agreement.
13. Severability. Any provision of this Letter Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability, without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the Lessee hereby waives any provision of law which renders
any provision hereof prohibited or unenforceable in any respect.
14. Indemnification. The Lessee shall pay and indemnify and hold harmless
the Administrative Agent and each Bank, and their respective officers,
directors, incorporators, shareholders, partners, employees, agents and servants
from and against any and all liabilities (other than liabilities arising out of
the gross negligence or willful misconduct of such Person), taxes, (excluding,
however, taxes measured solely by the net income of any Person indemnified or
intended to be indemnified pursuant to this Section 14, except as otherwise
provided in Section 14 hereof), losses, obligations, claims, damages, penalties,
13
causes of action, suits, costs and expenses (including, without limitation,
reasonable attorneys' and accountants' fees and expenses) and judgments of any
nature arising from or in any way relating to any and all of the following
during the term of the Fuel Lease and thereafter: (a) any injury to or disease,
sickness or death of Persons, or loss of or damage to property, occurring
through or resulting from any nuclear incident (as that term is defined in the
Atomic Energy Act, 42 U.S.C. Section 2011 et seq.) involving or connected in any
way with the Nuclear Material or any portion thereof, (b) the acquisition,
ownership (including strict liability of an owner or liability without fault),
possession, disposition, sale, use, nonuse, misuse, leasing, fabrication,
design, cycling, recycling, transportation, containerization, cooling,
processing, reprocessing, storing, condition, management, operation,
construction, maintenance, repair or rebuilding of the Nuclear Material or any
portion thereof or resulting from the condition of adjoining and underlying
land, buildings, streets or ways, (c) any use, nonuse or condition of, or any
other matter of circumstance relating to, the Generating Facility, any other
property associated therewith or any adjoining and underlying land, buildings,
streets and ways, (d) any violation or default, or alleged violation or default,
of the Fuel Lease or this Letter Agreement by or on behalf of Lessee, or of any
contracts or agreements to which the Lessee is a party or by which it is bound,
or any Legal Requirements, (e) performance of any labor or services or the
furnishing of any materials or other property in respect of the Nuclear Material
or any portion thereof, (f) any infringement or alleged infringement of any
patent, copyright, trade secret or other similar right relating to the Nuclear
Material or any portion thereof, (g) Lessee's agreements or obligations
contained in the Fuel Lease or this Letter Agreement, (h) any claim arising out
of loss of damage to the environment, (i) any claim arising out of strict or
absolute liability in tort, or (j) the offering and sale of Commercial Paper.
The Lessee also indemnifies each indemnitee, as aforesaid, from and against all
other liabilities, taxes, losses, obligations, claims, damages, penalties,
causes of action, suits, costs and expenses (including, without limitation,
reasonable attorneys' and accountants' fees and expenses) and judgments of any
nature which may be imposed on, incurred by, or asserted at any time against any
indemnitee in any way relating to or arising out of the performance of this
Letter Agreement, the Fuel Lease or any other Basic Document to which Lessee is
a party, provided, except for claims of a nature contemplated by (i) above, that
the Lessee shall not be required to indemnify any indemnitee with respect to any
liability relating to or arising out of indemnitee's gross negligence or willful
misconduct and provided, further, that the foregoing immunity shall not limit
the terms of any indemnity that the Lessee may grant separately to any
indemnitee pursuant to any separate agreement. In the event that any action,
suit or proceeding is brought against the Company or any other Person
indemnified or intended to be indemnified pursuant to this Section 14 by reason
of any such occurrence, the Lessee shall, at the Lessee's expense, resist and
defend such action, suit or proceeding or cause the same to be resisted and
defended by counsel designated by the Lessee and reasonably acceptable to the
Person or Persons indemnified or intended to be indemnified under this Section
14 provided there is no conflict of interest with the Person or Persons
indemnified or intended to be indemnified under this Section 14. In the event a
conflict of interest contemplated by the proviso of the immediately preceding
sentence shall exist, then the Person or Persons as to which such conflict
exists may be defended by counsel of its or their choice at Lessee's expense,
provided Lessee's obligation for such expense shall be limited to one firm for
all such Persons as to which such a conflict exists. The obligations of the
Lessee under this Section 14 shall survive any termination of this Letter
Agreement, the Credit Agreement, the Fuel Lease or the Security Agreement, in
whole or in part.
14
15. No Waiver; Amendments. Neither the Administrative Agent, the
Collateral Agent, the Banks, the Company nor the Lessee shall, by any act,
delay, omission or otherwise, be deemed to have waived any of its rights and
remedies hereunder, and no waiver shall be valid unless in writing signed by the
party or parties sought to be bound thereby. A waiver by the Administrative
Agent, the Collateral Agent, the Banks, the Company or the Lessee of any of
their respective rights or remedies hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Administrative Agent, the
Banks, the Company or the Lessee, as applicable, would otherwise have had on any
future occasion. No failure to exercise nor any delay in exercise of any such
right or remedy hereunder shall preclude any other or future exercise or partial
exercise of any other right or remedy. The rights and remedies hereunder
provided are cumulative and may be exercised singly or concurrently, and are not
exclusive of any rights and remedies provided by law. None of the terms or
provisions of this Letter Agreement may be waived, altered, modified or amended
except by an instrument in writing, duly executed by the party or parties sought
to be bound thereby.
16. Successors and Assigns. This Letter Agreement shall bind the
successors and assigns of the Lessee and the Company and shall inure to the
benefit of permitted successors and assigns of either. The Letter Agreement
shall not be assignable by the Lessee or the Company, either voluntarily or by
operation of law, unless consented to by the Administrative Agent and the
Majority Banks. No permitted assignment by the Lessee or the Company shall
release the Lessee or the Company from any of its obligations hereunder. This
Letter Agreement shall inure to and shall be binding upon the successors and
assigns of the Administrative Agent and the Banks.
17. Notices. Any notice, demand or other communication which by any
provision of this Letter Agreement is required or provided to be given shall be
deemed to have been delivered if in writing addressed as provided below and
actually delivered by mail, courier or facsimile to the following addresses:
(a) except as otherwise requested in writing by the Administrative
Agent or any Bank, any notice, demand or communication which by
any provision of this Letter Agreement is required or provided to
be given to the Administrative Agent or any Bank shall be deemed
to have been delivered to the Administrative Agent or any Bank if
a single copy thereof is delivered to the Administrative Agent at
its address set forth in Section 11.01 of the Credit Agreement or
at such other address as either may have furnished the Company and
the Lessee in writing;
(b) if to the Company (with copies to the Lessee at the address listed
below), TMI-1 Fuel Corp c/o United States Trust Company of New York,
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, marked for the
attention of the Corporate Trust and Agency Division, telecopy
number ▇▇▇-▇▇▇-▇▇▇▇, or at such other address as it may have
furnished in writing to the Administrative Agent and the Lessee; or
(c) if to the Lessee, to Metropolitan Edison Company, c/o GPU Service
Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, marked for
the attention of the Vice President and Treasurer, Telecopier: (973)
644-4224, or at such other address or addresses as the Lessee may
have furnished to the Administrative Agent and the Company.
18. Set-off. (a) Lessee hereby acknowledges and agrees to set-off rights
against it as provided for in Section 11.08 of the Credit Agreement.
15
(b) Lessee agrees that it shall have no right of set-off, deduction
or counterclaim in respect of its obligations hereunder, and that the
obligations of the Banks hereunder and under the Credit Agreement are several
and not joint. Nothing contained herein shall constitute a relinquishment or
waiver of the Lessee's rights to any independent claim that the Lessee may have
against the Administrative Agent or any Bank for the Administrative Agent's or
such Bank's, as the case may be, gross negligence or willful misconduct, but no
Bank shall be liable for the conduct of the Administrative Agent or any Bank,
and the Administrative Agent shall not be liable for the conduct of any Bank.
19. Waiver of Jury Trial. Lessee irrevocably waives all right to trial by
jury in any action, proceeding or counterclaim arising out of or relating to
this Letter Agreement, the Credit Agreement, the other Basic Documents or any
instrument or document delivered hereunder or thereunder, except that the
foregoing shall not preclude any party hereto from submitting to a jury for
determination in any such action, proceeding or counterclaim any dispute
involving (a) the accuracy or completeness of any representation or warranty
made under the Basic Documents by Lessee, (b) the performance by Lessee of any
affirmative or negative covenant or agreement contained in the Basic Documents,
or (c) questions of materiality, or the reasonableness of, or good faith basis
for, any action taken, or determination made, by any other party hereto (other
than in respect of any calculation of principal, interest, fees, or increased
costs payable by the Lessee under the Basic Documents).
20. Governing Law. This Letter Agreement shall be governed by, and be
construed and interpreted in accordance with the laws of the State of New York.
16
S-1
IN WITNESS WHEREOF, the undersigned have caused this Letter Agreement to
be executed as of the date first above written.
METROPOLITAN EDISON COMPANY
By
------------------------------
Vice President
TMI-1 FUEL CORP.
By
------------------------------
Title
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THE FIRST NATIONAL BANK OF
CHICAGO,
as Administrative Agent
By
------------------------------
Title
------------------------------
By
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Title
------------------------------